Saracen Minerals pays $1b for Barrick Gold’s stake in Kalgoorlie Super Pit

Saracen Minerals Barrick Gold Kalgoorlie Super Pit
Saracen Mineral Holdings will acquire Barrick Gold's 50% ownership in the Super Pit for $1.1 billion, while American mining giant Newmont Goldcorp will retain its 50% stake.

Perth-based Saracen Mineral Holdings (ASX: SAR) has announced it will outlay $1.1 billion to acquire a 50% stake in the world-famous Super Pit gold mine in WA’s Kalgoorlie-Boulder district.

The company has entered into a binding sale agreement with Canada’s Barrick Gold to buy Barrick’s share of the Kalgoorlie Consolidated Gold Mines (KCGM) joint venture, through the acquisition of Barrick (Australia Pacific) Pty Ltd.

Barrick holds a 50% interest in the joint venture with Newmont Goldcorp Corporation.

Newmont will retain its 50% interest in the venture and operator rights.

Saracen said it would partly fund the transaction through a $796m capital raising via an underwritten institutional placement and an underwritten 1-for-5.75 pro-rata, accelerated, non-renounceable entitlement offer to eligible investors.

The placement will see the issue of 125 million new fully-paid ordinary Saracen shares to investors at an issue price of $2.95 per share to raise $369m.

It will utilise Saracen’s existing placement capacity and does not require the approval of shareholders.

The entitlement offer will raise a further $427m by giving investors the opportunity to subscribe for one new fully-paid ordinary Saracen share for every 5.75 existing shares.

It will see the issue of approximately 144.9 million shares at $2.95 per share.

The balance of the transaction price will be funded from a $450m senior secured term loan taken out with Westpac, BNP Paribas and Citibank.

Saracen also has existing cash reserves of $196m and a $45m working capital facility which is currently undrawn.

Largest gold producer

The acquisition of Barrick (Australia Pacific) will position Saracen as one of Australia’s largest gold producers with group reserves of approximately 7 million ounces from three mines close to Kalgoorlie.

Managing director Raleigh Finlayson said the growth is consistent with the company’s strategic objectives.

“The Super Pit is a Tier 1 gold mine with an outstanding track record of stable, large scale gold production and cash generation over many decades,” he said.

“It is an asset Saracen knows well and has admired for many years and we are confident it aligns with our clearly defined growth strategy.”

He said working with Newmont would provide a market advantage given the company’s extensive knowledge of the Super Pit and “unrivalled experience” in open pit and underground operations.

“We believe there is significant exploration and development potential at the Super Pit and we look forward to working collaboratively with Newmont Goldcorp to ensure it is realised.”

Completion of the acquisition is subject only to approval by the WA Minister for Finance, Aboriginal Affairs and Lands.

Tier 1 operation

The KCGM joint venture comprises the Fimiston open pit and the Mt Charlotte underground mines (together known as the Super Pit) located near Kalgoorlie along the Golden Mile – one of the richest gold deposits in the world.

The pit is a large-scale, long life, Tier 1 operation which produces an average 660,000 ounces of gold per annum at an all-in sustaining cost of approximately $1100/oz.

In financial year 2019, it produced 490koz, making it one of the largest gold mines in Australia.

The operation also has two crushing circuits, two milling circuits, two flotation circuits and three carbon-in-leach circuits.

At end 2018, the Super Pit had a mineral resource of 273 million tonnes grading 1.3 grams per tonne for 11.7 million ounces.

Included within that amount are reserves of 193Mt grading 1.2g/t for 7.3Moz.

Rock slides

Super Pit production during 2019 was impacted by rock slides in 2018 which caused one million tonnes of rock to tumble down the eastern wall of the Fimiston pit.

The slides – which occurred over two days in May – destroyed a ramp and blocked access to part of the pit, temporarily suspending operations and cutting expected future production rates until remediation works have been implemented.

Monthly ore figures since the slides has reduced from over 1.2Mt to 0.4Mt and the average width of mining bench down from 300m to less than 100m.

A remediation plan is currently at corporate review and approval stage.

Once approved, remediation is anticipated to take 3.5 years, over which time gold production is expected to average 245koz (Saracen’s 50% share) and then revert to historical levels.