Silver Lake Resources (ASX:SLR) targeting 70,000 ounces annual production

Interviews

TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH SILVER LAKE RESOURCES (ASX:SLR) MANAGING DIRECTOR, LES DAVIS
 
Joining me today from gold producer and explorer Silver Lake Resources is Managing Director, Les Davis. 

Les welcome to FNN. With a name like Silver Lake Resources investors could be forgiven for thinking silver is your focus, is that the case?
 
Les Davis: We named the Company Silver Lake after the Silver Lake Shaft which was the first nickel mine that Western Mining sunk in Kambalda in 1960. All of the directors of Silver Lake are all ex WMC executives at some stage in their career; I’ve personally done 25 years with WMC. I was brought up in Kambalda, so we thought naming our business or our Company after the first mine that was sunk in Kambalda - small things turn into bigger things and that was our logic with name.
 
OK, so where are your projects?
 
Les Davis: We have two project areas located in Western Australia, one called Mount Monger which is located 50 kilometres south east of Kalgoorlie and the second project is called the Murchison, which is located 600 kilometres north of Perth.
 
What was gold production last year and what’s your target for 2011?
 
Les Davis: Last year we’ve done 60,000 ounces and this year we’ll do 70,000 ounces but we are growing a very robust business. And we should be producing 200,000 ounces per annum by 2014 from Mount Monger and another 100,000 ounces per annum by 2014 from our Murchison project.

Thanks Les. Now for investors not familiar with your stock, where’s your share price and what’s your market cap?
 
Les Davis: Currently our share price is around $2 per share and our fully diluted market cap is 406 million.
 
To your projects now starting with the producing Daisy Milano mine in the Mount Monger gold fields. What’s the size of the resource there and how many ounces are being produced?
 
Les Davis: Daisy Milano has produced now in excess of 300,000 ounces of gold. We think it will end up producing a million ounces, so it’s starting to become very significant on a regional scale to Kalgoorlie. At the moment we’re drawing it down at around 60,000 ounces per annum each, but a very unique part of the mineral field is the nearby stack load of mineralisation east west. 
So, 100 metres to the east of Daisy Milano, we have another three potential Daisy Milano style mineralised loads and to the west, we also have another three. So it’s very, very well endowed and it will end up being a very high yielding producing mineral field over the next five to 10 years. 
 
Thanks Les, so what’s the mine life and cost of production per ounce?
 
Les Davis: Currently we have around a 10 year life of mine at Mount Monger, particularly around Daisy Milano and our cash cost of production is $575 per ounce. Interestingly to see in the 2011 gold survey, the average global cost of production is round $557 per ounce. So, we’re certainly sitting within that average.
 
Right, and what are the prospects for an upgrade to the resource now that you have consolidated ownership of the tenements at Mount Monger?
 
Les Davis: Certainly you’d have to say there’s a lot of upside left there as one of the key documents we looked at when we bought the mineral property in 2007, was what I refer to as The Anglo Report. So, a large mining company had been through the mineral field, and they came up with a range of endowment for 2 to 4.5 million ounces of gold. We currently have a 1.3 million ounce resource base at Mount Monger. So I think we’ll easily get to the 2 million ounce target those guys had, but I think time will show that we’ll get closer to the 4.5 million ounce endowment.
 
Now to the Murchison gold fields, what stage are your projects?
 
Les Davis: We’re about 70 per cent of the way through a Definitive Feasibility Study and that will be completed at the end of this year. We’ve identified a production plan eight to 10 years for around 100,000 ounces per annum and that will be sourced from 14 open pit and four underground ore sources.
 
Thanks Les. So what’s the size of the resource and prospects for further discovery?
 
Les Davis: There’s 1.5 million ounce resource base in the Murchison and one of the key project areas we have up there is called Moyagee. We’ve only been drilling the southern 5 kilometres of the Moyagee project, because the northern 30 kilometres of that project is underneath a salt lake called Lake Austin. 

There’s geological reasons why in Western Australia, some of the highest yielding gold deposits are located in, around or under salt lakes. This simply has no drilling in it, so it’s subject to Native Title. We’ve all but resolved those issues and we’ll be up there drilling at the end of the year, so we still feel there’s a lot of upside in our Murchison project as well.
 
And what’s taking place now?
 
Les Davis: We’re doing a lot of mine design schedules, costings for the capital and everything else so there’s a lot of - all the grunt works going on now. But the Board will make a decision at the end of this year and we plan to commence construction of the plant and everything in January. And we’ve allowed ourselves 18 months to relocate the processing facility that we bought, recommission the mine and pour the first 50,000 ounces of gold. So next New Year’s Eve, I should have the first gold bar in my hot little hand for that period of time in 2012. 
 
OK now you’ve also got projects at Perenjori, 300kilometres north east of Perth in the wheat belt and 500kilometres south east of Port Hedland. Are these relatively new to the Company?
 
Les Davis: No, we put them together at the time when we became an ASX listed vehicle in 2007. We have been up there exploring but our key focus was at Mount Monger, so now we have that in production. We’re generating very good cash flow and that cash flow from Mount Monger will go to build the Murchison. When we get the Murchison into production, then we will focus on our Rothsay project near Perenjori.
 
And what do you know about the prospectivity of the two areas?
 
Les Davis: They are both highly prospective as when you look at the tenements there, again they’re under drilled and everything that Silver Lake owns, only 3 per cent of the holes that were in the database when we bought these projects, are drilled deeper than 100 metres. So our success to date is that we’ve taken our resource base from 830,000 ounces in November 2007 to 3 million ounces today. So if you do the work and you do the drilling, you will be rewarded.
 
Now to your financials. Are you profitable?
 
Les Davis: Absolutely. Silver Lake has made a profit every year since we’ve listed and we generate very good cash flow. So we don’t have any debt, we don’t have any hedging and we’ve currently got around $30 million in the bank. 
 
And are you funded for the rest of 2011?
 
Les Davis: Absolutely. Our growth plans is that we are about to take Mount Monger processing facility to 1 million tonnes per annum – that’s about a $13 million commitment. Everything I’ve talked about is all funded from cash flow and future cash flows.
 
Finally, Les, where would you like to see Silver Lake Resources over the next six to 12 months?
 
Les Davis: I really think you’ll see a transformation in the Company. We have been bottle necked at our underground operations in Kalgoorlie. We’ve just completed a 520 metre ventilation shaft and that’s how we start to double production quite easily.
I think the investment community should keep an eye on our exploration resource build because we’ve really had a West African style resource build, but we’ve achieved that in Western Australia. So it’s quite exciting and we have committed to an $18 million per annum exploration program and we’ll continue to do that for the foreseeable future. 
 
Les Davis, thanks for the update, and congratulations on the results so far.
 
Les Davis: Thank you.
 
ENDS

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