The falling gold price is continuing to hit Western Australia’s resources sector, with Saracen Minerals today joining a string of companies to cancel projects, slash costs and launch strategic reviews.
Saracen Minerals announced late today a host of cost saving measures, including placing its planned $25 million expansion of processing facilities at its Carosue Dam gold operation on ice.
The company awarded the engineering and construction contract for the expansion to GR Engineering in February, but crews are yet to arrive on site.
Saracen said it expected to save around $18 million as a result of not going ahead with the expansion.
GR Engineering said it would take a $4 million hit to its revenue as a result of Saracen’s decision, and would make staffing cutbacks and additional measures in response to the adverse market conditions.
Saracen also said today that it would defer development of its Deep South underground gold mine, as it seeks to reduce capital spending while the gold price remains weak.
The miner also expects to save around 30 per cent on its current open pit mining costs at Deep South by reducing the mining fleets to two, down from the four currently operating.
Saracen has also committed to a review of its non-core tenements, after reducing its exploration spending to $8 million per year, down from between $10 million and $15 million.
“We are confident that we have developed strategies for different gold price environments, even in an extremely depressed gold price scenario, that will ensure we remain cash flow positive and operationally robust,” Saracen managing director Raleigh Finlayson said.
“Should higher gold prices return and/or other conditions change, the key capital projects that are being suspended or deferred can be reinstated with higher production targets as a result.
“This decision will be based on delivering the optimum free cashflow.”
Meanwhile, gold explorer GBM Resources said it completed a review of its operations today, identifying initiatives to save up to $600,000 per year.
The initiatives include slashing salaries for executive directors and senior staff, as well as external services, to prioritise spending on exploration.
GBM said it would look for near-term gold production acquisition opportunities with the view of shifting from exploration and production.
“The board and management believes it is important to ensure that it is taking all possible steps to preserve shareholder value and believe that the outcomes of this strategic review, cost reductions and strategic acquisitions will achieve a step change in value creation for the company and its shareholders,” GBM said in a statement.
Earlier this week, Fraser Range Metals Group said it had decided to postpone a planned capital raising due to poor market conditions.
The Fraser Range announcement was preceded by Tawana Resources announcing a review of its financing and partnership options, to advance development at its Mofe Creek iron ore project in Liberia.
Tawana said chairman David Frances had tendered his resignation, with the company saying it would not immediately appoint a replacement.
Tawana said it would continue to explore potential funding and development scenarios through its strategic review.
At close of trade today, Saracen shares had lost half a cent, to finish at 18 cents, GR Engineering and Tawana Resources shares were steady at 61 cents and 0.6 cents, respectively, while GBM’s stock lost 0.1 cents, to finish at 1.9 cents.