BUSINESSWEEK ONLINE : APRIL 28, 1997 ISSUE
INSIDE WALL STREET

Sparklers In The Namibian Seabed
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Who loves diamonds? The Street gave a tepid response to Namibian Minerals (NMCOF), a prospector for diamonds off the coast of South Africa and Namibia. On Apr. 1, the stock opened on the NASDAQ at 4 a share--and has scarcely budged. Part of the problem: The Bre-X scandal in Indonesia has spread fear about government mining contracts. As a result, investors have gone sour on mining issues.

But some pros see potential. ''This is the time to buy, before Namibian starts mining in September,'' says a New York money manager. Namibia's government granted the company a 15-year license to mine some of the estimated 2.9 million carats of diamonds lying in the seabed. ''This tiny London company is a pure play in diamonds and their huge earnings-growth potential.''

In its initial exploration, Namibian identified 3 million carats that are 95% gem quality, valued at $200 per carat. De Beers Consolidated Mines, of South Africa, is the only other company licensed--and already mining--in the region. In 1996, De Beers recovered 650,000 carats, worth $340 per carat.

''The concession areas are in close proximity to areas of historic offshore diamond production by De Beers and Ocean Diamond Mining Holdings,'' notes analyst Jonathan Challis of Ivanhoe Capital, in London. Challis says Namibian is trying to secure a number of projects in Angola, which contains some 12% of the world's gem deposits. Namibian already has acquired a 42.5% stake in three diamond concessions in Angola and also has licenses in Zaire.

A Dresser Industries subsidiary, Subsea Offshore, which owns the ''largest and most sophisticated remote-controlled underwater vehicle fleet in the world,'' is developing an underwater mining system for Namibian, says Alastair Holberton, CEO of Namibian.

''Next year will be our first full year of production,'' he says. Holberton expects revenues of $33 million and a loss of $10 million. ''De Beers has already approached us with an offer to buy the diamonds we can produce.''


BY GENE G. MARCIAL

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