Hello Vaughn,
While I agree that successful exploration results in the NWT would add significant upside to SUF's disappointing share price, I think that Klipspringer and Marsfontein alone should justify a share price over $20.
The cash flow from Marsfontein alone should be over $2.70 per share in 1999, with the production of around 1 million carats. This implies the usage of about 450,000 tonnes of primary kimberlite. With reserves being increased to over 1 million tonnes of primary kimberlite, this implies similar production in 2000, with no consideration of the stored gravels at M1 (over 500,000 tonnes), M3 gravels, M3 kimberlite, or any new finds or increases in the next two years.
Remember that local exploration was virtually non-existant for most of 1998. I believe that Marsfontein will be able to produce at rates similar to Q498 for the next 3 years based on the M1 pit and stockpiled ore alone. I have confidence that the Marsfontein property will be a viable producer for over 5 years, after further exploration turns up more diamondiferous material.
So, with expectations of cash flow nicely over $2.50 for at least the next 3 years, with the expected extension of this period and absolutely no consideration for the rest of Klipspringer, Camafuca, other deals in RSA (with De Beers and the Newco, happily prodded along by government interests in promoting empowerment), before any success in NWT, I think the shares should command a reasonable multiple of 8 times cash flow.
Of course, success up north would add considerably to the value of SUF and expand the cash flow multiple. Just imagine SUF with the expected cash flow above, the best indicator mineralogy of any diamondiferous kimberlite yet found in NWT (including Aber and Diamet properties and mines), and the announcement that they hit a pipe with drilling next month. The stock will rocket!
But if they miss again this season, (unlikely if you've seen the determination in the eyes of CJ, LB and HB), the South African operations still justify significantly higher prices, no matter what Canadian mining analysts, still new to diamonds, have to say.
(Remember that SUF is the only Canadian diamond miner/explorer that is unlikely to require the services of corporate finance departments for the next few years. They are unlikely to generate fees for a brokerage house, making them much less attractive to dual analyst/fund raiser make-up of most of our sell side analysts)
Just my 2 cents!
Regards,
Confluence |
