company decisions, page-11

Zog a friend sent this to me and I thought it worth sharing as it may fill a few gaps in the story you've summarised so well .

"The Murchison was only viable if it went underground - it wasnt viable on open-cuts.

The big mistake was to decide to go underground at Caustons, instead of the original plan to mine Comet as per the ERA report for August 2013, viz :

under Figure 18 on page 10 of the October 2013 report available from the website : www.eagleres.com.au

The original concept was to go underground at Comet, partly because Comet has a number of double digit grades at depth compared to Causton's initial expected ~10g/t target shown blocked in red (7.5g/t to 15g/t) in Figure 18b, however, the Comet pit needed dewatering first (expected to be completed by October 2013), so Caustons became the first underground prospect. It should be noted that the number of low grade blocks under Caustons South potentially appears to mostly be due to sparse drilling.

This concept was included in the July 2011 ERA report, viz :

Venus and Eclipse are currently expected to provide the initial feed for the Murchison plant, with underground ore coming from Comet. One of the hindrances to previous owners considering mining Comet has been the waste dump on the eastern wall over the orebody and its removal in order to continue open-cut mining.

Silver Lake are not going to remove the waste dump,

instead they expect to have a small cut-back extending the open-cut to the south (which is the direction the high grade appears to plunge), though that may only occur after the underground. The underground concept for Comet has not changed since 2010, with a box-cut expected to be located between Comet & Pinnacles and a decline going to Comet and then driving NE and SW along the orebody.

The 2011 report also stated that Caustons was going to be second, accessed from Caustons South pit, NOT the main Caustons Pit - so they completely changed their original plans.



All the pits needed dewatering before mining, so theoretically they could have dewatered Comet first - but didnt - I dont know why. They did the Comet Sth cut-back and yes it was good grade, but didnt follow through with the Comet underground.

Caustons appeared to have a lot of water in it - just look at Google Earth and contained in the ERA reports - but perhaps it was faster to dewater than Comet and that's why they went for Caustons. The problem was though that Comet looked like it was in good hard ground, whereas Caustons appeared to be weak soft - Caustons even had a failure in one of its walls - which is exactly what they found out (weak soft) when they went into Caustons...



My guess (I havent spoken to anyone, so i dont know - so its a guess) is that the reason for the cost reduction in September 2013 was that high grade area in Comet north, and the reason for costs then to rise afterwards was that they went for Lena and Lena's grades werent there - ie the geological model was wrong and they were lower than expected, and Lena had trucking costs on top too.

So : where did SLR go wrong ? :

Throwing $20m or so away on Hollandaire - they should have kept to gold and not been distracted by copper - which wasnt there anyway.
Not going for Comet underground. Perhaps they were too fast, and needed to have done exploratory underground at Caustons first before they put the plant in - that's what Avoca did at Higginsville for both Trident and Chalice. It's easy in hindsight, but if they had been 6 months' later the Murchison may not have happened. (They could have usefully used that Hollandaire money on dewatering and entering both undergrounds).
What else could they have done? - Partly hedged the underground and/or the project and hence reduced some of the risk. When the gold price fell, the loyal insto anti-hedging shareholders dumped gold stocks that didnt have any hedging.
What shouldnt they have done? - Bought Integra when they did, they should have let Integra go into receivership and bought it after that. Buying Integra gave the joint insto shareholders who knew IGR was a dog - a get out of jail free card - which they almost immediately exercised on conversion (hmm devils advocate thought, if you as a major shareholder in both stocks [SLR & IGR] approve of one stock buying the other out and then sell most of (if not all) of your stake post merger, is that insider trading?).
Stopped speaking to the market and analysts (still a current fault) - the market makes up its own excuses, which are often worse than reality. (Pulling out immediately ahead of the Freo conference was [in hindsight] a classic sell signal).
What can SLR do now - walk the streets, fess up to the mistakes, explain how you are going to solve them and move on…."