Saracen Mineral : December 2018 Quarterly Report

SARACEN MINERAL HOLDINGS LIMITED

QUARTERLY REPORT: DECEMBER 2018

Corporate Details:

Saracen increases production guidance following record December half

21st January 2019

ASX code: SAR

Mine operating cash flow of A$67m in December quarter from production of 88,833oz; FY19 guidance rises to 345-365,000oz from 325-345,000oz at unchanged AISC of A$1,050-1,100/oz

Corporate Structure:

Ordinary shares on issue: 820.3m

Sustainability

Unvested employee performance rights: 12.0m

•  No LTI's during the quarter, LTIFR steady at 0.4 (30 September 0.4, WA Gold Mining Average 1.9)

Market Capitalisation: A$2.4b (share price A$2.94)

Production

Cash, bullion and investments (December 31): A$142.6m

•  Quarterly gold production of 88,833oz (Carosue Dam 53,108oz; Thunderbox 35,725oz) at AISC of A$1,067/oz

  Debt (31 December): Nil

•  Closing ore stockpile (inventory awaiting processing) of 53,439oz

  Directors:

•  FY19 guidance increased to 345-365,000oz (previously 325-345,000oz), AISC maintained at A$1,050-1,100/oz

Mr Tony Kiernan Non-Executive Chairman

Financial

Mr Raleigh Finlayson Managing Director

•  Cash and equivalents of A$142.6m at 31 December (up from A$131.0m at 30 September, despite spending A$55.3m on growth capital and exploration)

  Mr Geoff Clifford Non-Executive

•  Gold sales for the quarter of 85,049oz at an average sale price of A$1,724/oz, generating revenue of A$146.6m

  Mr Martin Reed Non-Executive

  Dr Roric Smith Non-Executive

•  Gold hedging of 382,100oz at an average delivery price of A$1,773/oz (272,400oz at A$1,743/oz at 30 September)

Discovery and growth

Ms Samantha Tough Non-Executive

•  A$60m FY19 exploration budget continues ramping up with A$12.3m invested in the quarter

  Substantial Shareholders:

  Van Eck 13.3%

  BlackRock Group 5.0%

•  Drill results from Carosue Dam included; Karari 71.0m @ 6.0g/t, 36.0m @ 3.8g/t and 13.1m @ 9.1g/t; Whirling Dervish 21.3m @ 4.7g/t, 20.5m @ 4.5g/t and 20.5m @ 4.1g/t; Deep South 10.9m @ 18.3g/t, 5.0m @ 18.0g/t and 9.2m @ 12.3g/t

  Registered Office:

  Level 11

•  Drill results from Thunderbox included; Zone A 37m @ 2.8g/t, 28m @ 2.9g/t and 14m @ 3.7g/t; Kailis Stage 2 9.0m @ 15.7g/t and 7.0m @ 17.1g/t; Bannockburn (Irvin Lodes) 14.0m @ 3.7g/t and 15.0m @ 2.9g/t

  40 The Esplanade

  Perth WA 6000

  Telephone: [phone]

  Facsimile: [phone]

•  Encouraging results reported in the Carosue Dam Corridor, within 4km of the mill; Atbara discovery hole 40.0m @ 3.8g/t (including 12.0m @ 7.7g/t), Qena discovery hole 20.0m @ 2.8g/t

  For further details contact:

  Troy Irvin Telephone [phone]

•  This exploration success has prompted Saracen to increase the FY19 capital development budget by A$35m; This will accelerate underground development at Carosue Dam and Thunderbox, ensuring both the increased production rate and mine lives are maintained

Overview

Saracen Mineral Holdings Limited (ASX: SAR) is pleased to report on a strong December quarter which confirms the strategy to grow inventory, production and cash flow is proceeding to plan.

Production for the December quarter was 88,833oz at an all-in sustaining cost (AISC) of A$1,067/oz. Production for the December half was a record 177,774oz at an AISC of A$1,030/oz. This stemmed from record group mill throughput and record mill grades.

Figure 1 - Group production and AISC

Recovered gold (koz)

Mar Q 2018

A$/ozJun Q 2018

Sep Q 2018

Dec Q 2018

Thunderbox

Carosue Dam

Group AISC

FY19 guidance is increased to 345-365,000oz (previously 325-345,000oz), with AISC maintained at A$1,050-1,100/oz.

Cash and equivalents rose to A$142.6 million, up from A$131.0 million at September 30, despite the Company spending A$43.0 million on growth and A$12.3m on exploration in the quarter. Exploration and development capital expenditure is anticipated to peak in the current March quarter.

Another host of impressive exploration results were delivered across the portfolio, including two new discoveries close to the Carosue Dam mill.

