Hi Buylowsellhigh..
Sorry, I could not respond any sooner.
I really don't know how much this transaction (if it happens) would effect SUF share prices. First of all SUF is not trading at its actual market value. I will make a comparison with DMM.
DMM will start production today. They will hit their full production figures in January. According to Globe&Mail they bring in $500,000,000.00 a year. Assuming that they are able to sell all their diamonds, DMM will get 29% of that amount. And of that figure they will also pay 46% loyalty and taxes. That leaves them with $78,000,000.00. annually. Their share of the operation was financed by BHP. So they have to pay BHP's loan. I believe that 90% of that money will go to BHP. That will leave them with less than $8,000,000.00. I am sure that there are other expenses not taken into account(such as cost of operations etc.) And DMM.B stock is trading over $22.00 CDN. Meanwhile SUF is bringing in DMM.B's annual net cash flow in less than 2 months(my humble guess based on their last press release regarding to their production) and trading at 1/3 of DMM.B share price value AND THEY ARE DEBT FREE. I do realize that SUF's mines are not in Canada. But I think what is selling in today's economy is not the quantity but the quality of diamonds. And SUF is producing the quality diamonds. The RSA is still a reliable place and Angolan operations of SUF are still going on despite the struggles in that country. I don't think that we will see a recovery in the diamond market within 1999. Maybe towards the end of 1999 and year 2000 it will start. I don't know if DMM is going to be able to sell all their diamonds at the expected $130.00 US/carat. But it seems like the quality of its diamonds and $50,000,000.00/annum unconditional sales agreement to the CSO gives a good edge to SUF during these turbulent times.
So, to answer your question as to how New Indigo will effect SUF prices; .. I really don't know. I don't even know if it is a good idea to acquire more Canadian territory. Even if they acquire Jericho project, they can not start production any sooner than 2 years. So definitely there won't be an immediate effect. I have no idea as to what the grade and the quality of Jericho samples are.
But with or without New Indigo, I am expecting SUF share prices to go much higher than where they are right now very soon.
I hope I am right.
Regards
Bozkurt |
