Saracen Mineral Holdings Ltd [ASX:SAR] announced yesterday they’ve gone into a deal to acquire a 50% stake of the Super Pit gold mine. Saracen is looking to purchase 100% of the shares held by Canadian Barrick Gold Corp [NYSE:GOLD] for US$750 million, or about AU$1.1 billion.
Saracen is an ASX200 listed gold company with a $2.82 billion market cap. At time of writing, the company is on a trading halt at $3.39 a share. Could the Saracen share price go up when the company’s shares start trading?
What’s the deal?
The Super Pit gold mine is one of the largest mines in Australia. It’s located 600 km east from Perth in the Kalgoorlie-Boulder region in Western Australia.
The mine produced 730koz of gold in FY18. Production decreased in FY19 to 490koz due to a pit wall failure. Saracen expects it will take about three and a half years to bring production back to historical levels.
Source: Saracen Mineral Holdings
Barrick has a 50–50 joint venture on the Super Pit with Newmont Goldcorp Corporation [NYSE:NEM], and Saracen will be partnering with Newmont, who will stay as operator for the joint venture.
Saracen is currently trying to raise $796 million in equity placement to fund the deal with the rest of the amount coming from a loan.
Saracen shares have fared quite well this year. They’ve seen a 19% increase since the beginning of the ear as gold prices kept increasing. Yet Saracen is trading close to 30% lower than in August, when shares reached a high of $4.75 a share.
What could happen next for the SAR share price?
This acquisition could be good for the company.
The Super Pit increases their portfolio, which already includes the Carosue Dam and Thunderbox mines, located in the same region.
Super Pit also plays on Saracen’s objective to increase production, at a time when gold prices are still rising and the Australian dollar is losing ground against the US dollars.
With gold prices rising, there are a few ways to get exposure. The best is to own physical gold. Another way is to buy gold stocks.
You can check out our ‘How to Pick Winning Gold Stocks’ report here.
PS: Watch the full video interview with The Rum Rebellion’s Greg Canavan and Jim Rickards, US economist and gold expert. Click here to watch.