Golden producer on the rise

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 09 Mar 2016   Posted by admin


By Samantha James

FIRST gold pour at the Thunderbox gold mine in WA was achieved ahead of schedule in mid-February 2016, with ramp up set to double Saracen Mineral Holdings’ annual gold production to more than 300,000 ounces.

Saracen owns the producing Carosue Dam open pit and underground gold operations, the Thunderbox open pit mine and recently refurbished Thunderbox carbon in leach (CIL) plant, as well as gold and nickel exploration and development projects in WA.

The company is completing several studies into the viability of developing underground projects to extend the life of mine at Carosue Dam.

In early February 2016, Saracen announced that commissioning of the Thunderbox CIL plant and the first mining of the Thunderbox open pit was completed ahead of schedule, with first production expected during the June 2016 quarter. First gold pour was achieved on 19 February.

Despite ongoing development and exploration expenditure at Thunderbox and Carosue Dam, Saracen remained debt-free, reporting net cash and bullion of $42.1 million as of 31 December 2015 and net profit of $7.9 million for the half year.

This was a 106 per cent increase from the previous corresponding period.

Drilling and blasting is ongoing at Carosue Dam and Thunderbox.

Drilling and blasting is ongoing at Carosue Dam and Thunderbox.

Start up

Saracen is an ASX300-listed gold producer benefiting from strong finances, strategic infrastructure in the north eastern Goldfields of WA, and multiple pits that are being cutback as part of the company’s long term mining plan.

Saracen grew from an explorer to a mid-tier gold producer in just eight years, after acquiring the mothballed Carosue Dam operations – which includes the Karari, Whirling Dervish, Red October and Deep South open pits – from St Barbara in 2006.

Saracen also purchased the Wallbrook mining centre, 40km north of the Carosue plant in 2007, which comprised four known deposits – Eleven Bells, Redbrook, Red Flag and Crusader.

Saracen reopened Carosue Dam in 2010 under a two stage plan involving initial open pit mining and subsequent underground operations.

In the time since, Saracen has investigated underground development options at Karari, Red October and Whirling Dervish, where scoping and feasibility studies are ongoing.

Karari has an expected mine life of more than five years.

Underground production at Red October began in September 2011 and in the first half of fiscal 2015, the company began work on a portal near the base of an open pit cutback at the Karari pit.

First full-scale production stoping at the Deep South underground pit was on track to begin during the June 2016 quarter.

Saracen acquired several nearby historical gold and nickel projects from Norilsk Nickel in 2014, and in the second half of 2015 Saracen purchased the established Kailis and King of the Hills projects, about 55km from Thunderbox.

The company planned to utilise the Thunderbox processing facility to process ore from these projects.

A stage 1 open pit cutback development of the Kailis ore reserve was scheduled to begin in fiscal 2017 to produce 50,000oz of gold grading 2.9 grams per tonne of gold.

In early 2016 Saracen was completing a scoping study to assess potential mining options for the King of the Hill project.

Underground jumbo drilling at the Red October pit at Carosue Dam.

Underground jumbo drilling at the Red October pit at Carosue Dam.

Carosue Dam

In late February 2016 Saracen announced drill results from a $1.8 million resource definition and exploration drilling program at Carosue Dam (approved in November 2015).

Drilling at Karari had extended the lode a further 100m down dip of the current resource.

Additional gold discoveries had also been made at the Far South and Blue Manna deposits at Carosue Dam, which could lead to further resources.

A resource and reserve increase at the Carosue Dam project was scheduled for release in the June 2016 quarter.

By this time, Saracen had approved further work programs at Karari and Red October, with total investment of $3.6 million since December 2015.

Saracen had scheduled a cutback on the Eleven Bells and Redbrook deposits within Wallbrook to begin in fiscal 2016.

The open pit mines, now on care and maintenance, would be used as a source of softer feed for blending purposes at the Carosue Dam mill.

The Wallbrook precinct has resources of 12.1 million tonnes grading 1g/t of gold for about 401,000oz of gold and reserves of 1.8 million tonnes grading 1.3g/t of gold for 74,000oz of gold.

Additional open pit ore sources within the Wallbrook project were planned to be developed in fiscal 2017, starting with drilling programs to determine further resources.

From left to right: Saracen director Martin Reed, chairman Geoff Clifford, processing manager Wayne Heedes and managing director Raleigh Finlayson at Thunderbox’s first gold pour.

From left to right: Saracen director Martin Reed, chairman Geoff Clifford, processing manager Wayne Heedes and managing director Raleigh Finlayson at Thunderbox’s first gold pour.

Thunderbox

Saracen began commissioning the 2.5 million tonnes per annum Thunderbox processing facility in February 2016.

Ore was introduced to the grinding circuit following refurbishment of all key areas of the processing plant, including crushing, grinding and classification, leaching and adsorption.

First gold pour, achieved in late February, came 10 months after board approved the $65 million development.

About 210,000t of commissioning ore grading 0.9g/t of gold was stockpiled in preparation of ramp up.

Saracen has begun investigating underground development potential to extend the mine life beyond five years.

Drilling planned for the second half of 2016 would aim to define a long-term underground mine, which could potentially extend the project life beyond 10 years.

Saracen managing director Raleigh Finlayson said Thunderbox had transformed Saracen 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,” he 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.”

Saracen was steadily moving towards production of 250,000 ounces per annum of gold through development of open pit and planned underground resources.

“Our project development team continue to do a first-class job,” Mr Finalyson said.

“We remain positioned to complete commissioning and ramp-up to steady-state output ahead of the schedule and budget outlined in our March 2015 feasibility study.”

Saracen is completing a feasibility study at Carosue Dam’s Whirling Dervish open pit to determine underground mining options.

Saracen is completing a feasibility study at Carosue Dam’s Whirling Dervish open pit to determine underground mining options.

Internal funding

Saracen’s all-in sustaining costs for the second half of 2015 were$1017 per ounce of gold, a 22 per cent decrease from the previous period of $1309/oz of gold.

This, combined with a 4 per cent increase in production to 82,000oz of gold and an increase in the average realised price by 4 per cent to $1591/oz of gold, drove a 5 per cent increase in revenue to $126.6 million.

The company’s operating cash flow of $55.1 million was up 149 per cent, offset by a $25 million non-cash charge from expensing the carrying value of the Whirling Dervish ore stockpiles as they were processed.

This charge resulted in a net profit before tax of $11.9 million for the second half of 2015, up 116 per cent from the previous corresponding period.

The strong result left Saracen with cash and bullion of $42.1 million and no debt at 31 December 2015, compared with net cash of $22 million a year earlier.

This was despite a $51.9 million spend during the period on capital development, primarily at Thunderbox.

“We have slashed costs, generated a significant increase in cashflow and doubled our profit,” Mr Finlayson said.

“At the same time, we funded the development of our second major WA project, Thunderbox, from cashflows and still finished the period with $42.1 million in cash and bullion and no debt.

“With the first gold now poured at Thunderbox, we are on track to double production to around 300,000ozpa, underpinning further growth in cashflow.”

Saracen anticipated that, after allowing for development expenses at Thunderbox, it would have total cash and equivalents in excess of $20 million at 31 March 2016 with no debt drawn, confirming the company’s growth to about 300,000ozpa of gold would be 100 per cent internally funded.