St Augustine Gold and Copper Ltd T.SAU

Wall Steet research Firm Coverage of SAU

[BronxPark]

I checked these Guys out.This is a pretty repected Wall Steet Research Firm. They provide Coverage to very impressive arrat of Corporations mainly in the US. Simberi doesn't even seem to fit their profile of a company that they would even condider providing coverage to. This is pretty intriguing. https://khandaker.com/researchcoverage.cfm?portfolioid=1# Khandaker Partners & Co, Inc. 14 Wall Street ,30th Floor New York, NY 10005 Tel: [phone] Fax: [phone] Email: [e-mail] https://www.simberimining.com/_resources/khandaker_research_report.pdf Initiation of Coverage Equity Research We are particularly excited about Simberi Mining’s Kakanda Project, which is located in the vastly un-explored Central African copperbelt, home to around 10% of the world’s copper deposits. This National Instrument 43-101 (“NI 43-101”)compliant property of the company is in the advanced stage of development and contains a sizeable (Indicated and Inferred) resource of superior-grade copper/cobalt mineralization. This, along with the bullish outlook for the metal and mining sector lends support to our view on this stock.The company’s flagship Kakanda Project is in the advanced stages of development. Investment Summary We are initiating coverage on Simberi Mining Corporation (SAU: TSX-V, S9X: BBSE) and expect the company’s market capitalization to reach C$194.36 million, with a corresponding target stock price of C$1.23 over a 12 month horizon. Capitalization (C$ millions) Current Market Cap 13.40 Target Market Cap* 194.36 * Our target price and target market cap are aiming at a 12 months investment period. For details, please see financial forecasts and analysis. Price (C$) 02/22/2007 0.085 Price Target * 1.23 The company enjoys a healthy cash position (C$3.66 million in September 2006). Furthermore, in our opinion, Simberi Mining is comfortably placed to fund any further exploration requirements as it is supported by an attractive asset portfolio. Simberi Mining recently completed the C$2.7-million private placement in November 2006, which is likely to further speed up the development of its projects. Moreover, commencement of production at the Kakanda Project in the near future is likely to bring in healthy cash flows for the company. Financial Forecast and Analysis SUMMARY We valued Simberi Mining Corporation (SAU: TSX-V; S9X: BBSE) using two methods – the Net Assets Value (NAV) approach and the Market Cap method. These yielded a per share fair value of C$1.64 and C$0.82, respectively. To arrive at the price target, we used the average of the fair values obtained from the two valuation methodologies mentioned above. This resulted in a 12 month target price of C$1.23, which is more than fourteen times the stock’s current market price of C$0.085. NAV Approach In our NAV approach-based model, we limited our estimation to the Kakanda Project (51% interest), since, in our view, it will be the primary revenue generator in the horizon period. On account of holding an Indicated Tailings resource of 18.4 million tonnes grading 1.22% Cu and 0.15% Co, and an Inferred Hard Rock mineral resource of 11.3 million tonnes grading 3.25% Cu and 0.20% Co and being in the advanced stages of development, the Kakanda Project is the flagship property of Simberi Mining. In line with our conservative approach to the valuation, we modeled the mine to commence production from the Tailings resource in late 2009 with the first revenues coming in the beginning of 2010. The Hard Rock resource base is expected to come online only in 2013. We have also assumed that only 60% the total Inferred Hard Rock resource will be scaled to Indicated and Measured levels. The company is expected to generate revenues by selling copper and cobalt. Based on the current resource estimates and the capacity levels to be available in future, Simberi‘s annual copper production is estimated at be around 32,000 tonnes initially and is likely to scale up to approximately 43,537 tonnes, once Hard Rock resources are mined. Regarding cobalt, Simberi Mining plans to produce around 3,500 tonnes of cobalt each year. The realized prices of copper and cobalt have been kept in the range of US$2.0-2.2 a lb. and US$13.0-15.0 a lb., respectively. We also assumed a much higher production cost of US$1,870.3 a tonne to recover copper from the Tailings deposit. Incase of Hard Rock resource, a cost of US$1,070.2 a tonne has been assumed. A 2.0% inflation is expected to occur in the cost of production each year. Thereafter, we have assumed a profit share of 92% in the initial years (until the company’s capital expenditure of C$348.75 million is recovered) and then a share of 51%. Having estimated the net cash flows for the life of the mine, we then discounted the same by 15.57% or the cost of equity that includes an additional 2% country risk—the project is located in the DRC. Our cost of equity was based on a risk free rate of 4.10%, a risk premium of 7.25% and a beta of 1.24. The NAV approach yielded an asset value of C$1.64 per share. Market Capitalization Method We also valued Simberi Mining on the basis of market-capitalization per tonne of resource. For this, we first calculated the market cap per tonne of copper resource for several copper exploration and development companies. The copper resource includes Measured, Indicated and Inferred resources as reported by NI 43-101. Our analysis indicates that companies with copper mines/properties have a market capitalization of C$4.36 a tonne of copper. Therefore, with a likely resource of 29.70 million tonnes, Simberi Mining’s market cap works out to be C$129.49 million or C$0.82 per share.