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

To: Andrew who wrote (5746)	3/1/2000 10:32:00 AM
From: Confluence	Read Replies (1) \| Respond to of 7235

Hello Andrew, The rumour that I heard was that most of the minority shareholders (31%) would not tender (I can't blame them!), and the remaining 15% was held by a fund that was unsure about tendering, or possibly selling their stake to a different investor above SUF's offer. From the way its trading so far today, it looks like those who were expecting this news are already long, and it may take a couple of days for the various analysts to crunch the numbers and come up with valuations and targets. The simplest view that I took was the cash flow of around US$33 million. At current exchange rates, and assuming the dilution due to financing the cashflow to SUF should be about $.80 per share for a long term. Because this is a long life deposit, analysts should use a larger cash flow multiple when determining their target prices. Another way to look at the deal is that SUF spent about US$10 million to acquire a project with a net present value of US$121 million. That seems like a good deal from my perspective, but it will be incumbent on the new president to restore SUF's credibility to the analysts and institutions so that the overhanging negative goodwill gets removed and SUF can resume its valuation on a sum-of-the-parts basis rather than the present cash flow of M1. But then again, I thought the stock was a deal at $5!! From my understanding, the project financing has already been agreed upon with RMB, but I don't see how SUF would be served by announcing this before the minority shareholder issue is resolved. The US$10 in cash sitting in Messina's bank account can now be accessed and utilized by SUF to begin work. Regards, Confluence