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Saracen Mineral Holdings Limited - Quarterly Report December 2013

January 30, 2014

ENP Newswire - 30 January 2014 Release date- 29012014 - Comment from Managing Director, Raleigh Finlayson : 'The first half of FY2014 has seen Saracen's Carosue Dam Operations exceed guidance by approximately 10,000 ounces, which we are pleased to advise has resulted in our second increase in production for the year to 125 - 135,000 ounces. More importantly the increased gold production has translated into additional cash, with year to date free cashflow above guidance by $7.1 million , resulting in the company remaining in a net cash position of $0.8 milllion compared with guidance of a net debt position of $6.3 million . Saracen's vision of 'Adding Value to our key stakeholders by delivering at least A$60 million free cash flow by the end of FY2015' is currently tracking ahead of schedule. Saracen's future beyond FY2015 has just received a significant boost with the acquisition of the Thunderbox Operations providing the Company with at least an additional five years mine life, with Saracen's combined operations capable of producing in excess of 250,000 ounces per annum.' Summary Operations 678,158t @ 1.67/t for 31,096 recovered ounces produced during the quarter. 2.03 million BCMs mined from open pits during the quarter. Year to date 4.35 million BCMs mined from open pits versus 4.18 million BCMs planned. 549,000t @ 1.04g/t for 18,351 contained ounces mined from open pits during the quarter. 86,000t @ 5.90g/t for 16,326 contained ounces mined from underground during the quarter. Exploration Further high grade drilling results received from Red October , highlights include: ROGC207: 0.9m @ 95.8g/t ROGC228A: 1.6m @ 33.3g/t Discovery of multiple high grade shoots at Karari, highlights include: o KRRC323: 19m @ 5.11g/t, including 11m @ 7.7g/t KRRC327: 21m @ 3.23g/t, including 7m @ 5.2g/t Note: The above results were previously reported in ASX Announcement ' Red October and Karari Exploration Update' on 16th of January 2014 . Resources & Reserves for the Carouse Dam Operations Mineral Resources & Ore Reserves Statements for the Carosue Dam Operations updated on the 8th October 2013 . Mineral Resources stand at 84.4 million tonnes @ 1.4g/t for 3.92 million ounces. Ore Reserves stand at 15.8 million tonnes @ 1.7g/t for 860,000 ounces. Finance Cash at bank at quarter end totalled A$13.4 million . Bullion at quarter end totalled A$9.4 million . 38,500 ounces of spot deferred hedging added to existing program. Total gold hedging in place of 177,364 ounces at an average price of A$1,631 /oz. Mark to Market value of the hedging of A$41.2 million based on a spot price of A$1,352 /oz (as at 31 December 2013). Mergers & Acquisitions ( Post Quarter end) The acquisition of the Thunderbox Operations from Norilsk Nickel Australia Pty Ltd ; The acquisition adds 2.09 million ounces of gold in Mineral Resources and 728,000 ounces in Ore Reserves at A$11 per resource ounce and A$32 per reserve ounce; Saracen's total Mineral Resources will increase to 6.0 million ounces of gold and Ore Reserves increase to 1.6 million ounces; For more information refer to the ASX Announcement of 21st January 2014 . Health and Safety There was one Lost Time Injury ('LTI') recorded during the quarter when a contract employee suffered a short-term knee injury. STE Group has been engaged to assist Saracen with conducting a complete refresh of all Risk Assessments across all facets of the business. Key risks that have the greatest potential to endanger employee's health and safety have been the main focus. Processing Total ore milled was up 4% on the September quarter due to the increased tonnage of softer Whirling Dervish ore. Mill throughput was 315 tonnes per hour, up from 309 tonnes per hour in the September quarter. The September quarter had the benefit of higher grade mill feed from the base of the Karari open pit which was completed during the September quarter. Total gold produced for the December quarter of 31,096 ounces was ahead of guidance of 28,000 - 30,000 ounces due to the higher tonnage and grade delivered from the Red October underground mine. Total mill recovery rates during the December quarter were 85.2%, 1.5% lower than the previous quarter. The reason for the lower recoveries is the higher quantities of Red October ore processed during the December quarter which has a lower recovery level than Whirling Dervish ore. A batch trial of processing 100% of Red October ore (as opposed to the current blending of ores at 15% Red October and 85% Whirling Dervish) will be conducted during the March 2014 quarter to try and optimise the milling parameters for both ores sources, thereby maximising mill throughputs and recoveries to achieve optimum cashflow results. Open Pit Mining Following the completion of the Karari open pit during the previous quarter, Whirling Dervish is now the only active open pit mine. The Whirling Dervish open pit continued to progress ahead of schedule during the December quarter with material movements generally in line with budget (2.03 million BCMs versus 2.08 million BCMs budget) and 4% over budget year to date (4.26 million BCMs