Soho Resources (SOH.V) - substantial upgrade to total resource

Update by Objective Capital , Aug 19, 2009 download full report
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Key Points:

• Drilling leads to a substantially larger NI 43-101-compliant mineral resource
  Soho wrapped up an aggressive 2008 drill programme last fall, allowing the company to substantially revise its existing mineral resource estimate for Tahuehueto. The company now projects the project contains a total resource of some 12.2 million tonnes, containing 665,000 ounces of gold, 13.3 million ounces of silver, 70 million pounds of copper, 305 million pounds of lead and 569 million pounds of zinc. This translates to approximately 1.8 million equivalent ounces of gold compared with the earlier estimate of 725,000 equivalent ounces of gold contained within 6.4 million tonnes of rock, an increase of nearly 150 percent.

• Soho’s revised resource estimate represents a substantial classification upgrade
  Last year’s aggressive drilling programme has allowed Soho to substantially upgrade its previously inferred mineral resource. The latest estimate now classifies 26 percent of the resource as measured, and a further 34 per cent as indicated, leaving just 40 percent of the total resource in the inferred category. This significantly increases our confidence in the project.

• Gold remains near its record high
  The price of gold remains buoyant despite, or perhaps because of, the global recession. The metal briefly topped US$1,000 per ounce early in 2008, then retreated below US$700 per ounce in the autumn of 2008, at the height of a market meltdown that savaged the resource sector. Since then, gold has stabilised at just over US$900 per ounce. Silver and copper have performed less impressively than gold, although their prices remain above their long-term, inflation-adjusted averages, while lead and zinc prices are now near or below their long-term averages.

• Confirmed valuation more robust on gathering confidence
  Our revised core model places a value of C$0.35 per share on Soho Resources. This is an increase over our July 2008 estimate of C$0.27 per share, and it represents a material premium to the recent share price. Our revised valuation is more robust given the gathering confidence provided by the new resource estimate. Our more optimistic assessment of C$0.41 per share, based on higher probabilities, reflects the potential offered by further drilling and upgrades to the mineral resource.