Sara­cen Min­er­als

Af­ter di­vest­ing two non-core gold as­sets for $18 mil­lion, sara­cen Min­er­als will turn its fo­cus to­wards grow­ing key re­sources ad­ja­cent to its pro­cess­ing fa­cil­i­ties and driv­ing down pro­duc­tion costs.

The Australian Mining Review - - CONTENTS - CAMERON DRUM­MOND

THE June quar­ter was quite a mile­stone for Sara­cen, and there’s cause to cel­e­brate – the gold miner posted record pro­duc­tion dur­ing the quar­ter and achieved its goal of dou­bling an­nual pro­duc­tion to 300,000 ounces (oz), while also de­liv­er­ing im­pres­sive ex­plo­ration re­sults.

Pro­duc­tion rose 23 per cent quar­ter-on-quar­ter to 79,985oz, driven by ris­ing mine grades.

This, to­gether with a 25 per cent re­duc­tion in all-in sus­tain­ing costs (AISC) to $1127/oz, un­der­pinned a quar­terly rev­enue of $127.3 mil­lion.

Sara­cen man­ag­ing di­rec­tor Raleigh Fin­layson said achiev­ing the 300,000oz per an­num pro­duc­tion tar­get was very sig­nif­i­cant.

“Sara­cen has now ce­mented its po­si­tion in the ranks of Aus­tralia’s lead­ing mid-tier gold pro­duc­ers, with a pro­duc­tion pro­file and growth out­look over the next few years which puts us in an en­vi­able po­si­tion in the ASX-listed gold sector,” he said.

$7.8m was spent in the three months to the end of June, with drilling con­cen­trated at Karari and Thun­der­box.

“Dur­ing the quar­ter, we be­gan to reap the re­wards of our sub­stan­tial re­cent in­vest­ments in growth,” Mr Fin­layson said.

“At Caro­sue Dam, the in­vest­ment in twin de­clines at the Karari un­der­ground mine is now pay­ing off with mul­ti­ple stop­ing fronts es­tab­lished, help­ing to drive an in­crease in mine pro­duc­tion and grade.

“At Thun­der­box, mill through­put and re­cov­er­ies in­creased markedly as a re­sult of im­prove­ments to the plant and a higher grade feed – which to­gether drove record gold pro­duc­tion.

“Mean­while, our strength­en­ing bal­ance sheet means we can con­tinue to fund our on­go­ing com­mit­ment to ag­gres­sive ex­plo­ration across our port­fo­lio – which is de­liv­er­ing im­pres­sive re­sults.

“Re­cent drilling at the Karari un­der­ground mine at Caro­sue Dam is be­gin­ning to show the true po­ten­tial of this large and grow­ing gold sys­tem, while at Thun­der­box drilling has ex­tended the thick A Zone min­er­al­i­sa­tion at depth – high­light­ing the po­ten­tial for a multi-year un­der­ground mine.”

Ore re­serves by the end of FY17 grew a whop­ping 40 per cent to 2.1 mil­lion ounces, de­spite the de­ple­tion of 293,000oz dur­ing the pe­riod.

This was largely due to a maiden re­serve es­ti­mate of 518,000oz at Thun­der­box un­der­ground.

Based on the re­sults, Sara­cen’s op­er­a­tions have a com­bined mine life of at least seven years and high­lighted the po­ten­tial to be min­ing for more than a decade.

“Karari is rapidly prov­ing to be one of Aus­tralia’s fastest grow­ing mines,” Mr Fin­layson said.

“Af­ter ramp­ing up pro­duc­tion to more than 100,000ozpa, we have now al­most quadru­pled the Re­serves af­ter ac­count­ing for de­ple­tion.

“At Thun­der­box, we have de­liv­ered a maiden re­serve for what is shap­ing up to be one of Aus­tralia’s larger and more pro­duc­tive un­der­ground mines.

“The re­sults show that last year’s record ex­plo­ration bud­get was money well spent, sup­port­ing the Com­pany’s strat­egy to grow pro­duc­tion and mine life at its ex­ist­ing as­sets.”

Pro­duc­tion guid­ance for FY18 re­mained at 300,000oz at an AISC of $1150/oz, how­ever Sara­cen said it would up­date its five-year out­look in De­cem­ber af­ter the com­ple­tion of fur­ther drilling at Karari and Whirling Dervish.

Di­vest­ment

Sara­cen re­cently di­vested its King of the Hills and Red Oc­to­ber mines, pock­et­ing a to­tal $18m in cash and shares.

On 3 Au­gust it off­loaded its King of the Hills gold project to ASX-listed Red 5 in a cash and scrip deal worth $16m.

As part of the deal, Red 5 paid $7m up­front; is­sued Sara­cen 90 mil­lion Red 5 shares – es­crowed for 12 months; and will pay a fur­ther $4.5m in cash or Red 5 shares a year af­ter the deal’s com­ple­tion.

King of the Hills is an un­der­ground project with 402,000oz grad­ing at 4.6 grams per tonne (g/t).

“Red 5 is aim­ing to bring it into pro­duc­tion as part of a wider con­sol­i­da­tion strat­egy, and Sara­cen will re­tain on­go­ing ex­po­sure to this through its share­hold­ing – a good out­come for both par­ties,” Mr Fin­layson said.

In late Septem­ber Red Oc­to­ber was off­loaded to neigh­bour­ing ten­e­ment holder Matsa Re­sources for $2m in cash and shares.

The mine – moth­balled by Sara­cen in June – con­tained 99,000oz grad­ing at 6.9g/t at the time of sale.

“Sara­cen will re­tain on­go­ing ex­po­sure to the as­set through its share­hold­ing in Matsa, mak­ing this an ex­cel­lent out­come for both par­ties,” Mr Fin­layson said.

Mr Fin­layson said while both King of the Hills and Red Oc­to­ber were high qual­ity as­sets, their “po­ten­tial as a source of ore is be­ing dis­placed by the abun­dance of higher mar­gin ore closer to [ex­ist­ing] milling in­fra­struc­ture”, and the sales were op­por­tu­ni­ties to crys­tallise value from non-core as­sets.

“We are ex­pe­ri­enc­ing out­stand­ing growth at the Karari and Thun­der­box mines, lo­cated im­me­di­ately ad­ja­cent to the Caro­sue Dam and Thun­der­box mills re­spec­tively,” he said.

All images: Sara­cen Min­er­als.

Sara­cen said it has ex­pe­ri­enced out­stand­ing growth at Thun­der­box.

Un­der­ground at Karari.

The Caro­sue Dam mill will process ore from all of Sara­cen’s core as­sets.

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