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Scheme Becomes Effective
Saracen Mineral Holdings Limited (ASX:SAR) and Northern Star Resources Ltd (ASX:NST) are pleased to announce that Saracen has today lodged with the Australian Securities and Investments Commission (ASIC) a copy of the orders of the Supreme Court of Western Australia (“Orders”) approving the scheme of arrangement pursuant to which Northern Star will acquire all of the shares in Saracen (“Scheme”). As a result, the Scheme is now legally effective.
A copy of the Orders as lodged with ASIC is included as Appendix 1 to this announcement.
Suspension of Trading
Saracen shares will be suspended from trading on the ASX at the close of trading today, Wednesday, 3 February 2021. Scheme Consideration Saracen shareholders who hold shares at the Scheme record date, being 7:00pm AEDT on Friday, 5 February 2021 (“Scheme Record Date”), will receive scrip consideration of 0.3763 new Northern Star shares for every 1 Saracen share held at the Scheme Record Date (“Scheme Consideration”).
It is expected that the Scheme will be implemented, and the Scheme Consideration will be paid to Saracen shareholders, on Friday, 12 February 2021
Saracen shareholders vote overwhelmingly in favour of merger with Northern Star
Overwhelming support for deal to create a Top-10 global gold miner which is expected to unlock synergies with an estimated NPV of A$1.5-A$2b1
06-Oct-2020: Presentation - SAR and NST agree to Merger of Equals
plus: Saracen and Northern Star agree to Merger of Equals
and: Saracen AGM Presentation - "There's nothing like Tier 1 Gold"
Transaction rationale
The scale and liquidity to attract both gold and generalist investors.
A compelling combination - Takeaways
A unique opportunity exclusively available for both companies to unlock significant value, and build a major global gold producer with an exceptional high-margin growth profile.
Benefits to Northern Star shareholders
Benefits to Saracen shareholders
Benefits to both sets of shareholders
--- click on links above for more --- [and there is a lot more]
[I hold both NST & SAR shares, and I flagged this merger as a possibility last year and again earlier this year after the two companies became JV partners in KCGM - i.e. the Kalgoorlie Super Pit. It just makes sense. Very positive IMO.]
04-Aug-2020: Carosue Dam and Thunderbox only - Reserves rise to 3.7Moz
[I hold SAR shares]
06-May-2020: Corporate Presentation - May 2020 - "There's Nothing Like Australian Gold"
Disclosure: I hold SAR as part of my "Big 5", which also includes NST, EVN, SBM & RRL. At the smaller end, I also hold PNR.
17-Feb-2020: Saracen continues run of strong growth in profit
Saracen continues run of strong growth in profit and cashflow with more to come
Underlying NPAT up 84% to A$80m from production of 216,452oz; FY20 guidance +500,000oz
HIGHLIGHTS
Saracen Mineral Holdings (ASX: SAR) is pleased to announce that it recorded further strong growth in production, cashflow and profit in the six months to 31 December 2019.
The result, which included a one-month contribution from the KCGM Super Pit, was underpinned by production of 216,452oz, a rise of 22 per cent from the previous corresponding period.
Saracen is on track to meet its FY20 production guidance of +500,000oz. This includes allowing for a seven-month contribution from the Super Pit. Guidance for FY21 will be published early in the September quarter 2020, following updated Resources and Reserves.
In the six months to December 31, underlying NPAT increased 84% to A$80.2 million. This came on the back of a 45% jump in sales revenue to A$409.9 million and increased gold sales of 206,277² ounces (PCP: 167,095 ounces) at an average sale price of A$1,984/oz. One-off transaction costs of A$10.8 million (net of tax) were incurred on the Super Pit transaction and expensed in this period.
EBITDA³ increased 71% to A$178.6 million (underlying EBITDA A$194.4m) and statutory NPAT increased 61% to A$69.1 million.
Saracen Managing Director Raleigh Finlayson said the results showed the Company was in the midst of a strong growth phase at all levels of its business.
“The key message from these results is that Saracen has continued to grow and will continue to grow,” Mr Finlayson said. “We are growing production and our inventory through a financially-rewarding combination of aggressive near-mine exploration and prudent acquisition, all within 300km of Kalgoorlie.
“With the addition of the Super Pit and the Carosue Dam mill expansion set for commissioning in the December quarter, our production and cashflow is poised to continue growing.
“We are also looking forward to the results of the review we are undertaking at the Super Pit, which is a world-class asset with an exceptional future.”
