Saracen Mineral’s Share Price Sinks on Rising Production (ASX:SAR)

The share price of Saracen Mineral Holdings Ltd [ASX:SAR] is down today despite some solid full-year earnings.

SAR shares received a modest boost yesterday, thanks to an upgrade at the company’s KCGM (Kalgoorlie Consolidated Gold Mines) joint venture with Northern Star Resources Ltd [ASX:NST].

Though SAR announced record profit and record production for the past financial year, the share price has sunk by 11 cents, or 1.91%, to trade at $5.65 per share.

In opening trade this morning, SAR shares were 1.56% higher but then sunk below yesterday’s closing price of $5.75.

SAR joins a host of other Aussie gold miners trading lower this morning, despite an upbeat ASX.

Could dividends be to blame?

With the addition of its Kalgoorlie Super Pit in tandem with the rising price of gold, SAR has some solid growth potential.

In its full-year results, net profit more than doubled from $92.5 million in the previous financial year to $189.7 million.

Underlying net profit is up 173% to a record $257.5 million.

And full-year earnings grew by a record 104% to $447.6 million.

This was thanks to a record production of 520,414 ounces of gold and a steady all-in sustaining cost of AU$1,101 per ounce.

Group production is tipped to rise year on year until FY27 when SAR is forecasting annual production of ~800,000oz.

So, what has pushed the SAR share price down?

It could be that investors were expecting a dividend.

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But they won’t be getting one this year.

Though the miner has never paid a dividend before, last August it announced a new policy of paying out 20–40% of profit to shareholders.

As part of its KCGM joint venture, Saracen borrowed $400 million in November 2019 to acquire the Kalgoorlie Super Pit.

The board recently amended the dividend policy such that a dividend is declared when SAR has a minimum net cash balance of $150 million…

…which it currently does not.

This is a little disappointing for some.

But the investment of that capital could mean even bigger dividends later.

When can Saracen Mineral shareholders expect pay day?

In FY20, SAR shareholders received a ~60% return on their investment.

That’s a better return than NST, Evolution Mining Ltd [ASX:EVN] or Newcrest Mining Ltd [ASX:NCM] over the same period.

But it is difficult to say if a dividend can be expected this financial year.

And SAR has not given too much away.

At this stage, we know SAR will spend at least another ~$430 million to increase production and lower costs in the future.

While SAR hasn’t become a dividend stock just yet, there is a new emerging class of dividend superstars that could be set to thrive in the post-pandemic world. Read here about our top five ASX-listed dividend stocks with a great chance of maintaining big payouts after the crash. Click here to download your free report.

Kind regards,

Lachlann Tierney,

The Rum Rebellion


Lachlann Tierney is a writer for The Rum Rebellion and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. 

The Rum Rebellion