(OT) Sabina Siver Corp. - I really like itI posted this at lemetropolecafe.com. I will let the articles speak for themselves. I do own it. Please do your own DD before you invest.
SabinaSilver Corporation is a Canadian public mineral exploration anddevelopment company, with assets including the large 100%-owned HackettRiver Silver-Zinc Project in Nunavut and Del Norte Silver-Gold Projectin British Columbia. In addition, the Company has four promising goldprojects in the Red Lake Mining District, Ontario. The magnitude of thesilver resource and zinc resource at Hackett River ranks Sabina SilverCorporation among the top 10 silver-focused companies operating in theWestern Hemisphere.
Silver Equivalent
MI 616.80
Inf 139.91
Total 756.71
Highlights from preliminary economic assessment:
* Average annual production:
* 12.4 million ounces silver
* 324.7 million pounds zinc
* 20.7 million pounds copper
* 37.0 million pounds lead
* 17.2 thousand ounces gold
* A mine life of 13.6 years;
* A net present value-$345-million at an 8-per-cent discount rate;
* A pre-tax internal rate of return (IRR) of 20.6 per cent;
* A payback period approximately three years after the start of concentrate production;
*Total life-of-mine production of 4.4 billion pounds of zinc, 169million ounces of silver, 283 million pounds of copper, 504 millionpounds of lead and 234 thousand ounces gold based on the currentNational Instrument 43-101 compliant mineable mineral resource;
* Initial (three-year) capital costs of $527-million;
* Open-pit mining costs of $12.74 per tonne of ore milled or bulk mining cost of $2.24 per tonne mined over the life of mine;
* Underground mining costs of $37.92 per tonne of ore milled over the life of mine;
* Cash cost of $4.44 (U.S.) per ounce silver equivalent;
* Cash cost of $0.22 (U.S.) per pound zinc equivalent;
*The preceding calculations are based on $8.69 per silver ounce, $0.72per pound of zinc, $1.35 per pound of copper, $0.39 per pound of lead,$522.5 per gold ounce;
* Considerable upside expansion potential remains on the known three resource deposits;
*High exploration potential for discovery of additional deposits withinsimilar volcanic stratigraphy on the company's leases within theHackett River greenstone belt.
Other Projects
Del Norte Project
* Located in northwestern British Columbia, 30 km east of Stewart, BC;
*Emphasis on stepout work to determine potential tonnage and grade inthe K-Zone area (0.2 oz/t gold and 19 oz/t silver over 10m (33ft) onsurface; 2 oz/t gold and 110 oz/t silver at 125m vertical depth);
* Company plans to advance Del Norte to resource estimate stage;
* Potential for +1 million ounces of Au equivalent (Au + Ag @ 60:1 ratio)
Red Lake Project
* Located near Red Lake, Ontario;
* The Project includes the following 5 properties: Redaurum, Newman-Madsen, Golden Sidewalk, Peacock and Skinner;
* Integrated field exploration work completed;
*Emphasis on developing solid drill targets on the Newman-Madsen (50:50JV with Wolfden), Golden Sidewalk and Skinner Projects;
*Drilling to recommence in Q1-2007 after compilation of results ofgeological mapping, prospecting, geochemical sampling and geophysics;
* 80%-owned Redaurum project being drilled by Goldcorp; exploration update expected in Q1-2007.
Sabina Silver - Opportunity Overlooked by the Market
By: Boris Sobolev, Resource Stock Guide
January 7, 2008
Sabina Silver Overview
Hackett River Project
Highlights from Preliminary Economic Assessment
Mining and Acquisition Activity in the Neighboring Areas
Key Management
Current Situation and Upcoming Developments
Sabina Silver Overview
SabinaSilver Corporation (SBB.V, SBBFF.PK) is one of a few publicly tradedcompanies with truly large undeveloped silver resources located on oneproperty. The Company possesses tremendous upside but it is far frombeing a darling among resource investors. We think that this will notstay for too long. The Company is on a steady track to success and is alikely acquisition target when the price of silver starts to move.
Sabinaowns several properties (Hackett River, Del Norte and several Red Lakeproperties), and is actively drilling on most of these projects. Butthe main value is in Hackett River Project, located in Nunavut,approximately 480 kilometers northeast of Yellowknife, and 250kilometers southwest of Hope Bay, Canada. It is also located 75kilometers from the potential deep water port on Bathurst Inlet alongthe northern coast of the Canadian mainland.
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Hackett River Project
TheHackett River deposit was first discovered by Rio Tinto Exploration in1956. In the 1970s, Cominco defined a historical resource and in the1990s Etruscan completed geophysical surveys and drilling on the Mainand East Cleaver Lake zones.
In 2003 Sabina signed an optionagreement with Cominco and eventually acquired a 100% interest inHackett River property. Cominco still holds a 2% net smelter returnroyalty. In addition, there is a 10% net profits interest royaltyretained by Etruscan Resources Inc. which is capped at $2,000,000.
Sabina defined the following NI 43-101 compliant resource:
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Averagegrades are as follows: 4.67% zinc, 4.37 oz/st silver (149.89 g/t),0.32% copper, 0.68% lead, and 0.009 oz/st gold (0.32 g/t).
Althoughzinc comprises about half of the resource total based on today’s marketprices, the silver resource of over 250 million ounces is large by anystandard.
Early in 2007, Sabina released the results from a preliminary economic assessment of Hackett River.
Highlights from Preliminary Economic Assessment
It is expected that the Hackett River deposit will be mined by two open pits as well as via an underground decline.
