Quarterly Report
SARACEN MINERAL HOLDINGS LIMITED
ACN: 009 215 347
QUARTERLY REPORT: MARCH 2016
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Corporate Details:
27th April 2016
ASX code: SAR
Corporate Structure:
Ordinary shares on issue: 800.8m
Unvested employee performance rights: 20.2m
Market Capitalisation: A$813m (share price A$1.015)
Cash & Bullion (31 March): A$34.3m Debt (31 March): 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:
Wroxby 8.2%
Paradice Investment Management 8.0% Van Eck 7.4%
Karara Capital 6.1%
Group Resources and Reserves:
Resources 7.6Moz (30 June 2015)
Reserves 1.5Moz (30 June 2015)
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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Ramping up to ~300,000ozpa as Thunderbox prepares for first commercial production
Production
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Quarterly gold production of 43,059oz (Carosue Dam 33,749oz, Thunderbox 9,310oz)
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Quarterly all-in sustaining cash costs (AISC) of A$1,183/oz, YTD AISC A$1,065/oz (within FY16 outlook range of A$1,025-1,075/oz)
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FY16 group production outlook increased to 175-195,000oz
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Improved June quarter anticipated at Carosue Dam as deferred high-grade ore is processed, and Thunderbox achieves commercial production
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Thunderbox commissioning almost complete with commercial production anticipated in the current June quarter, doubling total group production to an annualised rate of ~300,000oz
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Development of Carosue Dam's Deep South underground mine continues with commercial production anticipated in the current June quarter
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Cash and equivalents at 31 March of A$34.3m ($42.1m at 31 December 2015), exceeding outlook which stated cash and bullion "in excess of $20m" at 31 March 2016
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Operational cash flow generated at Carosue Dam for the quarter (including movement in gold in transit) was A$26.0 million
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Subsequent to the March quarter, Saracen purchased the Norilsk royalty (1.5% NSR) reducing Thunderbox's AISC to ~A$1000/oz
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Resources at Carosue Dam's Karari mine increase by 240,000oz to 873,000oz (up 38%), and Reserves increase by 114,447oz to 212,447oz (up 117%), relative to 30 June 2015 (after mining depletion)
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Karari extended approximately 100m down dip with an intersection of 12.0m @ 5.1g/t from 557m
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New drill platforms at Karari being developed, aimed at extending mine life beyond the current five year plan at Carosue Dam
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Three LTIs occurred during the quarter; TIFR steady at 368
Development
Financial
Exploration and growth
Health and safety
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Group Summary
Table 1 - Consolidated production and sales summary
Group Units Sep Q 2015 Dec Q 2015 Mar Q 2016 YTD FY16
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Recovered Gold
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oz
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38,140
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44,265
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43,059
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125,464
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AISC*
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A$/oz
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1,025
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1,009
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1,183
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1,065
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Sold Gold
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oz
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39,391
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44,049
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36,891
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120,331
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Average Sale Price
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A$/oz
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1,593
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1,590
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1,675
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1,617
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Sales Revenue
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A$m
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62.8
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70.0
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61.8
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194.6
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AISC applies to Carosue Dam production only, Thunderbox costs are capitalised (until commercial production)
Carosue Dam Operations
Table 2 - Carosue Dam - Key metrics
Carosue Dam Units Sep Q 2015 Dec Q 2015 Mar Q 2016 YTD FY16
Underground Mining
Ore Mined
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t
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143,000
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248,000
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275,000
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666,000
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Mine Grade
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g/t
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4.30
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4.54
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2.94
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3.83
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Contained Gold
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oz
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19,759
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36,229
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26,051
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82,039
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Mill Production
Ore Milled
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t
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577,000
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569,000
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565,000
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1,711,000
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Mill Grade
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g/t
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2.25
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2.62
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2.02
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2.30
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Contained Gold
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oz
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41,753
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47,854
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36,733
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126,340
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Recovery
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%
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91.3%
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92.5%
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91.9%
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91.9%
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Recovered Gold
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oz
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38,140
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44,265
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33,749
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116,154
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Underground Mining
Ore mined from underground continues to increase, rising to 275kt in the March quarter. Increased ore from the development of the Deep South mine was offset by lower production from Red October, where exploration drilling is prioritised. Table 2 includes production from:
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Karari - 11.4koz @ 2.5g/t (v December quarter 15.1koz @ 3.1g/t)
Ore grade and production was lower than the December quarter due to predominantly development ore only being mined from the Dhoni lode. Stoping is set to increase in the current June quarter and the head grade is expected to revert to ~3.0g/t in line with the Reserve grade.
