Just a quick copy + paste from me Ronnie. You may have missed this one.
And we are doing great over here, hope you are too. Thank you for keeping up the thread, you are doing great as always. Glad to see the followers have finally arrived and your thread has gotten the attention it deserves. Will give you full update on how my trades (many influenced by your research) went later on - probably after next leg down. See you tomorrow, friend.
The following is taken from the latest Goldman Sachs research Report:Saracen Mineral Holdings
(SAR.AX)
3Q FY20 result: production and AISC better than our estimates as consistent quarter delivers cash build; retain Buy
29 April 2020 | 1:18AM AESTSAR's Mar Q gold production of 158koz was +6% vs GSe, with AISC of A$1,133/oz -6% below our estimates. The result demonstrated very consistent production at all assets QoQ despite dealing with COVID-19 restrictions and some asset-specific impacts. Thunderbox recorded a very strong quarter despite pit access issues, with mill throughput and grade both exceeding our expectations driving sub-A$700/oz AISC at the asset. FY20 guidance of +500koz production remains unchanged; we expect SAR will be able to achieve this comfortably and continue to forecast further growth into FY21 as the CDO mill expansion ramps up and KCGM continues to improve.
Key highlights
FY20 Guidance: Group production remains unchanged at >500koz. We estimate 521koz at an AISC of A$1,130/oz, largely unchanged from our prior forecast. SAR will retain the flexibility to pull forward processing of high grade stockpiles at CDO and TBO in the June Q, in order to offset any ongoing COVID-19 impacts or to release additional cash flow if required. We expect this will be used sparingly, and production guidance for FY21 remains at >600koz (GSe: 663koz).
Financials: Cash of A$340mn, up from A$284mn after making an additional early debt repayment of A$25mn, and final FY19 tax payment of A$15mn. Post the end of the Q, SAR withdrew an additional A$45mn from its revolving credit facility to maximise cash reserves. We forecast net debt of A$87mn by the end of FY20 before returning to a net cash position early in FY21.
Carosue Dam: Mined grade at Karari-Dervish during the Q was affected by a focus on paste backfilling primary stopes, and the mine sequence progressing through a lower grade area. This resulted in higher unit costs vs. our forecasts. Grade is expected to recover to ~2.8-3.0g/t during the June Q. As previously flagged, comissioning of the CDO mill expansion has been delayed to the Mar-21 Q due to COVID-19 related delays sourcing equipment from China. During the quarter, works commenced at the Porphyry Mining Centre, to support long term open pit mining in the region. Open pit mining is on track to commence in the Sep Q to provide additional ore to feed the mill expansion.
Thunderbox: Record quarter at TBO, with production +26% higher than our estimate driven by higher grade and throughput (annualising at ~3.0Mtpa). During the quarter, the C Zone pit experienced a localised wall failure on the West Wall ramp, hindering access to mining ore. The company used this opportunity to ramp-up mining in the D Zone pit whilst the wall was remediated. Remediation is now complete with access to the bottom of the C Zone restored in April. Mining at the Kailis pit (Stage 2) was completed ahead of schedule in March, however stockpiles will continue to provide high grade oxide blend to the mill during the June Q. Development of TBO underground is progressing well with the tender for the ramp up of the UG mine issued during the June quarter and first stoping expected in FY21.
KCGM: Mostly in-line with our forecasts, although unit costs were better than our forecasts potentially aided by a lower diesel price. Throughput was impacted by a major mill shutdown, with the next major shutdown planned for the Sept Q. Early progress has been made in opening more mining fronts, with the Brownhill and Morrison pits progressed during the quarter at the expense of some focus on Golden Pike. We view this as a sensible move to expand flexibility at the operation and better utilise the available mobile fleet. The JV is also reviewing plans for Eastern Wall Remediation (EWR), with the addition of economic surface pits and a higher gold price making a full cutback look more economic. An update on the preferred EWR option will be provided in the Sept Q, along with a revised JORC Reserve and Resource, and a progress update on recent drilling.
Changes to earnings and valuation: Our FY20 earnings are up after incorporating the stronger result. Our NAV and EV/EBITDA valuation are similiarly up +1%/+2%.
We retain our Buy rating with 10% upside to our 12-m TP of A$5.00/sh (up +2%). Key thesis: (1) Most compelling production and earnings growth profile in our coverage (+56% production growth by FY24e, +27% 5yr EPS CAGR), driven by KCGM and the Carosue Dam expansion project; (2) strong free cash flow and balance sheet: we forecast FY21 FCF yield of 10% despite investment in a growing production profile, we expect SAR will be net cash by early FY21; (3) trading at 0.95xNAV, despite potential for further positive valuation catalysts at KCGM in particular.
