Silver Lake cautious on outlook

Gold miner Silver Lake Resources says it is not in a position to pay dividends, citing volatile gold prices and the state government’s minerals royalty review as threats to its balance sheet.

“A threat on the cost front remains the Western Australian government’s review of the current state minerals royalty system," chairman Paul Chapman told shareholders today.

"Silver Lake, through a number of industry bodies, opposes any potential increase to the current gold royalty rate of 2.5 per cent. The current royalty is fair and reasonable in light of all relevant circumstances applying to gold metal production."

Like many others in the gold sector, Silver Lake has faced a number of setbacks this past year.

However it believes the acquisition of Integra for $426 million in January was still the right move.

“We remain convinced that the assets are of good quality. We have realised the synergies that we expected to realise. The Maxwells pit has been reinterpreted and is now performing well,” Mr Chapman said.

“The Lakewood and Randalls mills have a combined capacity of 1.9 to 2.1 million tonnes per annum and are being fed ore from multiple mines and large surface stockpiles.” 

In April, the company entered into a protracted commercial dispute with engineering contractor Pacer over a $20 million price increase of the Tuckabianna plant at the Murchison Gold project. Staff numbers were cut and those remaining, including the directors, were handed cuts to their remuneration.

This dispute coincided with fall in the gold price below the $1,300 an ounce mark, with restructuring moves taking place to face these challenges, according to Mr Chapman.

“We responded to these dual events by undertaking a major restructuring of our business. Our view is that the gold price will recover and when it does, Silver Lake needs to be there to take full advantage of it,” he said.

“Since our IPO in 2007, we have had a goal of having multiple mines feed multiple mills, rather than relying on a single asset.We believe that this has been the right strategy and when the gold price inevitably improves, we will be well positioned to benefit.” 

Silver Lake shares closed the day's trade 2 cents lower at 67 cents.