LS: Silver Lake Resources Ltd. (SLR:ASX). It's been a producer since 2008. Earlier this month I visited its key asset, a high-grade, underground mine called Daisy Milano in Western Australia. Things are looking good there. The company has no debt and about $30–35M cash and bullion. It has a market cap of just under $200M.
TMR: How good are its all-in cash costs?
LS: For FY/15, we forecast the all-in cash costs to be just over AU$1,000. The Aussie gold price is about AU$1,400/oz, so it has a margin of about AU$400/oz. I estimate it will produce around 139 Koz for FY/15. That means a significant amount of free cash flow. That's why we believe Silver Lake has strong appeal.
TMR: Silver Lake just bought the last 15% of the Mount Monger joint venture from Newcrest for $1.5M. What's the significance of that?
LS: It's a good little deposit less than 20 kilometers (20km) from its mill, with 100 Koz gold in reserve: part open-pit, part underground. The underground reserve is running over 7 grams per ton (7 g/t), pretty strong for an Australian mine, and the open pit is running around 3.5 g/t. Now that the company owns 100% of this asset, it's ready to spend money on it and, hopefully, expand and improve it. Drill rigs are on site as we speak. If drilling success can increase the reserve profile, it should enhance mine life.
TMR: What's your rating and target price for Silver Lake?
LS: A Buy rating and a $0.66 target price. It trades currently at $0.44.
