Investors Keep Explorer's Gold Project Advancing But More Slowly

In a Dec. 21, 2018, research note, BMO Capital Markets analyst Andrew Kaip reported that Sabina Gold & Silver Corp. (SBB:TSX; RXC:FSE; SGSVF:OTCPK) will use proceeds from its recent CA$28.1 million bought deal financing to advance its Back River project and for general corporate expenses. BMO resumed coverage on this name after the financing restriction period ended.

Kaip relayed that the "offering looks to have been well received" with the initial CA$20 million target increasing to $25.3 million and Zhaojin International Mining, to maintain its 9.7% interest, investing an additional CA$2.8 million. The financing was done at CA$1.20 per share with 23.4 million shares issued, representing 8% dilution on a fully diluted basis.

The financing amount plus existing cash and cash equivalents at the end of Q3/18 minus the company's estimated Q4/18 expenditures of CA$20 million should leave Sabina with a total of $47 million on the balance sheet at year-end 2018, wrote Kaip.

BMO revised its forecasted 2019 capital outlay for Sabina to CA$35–40 million from its previous estimate of US$120 million, Kaip indicated. This is due to the explorer having to take a more "staged development approach to Back River" because of the fact "the window for procurement and a larger sealift in 2019 has now passed."

This slower approach, Kaip explained, means the company has added 12 months to its development schedule, with the start of production now slated for 2022. It also means a bit more capital will be needed; BMO now estimates that to be CA$462 million versus CA$450 million. The delay, however, is positive, Kaip wrote, because it will allow Sabina "to complete detailed engineering and lock down key construction contracts with more certainty."

Kaip noted this change drops BMO's estimated net present value 5% on Sabina by 13%, or to CA$1.45 per share. Even at this share price, the stock is "attractively priced relative to peers." Thus, BMO maintains its Outperform rating and its CA$2.50 per share target price on Sabina, whose current share price is CA$1.25 per share.

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Disclosures from BMO Capital Markets, Sabina Gold & Silver, December 21, 2018

IMPORTANT DISCLOSURES

Analyst's Certification
I, Andrew Kaip, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.

Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Company Specific Disclosures
Disclosure 1: BMO Capital Markets has undertaken an underwriting liability with respect to Sabina Gold & Silver within the past 12 months.
Disclosure 2: BMO Capital Markets has provided investment banking services with respect to Sabina Gold & Silver within the past 12 months.
Disclosure 3: BMO Capital Markets has managed or co-managed a public offering of securities with respect to Sabina Gold & Silver within the past 12 months.
Disclosure 4: BMO Capital Markets or an affiliate has received compensation for investment banking services from Sabina Gold & Silver within the past 12 months.
Disclosure 6A: Sabina Gold & Silver is a client (or was a client) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: A) Investment Banking Services.

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