Klipspringer weighs on SouthernEra

SouthernEra Diamonds (SDM-T) lost US$14.5 million before taxes for 2004, partly owing to costs associated with dividing the original SouthernEra Resources into two separate entities.

In September 2004, the mother company split in two, forming SouthernEra Diamonds and Southern Platinum (SPC-T). The latter explores for and mines platinum group metals and gold.

Corporate, general and administrative expenses for SouthernEra Diamonds totalled US$3.5 million in 2004, most of which (US$2.3 million) were associated with the division.

The company generated US$23.8 million in revenue from PGM production at its Messina mine in South Africa’s Limpopo province, until Sept. 1. This was included in the net loss from discontinued operations.

The Klipspringer mine, in the same province, was closed at the end of 2003, owing to the strength of the rand in relation to the U.S. dollar, though some stockpiled ore was processed in January 2004. Co-owners SouthernEra Diamonds, with a 56% interest, and De Beers Consolidated Mines and Naka Diamond Mining, with a combined 44%, intend to reopen the mine once the rand depreciates.

Klipspringer has an indicated resource of 800,000 carats in 1.7 million tonnes grading 47 carats per 100 tonnes. Mining costs are high because the diamonds are in narrow stockworks unconducive to mechanized extraction.

The cost of shutting down Klipspringer was US$1.3 million; plant and equipment carrying costs amounted to US$1.9 million. The loss from mining operations after amortization was US$4.5 million.

The company paid US$2 million in accrued interest on tax liabilities and in interest paid on an overdraft facility at Klipspringer.

The property hosts several kimberlite dykes, as well as blows and small pipes. The kimberlites include the now-depleted Marsfontein M1 pipe, the Leopard fissure, the Sugarbird blow, the Kudu fissure, and the Kudu blow. The companies plan to explore other anomalies this year.

SouthernEra Diamonds owns an 18% carried interest in the Camafuca project, 20 km southeast of Lucapa in northwestern Angola. A local company, Sociedade Mineira do Camafuca, will develop and operate the mine.

Last year, SouthernEra spent a total of US$16.2 million exploring for diamonds in South Africa and other countries: the company flew an airborne geophysical survey and outlined targets on the ground in DRC; it found the first diamondiferous primary kimberlite in Gabon and additional diamondiferous kimberlite in Canada; and in Australia, reverse-circulation drilling tested 10 aeromagnetic anomalies.

Southern Platinum reported a loss of US$23.3 million for 2004 (ending Dec. 31), which includes SouthernEra Resources’ performance until the end of August. The loss reflects both the cost of mine expansion and the increase in value of the rand.

Revenue of US$43 million was offset by US$46.1 million in mine operating costs. The loss from mining operations was US$19.5 million.

The Messina mine produced 766,279 tonnes grading 3.97 grams PGMs plus gold-equivalent per tonne for a total of 86,312 oz. combined PGMs plus gold, 891 tonnes nickel, and 648 tonnes copper.

Southern Platinum owns 91.5% of Messina Ltd., which owns the mine.

The company paid US$12.3 million in interest incurred through a loan facility and debt associated with the mine.

In March 2004, Lonmin (LMI-L) offered to buy the outstanding shares of Southern Platinum for $2.66 per share. The offer values Southern Platinum at US$190 million and was endorsed by that company’s board of directors but has yet to be approved by shareholders and regulators.