Saracen's super Super Pit deal

Paying one-third of your market capitalisation for a gold asset that just about doubles your production makes sense every day of the week (writes Barry FitzGerald on MiningNews).
22nd November 2019
Resources Rising Stars

Paying one-third of your market capitalisation for a gold asset that just about doubles your production makes sense every day of the week (writes Barry FitzGerald on MiningNews).

Make that doubly so if downside risk to a fall in gold prices can be protected against using some astute hedging while prices are at near all-time highs in Aussie dollars, and the asset is truly bolt-on because it's operated by one of the best in the business for a management services fee.

All that is what Saracen boss Raleigh Finlayson has pulled off by beating the competition to acquire Barrick Gold's 50% interest in Kalgoorlie's Super Pit for A$1.1 billion (US$750 million), with Newmont Goldcorp continuing on as 50% owner/operator.

Kalgoorlie is the spiritual home of the Australian gold industry, with the Super Pit (virtually) at its core.

Foreign-owned by the North American majors Barrick and Newmont since 2002 when Newmont entered the operation through the takeover of Robert Champion de Crespigny's Normandy Mining, it's kind of warming to see a local like Saracen flying the flag at what is Australia's best-known gold mine.

A heavily caffeinated Finlayson announced the deal on Monday after flying back from Toronto where the deal with Barrick was secured on the weekend and he quite rightly declared it would be transformational for the company.

Under Finlayson, Saracen has already been on a high-growth trajectory, with the two recycled mines it already owns - Carosue Dam and Thunderbox - good for a combined 360,000oz in FY2020, growing to 400,000oz in FY2021 after an expansion at Carosue Dam.

For that, Saracen was being valued by the market at $2.8 billion, a multiple of where it was just three years ago, with the combination of production growth from 188,000oz in FY2017 and gold's bull run underpinning the charge.

Now it is to pick up 50% of the Super Pit for $1.1 billion, which is forecast to boost group production by 245,000oz in FY2020 to 605,000oz, pushing Saracen beyond St Barbara in the gold production stakes to fourth position behind Newcrest, Northern Star and Evolution.

Read more at https://www.miningnews.net/barry-fitzgerald/opinion/1376119/saracen’s-super-super-pit-deal

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