Silver Lakes Resources Full-Year Gold Production Up 83%
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Seeking Alpha Analyst Since 2009
Silver Lakes Resources (ASX: SLR) has penned in record production of 55,600 ounce of gold for the quarter ended 30 June 2013, contributing to a 83% increase in fully-year production to 151,296 ounces.
It has also updated its total JORC Resource to 6.4 million ounces of gold and Reserves to 1.7 million ounces of gold.
Production for Mount Monger for the June quarter has increased to 43,196 ounces of gold, with the company implementing cost saving and grade enhancement plans.
Further production came from its Murchison Gold operations, which was declared commercial on 1 June 2013. The project produced 12,404 ounces of gold in the June quarter, more than double the 5,528 ounces in the March quarter.
The company expects this growth to continue with its financial year 2014 production guidance of between 180,000 and 200,000 ounces of gold.
It plans to maximise cash flow in the current financial year by deferring capital and implementing cost savings.
Silver Lake has cash and bullion on hand of $19.2 million as of 30 June 2013.
Group Operations
The company mined 470,735 tonnes of ore with 44,234 ounces of contained gold during the June quarter, up 14% on the previous quarter.
It also milled 796,799 tonnes of ore for the quarter at a blended grade of 2.3 grams per tonne gold for 55,600 recovered ounces, a 27% increase on the previous quarter.
Unprocessed ore stocks available for mill feed at the end of the quarter are about 1.8 million tonnes containing approximately 77,000 ounces of gold.
Gold bullion sold for the quarter was 56,450 ounces at an average realised price of A$1,434 per ounce for A$81 million revenue. Bullion refined and not sold at the end of the quarter totalled 4,812 ounces.
Unaudited C1 cash operating costs at Mount Monger for the quarter were A$712 per ounce and all in sustaining cash costs (AISC) for the quarter were A$1,090 per ounce.
The company said that costs (net of revenues) from the Murchison Gold Project have ceased to be capitalised and will be reported on an operating basis in a similar format as Mount Monger Operations in the September 2013 quarter.
Silver Lake is expecting to be in a position to adopt the World Gold Council "all-in sustaining costs" methodology, which gold mining companies can use to report their costs as part of their overall reporting disclosure, in the September 2013 quarter.
Maximising cashflow
Due to the current challenging gold price environment Silver Lake has implemented various cost saving initiatives for the year ending 30 June 2014 to maximise cashflow, including:
- Optimising Murchison Gold Operations to produce gold from open pit operations and defering development of the underground Caustons mine for 12 months;
- All expansionary capital expenditure has been deferred;
- Exploration has been reduced to $7.5 million with a focus on short term, high impact outcomes;
- Reduction of 45 employees & contractors with 11 Perth based employees redeployed to vacant positions at operating sites;
- Directors' remuneration reduction of 10% commenced on 1 July 2013;
- Group wide employee salary reduction of 7.5% commencing in August 2013 and a salary freeze has been put in place for a minimum of 12 months;
- Progressive changeover of the Randalls operations to a residential workforce from a fly in, fly out workforce;
- Renegotiation and alignment of group suppliers including services and materials;
- Renegotiation of prime source mining contractors key input costs; and
- Continuation of processing surface stockpiles in lieu of expending capital on developing new mining operations.
Under the current budget and with prevailing gold prices, the company's guidance for the 2014 financial year is 180,000 to 200,000 ounces of gold sold.
Guidance for Mount Monger Operations is 120,000 to 130,000 ounces of gold.
The Lakewood & Randalls mills will be fed with underground ore from the Daisy Complex and the recently recommenced Cockeyed Bob deposit, open pit ore from the Maxwells deposit and continued processing of surface stockpiles.
The company also expects to produce between 60,000 and 70,000 ounces of gold from its Murchison Gold Operations.
Supply feed to the mill for the current financial year will be maintained at 1.2 million tonnes per annum rates from continued mining of multiple open pits and historic stockpiles.
