For the 2013 financial year so far the company has produced a total of 95,696 ounces, which is a 16% increase over the full 2012 financial year's production of 82,531 ounces.
The Mount Monger operations produced 38,232 ounces, while the start of production at the Murchison Gold Project in late February built on that with a further 5,528 ounces.
Gold bullion sold for the quarter reached 42,200 ounces at an average realised price (post-hedging) of A$1,535 ounces for A$64.8 million in revenue.
The 10,229 ounces forward sold at $1,364 per ounce were delivered in the March quarter to close out the hedge book that came with the Integra Mining transaction.
Silver Lake had no further hedging in place at the end of the quarter.
Murchison commercial production
Commercial production from the Murchison Gold Project is expected to be declared in the June 2013 quarter.
Silver Lake's strategy was to achieve gold production by commissioning the crushing, grinding and CIL circuits and producing gold on carbon for offsite processing.
In parallel to that initial production, ongoing construction activities included tying in the gravity circuit to the process flow and completion of the gold room.
A small construction team remains onsite to progress these activities which are expected to be completed in around four weeks.
The estimated cost to complete this from the end of the March 2013 quarter is $3.1 million.
The crushing circuit is capable of producing 2 million tonnes per annum and has been running at this rate consistently.
Additionally, the ball mill has been operating at name plate capacity of 1.2 million tonnes per annum since mid-March 2013.
Mill availability has been 93% and the plant was commissioned on low grade ore of 1 gram per tonne (g/t) gold and is currently being fed a blended grade of 2g/t gold from open pit ore sources.
All in sustaining cash costs
Silver Lake has adopted a more detailed cost reporting methodology. Unit costs are calculated over ounces of gold sold for the period.
Unaudited C1 cash operating costs at Mount Monger for the quarter were $730 per ounce and all in sustaining cash costs for the quarter were $1,144 per ounce.
Silver Lake has implemented a plan to improve or maintain margins at the Daisy Complex, within the Mount Monger operations.
The changes are expected to reduce the all in sustaining cash cost at Mount Monger by about $100 per ounce and will generate free cashflow from operations of around $3 to $3.5 million per month at an A$1,300 gold price.
Ore will be produced from selective high grade mining blocks and less ore from bulk lower grade mining blocks, resulting in a 45% reduction in ore production and 35% reduction in total monthly operating/capital expenditure at the Daisy Complex.
These changes maintain margins and do not sterilise any developed bulk mining ore blocks within the current reserve. Production from these areas can readily recommence in a higher gold price environment.
At Maxwells, a redesign has been undertaken to focus on mining the higher grade thicker ore zones in the centroid of the open pit to increase mined grades at similar monthly ore tonne volumes.
The current size mining fleet is more conducive to the width of the ore in these zones. These design changes do not sterilise any ore blocks within the current reserve and production from the narrower ore zones can still be extracted albeit with a smaller mining fleet.
As a result of the reduced ore tonnages from the Daisy Complex, mill feed will be supplemented with already mined higher margin surface stockpiles which held about 1.8 million tonnes containing 87,300 ounces at the end of the March quarter.
Mount Monger business optimisation
Meanwhile, the Mount Monger business optimisation is progressing to plan and results from the optimisation are expected to be announced in the June 2013 quarter.
There are 10 projects that are being evaluated and optimised along with the current underground and open pit operations including surface stockpiles.
The outcome of the business optimisation is to deliver the best financial return to the business from the optimised sustainable production rate and processing strategy at Mount Monger.
Fiscal 2013 outlook
Group guidance for the year ending 30 June 2013 is 140,000 to 150,000 ounces.
Guidance for the Mount Monger operations for the full 2013 financial year is reduced to between 120,000 and 125,000 ounces, while guidance for the Murchison operations is 20,000 to 25,000 ounces.
Plans to maintain or improve margins as well as production guidance for FY13 should send a strong message to investors. In addition, the recent pull-back in share price to around $1.30 provides a golden opportunity.
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