While I've been impressed with the operating performance of the SLR the last few years their communications leave a lot to be desired.
I find the Macmahon statement yesterday quite perplexing.
I'm not experienced in commercial contracts for mining contractors but are we to assume that given Macmahon has agreed on a price for the next four years that the updated mining profile of the deflector south west has been finalised?
If so why haven't shareholders been told what the tonnage and grade of the new mining profile is. With Rothsay and SW Deflector being of a higher grade than Deflector and the mill already being constrained, higher grade is going to make a big difference to output. If the company has the updated plan they should release it. A sensitivity analysis assuming 95% recoveries (with new CIL circuit) shows the potential for growth is below:
Tonnes
Grade
Output (Oz)
1
700,000
5.5g/t
117,605
2
700,000
6.0g/t
128,296
3
700,000
7.0g/t
149,678
4
700,000
8.0g/t
171,061
As can be seen every increase in grade by 1 g/t gives off about another 20,000 ounces. I am hoping that Rothsay and South West will increase overall grade by at least 1g/t which at current prices would add another $47 million straight to the bottom line less royalties.
It would nice for SLR to come out with a four year plan as RMS does, so that the potential growth of this company becomes visible.
Given that the gold price has been curtailed by the powers that be, SLR is only going to lift its share price by increasing its production and improving its communication.
I stand to be corrected but I can't see SLR being listed as being presenting at this weeks RIU conference in Fremantle. Are these guys interested in selling the company or not? How hard is it to turn up to a conference in your own back yard!
Given its substantial tax losses I'm not in favor of dividends. Exploration at Deflector is yielding ounces at $14 so would much rather see an uplift in exploration and acquisitions
I'm starting to think BRB is looking attractive - it's got a resource of around 1 million tonnes and is practically on SLR's doorstep. It has a MC of $68 million and around $15 million cash but is looking to increase its resource soon. It's not the flashest resource grade at 1.3g/t but there does appear to be serious underground potential. It's share price never took off like other explorers so its reasonable priced given its location to SLR.
The other option is GCY which only has a MC of $123 million but has a brand new mill and 52,000 ounces hedged at $2,611 over the next 18 months so it should make some decent coin relevant to its market cap given ASIC is around $1,500 - not to mention it would also have substantial tax losses which SLR has the potential to use in the next few years. It doesn't have a great resource either but that could change if it could pick up MGV just to its north which has some serious high grade resources. MGV has a market cap of around $200 million and is tied up with EVN but even if SLR picked up a small stake it will double its money sooner or later just on the trade if it couldn't take either of those companies out.
As stated before last quarter was down because:
1) Karonie grade was lower due to stripping but is now increasing 2) Deflector was transitioning to the SW lodes which will grow resources 3) Santa Fe was in mining developing ore - this will also improve - having said that I'm not sure why they are going underground at Santa Fe if they are thinking about an open pit there (another half arsed statement will is still be fully explained)
Long story short SLR management can't rely on the gold price to lift the share price - they need to pull their finger out.
At this stage I will be voting against any bonus at this year's AGM unless they do.