Group Finance
Cash & bullion on hand as of 30 June 2013 totalled A$19.2 million (unaudited) with a net debt position of A$32.8 million.
No hedging was in place at the end of the quarter and operating cashflow for the quarter was A$23.8 million.
As a result of substantially lower gold prices, a review of recoverability of Silver Lakes' asset values is in progress. Based on findings of the review to date, an impairment of assets in the order of $320 million to $370 million pre-tax is likely.
These impairments are subject to audit and may vary accordingly.
The impairment charges are non-cash and therefore do not impact the Group's cash position or operations.
The impairments will reduce the book value of total assets at 30 June 2013 from $830 million to between $460 million and $510 million.
Exploration & Development Overview
Silver Lake completed the Pre-Feasibility Study at Hollandaire, which showed that a viable open pit mine can be developed on its gold and upper copper zones.
Production from the open pit and initial Ore Reserve is estimated at 13,500 tonnes of copper, 13,800 ounces of gold and 145,400 ounces of silver over a two year life of mine.
This scenario would see payback of a base metals circuit and provide a modest surplus. Installation of this circuit provides for upside in the event of further base metals exploration success or increases in metal prices.
The PFS does not include potential production from the underground Hollandaire Lower and Hollandaire West zones.
The study had assumed flat prices of A$1,450 per ounce of gold, A$7,500 per tonne of copper and A$23 per ounce of silver.
At Mount Monger exploration continued at Haoma West & Stanley lodes located to the west of the Daisy Milano infrastructure with peak results of 0.6 metres at 764g/t gold including 0.2 metres at 2,255gt gold at Haoma West and a peak of 0.3 metres at 475g/t gold at Stanley.
These results are encouraging and emphasise the ongoing potential for further gold discoveries to the west of Daisy Milano.
In the Murchison grade control drilling continued at Katies to infill the existing resource and to define the planned pit dimensions.
Drilling was also completed at Gilt Edge to delineate the extent of a mineralised laterite cap. Subject to assay results, this material could provide incremental feed to the Murchison gold mill.
Activities in the Great Southern consisted of surface mapping and soil sampling. During the quarter the activity centred on the Mount Benson area to the east north east of the town of Ravensthorpe.
Updated JORC Resource and Reserve
Separately, Silver Lake has estimated its JORC Resource at 66.4 million tonnes at 3g/t gold for 6.4 million ounces, 17.8Mt at 18.3g/t silver for 10.5 Moz and 17.2Mt at 0.8% copper for 133,500 tonnes.
Reserves are 20.3Mt at 2.6g/t for 1.7Moz of gold, 8Mt at 32.9g/t silver for 8.5Moz and 8Mt at 0.9% copper for 73,500 tonnes.
The June 2013 resource inventory is calculated after allowing for the previous 12 months mining depletion totalling 163,400 ounces of gold made up of 95,900 ounces from Mount Monger Operations, 43,600 ounces from Randalls operations, 23,900 ounces from the Murchison Operations.
Resource inventory at Great Southern remain unchanged while resource definition drilling at Hollandaire resulted in improved data density, which increased total silver metal by 35,000 ounces and decreased total copper metal by 7,000 tonnes.
Mount Monger has a Resource of 2.2Moz of gold of which 1.4Moz is accessible from existing infrastructure. Reserves have been pegged at 500,000 ounces. The maiden Resource at Haoma West has been estimated at 203,000 ounces.
The underground ore reserve estimate at Mount Monger is based on a 2 year outlook due to the variable nature of the mineralisation. The company will update underground ore reserves at Mount Monger annually and the estimate will continue to be calculated on a 2 year rolling basis.
Randalls/Aldiss has a total gold Resource of 1.3Moz and Reserves of 0.4Moz while Murchison has a 1.9Moz gold Resource and Reserves of 0.4Moz.
Great Southern has a total Resource of 1Moz of gold and 0.4Moz in Reserves.
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