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Summary
- Saracen Mineral Holdings (SAR) reported over 100% growth in its statutory NPAT on the back of record production volumes, steady costs and a strong Australian-dollar gold price.
- SAR has also acquired 50% interest in world-class, Tier 1 Super Pit gold mine that pushes Saracen into the next league of gold miners.
- SAR believes that production at Super Pit is expected to grow to +500,000ozpa from FY24 with existing reserves of 9.7Moz supporting a mine life visibility of 15 years.
- The D Zone at Thunderbox is another robust open-pit opportunity for SAR where production is anticipated to ramp-up to ~200,000ozpa.
The all-Australian gold growth company, Saracen Mineral Holdings Limited (ASX:SAR) believes “There’s Nothing Like Australian Gold”. There's no denying the statement as Australia is among the top producers of gold in the world and is projected to have the world’s largest gold reserves. According to Geoscience Australia, more than half of the gold reserves of Australia lie in Western Australia. The existence of abundant gold in Australia allows mining in all states as well as the Northern Territory. Therefore, with enormous levels of estimated gold reserves and significant levels of production every year, Australia plays a key role in the international gold industry.
On that backdrop, let us lens on Saracen Mineral Holdings’ latest developments.
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Over 100% Growth in Saracen Mineral’s Statutory NPAT For FY20
Saracen Mineral’s three highly prolific mines, located on the doorway of Kalgoorlie, propel the Company to deliver a premium product in the form of 100% Australian gold.
During the year ended 30 June 2020, SAR witnessed record production volumes, steady costs and a strong Australian-dollar gold price. This further resulted in SAR’s statutory net profit after tax skyrocketing by 105% (YoY) to A$189.7 million and EBITDA shooting up by 104% (YoY) to A$447.6 million.
Furthermore, gold sales jumped to 528,693oz at an average price of A$2,138/oz compared to 350,904oz at A$1,726/oz in FY19.
The impressive results indicate that the Company has taken a leap into the big league of ASX gold producers, with production rate running at over 600,000oz annually. This suitably places the Company to benefit from the robust gold price and progressively produce a solid increase in its cashflow.
Furthermore, cashflow and robust balance sheet present flexibility for continuous expansion through exploration and development, supporting potential rises in production and mine lives.
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Saracen Enters Next League Of Gold Miners Through Acquisition Of World-Class Super Pit
In November 2019, SAR acquired 50% interest in the Kalgoorlie Consolidated Gold Mines Joint Venture (KCGM JV), which owns and operates the Super Pit gold mine in Kalgoorlie-Boulder, Western Australia. The mine was acquired from Barrick Gold Corporation by purchasing 100% of the shares in Barrick Pty Limited.
Opportunistically, the Super Pit being a Tier 1 asset in a Tier 1 mining jurisdiction presents the opportunity of large, high quality, long-life open-pit and an underground gold mine for the Company.
Super Pit has produced an average of ~660koz per annum during the 5-year period to FY2019, and the production is expected to rise to +675koz pa on a 100% basis. Presently, operations are being de-risked, and productivities are growing with multiple production sources and the existing reserves of 9.7Moz support a mine life visibility of 15 years.
Kalgoorlie Super Pit Gold production Estimate (Source: ASX Announcement Dated 08/09/2020)
Furthermore, SAR is optimistic that the production is expected to grow to +500,000ozpa from FY24 with the pit wall remediation completion, Fimiston South becoming an increasingly dominant ore source, and increased access to high-grade Golden Pike North.
Interesting Read: Saracen To Acquire Superpit Gold Mine, and Replace Barrick Gold in KCGM JV With Newmont
Additional Drilling Planned At Thunderbox With High-Grade Shoots Remaining Open Down Plunge
At the Carosue Dam and Thunderbox, the Company’s Reserves increased by 12% to a record 3.7Moz, underpinning SAR’s strategy of investing in production growth. Since 2013, reserves are believed to have increased beyond four-fold and have nearly doubled over the past three years.
Source: ASX Announcement Dated 08/09/2020
The D Zone at Thunderbox, which is the northern extension of C Zone is another robust open pit with features including:
- Low cost/ High productivity
- Top-down, perimeter-to-perimeter sequence with no staging
- Approximately 94% metallurgical recoveries
- Around 2.5 years of soft oxide feed blend that benefits mill throughput
- Increasingly lower strip ratio and better grade
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Production is anticipated to ramp-up to 450,000ozpa from FY23, including ~200,000ozpa coming from Thunderbox while the grade is expected to increase as the mine gets deeper. Moreover, high-grade shoots remain open down plunge, with additional drilling planned at the area and a Scoping Study has validated the possibility to develop the Thunderbox mill to 3.5Mtpa during FY22.
The Company has been establishing a growing trend on the basis of a simple business plan and has a track record of eight years of meeting or surpassing the guidance. SAR believes that it is among the top 20 gold producer worldwide following the acquisition of 50% of the world-class Super Pit.
The Company has been at the forefront for delivering sector-leading financial results while making sure the balance sheet remains in a strong position. Moreover, SAR believes that its investment in exploration, innovation and ESG shall result in escalating production, mine life and shareholder returns.
As on 10 September 2020, SAR share price is trading at A$5.130, up 2.6% from the previous close at 11:10 AM AEST.
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