Hello Goalie et al,
From a fax I just got:
***
New First Marathon research report dated February 9, 1999 is titled "Visit to Marsfontein - Simple Mining and also Very Profitable"
Recommendation: FOCUS BUY
Estimates:
----- 97A 98E 99E
EPS (0.33) 1.20 1.45
CFPS (0.04) 1.75 1.90
Those were the numbers, with no target price.
Some other comments from report:
- 390,000 carats mined from alluvials overlying M1, 200,000 carats from M1 at a grade of 3.3 cpt
- Straightforward, simple operation expected to mine about 1,000,000 carats in 1999 with revenues around US $150 million and operating costs of less than US $15 million
- for 1999, budgeted grade is 2.25 cpt, with actual grades in January of 2.85 cpt.
- 48,000 carats viewed at De Beers sorting facility - high quality, many large stones over 10 carats. Recently the mine produced a 210 carat stone, demonstrating the potential of M1
- Mining is very simple. A contractor hauls ore out of pit, stock piles it (30,000 tonnes now in pile) and it is trucked to plant as necessary
- JV plans to deepen pit to 150m from plan of 100m. Reserve increase from 700,000 to 1,000,000 tonnes, including only M1 and not gravels or kimberlitic diabase.
- the gravel anomaly extends 500m south of M1, with two trenches completed
- At M3, located 1 km west of M1, diamondiferous gravels 10m thick have been located. Sampling continues, with the possibility that these gravels could be extensive, low cost, high value, etc.
- Exploration is just starting on Marsfontein, with new attention being paid to a strong anomaly trending west from M1 towards M3. This anomaly is exciting since the M1 pipe, arguably the richest in the world, would comfortably fit between the 50m sample sites taken so far.
- Security is excellent
***
While not a complete reporting, I believe the above does a fair accounting of what is contained in the report.
What is missing, however, is the lack of a target price, projections on earnings or cash flow in 2001+, mention of any SUF holdings outside of Marsfontein (like Klipspringer, NWT, Angola, etc.), the potential value of future JVs between SUF, De Beers and Newco, comment on the politics of the JV and working in RSA, etc.
Also, what really caught my eye, were the EPS and CFPS numbers for 1998 and 1999. Given that the 1998 numbers should be very accurate, how can the 1999 numbers not reflect the projected 69% increase in t production at M1, or any other production from Klipspringer? It seems to me, that if one assumes the 1998 data (due in a month) is correct, than the 1999 EPS and CFPS numbers should be at least $2.00 and $2.90, repectively, before any consideration of the rest of Klipspringer or other possibilities.
This stock is worth a bunch more than $7.00!!
Regards
Confluence |
