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Saracen Mineral share price on watch after bumper first half profit growth

The Saracen Mineral Holdings Limited (ASX: SAR) share price could be on the move on Monday after the release of its half year update.

How did Saracen perform in the first half?

Saracen had a very strong first half to FY 2020 thanks to the perfect mix of production increases, steady costs, and a jump in the gold price.

For the six months ended December 31, the company reported an 84% increase in underlying net profit after tax to $80.2 million. Its statutory profit after tax grew strongly as well and was up 61% on the prior corresponding period. The latter included one-off transaction costs incurred on the Super Pit transaction.

This strong profit was driven by a 22% increase in gold production to a record 216,452 ounces. The aforementioned Super Pit operation made a one-month contribution to its production.

Saracen’s all-in sustaining cost (AISC) was steady at a lowly A$1,041 an ounce, meaning it profited greatly from a 18% increase in its average realised gold price to A$1,984 an ounce.

Also growing strongly was its operating cashflow. It increased 35% to A$152 million over the period. This left the company with cash and equivalents of A$283.8 million at the end of December.

Outlook.

Saracen’s managing director, Raleigh Finlayson, appeared to be very pleased with the half.

He said: “The key message from these results is that Saracen has continued to grow and will continue to grow. We are growing production and our inventory through a financially-rewarding combination of aggressive near-mine exploration and prudent acquisition, all within 300km of Kalgoorlie.”

“With the addition of the Super Pit and the Carosue Dam mill expansion set for commissioning in the December quarter, our production and cashflow is poised to continue growing. We are also looking forward to the results of the review we are undertaking at the Super Pit, which is a world-class asset with an exceptional future,” he added.

In light of this, management believes the company is on track to meet its FY 2020 production guidance of +500,000 ounces.

Elsewhere, rival Regis Resources Ltd (ASX: RRL) will be on watch after reporting a record net profit after tax of its own. For the first half of FY 2020, it posted a 17% increase in net profit after tax to $93.4 million. 

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Motley Fool contributor James Mickleboro 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 Scott Phillips.

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