Ground Breakers: Silver Lake post golden quarter to get over Gwalia blues

Silver Lake hits sales guidance after record fourth quarter gold sales
Pilbara Minerals leads the large caps with Tesla and BYD sales stoking interest in battery and EV metals
PLS says Calix JV FID is due this month

It’s been a rough couple of weeks for Silver Lake Resources (ASX:SLR) which was unable to charm shareholders in besieged St Barbara (ASX:SBM) to nix a near watertight deal with Raleigh Finlayson’s Genesis Minerals (ASX:GMD) over the $650 million sale of its Gwalia gold mine.

Silver Lake’s pitch is that the operation, which would have pushed its production capacity up to around the 400,000ozpa mark, would have been better off in a larger organisation.

The $1 billion capped gold miner was also offering more, but not enough apparently for an unmoved St Barbara board to take the risk of engaging.

Oh well, it’s back on the horse, and for SLR investors its June sales report is the best news they’ve read in weeks (especially since their lack of enthusiasm for the Gwalia bid shone through with every update).

The numbers are in, and they include a record sales result of 83,540oz, powering Silver Lake to a 3% year on year lift in sold ounces to 260,370oz for FY23.

All in sustaining costs are also expected to drop, falling to the lowest level of the year to help SLR hit its $1950-2050/oz guidance range for the year.

That translated to a cash build from $268m to $331m, with the Mt Monger and Deflector operations the standouts.

SLR was up 5% this morning and for good reason. RBC’s Alex Barkley said the result came in 21% above the investment bank’s estimates and 13% above consensus despite the closure of the Sugar Zone operations in Canada for several weeks due to forest fires.

“We had already expected better grades and production in Q4 (RBCe 36koz, Q3 27koz) but grade has likely exceeded our estimates,” Barkley said.

“At Mount Monger, better grades at new mine Tank South could have continued. In Q3 it mined ~4.4g/t, above Q2 at 2.2g/t and its Reserve 3.2g/t.

“Although, in Q4 we expected more ex-pit ounces to come from variable grade Daisy (~73%) and ~2/3rds of processed ore from stockpiles, which could have prioritised better grade material.

“Regardless of the source of the gold sales beat, this appears to be a strong quarter which has helped SLR achieve FY23 gold sales guidance.”

Silver Lake Resources (ASX:SLR) share price today:

PLS edges towards FID on Calix JV

It’s been a solid morning for ASX resources stocks, led by everyone’s favourite lithium beast Pilbara Minerals (ASX:PLS).

The lithium producer was up almost 5% leading a broad rally across battery metals stocks that appeared to have little behind it on first glance, with lithium chemical prices overseas largely unchanged.

But there was some positive news for the EV metals industry from the downstream end, with BYD and Tesla both announcing record EV sales for the first half and June respectively, and expectations rising that China could inject some sweet stimulants into its economic system. Those hopes lifted copper as well.

“Copper inched higher as weak economic data increased the case for more stimulus measures. Weakness in the manufacturing sector in Europe and the US was matched by a fall in Caixin’s Purchasing Managers Index in China,” ANZ economist Adelaide Timbrell said in a note to clients this morning.

“At 50.5, it sits just above the level seen to signal expansion. This follows on from the official PMI, which remained below 50 for the fourth consecutive month in June.”

“Geopolitical risks also rose after China announced export controls would be placed on two critical metals to the semiconductor and electric vehicle (EV) markets: gallium and germanium,” she added.

“Starting from 1 August, exporters will need to apply for a licence, with details of their overseas buyers and applications. Critical minerals also received a boost after Tesla and BYD reported strong sales of EVs.”

PLS did announce the company was on track to deliver a final investment decision on a midstream processing demonstration plant with Calix (ASX:CXL), designed to deliver a greener processing route for its Pilgangoora spodumene into a lithium salt product.

Supported by a $20m Aussie Government grant from the Modern Manufacturing Initiative, the successful demonstration of the project at Pilgangoora could be used as an opportunity to extend the rollout of the technology to other hard rock lithium mines.

“Successful demonstration of the mid-stream process may lead to a commercial scale plant being built as part of Pilbara Mineral’s future mid-stream strategy and to future commercialisation of the calcination technology, with the JV licensing the technology to the global spodumene processing industry,” PLS said in a statement late yesterday.

PLS wasn’t the only EV metals stock in fine form. Lynas Rare Earths (ASX:LYC) was up 3.26%, while IGO (ASX:IGO) rose 1.88% and Allkem (ASX:AKE) lifted 1.76%.

Liontown Resources (ASX:LTR) was up 0.88%, with gold and coal miners also supported on higher prices.

Gold rose slightly overnight, while front month coal futures dropped slightly to US$154.45/t, but remain above levels of under US$130/t seen a couple weeks ago, with energy stocks up as supply cuts from Saudi Arabia and Russia threatened to lift prices.