Gold Stocks to Buy Saracen Mineral Holdings (SAR)

Saracen Mineral Holdings SAR ASXSaracen Mineral Holdings (SAR) is an Australian mid-tier gold producer. The company became a producer when production began in April from the Carosue Dam gold project, 120km north-east of Kalgoorlie in Western Australia. Current gold production is from the Porphyry and Whirling Dervish open pit mines.

SAR has only just made the leap to producer, but as its quarterly results demonstrate, the company is already delivering increasing gold production from its flagship Carosue Dam operations.

Carosue cruising along

Carosue Dam’s 2.4 million tonne per annum (mtpa) processing plant is forecast to produce approximately 100,000 to 120,000 ounces of gold in FY11.

SAR is targeting an increase in production to around 160,000 ozpa by 2015. Gold resources at Carosue stand at around 3.3 million oz while reserves stand at around 0.9 million oz.

Saracen’s Carosue Dam operations area contains a large number of known gold deposits within four separate districts (the Carosue Dam, Porphyry, Safari Bore and Red October districts).

SAR is forecasting future production from open pit mines at Karari, Enterprise, Wallbrook and Deep South, and, subject to positive feasibility study results, underground operations at Porphyry, Red October and Deep South.

Project development for a trial underground mining operation at Red October is presently underway.

Looking golden

SAR’s tenement holdings and gold deposits are located in one of the world’s most prospective gold provinces.

In excess of 23 million ounces of gold in resources have been found and/or brought into production in this province, where SAR is building a long-term strategic infrastructure and resource position.

As at 30 June 2010, SAR’s gold hedging position stood at put options bought over 154,347 oz, and call options sold over 90,810 oz, all at an exercise price of $1,250 per ounce and expiring in monthly amounts through to December 2011.

SAR is fortunate in that its commodity of choice – gold – is experiencing a “golden” run over the months, and currently sits at around US$1,400 per ounce.

As a result, Australian gold miners have been among the hot stocks this year as investors look to gain exposure surging bullion prices.

The precious metal has repeatedly hit record highs on demand from China. Even though China is currently in the midst of battling inflation, the country is buying large amounts of gold and creating demand for SAR’s services.

Pumping production

In its first full production quarter, being the quarter ended 30 June 2010, Carosue Dam operations produced 25,036 ounces of gold, from the processing of 520,214 tonnes of ore grading 1.62g/t.

Most of the ore was sourced from the Porphyry open pit mine.

Saracen’s second open pit mine, at Whirling Dervish, supplied first ore to the plant in June 2010.

For its more recent (September) quarter, gold production totalled 27,233 ounces at a cash cost of $705 per ounce.

The quarter saw gold resources increase by 8% to 3.3 million ounces and gold reserves increase to 0.9 million ounces.

SAR clocked mine operating profit (excluding hedging losses) of $11.3 million for the September quarter.

Impressively, over the quarter Saracen Mineral Holdings saw its Million Dollar operation gold resources increasing 55% to 327,000 ounces.

Drilling at Million Dollar is continuing whilst SAR is focused on an exciting broader $12 million drilling campaign, targeting numerous brownfields and greenfields targets.


Saracen Mineral Holdings has only just made the leap to producer, but as its quarterly results demonstrate, the company is already delivering increasing gold production from its flagship Carosue Dam operations.

The company is looking at a successful future as a mid-tier gold producer, which will be boosted by the development of its various operations in the lucrative West Australian gold districts.

This bullish outlook means SAR will be one of the stocks to watch in coming months.

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