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Saracen Mineral Holdings to acquire Barrick’s 50% stake in Super Pit

The company will acquire Barrick (Australia Pacific) Pty Limited for total consideration of US$750 million.

Saracen Mineral Holdings Limited - Saracen Mineral Holdings to acquire Barrick’s 50% stake in Super Pit
Saracen’s partner in the Super Pit at Kalgoorlie-Boulder is Newmont Goldcorp

Saracen Mineral Holdings Limited (ASX:SAR) has underwritten its future as a leading Australian gold producers by entering a sale agreement with Barrick Gold Corp (NYSE:GOLD) (TSE:ABX) (ETR:ABR) to acquire its 50% stake in the Kalgoorlie Consolidated Gold Mines JV, which operates the Super Pit.

This will occur through the purchase of 100% of the shares in Barrick (Australia Pacific) Pty Limited for a price of US$750 million.

The Super Pit is a large, high-quality, long-life open-pit and underground gold mine in the globally renowned Golden Mile Region of Kalgoorlie-Boulder, Western Australia.

One of Australia’s largest gold mines

There have been more than 60 million ounces of gold produced from the Golden Mile.

The Super Pit is a large-scale operation with 490,000 ounces produced in FY2019, making it one of Australia’s largest gold mines.

Newmont Goldcorp Corp (NYSE:NEM) (TSE:NGT) (FRA:NMM), the world’s leading gold company, will be Saracen’s JV partner and will retain its 50% ownership interest in the KCGM JV and operatorship of the Super Pit.

Institutional placement

Saracen intends to raise approximately A$796 million via an underwritten institutional placement and an underwritten 1 for 5.75 pro-rata accelerated non-renounceable entitlement offer to partly fund the transaction.

The balance of the purchase price will be funded from a new A$450 million senior secured term loan.

Saracen’s managing director Raleigh Finlayson said the acquisition was consistent with Saracen’s strategic objectives and would give the company three mines in close proximity to Kalgoorlie.

“Transformational” announcement

“We are proud to announce this acquisition which we believe will be transformational for Saracen and our shareholders.

“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.

“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.

“We are excited to partner with Newmont Goldcorp who has 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.”

“Enhance our business”

He said, “This transaction will enhance our business across a variety of key financial and operational metrics and provide our shareholders with exposure to a third high-quality Western Australian gold asset.

“The transaction establishes Saracen as a leading gold miner with anticipated production in excess of 600,000 per annum exclusively from the Goldfields region of Western Australia for many years to come.”

Saracen’s shares last traded on Friday at $3.39.

Super Pit production is sourced from the Fimiston open-pit and Mt Charlotte underground mine and ore is processed through two milling circuits with 13Mtpa of combined capacity.

As at December 31, 2018, the Super Pit had a NI 43-101 mineral resource of 273 million tonnes grading 1.3 g/t for 11.7 million ounces.

Included within that amount are NI 43-101 mineral reserves of 193 million tonnes grading 1.2 g/t for 7.3 million ounces.

Super Pit FY2019 production of 490,000 ounces was impacted by a 2018 pit wall failure.

Remediation is underway and anticipated to take about 3.5 years, over which time Saracen’s share of gold production is expected to average 245,000 ounces, after which production is anticipated to revert to historical levels.

Quick facts: Saracen Mineral Holdings Limited

Price: 2.93 AUD

ASX:SAR
Market: ASX
Market Cap: $3.14 billion
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