SouthernEra Diamonds falls on 2004 results

SouthernEra Diamonds (SDM-T) posted a US$14.5 million loss before taxes in 2004.

It was a significant year for the company, which was formed on Sept. 1 following a split of SouthernEra Resources into two entities: one being diamond-oriented SouthernEra Diamonds and the other, Southern Platinum (SPC-T), which holds the platinum group metals and gold exploration and mining assets.

Corporate, general and administrative expenses totaled US$3.5 million for the year, up from 2003 primarily because of costs of about US$2.3 million associated with the division of the company.

The company had US$23.8 million revenue from platinum group metal production at its Messina mine up until Sept.1. This was included in the net loss from discontinued operations.

The Klipspringer mine was placed on care and maintenance at the end of December 2003. Minimal stockpiled ore was processed in January of last year.

The mine is 56%-owned by SouthernEra Diamonds and 44%-held by De Beers Consolidated Mines and Naka Diamond Mining. It is about 200 km north northeast of Johannesburg, South Africa.

Klipspringer has an indicated resource of 800,000 carats, from 1.7 million tonnes grading 47 carats per hundred tonnes. Mining costs are high because diamonds are in narrow stockworks, which are not conducive to mechanized mining.

Operating costs at Klipspringer are in South African Rand, whereas revenue is in U.S. dollars, so the higher Rand value in relation to the U.S. dollar was a detriment.

Care and maintenance costs totalled US$1.3 million and plant and equipment carrying costs came in at US$1.9 million. The loss from mining operations, after amortization, totalled US$4.5 million.

The company paid US$2 million in interest partly due to accrued interest on tax liabilities and also through 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 mined-out Marsfontein M1 pipe, the Leopard Fissure (Klipspringer), the Sugarbird Blow, the Kudu Fissure and the Kudu Blow. The companies plan to follow up on other anomalies this year.

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

SouthernEra spent about US$16.2 million on exploration last year. It is exploring for diamonds in Canada, South Africa, Australia, Gabon and the Democratic Republic of Congo (D.R.C.).

Last year SouthernEra completed an airborne geophysical survey in the D.R.C. and performed some ground follow up, which identified targets for more work. The company found the first diamondiferous primary kimberlite in Gabon and it also found additional diamondiferous kimberlite in Canada.

Southern Platinum’s 2004 Results

Southern Platinum reported a total net loss of US$23.3 million for 2004. This takes into account the full year ended Dec. 31, and includes SouthernEra Resources performance up until the end of August.

The company reported a net loss from mining operations of US$19.5 million. Revenue of US$43 million was offset by mine operating costs totalling US$46.1 million.

The loss was primarily due to costs related to mine expansion and the increase in value of the South African Rand in relation to the US dollar.

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

Southern Platinum owns 91.5% of South African-based Messina Ltd., which owns the Messina platinum mine.

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

In March Lonmin (LMI-L) offered to buy the outstanding common shares of Southern Platinum for $2.66 per share. The offer values Southern Platinum at US$190 million and was endorsed by Southern Platinum board members, but still requires shareholder and securities exchange approval.