SILVER Lake Resources’ $426 million acquisition of Integra Mining will create one of the largest gold mining companies in Australia, boasting a 6.6 million ounce resource and $107 million in cash.
With the merger likely to be finalised by the end of the year Silver Lake, which already has an extensive asset portfolio throughout WA, will be on track to produce 400,000oz per annum of gold in 2014.
As part of the transaction, which was announced in August, Integra shareholders will be offered one Silver Lake share for every 6.28 Integra shares they hold.
Silver Lake, which will be 40 per cent owned by Integra shareholders, will have four operating underground mines, one large-scale open pit and two processing facilities with a 2.2 million tonne per annum milling capacity.
The merger will boost Silver Lake’s tenement holdings in the Eastern Goldfields – where its flagship Mount Monger mine is – and reduce future operating and capital costs.
Commenting on the deal, Silver Lake managing director Les Davis said the acquisition would further diversify the company’s asset portfolio and provide increased gold production, enhanced cash flows, near-term organic growth and significant exploration upside.
“The transaction complements our expansion plans at Mount Monger as the assets neighbour and abut our current operations,” he said. “So [the company] is in a very strong position now…Silver Lake is one of the largest local gold miners in the district.”
Silver Lake currently has a combined total of 4.5moz of resources throughout its tenements in the Mount Monger and Murchison Goldfields, and the Great Southern region of WA.
Integra’s assets, which include its flagship 100,000ozpa Randalls gold project about 60km east of Kalgoorlie, contain a combined mineral resource inventory of 2.1moz of gold and 0.5moz of reserves.
In August, Integra managing director Chris Cairns said in a statement that while Integra would have been a successful independent company, the merger was in the best interests of its shareholders.
“This deal will enable Integra shareholders to benefit from being part of a bigger and more diversified company,” he said.
“In addition, Integra shareholders will gain the benefit of an attractive upfront premium, a share of the operating and other synergies that the deal can deliver whilst still retaining significant exposure to the upside that Integra’s and Silver Lake’s assets
The transaction, which is subject to minimal conditions including shareholder and ASIC approval, will be implemented as a scheme of arrangement.
Other notable achievements for Silver Lake this year include: the acquisition of the Great Southern project in March; the pouring of the first 250,000oz of gold from Mount Monger in May; and the discovery and subsequent maiden resource of the
high-grade Hollandaire copper-gold deposit in the Murchison in June.
Silver Lake’s Mount Monger mine, 50km from Kalgoorlie, comprises 126 highly-prospective tenements covering 161 square kilometres.
Gold mining began in the region during the early 1900s, with historic workings in the field extending 80m below the surface.
While previous explorers in the Mount Monger Goldfield focussed on finding near-surface oxidised mineralisation suitable for open-pit mining, a study undertaken in 2003 revealed targets with the potential to host between 2moz and 4.5moz of gold
to a depth of 500m.
The current Mount Monger project, which Silver Lake purchased in late 2007, comprises the Daisy Milano, Daisy East, Rosemary and Haoma underground mines, which have a combined 1.7moz gold resource, not including the 250,000oz of gold that
has already been produced from the area under Silver Lake’s ownership. Emerging open-pit mines comprising the Wombola Dam, Wombola Pit and Magic deposits will further strengthen the project’s potential.
Mine production at Mount Monger during the September 2012 quarter totalled 35,000oz, with milled production of 26,000oz.
Mr Davis said the production forecast for the current financial year was between 120,000oz and 150,000oz of gold.
“The first quarter production [for this financial year] at Mount Monger is as expected as we continue to expand significant amounts of ore development into the Daisy Milano and underground mines,” he said. “The second half of the [2012 to] 2013 financial year will enhance production further as the high-grade Haoma deposits become the dominant ore source.”
Silver Lake spends about $10 million each year on exploration in the Mount Monger area.
The company has begun an exploration program targeting 2.5moz of gold in resources, and a systematic exploration program is currently under way to determine the overall resource potential of the operation.
Underground drilling programs at the Daisy Milano decline continue to assess down dip extensions to its ore body, and extensions up and down dip of Haoma.
An ongoing drilling program west of Haoma and east of Daisy Milano is testing parallel ore bodies.
Silver Lake is currently developing a second gold mining project in the Murchison Goldfield. Costing $70 million, it will feature multiple mines feeding into a central processing facility.
The project comprises 14 open pits and four underground feed sources – Tuckabianna, Comet, Moyagee and Mount Eelya – which lie between the multi-million ounce gold-producing areas of Mount Magnet and Cue, 600km northeast of Perth. Silver Lake acquired a 1.2mtpa mill in 2010, and the first gold production from Murchison is expected to begin early next year.