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Gold/Mining/Energy : DIAMONDWORKS DMW.v

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To: Robert Saito who wrote ()	6/23/1998 10:06:00 AM
From: Andras	Read Replies (1) of 413

Midland Walwyn, or Merrill Lynch Canada target price $4.30! VALUATION/SHARE PRICE IMPACT: NO CHANGE IN OUR VALUATION Our valuation of DiamondWorks has focused on a discounted cash flow (DCF) analysis of our forecast of the company's diamond production from alluvial sources at Luo and Yetwene in Angola. Our production model suggests that DiamondWork's alluvial operations are worth US$49.1 million. Using a price-to-net-asset-value (P/NAV) multiple of 1.25 times for an emerging Tier 2 (mid-cap) diamond producer and a 1.37:1 C$:US$ exchange rate suggests a fair value of C$0.78 per DiamondWorks share (based on 110.6 million shares fully-diluted). Adding our assessment of DiamondWorks producing assets of $0.78 per share, our valuation of $3.42 per share for the company's non-producing assets (mainly kimberlite-hosted diamond resources), and cash on dilution of $0.10 per share, gives us a target price of $4.30 per DMW share. We reiterate our 1-Buy (Speculative) recommendation of DiamondWorks' shares. Happy investing, Andras

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