It seems that over the past month or so, there have been numerous articles comparing SDL with FMG. One of the more detailed of these is the RM Capital report on the SDL website.
FMG plans to commence production in Q1 2008 ; SDL is looking at 2012/2013. Ok, I know what some of you are thinking - "so what?, obviously SDL is 4-5 years behind FMG". True, however, my point is that although SDL may appear to resemble another FMG in it's infancy, it might be worth keeping it all in perspective. FMG (approx 240m shares on isue) actually has a 2.4bt reserve; has secured the $3.2B financing necessary to construct the operation; has actually commenced construction; and plans to commence production in Q1 2008.
Now a quick look at SDL (approx 1.6B shares on issue) ; a 'POTENTIAL' resouce of +800mt of hematite; George Jones at the helm; $30m in cash to cover its 20,000m of drilling this year & part of the BFS. However, this +800mt potential resource is based on ONLY 6 holes conducted by the United Nations Development Fund (UNDF) and the Canadian International Development Agency between 1976 to 1984. SDL does not even have any drill rigs IN Cameroon yet, and drilling is not expected to commence prior to late May 2007, with first results in late June/July.
In the scoping study, SDL estimates a $2.46B capital cost, however, by the time financing is actually put together, it is reasonable to expect this to have blown out significantly.
Overall, apart from some rather heavy insto buying (mainly by Ken Talbot's fund), over the past few weeks, and the very first few hundred metres (of probably 50-70,000m that will be drilled in Cameroon over the next 18mths) of drill results due in late June/July, SDL's rise from 7c to 16c today seems a little stretched. Based on what SDL actually has at present, not what 'potential' may exist, SDL is starting to look a tad expensive and unless you're looking at a minium 12mth hold, those buying in at all time highs may be left holding the hot potato.
Anyone care to comment?
SDL Price at posting:
0.0¢ Sentiment: Hold Disclosure: Not Held
