silver lake resources: net profit doubles

Silver Lake Resources: net profit doubles to A$31.175 million on increased gold sales

Monday, September 03, 2012 by John Phillips

The 28% increase in gold sales to 83,347 ounces during FY12 powered the Silver Lake net profit 97.4% higher to $31.175 million. An expanded Silver Lake with Integra Mining would provide the group with Reserves of 1.8Moz and Resources of 6.6Moz.

Gold producer Silver Lake Resources (ASX: SLR) has delivered a bumper set of results for financial year 2012, with net profit up 97.4% to $31.175 million.

Other impressive metrics from the ASX 200 listed company included:

- Revenue up 50.4% from $89,982,000 to $135,338,000;
- Basic earnings per share up 73.2% from 8.83c per share to 15.29c per share;
- Net cash from operating activities up 88.5% from $33,346,000 to $62,869,000;
- Cash and cash equivalents up 324% from $16,085,000 to $68,249,000;
- Gold sold up 28.8% from 64,703 ounces to 83,347 ounces;
- Ore tonnes mined up 76.9% from 405,525 tonnes to 717,076 tonnes; and
- Construction of Murchison project 60% complete.

Silver Lake has a resource base of 4.5 million gold ounces in the highly prospective regions including the Mount Monger and Murchison goldfields and the Great Southern district of Western Australia.

Not to be forgotten Silver Lake’s exploration program is targeting 10 million gold ounces over time.

Silver Lake’s Mount Monger Operation contains the Daisy Milano, Daisy East, Rosemary & Haoma underground mines and the Wombola open pit mines located 50 kilometres south east of Kalgoorlie.

Gold ore from Mount Monger is transported to Silver Lake’s Lakewood Gold Processing Facility located 5 kilometres south east of Kalgoorlie and 45 kilometres from the Daisy Milano mine. This facility has been expanded to 900,000 tonnes per annum and is currently being expanded to 1 million tonnes per annum by September 2012 quarter.


Second mining operation

Along with the impressive financials, Silver Lake also outlined in a Directors’ Report how the company is developing a second mining operation with multiple mines feeding a central processing facility.

The project is under construction and production is expected to commence in the March 2013 quarter.


Targeting a +400,000 ounce operation

The Silver Lake future plan includes a significant increase in production - with the aim of creating a +400,000 ounce gold producer by 2014. This would transform the company into one of Australia's largest gold producers.


Analysis

With Silver Lake recently making an offer of $426 million for Integra Mining (ASX: IGR) - the completion of the deal would add significant Resources of 2.1 million gold ounces and Reserves of 0.5 million gold ounces to the company.

Silver Lake would then have total Resources of 6.6 million ounces, along with Reserves of 1.8 million ounces, a mill capacity of 3.4mtpa with a land holding of around 5000 square kilometres - plus upside Resource / Reserve potential with drilling ongoing.

The outcome of this deal would power Silver Lake to produce between 255,000 to 295,000 gold ounces in FY13, and a further increase to 400,000 gold ounces in FY14. This would transform the company into one of Australia's largest gold producers.

The new Silver Lake would then have a market cap. over $1 billion, with a warchest of $107 million in cash.

Now with the recent pull-back in the Silver Lake share price to around the current $2.90 level from around $3.30ish just last week, investors have the opportunity to increase holdings at a lower price - at a time when spot gold is again on the increase and pushing the US$1700 an ounce level.



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