St Barbara Limited

SBM Details

JV with AQX Completes Geochemical Sampling Program at Horn Island Project: St Barbara Limited (ASX: SBM) is involved in the mining and sale of gold, mineral exploration and development. Recently, Norges Bank ceased to be a substantial holder in the company, effective from October 15, 2019.

On October 7, 2019, Alice Queen Limited (ASX: AQX) informed the market that it has completed a soil and rock chip geochemical sampling program across its Horn Island project under a recently formed Joint Venture with St Barbara. Although assay results from this geochemical survey campaign are currently pending, several encouraging observations have been noted from the rock chip sampling of outcropping quartz vein occurrences, supporting a number of fundamental features that potentially outline extension of the hydrothermal system from the currently defined Horn Island gold resource.

Q1FY20 Key Highlights for the period ended September 30, 2019:Consolidated production for the quarter was reported at 87,569 ounces, as compared to 86,197 ounces in Q4FY19. Production at Gwalia stood at 38,153 ounces of gold for the quarter, with 164 kt of ore milled at an average grade of 7.4 g/t Au (gold). Production at Simberi for the period stood at 27,061 ounces of gold, at an average milled grade of 1.19 g/t Au. Production at recently acquired Atlantic gold stood at 22,355 ounces at an average milled grade of 1.29 g/t Au.


Production Summary (Source: Company Reports)

FY20 Guidance:Gold production at Gwalia (Australia) for FY20 has been revised from earlier 200,000 to 210,000 ounces to 175,000 and 190,000 ounces, with All-In Sustaining Costs guidance, revised from the previous A$1,230 to A$1,290 per ounce to A$1,390 and A$1,450 per ounce. Sustaining capital expenditure has been revised from the previous A$55 Mn to A$65 Mn to A$60 Mn to A$65 Mn. Growth capital expenditure has been revised from the previous A$30 Mn to A$35 Mn to A$32 Mn to A$38 Mn.

Gold production at Atlantic Gold (Canada) is expected to be in the range of 95,000 and 105,000 ounces, with All-In Sustaining Costs in the range of A$900 and A$955 per ounce. Sustaining capital expenditure and exploration costs are expected to be in the range of A$13 Mn to A$17 Mn and A$11 Mn and A$13 Mn, respectively. Simberi (PNG) production and cost guidance for FY20 remains unchanged.

Stock Recommendation:SBM’s share generated a negative YTD return of 38.40%. Its gross margin, EBITDA margin, and net margin for FY19 stood at 51.5%, 44.3%, and 21.8%, better than the industry median of 42.0%, 29.1%, and 11.0%, respectively, implying decent fundamentals of the company. Its ROE for FY19 stood at 15.0%, better than the industry median of 12.3%, which implies that the company is generating a better return for its shareholders than its peer group. Its current ratio for FY19 stood at 10.07x, better than the industry median of 1.75x, which implies that the company is in a better position to address its short-term obligations. The stock has corrected ~15.24% in the last 3 months. Hence, considering the aforesaid facts and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $2.530, down 8.993% on 18 October 2019, on account of the announcement related to the revision in FY20 guidance.

 
 SBM Daily Technical Chart (Source: Thomson Reuters)

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