All images: Saracen Minerals
BY: JESSICA CUMMINS
Capping off FY18 with record breaking results and hitting 2.5 million ounces in gold reserves brings Saracen Minerals closer to reaching its goal of 400,000ozpa within the next five years. Saracen Minerals managing director Raleigh Finlayson speaks with The Australian Mining Review about its achievements and plans for the rest of the year.
GOLD miner Saracen Minerals is in good stead with a FY18 net profit surge of 166 per cent to $75.6 million; an increase from $28.4m a year prior.
Saracen Minerals managing director Raleigh Finlayson said the strong results were particularly pleasing given the miner was in a growth phase.
Mr Finlayson said profit and free cash flow surged as the company grew production and reduced costs; a result of its huge exploration success.
“Exploration is the key to our ongoing growth and therefore we have committed $60 million to exploration in FY19,” he said.
“With a 300,000ozpa production profile now established, growing mine life and no debt, Saracen has an excellent platform from which to capitalise on further growth opportunities as they rise.”
With a goal to reach 400,000ozpa within the next five years, Mr Finlayson said exploration, again, would be a key driver of this along with the expansion of the Carosue Dam facilities to accommodate additional ounces.
“Our record spend on exploration is more than double spend than any other year so we are keen to see the results of that to help define the mine plan,” he said.
Having presented for the first time at the Precious Metals Summit in Colorado in September Mr Finlayson said a key takeaway for Saracen was the varying difference in performance between Australian mid-tier gold producers and its American peers.
“Over the last five or six years the Australian gold mining space has performed very well from a delivery on guidance, cash flow, and share price point of view compared with our peer group in America,” he said.
“Both large and small companies and those in similar size have had varying and quite negative performances in comparison so there is quite a big disconnect and by default Australian companies have been outperforming.
“From an investor point of view they are very pleased with performance, very pleased with the track record, pleased with ongoing growth and the aspects on the back end of exploration.”
Carosue Dam
The company’s Carosue Dam operations incorporates the Laverton and Keith Kilkenny tectonic zones north east of Kalgoorlie in one of the world’s most prospective gold provinces.
With an overarching goal to build a long-term strategic infrastructure and position in the area, Saracen’s tenements included the Karari and Whirling Dervish gold deposits, the Porphry project and the Deep South project.
The mid-tier gold producer committed to building a $7m airstrip at the site, and Mr Finlayson said the project was progressing well with works about 30 per cent complete.
“We are looking to land planes by the end of FY19,” he said.
“It’s a more efficient way to get people out to the mine site and saves them 150km of travel with a chunk of that being on gravel road,” he said.
“So it’s a tick from a safety level and from a community level – the sourcing of drilling equipment, suppliers and contractors will be prioritised locally.”
Thunderbox
After purchasing the Thunderbox tenement in 2014 for $23m and achieving its one millionth ounce of gold in October last year, Saracen kicked off development at its underground mine in June 2018.
Gold production for FY18 reached 145,152oz; up from 116,837oz last year.
Mr Finlayson said the company was now looking forward to seeing drilling results come out of an asset that, in the past, had been primarily focused on development and production levels.
In addition, he said the company was in a unique position with Thunderbox seeing a grade appreciation as it gets deeper.
“The portion of the orebody is around 1 gram per tonne at the top and at the base of the tips its 2 grams per tonne, so favourable grade characteristics will continue to lower our costs as we get deeper into the mine life.”
The focus for FY19 will be on establishing the drilling platform to allow the ore body to be delineated at depth, through a methodical drilling program.
“The platform construction works in parallel with exploration spend so we will have the study on expansion done before the end of FY19 and a 12-month construction period for the additional bore mill and two additional tanks which will see completion set for FY21.”
Achievements
Mr Finlayson attributed recent success to acquiring its second asset,Thunderbox, swiftly, and at the right time.
Saracen, however, was not immune to the gold price crash in 2013 when investors saw the price drop by 28 per cent over night.
“It was on the 20 April and the reason why I remember it so well is because it was seven days into my 10 years as managing director,” he said.
“I think the key learning there is…I like the analogy of you plan for a draught when you’re not in a draught.
“If you start planning for a draught when you’re in one, the horse has bolted.
“In Australia we are getting an A in the favourable gold price of the currency – around $1700 dollars of the gold price which is an all-time high.
“We have been making sure we are taking advantage of new technologies and innovations to enable us to lower our cost base, and if we were encountered with a lower gold price we would be able to withstand it for longer.”
Mr Finlayson also highlighted Saracen’s hedge book as the second notable aspect.
“We have a locked in price of 270,000 ounces at $6 dollars an ounce higher than the spot price so we are focused on our revenue and cost line.”
Planning Ahead
Moving into 2019, Mr Finlayson said gold production would be sourced from the Karari, Deep South and Whirling Dervish underground mines with balance coming from third-party ore purchase agreements and various ore stockpiles.
Over the next two years, he said the company’s business plan consisted of increasing production from Karari’s underground mine to 1.5mtpa, maintaining steady state production from Deep South, and ramp up production at Whirling Dervish.
Exploration would continue throughout the ‘corridor of riches’ with the hope to grow the current gold reserve base and reach its goal of 400,000ozpa.
