BAFI-1070 Financial Statement Analysis: A Report on Saracen Minerals

This report provides a comprehensive financial analysis of Saracen Mineral Holdings Limited (SAR). It begins with a business description, including the company's history, operations, and financial overview. The report then delves into a corporate strategy analysis, followed by a PESTLE and SWOT analysis to assess the external and internal factors impacting the company. The financial analysis section examines key financial metrics, including revenue, gross margins, and net profit, providing insights into Saracen's performance over several years. The report also covers the company's corporate strategy, emphasizing innovation, research and development, and strengthening alliances. The PESTLE analysis explores the political, economic, social, technological, legal, and environmental factors affecting Saracen. The SWOT analysis highlights the company's strengths, weaknesses, opportunities, and threats. Finally, the report concludes with an investment recommendation based on the financial analysis, providing a final decision on whether to buy or not buy SAR shares, considering both qualitative and quantitative aspects.

Running Head: FINANCIAL STATEMENT ANALYSIS 1
FINANCIAL STATEMENT ANALYSIS

Running Head: FINANCIAL STATEMENT ANALYSIS
Table of Contents
1.0 Business description, History and Financial Overview..............................................................3
1.1 Introduction.....................................................................................................................................3
1.2 Financial overview..........................................................................................................................3
1.3 Corporate Strategy...........................................................................................................................5
1.4 PESTLE Analysis............................................................................................................................6
1.5 SWOT Analysis...............................................................................................................................7
References...........................................................................................................................................10

Running Head: FINANCIAL STATEMENT ANALYSIS
1.0 Business description, History and Financial Overview
1.1 Introduction
Saracen Mineral Holdings Company, a Perth-based company, founded in the year, 2006 and
listed on ASX is a gold mining company. There are two major operations in Western
Australia: The Carosue Dam Operation, approximately 120km north-east of Kalgoorlie; and
The Thunderbox Operation, approximately 45km south of Leinster. The production started in
the year 2010 and CDO infrastructure is now made up of a paste plant, processing plant &
thickener, and it also has the possession of the two villages that can give space to 400 people,
various water and power infrastructure assets and an airstrip can also be made available to the
company. As on 30th June, the number of the employees has been reached to 433 where the
female participation was 15.7% and it increased to 18% (Saracen, 2019).
1.2 Financial overview
2015 2016 2017 2018 2019
0
100000
200000
300000
400000
500000
600000
Financial Overview
Expenses
Revenue
Gross profit

Running Head: FINANCIAL STATEMENT ANALYSIS
As per the financial overview it can be said that the revenue earned by Saracen Mineral
limited have a huge impact as it can be observed from the graph below which suggests that
the position of the revenue is quite exciting with respect to the expenses. The gross margins
achieved by the company over the period of 5 years have been on the increasing front from
$26524 to $151743. Further this also depicts that the company generates sales volume in the
effective manner without incurring any heavy expenditure in any of the financial years. The
year 2015 saw a slow growth rate but thereafter the speed was drastic and double the previous
years (Hamilton, Harris and Hillier, 2016).
2015 2016 2017 2018 2019
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
Net profit margin
Net profit margin
The net profit ratio as determined by the graph above can reflects that in the earlier years the
net profit was on the rising verge, in the year 2015 and thereafter the margin decreased from
2016, to 2017. That year the net profit was recorded at $28386 against the revenue of
$423058, at 6.71% and this happened due to the sudden pressure of the operating costs.
Thereafter the scenario changed and the company reached to 14.79% and 16.65% in the year
2019. This indicates how well the company has pushed itself to reach towards the goals and
the objectives of the company. It becomes imperative from the net profit margin that how the

Running Head: FINANCIAL STATEMENT ANALYSIS
operations of the business are running and hence it can be concluded that in case of Saracen
Minerals Limited, the company is performing outstandingly (Resources Rising stars, 2019).
1.3 Corporate Strategy
There are several elements to grow continuously in the business and the competitive world;
however the three major elements that have been selected by Saracen Minerals Limited are
on innovation, constant research and development and strengthening with the allies, as they
believed all these three factors were necessary to achieve the long term growth and success.
There was a clear transmission of the strategy amongst the employees and therefore with the
help of the employees the company was able to spent $18.2 million on the exploration in the
June Quarter as it also helps in establishment of 400000oz per annum production profile. The
innovation is the substantial key in this sector to get a competitive advantage over the other
companies and therefore the company updated the market with the gold reserves and the
seven year production outlook at one of the forums (Kim and Davis, 2016). Lastly the
constant efforts on strengthening the allies with Nexus Minerals gave a stake of 6% and these
results in the ramping up of the exploration process. Under the binding terms of agreement,
Nexus Minerals will acquire the project exploration tenements package for a consideration of
1.49 million Nexus Minerals shares. This gave the high prospective of the profit and the
investors are keen to invest in the business of Saracen Minerals, keeping in mind the
profitability position as well (Hoey, 2018).

