Saracen denies dividend after Superpit acquisition

Saracen Mineral Holdings boss Raleigh Finlayson says the company wants to keep its powder dry for growth options around the Superpit...
21st February 2020
Resources Rising Stars

Saracen Mineral Holdings boss Raleigh Finlayson says the company wants to keep its powder dry for growth options around the Superpit and to reduce debt before paying a long-awaited inaugural dividend (reports The Australian Financial Review).

The Saracen board opted not to pay a half-year dividend in the wake of forking out $US750 million ($1.115 billion) for a half share in the Superpit gold operations.

The company whet investor appetites in August when it announced plans to start paying dividends under a new policy of distributing 20-40 per cent of net profit as long as its cash balance was above $150 million.

Saracen ended the half-year with cash and equivalents of $283.8 million. That was after the Superpit purchase in November, raising $796 million in equity and drawing down $400 million from a new $450 million term loan.

"First and foremost our prime objective is to get our balance sheet as close to net cash as we can in short order," Mr Finlayson said.

"The second thing is that we are undertaking a strategic review of the Superpit just to understand short- and longer-term growth options on the asset, and we thought it wise while doing that to buy ourselves another six months."

Saracen said on Monday that it was on track to achieve full-year production guidance of more than 500,000 ounces, factoring in its share from the Superpit at Kalgoorlie in Western Australia.

Including a one-month contribution of 20,634 ounces from the Superpit, Saracen produced 216,452 ounces of gold in the half-year to December 31.

The Superpit production came at an all-in sustaining cost (AISC) of $1522 an ounce compared to AISC of $1041 an ounce across the wider Saracen operations.

The mid-tier gold miner is reviewing the Superpit in conjunction with co-owner Northern Star Resources, with both companies saying they are confident of adding value to the operations.

Saracen’s net profit after tax for the first half was $69 million, up 61 per cent from $43 million for the same period last year, while revenue jumped 45 per cent to $409.9 million.

The Superpit result was in line with Saracen calendar 2020 guidance of 245,000 ounces at an AISC of $1470 an ounce.

Saracen has said it expects to spend about 3½ years completing remediation work on a 2018 pit wall collapse that cut Superpit production and increased operating costs.

The mine was producing about 700,000 ounces a year at an AISC of slightly more than $1000 before the 2018 wall slip, and Mr Finlayson said it should bounce back to those levels after the remediation work.

"Being a relatively fixed-cost site you’ll see AISC decline quite rapidly as production increases back to historical levels, bearing in mind it has done 21 million ounces over three decades," he said.

Both Saracen and Northern Star, which acquired its 50 per cent stake for $US800 million in December, have said they will provide a comprehensive update on the Superpit sometime around the Diggers & Dealers mining conference in Kalgoorlie in August.

 

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