Hello GeorgeS et al,
I thought today's press release was very positive. While somewhat less easy to read than might be expected, ;), I think it is summarized as follows:
1) Development at Klipspringer continues in an impressive fashion. The new 50 tph plant will allow for enhanced production of both Klipspringer and Marsfontein, plus enable easy bulk sampling of prospects while ensuring top production from M1. Bottom line is more and better exploration and development of reserves at both properties, with increased carat production.
2) While Maps might have been nice to allow for better understanding of some of the commentary, a visit to the website will show that the M1 pipe lies east of M3 (about 1km) and both lie very generally to the east of the Leopard fissure system. The implication is that all deposits may be facets of the same, larger system. I get excited by the hope that perhaps M1 is like the Sugarbird blow, and represents a larger deposit of kimberlitic material along a longer system. If the fissures and M1 are continuous, an optimist could hope that more M1,...M3,... type deposits might be discovered.
3) The stockpiling of ore from the Leopard fissure is commencing. Work along the two sections continues, with the expected contribution of 16,000 tonnes per month by December. My math shows 16,000cts/month x 0.7cts/tonne = 11,200 carats of 100% SUF production per month. Values were previously estimated at US$100 per carat, although the higher cost of fissure mining might move the gross margin from 85% down to 75-80% (Imagine!). My guess is that somehow, this production target will be advanced.
4) A new fissure system seems to be developing north of the Leopard fissure. This is potentially excellent, although preliminary news.
5) I think one can make the conclusion from this release, just weeks after several analysts visited Klipspringer, that SUF is anticipating increased production from both Klipspringer and Marsfontein, and that this new plant allows for both this production increase and expedited exploration (Just think about using a backhoe to scoop samples into a truck and then have that truck dump directly into the plant!). Basically, they're increasing reserves at both sites, while doing so in a cost-efficient modular format.
6) The present reserves at Klipspringer, while not proven in the strict sense (to allow analysts to do DCF analyses with other "faulty" assumptions), are certainly factual enough to begin mining in a gradual and building sense.
That is what I surmise from the NR.
Some of my own thoughts:
My rough math shows that about 3 months production from the Leopard fissure should pay for a new plant to double SUF's capacity outside of Marsfontein.
I think their game plan is two-folded at Klipspringer: to build reserves at Marsfontein to justify a lifespan greater than 5 years, and to gradually bring on production at Klipspringer as an almost independent source of cash flow.
The present indicated reserves of the Leopard fissure alone could generate enough to produce over 15,000 carats/month, at rated capacity of the new plant, for over six years! By adding more reserves over this period, adding to the modular plant configuration, and considering how much we don't know about Klipspringer, the growth could get large.
With M1 production around 100,000 carats/per month, and SUF taking 40,000 for their interests, it seems easy for me to build a scenario about a year into the future where SUF can enjoy production over 60,000 carats per month for over five years, based solely on what has been found already at Marsfontein and Klipspringer.
So, SUF revenues could be something like 720,000 carats x US$100/carat(net) which translates into $108,000,000 Canadian, or about $4.00 per share cash flow (roughly)!
New discoveries are obviously additive to lifespan of these projections, and then there are a couple other things like Camafuca, the NWT program, other diamond JVs in RSA with SUF's new friends, and whatever else in the world Dr. Jennings and crew manage to come up with.
As an aside, did anyone hear about a corporate tax cut in RSA? Apparently, the top rate was cut by 5%, giving SUF shareholders a 5% earnings present!?! (Does anyone remember the last corporate tax cut in Canada?)
bday.co.za
Anyway, I just can't believe this is a $7.00 stock!
Regards,
Confluence |
