So I'm having another look at the independent expert report, and...

So I'm having another look at the independent expert report, and I have to say I'm flabbergasted at how audacious their assumptions are in down ramping the company. BDO would make skol blush with the assumptions they have used. I've reported my concerns to ASIC and suggest others do as well. I intend on speaking to a lawyer this week to see if we can stop the meeting from going ahead. My concerns are as follows:

1) Assumed gold price is around 10% lower than current price.
2) FX rate is forecast to jump by around 6% next year and then 10% over the remaining life of assets. No reason is given as to why the FX AUD rate would climb by 10% while the gold price would fall slightly. Combining these two factors gives an AUD gold price almost $900 less than current prices which is ridiculous.
3) Discount rate of 10% is applied. It's not clear when they start to apply the rate, from the start of FY 2025 or the start of calendar year 2025. Assuming the later, then the discount rate is applied at least 6 months to early given the deal won't be settled until June 2024. The discount rate shouldn't apply until the start of FY 2026 at least. This means that the value of profits from each year is discounted by 5% too much not to mention 10% is a high discount rate given SLR has no debt and a strong capital position.
These three assumptions alone wipe hundreds of millions from the value of SLR.
4) Forecast production for this half is 110,000 ounces. SLR has already punched out 65,000 ounces in the last quarter - so are they going to produce just 45,000 ounces this quarter? I don't think so. But it gets worse, Production is forecast to be 180,000 ounces next year, and 170,000 ounces the year after that. Surely, they are taking the piss, right? 45,000 ounces for the next 9 quarters after just producing 65,000 in the last quarter. Yet again buy pushing out the production profile they get to discount it by another 10%. Not to mention the idea that SLR will just sit on their hands and do nothing about converting high grade is just plain misleading.
5) Mineral Reserves are valued at $410 million for around 800,000 remaining ounces at the start of the year. i.e. just $500 per ounce. Yet in the last quarter the 65,000 ounces they produced $58 million on an average gold price of just $3,110. The gold price is almost $500 times higher now. Assuming just the $3,110 rate if the whole 800,000 in reserves were sold then SLR would generate $714 million from their reserves not $410.
6) SLR's other assets and liabilities are valued at just $283 million. This is way understated. As per last quarterly cash and liquid assets were around $526 million. Subtract Payables, Employee entitlements and rehabilitation costs of $130 million leaves other assets at $400 million. Deducting the tax liability of $92 million is wrong in my view. It's a non-cash movement that is reflected in ongoing $200 million in Australian tax losses SLR has.
7) I can't get to the bottom of this but if the DCF model discounted cash flows by 30 cents for tax then that is wrong. Any tax paid can be passed on as franking credits. AT the rate they are going SLR will be paying tax before RED so discounting for tax without taking into account franking credits favours RED's valuation not SLR's.
8) Cash earned from the last quarter is not included in the other assets figure which is wrong in my view. As already stated, they added $58 million in the last quarter. By Juen with gold prices as high as they are they will have probably added another $50 million.
9) Same for the value of RED shares and other shares - they are valued at just $126 million when the current market price is $184 million as per last quarterly. They are understated by about $50 million as well after taking into account tax.
10) Reserves and resources have not been updated since June 30 2023. By the time of the merger this value will be almost 12 months out of date. A new resource for Spanish Galleon and an updated resource for Sugar Zone should be released at the very least. Flora Dora and Daisy should also be updated given drilling success there in the last 12 months.
11) For some reason in 12.1.1 when calculating the value of SLR shares the value of RED shares is subtracted. I have no idea why this is logical. RED shares are worth something to SLR shareholders.
11) Tonkin is allowed to vote with his circa 700,000 shares. Thats wrong in my view as it's a conflict of interest.

Long story short I don't believe that the company Directors are acting in our best interests. We need to stop this deal from going ahead. SLR is worth closer to 5 RED shares not 3.434. SLR's operating assets alone are valued at $582 million v $380 million for Red even after all the flawed assumptions, and has a better capital position of about $600 million before RED's MTM losses on the hedges. How can the directors recommend a merger that values both companies around the same price. It's a breach of their duties to act in our best interest.

These discoveries are worth a lot of money and aren't included in the independent expert report. It's a blatant stitch up.

GLTA/IMHO