email response from bill, page-6

marcs

yes, i believe the EV/resource oz may be one of the lowest of asx gold explorers and possibly THE lowest of the gold producers. does anyone know of an explorer (let alone a producer) with a lower EV/resource oz?

now, as to your question of why, here are a few possible factors:

* there was a significant delay (circa 6 months) between when management forecast they would first pour gold and the first actual pour (a couple of weeks ago). on a positive note, most observers here agree that management have done a good job to progress to first gold pour within 2 years of acquiring the (moth-balled) operation given all the issues faced in revamping an operation in a country such as ghana. on the negative side, management are guilty of poorly managing shareholders expectations throughout the latter stages of this process. many believe they have "over-promised and under-delivered". imo management would have been much better served by "under promising and over delivering" though i accept this is easier said than done.

* compounding the problem of the above delay has been a frustrating lack of communication to shareholders re the reasons for the delays and a lack of updates re progress/milestones etc. there was an excruciating silence throughout the delayed period to initial gold pour and imo many small shareholders, either through fear that a significant problem had occurred or just plain frustration, sold out causing the s.p. to gradually drift south.

these two issues are pretty inexcusable as the time/effort/cost involved in effectively managing shareholders' expectations through regular, sensible, well-constructed updates is so small compared to the cost and effort involved with actually carrying out the works. yet, as with much in business, perception is as important as reality. (in the short term, one could argue that perception is more important than reality?).

* the other significant issue was the poor management of the recent capital raising which saw the s.p. drop from circa 4c to sub 3c in a matter of days. the timing of the cap raising was unfortunate in that it co-incided with a general market downtown related to the japanese tsunami and the fukushima disaster. despite the unfortunate timing, most hc punters (incl myself!) believe management handled the cap raising poorly in having to significantly reduce the offer price despite having already announced that the (higher) initial offer price was underwritten by patersons ...

* finally there has been a general market downturn for all small cap mining stocks which has been further exacerbated by end-of-year selling to crystallise cap losses.

i really hope i haven't already scared you off as i'm almost to the good news!

would i employ any sbl management to work in a PR agency? that's definitely a big no!

would i employ any sbl management to work in a bank or stockbroker to negotiate cap raisings? that's another big no!

do i think that sbl management have done a great job (from an engineering perspective) in progressing to first gold pour within 2 years of commencing their konongo operations? that's a big YES!

do i think that sbl has huge potential resource upside? that's another big YES! remember that sbl has barely drilled to 100m (some holes to only 50m) and has already sured up a jorc resource of 1.5M oz. the nearby 50M oz obuasi mine has the bulk of its gold sitting between 500m and 1,000m depth.

so, in summary:

* sbl is arguably the lowest ev/resource oz gold producer on the asx;

* sbl has a 1.5M oz resource with genuinely huge potential resource upside;

* sbl is now a more advanced (and de-risked) operation than that for which investors were prepared to pay 4cps only four months ago!;

dyor, but imo, at sub 2c it's a screaming buy!

k