St Barbara Limited

Debt Free Balance Sheet: St Barbara Limited (ASX: SBM) is primarily engaged in mining and sale of gold, mineral exploration and development. The company has recently come up with an announcement regarding a change in substantial shareholding of Van Eck Associates Corporation, with voting power reducing from 13.30% to 12.22%.

Recently, the company has entered into a pact to acquire 100% of the outstanding common shares and options of Atlantic Gold Corporation for a total consideration of A$768 million. St Barbara recently completed a Retail Entitlement Offer of $490 million, post which the company had A$870 million in cash and deposits ready for settlement and a three-year revolving facility of A$200 million.

In the month of June, St Barbara entered into an Earn-In and Joint Venture agreement with Alice Queen Limited’s 84.5% owned subsidiary, Kauraru Gold Pty Ltd. SBM has extensive experience of operations in a tropical region like Horn Island. The company’s financial security, technical capability, and operational flexibility will help Alice Queen to realise and fully maximise the potential of the region.

Key Highlights of Quarter Ending March 2019: For the quarter ending March 2019, the company reported consolidated gold production of 88,358 ounces as compared to 89,244 ounces in the previous quarter. During the period, All-In Sustaining Cost stood at A$1,098 per ounce as compared to A$ 1,108 in the previous quarter. The average realised gold price for the period was A$1,810 per ounce against A$ 1,722 per ounce in the previous quarter. During the period, gold production at the Gwalia mine was reported at 54,261 ounces as compared to 53,257 ounces in December quarter. This was at an AISC of A$ 1,016 per ounce in Q3FY19 as compared to A$1,081 per ounce in Q2FY19. Gold production at the Simberi mine reported a decline at 34,097 ounces in the current quarter as compared to 35,987 ounces in the previous quarter. The company reported A$382 million cash at bank with no debt as at 31 March 2019. A fully franked interim dividend of $0.04 was also paid on 27 March 2019.


Gold Production and Guidance Data (Source: Company Reports)

Other highlights included the Gwalia Extension Project which remained on schedule with an overall project budget of $112 million. The Company increased the project budget due to aggregate costs of $9 million associated with some project related items including contract negotiations with PAF contractor and some infrastructure scope changes.The extension project is expected to be completed in the second quarter of FY20. In addition, the period also saw exploration activities in the form of drilling programs and feasibility studies for the Gwalia mine.

FY19 Guidance: The company updated the FY19 guidance on 22 March 2019 with an expected production between 130,000 and 135,000 ounces. The previous guidance was in the range of 120,000 to 130,000 ounces. Previously, the AISC guidance was in the range of A$1,275 and A$1,375 per ounce which was later revised to A$1,245 and A$1,300 per ounce. Guidance for sustaining capex remained unchanged at A$9 million to A$10 million.

Stock Recommendation: The stock of the company generated returns of 1.38% and -34.43% over a period of 1 month and 3 months, respectively. For the first half of FY19, the company had an EBITDA margin of 46.2%, which is higher than the industry median of 33.4%. The company’s net margin for the period was 24.5% against the industry median of 12.5%. Given the backdrop of mix scenario, investors should watch the stock at the current market price of $3.080 per share (up 5.479% on 25 June 2019).  

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