Silver Lake Resources (ASX: SLR) should trade firmer today after locking in profit margins via a forward gold hedging program for 50,000 ounces from 50,000 ounces of surface stockpile at Mt Monger, Western Australia.
The hedging is spread evenly from April 2014 to March 2015, which at an average forward price of A$1,536 per ounce, secures a favourable margin on lower grade surface stockpiles that are expected to be processed over the hedge period.
The hedging, with The Commonwealth Bank (ASX:CBA) protects around 30% of expected production during the period.
Silver Lake's FY14 group production guidance is between 205,000 to 220,000 ounces of gold, most of which will come from its core Mt Monger asset, a high margin operation located 50 kilometres south-east of Kalgoorlie.
Expansion and development options
The company has multiple near term options to develop Mount Monger Operations, with a focus on additional open pits and underground expansions from multiple pre-production deposits:
- Majestic open pit followed by Imperial underground mine;
- Wombola Dam open pit;
- Expanded capacity from Cock-eyed Bob underground mine;
- Maxwells underground mine;
- Upper areas to the east and west of Daisy Milano;
- Lorna Doone open pit; and
- Magic underground mine.
The company recently raised $39 million through a fully underwritten placement to advance these growth projects within Mount Monger.
Notably, capital was raised at $0.60 to sophisticated and professional investors; a significant premium to its current price of around $0.47.
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