Saracen pays $US750m for Super Pit stake

Saracen Mineral Holdings confirmed today it has agreed to buy a 50 per cent stake in Kalgoorlie’s famous Super Pit gold mine with managing director Raleigh Finlayson saying the asset has already delivered positive surprises.

Perth-based Saracen has agreed to pay $US750 million ($A1.1 billion) for the 50 per cent interest held by Canadian company Barrick Gold, which has been trying for several years to sell its stake.

US-based Newmont Goldcorp will retain its 50 per cent ownership interest and will continue to operate the mine, under the oversight of a joint venture committee that will equally represent the two owners.

The ownership interests are held through the Kalgoorlie Consolidated Gold Mines joint venture.

The Super Pit is one of Australia’s largest, long-running gold mines, comprising the Fimiston open pit mine and the Mt Charlotte underground mine.

Its output last year fell to 490,000 ounces, its lowest level in many years after a pit wall collapse in 2018.

Mr Finlayson told a conference call today that after two months of technical due diligence analysing the Super Pit, he saw a lot of upside.

“This is a massive opportunity when we look at this from a technical perspective,” he said.

Mr Finlayson said production at the Super Pit would stay around current levels for the next three years while remediation of the pit wall was undertaken but could then increase to about 700,000 ounces.

Combined with expansion opportunities that Saracen is already evaluating at its Thunderbox and Carosue Dam operations, he said the gold miner could potentially lift annual output to as much as 785,000oz.

That compares to production in FY19 of 355,000oz from Thunderbox and Carosue Dam and 245,000oz from its share of the Super Pit, for a total of about 600,000oz.

The Super Pit has a mine life of 12 years based on current reserves and Mr Finlayson said there was plenty of scope beyond that, based on current estimated resources and exploration upside.

Mr Finlayson said the previous ownership structure meant there had been limited visibility on the Super Pit's potential, but Saracen now had a better insight via its technical due diligence.

Saracen intends to raise A$796 million via an underwritten institutional share placement ($369 million) and an underwritten 1 for 5.75 entitlement offer ($427 million) to partly fund the transaction.

Both capital raisings will be priced at $2.95 per share, a 13 per cent discount to Saracen’s closing price last Friday.

RBC Capital Markets and Goldman Sachs are acting as joint lead managers and are underwriting the capital raisings.

The balance of the purchase price will be funded from a new A$450 million senior secured term loan from a banking syndicate (Westpac, BNP Paribas and Citibank), with an anticipated drawdown of A$400 million.

Mr Finlayson said the acquisition would be transformational for Saracen.

“We are excited to partner with Newmont Goldcorp which has extensive knowledge of the Super Pit and unrivalled experience in open-pit and underground operations,” he said.

“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.”

Saracen anticipates annual production across its three gold mines, all located near Kalgoorlie, to be in excess of 600,000oz per annum.

RBC Capital Markets and Goldman Sachs are acting as financial advisers to Saracen with DLA Piper acting as legal adviser.

Barrick was advised by Credit Suisse Securities (Canada) along with law firms Davies Ward Phillips & Vineberg and Herbert Smith Freehills.