Silver Lake Resources (ASX:SLR) has entered into a binding heads of agreement to sell its Lakewood Mill and associated infrastructure located 5 kilometres southeast of Kalgoorlie, Western Australia, to a private consortium for A$5.5 million in cash.
The company will also receive a 2% gross revenue royalty on all minerals mined or recovered from mining leases 26/242 and 26/367.
Silver Lake has been seeking expressions of interest to either toll treat through, or for outright purchase of, its Lakewood Mill.
Completion of the agreement is conditional upon a six week final due diligence and financing period and is expected to occur in the December 2014 quarter.
The company has already received A$500,000 as a deposit for the Lakewood Assets.
It had acquired the Lakewood Mill in December 2007 to process ore from its core Mount Monger Operations located 50 kilometres southeast of Kalgoorlie.
Lakewood was successfully operated from 2008 to mid-2014 and is capable of processing 700,000 tonnes per annum of hard rock or 900,000tpa of soft rock.
The mill was placed on care and maintenance as Silver Lake’s current and longer term operating strategy revolves around the Randalls Mill, located 15 kilometres southeast of the Daisy Complex.
The company is also leasing its Murchison gold mill and associated infrastructure to a private consortium in return for $7.9 million in equal monthly payments over the 10 month lease. This lease could be extended in two stages, increasing payments by up to $16.6 million.
Analysis
The sale of the Lakewood Mill and associated infrastructure for A$5.5 million in cash and a 2% gross royalty provides additional cash resources to Silver Lake Resources and a continuing production royalty revenue stream.
Silver Lake is currently focused on the Mount Monger Operations and has multiple near term options to further develop the project.
These include:
- Majestic open pit followed by Imperial underground mine;
- Maxwells underground mine;
- Upper areas to the east and west of Daisy Milano;
- Lorna Doone open pit; and
- Magic underground mine.
These deposits have work programs in place to advance towards production and are in various stages of evaluation.
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