fundamentals, page-50

Despite SLR's "funnymetals" the share price fell today.

It could be those in the know selling out ahead of a poor December quarterly report. I say that because I do not expect any improvement in the operations of IGR in that quarter, which when you look at their last quarterly report looked pretty bad, plus SLR's Mt Monger operations are still relatively high cost and would not yet be producing at the rated 200k ounces per year. Obviously no synergies from the merger are yet in place.

Another factor further out is that the cost savings from copper credits for the Murchison operation will not be introduced in 2015 or 2016 (if I have correctly read SLR's presentation at the AGM) so that will be a pretty costly operation until then.

In addition a pullback is taking place in some of the mid tier goldies because it seems likely that fundies are facing redemptions as investors move funds into dividend paying shares and in the face of the negative returns by the gold fundies. No doubt shorters are taking advantage of this and forcing share prices lower.

For those with a gambling problem like myself, the lower price has excited some of us (me included) enough to buy back into SLR. $3.00 is the fair value price that my former analyst was suggesting about 5 months ago. That analyst has left the brokerage house and his replacement has a $3.74 target on SLR.

I know there is a lot of hope and expectations that gold will head off to the moon and we goldiebugs will get our just deserts for being pure of heart (and a little mercenary). However, my expectation is that gold stays in the $1400-1800 range for most of this year. Here are a couple of articles to dampen expectations (the second was previously posted on the PRU thread by exfiles)

http://www.marketoracle.co.uk/Article38201.html

http://www.safehaven.com/article/28292/gold-and-silver-opposing-forces-very-under-rated-ode-on-a-ungrecian-chart

So the bottom line for me is that if the quarterly report is poor, or if the price of gold falls back to below $1540, or if there is a 8-10% market pullback then SLR could easily reach $2.80. A combination of all three factors could result in SLR trading at around $2.50 (according to my gut instinct).

I am back in SLR at $3.00 with a small parcel hopeful for a trade in the short/medium term, if I get lucky.

loki (cheerful as ever.)