What will the Red 5–Silver Lake merger mean for the Australian gold sector?

Silver Lake Resources and Red 5 announced a merger proposal…

Silver Lake Resources and Red 5 announced a merger proposal yesterday that is set to create a diversified mid-tier gold company producing around 445,000 ounces per annum.

If the deal goes ahead, the merged entity will be firmly established as a mid-tier company, sitting alongside Regis Resources in terms of gold production while consolidating several prospective Western Australian gold projects.

But what will the consolidated entity look like and what will this mean for Australia’s gold industry?

Red 5

The Western Australian gold miner brings its wholly owned King of the Hills (KOTH) mine and processing hub to the table.

The flagship project is located 28km north of the Leonora region, a Tier-1 gold mining area in WA. KOTH is also 80km south of the company’s Darlot satellite gold mine, centred in the eastern Goldfields region of WA as another prominent gold mining town.

The KOTH operations produced 163,000 gold ounces (oz) in 2023 at an all-in sustaining cost of $1837 per ounce.

Most recently, KOTH produced 53,017oz during the December 2023 quarter, with 168,000 tonnes of ore being mined from the Darlot satellite underground mine at 3.18 grams per tonne.

As of September 2023, KOTH has a 6.2-million-ounce resource and a 2.6-million-ounce reserve, making it one of the largest mines in Australia by ore reserve.

The operation remains on track to deliver the top end of its 2023–24 financial production guidance of 195,000–215,000oz.

Silver Lake

The gold company owns two key WA projects: the Mount Monger asset in the eastern Goldfields region and the Deflector gold-copper project in the southern Murchison region.

Mount Monger produced 23,429oz during the December 2023 quarter, while Deflector produced 33,200oz and 236 tonnes of copper.

Year to date, Mount Monger has produced 51,070oz and Deflector has produced 65,487oz and 541 tonnes copper.

As of September 2023, Silver Lake’s group mineral resources total 6.2 million ounces (moz) of gold and 14,400 tonnes of copper, and its group ore reserves equal 1.4moz and 2768 tonnes of copper.

Silver Lake also has a Canadian presence through its Sugar Zone deposit, which is a high-grade underground mine in Northern Ontario, approximately 30km north of White River.

Its drilling activities have ramped up, with five rigs being active and 27,380m drilled during the December 2023 quarter. A 93,000m drill program is scheduled for 2024 in order to unlock further resources from the project, which currently has a 1.5moz resource and a 0.5moz reserve.

While the Red 5–Silver Lake merger is not set in stone, both companies are set to unlock a plethora of gold and shareholder benefits, notably through Tier-1 WA mining jurisdictions.

The merger is expected to be implemented by June.

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