SBL 0.00% 0.1¢ signature metals limited

could this be the pru of 2010?

  1. 749 Posts.
    A number of similarities are evident between Perseus and interesting gold junior, Signature, which I hope will become increasingly apparent to the market as 2010 unfolds. Keeping it simple, the most obvious are as follows:

    *both operate in West Africa on rich and proven world-class gold belts
    *both have multi-million ounce gold production potential (Perseus with 7m ounce in the proven and probable category and Signature just short of the million mark but rapidly expanding with every drill hole sunk)
    *both are set to be relatively low-cost, long life producers in the short to medium term (in fact Signature has a moth-balled mill on site that directors say can be re-commissioned swiftly once a larger resource has been proved up)
    *both have a degree of sovereign risk (although Ghana is one of the more stable West African nations)

    Perseus clearly has a much larger proven and probable resource - 7 million ounces in the proven and probable category compared to Signature's 980,000 ounces - but here's where it gets interesting if you like an 'untold story': Perseus' enterprise value per ounce is around $90 in the ground while Signature's is around $36. Put another way, while Perseus has 7 times the resource of Signature, it has a market cap of $566m compared to SBL's $24m. Allowing for PRU's larger resource, seven times $24m comes to... just $168m. That means Perseus is valued around 300% more per ounce than is Signature.

    I know Perseus probably has a "take-over premium" built into its price as the majors must be running the ruler over a resource of that size, but I see Signature as an excellent example of a similar African story with a swiftly growing resource in a new mining "hot spot". It seems almost certain that SBL could double the size of its resource in 2010 with in-fill drilling and once the decision to mine is made, it could generate cash-flow swiftly by powering up the mill on site (shut down when gold languished at $300 / ounce).

    SBL has a lot of shares on issue but with a total market cap of just $24m and around $2.8m in cash, it could well follow PRU's trajectory of the past year in my view.

    All of the above is opinion only and I welcome thoughtful responses. As a holder of the stock, I have a strong vested interest in the outcomes sketched above, so caveat emptor.

    By the way, I also think PRU has lots of legs yet and do not believe it over-valued in the slightest. I merely use it as the basis for a comparison with a similar, early-stage junior.

    Good luck all holders

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