SILVER Lake Resources has launched a $A39 million capital raising after making the tough decision to place its Murchison gold mine on care and maintenance, resulting in the loss of 127 jobs.
Silver Lake's Murchison operations
The company announced a review of the Murchison operations last month due to the weakness in the gold price coupled with a disappointing operational performance.
Mining and processing will end in the June quarter and the suspended underground mine contract will be formally terminated.
The move will result in 42 employees becoming redundant, at a cost of $12 million, and the loss of 85 contractor jobs.
“Continuing production at the Murchison gold operations is unsustainable at the current gold price so we are taking the decisive action by placing it on care and maintenance in the June 2014 quarter,” Silver Lake managing director Les Davis said.
“This decision preserves a number of strategic options for the company including recommencing operations in the event of a higher sustainable gold price.
The company intends to focus capital on further optimising and funding growth projects at the low-cost Mount Monger operations.”
Silver Lake recognised an impairment of $41.6 million on the Murchison operations for the December 2013 half-year, leading to a loss of $47 million for the period.
The company will raise $39 million in a placement to professional and sophisticated investors through the issue of 65.6 million shares at 60c per share, an 11.8% discount to the company’s last closing price of 68c.
The placement is underwritten by UBS, which is also acting as sole bookrunner and global lead manager.
Silver Lake will use $12 million for the closure of Murchison and $24 million for growth at Mount Monger.
The company has identified several near-term growth options at Mount Monger, including the Majestic open pit and Imperial underground, the Wombola Dam open pit, the expansion of the Cock-Eyed Bob and Daisy Milano underground mines, the Maxwells underground, the Lorna Doone open pit and the Magic underground.
Despite the impending closure of Murchison, Silver Lake has left 2014 financial year guidance unchanged at 205,000-220,000 ounces of gold.
“With the Murchison gold operations being placed on care and maintenance and a strengthened balance sheet, our priority will be on maximising free cashflow from our low-cost, high-grade operations at Mount Monger,” Davis said
SLR Price at posting:
68.0¢ Sentiment: None Disclosure: Not Held
