Hello John, Peter, ValuePro, et all
You would have to think that those two large share holders and pension funds were putting pressure on CJ to settle. Paper losses like they were showing on the books can not do too much for their manager's career prospects..
Another shareholder was also wondering if DeBeers had accumulated a significant voting position in SUF and wondered if that was why they appeared to have such a favourable result? Unless those other two major shareholders sold them some, I can't imagine that they would have as much clout as even Rio Tinto with 17%. The public float just isn't that large. I don't think more than 20% of SUF free trades and I have not sold any. But then my % does not put me at the table.
As I have posted previously, SUF and DeBeers are already partners on one other farm according to the AR and of course have several properties up here on which they collaborate. There is just no getting away from this reality.
After all people, this is the big leagues, where the rules of right and wrong have little to do with business. Anyone who thought that this was not an incestuous industry had better have a reality check. By partnering now with DeBeers, it is unlikely that SUF will be threatened again until Camafuca nears production. That, after all, is the real prize here.
So "De Beers will have management of the Marsfontein project with a 60% interest, and the existing SouthernEra/Randgold joint venture will have a 40% share." Now one question perhaps might be, What constitutes the Marsfontein project? The M-1, or the entire collection of farms that make up Marsfontein? Remember there are other anomalies.
So we all might lament the loss of 60% of the M-1, but then did SUF have to pay $75 million or nothing? Did SUF get 40% for no cash layout other than their existing investment? Seems to me, that if DeBeers had the rights to the M-1 outright, they gave up 40% for marketing rights to Klipspringer plus $75 million. Does not sound like it was as cut and dry as some suggested.
Bottom line is that SUF needed the quick cash injection the M-1's production gives to maintain momentum. Without it, it would have taken much longer to pay off the cost of the enlarged mill, any loan, and develop the rest of the Klipspringer project. This way, they swallow some pride and move on advancing Klipspringer development probably by three to four years and putting sheckles in the bank to finance plant expansion in Angola, Camafuca pre-feasibility and NWT exploration.
Its sort of like a divorce (or a shot gun wedding if you prefer.) You make the best of distasteful choices. You can not stand your X getting your house, but your glad to be rid of the b....h or b.....d (as the case may be)..... and you got the fishing boat or Porche with nothing owing the bank!
If the Klipspringer plant is processing DeBeers 60%, I can't help wondering if there will also be a cash fee paid to SUF for use of the facilities. In addition, if DeBeers (CSO) gets to market Klipspringer goods, I would presume there is some mechanism for insuring that the price nears or matches that available through the SA Diamond Board.
If anyone is attending the Annual Meeting, I am sure all this will come out.
What really ticked me off this morning was that I noticed the volume, but couldn't get through from up here with my buy order before the stock was halted. Some folks definitely had advance knowledge of this news (165,000 shares before the halt) and one of you should ask about that at the AM as well? Was it short covering and buying by Debeers shills and insiders, because I can't imagine CJ would put up with SUF staff doing that.
Finally, Peter, I am sorry and perhaps I am missing it, but where in the announcement does it say SUF gave up 25% of Klipspringer? As near as I can tell, they still own the majority of it, lock, stock, and blow.
This must be news day as WSP and ABZ also had NR's this morning. I can not tell from Aber's First Quarter Report which if any of their discoveries might include properties shared by SUF but they have discovered some more pipes and proven some more economics that might also help SUF valuations.
Have a look:
Diavik Diamonds Project
-----------------------
The Diavik Diamonds Project is located approximately 300 kilometres
northeast of Yellowknife and 35 kilometres southeast of the BHP Ekati Diamond
Mine. The filing of the Project Description in March formally triggered the
environmental review process. The feasibility study, budgeted at $30 million,
is scheduled for completion in the fourth quarter of this year. The study is
being conducted by Nishi-Khon/SNC Lavalin Group, a joint venture between the
aboriginal Dogrib Nation Group of Companies and the engineering firm
SNC-Lavalin Group Inc,
Capital costs for the project are estimated at a prefeasibility level
(+/-25%) at $875 million, including a $75 million allowance. Aber is
responsible for its 40% share of the costs. Based on prefeasibility work,
estimated mineable reserves are 104 million carats of diamonds with an average
estimated value of US$56 per carat. The diamonds are contained in 26.7
million tonnes (undiluted) of kimberlite ore with an average undiluted grade
of 3.88 carats per tonne. Production is anticipated to commence in late 2001
or early 2002. The operation would yield six million to eight million carats
of diamonds per year during full open pit production, with a total mine life
expected to be 16-22 years. Aber retains the right to market its 40% share of
production. Estimated reserves, capital costs and timetables are subject to
change as engineering studies continue.
Diavik Exploration
------------------
Exploration at Diavik is budgeted at $10 million for 1998. During the
first quarter, a 29 tonne mini-bulk sample collected from A-11 North using
large diameter core drilling yielded 7.6 carats of diamonds, including a 3.01
carat gem diamond. Any decision on further work will be made after a review
of the recently received data. The pipe is about 10 kilometres east of the
proposed Diavik development site.
Delineation drilling was carried out on known diamondiferous pipes A-2
and A-5, which are in close proximity to the development area, and on pipes
A-21 and A-154 South, which are in the reserve base. Drill core samples from
A-2 and A-5 are now undergoing caustic fusion analysis for microdiamonds and
results will be reported when available. Updated resource models for A-21 and
A-154S will be available later this year.
Diamond drilling was carried out on previously untested phases of five
kimberlite pipes. Caustic fusion results are pending. Regional exploration,
testing targets generated from the 1997 detailed airborne survey, resulted in
the discovery of four additional kimberlite bodies, bringing the number of
kimberlites discovered on the Diavik property to 53. Caustic fusion results
are pending on all four intercepts and results are expected by late summer.
Eight geophysical anomalies, located within 15 kilometres of the proposed
development site, remain to be tested later this summer with ground geophysics
and possibly with drilling. Condemnation drilling in the proposed project
development area was completed and did not identify any new kimberlite pipes.
Regards
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