SouthernEra posts wider loss (May 31, 2002)

Diamond miner SouthernEra Resources (SUF-T) has posted a first-quarter net loss totalling $1.4 million.

The loss translates into 4 per share and compares with a year-ago loss of $800,000 (or 3per share). Revenue between the two periods slipped by $1 million to $600,000. Cash flow consumed by operations leapt to $1.5 million from $300,000.

While the average grade of material from the 50% owned Klipspringer diamond mine in South Africa increased to 52 carats per hundred tonne from 17 cpht, throughput dropped by 75% to 36,825 tonnes. First quarter production was 15,500 carats, down from 25,443 during the first three months of 2001. Of that, 7,752 carats went to SouthernEra’s account, down from the year-ago 16,205 carats.

During the quarter, SouthernEra focussed its efforts on development work and construction at the 70.4% owned Messina platinum-group-metals mine in South Africa. In all, SouthernEra spent $9.3 million at the mine during the three months.

The company plans to go ahead with an immediate deepening of the Voorspoed Main shaft at Messina. The project will send the shaft bottom from its current depth of 432 metres to 730 metres. The move is expected to boost phase 1 production by 50%. The plan calls for production to hit 80,000 tonnes per month by the end of the 2003 third quarter. The rate is expected to climb to 120,000 tonnes per month by the end of the first quarter of 2004. The expansion will not affect the company’s accelerated production plan at Messina, which will continue to produce at 20,000 tonnes per month.

The deepening comes with a price tag of US$22 million. About US$20 million in cash flow will be deferred from 2003 to 2004. Thereafter cash flow is expected to generate an additional US$20 million in cash flow each year, assuming no changes in metal prices. The company is currently in talks with its bankers to fund a significant portion of the project.

At last count, Messina’s reserves stood at 26.4 million tonnes grading 6.3 grams PGMs plus gold, with copper and nickel byproduct credits. The deposit should keep a proposed concentrator fed for 17 years.

On the exploration front, ground magnetic, electromagnetic and gravity geophysical surveying over several kimberlite targets on the Majestic and Crown projects in northern Ontario are expected to wrap up by the second quarter.

Diamond exploration also continued in the Slave Craton, Northwest Territories and within the Superior Craton, Ontario.

At quarter’s end, SouthernEra had $8.3 million in cash and equivalents.