Marsonfontein diamond farm jump-starts SouthernEra — Diamond miner posts second consecutive profit

Commercial production at the Marsfontein diamond farm in South Africa has enabled part-owner SouthernEra Resources (SUF-T) to post its second consecutive quarterly profit.

In the three months ended Sept. 30, SouthernEra earned $11.9 million on revenue of $24 million, compared with losses of $600,000 on $80,000 in the equivalent period of 1997 when it was still developing its projects in southern Africa.

When combined with the two previous ones, the recent quarter boosts the company’s earnings in the first nine months of 1998 to $13.9 million on revenue of $35.2 million. This compares with losses of $2.1 million on $338,000 in the year-ago period.

Aggregate production topped 125,500 carats, of which 60% came from the company’s share of output at Marsfontein. That project, which hosts the M1 kimberlite pipe, reached full-scale production in late August and is a 40-60 joint venture between SouthernEra and De Beers Consolidated Mines (DBRS-Q).

In all, 34,000 tonnes of diamondiferous overburden overlying M1 were processed in the recent quarter, yielding 189,600 carats for an average grade of 5.6 carats per tonne.

Stockpiles of portions of this material and ongoing stripping are to augment production in the coming weeks, with a complete switch to lower-grade primary ore expected by year-end.

At last report, M1 hosted minable reserves of 736,00 tonnes at a recoverable grade of 2.25 carats per tonne. The reserves account for 15% dilution, are estimated to a depth of 100 metres and are sufficient for 2.5 years of production at current rates.

Production from the adjacent Klipspringer property added 18,000 carats to the company’s quarterly chest. The diamonds represent the end of mining at the Sugarbird Blow, which was depleted last July.

As well, underground development on the Leopard fissure has been accelerated to allow for the commencement of production in mid-1999. In total, 10,000-12,000 tonnes are expected to be processed monthly from the fissure’s resource of 3.8 million tonnes averaging 0.753 carat.

Regional exploration has led to the discovery of a fissure striking parallel to Leopard and situated 40 metres from the small Kudu pipe, where delineation drilling and trenching are in progress. So far, the fissure has been outlined over a strike length of 500 metres and down to a depth of 250 metres.

Klipspringer consists of several farms that are either wholly or partly owned by SouthernEra. Current efforts are focused on those farms the company owns outright.

In Angola, SouthernEra benefited from higher production at the partly owned Cassanguidi and Lou fluvial operations. Combined, the two projects cranked out 63,000 carats in the recent quarter, netting the company 31,500 carats, or 24,800 carats more than in the previous quarter.

The improvement is attributed to Cassanguidi, where mining of rich scour channels resulted in 58,200 carats being recovered. Though production at Lou was halved, it is expected to rise in the current quarter as a secondary diversion of the river has been completed.

SouthernEra covers the operating costs at both projects and is earning 35% of the net profits from Cassanguidi, while continuing to receive 46% of the revenue from Lou.

Elsewhere in Angola, trenching on the Camafuca kimberlite pipe is expected to provide a 20,000-tonne bulk sample for processing by year-end. SouthernEra owns a 51% interest in the project and recently tallied the pipe’s resource at 88 million cubic metres averaging 0.15 carat per cubic metre.

In related news, SouthernEra is continuing due diligence on a possible merger with New Indigo Resources (NDR-A), which, if successful, would enlarge its existing Canadian exploration portfolio. Discussions, however, are being complicated by a lawsuit filed last June against New Indigo and sister company Lytton Minerals (LTL-T) by two parties claiming to be shareholders of both. The parties — The Fern Trust and Howard Miller — allege that certain past actions of the companies were “oppressive” to them as shareholders (T.N.M., Aug. 17-23/98).