Saracen Mineral Holdings Limited


SAR Details

·       Production and costs are on track: Saracen Mineral Holdings Limited (ASX: SAR) stock surged over 5.1% on October 26, 2016 as the group met their production and costs guidance and reported for solid September quarter with ramp-up to 300 kozpa firmly on track. Gold prices also boosted the stock price to some extent. The group’s gold production rose 13% to 188,656 oz for fiscal year of 2016 as compared to 167,531 oz in the prior corresponding period. All in Sustaining Cost fell over 4% to $1,095/oz against $1,139/oz in the prior corresponding period. Thunderbox open pit project was brought into production ahead of schedule and below budget during 2016 while the group invested $10 million at Carosue Dam for developing Karari underground mine. SAR acquired Kailis and King of the Hills projects, during the year which would add high grade ore into the processing schedule at the Thunderbox mill. SAR forecasts to enhance their production to a rate of 300kozpa for FY2017 as compared to 188koz in FY2016). Saracen would focus on their underground growth projects at Karari, Deep South, Red October, King of the Hills, and Thunderbox. On the other hand, SAR stock lost over 26.5% in the last three months (as of October 25, 2016) and still trading at a higher P/E. The group will hold its AGM on November 30, 2016.
·       Recommendation: We maintain our “Expensive” recommendation on the stock at the current price of $1.24
 

Saracen Group’s five-year plan (Source: Company Reports)
 
Independence Group NL


IGO Details

·       Finished Nova Construction ahead of the schedule: Independence Group NL (ASX: IGO) stock surged over 2.4% on October 26, 2016 driven by their September quarter results. The group finished its much talked Nova construction four weeks ahead of the feasibility study schedule. The group reported their first production at Nova for nickel and copper concentrates in October 2016. Tropicana gold production was also on track which delivered a better than estimated all-in sustaining costs of A$1,097 per ounce during the quarter. Based on attributable revenue of A$1,632 per ounce, this equates to a notional AISC margin of A$14.2 million for 1Q17 whereas Tropicana’s free cash flow contribution was A$4.8 million. IGO’s unaudited underlying EBITDA reached A$38.1 million while the unaudited NPAT reached A$10 million for 1Q17. The group has built a strong balance sheet with net debt of A$22 million and A$279 million of undrawn debt facilities. IGO raised net proceeds of A$274 million.
·       Recommendation: We maintain our “Hold” recommendation on the stock at the current price of $4.25


Tropicana quarter performance (Source: Company Reports)

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