Wednesday, January 02, 2013

Silver Lake Resources (SVLKF) Mines Australian Gold

Silver Lake Resources (SVLKFSLR.AX) mines gold in Australia.  Did I ever mention that I visited Australia in 2001?  I didn't go to any gold mines but I met other multinational executives in Melbourne.  What a nice town.  I didn't date any Australian women.  Next time I'm down there I'll have to check out some of these gold miners.  In the meantime I'll just have to settle for their financial numbers.

My regular readers know that Australian company management nomenclatures sometimes throw me for a loop.  The Silver Lake team looks solid even though there's no clear "CEO" title.  I can live with the lack of translatable titles when the whole team is steeped in geology and mining engineering.  

This is an established mining company, so a project-by-project comparison is less useful than a fundamental evaluation that encompasses the whole company's multi-project performance over time.  Their net income for the past three years has been consistent and they have no long-term debt.  FCF turned positive in their 2012 annual statement after having been negative for two years prior.  I can understand the need to invest in new infrastructure at developmental stage projects but at some point this will hurt net earnings if they can't put new properties into production.  Their five-year ROE is pretty remarkable at 19.12%.  

I'm pleased with the quality grades from Silver Lake's operating mines.  They need to keep their company-wide cash cost of production far below US$600/oz if they are to create value in the long term.

Full disclosure:  No position in Silver Lake Resources at this time.