St Barbara Mining is sliding into rough waters as mining, labour and cost problems hit its mining activities in WA, dropping production and forcing cut backs to new investment – news that was unexpected and saw the shares plunge more than 20% on Tuesday.
The shares closed at 52.5 cents, down 21.6% yesterday after the market had looked over and given the thumbs down to the weak September quarter production report and reduced full year gold output guidance.
St Barbara said it started the 2023 financial year with group gold production of 63,700 ounces — down a third from the 86,403 ounces produced in the June quarter and from the 67,000 ounces produced in the September quarter last year.
That saw the company cut guidance for the full year to 260,000 to 290,000 ounces, down from the range of 280,000 to 315,000 ounces at the time of the release of the 2022 results in late August.
St Barbara owns and operates the Atlantic operation in Canada, Simberi in Papua New Guinea, and the Leonora operation in Western Australia.
The company said that while its Simberi and Atlantic operations performed in line with expectations, the Gwalia mine within the Leonora operation was hit by lower equipment availability and utilisation.
That in turn saw the forecast guidance for the biggest gold mining operation in the company slashed to a range of 145,000 to 160,000 ounces for the year to June, 2023, down from the original 170,000 to 180,000.
The forecasts for the Atlantic operations in eastern Canada were unchanged at 40,000 to 50,000 ounces and for the Simberi operation in PNG at 70,000 to 80,000 ounces.
The main problem seems to have been with the Gwalia mine within the Leonora operation which was impacted by lower equipment availability and utilisation.
To reduce the financial and operational impact of contractors and equipment availability issues in the current quarter, St Barbara decided to defer the expansion of the Leonora processing plant by at least 12 months.
As a result, the company will defer the costs required to expand the processing plant, upgrade the refractory ore circuit and construct the Aphrodite mine.
St Barbara directors explained in the quarterly report that the problems at Leonora and especially Gwalia were industry wide.
“The FY23 gold production guidance for Leonora was underpinned by the delivery of 1.1Mt of Gwalia ore to the processing plant. Over the last year there has been a steady rate of improvement in equipment availability and utilisation but the rate of improvement required to achieve guidance has not been achieved.”
“Across the industry there has been intense competition for highly skilled fitters and maintainers and St Barbara, together with Macmahon, has only been able to fill the majority of required positions by the end of September 2022.
“It has become evident the full year target of 1.1Mt of ore out of Gwalia cannot be achieved in FY23. Based on the most recent expected equipment availability and utilisation rate projections, a new target of ~950kt has been calculated. This is a 14 percent reduction in ore being delivered to the mill which in turn has driven the 14 percent reduction in production guidance.”
“Capital expenditure guidance has been updated to reflect the deferral of the Simberi Sulphide project, the Leonora Processing Plant expansion to 2.1Mtpa, development of the Aphrodite underground mine and refractory ore treatment capability at Leonora.
“Underlying local currency guidance for Atlantic and Simberi is consistent with prior guidance, however the Australian Dollar guidance has been updated to reflect the depreciating exchange rate. AISC guidance for Leonora has been updated to reflect lower gold production.”
In PNG, St Barbara said that “Mining reviews supporting the strategic review of Simberi have identified additional oxide ore. This additional material has the potential to extend the mining of oxide ore through FY25”
“Formerly oxide ore mining was scheduled out to only FY24. No decision is therefore required on the Sulphide project for at least 12 months while maintaining business continuity. The strategic review process is ongoing with multiple interested parties.”
Costs per ounce will rise because of the lower production expected from Laverton.
