Silver Lake to invest more than $30M in turnaround plan for Sugar Zone gold mine

Australia’s Silver Lake Resources (ASX: SLR), the new owner of the Sugar Zone mine in northern Ontario, is prepared to invest between $31.2 million and $41.1 million over the next two years on operational improvements and cost reductions on the struggling project, the company said in its recent quarterly report.

Silver Lake acquired Sugar Zone in February after winning the bid for the mine’s previous owner Harte Gold. Harte Gold had been in financial turmoil after rushing the gold mine into production without a feasibility study and failing to overcome a series of operational issues. It eventually sought creditor protection and was put up for sale.

Located 30 km north of White River, the Sugar Zone underground mine has been in production since 2019 and is one of Ontario’s most recent and highest grade gold mines. Proven and probable reserves at the end of 2020 were 797,000 oz. grading 7.18 grams gold per tonne in 3.5 million tonnes, which is similar in nature to the Rothsay and Mt Monger mines that Silver Lake operates in Australia. In 2021, the Sugar Zone mine processed 257,281 tonnes of ore at 6.5 grams gold for 51,453 oz., which was consistent with Harte Gold’s revised guidance range.

Starting this year, Silver Lake is seeking to enhance the mine’s long-term performance and profitability through a series of investments, which will include the latest generation drilling, loading and haulage fleet to replace the existing fleet, which, in many cases, exceed 10 years of operational service. The changes are expected to increase mine capacity, improve operating efficiency, increase productivity, and reduce unit mining costs. The new mining fleet investment will occur over a two-year period and is expected to cost approximately $14.3 million to $16 million.

The company will also replace the existing crushing circuit, which represents a high cost bottleneck to increase processing throughput. The new crushing circuit will have capacity of 125 tones per hour and allows the crusher to exceed the existing milling capacity, which is to be increased to 1,000 tonnes per day.

The Sugar Zone mine has also been redesigned to eliminate one of two declines accessing the Sugar Zone mining areas. Level intervals will increase from 15 to 17 metres with the replacement of older generation pneumatic longhole drill rigs with modern electro-hydraulic, longhole drill rigs. The Middle zone will continue to be accessed via the single decline from the upper Sugar Zone decline. The redesign helps to reduce development metres over the life of mine, increase operating efficiency and reduce costs.

In terms of surface infrastructure, the existing enclosed crushing facility will be converted to a fit for purpose mobile maintenance workshop, associated warehouse and secure enclosure for site critical spares. Silver Lake is also assessing the opportunity to relocate the White River camp, eliminating the approximate 50-minute travel time between Sugar Zone and White River.

On the exploration front, investment will prioritize in-mine, near-mine and district-scale opportunities to target growth. The main Sugar Zone deposits remain open laterally and at depth along a 3 km trend. According to Silver Lake, limited drill coverage and inadequate exploration work beyond current resource limits provides the potential for highly accretive new discoveries.

Plans are in motion to enhance the geological model with an $6.2 million, 67,000-metre grade control and resource definition drilling program.