Red 5 reported its fourth consecutive quarter with production above 50,000 ounces at 50,132oz. 

While it was its weakest number in a year, the company is still on track to deliver at the top end of guidance for FY24 of between 195,000-215,000oz.

Production was affected by planned and unplanned downtime at the King of the Hills mill and some minor mining and processing impacts from both extreme heat and rainfall events.

Gold sales were 49,726oz at an average realised price of A$2719/oz.

Silver Lake reported sales for the three months to March 31 of 64,463oz plus 338 tonnes of copper. It didn’t reveal an average sales price, but it should be much higher than Red 5 given the gold price has edged near $3500/oz and Silver Lake lacks Red 5’s out-of-the-money hedging burdens.

Red 5’s year-to-date production is now 158,158oz, behind Silver Lake’s 179,439oz gold and 872t copper.

Looking at the financials, Red 5 had cash and liquid assets of $58.3 million at the end of March, while its focus on paying down its loans took net debt to $42 million. Total debt remains steady at about $101 million.

Silver Lake’s multiple years of steady production — ignoring its issues at the now-suspended Sugar Zone mine in Canada — allowed it to end the quarter with increased cash, bullion and investments of $508 million, up from $420 million at the start of the year.

Crucially for the merger, Silver Lake is debt free, and its mid-year reports showed costs were below $1800/oz. 

Red 5’s KOTH open pit, KOTH underground and Darlot underground, and Silver Lake’s Mount Monger and Deflector, were all said to perform strongly.

Silver Lake also expects to deliver at the upper end of guidance.

Assuming shareholders back the circa $2.2 billion ‘merger of equals’, the combined producer would be well placed to exceed 440,000ozpa of profitable sales from multiple Western Australian gold mines. 

Under the arrangement, Silver Lake will be acquired by the indebted Red 5 for the issue of 3.434 Red 5 shares for every Silver Lake share.

Red 5 shareholders will own around 52% of the new gold miner, which is tipped to be a top-six Australian producer with an enviable cash position.

The scheme of arrangement is targeted for completion by mid-year.   

A draft copy of the scheme booklet was lodged with the Australian Securities & Investments Commission last week and should be despatched next month, ahead of a late May shareholder meeting.