Stock of the Week Silver Lake Resources (SLR)

Silver Lake Resources (SLR) is a gold producer operating in highly prospective regions, including Mount Monger and the Murchison goldfields of  Western Australia.

The company has a resource base of 1.5 million oz, primarily in gold but also in copper through its Copper Lakes project (also in WA).

The group is a relative newcomer, in March 2009 delivering record mine and mill production and in February 2009 pouring its first pure tonne of gold.

SLR is at present focused on Mount Monger, which has additional multi-mine potential. The company is also continuing to review low capital milling options for the Murchison project.

SLR recently reported its March quarter results, including record mine production of 23,150 ounces, and decreased costs.

In terms of stock picks, the company is very well placed, recently flying high on three new exploration discoveries, and benefitting from a steady boom time for gold.

Major Projects

Mount Monger is a high grade, high margin gold production operation, with 50,000 oz pa (ounces per annum) in gold from underground, and 10,000 oz pa gold from an open pit.

Murchison is a 965,000 oz gold resource, with the potential for high grade open pit production.

The two projects constitute large production centres with the potential for multiple surface and underground mines.

Of late, SLR has come across three new discoveries – Daisy East and Emma at Mount Monger, and Genesis in the Murchison.

And whilst SLR’s resource base is presently at 1.5Moz (million ounces) of gold, with such new discoveries the company has a 5Moz identified gold potential (which it intends to reach within two years).

This potential helped SLR to win 2009 Gold Miner of the Year from Gold Mining Journal and Paydirt.

A Golden Time

While base metals suffered over the global economic downturn, one metal to emerge from the metals slump looking strong has been gold, which demonstrated amazing strength in 2009-10.

The precious metal remains in high demand due to a volatile US dollar and economic uncertainty.

Such uncertainty includes fears of Greece’s economic troubles, which has dominated global economic sentiment of late.

These fears have driven investors to gold as a safety investment. With the precious metal still safely above US$1,200 per ounce, it seems likely that investors will continue to turn to gold as a refuge from Euro-region risk.

Most forecasts are pointing towards further gains in the gold price, which is a positive for SLR going ahead.

Profitable Results

SLR clocked $10.7 million in net profit in its first full year of operation alone.

The company has remained profitable, in April releasing an impressive March quarterly report.

For the quarter, SLR clocked record mine production of 23,150 ounces. Ore production from the Mount Monger operations totalled 23,148 ounces, which was 53% higher than the previous quarter.

Impressively, cash operating costs per ounce were $490 for the quarter (34% lower than the previous quarter) and total cash costs per ounce were $692 (30% lower).

As at 31 March, cash and cash equivalents totalled $28.7 million, comprising $25.7 million in cash and $3 million in bullion on hand.

The company remains on track for gold production of 60,000-70,000 ounces for the full year.

Targeted production of 300,000 oz pa by 2014 is aimed at from two large production centres at Mount Monger & Murchison.


SLR is a promising gold miner, with highly successful discovery rates characterising its tenements, which are highly gold prospective and underexplored.

The company has identified gold potential and is ready to drill. At present, every dollar is going into exploration on its low execution risk resources.

SLR boasts an $18 million exploration programme to identify new resources following its recent three major discoveries at Mount Monger and Murchison.

SLR’s resource base currently stands at 1.5Moz gold, though the company has set a two-year resource target of 5Moz of gold.

With gold prices still safely above US$1,200 per ounce, SLR is looking profitable and has become one of the key stock picks, owing to its two large production sectors in the lucrative West Australian mining region.