Ground Breakers: Genesis merger talks are still bubbling away in the background as St Barbara sells growth story

St Barbara boss Craig Jetson says discussions are ongoing with Genesis Minerals in its bid to consolidate the Leonora gold region
Genesis kicked off the consolidation with a bid for Dacian Gold, which it now owns 30.60% of
SBM dumps dividend after impairment drives $161m loss

The rumour mill may be running a little cold since talks between St Barbara (ASX:SBM) and Genesis Minerals (ASX:GMD) dominated the pubs at this year’s Diggers and Dealers conference in Kalgoorlie.

But St Barbs boss Craig Jetson says discussions are still ongoing amid the Gwalia gold mine owner’s bid to consolidate the Leonora gold district, something that has raised the eyebrows of longtime SBM shareholders concerned they could give control of the region’s flagship asset to crown former Saracen and Northern Star and now Genesis boss Raleigh Finlayson the leader of the kingdom.

Jetson told analysts and media on an investor call today that discussions are still bubbling away in the background.

“I’m not shy from saying the Genesis discussions at times are ongoing, along with other discussions as well,” Jetson said.

“There is more than one train in the station that we need to make sure that we’re analysing, we’re getting the right view as we do our diligence and go through our business development thinking our strategy to grow in the province.

“And so I’m not I’m not suggesting for a moment conversations have stopped.”

But he was also at pains to paint a rosy picture of the now WA-based goldie’s outlook, saying it had growth on the horizon few of its peers boasted. He noted Gwalia, already in St Barbs’ hands, was the ‘jewel in the crown’ in the Leonora province.

“Our province plan strategy is seeing undeveloped opportunities in the region beginning to approach us for future development,” Jetson said.

“This is at a time when the industry performance in general across our sector is in decline.

“But St Barbara Mining is growing and become the gold business of the future in particular central to regional consolidation, and being the envy of most and the interest of everybody.”

Genesis completed a $100m capital raising today that will be used to support its acquisition of struggling Leonora region gold miner Dacian Gold (ASX:DCN), with GMD revealing it has now picked up 30.6% of the voting shares in its target, with a further 6.47% picked up under the scrip bid’s Institutional Acceptance Facility.

So how was that performance last year?

Not outstanding. Impairments fuelled a $161m after tax loss on an underlying profit after tax of $24m, with SBM’s output of 280,746oz at $1848/oz impacted by issues at the Atlantic Gold operations in Canada ($224m impairment) and Simberi mine in PNG.

There is light at the end of the tunnel on both those fronts, with SBM recently getting greater clarity on the likelihood of gaining approvals to extend the Atlantic mines in Nova Scotia and starting a process to sell Simberi, where a long planned sulphide expansion was deferred earlier this year.

St Barbara’s EBITDA fell 34% from $300m in FY21 to $197m in FY22 on lower output, with underlying after tax profit down 70%, costs up 14% and cash flow sliding 61%.

There were also no dividends after a 6cps payout last year, with the need to divert capital its growth plans at Leonora, where the Zoroastrian mine will enter the production schedule at the start of FY24 and Beaver Dam in Canada.

RBC analyst Alex Barkley said SBM’s results, while weaker than last year, were broadly in line with market expectations.

“We consider no dividend payment a prudent option as SBM embarks on new growth spending at Leonora and Atlantic,” he said.

“Recent permitting success at Atlantic could position the site for an improved outlook. Overall, we consider today’s result a neutral outcome although initial market reaction may be negative.”