what bernanke has done, page-2

The dilemma;
What price of gold do we assume for 2013/2014?

For SLR we now have very good guidance on costs and ounces for each project with as much detail given by management as needed.
The base case is 400,000oz for 2014. Beyond 2014 SLR are considering doubling capacity of IGR’s plant.
That would boost production by 100,000oz assuming flat grades.
If grades improve through more u/g mining from IGR’s assets (seems likely) then 100,000oz should be conservative.
A 50% increase in plant size would add 50,000oz and this will very likely be supplemented with gold by product ounces from Murchison’s Hollandaire.

At spot gold ($1,770 and $1.05AUD) and assuming no expansions and no Hollandaire ounces, I have SLR on a cash flow multiple of 6.3 (PE around 7.4) for 2014.
2015 and beyond should see significantly more ounces as described above as well as very large copper credits for the Murchison project which will make a significant difference to cash flow and profit margin there.
Considering the upside potential from current expansion plans being looked at, increased exploration upside thanks to the merger and now a resumption in the gold price long term uptrend, a forward cash flow multiple of 6.3 on a likely minimum 10 year mine life (likely to be extended with exploration) just looks too low.
50% upside to the share price would give a multiple of 9.5 which seems more fitting to reflect likely exploration upside, likely expansions and gold price upside.
Looking at the 10 year chart for gold, the gold price in 2014 could easily be at $2,200 assuming the up-trend does not become steeper again. (I think it will become steeper based on the chart pattern, my fundamental view on POG before QE3 and now also because of QE3).
$2,200 would put SLR on a cash flow multiple of 4.1 on my spreadsheet (with no expansions for IGR plant and no Hollandaire).
The share price is very capable of doubling or better over the next 9-12 months as we move into 2014 production.
I haven’t even considered potential from the PRH assets.
Hollandaire and IGR plant expansion already look justified and likely.
SLR did not buy IGR for 100,000oz per year.