SouthernEra First Quarter Results
Company Reports a Net Profit of $0.4m (1c per share)
Shares Issued and Outstanding: 61,593,793
TSX: SUF
AIM: SRE
TORONTO, May 20 /CNW/ - The Board of SouthernEra Resources Limited
announced the following highlights from the first quarter of 2003:
- SouthernEra secures C$69.75 million in equity financing
- SouthernEra announces support for Messina Limited debt restructuring
- Messina upgrades Phase 1 probable mineral reserve
- SouthernEra appoints Williams de Broe as UK Nominated Advisor and
Broker
Subsequent to March 31:
- SouthernEra appoints Senior Vice President and CFO
- SouthernEra releases Messina Platinum first quarter development report
The Company realized a net profit for the three months to March 31 of
$0.4 million (1 cent per share) on revenue of $1.1 million, compared to a loss
of $1.4 million (4 cents per share) on revenue of $0.6 million in the first
quarter of 2002. Cash flow used in operations for the quarter was $5.7 million
(10 cents per share), compared to a use of $1.5 million (4 cents per share) in
the first quarter of 2002.
Operations Update
At the Company's 50 percent-owned Klipspringer Diamond Mine, fissure
development and mining is now the focus of activity. In the first quarter,
tonnage throughput was 78,800 tonnes. Average grade in the quarter was 37
carats per hundred tonnes, yielding 29,400 carats.
The Company's subsidiary Messina Platinum continued to make good progress
in developing the Phase 1 Mine. During the first quarter of 2003, Messina's
now fully commissioned Main Shaft hoisted 156,000 tonnes, of which 81,549 were
development waste tonnes and 74,454 were reef tonnes from both production and
development levels. Production during the quarter came from the 150 and 200
metre levels. Development is currently focused on the 275 and 350 metre
levels. Based on progress to date, the Company believes Messina is on track to
meet the previously published 2003 production build-up targets of 40,000
tonnes per month by the end of June and 80,000 tonnes per month by the end of
September.
During the quarter, exploration activities continued at the Company's
platinum and diamond exploration projects. Following continued drilling at the
Millennium Platinum Project in South Africa the Company is on track to report
an expanded resource prior to the end of June. Drilling also continues at the
Company's Canadian diamond exploration projects. Results from this program are
expected in the months ahead. Following the conclusion of an airborne survey
at the Company's diamond and precious metals projects in Gabon, a drilling
program is set to commence. Drilling is also expected to commence at the
Company's diamond projects in South Africa and Australia.
SouthernEra secures C$69.75 million equity financing
The Board of Directors accepted a bought deal equity proposal to issue 9
million common shares at C$7.75/share for gross proceeds of $69.75 million to
a syndicate led by Griffith's McBurney & Partners. The proceeds of the
financing are being used to support remaining development at Messina Platinum
and future expansions, debt restructuring at Messina Limited, working capital
requirements and general corporate purposes.
SouthernEra supports Messina Limited debt restructuring
The Board of Directors announced that it has resolved to support its
subsidiary, Messina Limited, in its endeavours to restructure its balance
sheet with a view to the reduction of Messina's debt. SouthernEra will support
and underwrite a Messina rights offer. Support is subject to agreement with
Messina on the terms of a rights offer as well as the associated regulatory
process in South Africa.
Probable Mineral Reserve Upgraded at Messina Platinum's Phase 1 Mine
The Company announced an upgraded Probable Mineral Reserve for Messina
Platinum's Phase 1 (Voorspoed Section) of 24.5 million tonnes at 4.98 grams
per tonne 5PGE plus gold.
Williams de Broe appointed as Company's UK nominated advisor and broker
in UK
The Board of Directors announced that Williams de Broe Plc has been
appointed to act as nominated advisor and broker to SouthernEra Resources
Limited in respect of the Company's listing on the London Stock Exchange's
AIM.
SouthernEra Resources is an independent producer of platinum group metals
and diamonds. The company also has an extensive PGM and diamond exploration
program. The common shares are listed on the Toronto Stock Exchange and the
London Stock Exchange's AIM market.
