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New Australian gold entity poised to take over White River mine

Red 5 and Silver Lake Resources propose to finalize merger deal by June
Processing ore at the Sugar Zone Mine during its Harte Gold days (Company photo)

A rival Western Australian gold mining company is acquiring Silver Lake Resources and its Sugar Zone Mine, north of White River.

In what’s being called a “merger of equals,” Red 5 Ltd., based in West Perth, is acquiring all of the shares of Silver Lake Resources.

The transaction is valued at $2.2 billion Australian ($1.9 billion Canadian).

The takeover is being pitched as the creation of a new leading, ASX-listed, mid-tier gold producer with a combined 445,000 ounces in annual gold production.

Silver Lake operates three mines in Western Australia and Sugar Zone in northeastern Ontario. Red 5 operates two in Western Australia. 

Silver Lake picked up Sugar Zone, 30 kilometres north of White River, in a CCAA sale in early 2022. 

The incoming ownership elected to halt operations last summer and go back to the basics in redefining the gold resources in and around the underground mine with an extensive drill program while investing to upgrade the operation and make it a cost-efficient mine.

Before it was mothballed, Sugar Zone produced 39,000 ounces in its 2023 fiscal year. The asset holds 506,000 ounces in reserves and an estimated 1.5 million ounces in measured and indicated resources.

According to a signed and binding scheme implementation deed to merge the companies, each Silver Lake shareholder will receive 3.434 Red 5 shares for every Silver Lake share held.

Silver Lake’s board of directors recommend its shareholders vote in favour of this deal. A special meeting to vote will be held sometime in May. The proposed deal is expected to close in June. 

Red 5 shareholders will own 51.7 per cent of this new merged entity. Silver Lake shareholders will hold 48.3 per cent.

Silver Lake Managing Director Luke Tonkin will served as managing director and CEO. Russell Clark, chair of Red 5, will chair the new company. Four directors from each company will serve on the new board,

In a Feb. 5 statement, Tonkin called the transaction a “highly complementary combination of assets and balance sheets” for shareholders of both companies that brings increased scale, diversification and financial strength to the table with this new company.

“Mergers work when each company brings attributes that the other company does not possess, which is undoubtedly the case here,” Tonkin said.