Saracen Acquiring Idle Norilsk Gold Operations in Western Australia
Consideration payable by Saracen to Norilsk for the acquisition comprises A$20 million cash on settlement; A$3 million cash upon the sooner of commencement of commercial production, or if, after a period of 24 months following settlement, the prevailing gold price has exceeded A$1,550/oz for a calendar month; and a 1.5% net smelter return royalty on the Thunderbox operations, capped at A$17 million. Saracen also will assume all environmental rehabilitation obligations related to the assets.
The Thunderbox gold assets were seen as non-core assets by nickel-focused Norilsk. The sale is expected to close in the first half of 2014.
Thunderbox produced 155,000 oz of gold in 2006, its last full year of operation, processing 2.2 million mt of ore at a grade of 2.3 g/mt gold and cash costs of $352/oz. Based on the current open-pit ore reserve of 728,000 oz, Saracen estimates that Thunderbox could produce approximately 140,000 oz/y of gold at an all-in sustaining cash cost of approximately A$1,100/oz over an initial mine life of five years. Saracen estimates that total redevelopment capital expenditure will be approximately A$45 million to $A55 million, inclusive of all capital and pre-strip mining costs.
Saracen is targeting restart of production within 18 months of settlement.
Saracen expects to find synergies between Thunderbox and its current Carosue Dam operations, about 300 km to the southeast, with respect to operating personnel and open-pit mining equipment, given both operations are planned to utilize similar-sized equipment.
Saracen said it will emerge from the acquisition with significantly enhanced mining assets, including:
• Total gold mineral resources of 6 million oz;
• Total gold ore reserves of 1.6 million oz;
• Existing gold production of 120,000 to 135,000 oz/y, with potential to double this once the Thunderbox operations have been developed;
• Total milling capacity of approximately 5 million mt/y;
• Diversification across two key operations in separate but relatively close geographical locations.