Reading the expert guidance report, it's remarkable how much out...

Reading the expert guidance report, it's remarkable how much out of date their analysis has become in just a few weeks. The SLR chairman notes this at the end of his opening letter, in relation to the companies' hedge books, but it extends much further than this:


The experts make assumptions regarding gold prices and discounts Silver Lake's projected cash flows by 10% (p.111) when in the real world, based on the market, an accelerator should be applied to their assumptions of cash flows instead, call it ACF. SLR is currently generating millions of FCF per week from their mining assets, completely blowing away the experts' valuation metrics.

Take the table below (p.62) and their preferred "sum of parts" valuation of 83c per SLR share.



Now compare this with the subsequent reality reported in the quarterly released this week - "net cash, bullion and liquid investments of $526m". Add on concentrates/GIC of $31m and my estimate of net realisable stockpile value, updated for MM and Deflector @ $3500 gold price ($241m, neither DCF nor ACF), equates to $798m or 85c per share. So the actual mining assets currently generating millions of FCF per week are valued at ZERO, according to the expert's preferred sum of parts valuation. Their analysis is obsolete.

While the valuation underestimates both current and short-term free cash flows relative to RED, it also underestimates long-term cash generation by using obsolete life-of-mine assumptions. The reality is that much of the M&I resources of 4.2Moz will be converted to reserves and extend assumed mine lives across all 3 operations. In the most recent quarterly, SLR made reference to this at Mount Monger (presumably referring to French Kiss, Maxwells and Cock-Eyed-Bob):