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Poor production for Wealth 4 U
Marc Hasenfuss
Posted: Tue, 26 Aug 2008
[miningmx.com] -- THERE’S been a rather harsh reality check for Wealth 4 U Mining & Exploration.
The unlisted start-up mining venture - which aimed to be "the largest marine and alluvial diamond company in Africa giving unsurpassed returns to its shareholders" – has seen production falter horribly.
W4U’s monthly production figures - which were suspended mysteriously in November last year - have now been re-stated from February 2008 on the company’s website.
While this is a welcome development as regards transparency, shareholders - who forked out 100c/share to garner unsurpassed returns - will be grimacing at the pitiful production figures.
Between February and mid-August 2008, W4U produced less than 200 carats from its shore-based and boat mining operations in an Alexkor-owned concession on the Namaqualand coast.
Even considering that the winter
weather curtails marine mining activity on the West Coast, the production figures look more akin to the hauls from part-time diamond divers’ rather than a publicly funded corporation.
Based on W4U’s original pricing forecast of $366/carat (R2,900/carat) the company’s revenue for the seven months between February and August can not be much more than R560,000. This surely means W4U is not exactly long on cash flow to cover its corporate expenses and operational costs.
The production figures may also explain comments made recently to Fin24 by W4U prime mover Louis Liebenberg, who claimed unspecified issues with state-owned diamond miner Alexkor could force the company to shift its mining assets from Namaqualand to Namibia (see "Shareholders get carats" on Fin24).
To put W4U’s production figures in perspective, it is worth noting the (arguably) best independent marine diamond producer in South Africa, Ocean Diamond Mining Holdings, produced up to 20,000 carats a quarter in its heyday in the late nineties. Even the hapless Benguela Concessions produced almost 20,000 carats annually from its ancient Moonstone mining vessel in the late nineties.
W4U clearly wanted to make waves on the west coast – even wanting to put two mid-water mining vessels to work before the end of February 2008. A snippet from a
newsletter from October 2006 read: "It is our firm belief that the company can harvest just over 100,000 carats per year. This would give a gross annual income of R220m and a net dividend of close to 3% per month."
For the shorter term W4U initially forecast 900 carats a month from share-based operations and 1,000 carats a month from boats – production that would yield annual revenues of R45m.
Based on these production forecasts W4U claimed in its first quarter review for 2007 that the company would qualify for a listing on the Alternative Investment Market (AIM) in London. This would see an expected offering price of 30p – "which is much higher than the current internal valuation of 260c/share".
With 126m shares in issue that internal valuation inferred a market capitalisation of over R300m – a value that now looks pie-in-the-sky in view of dribbling production.
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