d j carmichael report on sub sahara s projects an

Sub-Sahara Resources NL (SBS) is an Australian based, diversified
exploration company with assets in Tanzania, Eritrea and Australia. SBS
have acquired world class gold projects in major gold belts in Tanzania
and copper-zinc-gold targets in Eritrea, with the potential to host both
high-grade VMS-gold deposits and low-grade-bulk tonnage base metal
systems.
Event:
SBS have announced that a Fair Market Value (FMV) of US$26m has been
derived by an independent expert in relation to 100% of the Asmara JV with Sunridge
Gold Corp. (SGC). Accordingly, under the terms of the Option Agreement, SGC will
issue SBS with 7.6m shares at a strike price of C$1.84 as consideration for its 48%
interest in the project and values the SBS interest at A$16.37m.
Key points are:
The agreement with SGC will provide SBS with a 15.98% fully diluted, post
transaction interest in SGC. SGC is currently trading at C$2.70 per share,
realising A$24m in value, upfront, for SBS.
Together with cash on hand and its investment in Currie Rose Resources Inc,
the SGC agreement provides a cash backing of $32m or 8cps. At the current
share price, this exceeds the market capitalisation by approximately A$2.0m
and results in an EV of zero.
A major gold exploration project is currently being drilled by SBS s JV partner,
Barrick Exploration Africa Ltd (BEAL), at Nyanzaga, Tanzania. At the Tusker-
Kilimani Zone, BEAL are completing an infill drilling campaign to firm up the
resources suitable for an Mineral Resource estimate conducted under JORC
guidelines. SBS intend to release the resource estimate in late August-early
September.
Tusker is a large bulk tonnage - low grade style deposit. However, the results
of the recent drilling campaigns by BEAL demonstrate that higher grade parts
of the ore body exist, which have the potential to significantly enhance the
economics of the project. The drilling has confirmed the existence of a broad
mineralised zone, 50-200m wide, striking north for at least 600m and open to
the south. Significant intersection lengths are often in excess of 200m at
grades averaging 1.5 g/t gold, but zones of up to 2.50g/t to 3.00g/t over
extended lengths have recently been discovered.
An active exploration continues at SBSs other exploration projects in Tanzania
and at the Zara Project in Eritrea, which have the potential to realise further
value as the exploration continues.
We believe SBS is undervalued and that a re-rating will occur on the release of
the resource calculation for Tusker. We maintain our Speculative BUY