The key to this stock is cash flow not accounting profit. Check out the quarterly reports and you will find some waterfall charts showing cash in and out over the quarter. What these charts tell us will be key for a rerate in the short term.
Keep in mind accounting profit has non-cash items, in the case of Silverlake depreciation/amortisation is most significant. This line item was circa $70m in FY 2017. They are able to do this as basically they spent a bucket load of money in the past on assets and are now able to depreciate it (with the benefit of reducing tax paid).
Silverlake is one of the highest cost producers in Australia. This is primarily a function of the type of mines they have . The good news is that this means upswings in the gold price have a big effect on the bottom line (any hedging not withstanding).
A lot to like here and I look forward to the upcoming quarterly report. My gut feeling though is the March quarterly will be the catalyst for a significant re-rate, although the price of gold is key.
SLR Price at posting:
41.5¢ Sentiment: Buy Disclosure: Held
