Some stuff cherry picked from SH, FYI
Here's a second comment from the National Post:
Not the time to hedge gold output
Will benefit most if metal stays hot, Bill Belovay says
Sonita Horvitch
Financial Post April 24, 2002
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A diamond and platinum producer's stock that he considers offers good value:
- SouthernEra Resources Ltd. (SUF/TSE) $4.73 ($5.47 - $2.13). Based in Toronto, this
company holds producing diamond interests and a platinum group metals property in South
Africa. It also explores for precious metals and diamonds in other countries including Canada.
"The company is increasing its focus on platinum and I like this change of focus," says
Belovay. In South Africa, the company has a 70.4% stake in Messina Ltd. That firm in turn
holds 100% of the Messina mine, which is about 250 kilometres north of Johannesburg and is
coming into production. By the first quarter of 2003, this mine is expected to produce 160,000
ounces a year of platinum group metals -- which include platinum, palladium, rhodium and
ruthenium. Dividing the market capitalization of SouthernEra's stock by the number of ounces
of platinum group metals in the ground implies that an investor is paying US$7.63 an ounce
for these metals. That compares with US$37 an ounce for North American Palladium Ltd., a
Toronto-based palladium-platinum producer with a mine north of Thunder Bay, Ont., Belovay
says.
shorvitch@nationalpost.com; Jones Heward Investment Counsel Inc. may hold positions in the securities
Haywood Securities Pushes SouthernEra On Its Way To AIM
The results for 2001 from SouthernEra Resources do not, at first glance, reflect the great
changes that have taken place in the company since the new management team under the
chairmanship of Dr Chris Jennings took over in the summer of 2000. Diamond sales generated
revenues of only US $3.8 million in 2001 compared to US$17.3 million in 2000, but this was
due to the cessation of mining at the high yield MI open pit diamond pipe at Marsfontein. With
no contribution from this the company had to rely on sales of diamonds from the treatment of
low grade stockpile and tailing materials and limited underground fissure material from the
Klipspringer Joint venture.
Klipspringer, however, is the key to the future and diamond production commenced last year
from the newly commissioned No 4 level approximately six months ahead of schedule.
SouthernEra now anticipates that production from it should reach 186,000 carats/year - nearly
20 per cent above feasibility estimates - when full capacity of 33,000 tonnes month is achieved.
This is one of the reason why leading Canadian stockbrokers Haywood Securities are
recommending SouthernEra so vigorously, and the other is the potential from its 70.4 per cent
owned Messina mine which is also in South Africa.
Until recently it was thought that SouthernEra would be a significant producer of diamonds and
platinum group metals by the end of this year and getting the full benefit of carrying operating
costs in rands and selling its products for dollars. However, as Haywood points out, the recent
decision to accelerate Phase 1 in the Voorspoed section at Messina by deepening the shaft now
rather than late in 2003 as per the original feasibility, will postpone production from the platinum
group metal project until the third quarter of 2003.
The brokers, however, see this as a positive move. For a start the shaft deepening will be easier,
safer and quicker to carry out before production commences. Second, it will boost throughput
from 80,000tonnes a month to 120,000 tonnes a month, Third, even though it will defer cash
flow of US$20 million by a whole year, it will boost cash flow thereafter by a similar amount
year on year. As a result production of PGMs is expected to rise from 110,000 to 167,000
ozs/annum, and all at a cost of only US$22 million.
The original plan was based on the need to conserve cash, but by deepening the shaft now
Haywood reckons that the only bottle neck will now be the mill as the number of working levels
will be increased from four to seven. It will also, according to the company, boost the net
present value of Phase 1 by 20 per cent by reducing capital and operating costs; ensuring that
the mill is used to full capacity; and reducing the mine life from 17 to 12 years. In the meantime
the Phase 11 feasibility in the Doornvlei section is also expected this summer.
SouthernEra has plenty of other strings to its bow with exploration activities in Canada, South
Africa, Gabon and Australia all producing positive results. Much interest is now focussing on the
potential of the huge Camufuca kimberlite pipe in Angola now that peace seems to be returning
to that country. But the other thing about SouthernEra which Haywood forgot to mention is that
the company has made a policy decision to seek a dual listing on AIM, according to insiders.
SouthernEra would be quite a prize for AIM and hopefully the London market would help
double the share price from its present level towards Haywood's revised target of C$10 per
share ( 438p)
rom minesite.com:
A little number crunching, if you find errors, please feel free to debate! )
Haywood had a npv of first stage production at Messina with 160,000 oz. production at $5/share with a 10% discount rate, with production being delayed and increasing by 80,000 oz./yr. they increased the npv by a conservative $1. to a total of $6/share.
Patrick Evans recently stated that second stage production could be in the neighbourhood of 400,000/oz./year! And the third stage could be about the same as the second. Eventually when both of these are built and running that could more then quadruple production from stage one levels!!! We are one year from production at phase 1, so adding 10% to $6, we get a value when operation of $6.60, stage 2 and 3, when operatiog then should about quadruple that number to bring it to $26.40/share. Then, of course there's millennium and whatever other pgm properties get developed, and then of course theres diamonds. The underlying value here could grow by a huge factor!!!
I remember rxd ran to $15/share a few years back on nothing substantial, who knows what suf could do? We have the underlying assets and aggressive, intelligent leadership at the helm. It should be fun! I'm glad I loaded up!!!
Regards, dcj |
