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

To: Andrew who wrote (1632)	6/17/1998 12:39:00 PM
From: VAUGHN	Read Replies (2) \| Respond to of 7235

Hello Andrew I have not made a close enough inspection to offer you any knowledgeable insights here and frankly, there is such a variation and this is such a new industry for Canada, I suspect there will be both a comfort and learning growth curve with Canadian investors. Just take a look at Diamet. It is about to go into production and by any analysis, it has to be trading at a ridiculous discount to projected earnings. As a benchmark, you should probably take a look either at Ashton in Australia (not Canada) and DeBeers. Both are pure plays I believe. If you were to use gold miners as a comparison, you would see a huge variation, but again, the pure play Canadian market leaders (producers) should give you a rational idea, Barrick, Placer, et all. I personally believe that once Diamet has two to three years production under its belt and is nearing full production in the years that follow, all Canadian diamond plays will be valued in comparison to its NAV. There must of course be adjustments for unique aspects, risks, etc., of each play. It seems to me that investors initially get into most plays and perhaps especially diamond plays for the potential big bang. That is only going to happen when either the successful explorer, having gained market attention, either a)is made a tremendous buy out offer (has not happened in the diamond game so far), or b) continues to announce exploration success after success (such as Diamet, Aber, Southernera, and Mountain Province) In the case of MPV however, I am increasingly of the opinion that its relationship with DeBeers while advancing field progress, is anchoring its price as the market rightly or wrongly does not anticipate either a buy-out, imminent production or that the company will not dilute equity or lose play share in return for a development free ride. Up until now, for me, other than management's obvious credentials, what was so attractive about SUF was their continued exploration success, their refusal to materially dilute equity, and the speed of which they were gaining cash flow (discovery to mine in just a few years). Remember the market really only fell in love with them late last summer when they made what seemed like a never ending series of exploration and progress announcements. There was momentum, and while inevitably, there had to be a rationalization and consolidation, as long as they continue pursuing new exploration targets while they put Klipspringer, M-1 and Camafuca into production, the market will continue to give this play its attention. I still maintain, Canadian exploration success is the key. SUF needs the stability that only two or more high grade pipes in Canada will afford. The instability of their African exposure and now including the market's reticence about SA exposure, will probably keep the market from assigning significant trading multiples. This is unfortunate in the short term, but as long as they can get through the next few years without further incident, legal or political complications, the market will again assign a higher multiple to Klipspringer and their RSA exploration. Resource stocks should all be in recovery by then and I anticipate that this sector will be the hot one by 2000 - 2001. Just my opinion Regards