Saracen Minerals Reported 17% Growth In Underlying NPAT For H1 FY19

Saracen Mineral Holdings Limited (ASX:SAR) is an ASX listed Australian gold explorer, developer, and producer. Its current annual production stands at over 300,000 oz p.a., and with robust cash flows, it is virtually debt free.

Saracen Mineral has announced its half-yearly result report for the financial year 2019. Its net profit after tax (underlying NPAT) for H1 FY19 rises 17% from the previous corresponding period (PCP) to A$43.5 Mn (PCP: A$37.2 Mn), revenue rises 15% to A$281.9 Mn (PCP: A$245.6 Mn), gold production rises 13% to a record 177,774 ounces (PCP: 157,795 ounces), all in sustaining cost decreased by 6% to A$1030 per oz (PCP: A$1091 per oz), whereas average gold price realized increased by 6% to A$1684 (PCP: A$1591). Its cash and equivalents rise by 20.54% to A$142.6 Mn on 31 December 2019 from A$118.3 Mn on 30 June 2018 even after spending A$94.2 Mn on growth project development and exploration.

As previously guided, A$7.3 Mn of gold sales during the half year FY2019 were derived from development activities at the Whirling Dervish (A$5.2 Mn) and Thunderbox (A$2.1 Mn) underground mines. During the period, the company entered into agreements to purchase third party ore from many parties, and this ore was included in the blend processed through its Carosue Dam plant. The costs associated with this third party ore of circa A$23 Mn, are included in the mine operating expenses in the statutory accounts.

EBITDA and NPAT were steady at A$104.1 Mn and A$43.0 Mn respectively, despite the PCP including A$10.6 million for the sale of King of the Hills.

Depreciation and amortisation decreased to A$43.0 Mn (PCP: A$46.3 Mn), which was driven by Thunderbox Zone A deferred mining expenditure being fully amortized in the PCP (triggered by the actual strip ratio falling below the average life of mine strip ratio, and completion of the Zone A open pit) compared to a small amount of initial amortisation of deferred mining expenditure in the current period (A$100,000 relating to Thunderbox Zone C open pit). It’s strong balance sheet and almost zero debt supports ongoing aggressive exploration to continue growing reserves beyond 2.5 Mn ounces and achieve “flight to 400” production target.

No corporate debt was drawn at the end of the half-year. During the period, the term of the debt facility was extended by one year to November 2020. At 31 December 2018, the company reported A$292 Mn of available liquidity which comprised undrawn debt facility of A$150 Mn, cash and bullion of A$128 Mn, and investments of A$14 Mn.

The strong performance is directly attributed to the investments made in exploration and development, which has led to the building of a 2.5 Mn ounce reserve base and growing production towards its 400,000 ounces per annum target. The Company expects growth in its mine life, production, and inventory further from its existing assets.

In the current quarter, the Company added 32,000 ounces of hedging at A$1,913/oz for the period from January 2020 to February 2022. Its hedge book now comprises 392,500 oz at an average delivery price of A$1,786/oz.

On stock performance front, SAR last traded at A$2.910 down -9.627% (ASX: 4:00PM, February 19, 2019) with the market capitalization of ~A$2.64 Bn. Its PE multiple is 34.66x. Its 52 weeks high has been noted at A$3.470, and low at A$1.5. Its absolute return for the last 3 months, 1 year, and 5 years are 27.78%, 106.41%, and 727.08% respectively.

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