re: will become a million ounce producer, page-5

re: 21 percent up will become a million ounce prod I don't hold but thought you may like the following
ST BARBARA - QUALITY LEVERAGED GOLD PLAY

In 2005 St Barbara acquired the Sons of Gwalia gold assets without legacy debt and gold hedging. The company is now one of a small few independent domestic gold producers of meaningful scale. SBM has a 7Moz resource inventory and is set to produce 165koz of gold in FY06. Financially, the company is robust with a net cash position of $85M and over $30M in listed investments and no debt.
Gold inventory grows to 7Moz. SBM recently announced a significant upgrade to both resources (6.6Moz to 7.3Moz) and reserves (0.4Moz to 1.1Moz) largely due to revised estimates for Gwalia Deeps including initial estimation of reserves at 0.7Moz. Further, deep drilling beneath 240m Gwalia Deeps returned [email protected]/t suggesting further potential upside, broadly estimated at +0.5Moz. We would expect to see further reserve upgrades in the near term based on the level of recent drilling activity.
Leonora studies ongoing. Feasibility studies looking at recommencing production from Leonora are ongoing and are expected to be complete in the Sept. quarter of 2006. Leonora could be a +$100M investment lifting production towards 500koz pa.
Discount to peer group, target $1.00. SBM is trading at a discount to its peer group on a number of measures. Sector multiples suggest a value over $1.00 per share. As the company continues to perform (eroding the SGW legacy) and enunciates its Leonora growth plan, this discount should close. Our 12-month price target is $1.00 and Speculative Buy rating maintained. We estimate SBM is carrying an ROE of 26% from next year and the company has an active buyback in place.