Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : WillP Speaks on Winspear -- Ignore unavailable to you. Want to Upgrade?

To: The Fix who wrote (35)	2/22/1999 2:09:00 PM
From: teevee	Respond to of 177

Author: teevee -- Date:1999-02-21 20:38:53 Subject: Psst-wanna buy an interest in a diamond mine? Hi WillP, There has been some recent internet rumors of a Aber takeover of Winspear. I commented earlier on SI as follows as to what I think might be going on..... Here is my guess as to what might be going on...... 1. Aber NEEDS in a very big way, a contracted buyer for their share of production from the Diavik project. Without a guaranteed market, debt financing for Abers share of capital costs for Diavik is unlikely. Unconventional lenders (like the Nevada's for example) would probably want some additional equity, and it would be in their favor, not in the favor of current shareholders(ie. some form of heavy dilution). Should RTP proceed, and Aber doesn't have their share of capital costs, their interest could be diluted(this is where and the point in time when the Nevada's could step forward as a lender of last resort-to the detriment of Aber shareholders)....time is running out for them. Unfortunately for Aber, the only likely supplier of a sales quota or guaranteed buyer that would satisfy bankers or other lenders is De Beers........ 2. Hmmmmm....I wonder if De Beers has the upper hand here? Would they insist...ooops...politely suggest... that Aber make available through a farmout to DeBeers, their exploration lands, interests and projects outside of Diavik (this would include Snap Lake)? I can certainly understand why Winspear management might be just a little nervous about DeBeers.....the "hard ball" hasn't even started yet. The southern kimberlite field already appears to be far more important than the northern one. DeBeers knows this and will act accordingly. Winspear and SUF are the only juniors left in the southern type II kimberite field that DeBeers don't have their hooks into. Additional comments are: The current thinking is that Aber wants to sell their interest in Snap Lake and other exploration projects for a number of reasons: 1. Aber may believe the value of its interest in Snap Lake and other exploration projects and lands are perhaps not reflected in Aber's share price. 2. Aber wants to concentrate on diavik(Aber needs to raise through debt and or equity, a lot of money for their share of capital costs for diavik-- exploration expenditures elsewhere AT THIS TIME would likely be considered a drain on moneys "earmarked" for Diavik). From this perspective, ongoing costs/expenditures not related to Diavik are likely viewed as unwanted liabilities. 3. Perhaps by spinning off their exploration interests into another public vehicle, they could capture some value( the "talk on the street" was likely a trial balloon to guage potential interest). I suspect that in this case, nobody is interested in underwriting a minority interest in a project where someone else is the operator. 4. A direct cash sale of their interest in Snap Lake will also be dificult as it is a minority interest and as such, IF a buyer was found, the price likely would be a low ball offer.Also, we don't know if winspear has a "right of first refusal"-I would guess that they do and this would also make it tough for Aber to sell. Bottom line is I don't think Aber is considering a takover of Winspear. Any further comments out there appreciated. regards, teevee Top Reply Author: WillP -- Date:1999-02-22 05:50:44 Subject: No Thanks...Trying to Quit :-) Ahh...the speculation continues. Some observations: #1. Aber has the right to market it's own diamonds, and has the 'option' to do so through RTZ, De Beers, or any other interested party. Some are more likely than others. Certainly de Beers is very willing. Securing a marketing agreement should be a 'snap' if you're willing to include de Beers in the mix. #2. AberEx is a pretty widely circulated rumour, isn't it. (It even appears on some recent property maps, btw.) #3. Mining has always been an 'incestuous' business with two companies owning parts of each other and rivalling shares of a third. The ownership and rights to many properties is a complicated thing. Snap Lake will ultimately prove no different. These guessing games are therefore frequent...and anything is possible. #4. Raising debt money may not be as hard as you suspect. There has not been a great deal of debt financing for new Canadian mines recently, given metal pries. With permits in hand and a bankable feasibility completed...plus a very short payback period...methinks it isn't a daunting task to find debt financing. #5. I don't know what would be more benign to Winspear...Aber as one entity, or as two. The status quo has worked to date. Then again so did the US/USSR. :-) However...for entirely different reasons...I arrive at your bottom line. I don't think that Aber is about to take over Winspear any time soon. Regards, WillP