RE: come back to the realHello Bushman, from your profile I can see that you are from South Africa (ZA), so have you followed the marine sector for long ?
If yes, how long have you followed the AFA story ?
After reading your comments it seem to me that you may be missing part of the AFA story.
The sampling about to be undertaken is not designed to prove the presence of diamonds, since that was done in the past by De Beers and by Gemfarm when they we under contract to AFA... Just read the corporation technical report and you will notice that with the information available from these sampling programs, the Corporation technical team was able to start talking about a range potential for the concession... (all the reports are available on the web site
www.afri-can.com
The key point to remember is that the sampling program is designed to quantify the resource so that we can have an idea of the number of carats present on block J. The entire program is designed and it is my understanding that this is also being validated by outside consultants in order to insure that the final results are a pretty accurate statistical model of the number of diamonds present. It is true that the final number will be how many carats are extracted, but if you are familiar with the diamond history of the West Coast, you will agree that more often then none, the numbers of carats mined is always greater then the resource identified.
Now, let me used this opportunity to make my bold but humble prediction, my back of the envelope math tell me that we should find diamonds in a range of about 5 millions carat. (Let the prediction lottery start)
Profit and loss analogies are not appropriate at this time, Afri-Can is an exploration Corporation, and its mandate is to invest money into exploration projects in order to identify a large deposit... therefore the sampling does not really cost money, but represent an investment .. and the Corporation make a return on its investment either by putting the deposit in production or by selling it to a major partner..
Now let look at one possible and very plausible investment scenario, all the sampling program combine could have a total cost of $ 7 million, and let assume that AFA does identify 5 million carats, that means that Afri-Can will have invested about $ 1.40 per carat in exploration, not bad for diamonds that will be sold over $ 200.00 per carats.
Now let add to this, the cost of the time "lost" waiting for the vessel since 2008 at $ 1,5 million, and you will notice that it only represent another $0.30 per carat..
From this it become very clear that risk reward profile is very good, and that if the Corporation chose the option to sell its project, it will be able to generate a good return on its investment when selling its deposit to a major partner.
Now, lets look at the potential scenario concerning cost projection, from the information I have been able to find from DeBeers, building a new vessel could cost $ 100 millions, and the production cost should be around $ 100 per carats. (The $ 100 cost does include the government diamond royalties), so for me this look very good and with Diamonds price expected to return to there price of pre-2008, ($ 250.00 per carats for Namibian goods) the project look even more promising since every increase in diamond price will go directly to the bottom line... So even this scenario look very promising ...
Naturally, this will become clear once the program is done, and in the mean time the key question is when will this happen, and my prediction is soon, since we only have one more major hurdle to past (IE as per the last press release) before the vessel is ready to go to the concession..
Regards,
Ke