The Saracen Mineral Holdings Limited (ASX: SAR) share price is surging today on the back of a new gold rush combined with news that the company's gold reserves have increased by 32%.
Saracen shares closed yesterday at $4.05 but opened at $4.30 this morning and subsequently hit a new all-time high of $4.54. SAR shares are sitting at $4.52 at the time of writing – an 11.48% rise.
Saracen's Gold Reserves
On Thursday (before market open), Saracen announced to the ASX that its estimated gold reserves have increased by 32% to 3.3 million ounces as of 30 June 2019, which is up from the 2.5 million ounces it estimated at 30 June 2018. Saracen estimates that this increase underpins a production capacity of 400,000 ounces per annum for at least the next seven years. The company predicts FY20 production of 350-370,000oz at an all-in sustaining cost (AISC) of A$1,025-A$1,075 per ounce, followed by 400,000oz per annum from FY21-26.
With today's price of gold in Australian dollars at its highest point ever at over $2,100/oz, this gives Saracen's reserves a value of $6.93 billion – which is promising for a company with a market capitalisation of $3.32 billion.
What's happening with the gold price?
After a price collapse on Thursday following the 'more Hawkish than expected' comments from US Federal Reserve chair Jerome Powell, gold prices surged violently overnight as US President Donald Trump announced a resumption of hostilities in the US-China trade war, hitting Chinese imports with another US$300 billion worth of tariffs. Gold is often viewed as a 'safe haven' asset during times of global uncertainty, which was proved yet again this morning by the gold price spiking above the A$2,100/oz mark for the first time
Foolish Takeaway
Needless to say, it's a good time for an Aussie gold miner to announce its reserves have increased by 32%. These two factors have lifted the Saracen share price to where it is today, and if the gold price can solidify around the A$2,100 level, I expect further upside for SAR shares.
