Silver Lake Resources eyes potential third production centre with 1Moz gold project acquisition

Silver Lake Resources (ASX: SLR) will acquire an advanced gold exploration project with 1 million ounces in gold Resources and numerous targets in Western Australia following an agreement with Phillips River Mining.

Under the deal, Silver Lake and Phillips River have agreed to merge Phillips River’s assets into Silver Lake by a Scheme of Arrangement.

The acquisition has a transaction value of about $20 million, or about 2.5% of Silver Lake’s current market capitalisation.

With a JORC Resource of 1 million ounces of gold, 10 million ounces of silver and 95,000 tonnes of copper the assets represent an attractive medium term growth platform for Silver Lake.

Post-merger the Philips River assets will be collectively known as the Great Southern Gold Project.

Great Southern has two discreet exploration projects, Kundip and Munglinup covering more than 2,500 square kilometres of tenements located in southeast Western Australia.


Kundip Mining Centre

The Kundip Mining Centre has a current JORC resource of 1 million ounces of gold, 10 million ounces of silver and 95,000 tonnes of copper contained in two main mining centres within 10 kilometres of each other that have been subject to a Definitive Feasibility Study (DFS).

The Trilogy orebody is a polymetallic deposit located on cleared freehold farmland owned by Phillips River.

At this stage, Silver Lake does not view Trilogy as a priority and will not be pursuing the DFS to develop the deposit.

Kundip constitutes a number of high grade gold ore bodies. These deposits have been mined in the past on a small scale producing 121,000 tonnes at 18g/t for 68,000 ounces of gold from both underground and open pit sources that are underexplored at depth.

The regional potential is high at Kundip for further high grade gold deposits to be identified through a systematic and ramped up exploration campaign.

Kundip has a current JORC Resource of 8.9 million tonnes at 2.7g/t for 0.8 million ounces of gold.

The DFS for Kundip delivered a probable mining reserve of 2.8 million tonnes at 3.4g/t for 307,000 ounces of gold, with an average copper grade of 0.4%.

Post ramp up of Mount Monger and development of the Murchison in 2013, Silver Lake will increase regional gold exploration at Kundip with the view to establishing a third gold mining centre, with potential copper and silver credits.

Silver Lake will also assess a low capital operating scenario with a simple and straight forward processing circuit.

In addition, exploration will focus on infill drilling to convert current resources to reserves, extensional drilling to expand current resources and step out drilling to delineate new resources.


Munglinup Project

Munglinup is a large greenfield exploration project covering over 1,600 square kilometres in the Albany Fraser belt.

This is one of Australia’s most significant gold belts and hosts the 5 million ounce Tropicana deposit located 500 kilometres to the northeast.

The tenement package is on cleared agriculture ground with shallow cover and is essentially unexplored.

Initial exploration will consist of geochemical and geophysical methods to establish target areas for follow up drilling.

Importantly, the acquisition fits in with Silver Lake’s long running strategy of acquiring gold assets that provide the company with a dominant position in a highly prospective region, existing JORC Resources with significant scope to extend those resources, near term production ability and substantial exploration potential.


Mount Monger and Murchison

Acquiring Phillips River’s assets allows Silver Lake to further grow its gold business post ramp up of Mount Monger and development of the Murchison.

Silver Lake is targeting to increase production from the Mount Monger Operations to 200,000 ounces per annum by 2014 via mining from multiple underground and open pit ore sources.

The Mount Monger Operations have a current JORC Resource of 5.1 million tonnes at 8.9 grams per tonne (g/t) for 1.5 million ounces of gold.

In the Murchison, Silver Lake is developing a second gold mining operation with multiple mines feeding a central processing facility.

Production is expected to begin in the March quarter of 2013, ramping up to 100,000 ounces per annum in 2014.

The Murchison Project has a current JORC Resource of 18.4 million tonnes at 2.8g/t for 1.7 million ounces of gold.

Silver Lake is also actively exploring the Murchison with a $20 million budget for base metal targets within the Eelya Complex following the discovery of the high grade Hollandaire copper deposit.


Post-Merger

On completion of the merger of Phillip River’s assets, Silver Lake will have 4.3 million ounces of gold inclusive of 442,000 ounces of reserve and 10 million ounces of silver and 95,000 tonnes of copper across three substantial project centres.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/24501/silver-lake-resources-eyes-potential-third-production-centre-with-1moz-gold-project-acquisition--24501.html