valuationI was buying Sabina at 37 cents, and I hold a lot less shares now than I did then, but all I care is:
1). Are precious metals a good place to be invested? I believe the answer is yes because of the fiscal and monetary policies of the US and other nations.
2). If you believe in investing in precious metals, how well does Sabina stack up against alternatives in the sector and what does that translate to in terms of how much you should invest in Sabina?
Well, I believe Sabina is the best value among companies with medium to high grade precious metals deposits.
Look at silver. You can't buy silver in the ground less than about $3 per ounce today. At that price, Sabina's 250 million ounces of silver alone almost justify its market cap. And the other metals in Hackett River add up to about equal to the silver in value, so you are looking at a value of Hackett River of perhaps $1.5 billion. That may be a bit optimistic, but if they expand the resource a bit, I believe that will firm up that valuation.
Then there is Back River. If we round the deposit down to 2 million ounces, these days high grade gold in the ground is worth at least $300-400 per ounce; I think some deposits are valued a lot higher but let's be conservative. So that puts Back River at a value of $600-800 million. If they find another million ounces that becomes $800-1200 million.
So, simplistically speaking, one could argue that right now Sabina's market cap is about what it should be if the only owned ONE of their two major projects. That also suggests what might be a reasonable stock price target. $12-13.
That's assuming the precious metals market is flat from here on out and that they don't expand their resources any further. A continued bull market in precious metals is hard to translate into target price- if gold is $5000 per ounce and silver at $100, I suppose this stock could be $100 per share but that is getting way too speculative.
If the deposits expand substantially, the target share price of $12-13 may get more in the range of $18-30.