Wednesday, December 21, 2011

Mid tier gold miner San Gold is on a tear heading into 2012

"These results provide a detailed account of one of the richest gold deposits ever discovered in Manitoba. It's extremely impressive that a gold deposit that wasn't even known about two years ago will be contributing 50% of our mill feed well into the foreseeable future," 

George Pirie, San Gold's President and Chief Executive Officer. December 20th, 2011.

 SanGold Corp. is a mid-tier Canadian producer of gold headquartered at Winnipeg, Manitoba. It currently owns the producing Rice Lake, Hinge and 007 mines and owns other gold mining interests in both Manitoba and Ontario, Canada.

Today's market cap is 606,000,000, up over 40% after yesterday's huge pop, with 312,677,000 shares outstanding. It has a 52 week trading range of $1.35 to $4.09 and is trading today under $1.90  Operating revenue is $75, 239,000, up 118% year over year. It has a three year return of 16.72%

8 Analysts have a buy recommendation on Sangold with a current consensus target price of $3.40 share.  Of course, that price was set well before yesterday's big news.  What was that big news?  Well it is the reason that the CEO George Pirie, made the above noted quote in his release yesterday. Basically, SanGold has released results of this years 200 drill holes at 007 and the numbers are astounding.  They represent the largest gold find in the history of Manitoba mining.  Here are some of those numbers:

  • S922-11-036, intersecting 23.2 g/tonne over 11.5 metres at a depth of 362 metres
  • S922-11-013, intersecting 110.1 g/tonne over 2.1 metres at a depth of 330 metres
  • S922-11-049, intersecting 44.2 g/tonne over 4.3 metres at a depth of 348 metres
  • S922-11-089, intersecting 63.0 g/tonne over 2.8 metres at a depth of 362 metres
  • S922-11-091, intersecting 21.7 g/tonne over 7.4 metres at a depth of 362 metres
  • S915-11-003, intersecting 11.8 g/tonne over 12.3 metres at a depth of 396 metres
  • S915-11-024, intersecting 60.7 g/tonne over 3.0 metres at a depth of 275 metres
  • S915-11-045, intersecting 45.6 g/tonne over 4.3 metres at a depth of 291 metres
  • S915-11-084, intersecting 17.4 g/tonne over 9.4 metres at a depth of 269 metres
  • S915-11-106, intersecting 18.1 g/tonne over 3.2 metres at a depth of 358 metres
 In an industry where  3 grams per ton is considered minable reserves, you can see from the results why 6 million shares traded hands yesterday and the stock jumped 40%.  With recent M&A action in this hot area
(2011 examples include: Eldorado buying European goldfields for 2.4B, Gold Corp buying Gold Eagle, Agnico buying into Pheonix, Agnico-Eagle buying Grayd Resources, Hedge Fund Luxor Capital buying Crocodile Gold, IAM gold announcing it is on the lookout for acquisitions etc.) I have become even more bullish on SanGold than I was even last month.

big miners have chosen the express route to increasing reserves by purchasing the known assets of their rivals rather than the heartache and headache of drilling core samples and filling out permit applications. San Gold is a growing, mid tier producer of gold. Yearly revenue is now 10% of market cap, new discoveries have increased the resource base, production will hit 100,000 oz in 2012 and SanGold has an earnings per share growth of over 30% for the past five years.

2012 should bring a whirlwind of M&A activity in the gold sector, and I plan on being in on the ground floor.  How about you?

Disclosure: long San Gold (SGR-TSX) and Brigus Gold (BRD).

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