Ground Breakers: Genesis talks raise ire of St Barbara shareholders as gold miner's performance improves

St Barbara faces investor concern on Genesis deal talks
The Gwalia gold mine owner is beginning to improve its performance, hitting guidance for 2022
Capricorn Metals shares run on record quarterly gold results

Cast your mind back to 2018 when gold miner St Barbara (ASX:SBM), fresh off one of the mining industry’s great rags to riches tales, hit an all time high of $5 a share.

Such days are long gone as a series of operational issues for the Gwalia and Simberi gold mine owner and the questionable decision to pay big bucks for the Atlantic Gold Operations in Nova Scotia have stripped billions off its market cap.

Having tumbled to a recent low of just 75c at the end of June, St Barbs is now worth $746 million at a price of 92c.

The ordeal has seemingly put one of WA’s most prolific gold miners in play, with reports of merger talks between Raleigh Finlayson’s upstart Genesis Minerals (ASX:GMD), dominating the public discourse around the company which should be the big fish in the Leonora gold pool.

That a (well backed) junior explorer with no production could seek operating control of one of WA’s longest running and most successful gold mines by merging with the company that owns it does not appear to sit well with investors.

Indeed, top 10 shareholder Rover Investments used a conference call today to issue its concerns, unusual for a forum usually consumed by analysts asking fairly dry questions about tax treatments and capex outlooks.

Long story short, they’re not particularly pleased it could be a merger of equals, also expressing a lack of confidence in the St Barbara board in the wake of the Atlantic Gold acqusition.

No decisions yet

St Barbara’s MD Craig Jetson defended the Atlantic Gold acquisition, saying it was permitting and not operations that had been the issue in Canada.

Meanwhile, he said there were no decisions yet on any deal with Genesis, saying St Barbs would be talking to multiple groups about mooted consolidation plans in the Leonora district.

“In terms of Genesis, I’ve spoken to them and talks are continuing,” he said.

“I’m not ruling out any business opportunity at this point in time, but what it will do is make good sense and make and create value to the current shareholder proposition, shareholder value and to our business.

“And it won’t be a reckless change or consolidation, if at all any.

“As I’ve said in today’s call, people now are coming to me asking me about their business opportunity, what they’ve got and the synergies that they can bring to Leonora.

“It’s great that we are the center of attention in terms of value creation, I’d rather people be saying, gee, I wouldn’t want to be a piece of Gwalia. I’d like a piece of that province plan, I want to be part of that, than don’t do that, I don’t want to be anywhere near where they are.

“So we’ve got the right strategy, we’ve certainly got the right endowment. We’re talking to the right people, not just one group of people, we’ll be talking to multiple groups. That’s what business development do.”

St Barbs reports operating improvement

More obviously on the block is St Barbara’ Simberi mine, where it halted an investment decision on a long planned sulphide ore expansion in favour of a “strategic review”, a commonly used synonym for sale.

It picked a good time to lift output at Simberi, which has struggled with a range of issues this year including a major Covid outbreak in PNG.

Simberi’s June quarter production lifted from 10,254oz in the previous quarter to 17,882oz, hitting its revised guidance of 25-30,000oz (28,136oz).

Costs also came down from $3829/oz in the previous quarter to $2276/oz.

SBM’s Leonora operations produced 50,506oz, taking full year production to within both output and cost guidance with 191,459oz at $1717/oz.

Atlantic delivered its best quarter of the financial year, turning out 18,015oz at $1751/oz to deliver 61,151oz for FY22. All up St Barbs produced 280,726oz at $1848/oz, within both production and cost guidance.

“Leonora has met original FY22 guidance for gold and AISC despite unforeseen industry pressures,” RBC analyst Alex Barkley said.

“This is a reassuring achievement for a site which has struggled vs. guidance in recent years.

“Leonora has added a material new 218koz Resource at Old South Gwalia. This could help to open up a new mining front and improve mine tonnage consistency.

“It also helps demonstrates the high volume of gold we see in the Leonora region, which could underpin the site’s potential to become a major regional hub.”

St Barbara (ASX:SBM) share price today:

Clark’s Capricorn shines

Mark Clark’s Capricorn Metals (ASX:CMM) pulled an almost 10% lift in its share price after announcing a record quarter from its Karlawinda gold project in WA.

One of the few gold miners which could be adequately described as a market darling in recent years, CMM’s strong early performance at Karlawinda continued with the 32,108oz pumped out in the June quarter outstripping the 31,769oz generated in the March term.

Its annual production for FY22 of 118,432oz was at the upper end of its 110,000-120,000oz guidance range, with AISC of $1112/oz for the nine months to June 30 towards the bottom of its $1100-1200/oz range.

Impressive in this market.

CMM hit a net cash position of $900,000 at the end of June with $65.9m in hand, and made a $15m repayment on its Macquarie loan to take its principal to $50m after the end of the quarter.

The company is tipping growth in FY23 as well, guiding production of 115,000-125,000oz at AISC of $1160-1260/oz.