San Anton (T.SNN) remains a solid play even though it has risen by more than 50% since I started posting on it a few weeks ago. I bought more this morning at $1.54 which is the all time high as I write this but I suspect it will be much higher still by the close tonight. The market depth is ugly but the buyers keep stepping up to hit the offer, as I did this morning.
There are three big factors that will be coming into play shortly, each of which will be bullish for SNN, but combined they will amount to a mini perfect storm.
The first is the pending release of the updated resource estimate. Right now, about 11 million gold equivalent ounces are compliant resources with an average grade of .79 g/t. That was based on about 100 drill cores completed in 2005. Since then the number of additional drill cores completed has more than doubled the total data base, on which a new updated resource is being prepared. I would assume that 15 million gold equivalent ounces would represent a conservative target, and since much of the drilling was infill work, I would also expect that the average grade of the deposit will climb closer to that magic 1 g/t gold level. I think SNN will be profitable well below a gram for the average grade, but above a gram puts it in line with GAM's Ocampo and we all know how the market values that one.
The second big factor will be the arrival of analyst coverage. Just as we saw last year with OSK, the effect of positive analyst coverage on a newly listed stock that has a narrow following is that an explosion in price will occur as retail investors and institutional buying compete for the float. This rise in price generates more buying from momo players. The float for SNN is smaller than most people think, because a holding company controls about 75% of the shares and they are not sellers.
The final input that will catapult SNN higher is the gold price itself. I believe we are on the verge of a sprint above $700 for the POG. Last year that was the driving force to propell the entire sector rapidly higher. With the large established resource SNN will be even more attractive with higher gold prices. And the news flow as 2 drills continue working round the clock will keep the spotlight on the company just as new money is looking for a home.
Combined, the effects of all three factors above should generate an impressive rise in the stock. And do not discount the value of the copper in the story. I think the analysts are going to be embarrassed by how strong copper performs this year after so many had written it off.
My personal opinion is that $10,000 invested in SNN now will be worth about $100,000 in less than 2 years. I made a similar projection in OSK back in march, and it took less than a year to exceed my expectations. I am wrong often enough to keep me honest and humble, but I do expect there will be a lot of people who will have to chase this stock later if they miss it now.
cheers!
COACH247 |
