Hello Peter
You may prefer the realism of what is here and now. If so, your buddy David sent the following based on his attendance at the AGM last week:
At the Annual Meeting of Southernera shareholders on June 25th, the
following information was presented. You can draw your own conclusion about
probable earnings per share and projected share price.
Consider only the Klipspringer/Marsfontein projects. (Angolan river
production and sales are increasing but let's ignore those projections.)
Since the plant began operating at Klipspringer mine four months ago, over
US$ 5 million in diamonds has been sold and 15,700 carats are on hand (see
News Release of 25 June). The last lot sold for US$121.75 per carat so
assuming the same price we can expect US$ 1.9 million when these are sold,
for a total of approximately US$ 7 million (C$ 10.5 million)from
Klipspringer (100% owned by SUF) up to July.
The terms of the recently announced joint venture between De Beers and
Southernera gives Southernera 40% of the Marsfontein project and mining of
M1 is expected to begin in July. It was reported that we can expect the
joint venture's production at M1 to increase rapidly as follows:
July 14,000 carats
August 45,000 "
September 67,000 "
October 90,000 "
November 112,000 "
December 112,000 "
and continuing at this rate for two years.
This comes to about 440,000 carats in 1998 for the joint venture so,
ignoring costs, SUF's 40% share should be about 176,000 carats. Assuming a
value of US$ 140 per carat, SUF's share from M1 should be worth about US$ 24
million (or C$ 36 million) in 1998.
At current conversion rates, SUF's gross income from all sources could be
over C$ 40 million in 1998. What about 1999?
In 1999 it seems that SUF should receive at least US$ 75 million (i.e. C$
110 million) from its share of M1. SUF probably will have a 35 tonnes/hour
plant operating at Klipspringer as well as increasing revenue from Angola so
1999 cash flow should be well over C$100 million.
Note that output from Klipspringer in 1999 is ignored and proven and
probable reserves also are ignored. (Note that at the annual meeting it was
announced that the Leopard fissure reserves are now double what was known
and a new diamondiferous pipe was found recently at Klipspringer.)
With estimated income of this order of magnitude and some 30 millions shares
in circulation, how long will it be before the investment community puts a
higher -- much higher -- price on SUF?
If the cash flow per share is over C$ 1 in 1998 and around $3 next year,
what should a share be worth? Any suggestions?
*************
One last thought on my earlier post. I left out the Canadian buck's depreciation:
$273.42 per share US x 1.38 = $377.32 Canadian
Regards
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