Friday, July 27, 2012

Sabina Gold and Silver (SBB)

It looks as though SBB has turned the corner today. Having been resisted at around  $1.80 for a while, it took a jump of over .40 over the last 2 days. Over 3 million shares crossing.

Even at the current prices, SBB looks like a good buy, being beaten down far from its 52 weeks high of ~ $7.

From their last press release...
          "The Company had cash of $147.4 million at March 31, 2012 and added $34m to the treasury in June 2012 after completing a financing."

This means that the company has roughly 180 million dollars in cash in the treasury. with a market cap of 389.79 million, SBB is being valued at 173.24 million by the market.


SBB has a little less than 7 million ounces of gold found on their Back River property in Nunavut. As well, they have a large "grass roots" property adjacent to the Back River property (roughly 50km away) which management considers to be highly prospective for more gold discoveries. 

Sabina stands to earn a substantial silver royalty on the Hacket River silver-zinc property, currently being developed by Xstrata. Their royalty agreement is set up such that they will receive %22.5 on the first 190 million/oz Ag produced, than %12.5 on any remaining silver production.

SBB filed a NI 43-101  technical report last month, as well a PEA study. From the press release...

 "As previously announced, the PEA was prepared by SRK Consulting (Canada) Inc. ("SRK") and contemplates a scenario with concurrent open-pit and underground mining operations delivering mineralized material from the Llama, Umwelt, Goose and George deposits to a centralized 5,000 tonne per day ("tpd") processing facility located near the Umwelt deposit. Gold production is projected to average ~300,000 oz/year over 12.3 years for total production of 3,677,000 oz Au, beginning in late 2016 or early 2017. Sabina is currently funded to advance the Project through final feasibility and permitting. The conclusions and recommendations of the PEA are that the Project may be economically viable and the Company should proceed to a Pre-Feasibility Study ("PFS")."

Silver has historically been extremely volatile. It has traded in a range of $3-$50/oz and currently sits somewhere in the middle. Although the outlook for precious metals seems to be a, by and large, bullish on; it is possible that silver slides down and trades in the $10-$15 range. In such a case, it would be unsure if Xstrata would continue with developing the property. Xstrata has had an a myriad of problems with their camp in Nunavut, which caused them to put the project on hold. The deposit is significant so one can expect that if Silver holds, or rises, Xstrata will end up developing the Hacket River Project.

As the governments of Latin America and Africa begin to impose less and less miner friendly regulations one may expect to see a premium be applied to large, high grade, deposits in safe, mine friendly countries. It will be interesting to see how SBB develops over the next few years, especially if gold prices continue their upward trend. 7 million oz at $2000/oz may be a realistic situation in the future.

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