Saracen Mineral Holdings has tipped the funds it is tipping this year into exploring and developing its Carosue Dam and Thunderbox mines in the northern Goldfields will set the gold miner up for further growth.
The rising mid-tier gold play, led by WA School of Mines graduate Raleigh Finlayson, clocked its record quarterly production of 88,900 ounces in the September quarter at all-in sustaining costs of $993 an ounce.
That saw its cash balance climb from $99.8 million to $111.2 million, a bounty it is planning to use to boost its exploration budget to $60 million and fund $80 million of growth projects.
They include a new airstrip at Carosue Dam, under construction and expected to open early next year, a paste plant, underground development at Thunderbox, alongside a feasibility study on expanding the Carosue Dam mill.
Mr Finlayson, Saracen’s managing director, told analysts on a conference call yesterday the company’s first priority was exploration and development ahead of acquiring new operations.
“It is a key focus for us, a record spend of $60 million and growth capital of $80 million is a big undertaking for the company, so that remains absolutely our highest priority this year,” he said.
Saracen has set guidance of 325,000-345,000oz at $1050-1100/oz in the 2019 financial year, but is planning to move beyond that to 400,000ozpa over time.
RBC Capital Markets mining analyst Paul Hissey said in a note to clients that Saracen was well placed to grow its resources through exploration.
“Of our domestic peer group, we see Saracen as having the best upside opportunity to create value through drilling/resource upgrades and volume increases,” he wrote.
Mr Finlayson said Saracen would take a wait-and-see approach to new acquisitions, noting that both the Carosue Dam and Thunderbox assets had been purchased relatively cheaply at $14 million and $32 million, respectively.
“I think we’ve proven to be really sensible over the journey,” he said.
“We’re more akin to wait for the opportunity to present itself and then work very hard to bring them into production and generate sustainable businesses out of them.”
Saracen shares rose 11¢, or 5.2 per cent, to $2.23 at yesterday’s market close.