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

To: PHILLIP FLOTOW who wrote (1919)	8/12/1998 10:44:00 AM
From: VAUGHN	Read Replies (1) \| Respond to of 7235

Hello Phillip I had an extremely interesting meeting with MVI Marketing yesterday. As I understand it, this is the firm that markets the production of Argyle indirectly through a third party involving the Indian market buyers and manufacturers. One discussion involved the current state of the diamond rough sales market. Apparently conditions can change radically within a two-month cycle. Just now, due in part to the state of the Asian markets and in part due to the success of the consumer jewelry market in the U.S., a vendor with Indian Goods in Antwerp right now probably just sold them as he sat at the table. The demand for diamonds typically used in the low end consumer jewelry market is voracious right now. On the other end, apparently vendors of the upper end rough are not seeing quite so much demand probably due to those aforementioned markets, and there is some downward pressure on quality prices, no doubt being resisted by DeBeers by withholding this type of rough from the market. What interested me most about this market cycle, was the implication with regard to SUF's decision to market Klipspringer's production through DeBeers for five years. The general sentiment of shareholders about this decision was negative. The feeling prevalently posted, was that SUF was giving up profits that shareholders did not otherwise believe they had to do. In retrospect, however, this may have been a very astute move on CJ's part and an insightful reading of current diamond markets and business cycles. He guaranteed SUF and shareholders a very attractive price for five years in a market that very may well be depressed for a year or two, possibly longer. Hats off to CJ and who ever else was involved in this decision. If you wonder why DeBeers price is in the tank, we need look no further than to their policy of withholding goods in market downturns. That hits right at the bottom line. However, I would not necessarily look to DeBeers as the bell-weather of the diamond mining industry as those at the other end of the market are doing just fine thank you. Argyle mines 99% "Bort" and about 30 "Pinks" a year. They can not keep up with demand for the Bort right now which is where 90% of their profits come from. Apparently the vast majority of American consumers do not care about quality, all they want is the lowest price possible that will put a smile on the face of who ever will be wearing the flash. SUF profit margins should be looking very attractive for awhile in comparison to many, if this market downturn continues. Regards