twas a night to remember!

Good evening all!

After all the ramblings today..Ok! Back to the real stuff now *clears throat and wipes grin off face*

Almost forgot to post that I had dinner with some mates at West Perth earlier this evening (@ Black Toms) and I snuck the topic of SDL in. Here are some thoughts that came by that I could remember:

THE DSO HEMATITE DFS
SDL cant afford to lose any more credibility on dates of Announcements (even though we all know that the delay in the DFS was attributed to the very reasonable cessation of drilling following the tragic events -> delay in the metallurgical testing) so when Guilio says in strong terms that they will release the DFS by end of Q1 CY2011 - you can bet the ranch on that. So we assumed that DFS will be released on 31 March 2011, if not earlier - and this date is used as our benchmark.

THE ITABIRITE PFS
PFS for the Itabirite was announced to being released also before end Q1 2011. BUT what quizzed us the most is that the company is focusing strongly on the release of the DFS and focusing all their energy, funds and time on that DFS and the metallurgical test work to get that DFS out in the shortest possible record time - why would they burden themselves to release the PFS within the same timeframe? This really puzzled us.

It would make more sense to release the PFS in Q2 after -
1. The positive response from the market and SP appreciation;
2. More credibility in the negotiations with strategic partners now being armed with a DFS;
3. The project risk having significantly been reduced and liklihood of having more access to funds/ CR palatability now than before the DFS; and
4. There is no rush to release a PFS - it is only relevant 10 years+ after the DSO!

But now the company has committed itself to release the PFS on the same date. Why?

Granted that PFS is not as exhaustive and onerous as a DFS, it is still a significant burden both time, cost and energy.

We thought that potentially the PFS will be released on the same day of the DFS (a "double bite of the cherry day"), but we still see a case for earlier release.

THE "DARK KNIGHT" OF THE QUARTER: NABEBA DRILLING RESULTS
Last but not least, this was an interesting topic. We guessed that many funds would probably have their eyes on the DFS and expect that between now and 31 March 2011, they can play with SDL stock knowing they have about a whole 7 weeks to play games until they need to seriously think of marriage (buy back their bundles of SDL stock).

This is where we thought there was room for them to get it wrong.

The Nabeba JORC compliant resource upgrade is an integral part of the DFS. We estimate it would take 1 month at least to incorporate the upgrade figures into the the DFS document.

This means that the Nabeba resource upgrade would need to be announced (and then incorporated into the DFS) NO LATER THAN late February - preferably mid-February.

But at the same time there is a twist, and perhaps the real reason why management strategised for the PFS to be released in Q1.

If the Nabeba results provide significantly better-than-expected drilling results, this will re-rate the existing analyst projections/ broker reports and the economic conclusions of the DFS. In turn, this would shine a brighter light on (or flow down to) the Itabirite PFS.

Now, think of it this way: A great DFS with better-than-expected upside potential, and better-than-expected Itabirite PFS would lead to SDL having significantly more weight in the final days of the negotiations with Strategic Partners. In other words, they will be much more compliant to GJ (armed with a better-than-expected DFS and better-than-expected Itabirite PFS) if the results show 35Mtpa initial production, but with significantly better-than-expected upside potential going forward after initial year of production of the DSO.

Therefore, it would pay more dividends to have a DFS and the PFS released TOGETHER and slammed on the table in front of the potential strategic partners in the final days as they scramble to 'out bid' each other to secure longer-than-expected quality IO supply.

Guilio saying that the project looks better by the day (remember, as MD he knew everything we know now, months ago - he is constantly in possession of market sensitive, and pre- release market information that even we dont know)could potentially be in reference to the 'ground report' he's been getting by the ground crew on the VISUAL grades of the drilling.

I share Guilio's sentiments, day-by-day the more I talk with those in the know and hot copperites here the more I think this project gets better.

If this analysis is on par then you have 2 weeks to buy cheap SDL shares.


Foxtrot