interested lt igr sucker, page-31

"Chuk I have always respected your views and research work, no probs. Do you have a figure which you would consider to be the "highest" that SLR should have paid?"

Thanks very much for that Paddyboy;
I am no where near qualified after two days of research on IGR to put an exact number on it but the diggers presentation sums things up nicely.

SLR resources, 4.5Moz with reserves 1.3Moz, land 3500km2, guidance for 2014 of 300,000oz/yr and 225mill shares.
IGR resources 2.1Moz with reserves 0.5Moz, land 1500km2, guidance of 100,000oz/yr and new entity to have 375mill shares or 150mill new shares.
So the number of shares on issue has increased by 67% for SLR.

What does SLR get for that?

Increase in resources of 47%. So far not so good.
Increase in reserves of 38%. Compared to an increase in shares of 67%, that looks lousy to me.
Increase in production guidance of 33%. Also lousy.
Even if SLR bumps up the IGR production to 150,000oz its still only 50% compared to a 67% increase in shares but bumping up the rate reduces mine life based on reserves of only .5Moz. even if you argue they will convert resources to reserves or find more gold, you could also increase SLR’s plant size to increase production rates and argue SLR could have found more gold. What’s the point of increasing production unless you have enough reserves?
SLR also have Geat Southern and the copper to boost production. Upside from those is now significantly diluted
Increase in land (less important) but still only 42%.

I don’t see the quality of their assets as being significantly higher than SLR’S to make up for the above.

Considering the increase in resources for SLR is going to be 47%, reserves is going to be 38% why pay a 40% premium for IGR which increases SLR shares on issue by a much larger ratio of 67%?
Too much dilution for what SLR has added as I see it. I can’t see how the synergies can make up the difference.

If anyone can see that I am missing something, please let me know.
I would like to be wrong on my view.

I still don’t see why any premium was justified.
IGR holders think IGR was too cheap but I say SLR was cheaper and a better run more diversified company.
Do any SLR holders disagree with that last sentence or any other points?

I will still conclude with SLR being my number 1 pick for an Aussie producer but my upside target has been significantly reduced by the heavy dilution compared to what SLR picked up.
On the positive side, the increased diversification (less risk) and production may justify a higher multiple.