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 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.
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.
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.