PERTH (miningweekly.com) – ASX-listed gold miner Saracen Mineral Holdings has indefinitely suspended its expansion plans for the Carosue Dam plant, along with the development of its Deep South underground operation, as a response to the gold price volatility.
The miner said it had, in response to the recent gold price volatility, undertaken a comprehensive review of its operations, with the aim of reducing production costs, minimising exposure to debt and insulating the company against any further movement in the gold price.
The key outcomes of this review included a decision to indefinitely suspend the plant expansion at Carosue Dam, which would have seen Saracen spend A$25-million to introduce a new tertiary crushing circuit and other downstream infrastructure to the plant.
Saracen said the expansion decision could be revisited following the completion of the Whirling Dervish pit cutback, or a return to higher gold prices.
The company had also taken the decision to defer the development of the Deep South underground mine, despite the project’s positive feasibility study.
The gold miner told shareholders that the decision to defer development was based on the objective of reducing capital outflows while volatile gold prices persisted and other capital-intensive projects remained ongoing, including the Whirling Dervish cutback.
As mining of the Deep South openpit was completed ahead of schedule this month, the mine has been placed on care and maintenance for the foreseeable future.
Saracen said that, as a result of the deferral, the company’s capital expenditure (capex) would be reduced by some A$23-million in 2014, with a further A$14-million saved in ongoing capex during 2015.
Meanwhile, the Whirling Dervish cutback would continue, while production at the Red October mine would also continue as planned.
The miner has also introduced numerous initiatives to reduce operational expenditure over the next six months, which was expected to result in a 30% cost saving, while also cutting back some A$8-million of exploration spend, while senior management have agreed to a pay cut.
Saracen MD Raleigh Finlayson noted that the company was confident that it had developed strategies for different gold price environments, even in an extremely depressed gold price scenario, which would ensure that Saracen remained cash flow positive and operationally robust.
“Should higher gold prices return or other conditions change, the key capital projects that are being suspended can be reinstated with higher production targets as a result. This decision will be based on delivering the optimum free cash flow,” he said.