Thursday, January 20, 2011

Silver Lake Resources (SLR) - Resource Upgrade

Yesterday Silver Lake Resources (ASX: SLR) announced a resource upgrade.

The increase bought SLR's total Gold to 3m ounces, following a 1m ounce increase in July last year. These increases are on top of inventory depletion from production which is ongoing and on the increase.

I recently sold out of SLR (@ $2.38) to fund another purchase, however the opportunity to buy back in after the upgrade and at a cheaper share price (@ $2.13) was too difficult to resist. SLR closed yesterday at $2.19.

Providing the next quarterly report meets approval of investors I can see a strong rally pushing the price higher in the months ahead much like occurred following the July resource increase. The day before the July release the share price closed at $1.78, at the peak a few short months later (27th September) we saw an intraday high of $2.69, an increase of 51%. A similar rise from Tuesday's close price of $2 would see SLR at $3.02.

While we haven't yet had the 4th quarter activities report, an astute member on Hot Copper forums (SunburntLand) managed to pickup some clues in the resource upgrade announcement.
A hint for the Dec quarterly too

From today's announcement "the December 2010 resource inventory is calculated after allowing for the previous six
months mining depletion of 36,800 ounces"

Subtract Sep quarterly production of 15,922 oz gives a Dec quarterly production of 20,878 oz

That's a 30% increase quarter on quarter

I think we'll still hit our annual production per the guidance of 90-105k oz as the Costello open pit ramps up to full operation
Hot Copper
That is a promising figure, although many will also be watching for the total mining cost per ounce which blew out in the third quarter 2010 to $1024 from $822 in the second quarter and $692 in the first.

In the latest Gold Mining Journal SLR was once again crowned the 'Miner of the Year', this is the second year running after also winning in 2009.
“Silver Lake has shown an ability to continue to consistently deliver on production targets and it also has a very active exploration programme to replace mined resources and grow the business.”

A respected resources journalist nominated Silver Lake for similar reasons: “Silver Lake has shown, through consistency and sticking to its strategy, what a small gold miner can achieve in times of high gold prices. The company has at no stage attempted to get ahead of itself, preferring to meet its production targets and bedding down its operations before turning to more ambitious developments.”
Last year SLR produced a medallion (through the Perth Mint) to celebrate their milestone of 100,000 ounces of Gold produced. Given the low premium over spot price I purchase a couple. I created a small collage shortly afterward and posted it on a forum. Here it is again with yesterday's updated resource figure:


Disclosure: Position held in SLR. Not investment advice. Do your own research.

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