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Gold/Mining/Energy : ABER RESOURCES -- Ignore unavailable to you. Want to Upgrade?

To: George J. Tromp who wrote (1785)	6/28/2000 1:28:00 PM
From: PHILLIP FLOTOW	Respond to of 2006

De Beers' hostile bid is unsurprising' Business Day (Johannesburg) June 27, 2000 Johannesburg - DE BEERS' announcement that it has launched a hostile bid for Canadian exploration group Winspear Resources should not be a complete surprise if signals given by the company over the past 18-months are anything to go by. Ever since starting its strategic review in conjunction with management consultancy Bain and Co, a main theme has been for De Beers to transform itself into a stand-alone diamond company rather than be seen as the diamond wing of mining house Anglo American, with which it shares a significant cross-shareholding. De Beers has also signalled that it wants to move away from being the custodian of the diamond industry to the preferred supplier, which will alleviate a heavy burden off the group's shoulders, as it will no longer have to control the market and buy up unnecessary supply, especially in the lower value goods. With a possible acquisition of Winspear, the criteria of preferred supplier is being addressed. The company, if the deal goes ahead will through ownership of 68% of Snap Lake and the marketing agreement with Canada's premier diamond mine, Ekati be marketing almost 30% of Canadian production, according to broker Canaccord Capital. This will allow it to continue to offer its sightholders (preferred suppliers) the widest possible range of rough diamonds. The broker said that while the bid for Winspear is not particularly large in cash terms for De Beers, it is significant in its location and longer- term potential. Furthermore, if the low- priced Argyle mine in Australia is taken out of the equation, average worldwide rough prices for diamonds come in at 84/ct. The average value at Snap Lake is considerably higher, at an estimated $118/ct for the pre-feasibility study; while Ekati produced stones with an average value of $168/ct last year, although this number would come down in future. More importantly though, De Beers has to find new areas of production, as most of Africa has been declared conflict zones and is therefore not in line with the group's stance against conflict diamonds, while its exploits in Russia have come under fire over recent months and are not looking positive for the future. CIBC World Markets analyst Jack Jones said last week at the announcement of the half-year rough diamond sales figures that "management at De Beers is focusing on diamond mining acquisitions, share buy backs and dividends". Jones said a possible acquisition would also mean that "De Beers will immediately obtain full management control of both the mining operations and the marketing of the diamonds produced" and would not have to rely on other producers. Added to that will be a greater presence in a region that has become the fastest- growing diamond producing region in the world. Future acquisitions in the area by De beers are not to be excluded, said another analyst. PHIL