The Silver Lake Resources Limited (ASX: SLR) share price is in the red after the company announced a drop in profits even as sales increased in FY22.
Shares in the Australian and Canadian gold miner are down 3.52% to $1.3025 at the time of writing. By comparison, the All Ordinaries Index (ASX: XAO) is also 1.75% lower in morning trade.
It isn't only Silver Lake's FY22 result that's weighing on its shares. The 0.2% dip in the gold price to US$1,747 an ounce and the broader market sell-off is also weighing on ASX gold shares today.
Let's take a closer look at the company's FY22 details below.
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Summary of Silver Lake's FY22 results
- Earnings before interest, tax, depreciation, and amortisation (EBITDA) of $267.6 million (-8% vs FY21) at an EBITDA margin of 42% (-13% vs FY21)
- Net profit after tax (NPAT) of $77.7 million (-21% vs FY21)
- Gold produced 256,538 ounces (+3% vs FY21)
- Averaged realised gold price A$2,482 an ounce (+7% vs FY21)
- All in sustaining cost (AISC) A$1,756 (+18% vs FY21)
Silver Lake's FY22 results highlights
Management blamed the drop in earnings and profits on increased depreciation and amortisation. It also mentioned non-cash mining costs associated with the treatment of stockpiles at Mount Monger and the inclusion of the Sugar Zone operation post 18 February 2022 to explain the year-over-year (yoy) movement in its financials.
Inflationary pressure also weighed on margins, but management pointed to the resilience of its Western Australian operations where free cash flow increased 20% yoy to $89.2 million.
A new processing circuit and a second high grade ore source was introduced at its Deflector gold-copper mine in WA. This led to a 24% increase in production and a 19% lift in sales.
The miner took advantage of Silver Lake's share price volatility during FY22 as it bought back shares on market. Silver Lake can purchase up to 10% of its ordinary shares through to 23 February 2023.
What management is saying
Silver Lake said in its ASX announcement:
Silver Lake executed several operational and strategic objectives through FY22. Our business demonstrated a high level of resilience to manage the prevailing operating climate and allowed Silver Lake to strengthen its operations and the growth outlook, in parallel with the commencement of capital returns to shareholders.
Outlook
The miner gave a positive outlook for FY23 but noted that cost pressures will rise. It is forecasting sales of 260,000 to 290,000 ounces at an AISC of A$1,850 to A$2,050 per ounce.
Silver Lake's total gold sales in FY21 was 255,994 ounces. The midpoint of its FY23 sales guidance represents a 9% yoy sales growth on an absolute basis and 6% growth on a sales per share basis.
The contribution from the newly acquired Harte Gold Corp and its Sugar Zone mine in Canada will undoubtedly help.
Silver Lake share price snapshot
The Silver Lake share price has held its value relatively well over the past year as it only dipped 4% before today's trade.
In contrast, its larger peers have fared worse. The Newcrest Mining Ltd (ASX: NCM) share price has tanked 27% and Northern Star Resources Ltd (ASX: NST) share price lost 22% over the period.
This compared to a 6% decline in the All Ordinaries over the past year to last Friday.