The full, unaudited financial statements are available at
www.southernera.com
SouthernEra Resources Limited
Consolidated balance sheets
(in thousands of United States dollars)
March 31, December 31,
2003 2002
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Assets (unaudited)
Current assets:
Cash and equivalents $ 32,094 $ 2,870
Restricted cash 11,790 11,055
Accounts receivable 7,760 7,359
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51,644 21,284
Property, plant and equipment 6,879 7,110
Exploration projects 10,284 8,994
Mining and development projects 138,973 121,260
Future income taxes 2,994 2,794
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$ 210,774 $ 161,442
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Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 9,638 $ 12,671
Income taxes payable 8,982 8,086
Camafuca loan 2,493 2,448
Messinaloans 11,216 5,729
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32,329 28,934
Long-term liabilities:
Messinaloans 46,327 46,926
Future income taxes 2,312 2,429
Non-controlling interests 8,538 7,813
Environmental rehabilitation provision 776 740
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90,282 86,842
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Shareholders' equity:
Common shares 174,335 130,628
Contributed surplus 1,635 1,635
Deficit (57,483) (57,869)
Cumulative translation adjustments 2005 206
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120,492 74,600
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$ 210,774 $ 161,442
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The accompanying notes form an integral part of, and should be read in
conjunction with, these consolidated financial statements.
SouthernEra Resources Limited
Consolidated statements of operations
(in thousands of United States dollars, except income
(loss) per share amounts)
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31 2003 2002
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Diamond sales revenue $ 1,086 $ 578
Direct costs:
Mining operations (1,851) (775)
Amortization (345) (347)
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(2,196) (1,122)
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Loss from mining operations (1,110) (544)
General and administration expenses (924) (403)
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Loss before the undernoted (2,034) (947)
Foreign exchange gain (loss) 2,021 (620)
Interest income 280 93
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Income (loss) before income taxes 267 (1,474)
Income taxes:
Current - (11)
Future recovery 117 79
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Income (loss) after income taxes 384 (1,406)
Non-controlling interests 2 24
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Net income (loss) for the period $ 386 $ (1,430)
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Basic and diluted net income (loss)
per common share $ 0.01 $ (0.04)
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Consolidated statements of deficit, contributed surplus
and cumulative translation adjustments
(in thousands of United States dollars)
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31 2003 2002
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CUMULATIVE CUMULATIVE
CONTRIBUTED TRANSLATION CONTRIBUTED TRANSLATION
DEFICIT SURPLUS ADJUSTMENTS DEFICIT SURPLUS ADJUSTMENTS
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Beginning
of period $(57,869) $1,635 $206 $(48,910) $1,044 $(4,529)
Conversion
rights - - - 591 -
Translation
gains (losses)
net for
the period - - 1,799 - - (152)
Net income
(loss) for
the period 386 - - (1,430) - -
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End of
period $(57,483) $1,635 $2,005 $(50,340) $1,635 $(4,681)
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The accompanying notes form an integral part of, and should be read in
conjunction with, these consolidated financial statements.
Consolidated statements of cash flows
(in thousands of United States dollars)
(unaudited)
FOR THE THREE MONTHS ENDED MARCH 31 2003 2002
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Net income (loss) for the period $ 386 $ (1,430)
Adjustments for non-cash items:
Amortization 346 347
Future income taxes (117) (79)
Gain on sale of fixed assets (12)
Foreign currency translation loss (gain) (2,021) 620
Non-controlling interest 2 24
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(1,417) (518)
Change in non-cash working capital balances (4,281) (964)
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Cash used in operations (5,698) (1,482)
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Financing activities:
Messinaloans 1,758 8,771
Issue of common shares for cash 43,707 4,456
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Cash provided by financing activities 45,465 13,227
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Investing activities:
(Increase) decrease in restricted cash (735) 145
Exploration and development projects (1,484) (823)
Messina platinum project (8,698) (9,297)
Property, plant and equipment (424) (60)
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Cash used in investing activities (11,341) (10,035)
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Increase in cash 28,426 1,710
Foreign exchange gain on cash held in
foreign currency 798 120
Cash and equivalents - beginning of period 2,870 6,513
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Cash and equivalents - end of period $ 32,094 $ 8,343
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Cash and cash equivalents comprise:
Cash $ 694 $ 1,543
Short-term investments 31,400 6,800
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$ 32,094 $ 8,343
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Supplementary information:
Interest paid $ 20 $ 68
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The accompanying notes form an integral part of, and should be read in
conjunction with, these consolidated financial statements.
Notes to consolidated financial statements
In the opinion of management, the unaudited consolidated financial
statements present fairly the Company's financial position as at March 31,
2003 and the results of its operations and its cash flows for the three months
ended March 31, 2003. The results of operations and cash flows are not
necessarily indicative of the future results of operations or cash flows.
1. ACCOUNTING POLICIES
The accounting policies followed by the Company are set out in Note 2 to
the audited consolidated financial statements included in the Company's 2002
Annual Report and have been consistently followed in the preparation of these
interim financial statements.
