All images: Silver Lake Resources.
BY CAMERON DRUMMOND
BOOSTED by a cash balance of $87 million, junior gold producer Silver Lake Resources is poised to add a fourth mining centre, Aldiss, to its Mount Monger operations after successfully executing a three year strategy to optimise value from existing production.
Mount Monger, south of Kalgoorlie in WA, is home to a highly-endowed gold camp with multiple mines and a history of replacing reserve life.
Following the major gold discoveries at Kalgoorlie in 1893, prospectors found gold 50km southeast of the town near Mount Monger in 1896.
The main production period started in 1916, when several mines were developed close to the Mount Monger homestead.
Some of these were the Caledonian, Daisy, Big Bull, Leslie, Pauline, Milano, Haoma and Maranoa mines.
Records show that the average production grade for all of these mines was in excess of one ounce (oz) per tonne (t) – more than 32 grams per tonne (g/t) in modern terms.
The Mount Monger field continued to be mined on a small scale over the next 50 years, with mine development and exploration activities driven by the gold price.
Mount Monger eventually consisted of 25 mine workings exploited by either small scale underground mining or shallow open pit.
Most of this mining did not extend more than 50 metres below the surface, and very little exploration had previously been completed below and along strike of these areas.
During this period the Mount Monger field remained unconsolidated with numerous mines operating along the tenements.
In 2003, the Daisy Milano underground complex was formed as part of a strategy to consolidate the remaining high grade Mount Monger field by buying out independent prospectors.
Then owner – Ridgeview Nominees – sold Daisy Milano to Perilya in 2005 for $3.2m.
Perilya had to transport ore more than 100km to other plants in the region, and eventually put the mine on care and maintenance in 2007.
Silver Lake acquired Daisy Milano for $14.5m at the end of 2007, and first gold was poured in 2008.
Over the next few years Silver Lake began and completed mining operations at Christmas Flat, Wombola and Wombola Dam.
In January 2013 Silver Lake bought out Integra Mining for $426m, which included mining operations in the Mount Monger region.
Assets included the 1.2 million tonne per annum (mtpa) Randalls gold processing facility, Maxwells open pit, and the Cock-eyed Bob underground mine, as well as a significant exploration package in the Mount Monger area.
Currently, three established mining centres, the Daisy Complex, Imperial/Majestic, and Mount Belches feed the centrally located Randalls mill at a rate of 150,000 ounces per annum (ozpa).
A value optimising strategy was implementing in 2015 to achieve consistent high-grade mill feed through its three mining centres while new mines were being developed/ramped up.
Over the last three years, this strong focus on cost controls was able to maintain all-in sustaining costs (AISC) below gold sale prices, leaving Silver Lake in the enviable situation to develop its fourth mining centre, Aldiss, in a cash positive position.
Pre-development works at the new mining centre began at the start of the June quarter.
Production Increase
Results from the March quarter showed record gold production from Mount Monger, underpinning a substantial increase in the company’s quarterly cash flow.
310,000t of ore was processed through Mount Monger’s Randalls processing facility during the quarter grading at 4.98g/t to produce 46,780oz, a 36.7 per cent increase from the December quarter.
Of this, 45,200oz were sold during the quarter, a 31 per cent increase on the December quarter and 21 per cent higher than any previous quarter.
Quarterly AISC of $1168/oz reduced the year-to-date AISC to $1302/oz, leaving Silver Lake well positioned to deliver its full year cost guidance.
Despite investing $8m on exploration and capital development during the period, Silver Lake ended March with a cash increase of $20.6m, leaving the company with a total cash and bullion balance of $87.3m and zero debt.
The strong results also lifted Silver Lake’s FY18 sales guidance to between 145,000oz and 150,000oz.
“Record March quarter production and strong cash generation from Mount Monger was underpinned by higher mined grades from both underground and open pit ore sources and is a direct result of our investment in the field,” Silver Lake managing director Luke Tonkin said.
“Silver Lake remains favourably positioned to end FY18 strongly and is exceptionally well capitalised to pursue value creating opportunities for our shareholders.”
At the end of March, the company’s forward gold hedging program totalled 142,500oz, to be delivered over the next 26 months at a lucrative average forward hedging price of $1720/oz.
Exploration
The company’s $12m exploration program is focused on targets in the Mount Monger camp, with the objective of delivering lower cost discoveries proximal to existing mines and mine infrastructure.
Drilling during the quarter returned strong results across all mining centres, demonstrating the potential for new lode discoveries and extensions to known lodes.
New lode structures discovered at Daisy North and Easter Hollows had “increased the confidence in the potential for new mining fronts”, higher in the mine elevation and proximal to existing development at the Daisy Complex.
At Mount Belches, drilling commenced at Santa, targeting high-grade BIF hosted ore shoots beneath the existing open pit floor to assess the potential for a third shallow underground mine, complementing the in-production Maxwells and Cock-Eyed Bob mines.
With final board approval for Silver Lake’s fourth mining centre, Aldiss, received in March this year, pre-development works kicked off in April.
The Aldiss mining centre is comprised of the Harry’s Hill and French Kiss deposits, with the possible addition of Karonie South following recent resource definition drilling.
Once established, Aldiss is expected to provide “base case” open pit production of between 130,000oz and 150,000oz between FY19 and FY21.
Silver Lake has flagged the delivery of first ore to the mill in the latter part of the 2019 September quarter, which “dovetails” with the drawdown of stockpiles after completion of the Imperial open pit.
“A hybrid owner-operator mine model will be adopted at Aldiss whereby all major earthmoving equipment will be dry hired with Silver Lake providing all operating labour,” the company stated.
“The adoption of this model (as opposed to engaging a mining contractor) results in an accelerated mine plan and an improvement in project margins.”
Silver Lake said that once the Aldiss mining centre was established it would focus on broadening the deposit to several near surface exploration targets along the north-trending shear zones that host the Aldiss gold deposits known as the “SAT” trend.
