SouthernEra eyes losses as mines develop

With $2.7 million in exploration cost write-offs, SouthernEra Resources (SUF-T) posted a loss of $1.2 million for the third quarter of 2001.

The loss, which translates into 3 per share, compares with year-ago income of $700,000 (3 per share). Revenue slipped to $1 million from $5.1 million between the two periods. Conversely, cash flow from operations climbed to $2.5 million from $500,000.

For the first nine months of 2001, SouthernEra’s net loss was $6 million (19 per share), just less than twice last year’s net loss of $3.3 million (12 per share). Cash flow dropped dramatically to $1.3 million from $13.2 million the previous year.

SouthernEra’s 50% cut of diamond production from the Klipspringer diamond mine in South Africa added up to 10,100 carats on throughput of 82,200 tonnes, or an average of 12 carats per hundred tonnes. A year earlier, the yield was 91,700 carats from 137,600 tonnes, or 67 carats per hundred tonnes. During the latest quarter, mostly stockpiled diabase fissure material was processed. During the same period of 2000, ore from the M-1 pipe was being processed.

In September, Diamond production began on the newly commissioned no. 4 level at Klipspringer some six months ahead of schedule. SouthernEra estimates that full production (expected sometime in the third quarter of 2002) will total 186,000 carats per year, or about 18% above feasibility estimates. The mine is part of a joint venture with De Beers Consolidated Mines, now a subsidiary of Anglo American (AAUK-Q) and Steppon Investments, a De Beers-associated black empowerment group.

Also in September, SouthernEra’s 70.4%-owned subsidiary, Messina, satisfied all conditions for a R345-million (US$40-million) loan to construct the Messina platinum-group-metals (PGMs) mine in South Africa. During the month, under an accelerated production program, Messina shipped its first PGM concentrate. The mine remains on schedule and budget for a production startup in the last quarter of 2002. Development expenditures during the recent three-month period at Messian rang in at $22 million. Preparations for a second phase feasibility study at Messina project has begun, a bankable feasibility study is expected to wrap up by mid-2002.

In October, the company acquired another 9 km of the Bushveld’s UG2 and Merensky reefs, which, combined, host the world’s largest platinum deposits. The new property, dubbed Millennium, sits on the eastern limb of the Bushveld igneous complex, just north of where it is cut by the Steelpoort fault. Here, the reefs dip 12-15, far shallower than at Messina, which also sits on the eastern limb. A drilling program will begin shortly.

In August, Rio Tinto, the company’s largest shareholder, upped its stake to 18.5% via a private placement, 2.5 million common shares at $3.75 apiece.