Silver Lake Resources (SLR) | Strong March quarter, increased guidance
Mount Monger has a cracking quarter: Silverlake produced 65,548oz of gold and 438t of copper in the March quarter, and posted record sales of 68,183oz of gold and 452t of copper. The average gold price was A$2,170/oz at an AISC of A$1,380/oz. The highlight was Mount Monger, which treated more ore at a higher grade than we were expecting given COVID-19. The 41,971oz produced was 22% more than our forecast. The AISC at Mount Monger was $1,462/oz for the quarter. Deflector produced 23,577oz of gold and 438t of copper, which were in line with forecasts. The AISC at Deflector was $1,232/oz.
FY20 guidance upgraded: SLR has upgraded sales guidance again, with the target now 250-260,000oz at an AISC of A$1,300-1,350/oz (previously 240-250,000oz). The positive outcome in the March quarter and the increased guidance has seen us increase our FY20 NPAT by 35% to $107m. Our valuation is unchanged at $1.58ps.
Good base for growth but not easy to quantify: SLR ended the quarter with $227m in cash and bullion and no debt. It continues to grow the resource base at Deflector and is likely to add more as drill access is established to test Deflector South West and potential extensions. Having completed the acquisition of Rothsay, its development plan now switches from a standalone processing plant to an expansion of the Deflector processing and changes in the flowsheet to allow the Rothsay ore to be treated in 1QFY22. SLR has also started the Santa underground development, which it expects will provide an additional source of high-grade feed.
Investment view: SLR has a strong balance sheet and the ability to maintain its production; however, we feel it is rather difficult to factor in some of the growth options, based on the information currently available to the market. We anticipate that clarification of the future options will occur following the full year results, the updated reserve/resource statement and the resolution of COVID-19 impact on the WA mining Industry. Our HOLD recommendation has been maintained and our price target has increased 1cps to $1.81ps. Click here to read full report