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Why the Silver Lake (ASX:SLR) share price is one to watch today

gold bars fulling to the ground and smashing representing falling prices of ASX gold shares
Image source: Getty Images

The Silver Lake Resources Limited. (ASX: SLR) share price has been surging higher in 2020, climbing 76.1% higher to $2.36 per share. The $2.1 billion gold producer has benefitted from higher gold prices alongside its fellow ASX-listed peers.

But there’s a big reason to watch the ASX gold share in early trade this morning: the company’s latest annual report.

Why is the Silver Lake share price worth watching?

Late yesterday, Silver Lake released its annual report for the year ended 30 June 2020 (FY20). The mid-tier ASX gold miner reported multiple records across key operational and financial metrics for the year.

Gold production jumped 64% compared to FY19 for a total of 273,071 gold equivalent ounces, with gold equivalent sales up 54% to 263,362 ounces. The group’s all-in sustaining cost (AISC) came in at $1,295 per ounce, below initial guidance of $1,300 to $1,350 per ounce.

Sales guidance was twice upgraded during FY20 and Silver Lake has now delivered 6 straight years of meeting or exceeding guidance.

Underlying net profit after tax (NPAT) surging 3,852% to $257 million while operating cash flow jumped 250% to $252 million. Year-end cash and bullion increased by $139 million to $269 million while Silver Lake remained debt-free.

The Silver Lake share price has performed strongly in 2020 and there was more to like about the latest update. Management expects strong momentum into FY21 with guidance of 240,000 to 250,000 ounces at an average AISC of $1,400 to $1,500 per ounce.

The group’s diluted earnings per share came in at 31 cents per share, which means the Silver Lake share price traded at an equivalent price to earnings (P/E) ratio of 7.61 at yesterday’s close.

Foolish takeaway

FY20 was clearly a strong year for the Aussie gold miner thanks to strategic acquisitions and favourable gold prices. That has seen the Silver Lake share price outperform the S&P/ASX 200 Index (ASX: XJO) and many of its peers.

The question for investors is how much of that growth and production is already priced in.

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Returns As of 6th October 2020

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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