Silver Lake shines ahead of merger

Gold producer Silver Lake Resources recorded solid gains during the first half of the 2024 financial year, amid its planned merger with fellow mid-tier entity Red 5. 

The South Perth-based company generated $374.4 million in revenue up until December 31 2023, up 28 per cent from $292.6 million during the prior corresponding period.

Silver Lake said this increase was spurred on by a higher average realised gold price and sales, particularly at the company's Mount Monger operation, located in the eastern Goldfields.

Mount Monger's revenue reached more than $151.7 million during the first half of FY24, rising from $98.9 million during the prior corresponding period. 

Additionally, Silver Lake recorded a net profit after tax of $49.7 million, after losing $14.8 million during H1 FY23. The improved result included a gain of $16.2 million following a re-evaluation of listed investments, coupled with a non-cash tax expense of $23.1 million. 

The company's earnings before tax, interest, depreciation and amortisation also climbed by 124 per cent, to $164 million from $73.1 million during H1 FY23, due to a larger weighting of sales within its strongly performing Western Australian portfolio. 

On the back of these solid results, Silver Lake said this would provide a great opportunity for a new merged entity to hit the ground running.

"The merger is expected to unlock value through the combination of two complementary gold businesses, the respective operations and balance sheets to create a diversified, low risk mid-tier gold producer, with the financial resources and long life assets to sustain a leading gold business through the cycle," the company said.

Earlier this month, Silver Lake and Red 5 told the market they planned to merge, which would give the combined entity a market cap of approximately $2.2 billion and unified production portfolio of around 445,000 ounces of gold. 

Silver Lake managing director Luke Tonkin will assume the same role of the new entity, while Russell Clark will be the company's chairman. 

Red 5 will have a 51.7 per cent stake in the new company once the deal has been finalised, which is expected to be in June. 

During its December 2023 quarterly update, Silver Lake said it was on course to meet FY24 group sales guidance of 210,000-230,000oz of gold with an all-in sustaining cost of $1,850 to $2,050/oz. These figures were reiterated during Wednesday's market update. 

Silver Lake last traded at $1.01 per share, as of 9.46am AWST.