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Gold/Mining/Energy : Winspear Resources -- Ignore unavailable to you. Want to Upgrade?

To: maintenance who wrote (24179)	8/18/1999 8:38:00 AM
From: Letmebe Frank	Read Replies (4) \| Respond to of 26850

The Huge Profit Potential of Diamonds in Canada (From MPV Thread) resopp.stockscape.com The discovery of diamonds in northern Canada in 1991 touched off one of the biggest staking rushes in Canadian history, involving more than 185 companies. Dia Met Minerals was a junior company set up to fund two geologists in their search for diamonds. Today, it is one of the very few institutional class diamond producers in the world. Along the way, Dia Met gave its early investors a one hundred to one return. One of the biggest mining companies in the world spent US$700 million to turn Dia Met's discovery into one of the most significant diamond mines in the world. That mine began production late last year. Partly because there are very few good companies involved in diamond exploration and mining, most investors know little about this extremely profitable industry. De Beers, the leading diamond company, complained of a disastrous year in 1998 that saw its profits slashed to only US$639 million. The price of De Beers' stock has more than doubled in the past few months as the company and the industry are rapidly recovering from the slump of the past two years. Other diamond company stocks remain stuck in the cellar as the good news about the recovery in diamond industry goes largely unnoticed. Almost ignored by most investors is the fact that Canada has now become an important producer of diamonds. Even more important, the process of developing the immense diamond wealth of northern Canada is only just beginning. Several more deposits have already been discovered, and are being rapidly advanced toward production. There is also excellent potential for additional discoveries. Leading the pack is Aber Resources, with a 40% interest in a project that is almost certain to become Canada's second major diamond mine. A well regarded British brokerage firm, in an attempt to get through to its readers, compared Aber's diamond deposit to a gold deposit. The analogy is stunning. They stated that Aber's Diavik deposit "is the equivalent of a gold mine with 20 million ounces in reserves / resources, with a cash cost of production of US$60/oz and capital costs of just US$30/oz of reserves. We know of no such gold mine in the world." Aber's deposit contains 26 million tonnes and has an average value of US$218 per tonne. The grade of the ore mined in the early years will be even higher. The operation will mine more than 1.5 million tonnes per annum, with the operating cost projected to be US$42 per tonne. Aber is only just beginning to get the respect it deserves as the next world-class diamond producer. Several other companies, that are not far behind Aber and Dia Met, remain almost totally ignored. The diamond deposits being found in northern Canada have unusually high values of diamonds. Of the ten highest value kimberlite pipes in the world (measured as US$/tonne of diamond content), seven, including the top three, are located in northern Canada. De Beers, and other major mining companies are well aware of the incredible value of the Canadian diamond deposits. These companies are spending enormous amounts of money exploring for new deposits. Virtually all of the ground is held by Canadian juniors, who, as usual, were the quickest to take action. The juniors are getting excellent deals from the majors, who are competing for the rights to participate in these potentially profitable projects. For example, Dia Met's major company joint venture partner provided US$700 million to fund the project to production to earn its 60% interest. Currently, most diamond production comes from Africa and Russia. Even though it has only been producing diamonds for a few months, Canada is already the largest producer of gem quality diamonds in the "first world". Its role in the diamond industry will escalate rapidly over the next few years. Investors interested in the Canadian diamond industry have a range of options, from a profitable, institutional-class mining company, to the explorers with a one hundred to one pay off potential. Several companies that have already made discoveries offer a comfortable balance between risk and reward. The diamond industry, like all resource sectors, went through a rough time over the past few years. The share price of industry leader De Beers fell to near $11, less than one third of its level of first half 1997. De Beers has already recovered to $25, reflecting the substantial turn around that has already occurred in the world diamond industry. The other diamond companies have not yet made a real move. Dia Met's Canadian project is just reaching full production levels. Upcoming earnings reports will focus attention on the huge profit potential of the Canadian diamond deposits. Aber's project is moving quickly towards a construction go-ahead, and is therefore attracting the attention of institutional investors. The attention that these two leading companies are bringing to the Canadian diamond industry is sure to generate interest in the lesser known companies that also represent outstanding value.