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Excellent drill results at Miraflores solidify potential
Ubika Model Price (UMP)
Price Target 1.16
Ubika Rating
Undervalued
Risk
High
Price (Jan 25, 2012)
.225
Gap to UMP
415%
52 Week Range
.14 -
.52
Share O/S
169 Million Shares
Market Capitalization
$38 million
On Jan 25, 2012, Seafield announced additional drill results from the drilling program at its most advanced Miraflores target located in the Quinchia district, Colombia. Results from two drill holes, the hole DH-24 and the hole DH-25, confirmed the mineralization at depth and also strongly suggested the extension of the mineralization in the southwest direction. These holes suggest that the current resource at the Miraflores targets could increase, potentially significantly, as the Company continues to find extension of the mineralization. The markets cheered the news strongly and the stock jumped by 32.5% on a strong volume of over 6 million shares traded.
v Miraflores continues to impress: SFF’s most advanced target continues to show strong potential for a big resource. This breccia system at the Miraflores already contains a significant resource (~1.6m oz grading 0.9 gpt). The Company has been reporting very encouraging drill results at this target as it follows the system and finds more evidence for continued mineralization. In addition to the results announced yesterday, the current drilling program has resulted in several strong intercepts such as 261.9 metres grading 0.8 gpt including 43 metres of 1.45 gpt announced in Oct of 2011.
v Resource expansion is likely: The Company already has a combined resource of approximately 2.5m ounces at its various targets at its project in Colombia. We believe that a resource expansion is highly likely as SFF includes drilling data from over 10,000 metres drilling at the Miraflores target.
v Cash is king: Seafield is one of the few junior gold exploration companies
with a strong treasury. It has over $13 million in cash to carry a very aggressive exploration program at its project and is fully funded for 18-24 months. The capital market remains challenging for juniors and this cash war chest will serve SFF very well in coming months.
v Undervalued compared with peers: We continue to believe that Seafield
remains considerably undervalued compared to its peers, especially to its immediate neighbour, Batero Gold Corp. (TSXV: BAT), which has a market value of $ 132 million. At a market value of $38 million, SFF is getting approximately $10/oz (after accounting for cash on the balance sheet), which represents a significant discount to its asset value and its future potential. We believe that this valuation gap will eventually close as Seafield continues to announce exploration, advances its various projects and the market recognizes its potential.
The current Ubika Model Price of $1.16, on adjusted shares basis, represents a 415% increase from the previous close. We maintain our Undervalued Rating on Seafield Resources Ltd.
The Company
Seafield Resources Ltd. is an emerging Canadian junior gold exploration company focused on several projects in the Quinchia district in Colombia, South America.
The company’s current land package totalling 6,757 hectares (67 square km) consists of several targets including the Dos Quebradas target and the Miraflores target.
Seafield’s investment potential is best explained by its large land holding (Seafield is the largest land holder in the Quinchia district) in the relatively unexplored but emerging new gold-copper porphyry district, home to recently discovered big world class deposits such as Marmato deposit (approximately 10 million oz) of Medoro Resources (TSX:MRS) located 10 km to the north and AngloGold’s La Colosa deposit of 13 million oz located 60 km southeast to Seafield’s property.
Analysis and Conclusion
(Read the Seafield Resources Ltd initiation research report dated November 11, 2010 and the update report dated May 27, 2011 available at https://www.smallcappower.com/microsite/seafield_resources_research_reports.html for a full analysis and our investment opinion)
We are pleased to see the current drill results. These drill results further confirm the potential at the Miraflores target. The breccia system appears to be sufficiently mineralized and continues to show expansion potential.
This is the first time that a hole was drilled in the southwest direction from the main resource area. The confirmation of the mineralization will warrant a follow up drill program to continue testing the extension of the breccia system. We believe that the Company can pursue a follow up drill program totalling 4,000 to 5,000 metres in coming months to confirm the expansion further and to test for the mineralization.
We continue to believe that SFF has the potential to find a gold resource deposit in the range of 3 to 5 million oz at different targets on its property. The current developments provide more credence to this belief. Most targets are still undiscovered and untested and the current systems are open for expansion.
We expect a very busy year for Seafield during 2012. The Company has made significant progress under the leadership of the new management, which took control last year in April. The new team has streamlined operations in Colombia, appointed a strong technical team with deep knowledge of Colombian exploration landscape and has been working on increasing the market awareness of the story.
We believe that during 2012, the Company could see significant expansion to its global resource base and will advance the Miraflores project towards feasibility. As Seafield Resources continues to move its resources at Miraflores to more advanced stage, finds additional resources at various targets and pursues an aggressive drilling program, several positive news and milestones are expected during 2012, which could bring significant attention to its stock.
Ubika Research Disclaimer
This report has been prepared by Ubika Research, a division of Ubika Corporation.
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