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Aug 2011 - DnD - SLR , MRP, Gold

Post Dnd 2011 Review

This year at Diggers we visited Silver Lake's new Haoma hangingwall drive to check out its progress as to whether it could become SLR's third 60,000ozpa source (it could), and also had a visit to Macphersons Nimbus acquisition, as MRP intend to bring the silver mine back into production.

There are always a few stand outs in the booths, this year being Silver Lake's 1000oz solid "Gold Prospector" and Focus Minerals' innovative new (free) iPad app. Sandfire's drill core samples looked as impressive as ever - but we also saw them last year.

  • The guest speaker was Todd Bucholz (a former White House Director of Economic Policy) who observed that the market cap of the company that makes "hot wheels" cars is now greater than that of General Motors (on which the model cars are based). We have included a few of his presentation slides in this review in which he saw no viable alternative to the mighty US$ as China cannot let the US Treasuries go down the gurgler because they have so many of them (or was that wishful thinking?).
  • Todd Bucholz thought that China was having its 15-year "day in the sun" much as Japan once did, and the US was entering a critical 5-year period that was "its last chance to get its act into gear, before the rivets pop".
  • Well, Silver Lake's Haoma hangingwall lode looks like it could have the goods. SLR's strategy is to have 3 underground lodes producing ~50,000ozpa to 60,000ozpa with the balance of the ~200,000ozpa target coming from open-cuts. Daisy Milano has been the ~50,000ozpa to 60,000ozpa mainstay and Daisy East has since started (following the completion of the new ventilation shaft in June 2011) as the second one. And although it is only one level, if Haoma continues the way it has so far, it could become the third.
  • In this review we have included a chart comparison of the gold price to a gold share index from 1979 to early 1984, showing that gold shares drifted sideways when gold peaked at US$850/oz and waited for the gold price to find its new base before the share prices doubled due to the underlying profit leverage (the shares did in fact later triple from a lower base - because they had by then experienced the impact that higher gold prices have on profitability.
  • And in the past 3 days, we have certainly seen volatility, with the gold price at the Sydney close being US$1900/oz, US$1850/oz, and US$1750/oz, with last night touching US$1700/oz twice before recovering to US$1774/oz and currently trading at US$1765/oz (9am Sydney EST 26 August 2011).
  • Quite frankly we think that the market has overlooked the impact that higher gold prices is having on producing gold company's profitability. As a producer commented at Diggers "we sold 1000oz gold and received more than $1.7m !!"
  • Written by: Keith Goode
  • Thursday, 25 August 2011

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