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Strong finish for Saracen/Northern Star ahead of merger

21st January 2021

By: Esmarie Iannucci

Creamer Media Senior Deputy Editor: Australasia

     

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PERTH (miningweekly.com) – Gold miner Saracen Mineral Holdings has reported a record half of production for the six months to December, as it readies for a merger with fellow-listed Northern Star.

Saracen’s gold production in the six months to December reached a record 309 512 oz, at an all-in sustaining cost (AISC) of A$1 196/oz, with production in the December quarter reaching 155 122 oz, at an AISC of A$1 224/oz.

The Carosue Dam operation produced a record 58 338 oz of gold during the quarter under review, while the Thunderbox mine contributed 37 338 oz. Saracen’s joint venture with Northern Star, the Kalgoorlie Super Pit, contributed a further 59 446 oz to Saracen’s portfolio.

Gold sales for the December quarter reached 150 163 oz, at an average price of A$2 332/oz, generating revenues of A$349-million.

Half-year unaudited net profits after tax have been estimated at between A$115-million and A$125-million.

Saracen MD Raleigh Finlayson said on Thursday that the company had met or exceeded all of its operational, financial and corporate objectives for the quarter.

“Our production centers performed extremely well, resulting in record production for the six months. We also continue to invest in our growth and future-proofing strategy, which will help ensure the Saracen assets meet the targets as part of the merger with Northern Star.”

For the full year, the Kalgoorie operation is expected to deliver between 220 000 oz and 240 000 oz of gold to Saracen, while Carosue Dam will deliver between 240 000 oz and 250 000 oz, and Thunderbox between 140 000 oz and 150 000 oz.

Post the quarter-end, Saracen’s shareholders voted overwhelmingly in favour of the proposed merger-of-equals with Northern Star, which would create a near two-million-ounce-a-year company.

“This is the last quarterly report for Saracen, but it also marks the start of a new chapter which will see shareholders benefit handsomely from the increased scale, synergies, flexibility and outstanding growth opportunities which will stem from our unique merger,” said Finlayson.

Under the terms of the merger, Saracen shareholders will receive 0.3763 Northern Star shares for each Saracen share held, resulting in Northern Star shareholders holding a 64% interest in the merged entity, while Saracen shareholders would hold the remaining 36%.

The merged entity will have a pro-forma market capitalisation of A$16-billion and a net cash position of A$188-million, with an immediate production profile of 1.6-million ounces, with a pathway to increasing production to two-million ounces a year.

The merged entity will have a 19-million-ounce reserve and resources of 49-million ounces, with the company holding three large-scale production centers in exclusively Tier 1 locations.

The merger would also result in the consolidation of the Kalgoorlie Golden Mile to be consolidated under one owner for the first time in more than 125 years.

For its part, Northern Star on Thursday reported that gold production for the December quarter was at the top end of the guidance, with the miner selling 252 899 oz, compared with the guidance of between 226 000 oz and 254 000 oz.

Gold sales for the December quarter were up 11% on the September quarter, bringing gold sales for the six months to December to 480 431 oz, which was in line with the full-year guidance of between 940 000 oz and 1.06-million ounces.

Northern Star reported that its Australian operations, including the Super Pit, contributed 198 701 oz during the quarter, while its Pogo operation, in Alaska, contributed a further 54 198 oz.

“It was a very robust performance with strong production and margins generating significant cashflow and enabling us to invest in further growth while strengthening our balance sheet in the process,” said Northern Star executive chairperson Bill Beament.

The strong production and cashflow enabled Northern Star to cut its corporate debt by A$125-million to A$375-million, while cash, bullion and investment stood at A$372-million at the end of December.

Beament noted that Northern Star’s Australian operations, including the Super Pit, had performed well during the quarter under review, while the production at Pogo was a testimony to the skills and commitment of the team, considering that it had managed more than 100 Covid-19 cases during the quarter.

“This has inevitable impacts on productivity at many levels. But despite this, nearly 59 000 oz was mined in the quarter, costs were 3% lower than in the 2020 financial year and free cash flow was strong.”

Of the merger, Beament said that the preparations were proceeding to plan.

“I am very confident that the combined group is on track to meet the production and financial targets we have outlined. The potential productivity gains and growth opportunities are immense and are particularly valuable to investors given the lack of growth in so much of the global gold industry.

The merger is expected to be implemented on February 12, subject to the satisfaction or waiver of the remaining conditions, including Supreme Court approval.


 


 

Edited by Creamer Media Reporter

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