STB - SA article

Good roundup from Seeking Alpha


The past 6 months have been very active for South Boulder Mines , with more news flow than I expected. I am confident that this positive company momentum will begin to be reflected in STB's share price sometime this year. In this update, I will focus on the two most significant topics for STB: (1) mine financing; and (2) the timing of the upcoming Prefeasibility and Definitive Feasibility studies.
In late July 2014 and early January 2015, South Boulder raised two separate strategic share placements with two Hong Kong-based institutional investors (Kam Lung Investment Development Company and Well Efficient Limited). This is beneficial in that STB now has sufficient working capital to complete its DFS, but more importantly, the two placements indicate investment demand from non-Western sources. With the project's location in Eritrea, western institutions will likely NOT be willing to fund STB in today's market environment. This is despite the fact that the Colluli mine is a world-class deposit that would be in production (if not already depleted) had it been located almost anywhere else in the world. The size and near-surface nature of this deposit make the Colluli deposit a true geological phenomenon, but the mine won't be built without further financing. The fact that STB is attracting non-traditional investors at this stage is a promising sign.
In the July 2014 update, I stated that "there will be a strict deadline of July 1, 2014, and, if the DFS hasn't been released in the timeframe Donaldson indicated, the Partnerships will liquidate its STB holding." Due to the tremendous progress STB has made over the past two quarters, and the fact that it has decided to release a PFS by February 2015, I'm willing to be a bit more flexible on the delivery of the DFS (which I now expect will be announced to the market sometime in Q3 2015). The combination of the Colluli Project's additional upside and the market's current valuation of STB (both in relative and absolute terms) justify waiting for the company's Definitive Feasibility Study.
Over the next six months, the single-most important announcement will be the PFS. This is due sometime in February 2015. I will be satisfied if the PFS checks two boxes: (1) initial CapEx >$500M; and (2) an NPV @ 10% >Initial CapEx. These are ambitious numbers, but given the quality of the Colluli Project, they should very attainable. Remember, the major STB risk factor is the stability of Eritrea (and hence, the availability of mine financing); NOT the economics of the mine itself. Assuming a successful PFS, South Boulder is geared for a very exciting H2 2015 - where I expect the release of a DFS, the completion of an Environmental Impact Assessment, and the granting of a mining license. If the company executes, this should be STB's first positive year from a share price perspective since 2010