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How Saracen Mineral Holdings Limited just tripled its net profit

Shares in mineral exploration and development company Saracen Mineral Holdings Limited (ASX: SAR) only rose slightly today to $1.57, despite the company announcing a $46 million interim statutory net profit – up an almighty 209% from the previous corresponding period.

With a focus on gold production, the debt-free Saracen has a portfolio of assets in the North Eastern Kalgoorie Goldfields in Western Australia.

Saracen’s bumper half-year results included underlying NPAT growth of 149% to $37.2 million, with an EBITDA rise of 123% to $103.4 million and gold production up 24% – the latter which the company said underpinned the “substantial increases” in cashflow and earnings.

Saracen attributes its strong performance to investment in exploration and development, with the unprecedented rise in NPAT coming off the back of a 32% jump in sales revenue to $245.6 million and increased gold sales.

Part of the NPAT figure is due to the $10.6 million sale of the King of the Hills project in October 2017 – Saracen originally acquired the project back in 2015.

Despite the bumper results, no dividend has been declared, with earnings per share sitting at 5.66c, but FY18 guidance has been maintained for all major operations.

Saracen share prices are up 18.5% from $1.28 this time last year, with BMO Capital and RBC Capital Markets both suggesting a price target of $2 after the company’s January quarterly report was handed down – a figure that may change to become even more favourable off the back of these stellar half-year results.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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