2. PROPERTY, PLANT AND EQUIPMENT
ACCUMULATED December 31
AMORTI- March 31 2002
COST ZATION 2003 NET
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South Africa - Buildings,
plant and equipment $ 13,078 $ (6,255) $ 6,823 $ 7,064
Toronto - Fixtures and
fittings 327 (271) 56 46
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$ 13,405 $ (6,526) $ 6,879 $ 7,110
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3. EXPLORATION PROJECTS
Accumulated
Carrying Value
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March 31, December 31,
2003 2002
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Canada
Yamba Lake - NWT $ 2,930 $ 2,855
Back Lake - NWT 615 557
Superior - Ontario 1,218 1,115
Other 473 365
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5,236 4,892
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Foreign
South Africa 1,793 1,458
Gabon 2,646 2,048
Australia 609 596
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5,048 4,102
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$ 10,284 $ 8,994
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4. MINING AND DEVELOPMENT PROJECTS
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Accumulated
Carrying Value
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March 31, December 31,
2003 2002
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Messina platinum project $ 123,830 $ 106,312
Camafuca project 15,143 14,948
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$ 138,973 $ 121,260
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5. MESSINA LOANS
March 31, December 31,
2003 2002
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Senior Debt $ 51,516 $ 45,643
Loans from a South African public company 3,562 4,252
Rio Tinto API underwriting guarantee advance 2,465 2,465
Other - 295
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57,543 52,655
Less current portion of loans (11,216) (5,729)
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$ 46,327 $ 46,926
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Senior Debt
The Senior Debt provided by a South African banking consortium ranks
above all other debt in Messina. It is secured in favour of the banks by all
the assets of Messina. Repayment of capital and/or interest to any other
lender to Messina, whether a lender in terms of the loan arrangements noted
above or for any other reason including any trade or other credit granted, may
only be settled by Messina with the banks' consent while any amounts due to
the banks, including interest, remain outstanding.
While the Senior Debt is outstanding, Messina may not incur additional
debt, acquire or dispose of assets or engage in activities outside the
parameters of the establishment of the Messina Platinum Project, or deviate
from the planned development of the project, without the consent of the banks.
The Senior Debt comprises two, South African Rand (R) denominated,
tranches making up a total of R345 million ($43 million), Tranche A of
R270 million ($34 million) and Tranche B of R75 million ($9 million). Both
tranches were drawn upon simultaneously and, other than for interest
determination, can be regarded as a single loan.
Drawdown commenced on September 18, 2001, and monthly drawdowns continued
until the final drawdown on September 30, 2002.
Interest accrues on the loan and is capitalized to the loan balance
outstanding. The repayment schedule includes an element of principal and
interest in each repayment instalment with the first instalment scheduled for
February 29, 2004 and with semi-annual payments thereafter until the final
instalment on August 31, 2008.
The interest rate in respect of Tranche A is fixed at 14.51% and in
respect of Tranche B, fluctuates with the average of a basket of long-term
South African money market rates (19% at March 31, 2003).
Loans from a South African public company
This loan of $3.6M is denominated in Rand and is unsecured and
subordinate to the Senior Debt provided by the banking consortium. The loan
bears interest at South African market-related rates (19% at March 31, 2003)
and interest is payable monthly in arrears. Capital repayments commenced in
January 2002 and, under renegotiated terms, are repayable in monthly
instalments of not less than R2.5 million ($0.3 million) per month from
February 2003. The banking consortium has consented to this repayment schedule
subject to continued satisfactory progress of the Messina Platinum Project and
such financial support as might be necessary from SouthernEra.
Accelerated Production Initiative (API) and API guarantee
As part of the overall Messina Platinum Project funding, an API,
comprised of a small concentrator plant and early stage trial mining, was
developed. The API was designed to conduct trial mining and make a financial
contribution to the overall project. The construction and commissioning of the
API plant was completed in August 2001 and trial mining commenced in the last
quarter of 2001 and continued into the third quarter of 2002. The API plant
and initial underground development costs of approximately R63 million were
funded by the South African public company loan and cash in Messina.
The API contribution is specifically defined as the net cash proceeds
received, measured on a quarterly basis commencing December 31, 2001, from
sales of PGM concentrate produced by the API, less certain defined marginal
costs of operating the API plant.
In addition, the funding arrangements with the banking consortium provide
that the contribution of R121 million to be made by the API be fully
underwritten. Rio Tinto PLC and Rand Merchant Bank (RMB) provided such
underwriting guarantees to the extent of R58 million and R63 million
respectively. The guarantees were provided for the period September 2001 to
September 30, 2002, being the required period of API contribution. The Rio
Tinto guarantee ranked first in the event of underwriting claim and was to be
fully drawn before the RMB guarantee became effective.
