PERTH (miningweekly.com) – Gold miner Silver Lake Resources has resorted to appointing a completion manager at its second gold operation after the engineering, procurement and construction (EPC) services provider reported a cost hike for the proposed Murchison plant.

Solutions provider Pacer Corporations, which was appointed as EPC contractor in December 2011, warned Silver Lake that the expected costs for the Murchison gold plant would top some A$92-million, which was significantly over the previously disclosed budget of between A$65-million and A$70-million.

The gold miner said that, while it had requested an explanation for the cost increase from Pacer, the service provider had, to date, not provided any. Furthermore, Silver Lake noted that delays on the construction of the back-end of the plant were also becoming apparent by mid-February.

ASX-listed Silver Lake reported on Thursday that it had only partially paid Pacer’s January invoice, pending a satisfactory response regarding the cost increases. The payment was based on the previously forecast amount.

“It is regrettable that this action was necessary. However, this was unavoidable in the absence of an adequate explanation by Pacer as to the management of the contract and for these unforecast increases,” said Silver Lake MD Les Davis.

“We understand from Pacer that an explanation will be provided. However, Silver Lake does not consider it has a liability to Pacer regarding invoiced amounts that exceed the amounts payable under the contract.”

Davis said Silver Lake would pursue all contractual, legal and statutory avenues available to the company to protect its interest in the matter.

The completion manager would monitor activities on site to ensure that construction activities at Murchison remained on schedule, and were being done in a cost-effective and timely manner.

Murchison poured its first gold in February this year. At full capacity, the central mill could process some 1.2-million tons a year from multiple mines, with the project having a current resource of 20.5-million tons, at 2.9 g/t gold, for 1.9-million ounces.