Hello Confluence
Well, I guess you are a very insightful investor as you pretty much nailed the number.
I don't think I need to preface my remarks by stating the obvious with regard to my belief in this company and management. However, as optimistic as I am in the long run I think it wise to keep the following factors in mind when suggesting near term price spikes.
1. Tax loss season is fast approaching.
2. As effective and efficient as security might be at Camafuca, I doubt the company will want to be reported as machine gunning 14 year old blacks even if they are guerillas. Not a good corporate image.
3. At some point, if the war turns against the government, SUF just may have to cut and run. I am not saying this will happen, but its important to consider what the market will anticipate with regard to the potential loss of this income.
4. Despite the fact that CJ had the foresight to lock in Klipspringer's price for five years, hence guaranteeing earnings, the market will probably assign a low multiple until the general malaise (recession mentality) subsides.
5. Historically, downturns last about an average of 10.5 months, however, I suspect there will be some hesitancy for a significant rally in 1999 because of fear associated with the year 2000 computer issue. Just a guess, but psychology (fear) is ruling this market not greed.
6. April I believe of 1999 is when the RSA elections are due. There remains the possibility that fear of political upheaval will depress SUF this coming spring. Remember that Nelson Mandela is not running and the opposition will take that opportunity to make inroads. NM has for all intents and purposes been in semi-retirement for several years now and his successor is being well groomed, but in light of fear of African politics, what will investors do up until April?
Obviously on the plus side:
a) For all intents and purposes, Camafuca is already in production albeit minor. However, once the plant is completed and the war does not encroach, this may become reasonably significant.
b) With better luck than HB has had up until now, SUF will find those Munn & Margaret Lake pipes next Jan-March.
c) With SUF's technical skill and deeper pockets, HB will find those Yamba Lake pipes Cypango, Tanqueray, Mill City and DeBeers could not.
d) The New Indigo deal will be consummated at an attractive price.
If b) or c) can be accomplished early in 1999, you can be sure the market will focus on SUF as again, they will have as I have repeatedly suggested they need, the shareholder security of Canadian assets (hopefully with world class (ABZ) numbers).
Do not misunderstand me, I remain an enthusiastic SUF shareholder and believe strongly in the long-term potential of this company and management's commitment and respect for shareholders. However, I have been around long enough to know that in the current market, it would be wise to assume the worst and remain cautious until the horizon is just a little bit clearer.
I believe the numbers will be achieved that you suggest, it is just that there may very well be some significant volatility or simply some modest appreciation until after January 2,000.
Just my two cents.
Regards |