In January 2002, $2.4 million (R27.8 million) was drawn against Rio Tinto
under their guarantee. The advance so provided became a United States dollar
denominated liability of the Company which, in turn, advanced these funds to
Messina by way of inter group loan account. The loan was fully repaid in
April 2003.
6. INCOME (LOSS) PER SHARE AND PRO FORMA INCOME (LOSS) PER SHARE
Basic and diluted income (loss) per share is calculated using the income
(loss) for the quarter of $0.4 million (2002 - ($1.4) million) with the
weighted average number of common shares outstanding during the period of
56,395,726 shares (2002 - 40,302,147). The exercise of stock options would
dilute earnings per share in the current and possibly future periods. The
effect of the potential dilution does not reduce earnings per share in the
current quarter and would be anti-dilutive in the comparable period of 2002.
The fair value assigned to the portion of 550,000 stock options vesting
in the current quarter but granted to employees in the first quarter of 2002
was $0.1 million. Had this value been charged to earnings in the current
quarter, income per share would be nil.
7. SEGMENTED INFORMATION
The Company operates in the diamond and PGM industries. The operations of
the Company are managed and grouped, by industry, on a geographic basis. The
Company's reportable operating segments comprise the diamond mining and
exploration activities at Klipspringer in South Africa, as well as in Angola
and Canada, and the Messina Platinum Project in South Africa. The Canadian
segment includes the head office operation and associated administration
costs.
SEGMENTED INFORMATION
March 31, March 31,
2003 2002
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Revenue from diamond sales:
Klipspringer $ 1,086 $ 578
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Interest income
Klipspringer $ 4 $ 2
Messina 17 81
Canada 259 10
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$ 280 $ 93
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Amortization
Klipspringer $ 341 $ 336
Canada 4 11
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$ 345 $ 347
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Segment loss (income)
Klipspringer $ 2,142 $ 1,532
Messina 10 (80)
Canada (2,616) 176
Other 197 154
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Reported enterprise income loss
before income taxes $ 267 $ (1,474)
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Segment capital expenditure
Messina $ 9,029 $ 9,297
Klipspringer 275 87
Angola 151 251
Canada 517 312
Other 634 88
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$ 10,606 $ 10,035
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March 31, December 31,
2003 2002
Identifiable assets
Messina $ 120,620 $ 103,088
Klipspringer 9,617 9,498
Angola 15,143 14,948
Canada 62,088 31,171
Other 3,306 2,737
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Total reported enterprise assets $ 210,774 $ 161,442
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8. DIFFERENCES BETWEEN CANADIAN GAAP AND IFRS
The Company prepares its financial statements in accordance with Canadian
GAAP, which generally conform to International Financial Reporting Standards
(IFRS) except for the following significant differences:
a) Under Canadian GAAP pre-development incidental revenue and associated
costs are deferred and amortized over the life of the mine. Under IFRS
incidental revenue and associated costs are recognized in the statement of
operations. As a result of this difference, the Company would have recognized
additional revenue derived from PGM sales at Messina Phase I. Mining costs
approximated the income earned and, therefore, there would be no material
effect on net income or earnings per share.
b) Under Canadian GAAP a provision for reclamation costs is expensed over
the life of the mine on a unit of production basis when an estimate of costs
is reasonably determinable. Under IFRS, a reclamation provision is accrued
when the liability is incurred with a corresponding debit to the related
asset. As a result of this difference the Company's unaudited, condensed
consolidated balance sheet under IFRS would be presented as follows:
March 31, December 31,
2003 2002
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Assets
Current assets $ 51,644 $ 21,284
Property, plant and equipment 6,879 7,110
Exploration projects 10,284 8,994
Mining and development projects 140,026 122,235
Future income taxes 2,994 2,794
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$ 211,827 $ 162,417
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Liabilities and shareholders' equity
Current liabilities $ 32,329 $ 28,934
Long-term liabilities
Messina loans 46,327 46,926
Future income taxes 2,312 2,429
Non-controlling interests 8,538 7,813
Environmental rehabilitation provision 1,829 1,715
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91,335 87,817
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Shareholders' equity 120,492 74,600
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$ 211,827 $ 162,417
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For further information: SouthernEra Resources Limited: Patrick C.
Evans, President and CEO; or Dr. Sally Eyre, Vice President, Corporate
Affairs, Telephone: (416) 359-9282, Fax: (416) 359-9141, E-mail:
inbox(at)southernera.com
(SUF.)
END