Saturday, April 17, 1999
SouthernEra caught up in gem dispute
Outlook favourable
Peter Kuitenbrouwer
Financial Post
SouthernEra Resources Ltd. of Toronto is caught in the crossfire of a new fight between De Beers Consolidated Mines Ltd. and the South African government over diamond prices that have long been set by De Beers.
And, as in an earlier dispute over ownership of a prized diamond play, the government position appears to favour the small Canadian firm over the huge De Beers.
The dispute centres on a parcel of rough diamonds produced in January from the Marsfontein mine in South Africa's Northern Province, a joint venture owned 40% by SouthernEra. De Beers and a black empowerment group own the rest.
Based on its "price book and sample" calculation method, De Beers puts the parcel's value at $18-million, of which $7.5-million belongs to SouthernEra.
In the past, De Beers would have simply paid the $18-million and shipped the diamonds to its London-based marketing arm.
But the newly appointed government diamond valuer, Claude Nobels, says the diamonds are worth a lot more than $18-million, and has refused to sign the export contract.
It's the first time in recent memory the valuer has questioned the firm. Under the previous system, De Beers controlled appointments to the valuator's office.
"It's not unnatural for a new government coming in to review the benchmark," a government source said yesterday. Blocking the shipment is another move by the black majority government to spread around mineral riches that, in the past, flowed largely to whites. Last year, the mines minister took SouthernEra's side in a fight with De Beers over the Marsfontein find, and announced an overhaul to put mineral riches in state hands.
A higher price for the rough diamonds would mean more tax revenue for South Africa.
In Vancouver, George Burne, managing partner of De Beers Canada Corp., said that if the De Beers cartel is expected to maintain the price of cut diamonds, it must set rough diamond prices.
"Mr. Nobels' opinion of what the price is is very different from someone else's," Mr. Burne said.
While the dispute simmers, De Beers has advanced the $7.5-million to SouthernEra to keep the firm afloat. Having fled fighting in Angola and with its platinum mine still in the planning stages, SouthernEra has one source of money -- Marsfontein.
Kim Freeman, SouthernEra's vice-president of operations, said the payout is welcomed. |
