ProShares Short SmallCap600 T.SBB

Dundee Capital Markets comments on Sabina Gold and Silver

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According to Dundee Capital Markets:

https://www.ge.tt/api/1/files/3CpXhyP2/0/blob?download

Sabina Gold & Silver Corp.

(SBB-T: C$0.455)

October 13, 2015

BUY, Speculative Risk

Dundee target: C$0.75

New Near-Surface, High-Grade Target Identified At Goose

Sabina Gold & Silver announced the discovery of a new near-surface, high grade banded iron formation drill target at its Goose property in Nunavut. Results support our view that Back River continues to host the potential for a district-scale camp, while current focus remains on building the smaller, high grade initial project outlined in a recent feasibility study producing ~200k opy over 12 years.

Kogoyok Discovery - New Near-Surface Targets Identified: Sabina identified new high grade near-surface gold mineralization within banded iron formation (BIF) at its high priority Kogoyok target on the Goose property (Figure 1). Assay results from 12 grab samples returned grades from 2.66 to 33.86 g/t gold (Figure 2). Kogoyok shares similar geological characteristics as the other major known deposits at Back River, which already hosts 5.3MM oz gold at 5.9 g/t Au in the M&I category & 1.9MM oz Au at 7.4 g/t Au in the inferred category (Figure 3).

Successful Low Cost August Exploration Program Continues to Add Value: In addition to identifying the new Kogoyok target, the summer program also refined the expansion of the Hivogani Mineralizing Trend, taking preliminary geophysics and rock & channel samples. Results from Hivogani are outstanding and are expected when survey and assay results have been received.

Results Support Investment Thesis: We continue to like Back River as a high grade deposit amenable to open pit and underground. The Initial Project feasibility study outlines a scenario with low initial capital requirements (C$415MM) for a 3,000 tpd mostly open-pit operation producing ~200k opy over 12 years (~250k oz in years 1-8). The Initial Project shows strong economics (after-tax NPV@5% of C$480MM & IRR of 24.2% at US$1,150/oz Au & 0.8:1 CAD:USD) and the smaller scale should be more manageable to finance in the current challenging economic environment, in our view. The company has also outlined a larger 6k tpd operation which would produce 352k oz Au per year, offering district-scale potential, which we view as a more attractive size for a potential suitor. Additionally, today's results highlight Back River's significant exploration upside on the large, unexplored project.

Attractive Valuation; Expecting Rerating: At DCM prices, Sabina trades at 0.46x P/NAV vs DCM's coverage universe of advanced developers at 0.58x NAV. In the near term, we expect Sabina to rerate as the market recognizes the merit in the lower capex scenario and increased attractiveness as a takeover target. As Sabina moves the project towards production, it should rerate towards producers at 0.8x-1.2x NAV.

Buy Rated; C$0.75 Price Target: SBB is well positioned to advance the high grade Back River gold project towards production. Our C$0.75/sh target is based on a 0.75x NAVPS multiple (DCM deck) to our C$1.00/sh NAVPS.