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$1.57 silver lake resources limited

Ann: Quarterly Activities Report, page-41

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Samscout

1,033 Posts.

693

28/01/23

16:31

Post #: 65925130
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Originally posted by Samscout: ↑

Disappointing quarter from Silver Lake. They have been paying the price for their under exploration at Mt Monger for a few quarters and it is now happening at Deflector. Despite having 3 operations, Deflector has been the only one pulling its weight, Mt Monger has been sliding for years. Sugar Zone still has potential but hasn't turned a profit so is yet to prove itself. To be fair that should take a year but if it's not showing a profit by the April 2023 quarter then it never will.

They withdrew guidance in the June quarter and overdelivered and now they've underdelivered. They honestly have no idea of what they are doing and just winging it from quarter to quarter.

The tepid exploration results from Deflector are the first since March 2020. Two and a half years ago. Mt Monger is a mess. It's basically just churning dirt at these prices whilst running down the stockpiles. So much for flexibility - it's a complete lie - the company has very few options if it can't recruit and hold onto staff. Cock-eye Bob clearly has plenty more gold in it - why did they have to shut down both Maxwells and CEB at the same time and furthermore when exactly do they intend to reopen these mines. If they treat their employees like their shareholders, then this could be some time away.

Islander your crack about reading the financials isn't enough. SLR need to come out and state what their plan going forward is, how they intend to control costs and what their mine plan is for the next 5 years, not the next 12 months. What happened to their contractors. What's going on at Flora Dora - are there drilling results there - given its proximity to Santa Fe it could have a material impact on that pit. The company announced it was drilling there back in April, yet we have heard nothing about it in six months. It wasn't mentioned in the Reserves statement, but it was then mentioned in the Annual report. This isn't surprising though as the company hasn't reported any exploration results from Mt Monger in years either, until the CEB results just released. The company is supposed to be a high-grade gold mining operation, but the fact is it is struggling to get enough of the high-grade material out of the ground.

Daisy is supposed to have a reserve grade higher than 7g/t but yet again it delivered just over 4g/t to the mine. I have not seen Daisy deliver greater than 5g/t in numerous quarters and it has consistently been below reserve grade for years. Correct me if I am wrong but stoping grade should be included in the reserve, shouldn't it?

The reserves statement was disappointing. The company failed to replace its reserves at Mt Monger and Deflector despite having over $300 million in the bank. A clear result of exploration underspend. What's going on at Aldiss - they have been talking about Thunder Ridge etc for years and still no results. Same for Rothsays - no exploration results or upgrade there either since they bought the mine. Same goes for French Kiss - they finished mining there a few years where they punched out 6g/t from the open pit - they should have been drilling there asap to see what underground potential is there.

The company can't keep running on 2 years' worth of reserves and expect any sort of re-rate. This is especially so since the SLR doesn't give briefings or presentations either.

Exploration results at Sugar Zone are promising but the operations there are very small - grade will need to lift to 7 or 8g/t before the company can turn a profit.

Same goes for Mt Monger - its mill is too small for the given grade and there is no indication as to when grade will increase. Yes Tank South will help but it won't be enough.

I think it's time Luke Tonkin got the sack - as an investor I can see no runway for SLR other than churning dirt and lining the pockets of executives. He doesn't give briefings, attend conferences and the buy back is a lazy use of capital that is just lining the pockets of his broker mates. With circa $300 million in cash, he should be trying to grow the company, not shrink it.

One final point that seems to be overlooked is the gold prepay that occurred at the purchase of Sugar Zone for the buy out the hedges (see attachment from March quarterly below) still has around $14 million to be delivered into. It was around $21 million at June 30 and $6.8 million was delivered into in the September quarter. That was a large part of the reason for the negative cashflow. That will hold the company back for the next two quarters as well. The company did a poor job of communicating that to investors in the quarterly that it was really a delayed capital transaction from Sugar Loaf.

If the gold price was higher, I would exit SLR now but given it's been smashed by 50% I will hold until gold lifts. It may slip further. Current management is incapable of growing this company. It should have been producing over 70,000 ounces per quarter by now, but it's still stuck below 60,000 ounces despite the significant capital invested in the company, especially at Deflector.

Very poor performance.

GLTA/IMHO

Expand

No idea what to expect in the upcoming quarterly.

SLR maintained guidance in the last quarterly so they would need to increase production above the 60,000 ounces from last quarter.

To meet the lower end of their 260,000 to 290,000 ounces they would want to produce closer to 70,000 ounces this quarter.

No idea re capex. Tank South capex should almost be done I would expect and a large chunk of Deflector as it transitions to South West.

Will be looking to see Sugar loaf production increase with the new permits that allow for higher mining and milling. It will need to start showing its capable of turning a profit.

Deflector should increase pruduction. If it meets expectations, then it will be a cash cow for the next two years.

Mt Monger has been disappointing for the last two years. Management need to confirm what their plans are in regards to restarting underground mining at Mt Belches i.e timeframes. With two underground mines there I can't see why they can't mine one while drilling the other. Shutting down both at the same time isn't a good idea. Further clarity on the start of Santa Fe would be appreciated along with drilling results from Flora Dora. If drilling results from Flora Dora are positive, then adding it into the Santa Fe mine plan could be extremely value accretive.

Two drags on cashflow will be the gold prepay which runs until Feb 23 and will suck out about $7 million in cash flow and the close out 15,000 ounces at $2,397.

On the upside, going forward SLR has no hedging below $2700 and term deposits are earning 4% so their cash should be pulling in over $10 million in interest annually.

Not interested in dividends until SLR has an 8 year mine plan. Bellevue Gold (BGL) has the same market cap as SLR, even though BGL has debt and is not even in production. The market values long life mines at much higher multiples. With plenty of cash SLR needs to increase the visibility of its resources. BRB, on the condition its geology is sound, looks attractive on a value basis, but always a risk until it produces a reserve.

I don't subscribe to the view that shareholders should sell if management doesn't perform. In that case the management should be replaced.

GLTA/IMHO

SLR Price at posting: $1.43 Sentiment: Sell Disclosure: Held
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