Saracen flags gold production rate of 300,000 ounces p.a. by June

Published 11-JAN-2017 15:25 P.M.

|

2 minute read

Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.

In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.

The below articles were written under our previous business model. We have kept these articles online here for your reference.

Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.


Click Here to View Latest Articles

Saracen Mineral Holdings (ASX: SAR) delivered a double dose of good news when it provided its production numbers for the six months to December 31, 2016, resulting in its share price hitting a high of $1.15 representing an increase of more than 4%.

Although, it should be noted that broker projections and price targets are only estimates and may not be met. Also, historical data in terms of earnings performance and/or share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.

Combined production from Thunderbox (28,530 ounces) and Carosue Dam (37,692 ounces) for the three months to December 31, 2016 was a record 66,222 ounces. Benefiting from contributions from Thunderbox, the company achieved production of 127,692 ounces for the six months to December 31, once again a record for the group.

However, strong trading in the stock could just have readily been attributed to management’s guidance of doubling its production run rate to 300,000 ounces per annum by the June quarter of 2017.

Analysts at Macquarie Wealth Management ran the ruler across the stock in December, indicating their confidence in the company reaching this milestone in the near term. The broker is forecasting total production of 278,000 ounces in fiscal 2017, increasing to 301,000 ounces in fiscal 2018, and remaining broadly at that level at least out to 2020.

The broker has an outperform recommendation on Saracen with a 12 month price target of $1.30, implying upside of approximately 13% to the group’s current trading range.

As an Australian producer Saracen stands to benefit substantially from the lower Australian dollar.

Based on the current spot price and an AUD:USD exchange rate of 76.5 cents the Australian dollar gold price is approximately $1540. Macquarie estimates that Saracen’s All In Sustaining Costs (AISC) in fiscal 2017 will be $1175 per ounce, leaving a healthy margin of $365 per ounce.

What’s in the forecast?

Macquarie is forecasting a net profit of $76.9 million in fiscal 2017, equating to earnings per share of 9.4 cents, implying a PE multiple of 12.2.

Looking at the broader sector, there has been good support for Australian gold producers since the gold price commenced its recovery towards the end of December.

The turnaround started approximately three weeks ago and since then Saracen has put on 40%, while other Australian producers to make robust gains have been St Barbara (+30%), Northern Star (+35%) and Evolution Mining (+40%).



General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

Publication Notice and Disclaimer

The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.

 

Discover Small Cap
Biotech Stocks

Join thousands of other Investors following our stock commentary for Free

X