Running Head: FINANCIAL STATEMENT ANALYSIS
1.4 PESTLE Analysis
Political and Legal ● Stable political environment in the
country.
● The intellectual property rights of the
company are protected in the
country.
● The country has very less chances to
have war like situations.
● The country faces a high level of
corruption by politicians which
could affect the stability of the
country.
Economical ● High rate of taxation could
demoralize the intent of the
company.
● A high possibility of increase in the
wages and salaries of the workers by
the government of the country.
● The growth of the company is
directly proportional to the GDP of
the country.
Socio-cultural ● The company while in production of
the goods should ensure socio

Running Head: FINANCIAL STATEMENT ANALYSIS
economic norms of the country.
● The company should also focus upon
the health and safety standards of the
workers (Cehlár, Domaracká, Šimko
and Puzder, 2016).
Technological ● The company should focus on new
technological developments which
help in decreasing the cost of
production (Widya Yudha, Tjahjono
and Kolios, 2018).
● Investment into the technology and
innovation would lead the company
to achieve high growths and high
rate of return.
Environmental ● Various rules and regulation
considering the environment factors
would lead to the change in the
working style of the company.
1.5 SWOT Analysis
Strengths  Good track record.
 High flow of cash.
 Strong training methods and

Running Head: FINANCIAL STATEMENT ANALYSIS
techniques.
 Greater customer satisfaction.
 Greater returns on capital expenses.
 Extraordinary performance in the new
markets.
Weakness  Less focus on financial planning.
 Less investment in the research and
development (Shahba, Arjmandi,
Monavari and Ghodusi, 2017).
 Very less scope of product
enhancement and development.
 Very little investment in new
technologies.
Opportunities  Scope of decrease in the
transportation costs.
 More chances of increase in the flow
of cash due to investment in new
products (Saracen, 2019).
 More scope of having new
technologies.
 Huge scope of providing customer
satisfaction.
Threats  Huge shortage of skilled and honest
workers.
 Shortage in the demand of profitable

Running Head: FINANCIAL STATEMENT ANALYSIS
products.
 Frequent changing laws of the country
affects the working style of the
business (Saracen, 2019).
 Increase in the cost of raw materials.
 Various external liabilities.

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References
Cehlár, M., Domaracká, L., Šimko, I. and Puzder, M., (2016) Mineral resource extraction and
its political risks. In Production Management and Engineering Sciences (Vol. 39, No. 43, pp.
39-43). ROUTLEDGE in association with GSE Research.
Hamilton, P.J., Harris, C. and Hillier, S., (2016) Characterisation of geothermal systems
through FTIR mineral analysis of drill cuttings for exploration, appraisal and development.
In Proceedings of the 4th Indonesia International Geothermal Convention & Exhibition.
Petroleum Field. Proc. 5th Geol. Conf. & Exhibition, Geol. Soc. Trinidad & Tobago.
Hoey, T. (2018) Nexus Minerals to boost gold portfolio with acquisition from Saracen
[online] Available from
https://www.proactiveinvestors.com.au/companies/news/190133/nexus-minerals-to-boost-
gold-portfolio-with-acquisition-from-saracen-190133.html [Accessed on 30th September
2019]
Kim, Y.H. and Davis, G.F., (2016) Challenges for global supply chain sustainability:
Evidence from conflict minerals reports. Academy of Management Journal, 59(6), pp.1896-
1916.
Resources Rising stars, (2019) Saracen Mineral Holdings keeps it real during gold price
highs [online] Available from https://resourcesrisingstars.com.au/news-article/saracen-
mineral-holdings-keeps-it-real-during-gold-price-highs [Accessed on 30th September 2019]
Saracen, (2019) Annual report [online] Available from
https://www.saracen.com.au/files/6015/6773/2091/AR.pdf [Accessed on 30th September
2019]

Running Head: FINANCIAL STATEMENT ANALYSIS
Shahba, S., Arjmandi, R., Monavari, M. and Ghodusi, J., (2017) Application of multi-
attribute decision-making methods in SWOT analysis of mine waste management (case
study: Sirjan's Golgohar iron mine, Iran). Resources Policy, 51, pp.67-76.
Widya Yudha, S., Tjahjono, B. and Kolios, A., (2018) A PESTLE policy mapping and
stakeholder analysis of Indonesia’s fossil fuel energy industry. Energies, 11(5), p.1272.