FLIGHT TO 400

JES­SICA CUM­MINS

The Australian Mining Review - - NEWS -

Capping off FY18 with record break­ing re­sults and hit­ting 2.5 mil­lion ounces in gold re­serves brings Sara­cen Min­er­als closer to reach­ing its goal of 400,000ozpa within the next seven years. Sara­cen Min­er­als manag­ing di­rec­tor Raleigh Fin­layson speaks with The Aus­tralian Min­ing Re­view about its achieve­ments and plans for the rest of the year.

GOLD miner Sara­cen Min­er­als is in good stead with a FY18 net profit surge of 166 per cent to $75.6 mil­lion; an in­crease from $28.4m a year prior.

Due to an in­crease in gold sales of 317,675 ounces; a 75 per­cent EBITDA rise to $198.7m; and dou­bling of its un­der­ly­ing NPAT to $67.3m, the com­pany con­tin­ues to be one of the top 10 gold min­ers in WA.

Sara­cen Min­er­als manag­ing di­rec­tor Raleigh Fin­layson said the strong re­sults were par­tic­u­larly pleas­ing given the miner was in a growth phase.

Mr Fin­layson said profit and free cash flow surged as the com­pany grew pro­duc­tion and re­duced costs; a re­sult of its huge ex­plo­ration suc­cess.

“Ex­plo­ration is the key to our on­go­ing growth and there­fore we have com­mit­ted $60 mil­lion to ex­plo­ration in FY19,” he said.

“With a 300,000ozpa pro­duc­tion pro­file now es­tab­lished, grow­ing mine life and no debt, Sara­cen has an ex­cel­lent plat­form from which to cap­i­talise on fur­ther growth op­por­tu­ni­ties as they rise.”

With a goal to reach 400,000ozpa within the next seven years, Mr Fin­layson said ex­plo­ration, again, would be a key driver of this along with the ex­pan­sion of the Caro­sue Dam fa­cil­i­ties to ac­com­mo­date ad­di­tional ounces.

“Our record spend on ex­plo­ration is more than dou­ble than any other year so we are keen to see the re­sults of that to help de­fine the mine plan,” he said.

Hav­ing pre­sented for the first time at the Pre­cious Met­als Sum­mit in Colorado in Septem­ber, Mr Fin­layson said a key take­away for Sara­cen was the vary­ing dif­fer­ence in per­for­mance be­tween Aus­tralian mid-tier gold pro­duc­ers and its Amer­i­can peers.

“Over the last five or six years the Aus­tralian gold min­ing space has per­formed very well from a de­liv­ery on guid­ance, cash flow, and share price point of view com­pared with our peer group in Amer­ica,” he said.

“Both large and small com­pa­nies and those in sim­i­lar size have had vary­ing and quite neg­a­tive per­for­mances in com­par­i­son so there is quite a big dis­con­nect and by de­fault Aus­tralian com­pa­nies have been out­per­form­ing.

“From an in­vestor point of view they are very pleased with per­for­mance, very pleased with the track record, pleased with on­go­ing growth and the as­pects on the back end of ex­plo­ration.”

Caro­sue Dam

The com­pany’s Caro­sue Dam op­er­a­tions in­cor­po­rates the Laver­ton and Keith Kilkenny tec­tonic zones north east of Kal­go­or­lie in one of the world’s most prospec­tive gold prov­inces.

With an over­ar­ch­ing goal to build a long-term strate­gic in­fra­struc­ture and po­si­tion in the area, Sara­cen’s ten­e­ments in­cluded the Karari and Whirling Dervish gold de­posits, the Por­phry project and the Deep South project.

The mid-tier gold pro­ducer com­mit­ted to build­ing a $7m airstrip at the site, and Mr Fin­layson said the project was pro­gress­ing well with works about 30 per cent com­plete.

“We are look­ing to land planes by the end of FY19,” he said.

“It’s a more ef­fi­cient way to get peo­ple out to the mine site and saves them 150km of travel with a chunk of that be­ing on gravel road.