versus 4.09 million BCMs budget). Total ore mined for the December quarter was 549,000t @ 1.04g/t for 18,351 ounces. The average strip ratio for the December quarter was 8.3:1 (w:o). The strip ratio for the remainder of the open pit is 4.5:1 (w:o). Total cash expenditure for Whirling Dervish during the December quarter was A$16.6 million versus A$17.7 million planned, a 6% reduction due primarily to savings in drill and blast and load and haul activities. Total unit mining costs for the December quarter were also lower than budgeted, with actual unit rates of A$8.17 /bcm versus $8.52 /bcm budgeted, a 4% reduction. The primary ore zones in the hangingwall structures are providing the mill feed in FY2014. The bulk footwall lode remains on schedule to be reached in Q1 FY2015, with significantly larger ore quantities and grades enabling 'all-in' sustaining cash costs to fall to A$950 /oz in FY2015. An additional 3,251 ounces (+22%) above Reserve has been mined from the Whirling Dervish open pit during the December quarter. The Reserve grade of 1.12g/t was achieved with the mining of approximately 420,000 tonnes of ore, with the extra material mined (129,000t @ 0.78g/t) being delineated from grade control drilling. Underground Mining Record production of 86,000t @ 5.9g/t for 16,326 ounces was mined from the Red October underground mine during the December quarter, exceeding guidance on tonnes, grade and ounces. The decline has now advanced four levels ahead of stoping which has allowed for the de-mobilisation of the second underground Jumbo during the current quarter, which will see a reduction in cash expenditure, without a corresponding reduction in ore production. The heavy focus on mine development over the past few quarters has now set up multiple stoping horizons that will facilitate optimisation of the production schedule. The remaining Jumbo has sufficient capacity to complete the decline and ore development levels in the remaining life of mine plan. Any additions to the mine plan as a result of the current resource extension drilling program may facilitate the re-introduction of the second Jumbo. Total cash mining expenditure was A$13.9 million with an 'all in' cash cost of A$853 per contained ounce (approximately A$1,050 per recovered ounce). FY2014 Guidance Following the actual performance for the first half of the financial year, Production Guidance for FY2014 has been revised upward to 125,000 to 135,000 ounces. Guidance for FY2014 was originally set at 110,000 - 120,000 ounces and was raised to 120,000 - 130,000 ounces on the 5th August 2013 . Exploration Exploration has been active across all of the key districts during the quarter. Drilling activities were focused at Red October and Karari. For details relating to the drilling programs please refer to the ASX Announcement - Exploration Update for Red October and Karari dated 16th January 2014 . Regional data collection has progressed, with 4 ground based Sub-Audio Magnetic (SAM) surveys completed in key project areas. These projects included Blue Manna, Deep South , Yilgangi and Patricia. The SAM geophysical method maps resistivity variation in the near surface including the regolith and bedrock geology. The surveys have provided additional detailed data that has aided the interpretation of the underlying geology and structural architecture. The improved understanding will assist with future drill planning and targeting. During the quarter Saracen pegged a large tenement area between Carosue Dam and the Yilgangi area, west of Porphyry. The area represents a rare greenfields opportunity in the district. Very little exploration has been carried out along the Lake Rebecca corridor which covers the highly prospective Keith-Kilkenny Shear Zone and associated second and third order structures. It is these structures that host the major deposits at Carosue Dam , namely Whirling Dervish and Karari. The current plan is to complete a full data review before planning the next stages of exploration. Exploration Next Steps Ongoing work will continue at a number of key projects during the March quarter. It is expected that in early February two costeans will be excavated north of Blue Manna. This will provide valuable information relating to the stratigraphy and structural features at the project, which can be factored back into the SAM survey interpretation, prior to planning the next drilling program. The results from the SAM surveys will continue to be evaluated. High priority targets derived from the surveys will be designed for drill testing later in the year. Exploration activity will also continue to progress at Red October and Karari based off the recent exploration results previously released. Finance Cash Position As at 31 December 2013 , Saracen's total cash position was A$22.8 million , comprising A$13.4 million held in cash and 6,772 ounces of gold in transit (approx. A$9.4 million at A$1,385 /oz). No further debt was drawn during the quarter. Gold Sales Gold sales for the quarter were 28,909oz at an average sale price of A$1,531 /oz for total revenue of A$44.3 million . Of these sales, 17,550 ounces were delivered into hedging at an average price of A$1,627 /oz. Gold in transit of 6,772 ounces includes