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Silver Lake and the Integra integration

Thursday, February 14, 2013
It is morning. Day one: 2012 Diggers and Dealers conference in Kalgoorlie. Delegates are either enjoying an early breakfast or nursing a ‘gone out too hard too early’ hangover.

Silver Lake Resources (ASX: SLR) managing director Les Davis fits neither category. He literally bounds toward the Kalgoorlie Arts Centre eager to spread his news.

“Have you seen our announcement this morning, Wally,” Les asks as he passes me on the street.

“We took over Integra last night.”

For the rest of that day, pretty much the rest of the conference, the proposed merger between the two neighbours was the key subject of discussion.

That it was achieved and announced so suddenly came as a surprise, however most of the delegates at the conference concluded it was an obvious outcome with many commenting they were surprised it hadn’t happened earlier.

Once the numbers of the merged entity are crunched the more Silver Lake’s reasoning for the takeover become obvious.

Each company had operating mines, Maxwells (Integra), Daisy Milano, Haoma, Daisy East, Wombola, and Rosemary (Silver Lake) in close proximity to each other, processing ore through two processing facilities with a combined milling tonnage of 2.2 million ounces; Integra’s at Randalls and the Lakewood facility of Silver Lake.

Six months on and Silver Lake says the integration of Integra’s operation into the Mount Monger operations has gone smoothly with production at both mills having hit around the 98,000 ounces of gold mark by the end of December.

“Both mills are going at full steam, as they were before the takeover,” Silver Lake Resources director of exploration and geology Chris Banasik told The Resources Roadhouse.

“From an Integra perspective we are still mining the Maxwells deposit and we are still drawing down on that large ore stockpile that Integra had.

“That’s going to be the modus operandi. That plan is going to remain in place until June – July when we have finished our complete optimisation of the Mount Monger area.

“From that perspective Lakewood hasn’t changed eithers, so ore that was being fed into Lakewood from Daisy Milano and our stockpiled Wombola pit material is still happening.”

In gold producing company terms Silver Lake now has a compelling, somewhat envious project pipeline.

 


Silver Lake’s land position in Western Australia now covers 5,000 square kilometres of highly- prospective, under-explored tenements containing gold, silver, copper and zinc.

The company currently has JORC Resources and JORC Ore Reserves containing:

-    6.6 million ounces of gold inclusive of 1.8 million ounces of reserve;

-    10.4 million ounces of silver; and

-    140,000 tonnes of copper.

As envious as the portfolio may be the task ahead of the company now is not as easy as it appears, which is to methodically work its way through the process of optimising the combined Mount Monger projects to extract maximum production and value from the operations.

At this stage the company is considering a range of options including:

-    The treatment of high and low grade ore sources through the Lakewood and Randalls mills;

-    Expanding the Randalls mill, this could then be fed from multiple open pit and underground ore sources;

-    Sharing mains power allotments;

-    Realising operational efficiencies through shared technical services providers and consolidating corporate activities; and

-    Optimising overall exploration expenditure through a more targeted program across the company’s expanded tenement package.

“We will be looking at such things like what ore bodies to we bring on first and when will be the optimum time to do so,” Banasik said.

“When do we bring on projects like the Majestic deposit?

“What do we do with the Magic deposit, what do we do with the other Wombolas, which of the Integra underground operations – Cock-Eyed Bob or Santa do we bring in?”

The conundrum surrounding the Majestic deposit is an example of the logistic puzzle the integration of the Integra projects has presented Silver Lake.

Integra had announced its intentions to have brought the Majestic deposit on March this year.

Banasik indicated Silver Lake’s intentions regarding Majestic are somewhat different.

“We’re not going to bring Majestic on as soon as that because we are still in the process of deciding where the development of Majestic fits in within the structure of what is now a much larger company,” he said.

“That even comes down to which of our two milling facilities is the best place to process the Majestic ore, Lakewood or the Randalls plant, which would have been the only option for Integra.”

Banasik explained Silver Lake’s exploration outlook doesn’t stop at Mt Monger with the company now considering its exploration options from a whole-of-company perspective by including its Murchison, and Ravensthorpe projects.

In the grand scheme of things these have now all been bundled under the one blanket, from which Silver Lake is basing its priorities to ensure it is spending its valuable exploration dollars at the best projects, irrespective of where they are located.

“We wanted to be able to be flexible and we wanted to have options, so we are now in the process of properly evaluating those options so we end up making the best and smartest decision,” Banasik said.

“Because we are now approaching exploration from a whole-company perspective we are commencing by spending a couple of months looking at some of the copper prospects in the Murchison, then some of the crew will be sent to Mt Monger and others to Ravensthorpe.

“Later on in the year the Ravensthorpe crew will be brought back to Mt Monger and we intend ending the year back in the Murchison.”

 


Since the announcement of the takeover at Diggers and Dealers speculation has been rife from within and without the industry as to which company would be the next to be rolled by the Silver Lake Tsunami.

It is a fair assumption to make; given the region is a proven area for high-grade gold mining littered with smaller companies conducting a good deal of exploration work.

“We are always looking,” Banasik said dryly.

“If we said we were stopping, industry watchers would be less than enthusiastic about our business acumen.

“You always have to be on the lookout for the next thing.”

The reality facing Silver Lake, and its contemporaries, is that everything the industry does is finite.

Gold mines eventually run out of gold and if a company isn’t smart enough to be looking over the horizon for the next opportunity then – by definition – it will perish.

“We have always comfortably filled Lakewood so it is not as if we are going to be picking up neighbouring projects just to feed the mills,” Banasik said.

“We will acquire projects eventually but we consider our own projects at present are good enough to last us for quite a while.

“Any company out there that may consider itself as a possible Silver Lake target because it has ounces just for the sake of ounces had best reconsider.

“That doesn’t make a target as we have plenty of ounces ourselves – it’s whether they have a project that is of a strategic benefit or whether we consider it to be underdone and we may be able to get more out of it.

“I consider the most important thing we have achieved since announcing the takeover is that we have maintained the status quo from a production perspective.

“Over the next six months that status quo will be going through an intensive re-optimisation program”

Silver Lake Resources (ASX: SLR)
...The Short Story


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Paul Chapman, Les Davis, Chris Banasik, Peter Johnston, Brian Kennedy, David Griffiths

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