Mr Finlayson said the acquisition of a half-share of the Super Pit for US$750m in November last year had seen the Company emerge with a vastly different production profile, cashflow projections and balance sheet.
“Saracen has shifted to another level in the league of global gold producers with the key benefits that brings for scale, asset diversity and cashflow,” he said.
“But we still have a desire to maintain a conservative balance sheet and therefore we are placing a strong emphasis on debt reduction.
“As part of this strategy, we have made the decision not to pay a dividend in relation to this half year. In line with our stated policy, the Board will revisit this matter at the end of the financial year.”
Overview:
[continues... click on link above for more]
Notes:
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I hold SAR shares.
03-Aug-2019: OK, where to start? Saracen is Australia's 4th largest listed pure-play gold producer. By "pure-play", I mean that I am not including companies like BHP, SFR, OZL or IGO who also produce gold, but either as a byproduct of other metals production or as a secondary revenue stream. The pure-plays are the gold producers whose primary focus is gold, and the top 10 (in order of market cap, from biggest to smallest) are currently:
It's a dynamic time in the Australian gold mining industry. Just in the past few days Evolution have moved back ahead of Northern Star for the first time in a few years, and OGC have leapfrogged back over Regis.
Eleven months ago, in late August 2018, when I last compiled a list of all of the ASX-listed pure-play gold producers (there were 29 of them), SAR was at #7, Dacian Gold (DCN) was at #9, and Aurelia Metals (AMI) was at #10. AMI is now down at #15 and DCN has fallen all the way down to #17 with a market cap that has shrunk from half a billion to now being less than half of that, at $216 million.
A$ gold has been hitting new highs throughout July, and again over the past couple of days (in early August) - and while the US$ gold price is now US$1,440.64/oz, the A$ gold price is now at an all-time record high of A$2,117.66/oz thanks to an A$ that is now worth less than 68 US cents. As I type this, the USD/AUD exchange rate = 0.67974.
While Australia's three largest gold miners (Newcrest, Evolution and Northern Star) have all almost doubled their market cap over the past 11 months, two of our current top 10 have done even better. Saracen has gone from being worth $1.522 billion to now being worth $3.684 billion, and Perseus has gone from $373 million to $858 million. Amazingly, Perseus (PRU) has done it with just two gold mines in West Africa (and a third on the way), while Saracen has done it with a suite of gold mines located here in Australia, so they've benefited from the depreciation of the A$ against the US$.
In a Livewire article published yesterday (Aug 2nd), which you can view here, Eley Griffiths Group's Ben Griffiths had this to say about Saracen:
"Your manager continues to be a supporter of gold producer/explorer Saracen Minerals (SAR), a holding central to our favourable view on bullion. Management have proven to be masterful stewards of capital over a long period of time. Their ability to grow production ounces through exploration, development and acquisition is close to sector best. We await their seven-year production outlook (including revision to resource/reserves) due to be announced in the month ahead."
While Saracen has looked expensive to me for the past 18 months, they just keep getting more expensive, and with the A$ gold price heading the way it is, there are certainly reasons to expect that to continue.
I recall that Saracen was one of the gold stocks that Peter Hall held in the Hunter Hall Global Value Fund (then HHV, now PIA) in 2016 before Donald Trump was elected as POTUS. When the market rallied instead of crashing after the election, as well as two of Peter's high-conviction stock-picks crashing at the same time (Vocus and Sirtex), he threw in the towel, sold all of his HHL & HHV shares to Soul Patts (SOL), and the SOL-backed Pengana Capital Group (PCG) took over Hunter Hall International and the management of HHV (the LIC), which they promptly renamed - HHV became PIA - the Pengana International Equities Fund. Pengana sold off all of Peter Hall's gold stocks in the process. PIA haven't done particularly well since then, but the gold stocks that they sold in early 2017 have shot the lights out.
Peter Hall was right about Trump as POTUS being good for gold, but he was too early, which, as Strawman suggested today in his Saturday morning "What's Trending on Strawman?" email, is the same as being wrong.
The strong tailwind of a rising gold price hasn't resulted in all of the sector doing well of course. A number of players have struggled with lower grades and higher costs than they had anticipated, including Dacian (DCN), Gascoyne (GCY, now in voluntary administration), Beadell Resources (was BDR, now delisted from the ASX after being taken over by TSX and NYSE-listed Great Panther Mining), and Blackham Resources (BLK, who are currently being propped up financially by their mining contractor, MACA - ASX:MLD).
Those gold producers with the best management and the best mines have thrived however, and Saracen (SAR) can certainly be included in that list.