Saracen Mineral Holdings Limited (ASX: SAR) is on track to achieve its key FY21 guidance targets for production and financial after a solid September quarter. The gold miner producer 154,388oz at an all-in sustaining cost (AISC) of $1,169 /oz. The company has also added $98 million to the balance sheet in free cash.
Operating costs were lower in the quarter. Largely due to reduced underground mining in July at Carosue Dam following a fatality and consequent restart of the operation. Nonetheless, processing remained in line with forecast, with additional ore sourced from the large Carosue Dam surface stockpile. Mining has since returned to budgeted levels at Carosue Dam.
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On track for FY21 guidance
The company's FY21 guidance of 600–640koz at an AISC of $1300–$1400/oz is unchanged. In addition, the company continues to capitalise on the high gold prices. Leaving FY21 growth capital and exploration budget of $484m unchanged. This strategy involves investing capital in the short term to de-risk production and lower costs in the future.
Saracen achieved a net profit after tax (NPAT), unaudited, of $70–$80 million while spending $14 million on exploration this quarter. Post quarter, the company agreed a merger of equals with Northern Star Resources Ltd (ASX: NST). The company believes this to be a uniquely accretive transaction which will deliver $1.5 billion in synergies, creating a top 10 global gold miner targeting 2 million ounces per year tier 1 locations. This means the Kalgoorlie super pit will be under one company for the first time in its history.
What did management say
Company managing director Raleigh Finlayson said it was a solid start to the new financial year, though the performance was marred by the tragic death of a colleague at Carouse Dam. He added:
With solid production and costs running slightly below (FY21) guidance, we generated strong free cash flow. This resulted in cash and bullion rising by A$98 million over the quarter to A$467 million, which in turn sets us up well as we prepare to invest A$484 million in development and exploration over the course of this financial year.
The combination of further growth at our existing assets and those of Northern Star, along with the synergies we stand to generate through the planned merger, puts our combined business in an extremely enviable position.
We will be generating substantial growth while most of the global gold industry is shrinking, we will be reducing costs in the process, and all in tier-one locations.
Saracen share price performance
The Saracen share price is up 83.4% in year to date trading due to uncertainty during the COVID-19 pandemic. It is currently trading at a price to earnings (P/E) ratio of 32.44 as the company works towards FY21 guidance.
