RE:Decision TD must think so. They just initiated coverage today with a spec buy recommendation and a $3.00 target price.
Daniel Earle July 14,2017
Event
We are initiating coverage of Sabina Gold with a SPECULATIVE BUY
recommendation and $3.00 target price. Our full initiation report will be published
later today.
Sabina Gold's primary asset is the Back River gold project (100%) in southwestern
Nunavut. The company also holds a substantial silver royalty on Glencore's Hackett
River silver-zinc development project and a portfolio of exploration properties. At
over 550km2 and covering 60 km of widely mineralized Banded Iron Formations,
we expect the Back River property to see decades of fruitful exploration once a
successful mining center can be established.
The permitting effort for the project was upset in June 2016 with a recommendation
from the review board that further study was required before permits could be issued;
however, after re-filing its Final Environmental Impact Statement with an addendum
in February and further hearings completed in June, we are optimistic that a positive
decision will be reached as expected on July 18.
Resources total over 7 Moz in all categories on the Goose and George properties,
separated by 50 km. The immediate focus is on Goose, where a Feasibility Study
(FS) in September 2015 outlined Reserves of 1.7 Moz at 5.9 gpt (open pit) and 0.8
Moz at 7.4 gpt (underground).
The FS contemplated a 3 ktpd mine with average annual gold production of ~200
koz at total cash costs of US$534/oz over a 12-year life. Initial capex was estimated
at $415 million; post-tax IRR at 24.2% and payback at 2.9 years (at US$1,150/oz).
Spot gold, the Canadian dollar, and diesel prices have all moved in the project's
favour since.
In our view, Sabina is in possession of one of the very few advanced-stage
development projects globally that combines significant scale and robust economics
at a time when the senior gold companies are beginning to make investments aimed
at shoring up their depleting Reserves and addressing their declining production
profiles.
TD Investment Conclusion
With the stock trading at a discount to its closest peers, we are initiating coverage
of Sabina Gold with a SPECULATIVE BUY recommendation and $3.00 target price,
based on a 0.8x NAV5% multiple.