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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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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