Saracen Managing Director Raleigh Finlayson said the December quarter results continued the

Company's track record of growth in its three key target areas: inventory, production and cashflow.

"The increased production guidance published today, which comes with no increase in costs, shows that our strategy of investing in exploration and development is generating outstanding results.

"In parallel with this latest production growth, we have delivered exceptional exploration results which will help underpin further growth in our inventory.

"Our strong production and tight costs meant we were able to invest in exploration and development while also increasing our cash position by another A$11.6 million to A$142.6 million.

"In light of our recent exploration success, we have increased the FY19 capital development budget by A$35 million. This will enable us to capitalise on our exploration success by sustaining the increased production rate while maintaining mine lives.

"Investing in organic growth has driven our success in recent years and it will continue to do so as we move towards our longer-term production target of 400,000oz a year."

Saracen's quarterly conference call will be held today at 8.00am AWST (11.00am AEST). The call can be accessed at:https://webcasting.boardroom.media/broadcast/5c342ad6eb965402d8d669b8

Table 1 - December quarter 2018 gold production and cost summary^

Dec Q 2018 UnitCarosue DamThunderboxGroup
Underground Mining
Ore Mined	t	509,000	28,000	537,000
Mine Grade	g/t	3.0	2.1**	2.9
Contained Gold	oz	48,783	1,797	50,580
Open Pit Mining
Total Mining	bcm	-	1,694,000	1,694,000
Ore Mined	t	-	545,000	545,000
Mine Grade	g/t	-	1.4	1.4
Contained Gold	oz	-	25,109	25,109
Mill Production
Ore Milled	t	617,000	684,000	1,300,000
Mill Grade	g/t	2.9	1.7	2.3
Contained Gold	oz	57,249	37,834	95,083
Recovery	%	92.8%	94.4%	93.4%
Recovered Gold	oz	53,108	35,725	88,833
Gold Sales	oz	52,538	32,512	85,049
Average Price Received	A$/oz	1,724	1,723	1,724
Sales Revenue	A$m	90.6	56.0	146.6
Closing Ore Stockpile
Ore	t	792,000	1,044,000	1,836,000
Grade	g/t	0.9	0.9	0.9
Contained Gold	oz	22,467	30,972	53,439
Cost summary
Mining	A$m	20.4	16.4	36.8
Processing	A$m	10.2	13.1	23.3
Site Administration	A$m	2.3	1.7	4.0
Cash Costs	A$m	32.9	31.2	64.1
Royalties	A$m	3.0	1.7	4.8
Capital Works	A$m	0.1	0.9	1.1
Development	A$m	6.4	2.8	9.2
Ore Inventory Adjustments	A$m	1.3	1.5	2.8
Corporate	A$m	1.8	1.3	3.1
All-in Sustaining Costs	A$m	45.6	39.5	85.1
Growth Capital*	A$m	25.4	17.6	43.0
Exploration	A$m	7.4	5.0	12.3
Unit cost summary
Mining	A$/oz	449	478	461
Processing	A$/oz	225	381	292
Site Administration	A$/oz	52	48	50
Cash Costs	A$/oz	725	907	804
Royalties	A$/oz	67	51	60
Capital Works	A$/oz	3	27	14
Development	A$/oz	141	83	116
Ore Inventory Adjustments	A$/oz	29	44	35
Corporate	A$/oz	40	37	39
All-in Sustaining Costs	A$/oz	1,005	1,149	1,067
Depreciation and Amortisation	A$/oz	236	237	236
Mine cash flow
Mine operating cash flow	A$m	48.1	19.3	67.4
Net mine cash flow	A$m	22.7	1.7	24.5

Mine operating cash flow = Sales revenue less AISC plus corporate costs plus ore inventory adjustments.

Net mine cash flow = Mine operating cash flow less growth capital.

Third party ore (Carosue Dam 5,503oz) included in recovered gold, excluded from A$/oz calculations.

Pre-commercial production ounces from Whirling Dervish (Carosue Dam 2,244oz) and Thunderbox underground (1,359oz) included in recovered gold, excluded from A$/oz calculations.

