ASX ANNOUNCEMENT
Silver Lake Resources Ltd ("Silver Lake" or "the Company")
Suite 4, Level 3 South Shore Centre
85 South Perth Esplanade South Perth WA 6151
TEL +61 8 6313 3800
FAX +61 8 6313 3888
ABN 38 108 779 782
Board of Directors:
David Quinlivan Luke Tonkin Les Davis
Brian Kennedy
ASX Code: SLR
Issued Capital: 503.2m Shares
DECEMBER 2015 QUARTERLY ACTIVITIES REPORT
-
Gold sales increase 23% to 37,191 ounces (average sale price of A$1,560/oz), on target to deliver FY16 gold sales guidance of 125,000 - 135,000 ounces
-
All in sustaining cost (AISC) down 5% to A$1,250/oz
-
Successful ramp up of the Lucky Bay and Santa open pits
-
Cash, bullion & investments increased to A$40.3m at 31 December 2015
-
Board approval received to commence Imperial/Majestic operation in 2H FY16
-
Drilling identifies Maxwells underground as a potential source of near term high margin ounces - follow up work to be accelerated in Q3 FY16
-
Key transactions agreed as part of non-core asset divestment process
-
Exploration in the quarter focussed on diamond drilling programmes at Dinnie Reggio, Maxwells, and commencement of an extensive regional air core drilling campaign proximal to the Daisy Complex
2.0m Options
-
m Performance Rights
All financial figures quoted in this report are in Australian dollars and are unaudited
Gold Sales & Revenue
Production - Underground
Production - Processing
Production - Open Pit
Silver Lake Resources Ltd (ASX: SLR) Page 1 of 47
Quarterly Overview
Safety
Nil lost time injuries reported across the Group during the quarter.
Mount Monger Operation
Gold bullion sold for the quarter was 37,191 ounces at an average realised price of A$1,560/oz for A$58.0 million revenue.
Gold production for the quarter increased 30% to 38,171 recovered ounces. The production increase was driven by a higher quarter on quarter average milled grade of 4 g/t (3.2 g/t in prior quarter), a result of run of mine material from the Lucky Bay and Santa Area open pits replacing low grade stockpiled ore in the mill feed.
The strong production and sales performance resulted in A$17.4 million of operating cash flow from Mount Monger, a A$7 million or 67% increase on the previous quarter (refer Figure 2). The strong production and sales performance has Mount Monger well placed to deliver its FY16 sales guidance.
Production
Mining
Ore mined from the Daisy Complex underground mine (refer Figure 4) totalled 87,418 tonnes at a grade of 6.7 g/t Au for 18,969 contained ounces. Ore development for the quarter totalled 704 metres, ore access development totalled 214 metres and capital development totalled 483 metres.
The Daisy Complex continues to deliver a consistent baseload production at Mount Monger, with the last four quarters ranging between 18,400 and 19,000 ounces.
Ore mined from the Cock-eyed Bob underground (refer Figure 5) totalled 25,851 tonnes at a grade of 4.1 g/t Au for 3,371 contained ounces, a 2% increase on the September 2015 quarter.
The strategy for the second half of the year at Cock-eyed Bob is to build on the successful diamond drilling program completed in the September 2015 quarter. All drill holes in this campaign intersected targeted gold mineralised BIF units and the focus for the second half will be to extend the drilling programme concurrently with the mining of existing high grade shoots. This additional drill information is integral to increase confidence levels with a view of extending the life of the mine below the existing development level.
Mining at the Lucky Bay and Santa Area open pits (refer Figure 3) reached full production levels in the quarter with mine production totalling 240,163 tonnes at 2.3 g/t Au for 17,485 contained ounces, a 242
% increase on the previous quarter. These open pits have produced 22,584 ounces in FY16 YTD and are expected to have a combined mine life of 14 months, producing approximately 50,000 ounces.
Processing
Mill feed during the quarter was sourced from Mount Monger run of mine ore following the ramp up of the Lucky Bay and Santa Area open pits, which resulted in the removal of low grade stockpiled ore from the mill feed. Ore milled for the quarter totalled 310,305 tonnes at a blended grade of 4.0 g/t Au for 38,171 recovered ounces.
