Saracen (SAR) released December Q results with group production of 78koz, down 4% QoQ, at all-in sustaining costs (AISC) of A$1,176/oz (vs Sept Q AISC $1,008/oz). 1H production of 158koz is tracking well above the 300koz guidance for FY18. Cash increased to $82.9M (from $60.5m). We expect the 2HFY18 will be equally positive with high grade ores from Kailis and productivity improvements at Carosue Dam. Exploration continues to highlight the potential for mine life extension ahead of the upcoming 5-year plan. Despite the positives Argonaut continues to believe the stock is trading ahead of our risk weighted DCF valuation. We retain our preference for producers on significantly cheaper metrics such as Ramelius Resources (RMS, Not rated) and emerging producers such as Dacian Gold (DCN). We maintain our SELL recommendation and a revised $1.46 target price (prior $1.50).
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