Investors gave a modest thumbs up to the news from gold producer Saracen Minerals that it had abandoned plans to pay its first-ever dividend in the wake of buying 50% of the Super Pit open-cut gold mine in WA.
Saracen said it now wouldn’t pay a dividend because it has to reduce debt following the Super Pit acquisition and maintain a conservative balance sheet.
The miner announced last August a new dividend policy of paying out 20% to 40% of profit to shareholders.
Now that will be going to its bankers to pay down the debt which stood at $385 million at the end of December. Saracen borrowed $400 million loan to help pay for half of the Super Pit but repaid $15 million early.
The miner revealed a big lift in underlying profit for the December half (thanks to higher production, the surge in gold prices and the weakness of the Aussie dollar) and affirmed its production guidance of over 500,000 ounces for 2019-20.
The company’s underlying profit after tax rose to $80.2 million in the six months to December 31, up 84% on the first half a year earlier.
Revenues rose 45% to $409.9 million over the same period, assisted by a 22% lift in gold production 216,452 ounces and an average realised gold price of $A1,984 per ounce.
All-in sustaining costs edged up to $A1,041 per ounce, up from $A1,030 per ounce in the first half of 2018-19.
“With the addition of the Super Pit and the Carosue Dam mill expansion set for commissioning in the December quarter, our production and cashflow is poised to continue growing,” Saracen CEO Raleigh Finlayson said in Monday’s statement.
“We are also looking forward to the results of the review we are undertaking at the Super Pit, which is a world-class asset with an exceptional future.”
The shares rose 1.9% to $4.21 as investors understood the reason abandoning the dividend idea.
