why invest in sar?

G?day Saracens.

SAR is one of several emerging gold producers I am working on atm. I do not hold any as yet. I am long FML having completed my DD on that one a while ago & deciding it was the best risk reward stock on ASX atm. My work to date on SAR looks good.
I also have small lots of IGR & NMG.

So to SAR:
Right address in WA

good production 110-120,000oz pa. With reasonable cash cost $680-700. ; I prefer to start when they are at least 100,000 oz pa . Plant achieved ahead of schedule & under budget, show management on the ball.

higher target (250,000oz pa Carouse only ? BUT NOT until 2015!). Target was 150-160,000oz in Feb.

Solid & growing resource base 3.3m oz; ok reserves of 885,000 oz.

No debt (& $50-60m tax benefits). But some hedging (normally don?t like, but use of puts/calls is better, although I note $6m loss on derivatives for the half!).

They seem to have plenty of high grade drill results throughout their tenements, but seem to be suggesting an acquisition is part of their growth plan. Also their higher production target of 250,000oz pa isn?t until 2015 ? too far out.

SAR are suggesting their mkt cap will be $1B in 2-5 years (BIG time spread?); that?s 3 x current & if they do an acquisition, it would need to be accretive straight away or multiple lower. This brings in the BIG risk of acquisition risk; these can sometimes NOT be successful or accretive to SH value.

Seems to me they have terrific ground & plenty of it, so why not just focus on that, rather than planning an acquisition?
Realistically I couldn?t see a $1B cap without that higher production, so that 2-5 years is really at least 4 years to 2015.

Sell down since recent highs, seems to be inline with its peers.

I?m looking for those that know this stock better than me, to tell me things I have wrong, or others I have missed etc. All constructive criticism & comments welcome, particularly any potential issues/problems.

as usual;
CAVEAT EMPTOR - risk in all Investments.
Everyone should make their own investment decisions & not base them on what they might read on an Internet chat site, or receive from me (who is just an enthusiastic amateur).
Remember, this information is probably worth what you paid for it.

cheers,

ned.