consolidation, page-12

For those that think a cheap acquisition means the asset is no good, or that you only get what you pay for.
Rubbish!

(Please be patient- it gets to talking about KGL below)

Check out this acquisition a few years ago.
$13.75 million paid for Daisy Milano which has turned out to be an absolute bargain.
Current half year profit pre tax is $24.6million (should be well over $50mill for the year as expansion continues).
It should be over $80mill per year NPAT over the next 10 years (flat gold price and excluding Murchison production) with excellent exploration upside.

Bargain!


http://www.silverlakeresources.com.au/files/files/57_SLR_031207.pdf

“SLR has acquired Perilya Limited’s 100% interest in the DM gold mine for A$13.75m in cash and SLR scrip. PEM expended ~A$40m since acquiring the project however a transition to mechanized mining proved unsustainable and operations were placed on C&M in CY06.
SLR intends reverting to the traditional mining method which has underpinned 18 years of near continuous operation.
SLR has executed an agreement to acquire the 300ktpa Lakewood Mill located 40km from DM for A$2.4m. The acquisition averts long-term reliance on toll-treatment, maximises payability and opens the door for third party ore processing. SLR is targeting a mill restart in February following refurbishment expenditure of circa A$1.5m.”

That’s a very similar amount paid by KGL for Burnakura, Gabanintha and Jervois.
I expect to look back once production ramps up at Jervois and say the same thing again;
Bargain!
In fact I am already saying it.
When SLR picked up Mt Monger, there were only 235,000 ounces although grades were excellent at 33g/t but the previous operator couldn’t make it work even at those grades using bulk u/g mining techniques because the ore body was too narrow.
We have more ounces than that at Burnakura (with its own mill) and Jervois is proving to be a much larger ore body with excellent metallurgy.
Grade at Burnakura is much lower but to compensate it’s mostly o/p and the u/g ore is wide enough for bulk mining.
Burnakuras’ higher grade ore of 2.9g/t should support 9 years of production at 500,000tpa (double the start up rate) which together with the heap leach operation should produce around 57,000 oz/yr.
SLR’s acquisition only supported 4 years from the resources defined at the time at 38,000oz/yr.

Jervois is already a much bigger resource than Burnakura.

SLR’s acquisition was a bargain at the time but became a bigger bargain after exploration success.
KGL’s acquisition is already an outstanding bargain and still has plenty of exploration upside.