Portfolio optimization initiatives are underway:Saracen Mineral Holdings Ltd (ASX: SAR) released its March quarter production update entailing gold production of 65,131oz which comprises 39,033oz from Carosue Dam and 26,098oz from Thunder box. This has been short of over 5,000oz from the guidance. Management also reiterated that their June quarter production guidance of 80,000oz is on track. The group’s grade mined at every ore source enhanced leading to an increase to an average of 2.3g/t as compared to 1.8g/t during the December quarter. For H1FY17, SAR had reported a revenue growth of 47% yoy at $186.6 million while NPAT grew by 89% yoy at $14.9 million. Revenue growth was largely driven by $14.0 million of gold sales during H1FY17 were derived from development activities at King of the Hills as previously guided. The company’s optimization initiatives have been underway to capitalize on recent production and drilling activities. However, longer term efforts targeting Karari and Thunderbox Deeps are found to be associated with generation of near term free cash flows, which raises some concern. Over the past one month (as at April 12, 2017), stock has moved up by 10.7%. Given the scenario and mixed view on production performance, we give an “Expensive” recommendation on the stock at the current market price of $1.085
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