Rowingboat, I crunched the numbers to see by how much an investment in SLR might outperform gold in a hyperinflationary world. At 4,500 gold, that is an increase of 2.6 times the current 1730. I currently use fairly conservative total cash costs of $830 when they produce 300,000 oz per year. Company guidance is lower. If I assume cash costs rise in line with gold, I get $2342. I also assume 40% company tax on top of royalties to allow for 30% higher taxes. My target for SLR becomes $17 for a PE of 10. That is 4.5 times the current price for a rise of 2.6 times in the gold price. An investment in gold is theoretically only going to protect you from inflation. An investment in a gold producer can make you a very strong profit.
Also keep in mind that I have ignored the very high grade copper deposit that looks very likely to bring cash costs down for the Murchison. Also at higher gold prices further expansion beyond 300,000 oz/year are inevitable. On top of that SLR has excellent exploration upside targeting a very realistic 5-10mill oz.
So I think the outperformance I showed above would be very conservative.
SLR Price at posting:
$3.76 Sentiment: Buy Disclosure: Held