Lower amortization costs translated into a modest profit for
Net earnings topped $701,000 (or 3 per share) on revenue of $5.1 million, compared with $3.1 million (12 per share) on $13.7 million in the third quarter of 1999. The difference reflects a 60% drop in comparable production from the Marsfontein diamond mine in South Africa, which itself reflects the mining-out of the M1 pipe. However, as a result, amortization charges relative to sales were essentially unchanged between the quarters, helping to offset the lost revenue.
Marsfontein, which is the company’s sole producer, produced 91,700 carats in the recent period, versus 231,157 carats a year earlier. Although reserves have been depleted, stockpiled gravel and diabase will keep the plant operating for another year.
Cash flow for the recent quarter was $544,000, bringing the 9-month total to $13.2 million, compared with year-earlier cash flow of $13.6 million and $32.3 million, respectively.
For the nine months ended Sept. 30, SouthernEra lost $3.3 million (12 per share) on revenue of $21.6 million, compared with a profit of $10 million (38 per share) on $39.3 million a year ago. Again, lower production, combined with a $1.2-million writedown on certain properties in the second quarter, accounts for the difference.
SouthernEra owns a 40% interest in Marsfontein. The remaining stake is shared by
Meanwhile, financing negotiations for the advanced Messina platinum and the Klipspringer diamond projects are expected to be completed in the coming months. SouthernEra owns a 70.4% interest in the former and a 100% interest in the latter.
Peak capital costs for Messina are pegged at US$69.5 million, whereas Klipspringer requires US$6.6 million to be ramped up to full production. About half of Messina’s costs are expected to be debt-financed, with the balance sought from end-market users or a potential joint-venture partner.
At Messina, which was partially developed in the early 1990s, SouthernEra is extracting bulk samples from the 200-metre level for metallurgical testing. Trial stopes are also being developed, and power and water supplies for full-scale production are being sought.
Current efforts at Messina are being funded internally.
Also in progress is a review of a feasibility study for the Camafuca kimberlite pipe, in Angola. SouthernEra, which owns 33% of the pipe, proposes initially to mine higher-grade sections from dredge ponds at a cost of $14 million. A decision is expected by year-end.
Meanwhile, the company’s board is expected to appoint a chief executive officer and chief operating officer by February. Steve Banning, who formerly served as president and CEO, resigned after the new board was elected in June.
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