^ Reported on an accrual accounting basis

* Refer to Figure 11 for breakdown ** Underground development ore only

Table 2 - FY19 YTD gold production and cost summary^

YTD FY19 UnitCarosue DamThunderboxGroup
Underground Mining
Ore Mined	t	969,000	29,000	998,000
Mine Grade	g/t	3.1	2.0**	3.1
Contained Gold	oz	96,864	1,889	98,753
Open Pit Mining
Total Mining	bcm	-	3,067,000	3,067,000
Ore Mined	t	-	1,165,000	1,165,000
Mine Grade	g/t	-	1.3	1.3
Contained Gold	oz	-	49,125	49,125
Mill Production
Ore Milled	t	1,264,000	1,425,000	2,688,000
Mill Grade	g/t	2.8	1.7	2.2
Contained Gold	oz	112,678	77,258	189,936
Recovery	%	93.1%	94.4%	93.6%
Recovered Gold	oz	104,861	72,912	177,774
Gold Sales	oz	102,699	68,974	171,673
Average Price Received	A$/oz	1,685	1,676	1,681
Sales Revenue	A$m	173.0	115.6	288.7
Closing Ore Stockpile
Ore	t	792,000	1,044,000	1,836,000
Grade	g/t	0.9	0.9	0.9
Contained Gold	oz	22,467	30,972	53,439
Cost summary
Mining	A$m	43.0	33.8	76.8
Processing	A$m	19.7	25.6	45.3
Site Administration	A$m	4.4	3.6	8.0
Cash Costs	A$m	67.1	63.0	130.1
Royalties	A$m	5.6	3.5	9.1
Capital Works	A$m	0.6	1.3	1.9
Development	A$m	10.8	5.7	16.6
Ore Inventory Adjustments	A$m	(1.6)	0.9	(0.8)
Corporate	A$m	3.2	2.3	5.5
All-in Sustaining Costs	A$m	85.7	76.7	162.4
Growth Capital	A$m	43.8	28.2	72.0
Exploration	A$m	14.4	7.8	22.2
Unit cost summary
Mining	A$/oz	500	472	487
Processing	A$/oz	229	358	288
Site Administration	A$/oz	51	51	51
Cash Costs	A$/oz	779	881	825
Royalties	A$/oz	65	48	58
Capital Works	A$/oz	7	19	12
Development	A$/oz	126	80	105
Ore Inventory Adjustments	A$/oz	(18.6)	12	(5)
Corporate	A$/oz	37	32	35
All-in Sustaining Costs	A$/oz	996	1,072	1,030
Depreciation and Amortisation	A$/oz	213	289	244
Mine cash flow
Mine operating cash flow	A$m	88.9	42.1	131.0
Net mine cash flow	A$m	45.1	13.9	59.0

Mine operating cash flow = Sales revenue less AISC plus corporate costs plus ore inventory adjustments. Net mine cash flow = Mine operating cash flow less growth capital.

Third party ore (Carosue Dam 15,580oz) included in recovered gold, excluded from A$/oz calculations.

Pre-commercial production ounces from Whirling Dervish (Carosue Dam 3,219oz) and Thunderbox underground (1,359oz) included in recovered gold, excluded from A$/oz calculations.

^ Reported on an accrual accounting basis ** Underground development ore only

Sustainability

No Lost Time Injuries (LTI) were reported in the December quarter.

Table 3 - December quarter 2018 group safety performance

LTI LTIFR TRIFR
Carosue Dam	0	0.8	14.4
Thunderbox	0	0.0	9.9
Group	0	0.4	12.6

Outlook

The group production outlook for FY19 is increased to 345-365,000oz (previously 325-345,000oz) at an unchanged AISC of A$1,050 - 1,100/oz.

Recent exploration success has prompted Saracen to increase the FY19 capital development budget by A$35m to accelerate underground development at Carosue Dam and Thunderbox.

Table 4 - Next chapter of growth in FY19

Key items UPDATED PREVIOUS COMMENT
A$m A$m
Karari paste plant	23	23	No change
Karari - Dervish underground development	42	20	Increase production rate as Deep South potentially nears completion
Thunderbox underground development	26	13	Advance the decline to enable early opportunistic stoping in FY20
Kailis Stage 2 open pit development	17	17	No change
Carosue Dam air-strip	7	7	No change
Exploration	60	60	No change
Total	175	140

Fast-tracking access to the additional underground ore identified by extensional drilling will ensure the increased production rate and mine lives are maintained.

Saracen has a robust balance sheet with available funding of A$292.5m (cash and bullion A$128.4m, liquid investments of A$14.1m, undrawn debt facility A$150m) plus operating cash flows and ore stockpiles.

Exploration and development capital expenditure is anticipated to peak in the current March quarter. This is likely to result in a temporarily side-ways movement in cash on hand over the March quarter before resuming an upward trajectory in the June quarter.

Saracen's 7 year production outlook, with organic production growth to 350kozpa, is considered a base case, with an upside case to 400kozpa (refer to ASX release dated 20th February 2018 "Corporate Presentation - February 2018"). The 7 year production outlook, and specifically FY20 group production guidance will be revised in the September quarter 2019.