Mining executive Rob Pease

Mining executive Rob Pease

Rob Pease's Sabina Gold and Silver (TSX:SBB) is getting hit hard this morning, down over 8% today, and 80% on the year, last at $.57.

A few reasons why the stock is falling off:

1) tax loss selling
-since the beginning of 2013 SBB has gone from $2.50+ to ~$0.55 (new 52 week low)
-investors who are losing money on SBB are selling at a loss to offset their capital gains in 2013

2) Gold price
-the Gold price has dropped 26% this year

3) General pain in the junior mining sector
-Rick Rule (Sprott USA Chairman) summed it up quite nicely with the quote: “The exploration industry was stupidly overcapitalized from 2003-2010. Every truly great party causes a truly monumental hangover. We’re in that phase now.”
-CEO.CA had a great interview with Mr. Rule in early November about the state of the junior mining sector (https://blog.ceo.ca/sprotts-rule-and-the-bear/).
-some highlights:
-He thinks that the top 10-15% of junior companies have already bottomed
-Rule predicted it will take another 18-24 months for resource equities to fully rebound. The largest mining companies are already starting to show compelling valuations

I am positively inclined to the stock at these prices. Sabina’s 100% owned Back River project in Nunavut is truly a world class asset. Back River has 4.6 million ounces of Gold (“measured and indicated” resource @ 6 grams per tonne) and an additional 1.9 million ounces of Gold (“inferred” resource @ 8 grams per tonne). This is a high grade deposit that has the potential to produce ~300k ounces per year. The market will see value here when resource equities start to rebound. Additionally Sabina owns a silver production royalty on Glencore Xstrata’s Hackett River project comprising 22.5% of the first 190 million ounces produced and 12.5% of all the silver produced thereafter (no additional costs to Sabina). Hacket River is a silver and zinc project located near the Back River project in Nunavut. Sabina sold the Hacket River project to Glencore Xstrata in exchange for $50mill in cash and a royalty on the silver mined.

The upcoming catalysts to drive the price higher:
1) 2013 exploration/drilling results from Back River (more drilling results to come this year)
2) completion of Draft Environmental Impact Statement (EIS) by end of 2013
3) Back River resource update (q1, 2014)
4) Sabina to commence feasibility study (q1, 2014)

Sabina Cash position (current market cap for Sabina is ~$120mill):
-projected cash balance at end of 2013: $60mill
-projected cash balance at end of 2014: $30mill

Analyst coverage:
RBC, outperform rating, $1.70 12 month target
Salman Partners, speculative buy rating, $3.00 12 month target
Desjardins, buy rating, $2.20 12 month target
Cormark, buy rating, $2.40 12 month target
BMO, market perform rating, $1.50 12 month target
National Bank Financing, sector perform, $1.50 12 month target

SBB 3 Year

SBB.TO - 3 Year (Stockwatch)

More: http://www.sabinagoldsilver.com/s/home.asp

Disclaimer: I own Sabina Gold and Silver stock and am biased. This is not investment or professional advice of any kind. Always do your own due diligence.