Next 12 months

The new financial year should see a major uplift in financial performance at SLR for three reasons:

1)The circa$1900 hedges roll over into $2300 hedges – last year SLR sold around 68,000 ounces at $1,900 – there is around 87,000 ounces hedged at over $2,300, this should see almost $30 million extra in revenue from hedged sales.

2)Capex will be much lower – as per the attachment $78 million was spent on the new CIP plant at Deflector and getting Rothsay underway.

3)Increase in production at Deflector looks like it will be around 20,000 ounces higher if the presentation earlier this year holds true – see second slide.

Its hard to say what Mt Monger will do so I will assume the same production and costs. Having said that there won’t be stripping costs and low grade at Karonie so performance may be better but given the number of mine sources it’s hard to tell without specific guidance.

On these facts I will assume production at260,000 ounces (20,000 higher than last year) and apportion ASIC on a higher production. YTD at March 31 ASIC was $1,485 so will forecast ASIC at $1,485 at240/260 for an ASIC of $1,361.

Using the current gold price which is also around the hedged price means SLR should be making around $1,000 an ounce or$260 million in operating profit.

I would guess there would be $25 million in exploration and around $40 million in royalties and admin costs.

Then there is the issue of capex – I can’t see much is needed at Deflector. The big question will be what happens once stripping at Tank South is done. Is there going to be an open pit at Santa Fe or not. If so, I would expect that would cost a lot to strip back – If I had to guess it could be $50 million but that’s purely a guess.

Furthermore, it wouldn’t necessarily be all in this financial year as Karonie, Tank South and stockpiles should see them through given labour shortages. So I guess/assume $35 million in capex which will hopefully be on stripping at Santa Fe but there will other maintenance issues I am unaware of.

All up that will leave SLR with around $160million in free cash flow, or around $40 million a quarter which should see SLR with almost $500 million in cash and shares in 12 months.

Obviously, this begs the question what SLRis going to do with all that cash. Plenty of tiddlers on offer at the right price – BC8 of course given they are a major shareholder, a GCY/MGV tie up looks like an opportunity – EVN may have other ideas. There are bigger opportunities out there but until the share price is higher I don't want an script offers that dilute current shareholders.

Regardless of what they decide their communications needs to improve and they do need to start putting that cash towork that could generate millions more.

There won't be much added to the bank this quarter if at all I would say as capex will chew up most of the cashflow.

I’ll be disappointed if SLR can’t get to$3 over the next 12 months assuming the gold price holds. Given its quality high grade reserves/resources, balance sheet and infrastructure it is worth more than that current price.

GLTA /IMHO