EL&C Baillieu First Glance | SAR – Outlook comments – Part 1
- Production higher in the future: SAR released updated reserves, resources, production and cost guidance for Carosue Dam and Thunderbox. In FY21, production guidance for Carosue Dam and Thunderbox is 380-400,000 at an AISC of A$1,200-1,300/oz. The production is in line with our 406,000oz forecast but the costs are 20+% higher than our forecast of A$1,040/oz. The company indicated that the Thunderbox mill would be expanded to 3.5Mtpa (currently 2.8Mtpa) in FY22 and Carosue Dam mill expansion from 2.4Mtpa to 3.2Mtpa is due to be completed in March Quarter 2021. Both expansions will increase production and reduce operating costs. FY23 guidance was given as ~250kozpa for Carosue Dam and ~200kozpa for Thunderbox with the latter being 40koz more than our forecasts.
- Reserves up and resources down: SAR have taken updated reserves and resources for updated modelling utilising exploration results, mines plans and gold price. The reserves for Carosue Dam and Thunderbox are now 3.7Moz (up 12%) see waterfall chart below. The reserves are calculated using a gold price of A$1,750/oz. Resources are now 7.8Moz, a decrease of 1.4Moz or 15%, as a result of using updated and more rigorous optimized pit and stope models at a gold price of A$2,250/oz. We view the resource changes as a positive and ounces will be replaced with exploration over time, SAR’s exploration budget for Carosue Dam and Thunderbox FY21 is $43m.
Investment view: Today’s announcement is the first part of SAR’s guidance for FY21 and beyond. The second component will be the update by NST and SAR on the plans for KCGM. Our estimates will be revised when further details are provided.