Hello Confluence
It really does not matter how big the Camafuca pipe is, that is totally immaterial if it is not economic.
Ekati will have annualized production of 3 million carats. Recent sales brought an average price of $124 per carat, (stones larger that 10.8 carats excluded). Lets assume an early run of mine price therefore of say $150 per carat until some of the lower value pipes are brought into production. So Ekati with proven and probable reserves of 65.9 million tonnes and an average mining rate of roughly 3,270,000 tonnes, will produce in six months, roughly $225,000,000.
Diavik will have annualized production of between 6-9 million carats, so let take the average, 7,000,000 carats times the average grade of roughly $63 per carat. So Diavik with reserves of 37.4 million tonnes and an average mining rate of roughly 2,000,000 tonnes, will produce in six months, roughly $220,000,000 gross.
Now Camafuca has 8,700,000 carats in estimated mineable reserves to 80 metres according to HA at roughly $100 per carat. So SUF's 51% of all of Camafuca's proven reserves would be roughly $444,000,000.
So rather than “six months”, the correct analogy would be approximately one year's production from one of Canada's two diamond mines would equal what SUF will realize from all of Camafuca's mineable reserves. At $17 per tonne, SUF will have to move 51,176,000 tonnes of ore to realize that gross revenue. So even if SUF can produce at the average Canadian mine production rate of 2,635,000 tonnes per year, at $17 per tonne, they will realize an annual gross of just $22,845,000 or roughly 5% of what Diavik and Ekati will generate over the same year . For SUF to gain their entire reserve gross will take a minimum of 19.4 years but I suspect that the mining rate is very very optimistic, especially under current circumstances.
After costs, I would be surprised if SUF realized $4,000,000 annually from Camafuca.
Regarding the fact that Kennecott discovered a pipe in which SUF has 40% share. The point I was trying to make, was not whether SUF participates in the occasional pipe here and there, even if that pipe has economic grades. Up here, it would probably take between three and four pipes reasonably close to one another to make significant mine development feasible. The market understands this. That no doubt is why you are not seeing the same speculation in the Back Lake juniors that Paul is so enthusiastic about, as you are seeing in the Yamba Lake juniors.
The market is quite willing to concede that SUF shares in quite a number of pipes out there perhaps even with economic grade kimberlite, however, the question the market always asks is, Will or can a single pipe or two pipes ever be a large mine?
Unless those pipes are large and run at 3+ carats/tonne and $100+/carat, don't bet on it. Anything less might, just possibly be a small mine, but even if it could, the market probably would not get excited about it especially if it had to be an underground operation.
The point about Yamba is that it has multiple pipe potential, hence greater probability of a significant mine earning numbers similar to what was outlined above and for the next 25 years. The quality of the junior partners is totally inconsequential. The mere fact that they might share in such a prize and are so cheep, with no or few assets, makes them even more attractive because they potentially become buyout candidates.
Very few and only the most uninitiated of investors would buy shares in such companies intending to hold them. These are speculators, not long term SUF investors. Frankly, these are the same people who jump all over internet stocks. Only the most naive holds them at 130 times earnings right? Everyone is hoping for some other poor greedy sucker to be jumping in to support the pyramid.
At least in the Yamba Lake case, the prize or hook isn't possible pie in the sky future revenues, it is a piece of a tangible asset, a diamond mine. In this case at least, there is real potential value underpinning the speculation.
The recent Kennecott pipe might be one of three or four economic pipes, but the odds and NR's do not imply this. The Back Lake targets might all be pipes, but there are apparently only three targets and while the geochemistry is outstanding, all three would have to have economic grades and be 3 or more hectares to be a significant mine. The odds and NR's just do not favour this possibility and the market knows it. The market also knows that SUF is running out of time to prove up all three this year unlike Yamba where exploration can carry on through out the summer and fall.
If SUF could announce three economic Brazilian pipes, the market would probably get even more excited than it will over Yamba, because the cost of development there is probably 20% of that in the NWT and the time frame to achieve production is probably no more than two years.
The market has grown up since the early 90's, and it knows what to look for and how to weigh the possibilities. It will not rush into just any piece of Moose pasture any more, and while there are a couple of other NWT diamond plays with real potential similar to Yamba's, they are not as mature, nor do they have SUF's reputation in the market.
One other thing, there is no way on God's green earth that I have any influence over the market vise a vie these three Yamba juniors. A few small investors may follow my thoughts, but believe me, that does no count for 99% of the share volume on these three over the past six weeks. I am just another poster with no influence what so ever in the real scheme of things.
Finally, I will never dispute the wisdom of developing producing assets, but there is a difference between getting kissed on the porch and being invited inside.
Regards & Good Luck.
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