Hi nordesmic, I agree with your analysis - despite SLR's credibility problems (which Luke Tonkin says he's intent on rectifying ) SLR's cash flow appears relatively robust (if you can believe their projections) and is sufficient for the next 12 months or more to make them fundamentally cheap by comparison to their peers.
Although many will see 40c as crucial support, and a breach of it could see a lot of 'stops' hit causing a cascade maybe to 37c, the next significant 'technical support', I don't think that will hold and remain the price for long.
Surely even the insouciant SLR management would have to speak loudly about such undervaluation ??
I think technically they're oversold but comparing technically, today's SP, when the gold price is different, SLR is well hedged and a manifestly different sounder company to that of 2014-15 is technically meaningless.
The September quarterly is due in the next 2 weeks, and the MD has stressed that while he doesn't report every bowel motion, he puts a lot into the quarterly's and they can be relied upon to accurate & substantive.
So, assuming all's going according to the last report (otherwise they would have had to inform the market right?) and that the ASIC's will start to reduce as the major spend on new mines is largely complete, and that the policy of judicious hedging will continue ( as a strengthening POG is definitely not a given despite what Jim Rickards might say ) then cash flow might well increase and the war chest may expand. Don't expect the management to surrender SLR' financial independence with meaningless gestures like a dividend or share buyback until reserves, production and profits are much more substantial. The best one can hope for is they finally start to deliver on their hype about what great geology SLR has and how great they are at revealing it.
Don't expect the management to surrender SLR's financial independence with meaningless gestures like a dividend or share buyback until reserves, production and profits are much more substantial. The best one can hope for is they finally start to deliver on their hype about what great geology SLR has and how great they are at revealing it, and avoiding 'pitfalls' (pun intended).
Short of a merger that would double the market cap, SLR won't be getting back into the ASX 200 anytime soon, and hence won't increase its ETF presence nor institutional support. Companies like SAR which is shedding underperforming assets seem like much safer places for institutional money than companies like SLR which are income support schemes for staff and management. The following is from FT Markets
" The 3 analysts offering 12-month price targets for Silver Lake Resources Limited. have a median target of 0.70, with a high estimate of 0.73 and a low estimate of 0.48. The median estimate represents a 72.84% increase from the last price of 0.405." So, worse case analysis, 48c, means currently safe buying ???????
So, I just bought 500,000 @ 41c for a trade - let's hope this is not another " un baiser fatal " for SLR.
SLR Price at posting:
41.5¢ Sentiment: Buy Disclosure: Held
