Winspear reflects a highly leveraged play on Snap Lake., which offers higher rewards but as well higher risk relative to price swings.,
and trading opportunities vs. Aber at this time. Several reasons may
exist for the parody of sorts. One may be a post financing blues., more
shares more dilution., maybe the fact many early investors in Aber were also investors in Winspear., the fact Aber seemed to pull back
from Snap Lake monetarily may have as well fractured a shareholder
base., margin calls., so many intertwinning factors the least of which
I could hang my hat upon., and say "this is the reason.," post Brex
syndrone., precipitated by the Brexs., the Delgratias., the Cartaways.,
a whole host of reasons., Aber being an imminent producer being treated as Gold mining stock.. as such a weakening in marginal
raw diamonds and the perception that the future growth is centered
in Asia., when in reality the US has been a continued growth area
for high grade stones. Many times the market overaccentuates the negatives without weighing the overall implications. I realized last
December., and it takes no amount of brilliance to figure this one
out., that given an enviroment of weakening demand for marginal
diamonds and the Asian problems of Japan and Indonesia., that
downward pressure would be exerted on producers., i.e., DeBeers..,.
and the near term producers as well would suffer. The niche enviroment being producers of large gem quality stones where demand is strong., and DeBeers has been stockpiling inventories
while letting small rough slid. Many articles refer to these facts not
only on DeBeers website., but sources across the internet. What are
the implications., in terms of these companies.? The closer the Diamets., and the Abers approach production the more the leverage
to diamond prices., because diamonds are tied to world demand.
The only way to survive from an investors viewpoint is to reach the
niche areas., and these stocks have performed according to my
expectations., Rex.mining., Southernera prior to the DeBeers debacle. 112 million carats are currently produced annually., of which
approx 20mil are high gem quality stones., of which there is steady
demand. At any given time DeBeers can ramp up production on the
Orapa or Venetia and fill the void created by the declining future production of the Argyle. The Orapa on a declining scale of prices would not be profitable very long without the shield of the cartel pricing. So there is a supply of is marginal quality diamonds of nominal sizes., i.e. DeBeers marketing campaign is to push diamonds
below 1.0 carat as engagement rings. This in itself provides ample
evidence of the glut of small stones. Given this enviroment., as well.,
Winspear has demonstrated in this sample that large stones exist., as
well in excellent percentages., so consequently the REWARD.
Aber like many near term producers suffer from the perception or lack
of news syndrome., the intermediate vacuum created from moving from exploration to production., much the same way Diamet lingered for several months pre-production. The problem as I see it., will either
be prolonged depending on world diamond demand or mitigated as
Japan and Indonesia re-emerge from economic doldrums. A call on
the Asian markets will be a call on the diamonds., by that producers.,
and near term producers., the speculatives run their own cycle.
On a more positive note., Aber production and Diamet production should be welcomed with a better market as the year 2000 approaches with increasing demand worldwide anticipated. With this
in my., I think the Abers., Diamets., Southerneras., Rexs are the
vehicles to achieve growth. Winspear could become a near term producer depending on several factors decided by feasibility studies
and tonnage outlines. They have passed 2 critical milestones., one
being grade., and gem quality., the third remains to be seen.
However I would say from the last weeks action., it is a resounding
yes.
Sincerely
George J. Tromp |
