Author: teevee --
Date:1999-02-21
20:38:53
Subject: Psst-wanna buy
an interest in a diamond
mine?
Hi WillP,
There has been some
recent internet rumors of a
Aber takeover of
Winspear. I commented
earlier on SI as follows as
to what I think might be
going on.....
Here is my guess as to
what might be going
on...... 1. Aber NEEDS in
a very big way, a
contracted buyer for their
share of production from
the Diavik project.
Without a guaranteed
market, debt financing for
Abers share of capital
costs for Diavik is unlikely.
Unconventional lenders
(like the Nevada's for
example) would probably
want some additional
equity, and it would be in
their favor, not in the favor
of current shareholders(ie.
some form of heavy
dilution). Should RTP
proceed, and Aber doesn't
have their share of capital
costs, their interest could
be diluted(this is where
and the point in time when
the Nevada's could step
forward as a lender of last
resort-to the detriment of
Aber shareholders)....time
is running out for them.
Unfortunately for Aber,
the only likely supplier of a
sales quota or guaranteed
buyer that would satisfy
bankers or other lenders is
De Beers........ 2.
Hmmmmm....I wonder if
De Beers has the upper
hand here? Would they
insist...ooops...politely
suggest... that Aber make
available through a farmout
to DeBeers, their
exploration lands, interests
and projects outside of
Diavik (this would include
Snap Lake)? I can
certainly understand why
Winspear management
might be just a little
nervous about
DeBeers.....the "hard ball"
hasn't even started yet.
The southern kimberlite
field already appears to be
far more important than
the northern one. DeBeers
knows this and will act
accordingly. Winspear and
SUF are the only juniors
left in the southern type II
kimberite field that
DeBeers don't have their
hooks into.
Additional comments are:
The current thinking is that
Aber wants to sell their
interest in Snap Lake and
other exploration projects
for a number of reasons: 1.
Aber may believe the
value of its interest in Snap
Lake and other
exploration projects and
lands are perhaps not
reflected in Aber's share
price. 2. Aber wants to
concentrate on
diavik(Aber needs to raise
through debt and or
equity, a lot of money for
their share of capital costs
for diavik-- exploration
expenditures elsewhere
AT THIS TIME would
likely be considered a
drain on moneys
"earmarked" for Diavik).
From this perspective,
ongoing costs/expenditures
not related to Diavik are
likely viewed as unwanted
liabilities. 3. Perhaps by
spinning off their
exploration interests into
another public vehicle,
they could capture some
value( the "talk on the
street" was likely a trial
balloon to guage potential
interest). I suspect that in
this case, nobody is
interested in underwriting a
minority interest in a
project where someone
else is the operator. 4. A
direct cash sale of their
interest in Snap Lake will
also be dificult as it is a
minority interest and as
such, IF a buyer was
found, the price likely
would be a low ball
offer.Also, we don't know
if winspear has a "right of
first refusal"-I would guess
that they do and this would
also make it tough for
Aber to sell.
Bottom line is I don't think
Aber is considering a
takover of Winspear. Any
further comments out there
appreciated.
regards, teevee
Top
Reply
Author: WillP --
Date:1999-02-22
05:50:44
Subject: No
Thanks...Trying to Quit :-)
Ahh...the speculation
continues.
Some observations:
#1. Aber has the right to
market it's own diamonds,
and has the 'option' to do
so through RTZ, De
Beers, or any other
interested party. Some are
more likely than others.
Certainly de Beers is very
willing. Securing a
marketing agreement
should be a 'snap' if you're
willing to include de Beers
in the mix.
#2. AberEx is a pretty
widely circulated rumour,
isn't it. (It even appears on
some recent property
maps, btw.)
#3. Mining has always
been an 'incestuous'
business with two
companies owning parts of
each other and rivalling
shares of a third. The
ownership and rights to
many properties is a
complicated thing. Snap
Lake will ultimately prove
no different. These
guessing games are
therefore frequent...and
anything is possible.
#4. Raising debt money
may not be as hard as you
suspect. There has not
been a great deal of debt
financing for new
Canadian mines recently,
given metal pries. With
permits in hand and a
bankable feasibility
completed...plus a very
short payback
period...methinks it isn't a
daunting task to find debt
financing.
#5. I don't know what
would be more benign to
Winspear...Aber as one
entity, or as two. The
status quo has worked to
date. Then again so did the
US/USSR. :-)
However...for entirely
different reasons...I arrive
at your bottom line. I don't
think that Aber is about to
take over Winspear any
time soon.
Regards,
WillP |