two weeks production due to the Christmas holiday period extending the normal refinery turnaround time. Debt During the quarter, the Company did not draw down against its banking facilities to leave the total drawn amount at A$22.0 million at the end of the calendar year. Exploration and Capital Expenditure During the quarter, the Company incurred $1.7 million on exploration activities and $3.0 million on capital works. Cashflows Closing cash of A$13.4 million excludes approx A$9.4 million of bullion in transit. Debt remains unchanged at $22.0 million . This leaves the Company with a net positive cash position of $0.8 million (including gold in transit), which compares favourably with year to date guidance of a net debt position of $6.3 million . Saracen has adopted a cash cost reporting methodology that reflects actual movements in cash, rather than including depreciation & amortisation which defers capital expenditure to a later period, which effectively smooths reportable cash costs. The declining strip ratios and increasing grade profile at the Whirling Dervish open pit help explain why AISC's fall so dramatically over the course of the next six quarters: The strip ratio for the Whirling Dervish open pit during the December quarter was 8.3:1 (w:o); The strip ratio for the remainder of the open pit is 4.5:1 (w:o); The strip ratio for the last two quarters of the pit is 1:1 (w:o); The average forecast grade for the last two quarters is in excess of 2.1g/t (versus an average grade for the December quarter of 1.04g/t). If a depreciation and amortisation approach was adopted, AISC would be 'smoothed' over the life of the Whirling Dervish open pit with high strip ratio capital expenditure above the average strip ratio of the pit (4.5:1) deferred out of the current quarter and reported back in as non-cash expenditure in FY2015. Decline development at the Red October underground mine would be treated the same way. Adopting this methodology would result in reportable AISC for the December 2013 Quarter and the next six quarters to June 2015 being approximately A$1,190 /oz. Saracen continues to report cash costs using an actual cashflow methodology (as opposed to the depreciation & amortisation method which is commonly used) as it better reconciles with actual cashflow movements, thereby increasing transparency on costs to the market. Hedging In late December, the Company added an additional 38,500 ounces of hedging at a price of A$1,384.50 per ounce. These additional ounces were undertaken on a 'spot deferred' basis which means that they do not have a set delivery date and can be utilised at any time by the Company (within the facility parameters). This allows the Company to sell gold production in excess of its current fixed hedge programme into the new facility which gives a guaranteed minimum price for those ounces. Alternatively, if the then spot price is higher, the Company can elect to sell on the spot market, which allows greater flexibility and the ability to achieve a higher average price. As at 31 December 2013 , Saracen had gold hedging in place (including the above ounces) covering 177,364 ounces at an average price of A$1,631 /oz. These ounces are to be delivered over the period from January 2014 to July 2016 (inclusive). The mark to market value of the hedge book at 31 December 2013 is A$41.2m based on a spot gold price of A$1,352.34 /oz. Contact: Raleigh Finlayson Managing Director Saracen Mineral Holdings Limited Email: About Saracen Saracen Mineral Holdings Limited (ASX:SAR) owns 100% of the Carosue Dam operations, 120 km NE east of Kalgoorlie, in the South Laverton region of WA, home to many other gold mines and deposits including Sunrise Dam , Granny Smith, and Wallaby. Carosue Dam's 2.4 million tonne per annum processing plant produced 136,168 ounces of gold in FY2013 and is forecast to produce approximately 125 - 135,000oz in FY2014 and 125 - 135,000ozs in FY2015. As at 30 June 2013 , Carosue Dam Operations Mineral Resources stood at 3.9 million ounces of gold, while Ore Reserves stood at 0.9 million ounces of gold. Gold production is from the Whirling Dervish open pit mine, supplemented by high grade underground operations at the Red October mine. In January 2014 , Saracen agreed to acquire 100% of the Thunderbox Operations, located approx 45 kms south of Leinster in WA. The Thunderbox Operations are on care and maintenance and include the Thunderbox and Bannockburn gold mines as well as the Waterloo nickel mine. There is also a 2.5 million tonne per annum CIL processing plant and associated infrastructure. The Thunderbox Deposit was discovered in 1999. Gold production totalled 805,000 ounces when processing operations ended in September 2007 . Thunderbox produced at an average cash cost of US$290 /oz with a cash cost in the final year of operation of US$481 /oz. As at January 2014 , the Thunderbox Operations Mineral Resources stand at 2.0 million ounces of gold, while Ore Reserves stand at 0.7 million ounces of gold. Total Mineral Resources stand at 6.0 million ounces of gold and 1.6 million ounces of Ore Reserves.

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Source: ENP Newswire

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