We also have another major input you may have forgotton to look at, the gold price.
Blacks is a short term bear and is sitting on the sidelines looking to try and snatch SBM at 20-22 cents while I'm a short term (0 - 6 mths) gold bull and SBM offers brilliant leverage.
Now if they run short of cash, they will indeed need a smallish raising and so be it, who will deny them. Suely not Macquarie who have no bloody choice but to keep stepping up, to protect whats already invested.
Gwalia is actually a no brainer. What has not been disclosed to date as far as I know, is the drilling inside the mine. About 30 days ago, they were punching 20 Metre holes and getting > ounce grades. SBM's view of Gwalia is that its world class and will prove to be the golden goose.
The negative is Southern Cross which is a runt and the board wavers between selling it off and keeping it. Lets face it, they need the $A gold price to stay north of $1,100 oz for Southern Cross to contribute in a meaningful way.
By the way, the company is pretty confident that the through put mishap is behind them and the next quarter will see normal production levels and costs per ounce retreat.
SBM is a pure exposure to the price of gold.
Its profitability rachets up dramatically with the gold price.
Instos can love or hate it but they dont have too many choices when they look to spread their funds accross unhedged gold producers in Australia. If gold starts cranking up again, the instos will hit the stock fast and hard.
SBM Price at posting:
22.6¢ Sentiment: Buy Disclosure: Held
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