“So it’s a tick from a safety level and from a com­mu­nity level – the sourc­ing of drilling equip­ment, sup­pli­ers and con­trac­tors will be pri­ori­tised lo­cally.”

Thun­der­box

After pur­chas­ing the Thun­der­box ten­e­ment in 2014 for $23m and achiev­ing its one mil­lionth ounce of gold in Oc­to­ber last year, Sara­cen kicked off de­vel­op­ment at its un­der­ground mine in June 2018.

Gold pro­duc­tion for FY18 reached 145,152oz; up from 116,837oz last year.

Mr Fin­layson said the com­pany was now look­ing for­ward to see­ing drilling re­sults come out of an as­set that, in the past, had been pri­mar­ily fo­cused on de­vel­op­ment and pro­duc­tion lev­els.

In ad­di­tion, he said the com­pany was in a good po­si­tion with Thun­der­box see­ing a grade ap­pre­ci­a­tion as it gets deeper.

“The por­tion of the ore­body is around 1 gram per tonne at the top and at the base of the tips its 2 grams per tonne, so favourable grade char­ac­ter­is­tics will con­tinue to lower our costs as we get deeper into the mine life.”

The fo­cus for FY19 will be on es­tab­lish­ing the drilling plat­form to al­low the ore body to be de­lin­eated at depth, through a me­thod­i­cal drilling pro­gram.

“The plat­form con­struc­tion works in par­al­lel with ex­plo­ration spend so we will have the study on ex­pan­sion done be­fore the end of FY19 and a 12-month con­struc­tion pe­riod for the ad­di­tional bore mill and two ad­di­tional tanks which will see com­ple­tion set for FY21.”

Achieve­ments

Mr Fin­layson at­trib­uted re­cent suc­cess to ac­quir­ing its se­cond as­set, Thun­der­box, swiftly, and at the right time.

Sara­cen, how­ever, was not im­mune to the gold price crash in 2013 when in­vestors saw the price drop by 28 per cent over night.

“It was on the 20 April and the rea­son why I re­mem­ber it so well is be­cause it was seven days into my 10 years as manag­ing di­rec­tor,” he said.

“I think the key learn­ing there is…I like the anal­ogy of you plan for a draught when you’re not in a draught.

“If you start plan­ning for a draught when you’re in one, the horse has bolted.

“In Aus­tralia we are get­ting an A in the favourable gold price of the cur­rency – around $ 1700 dol­lars of the gold price which is an all- time high.

“We have been mak­ing sure we are tak­ing ad­van­tage of new tech­nolo­gies and in­no­va­tions to en­able us to lower our cost base, and if we were en­coun­tered with a lower gold price we would be able to with­stand it for longer.”

Mr Fin­layson also high­lighted Sara­cen’s hedge book as the se­cond no­table as­pect.

“We have a locked in price of 270,000 ounces at $ 6 dol­lars an ounce higher than the spot price so we are fo­cussed on our rev­enue and cost line.”

Plan­ning Ahead

Mov­ing into 2019, Mr Fin­layson said gold pro­duc­tion would be sourced from the Karari, Deep South and Whirling Dervish un­der­ground mines with bal­ance com­ing from third-party ore pur­chase agree­ments and var­i­ous ore stock­piles.

Over the next two years, he said the com­pany’s busi­ness plan con­sisted of in­creas­ing pro­duc­tion from Karari’s un­der­ground mine to 1.5mtpa, main­tain­ing steady state pro­duc­tion from Deep South, and ramp­ing up pro­duc­tion at Whirling Dervish.

Ex­plo­ration would con­tinue through­out the ‘cor­ri­dor of riches’ with the hope to grow the cur­rent gold re­serve base and reach its out­look of be­tween 325,000-345,000ozpa.

“With a 300,000ozpa pro­duc­tion pro­file now es­tab­lished, grow­ing mine life and no debt, Sara­cen has an ex­cel­lent plat­form from which to cap­i­talise on fur­ther growth op­por­tu­ni­ties as they rise.”

Al­lim­ages:Sara­cenMin­er­als.

Min­ing op­er­a­tions at the Thun­der­box pit.

Thun­der­box un­der­ground.

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