Saracen Minerals Holdings Ltd (ASX: SAR) is an Australian gold miner. Saracen has three main projects in Western Australia. These include the Carosue Dam Operation, the Thunderbox Operation and the joint venture operation of the KCGM super pit (50% interest). Saracen has a market capitalisation of A$6.4 billion.

What are the key features of Saracen’s June quarterly report?

Gold production for the June quarter is 145,830oz. Regarding Saracen’s individual mines, KCGM (50% interest) gold production is 53,398oz, Carosue Dam gold production is 50,315oz and Thunderbox gold production is 42,117oz. FY20 gold production is 520,414oz. Regarding Saracen’s individual mines, KCGM (50% interest) gold production is 132,595oz, Carosue Dam gold production is 203,281oz and Thunderbox gold production is 184,538oz.

Importantly, Saracen has reported FY20 production ahead of guidance of 500,000oz.

Gold sales for the quarter of 148,011oz at an average sale price of A$2,280/oz for sales receipts of A$337 million (72,300oz delivered into the hedgebook at an average price of A$1,938/oz). Saracen’s balance sheet has improved over the quarter. Saracen holds cash and bullion of A$369.3 million at 30 June 2020 (A$338.8m at 31 March 2020) after making a debt repayment of A$38.5m, paying A$15.7m tax and spending approximately A$89-94mon growth capital and exploration in the June quarter. Saracen’s debt is A$321 million with a net cash of A$48 million at 30 June 2020.

Managing Director Raleigh Finlayson notes that the results reflected Saracen’s ongoing success in meeting or exceeding guidance and in generating growth. It is also noted that there are a number of positive new reports to come, this includes FY20 profit results and a KCGM update.

What is the outlook for Saracen?

The short-term and long-term outlook for Saracen is positive. Saracen is benefiting from a weak A$ and a rising gold price. This could increase revenue in the short-term for Saracen. Also, Saracen’s balance sheet is strong.

The long-term outlook for Saracen is also positive. The recent acquisition of the KCGM Super Pit could allow Saracen to transition from a mid-tier to top-tier gold producer. The acquisition is estimated to more than double Saracen’s total gold production in the coming years. Saracen expects to produce 600,000 gold in FY21.

Investors that want exposure to the gold industry could consider following Saracen to observe the company’s performance during the COVID-19 crisis (which to date has had no material impact) and developments of its mining operations.

What is the outlook for Saracen?

The market reaction to Saracen’s June quarter report is positive. Saracen is up around 3% and is currently trading at A$6.17. This is a positive announcement as the Australian market is down 0.3%. Saracen is trading at a forward P/E ratio in the mid-twenties.

 


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July 8, 2020