Saracen Mineral Holdings: Why Some Experts Are Bullish?

  • Dec 10, 2018 AEDT
  • Team Kalkine
Saracen Mineral Holdings: Why Some Experts Are Bullish?

Saracen Mineral Holdings unveiled the Goldman Sachs’ ‘buy’ recommendation in its Annual General Meeting. As per the AGM presentation, Goldman Sachs has placed a buy for Saracen shares at a price target of $2.80.

In Fiscal year 2018, Saracen Mineral Holdings Limited (ASX: SAR) achieved record production of 316 koz of gold, up 16% on previous year’s production of 273 koz. As a result, the company’s profit jumped to record level of $75.6 million, reflecting an increase of 167% on FY17. EBIT margin was up by 45% to 39% for the year ended 30 June 2018.

Posting as giant as 383% growth in last ten years, the company’s reserves have grown to 2.5 Moz in FY18. This reflects 20% y-o-y increase in reserves with 100% in Western Australia and 80% within 500m of two processing centres. Saracen’s safety record has also continued to improve, with the Lost Time Injury Frequency Rate dropping to 1 over the 12 months, well below the industry average.

Looking into full Fiscal year 2019, the company has upgraded its guidance to 325-345,000oz at AISC of A$1,050 - 1,100/oz. However, its ultimate aim is to achieve 4 Moz of Reserves.

Chairman, Tony Kiernan stated Saracen is currently focused on delivering its next chapter of growth, the “flight to 400.” This is in reference to its objective to grow production to 400,000 ounces per year.

Recently, the company has announced significant results from drilling undertaken at Carosue Dam project and Thunderbox. The company has also undertaken early stage aircore work in connection with regional exploration at Mt Celia in Carosue Dam and Bannockburn in Thunderbox.

Drilling at Saracen’s highly prospective gold corridor Carosue Dam has returned two new discoveries. It includes Atbara with 40m @ 3.8g/t and Qena with 20m @ 2.8g/t, both just 4km north of the mill. Saracen told that the significant investment in exploration along the Carosue Dam Corridor has only just started and these new discoveries and additional targets will be aggressively followed up during the remainder of Fiscal 2019.

Whereas, at Thunderbox the company has identified ‘consistent and persistent mineralisation’ from the early results of its planned 40,000meter underground drilling over Fiscal 2019. Further, the company is targeting Irvin lodes, extending towards the northern area of the Bannockburn resource. The Irvin lodes sit in the hangingwall of the Bannockburn Shear and are characterized by quartz veining with minor biotite and pyrite alteration.

All these programs outline the increase in exploration and drilling activities undertaken by the company across its entire portfolio. This includes a A$60 million investment planned over FY19 with A$20 million allocated for Karari & Dervish, A$16 million for Thunderbox, and A$11 million for Carosue Dam Corridor and remaining A$13 million for others.

These results reflect that Saracen’s strategy for organic growth is on track, said Saracen Managing Director, Raleigh Finlayson.

On Financial front, Saracen completed its Fiscal Year 2018 with cash and equivalents of $118 million even after outlaying $71.8 million for growth capital and exploration.  Moreover, in the last 4 years, Saracen’s market capitalisation has grown from $200 million to $2 billion and its annual production has risen from 140,000 ounces to more than 300,000 ounces.

Over the past one year, Saracen’s stock has shown a strong performance growth of 70.49% and the needle is still moving with positive daily price change of 1.56% over the past one month.

Currently, SAR is trading at $ 2.650 (up 1.9%) on 10 December 2018 (1:30 PM AEST).


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