Fully Informed Market

I thought this deal was bad for SLR shareholders from the get go. But two months in its even worse for a number of reasons:

1) the Gold price is circa $500 higher, than the offer date meaning that RED's hedge's are circa $100 million more out of the money.
2) Sugar Zone is now profitable. Last set of mining figures showed costs at around $3,000 an ounce. Ignoring hoped for turnaround, and assuming costs don't improve Sugar Zone is now slightly profitable at say $500 an ounce. With 500,000 ounces in reserves that's another 250 million added to the value of SLR because of the gold price rise alone.
3) Both companies have 6 million ounces in resources yet RED is being valued because it has more reserves. This is very debatable given SLR has a higher grade and Daisy in particular has an extremely low reserve/resource conversion rate given its resource grade is circa 20g/t. As pointed out yesterday SLR doesn't waste money on increasing reserves far out into the future given exploration costs involved with underground mining.
4) It's a fair bet SLR will have added another $100 million in cash more than RED by the time the deal is completed.

All up SLR's value has risen another half a billion, or circa 50 cents a share. No independent expert should recommend this merger in my view.

Furthermore, SLR should not be doing any deals until it updates it's reserves for this financial year, especially in regard to Sugar Zone. The Corporations Act explicitly states that holder should be given enough information to assess the merits of the deal. Much greater clarity on Sugar Zone, Cock Eyed Bob and Deflector extensions need to be provided before SLR gives up its rivers of gold.



P.S. Glad to be back in after managing to escape disaster at WGX. The only good this about this deal is that it has held back the share price long enough for me to get back in cheaply. Obviously SLR still need to lift their communication, but they have delivered operationally in the last 9 months.

GLTA/IMHO