bonanza grade silver, page-4

This morning I was mulling over whether to top up my SVL holding at these bargain basement prices.

Here are some factors I used to come to a positive conclusion.

Likely that we will have a JORC resource of a little over 10M oz by Q1'12. The company has previously stated that they expect a final resource size in the order of 26 - 57m oz.

If we use a 'take-over' multiple or a back-of-the-envelope valuation tool of 10% of the in-situ value of the silver (and note that this does not include the metal credits which will incrue due to the excellent associated grades of Cu, Pb and Zn) then the following can be applied.

@10M oz = 10m oz * say $30/oz * 0.1 = $30m/129m shares = 23cps
@ 26M oz = 60cps
@ 57M oz = 132 cps

So, clearly the mkt is looking at SVL at this stage as a 10m oz proposition with associated risk. Fair enough. But, if you believe that eventually, the company can get to, say the mid-point of the company's target of 26-57m oz, then $1 a share some time late in 2012 is not an unreasonable share price target.

If the silver price gets on a tear as some expect, obviously share price targets need to be adjusted accordingly.

As a point of interest, one of the better holes in the recently released drilling results returned 14m @ 1809g/t (with 1.6% Cu, 0.9% Pb and 6.8% Zn!!). This hole was far from untypical at Webbs. 1,809g/t silver is the value equivalent of 30g/t gold....over 14m. Wow.