Saracen Minerals won’t have any trouble in raising close to $A800 million from shareholders to buy a half interest in the huge Super Pit open-cut gold mine in WA.
Gold prices remain buoyant, even if they have slipped back under the key $US1,500 an ounce level in recent days on renewed confidence about a trade deal between the US and China.
But the outlook for the metal seems fairly solid – buying by central banks and ETFs have filled the gap caused by sharp falls in jewellery and investment buyers because of the rapid rise in price in the past year.
The total cost of Saracen’s purchase of the 50% stake is $US750 million (around $A1.1 billion) and Saracen will fund the remainder with a $A400 million loan.
With a market cap of $2.8 billion based on last Friday’s closing price of $3.39, this purchase will be a company transforming transaction, boosting its value by up to a third.
The Institutional Placement will comprise an issue of approximately 125.0 million new fully paid ordinary Saracen shares to certain eligible institutional investors to raise approximately $A369 million at an issue price of $A2.95 per share. The issue price represents a 13.0% discount to the closing price of Saracen shares of $A3.39 last Friday, November 15.
As well $A427 million will be sought via a 1 for 5.75 underwritten pro-rata accelerated non-renounceable entitlement offer to shareholders. The rest will come to the loan, cash on hand and a working capital facility, Saracen said yesterday.
The mine is half-owned by Canadian-listed Barrick Gold Corp which is selling to Saracen and Newmont. Barrick attempted to takeover Newmont to try and frustrate the latter’s bid for Gold Corp.
Newmont had already earmarked its 50% stake in the Super Pit for sale, but Barrick has beaten it to the punch.
The Super Pit is one of Australia’s largest gold mines with an average production of 660,000 ounces a year. Output fell to around 490,000 ounces because of the impact of a huge rockfall at the mine.
Saracen will buy Barrick’s half of Kalgoorlie Consolidated Gold Mines Joint Venture, which owns and operates the Super Pit gold mine.
“While this iconic gold mine has been a valuable contributor to Barrick over the years, the asset does not fit with our strategy of operating mines that we own,” the Barrick said in a statement.
The deal is expected to be completed by the end of 2019.
“We are proud to announce this acquisition which we believe will be transformational for Saracen and our shareholders,” Saracen managing director Raleigh Finlayson said yesterday in the statement to the ASX.
“The Super Pit is a Tier 1 Australian gold mine with an outstanding track record of stable, large scale gold production and cash generation over many decades.”
Saracen’s current production comes from two WA assets: Carosue Dam, 120km northeast of Kalgoorlie, and Thunderbox, 45km south of Leinster.