Quarterly Report
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SARACEN MINERAL HOLDINGS LIMITED
ACN: 009 215 347
Commercial production declared at Thunderbox
Production ramping up to ~300,000ozpa at AISC of
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Corporate Details:
10th May 2016
ASX code: SAR
Corporate Structure:
Ordinary shares on issue: 800.8m
Unvested employee performance rights: 20.2m
Market Capitalisation: A$965m (share price A$1.205)
Cash & Bullion (31 March): A$34.3m Debt: Nil
Directors:
Mr Geoff Clifford
Non-Executive Chairman
Mr Raleigh Finlayson Managing Director
Mr Mark Connelly Non-Executive
Mr Martin Reed Non-Executive
Ms Samantha Tough Non-Executive
Substantial Shareholders:
Van Eck 8.6%
Wroxby 8.2%
Paradice Investment Management 8.0% Karara Capital 6.1%
Registered Office:
Level 4
89 St Georges Terrace Perth WA 6000
Telephone: +61 8 6229 9100
Facsimile: +61 8 6229 9199
For further details contact:
Troy Irvin Telephone +61 8 6229 9100
[email protected]
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Key Points
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Commercial production declared at the Thunderbox gold project in WA, effective April 1, 2016
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Processing plant operating at nameplate capacity of 2.5Mtpa
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Thunderbox produced 7,026oz in the month of April 2016 at 94.1% recovery with an AISC of A$1,107/oz
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Group production ramping-up to ~300,000ozpa at AISC of
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Commercial production at Thunderbox achieved after a capital investment of A$63.4m
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Thunderbox free cashflow of A$1.6m (including capital) in the month of April with 6,052oz sold at average gold price of A$1,636/oz
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100% of the Thunderbox development funded from internal cashflows generated by the highly successful Carosue Dam project in WA
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100% of Thunderbox consideration now paid, totalling A$31.6m, including the purchase of the 1.5% NSR Norilsk royalty
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Fixed price diesel contracts initiated covering approximately 50% of the Thunderbox consumption over the next two years
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Pre-stripping of Zone C to commence in the September quarter, with installation of the gravity circuit in July 2016
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Exploration drilling underway at King of the Hills (65km south of Thunderbox); initial results anticipated in the September quarter
Saracen Mineral Holdings Limited (ASX: SAR) is pleased to declare commercial production at its 100 per cent-owned Thunderbox Gold Project in WA.
Thunderbox, which was delivered ahead of schedule and under budget, achieved cashflow positive status just two months after commissioning commenced.
This milestone means Saracen has joined the mid-tier Australian gold sector, increasing its production rate to ~300,000 ounces a year at an all-in sustaining cost of
Beyond the initial open pit mine life of approximately five years, Thunderbox has promising underground potential. Drilling planned for later this year will aim to define a long-term underground mine, which will potentially extend the project life beyond 10 years.
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All Thunderbox consideration now paid
All consideration for the acquisition of Thunderbox, totalling A$31.6m, has now been paid. This includes the purchase of the 1.5% NSR Norilsk royalty, and the A$3.0m final payment.
Table 1 - All Thunderbox consideration now paid
Consideration
A$m Comment
A$20m cash 20.0 Paid on settlement
A$3m cash 3.0 Paid on gold price > A$1,550/oz for a calendar month, 24 months following settlement
8.0m SAR shares* 7.9 Purchase of Norilsk royalty
US$0.5m cash** 0.7 Purchase of Norilsk royalty
TOTAL 31.6
A$/oz
EV/Reserve oz^ 39
EV/Resource oz^^ 13
* Based on 10 day VWAP of A99c prior to execution
** Based on AUD/USD 0.75
^ Based on Ore Reserves at 30 June 2015 of 802koz
^^ Based on Mineral Resources at 30 June 2015 of 2.46Moz
The total consideration confirms efficient allocation of capital, with the transactional Reserve and Resource multiples substantially lower than other comparable deals over recent years.
On a fully-funded (FF) basis i.e. including the capital investment of A$63.4m, the FF A$/Reserve oz is a compelling A$118.
Fixed price diesel contracts initiated
Saracen has taken the opportunity presented by historically low oil prices to partially fix the A$ diesel price. The fixed price contracts cover ~50% of the diesel usage at Thunderbox over the next 2 years.
Table 2 - Fixed price diesel contracts
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Tranche
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Delivery
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Volume
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Fixed Price*
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#
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Period
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Litres
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Litres per month
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A$/litre
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1
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1 Jul 2016 - 31 Dec 2016
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4,500,000
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750,000
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0.530
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2
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1 Jan 2017 - 30 Jun 2017
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4,500,000
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750,000
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0.560
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3
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1 Jul 2017 - 31 Dec 2017
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4,500,000
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750,000
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0.580
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4
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1 Jan 2018 - 30 Jun 2018
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4,500,000
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750,000
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0.605
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* The fixed price applies to the base Product Price (Diesel 10ppm), Ocean Freight, and Insurance and Loss for the volumes specified above. All other costs, charges and conversions of currency or metrics are added to the price.
The weighted average fixed price of A$0.569/litre (~A$0.62/litre including land freight delivered to site) is ~30% less than the Feasibility Study assumption of A$0.90/litre (delivered to site).
Thunderbox is a bulk open pit mine employing large scale mobile equipment, with the cost of diesel the largest single operating cost item. The partial fixing of the diesel price provides Saracen with a degree of price certainty over its biggest expense and will assist in managing future cash flows and production costs.
King of the Hills drilling
Exploration drilling is underway at King of the Hills (65km south of Thunderbox).
Figure 1 - Planned drilling at King of the Hills
The drilling will test potential higher grade zones identified to the south of the current underground workings. Initial results are anticipated in the September quarter.
Saracen Managing Director Raleigh Finlayson said Thunderbox had transformed the Company into a leading mid-tier Australian gold producer.
"Thunderbox gives us the level of production and cashflow sought after by international investors while enabling us to remain debt-free," Mr Finlayson said.
"The potential +10-year mine life of Thunderbox and the exploration upside at both Thunderbox and Carosue Dam means we have a sustainable production profile with strong growth prospects."
For further information please contact:
Investors: Media Enquiries:
Troy Irvin Read Corporate
Corporate Development Officer Paul Armstrong / Nicholas Read
Email: [email protected] Contact: (08) 9388 1474
Email: [email protected]
^^ The information on Thunderbox Mineral Resources and Ore Reserves has been extracted from the ASX announcement titled "2015 Mineral Resources and Ore Reserves" dated 15 October 2015. The report is available to view on the ASX Website at www.asx.com.au and on the Company's website at www.saracen.com.au.The Company confirms that it is not aware of any new information or data that materially affects the information included in the original market announcement and, in the case of estimates of Mineral Resources and Ore Reserves, that all market assumptions and technical assumptions underpinning the estimates in the relevant market announcements continue to apply and have not materially changed. The Company confirms that the form and context in which the Competent Person's findings are presented have not been materially modified from the original market announcement.