wots it worth?

Thought I'd have a crack at a valuation (again) and will be relatively conservative (grab a beer/wine/softdrink, this could be long)...

Assumptions:

- Plant running at name plate capacity: 350ktpa

- Average Headgrade: 2g/t (my assumption is that it will start higher based on ROM pad grades, reduce when they go to field, and increase again as they find sweet spots - but avg @ 2, over a 12 month period)

- Recovery percentage: 90% (I think this is around industry standard?)

- Plant availability: 85% (my guess based on older plant with refurbs & unforeseen outages)

- Conversion to troy ounces: 31.103

- SBL ownership of project: 70%

Given above I belive that output on an annualised basis would be around 12,000 ounces per annum net to SBL.

At an average price of $1,400 per ounce (AUD and/or USD - assume parity) then revenue of $16.9m p.a

Opex costs of $650/ounce (based on some old announcments and best guess) = $7.8m

Net earnings to SBL per annum = $9.0m

If you then assume a PE of 10 then thats $90m

At 2.8b shares on issue that equates to 3.8cps (as I said all very conservative) and assume that this is the base case then...

The upside variables are:

Increased average headgrade to 3g/t (which is mid point of their stated range) then this adds 2cps share to my base case valuation = 5.8cps

Increase plant capacity to 700ktpa adds another 6cps (I've not taking into account additional capex to do this, but they have already done a CR ($3m) to buy a mobile crusher etc to achieve this, so additional capex should be minimal) = 11.5 cps

Increase in POG of $100 to $1,500 (todays price - if this holds all year) is another 2 cps = 13.5 cps

Obviously all above is cumulative (and I think abit conservative)

The downside is obviously as extreme i.e lower head grades, lower output, low plant availability, lower POG etc which is ironically in this pessimestic market brings me back to the current share price of 2 cps.

So my theory is all the downside is already built in and no upside (I haven't even started on the manganese - mainly because I don't know where to start - but its gotta be upside!).

Saying all of above, obvioulsy working capital i.e self funding free cashflow is going to be key hence the sensitivity to meeting key dates of production. We've now meet a major milestone - we have gold barssss being produced, so cash will now start flowing.

I think the market will re rate this to "fair" value once we see sustainable production and we see that exploration grades continue to meet the targets. Fair value to me is around the 8 cps mark given above. If we hit signficant veins in the next assay results then game on, and there is certainly alot of evidence that points to elephants below the surface (think nearology, and previous shallow drills)


Sorry for the long post but in summary IMHO this is still way undervalued and the market is just looking for an excuse to rerate!!

DYOR bla bla


GLA

Maddoc