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

To: buylowsellhigh who wrote (5295)	1/4/2000 2:53:00 AM
From: marcos	Read Replies (2) \| Respond to of 7235

Diamond players find 1999 less than dazzling Retail demand soars, but risk-averse investors shy away By KEITH DAMSELL The Financial Post From far-flung operations in the Arctic to Africa, Canada's fledgling diamond players had a less-than-shining 1999. While retail demand for precious gems soared to record levels, risk-averse investors shied away from diamond stocks because of a wide mix of concerns, from regulatory and safety issues to climbing costs. "Our diamond industry should be flourishing right now," said David Davidson, analyst at Toronto's Newcrest Capital Inc. "But investors by and large are not interested in the sector at this time because companies are having difficulties." It's a far cry from the mid-90s when small investors, bedazzled by diamond discoveries in Canada's north, poured millions into speculative plays. But commercial development has taken much longer than originally anticipated. Shareholders have lost their patience and are now searching for more immediate gains in high tech and other sectors, analysts say. The discovery of a rare diamond-bearing kimberlite pipe is no longer enough to get investors excited. "The market gives no value to blue sky any more," said George Albino, analyst at Toronto's Deutsche Bank Securities Ltd. Aber Resources Ltd. of Toronto is perhaps the best example of the industry's roller-coaster year. Aber and majority partner Rio Tinto PLC of London are co-owners of the Diavik diamond project in the Northwest Territories. A marketing deal with U.S. diamond retailer Tiffany & Co. helped drive Aber shares to a record high of $15.80 on Aug. 19. But by Aug. 31, the company's lofty $850-million market capitalization was nearly sliced in half when the Diavik partners reported project costs would climb a staggering 46% and pushed commercial production back one year to 2003. Diavik got back on track when it received the long-awaited go-ahead from Ottawa in November. It's widely expected construction equipment will be trucked to the remote mine site 300 kilometres northeast of Yellowknife within the next three months, despite continued protests from natives and environmentalists. There was more good news last month when Aber reported a 10% rise in the value of Diavik's sample stones in Antwerp, Belgium. To the surprise of many analysts, however, Aber shares have failed to recover and remain mired in the $8 to $9 range. "Aber is sitting on a very rich diamond play," said Mr. Davidson. "But the market has focused on high costs and delays." Meanwhile, investors remain skeptical about the ability of Toronto's SouthernEra Resources Ltd. to secure new diamond projects in Africa. There's been little good news since the company lost control of the Marsfontein diamond mine in South Africa to giant De Beers Consolidated Mines Ltd. some 18 months ago. November results from the Klipspringer mine were less than expected. Bay Street remains uneasy about the company's operations in troubled Angola. The company is diversifying into platinum but has struggled to raise financing, analysts say. "Where's the future cash flow and where's it coming from?" said one Toronto analyst, who asked not to be identified. Leadership is an additional concern. In October, Christopher Jennings announced he was stepping down as president and chief executive effective Dec. 31. The company has yet to name a new chief executive. SouthernEra's stock market fortunes have plunged a dramatic 74% in 1999, making the company the fifth-worst performer on the Toronto Stock Exchange last year. The miner's market capitalization has plunged from about $240-million in January to the current $50-million range. Ironically, Aber, SouthernEra and others are suffering as precious gem retailers enjoy a banner year. On Dec. 20, De Beers reported 1999 rough stone sales of $5.2-billion (US), a record year. A robust U.S. economy is propelling the sales -- and share price -- of jewellers Tiffany & Co. and rival Zale Corp. Analysts are hopeful the gains will eventually trickle down to exploration and development plays. The sector is poised for a rebound and good news is expected in the coming months. While Aber and Rio Tinto break ground at Diavik, Vancouver's Winspear Resources Ltd. is expected to ask the federal government for the environmental clearance to proceed with its Snap Lake project, also in the Northwest Territories. Meanwhile, David James, analyst at Canaccord Capital Corp. in Winnipeg, is convinced De Beers is about to play a bigger role in Canada's diamond trade. "De Beers would really like a mine in the territory," he said. Mountain Province Mining Inc. of Vancouver is hoping to receive some good news from partner De Beers. The South African giant is expected to decide later this month if it will finance a feasibility study of the junior's AK/CJ diamond property. In addition, De Beers will begin advanced exploration of a promising property in northern Ontario on Jan. 15. The company has applied for a permit to construct a camp for 80 workers and a sampling plant in the James Bay lowlands. canoe.ca