WA gold company Silver Lake Resources has tagged its Murchison project in WA for imminent closure, in a move that will cut 127 jobs.
Silver Lake referenced a $47 million loss for the half years to 31 December 2013 as the reason for the closure, stating its priority was now the low risk Mount Monger project. After a trading halt in early March, the company issued 65.6 million new shares valued at $0.60 per share in an attempt to garner working capital; the effort was expected to bring in $39 million.
In the next two years, about $12 million will reportedly go towards Murchison’s June closure, including redundancy payments and site contract restructuring expenses, with ongoing care and maintenance costs estimated at $120,000 per month. $24 million will go towards growth capital at Mount Monger, and any remaining funds will be used as working capital.
The Murchison closure will see 42 Silver Lake employees and 85 contractors lose their jobs.
The closure was announced just one year after production at the site began. Silver Lake managing director Les Davis said that despite improvement in the gold price across the first months of 2014, production at Murchison was not a stable option. However, he would not rule out reopening the mine should there be a pronounced gold price recovery.
“We were extremely pleased with the level of interest in the [share] placement, which was well supported by new and existing institutions,” he said.
“This preserves a number of strategic options for the company, including recommencing operations in the event of a higher sustainable gold price.
“With the Murchison gold operations being placed on care and maintenance and a strengthened balance sheet, our priority will be on maximising free cash flow from our low cost, high grade operations at Mount Monger; the company intends to focus capital on further optimising and funding growth projects at the low cost Mount Monger operations.”
In a bid to re-strengthen its trading, Silver Lake announced it had locked in profit margins via a forward gold hedging program, for 50,000oz of surface stockpile at Mount Monger.
The hedging would be spread from April 2014 to March 2015, with an average forward price of $1536 per oz of gold, to secure a favourable return on lower grade stockpiles at the site.
Mount Monger currently produces gold at a cost of $1,070/oz.