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Red October - 11.9koz @ 3.8g/t (v December quarter 21.1koz @ 6.7g/t)
Gold production was lower than the previous quarter due to the planned development of the Deep South mine, with resources shared between the two mines. This has also enabled exploration drilling to be conducted from the base of the Red October mine (results expected in the current June quarter).
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Deep South - 2.7koz @ 2.3g/t (v December quarter nil)
99% of ore production was from development, with stoping commencing late in the quarter. Ore grades are set to increase to ~3.5g/t in the current June quarter with stoping ramping up.
Despite the softer quarter from underground mining, Carosue Dam generated operational cash flow of A$26.0 million resulting in A$34.3m cash and equivalents at 31 March 2016. This comfortably exceeded the outlook of "in excess of A$20m", reinforcing Saracen's cash flow credentials.
Combined underground mine production is expected to revert back to +30koz in the current June quarter with the commencement of stoping activities at both Deep South and the Dhoni lode at Karari.
Processing
Milling was impacted by adverse weather during the quarter, with heavy rains in the last two weeks of March restricting road haulage of ore from the Deep South and Red October mines.
The closing ore stockpile at the end of the quarter was 1.3Mt @ 0.9g/t for 37,996oz. These ounces will only incur processing and administration costs, equivalent to ~A$1,097/oz AISC or A$14 million in deferred free cash flow using latest costs and a A$1,518/oz gold price (average hedge price).
Outlook
A stronger June quarter is expected as deferred high grade ore is processed and stoping activities at both Deep South and Karari ramp up.
June quarter to date (to 25 April) Carosue Dam has performed strongly, with mine production of
~9,100oz @ 3.2g/t and mill production of ~12,500oz @ 2.5g/t. This sets the foundations for a strong finish to FY16.
Thunderbox Operations
Table 3 - Thunderbox - Key metrics
Thunderbox Units Sep Q 2015 Dec Q 2015 Mar Q 2016 YTD FY16
Open Pit Mining
Total Mining
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bcm
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2,420,000
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4,247,000
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3,679,000
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10,346,000
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Ore Mined
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t
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84,000
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326,000
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410,000
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Mine Grade
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g/t
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0.80
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0.98
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0.94
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Contained Gold
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oz
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2,159
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10,258
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12,417
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Mining Cost
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A$/bcm
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$3.57
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$2.73
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$3.78
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$3.30
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Mining Cost
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A$m
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$8.6
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$11.6
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$13.9
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$34.1
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Mill Production
Ore Milled
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t
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345,000
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345,000
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Mill Grade
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g/t
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0.92
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0.92
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Contained Gold
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oz
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10,230
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10,230
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Recovery
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%
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91.0%
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91.0%
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Recovered Gold
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oz
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9,310
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9,310
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Open Pit Mining
3.7 million bcm were excavated from Thunderbox (Zone A) during the quarter, with 345,000 tonnes of ore mined for 10,230oz at an average grade of 0.92g/t. By the end of the quarter, the pit floor of the cutback had reached the same level as the base of the old pit, allowing for ease of access, increased tonnage of higher grade, footwall ore and simplified scheduling of mining going forward.
Total mining expenditure was A$13.9 million (inclusive of load and haul, drill and blast, grade control, supervision and overheads), compared to budgeted costs of A$18.0 million (23% lower).
Material mined was slightly lower than budgeted movement of 3.9 million bcm (10% under performance), primarily due to inclement weather.
Unit mining costs for the quarter were 2% lower than budget and 25% below YTD budget (A$3.30/bcm v A$4.39/bcm).
Figure 1 - Thunderbox Open Pit (looking north) - Consistent and persistent
Figure 1 identifies both the lower grade hanging wall lode in the background and the higher grade, bulk, foot wall lode in the foreground.
Processing
Commercial production is anticipated in the current June quarter, doubling total group production to an annualised rate of ~300,000oz.
The laboratory was commissioned, the pebble crusher installed and the first of the spark ignition gas generators for the powerhouse has arrived on site. Plant throughput has reached nameplate capacity.
The first gold pour at Thunderbox took place during the quarter with a total of 9,310oz produced.
The current June quarter will see the commissioning of the tailings thickener, the electrical commissioning of the scats pebble crusher and the commencement of works on the new gravity circuit to be commissioned in July.
Outlook
A stronger June quarter is expected with increased tonnage of the higher grade foot wall ore becoming available for milling.
June quarter to date (to 25 April) Thunderbox has performed strongly. Mine production of ~6,368oz @ 1.6g/t and mill production of ~6,000oz @ 1.3g/t comfortably exceed the mine and mill head grade for the March quarter of 0.9-1.0g/t.