Surface stockpiles at 31 December 2015 totalled ≈214,000 tonnes containing ≈10,400 oz (30 September 2015 ≈195,000 tonnes containing ≈10,000 oz). The stockpiling of ore from the Santa Area open pits is expected to continue in the second half of the year as higher grade ore from the underground mines and Lucky Bay is prioritised at the mill.
Silver Lake Resources Ltd (ASX: SLR)
Page 2 of 47
Costs
Unaudited all in sustaining costs decreased 5% to A$1,250/oz. The lower quarter on quarter unit cost is primarily due to higher average mill feed grade as a result of ore from the Lucky Bay and Santa Area open pits taking preference over lower grade stockpiles fed in the previous quarter.
Total cost expenditure increased by 21% to A$47.1 million resulting from a planned increase in Mount Monger open pit activity in the December 2015 quarter.
Operating and development outlook
The Company's FY16 gold sales guidance is unchanged at 125,000 to 135,000 oz. Imperial/Majestic Project
In December 2015 the Company's Board approved the commencement of the Imperial/Majestic project, located 25 kilometres north west of the Randalls Mill. Key metrics of the project are summarised below:
-
The project will comprise two open pits which will be mined in stages to minimise cash drawdown
-
Pre-production activities are underway with mining expected to commence in Q4 FY16 and first ore delivery in July 2016
-
Mining is scheduled for 28 months and is expected to provide high grade open pit feed to the Randalls Mill in FY17, FY18 and FY19
-
The project is targeting a mine grade of 3g/t and the recovery of 90,000 - 100,000 ounces of gold at a strip ratio of ≈14:1
Maxwells Development
The Maxwells open pit was previously mined from surface (≈500 mRL) to the 360 mRL with the most recent cut back completed in June 2014. The open pit generated ore at 16,087 tonnes per vertical metre ("TVM") or 1,375 ounces per vertical metre ("OVM") over its life, however generated significantly more metal per vertical metre when the open pit exploited the three Maxwells BIF units within the open pit envelope. During this phase of mining the Maxwells pit produced approximately 24,000 TVM at 1,970 OVM.
Historical exploration drilling at Maxwells has, for the most part, been confined to the open pit envelope with only limited drilling below the pit floor. This is clearly shown in Figure 1 which shows drilling within and outside the Maxwells pit envelope.
Figure 1: Drill hole intercepts within and outside the Maxwells pit envelope showing minimal drilling down plunge of existing ore shoots indicating a continuation of the mineralised system
Silver Lake Resources Ltd (ASX: SLR)
Page 3 of 47
Historic grade control and exploration drilling coupled with recent diamond and RC drilling results at Maxwells supports the proposition that the ore shoots seen within the open pit may continue well below the base of the existing open pit to sustain an economic underground mine.
Extending the Maxwells mineralisation below the current pit floor and applying appropriate underground cut-off grades and modifying factors has the potential to support an underground operation producing approximately 45,000 ounces per annum at an AISC of approximately A$1,020/oz, assuming a gold price of A$1,500/oz.
Given the success of recent Maxwells exploration drilling and the potential for the Maxwells underground mine to become a significant high margin ore source, the Company has allocated A$1.4 million of the FY16 A$15.5 million exploration budget to drilling five priority targets at Maxwells. The program will target underground and open pit extensions, both down plunge and along strike mineralisation. Drilling will commence in Q3 FY16.
The Company expects to complete the assessment of an exploration decline at Maxwells during Q3 FY16. The development envisages strike development of the Eastern and Central BIF units, whist at the same time providing a drilling horizon from which to drill the high grade Western BIF unit directly beneath the pit floor, which is inaccessible from surface drilling.
Ore accessed during the development of an exploration decline is expected to provide cash flow positive ounces at a gold price of A$1,500/oz covering underground infrastructure development and mobilisation.
The potential development of the Maxwells underground mine is consistent with the Company's strategy of introducing mines into the Mount Monger production plan that generate strong cash margins and further reduce the Company's AISC profile.
A more detailed description of the exploration program currently underway and the initial results is set out on page 9.
Silver Lake Resources Ltd (ASX: SLR)
Page 4 of 47