Canaccord Update on Aber and comments on others.
Aber Resources (ABZ : TSE : $9.60) BUY
Target price: $30.00
52-week price range: $17.40-6.80
Shares O/S: fully diluted 48.0M
Working capital (30/06/98): $123.6M
Market capitalization: $461.0M
Rio Tinto's quarterly production results were just received and the
following short comment on the Diavik Project (under "Major
Developments") was included, and is of no surprise:
Diavik
Feasibility studies continued on the Diavik diamond project in Canada.
The feasibility study report will be completed following the Canadian
Government's decision on the project under relevant legislation, such
decision being expected in mid-1999."
Rio Tinto also noted that in the 1999 first quarter, production at the
Argyle diamond mine in Australia declined to 7.1M carats from 9.6M
carats (100% basis) with Rio owning a 59.7% interest. A financial
breakdown by sector was not given, but a recovery in the market price
for Argyle stones may have largely offset the production decline.
In the April 21, 1999 Daily Letter, we addressed the subject of the
delay" in the Diavik feasibility (but not in the production timing of
the project). We would again repeat that in the case of the BHP/Dia
Met Ekati Mine development, there really was not a formalized, final,
feasibility study announcement and Diavik may not be all that
different, although Aber has suggested that pertinent details may be
available this summer. When Rio's Q1/99 financials are available, we
hope to be able to put the (Argyle) diamond component into a fresh
perspective, but we currently estimate Rio's future annual revenue
flow from its 60% share of Diavik at US$235M or better.
There are three significant events anticipated for the Canadian
diamond sector this summer, one of which is a detailing of Diavik
following federal cabinet approval; and the other two are the bulk
sample results from the Winspear/Aber Snap Lake project as well as the
Monopros (De Beers)/Mountain Province AK project. These three
projects probably represent the second, third, and fourth diamond
developments for the NWT. Aber, Winspear, and Mountain Province
remain focal recommendations. BUY Aber.
Happy investing,
andras |