Average annual production:
* 12.4 million ounces silver
* 324.7 million pounds zinc
* 20.7 million pounds copper
* 37.0 million pounds lead
* 17.2 thousand ounces gold
Theabove silver production will put Sabina in the mid-tier silver producercategory overnight (much bigger than Hecla Mining as an example). Minelife is expected to be 13.6 years with a total life-of-mine productionof 4.4 billion pounds of zinc, 169 million ounces of silver, 283million pounds of copper, 504 million pounds of lead and 234 thousandounces gold. Initial (three-year) capital costs are $527 million,taking into account the possibility that the deep water port and theall weather road to the Hackett property will be fully funded by SabinaSilver.
The amount of capital costs required is likely toincrease due to normal inflation as well as widespread price pressuresin the industry. But we are confident that a negative surprise ofNovagold’s proportions is not possible here. There is no comparisonwith the rugged British Columbia mountains where Galore Creek islocated to the gently undulating topography of Western Nunavut. Theengineering design requirements of Hackett are being driven by the needto accommodate the climate and permafrost in civil and other design,which has been demonstrated can easily be done in such operations asthe old Lupin Mine as well as the current diamond operations of Diavikand particularly Ekati. Oftentimes, the occurrence of permafrost isactually a significant advantage.
Wardrop Engineeringperformed an economic analysis for Hackett River using several metalprice assumptions. The project economics are robust even for the mostconservative case.
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The project is sensitiveto zinc prices. Although short term price action on zinc has beenlackluster, we remain long term bullish on most base metals.
Chart5
Today,zinc prices are lower (at around $1.11/lb), but silver ($15.30/oz),copper ($3.10/lb), lead ($1.17/lb) and gold prices ($863/oz) are allconsiderably higher. So it is reasonable to base our analysis onsomewhere in between the “base case” and the “better case” scenario.Certainly, production costs have risen, yet being conservative, westill believe that the value of Hackett River is around $1.5 billionand investors’ payback period is about 4 years - strong fundamentalsfor a project of this size.
The project is in one of the mostmineral-rich, remote, but well developed areas in Canada. A newall-weather road is being planned that would link the Hackett RiverProject to the proposed deep water port facility on Bathurst Inlet. Theroad may receive federal and/or Nunavut funding. If this project iscompleted, it would have a highly positive effect on Hackett River.
Mining and Acquisition Activity in the Neighboring Areas
Sabina’sneighbors include Rio Tinto’s famous Diavik Diamond Mine and BHPBilliton’s Ekati Mine - the first diamond mine in Canada. Othercompanies with interests in the region include Newmont Mining (NEM),Agnico-Eagle (AEM), Dundee Precious Metals (DPM.TO), De Beers andZinifex.
In 2007 alone, there were three large acquisitionsof companies operating in the area. Newmont Mining purchased MiramarGold and its large gold projects – Madrid, Boston and Doris. Zinifex, amajor Australian zinc/silver producer, took over Wolfden Resources toadd to its portfolio some promising Nunavut properties. Agnico-Eagle(AEM) also joined the Arctic play by acquiring Cumberland Resources andits Meadowbank gold project in Nunavut.
It is clear thatSabina is on many majors’ list of acquisition targets. By adjustingmarket capitalization by the cash value on the balance sheet of $55million, its enterprise value (EV) is only $78 million, a paltry sumfor major and mid-tier mining companies. The total value of vastunderground resources by comparison is over $12 billion, 159 timesbigger than the EV. This earned Sabina a place in the recently featuredWorld Class Deposit Index.
Key Management
Sabina’sBoard of Directors appointed a new President and CEO in August. Becauseof added uncertainty and a general market panic, the stock fell and hasnot been able to fully recover since. In fact, the change in managementwas a highly positive development. Albert Brantley became the newPresident and CEO, bringing extensive mine development and constructionexperience to Sabina. Before joining Sabina, Albert Brantley was theCOO / Chief Development Officer at Oceana Gold which currently producesaround 200,000 ounces of gold annually and has multiple developmentprojects in New Zealand, Australia and the Philippines. We have had thepleasure of meeting Mr. Brantley and believe that he is the right manfor the job.
The outgoing President and CEO, who areexploration professionals rather than development experts, bothremained on the Board of Directors.
Current Situation and Upcoming Developments
Fromour latest conversation with Mr. Brantley, there may exist someadditional upside for the resource base. First assay results fromadditional drilling done this summer will be available at the end ofJanuary.
After the assay results are released, a resourceupdate is going to be issued in the beginning of 2008. For the mostpart, Sabina will convert the remaining inferred resources into theindicated category, although an increase in the tonnage cannot be ruledout.
At that point, Sabina should have everything it needs tocomplete its pre-feasibility study by July 2008 (moved from the Marchdeadline due to engineering firms’ backlog). Later in the year, theCompany will submit a draft Environmental Impact Study and complete abankable feasibility study by early to middle 2009. Beginning ofconstruction is anticipated in 2011.
With new management and$55 million in the bank, Sabina is well equipped and fully funded tocomplete both the pre-feasibility and the feasibility studies in thenext 18 months.
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Finally, we have been able todraw an interesting parallel for Sabina Silver. In the Resource StockGuide database, there is one company that is almost identical to SabinaSilver in many respects: Apex Silver (SIL)
Chart7
ApexSilver, traded on the AMEX, is well known amongst the investorcommunity. The notable differences between Apex and Sabina aregeographical location, market valuation and the stage of the projects.Apex is entering production in a politically challenged Bolivia, whileSabina is still four to five years away from seeing first revenue fromproduction in mining friendly Canada. Does that warrant a 30Xdifference in valuation? We find it hard to believe that it does.
Itis a challenge to be a value investor. It often takes a long time tosee any results. Yet rewards can be huge. The case for Sabina isstraightforward. The longer Sabina Silver remains an independentcompany and avoids getting acquired by a larger company, the more wewill benefit from Hackett River’s advancement to production. We areloading up and exercising patience.