PERTH (miningweekly.com) – Supply chain constraints and the unavailability of skilled professionals have contributed to ASX-listed Silver Lake Resources reporting a drop in gold production during the three months to March.

The company this week told shareholders that while its year-to-date operating performance had it positioned to meet its full-year production target, the severe disruption of Covid-19-related labour shortages in March and April had exacerbated the already tight labour market and supply chain constraints.

As a result, with the continuation of restrictions and isolation requirements on labour during the fourth quarter of the year, and continued supply chain constraints, the miner has withdrawn its sales guidance for the full year, as it could not predict the fourth quarter operating performance with an "acceptable level of confidence".

The miner has also warned that, as a result of the prolonged and continued uncertainty regarding Western Australia’s response to Covid-19, and the implementation of a proportionate response to any future variants, Silver Lake believed it was unlikely to see an influx of international and interstate skilled workers returning to the Western Australian mining sector in the foreseeable future in preference to employment opportunities closer to home.

The miner noted that should these conditions and associated uncertainty continue, it would impact Silver Lake’s ability to provide robust guidance based on first principles assumptions and planning with an acceptable level of risk for stakeholders to rely on.

“Silver Lake will adapt to the prevailing conditions by focusing on its highest-margin operations, minimising its exposure to the skills shortages and supply chains to preserve the value of its ore bodies and deploying capital where return on investment achieves the greatest return,” the company told shareholders this week.

“As such, Silver Lake will amend its operating strategy at Mt Monger to allow Mt Monger’s existing skills base to be deployed effectively and minimise the site's exposure to prevailing operating conditions, while retaining optionality over mineral resources and established infrastructure.

“The operating plan will increase the proportion of stockpiled ore in the mill feed schedule, commence the Tank South underground mine in the first quarter of 2023 and limit the near term reliance on run-of-mine production by suspending the Maxwells underground operation by the end of June 2022,” the company said.

Silver Lake this week reported quarterly production of 53 822 oz for the three months to March, along with 262 t of copper, with the Deflector operation providing 30 581 oz of the produced gold, along with all of the copper, while Mount Monger delivered 23 241 oz of gold.

The March quarter production results compared with the 64 009 oz of gold and 243 t of copper delivered in the December quarter, during which Deflector reported a record gold production of 31 838 oz and Mt Monger contributed 32 171 oz.

Meanwhile, during the quarter under review, Silver Lake completed the acquisition of TSX-listed Harte Gold Corp for a final acquisition price of $102-million, giving the company ownership of the Sugar Zone mine and associated 81 287 ha land package in a prolific gold district in Northern Ontario.

Sugar Zone produced 9 992 oz of gold during the quarter, selling 12 758 oz of gold, of which 4 926 oz were attributable to Silver Lake.

Since taking control of the Sugar Zone mine, Silver Lake is continuing its review of the mine, its design, exploration priorities, project priorities and operating strategy. The company noted that multiple medium- to longer-term design, operational and low capital intensity projects have been identified to improve the mine’s contribution to the Silver Lake business.

Furthermore, the review has identified opportunities to complement the skills, knowledge and experience base of the site, which will involve targeted recruitment, redeployment of existing Silver Lake personnel and engagement of suitably qualified and experienced technical and operational consultants and contractors. Improved systems and practices will be prioritised and introduced to the site over time once complementary skills are in place, Silver Lake told shareholders.

In parallel with Silver Lake’s review of operations, a review of exploration and growth potential at Sugar Zone and the extensive regional land package is also underway, with the exploration strategy focussed on the potential size of the exploration prize, the probability of exploration delivering the target size and quality, and the priority of each exploration target to the business.