SouthernEra posts flat loss

SouthernEra Resources (SUF-T) posted a net loss of $24 million (or 88 per share) for 2000, thanks to lower diamond production and a $20.4-million writedown.

The company lost $24 million (90 per share) in 1999. Revenues between the two periods fell to $25.9 million from $48.1 million. The decrease was due to the cessation of mining at the M-1 pipe at Marsfontein during the year. Production at the project during the fourth quarter was limited to gravel stockpiles.

Cash flow from operations for the year was $19.2 million, compared with $37.8 million in 1999.

During the fourth quarter of 2000, SouthernEra lost $20.6 million (76 per share) on revenue of $4.3 million, compared with a year-ago loss of $34 million ($1.28 per share) on $8.8 million. Cash provided by operations was $6 million, up slightly from $5.4 million a year earlier.

The fourth quarter was hit by a $20.4 million writedown of development costs at the Klipspringer joint venture. The company’s carrying value for the project’s plant and equipment is now $13.4 million. That amount is expected to be matched by SouthernEra’s joint-venture partners.

Under a new deal, SouthernEra will retain a half-interest in Klipspringer and act as operator. De Beers Consolidated Mines (DBRSY-Q) and Steppon Investments will split the remaining 50%.

In return, De Beers and Steppon Investments will contribute properties and cover the US$6.5 million needed to complete mine development. The new properties extend the strike length of the favourable Klipspringer fissure system to 7.5 km from 3.5 km.

An independent feasibility study (completed last summer) has pegged Klipspringer’s reserves at 3.6 million tonnes averaging 50 carats per 100 tonnes.

Over a 13-year life, the project is expected to generate US$166 million in revenue and an internal rate of return of 42.9%. The payback period would be 1.5 years after full production begins. The mine’s stones are expected to fetch US$100 per carat.

At the nearby, 70.4%-owned Messina platinum project, development has been accelerated to take advantage of robust metal prices.

The company hopes Messina will be churning out 20,000 tonnes of concentrate monthly by August. Mining will focus on a secondary shaft to avoid development of the US$60-million main shaft, which will begin to be used in 2003. At full steam, the operation will produce about 80,000 tonnes of concentrates monthly.

Messina’s measured and indicated resources (to a depth of 1,000 metres below surface) stand at 26.4 million tonnes averaging 6.3 grams platinum group metals plus gold.

Work continues at the 32%-owned Camafuca diamond project in Angola.

At the end of 2000, SouthernEra had $9.2 million in cash and short-term investments.