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Why Sabina Gold & Silver Shares Surged

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of gold developer Sabina Gold & Silver (TSX: SBB) popped 14% today after its quarterly results impressed Bay Street.

So what: The stock has plunged over the past year on slumping gold prices, but late Friday’s Q2 results — net loss of $1.6 million compared to a loss of $343 in the year-ago period — and an upbeat drilling outlook are prompting analysts to raise their valuation estimates. Specifically, drilling at its important Back River Gold Project in Nunavut — currently in the pre-feasibility and permitting phase — continues to be successful with five drill rigs at Goose and three drill rigs at George, giving investors plenty of good vibes over the asset’s prospects going forward.

Now what: Management will continue with their due diligence at Back River. “Over the last two years, work has focused on de-risking the Back River project with drilling and engineering and environmental studies,” said President and CEO Rob Pease. “While most field and drilling work done in 2013 will support a potential final feasibility study, planning and studies continue on our pre-feasibility study which we expect to be announced in early October.” So although Sabina might be too speculative for average investors, Back River’s upside, coupled with the stock’s still-depressed price, might be providing resource-savvy Fools with an attractive risk/reward tradeoff.

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Fool contributor Brian Pacampara doesn’t owns shares in any of the companies mentioned.  The Motley Fool does not own shares in any companies mentioned at this time.

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