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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Michael Burry who wrote (9750)	1/26/2000 4:42:00 PM
From: Tomato	Respond to of 78485

I just bought some ABERF (ABZ.To), Aber Resources. It's a diamond stock. I think it fits as a value stock. Bad part: They've got problems with the Canadian govt. and Provincial regulatory agencies and native groups about getting the necessary permits for building the 2nd (or maybe 3rd) diamond mine in Canada's NWT. They say if things aren't resolved in the next few days that they will be delayed by one year in their plans to build a mine with a start-up in 2002 or 2003. Good parts: JV partner: Rio Tinto PLC. Aber owns 40% of the Diavik project that has an in situ value of $4.3 billion US. 56 mil shares fully diluted. Share price is about C 8 or US 5 9/16. Of this I think they have C$4 in cash [got that number from a discussion site so I can't vouch for it and can't find the number in Aber's web-site} and a 16-32% interest (they're litigating whether they own 16% or 32% now) in another diamond project (Snap Lake) worth $4.2 bil. For comparison, the Ekati mine, Canada's first diamond mine, owned by Dia Met and Australia's Broken Hill Proprietary, has an in situ value of $7.2 bil and Dia Met had a $2.1 bil interest in it. Diamet's in situ value to mkt. cap ratio was 4.4 when Canaccord Capital did a comparison in Nov. At that time, Aber was trading at C$8.65 and its in-situ value to market cap ration was 13.6 to one and that number didn't include Aber's 16-32% interest in the Snap Lake, $4.2 bil property. Assumptions: Cash $4/sh Interest in Snap Lake: 16% (lowest figure) of US $4.2 bil= $672 mil . Assume current value is 10% of that number, or $67 mil. Divide by 56 mil sh and you have another $1.19/sh that would be double that if they succeed in the lawsuit ( I think they'll win). So, at around C$8/sh, the market is assigning around $3/sh to Aber's interest in the Diavik project, or C$168 mil worth of a $C6.18 bil in situ (US $4.3 bil) value. Other things to consider: Tiffany bought about 14% of Aber at C$13. They have a marketing agreement with Aber that frees Aber in large part from the monopoly of DeBeers and the Central Selling Organization. Franco Nevada, an historically shrewd company that mainly loans money to mining companies in return for a royalty percentage, owns about 13% of Aber. Worst case scenario...the govt. up there screws Aber and they can't build a mine. Margin of safety then.....not so good. Consequence: the govt. screws itself in that it won't get the taxes flowing from the mine and the economically poor area stays poor.