SouthernEra holds firm at Klipspringer property

Rumors of a potential breakup in ownership of the producing Klipspringer diamond project in South Africa’s Northern Province are unfounded, says SouthernEra Resources (SUF-T).

The embattled company’s latest troubles fall on reports in the daily press that De Beers Consolidated Mines (DBRSY-Q) has widened its sights to include the entire 52,844-ha property, instead of the disputed 439-ha portion of the Marsfontein farm. That portion of the farm covers part of the high-grade M1 kimberlite pipe (minable by open-pit methods) and was recently the focus of a now-dropped legal battle between SouthernEra and 29 heirs to the original mineral rights holders, who formed a deal with De Beers.

“We will not negotiate anything outside of Marsfontein,” SouthernEra President Christopher Jennings told shareholders during a conference call.

“We believe that if the minister [of mines for South Africa] exercises Section 24, it will not violate the heirs’ constitutional rights, as we have offered them the same compensation as De Beers.”

Section 24(1) of the Minerals Act of South Africa permits expropriation of mineral rights by the minister provided that compensation for the expropriated property is mutually agreed upon or achieved through arbitration.

Jennings says this avenue may be the only option left to SouthernEra as negotiations with De Beers have failed to come to any mutual agreement.

However, he was confident the company would gain some interest in the disputed land, but added that its exclusion does not justify its drop in market value.

Contrary to reports in the daily press, most of the Klipspringer property is under option to, or wholly owned by, SouthernEra. This includes the Sugarbird Blow, where open-pit mining is continuing, and the Leopard and Sugarbird fissures, which are being developed as part of a feasibility study. The portion of the Marsfontein farm that is not under dispute is a joint venture between SouthernEra and Randgold and Exploration of South Africa.

A spokesman for De Beers could not be reached for comment.

Meanwhile, the Leopard fissure has been intersected by drilling at a depth of 485 metres below surface and has been extended eastward along strike for 420 metres. Although no grades were reported, diamond-bearing kimberlite fissures ly retain their grade consistency.

SouthernEra produced a total of 21,866 carats of diamond in the first quarter. Half this production came from the Sugarbird Blow and fetched US$108 per carat on the market, which is $8 more than was originally anticipated.

The remaining production came from the jointly owned Lou River concession in Angola, where production is expected to double to 300 carats per day in mid-July.

SouthernEra lost $2 million during the three months ended March 31, compared with $214,000 in the corresponding period of 1997. Included in the recent quarter were writeoffs of $700,000 in expenses incurred on two properties in Canada’s Northwest Territories.

Capital expenditures and exploration costs at Klipspringer totalled $7.5 million, net of $1.5-million worth of recovered diamonds. The company spent an additional $3.7 million at its other projects and has $7 million in working capital remaining.