Clive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me from gold producer and explorer Silver Lake Resources
(ASX:SLR) is Managing Director, Les Davis.Les welcome back. Starting with your merger with Phillips River Mining, what are you acquiring and on what terms?
Les Davis: We’re acquiring and we’re merging the Phillips Rivers assets into Silver Lake Resources, so it’s basically a $20 million deal. And that will be an all-scrip transaction valued at $3.40 per Silver Lake share which, if you’re a Phillips River Mining shareholder, you will receive 0.882 shares. And we’re acquiring headline numbers of one million ounces of gold, 10 ounces of silver and 100,000 tonnes of copper, but it’s in an advanced exploration stage.
Clive Tompkins: Thanks Les. So what stage is the transaction and when is it expected to complete?
Les Davis: The transaction is via what we call a scheme of arrangement and we’re currently at about week four into a week 12 process. So it should be completed in May sometime and we’re currently on track for that to eventuate.
Clive Tompkins: Good. So Les with Mount Monger and the Murchison in production and ramp-up, is this part of Silver Lake’s strategy to grow
the resource base as the other projects mature?
Les Davis: Absolutely. We’ve really got a three-tiered growth strategy now that is, we have Mount Monger in production, the Murchison under construction and now we have an advanced exploration play. So we’ve really got those three options to deliver long-term growth to our Silver Lake shareholders.
Clive Tompkins: Now the Phillips River assets comprise two distinct areas in the southeast. Starting with the Kundip mining centre, where is it and what does it contain?
Les Davis: Yes so the Kundip mining centre and Munglinup tenements, they’re around 180 kilometres sort of west of Esperance, the town of Esperance or around 600 kilometres southeast of Perth. So the Kundip mining centre itself, that’s where the current resources are, so that’s where the million ounces of gold is. That’s where the 10 million ounces of silver is and that’s where the 100,000 tonnes of copper is. Our strategy upfront – there’re two distinct potential projects down there, one is the gold mining centres and that’s regional Kundip and the second is the Trilogy Deposit. The Trilogy Deposit is a polymetallic, so it’s quite a complicated capital intensive stream which you need from a processing point of view to get the metals out. Whereas we’ll focus solely upfront on gold and our plan is in 2013, is to get down there and we’ll accelerate the exploration campaign. If I turn the clock back and if I look at the resources at Kundip on gold only without Trilogy, there’s 800,000 ounces of resource there. That’s where we started the Murchison four years ago and now we’ve grown that into 1.9 million ounces, so the strategy’s the same. And as you pointed out, yes, we will grow the resource base down there, but we could also eventually end up with having a third production centre that could add another 100,000 ounces per annum, on top of the already targeted 300,000 ounces per annum that we’re trying to grow towards.
Clive Tompkins: Thanks. So how much drilling has occurred and what can you tell us about the prospectivity of the area?
Les Davis: There’s quite a bit of drilling being done around the Trilogy Deposit and per se the Kundip gold projects in the mining centre there. So it needs a lot more infill and geological understanding and we will do that because we’re fully funded to actually, you know, deliver into that strategy.
At Munglinup, that’s the blue sky down there. There’s around 1,600 square kilometres of tenements that are located in the Albany-Fraser zone. Now the Albany-Fraser zone goes right from the top of Australia, right through to the coast in the southwest here of Western Australia. This particular zone hosts multimillion ounce deposits like the Tropicana Deposit, so it’s in the right rocks but it just simply hasn’t had the work applied to it. So we’re very excited about the blue sky potential which compliments already a significant resource base of a million ounces at Kundip.
Clive Tompkins: Changing tack now, production at Mt Monger was a record 30,500 ounces in the December quarter. How much is has the new ventilation stack contributed to this?
Les Davis: Yes without the ventilation shaft that we constructed late last year, everything we’re doing today would have been a non-event because we simply were bottlenecked. So having that ventilation shaft in the ground, it’s allowed us now to come up with over one million ounces of gold exploitable from the underground mines that we have there now, which we have four in production - Daisy Milano, Daisy East, Rosemary and Haoma. Haoma in particular is looking particularly strong and we’re about to release our resource upgrade in the next couple of weeks. So it’ll be interesting to see what the final numbers look like, but it’s going from strength to strength. But again, the key here was committing to that $5 million ventilation shaft because with it, we would never have got to where we’ve got to today. And we could at least see 10 years plus, underground mining in front of us which is a terrific position to be in, considering we only bought the asset four years ago and we had 235,000 ounces of gold.
Clive Tompkins: Good, so what are you targeting in production for this quarter and the year?
Les Davis: Yeah I don’t like to go quarter by quarter, because we have variable nature of the mineralisation at Mount Monger, but we’re on track to deliver our 100,000 to 110,000 ounces per annum and that was our market guidance. We over-achieved in half one, we expanded our local gold processing facility to 700,000 tonnes per annum, on time and on budget. The mill was commissioned on low-grade ore in January and now it’s running at around 2,100 tonnes per day, day in/day out and we got 2,500 ounces out of the furnace yesterday. So it’s going according to plan.
Clive Tompkins: And now to your other key mining area, the Murchison. You acquired a 1.2 million tonne per annum mill for processing last year and have been drilling a number of prospects. When is production expected to commence and how many ounces are you targeting?
Les Davis: Production will commence from the Murchison in January 2013, so we’ve said to the market in the first quarter. We are certainly on track to do that. The ramp-up schedule at the Murchison is that it’ll do 50,000 ounces in financial year ‘13 because it starts in January and goes through to the end of June, then the following years will be 100,000 ounces per annum. So it’s a totally different operation to our Mount Monger operation which is sort of high-grade lower volume. In the Murchison it’ll be 1.2 million tonnes per annum at around three grams for 100,000 ounces per annum, once it’s ramped up.
Clive Tompkins: On to corporate matters, you raised $70 million in November last year to develop the Murchison and fund exploration. How much are you budgeting to spend this year and how much will go to the new Great Southern project?
Les Davis: So out of the $70 million fund raising we completed in November, $50 million of that was targeted to develop the Murchison project and $20 million to advance our copper exploration play at Hollandaire which is within the Eelya complex, which is four kilometres north of where we are building our Tuckabianne gold mill. So the answer to your question is this year we just want to get Mount Monger ramped up, then bring the Murchison into production then we’ll allocate at least another $9 million per annum out of our positive operating cash flows, to the Great Southern project. So it’s going to see a lot of exploration activity down there and it’ll be a combination of infill, you know, right through the greenfields. But it’s highly prospective and I’ll always remember back where we started with the assets that we have today. So to me it’s just a repeat of what we’ve achieved and about to achieve in the Murchison, and exactly follow that model down at the Great Southern. And I think it’s a recipe for success.
Clive Tompkins: Last question Les. Where would you like to see Silver Lake by year’s end?
Les Davis: I’d like to see, particularly Mount Monger, you know running at a million tonne per annum through our mill and I think we’re on track to actually do that. In the Murchison that close to pouring a gold bar, it would be a great Christmas present or New Year’s Eve present but if it comes on the 1
st of January 2013, that’s fine as well. And we would have by then, completed the transaction with Phillips River and we’re starting to build you know, geological knowledge down in the Great Southern project to take it to where it needs to be, which is targeted to be our third production centre in sort of a two to three year time frame.
Clive Tompkins: Les Davis thanks for the update.
Les Davis: Cheers Clive, it’s a pleasure.
Ends
