Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : SOUTHERNERA (t.SUF) -- Ignore unavailable to you. Want to Upgrade?

To: Goalie who wrote (4389)	8/24/1999 12:17:00 PM
From: Goalie	Read Replies (1) \| Respond to of 7235

From today's Financial Post: Blow to Diavik as diamond mine costs rise 46% Aber share price hit Keith Damsell Financial Post The development of Canada's second diamond mine has suffered a major setback with news the Diavik project will cost 46% more than expected and begin production a year later than forecast. The final price tag for Diavik will be an estimated 1.28-billion, $405-million more than forecast in the firm's 1998 pre-feasibility study. Commercial production at the Northwest Territories mine has been pushed back nine to 12 months to the first half of 2003. To make matters worse, Diavik will mine fewer stones than expected at a higher cost. About 1.5 million tonnes will be mined annually over the estimated 22-year lifespan of the mine. Many analysts were optimistic Diavik would process 1.9 million tonnes each year. It will cost $85 to process each tonne of ore during the first 10 years of production, 44% more than the forecast $59 per tonne to process ore for years three through nine. The details are found in the Diavik feasibility study received on Aug. 18 by the project's partners, Aber Resources Ltd. of Vancouver and British mining giant Rio Tinto PLC. Mine manager Diavik Diamond Mines Inc. and Aber released the news late on Friday. The cost increases and production delay surprised many industry watchers and led to an exodus of Aber investors. The stock fell 28%, down $4.40 to $11.10 on the Toronto Stock Exchange yesterday. About 1.3 million shares were traded, about 15 times the stock's average daily volume of about 90,000 shares. "This is a blow to people's enthusiasm," said David Davidson of Newcrest Capital Inc. of Toronto. Newcrest, along with Yorkton Securities Inc., cut Aber from a "buy" to a "hold." Diavik "has been pushed far enough out now that its beyond many people's investment horizon. For the short term the stock's going to tread water," Mr. Davidson said. "These numbers were totally unexpected," added a second analyst who asked not to be identified. "What do they know now that they didn't know a year ago?" The $30-million confidential feasibility study found cost increases "across the board," said Alan Bayless, an Aber spokesman. The complex mining project about 300 kilometres northeast of Yellowknife proposes the construction of earthen dikes around four kimberlite pipes that lie in the shallow water of Lac de Gras. The federal government is widely expected to give Diavik environmental approval in September. Aber must finance its 40% of the project, a figure that has ballooned to $512-million from $350-million. "We're still very keen to go ahead and put the project into construction," said Mr. Bayless. The company has $213-million in working capital and expects to raise additional funds through debt financing. The new forecast added fuel to environmental concerns. "This raises a lot of uncertainty," " said Kevin O'Reilly, research director of the Canadian Arctic Resources Committee. The Yellowknife-based group is demanding a more detailed review of the diamond project. "You expect companies to get their financials right. If they can't get that right, what does it say about their environmental processes?" Diavik's higher costs and delay failed to shake the resolve of Aber's major shareholders. "We think very long term," said Mark Aaron, spokesman for Tiffany & Co. The New York diamond retailer signed a $104-million equity and marketing deal with Aber last month. As part of the agreement, Tiffany acquired eight million shares at $13 each. The message was much the same from Franco-Nevada Mining Corp. Ltd. The Toronto mining royalty company controls about 8.6% of Aber's 53.8 million shares. "We're supportive shareholders," said David Harquail, its senior vice-president. **********************************