Hello all,
I happened to come across a recent research report from a South African firm, BOE Securities, written by the respected diamond analyst Hilton Ashton just after the visit to Klipspringer in early February. He presents a very different viewpoint from most of the co-opted Canadian gold/metals analysts, and upon reading, it struck me that perhaps this difference in perspective is at least partly responsible for the blase reports from all the Canadian analysts except those at TD and FM.
It is a nine page report, so I will attempt to summarize. His exact words are quoted. For anyone wanting a full read, send me a PM.
Cover Page:
Title: Southernera
Sub-title: "Should Seek Primary Listing In South Africa"
Recommendation: Strong Buy
- Klipspringer project progressing exceptionally well, mainly as a result of M1
- While M1 is being mined, Leopard fissure is being developed. It is the longest South African fissure system under the control of one company.
- "SUF still requires at least one more year to fully define, thru exploration,the extent of kimberlite mineralization on the Klipspringer property. Numerous discoveries of indicator minerals and diamond bearing fissure, blows and alluvial gravels make the blue sky potential very exciting."
"Recommendation: SUF is cheap at $7.05 per share therefore rates a BUY. Our DCF valuation is C$14.93 per share with on- and three- year price targets of C$20 and C$28 respectively. These targets are dependant on favourable investor perception that the diamond industry is past its worst."
"We believe that SUF should seek to move its primary listing to Johannesburg. This will attract many South African investors both private and institutional and will enjoy a better rating than afforded it by the Canadian investors. Offshore investors are just too far from the Klipspringer Project to appreciate the good work, results and prospects."
The body of the report covers details on Marsfontein, background, the JV with De Beers and the new black empowerment group, the mine visit, and gets into some detail about exploration at Marsfontein. The three main points made re: exploration were:
1. Garnets and spinels near M1. Two areas near M1 show similar indicator mineral intensity as those originally found over M1 and may be traces of pipes, blows or could be associated with the Leopard fissure system, but are definitely source anomalies.
2. Garnets and spinels in soil on a surface anomaly 500m south of M1 have also been found associated with surface gravels. Gravels have been found over large areas near M1, which suggest that a separate alluvial deposit may occur.
3. Another kimberlite, M3, has been found with drill testing to 100m with a preliminary grade of 30 cpht that mgmt believes understates the true grade.
"These additional diamond bearing deposits have not yet been accurately defined therefore cannot be classed as ore reserves. However, management feels confident that the Marsfontein farm will have adequate reserves to extend the life of the joint venture well beyond the end-2000 when M1 is exhausted. For valuation purposes, we conservativeley assume that the Marsfontein JV will mine 500 000 tonnes yielding 50 cpht in 2001 and 300 000 tonnes yielding 30 cpht in 2002."
(That was the synopsis of the first 4 pages. Rest to come in a bit.)
Regards,
Confluence
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