SouthernEra sees red as Messina produces

Thanks to a $2.6-million writeoff related to exploration expenses, SouthernEra Resources (SUF-T) has posted a $3.5-million (or 12-per-share) loss for the three months ended June 30.

A year earlier, the company’s loss amounted to $2.3 million (9 per share). Revenues between the two periods slipped to $1.4 million from $7.7 million in the corresponding period of 2000. Writeoffs related to exploration costs were $1.2 million in the second quarter of 2000.

SouthernEra had a cash flow deficiency of $1 million during the recent quarter, compared with positive cash flow of $5.5 million a year ago.

For the first half of 2001, the company’s net loss tallied to $4.9 million (16 per share), including $2.7 million in exploration cost writeoffs, compared with a net loss of $4 million (15 per share) for the same period of 2000. Cash consumed by operations was $1.3 million, a huge turnaround from the $12.7 million generated in the first six months in 2000.

SouthernEra’s half-share of production from the Klipspringer mine was 12,144 carats, down from 130,185 carats in the second quarter of 2000. The drop-off was due to the reprocessing of tailings and stockpiled diabase during the recent quarter. A year ago, ore from the M-1 pipe was being processed.

During the quarter, SouthernEra spent $13.1 million on development work and construction at the Messina project in South Africa. Under the company’s accelerated program, Messina produced its first platinum group metals concentrate six weeks ahead of schedule.

In June, Rand Merchant Bank agreed to participate in a R345-million loan agreement to construct the Messina mine.

Also in June, Messina Ltd., a subsidiary of SouthernEra, reached an agreement in principle with a major carmaker for an off-take contract to provide floor-price protection for platinum and palladium production.

Finalization of the loan is subject to:

• finalization of the floor-price agreement;
• final approval of a completion guarantee; and
• funding of, or acceptable guarantees for, R143 million of project equity.

Messina’s ventilation shaft is now licensed for workers and material. It will be capable of hoisting 30,000 tonnes of ore per month. Stoping activities have begun and will be ramped up to 20,000 tonnes per month. Progress on the main shaft and the larger mine is on schedule for a production startup in late 2002.

SouthernEra operates Messina, where reserves are pegged at 26.4 million tonnes grading 6.3 grams platinum group elements plus gold, with copper and nickel byproduct credits.

In early August, SouthernEra completed a private placement of 2.5 million shares at $3.75 each with London-based mining giant Rio Tinto (RTP-N). The deal ups Rio’s stake in SouthernEra to about 18.5%. Rio’s SouthernEra shares are held by one of its wholly owned subsidiaries.

SouthernEra intends to apply a portion of the $9.4 million in proceeds to development of Messina.