For some reason (and not the weakening gold price or higher Aussie dollar), shares in Saint Barbara Mines, the best performing stock in the ASX 300 last year, have gone cold, sliding 28% in the past week.
While Comex gold futures fell around 2.6% in New York last week up to to the close of trading on the ASX last night, St Barbara shares were down 28%, or 76 cents, in the same time, from the 52 week high of $2.68 last Tuesday afternoon to yesterday’s close of $1.915 when the shares dropped 4.7%.
No explanation or response from the ASX as to any reasons for the sharp slide.
And yet the company has built a reputation of being among the better run miners, with a conservative approach, preferring to pay down debt and lately return to hedging some of its production to build up cash to pay down more US dollar debt.
And yet yesterday the company got some good news from ratings group Standard & Poor’s – it raised its rating on Saint Barbara from ‘B-’ to ‘B’ and its senior secured debt, with a stable outlook.
In the current weak outlook for miners generally, that’s gold news – even gold mining giants like Newmont and Barrick have struggled to ride out the commodities sell-off in the past couple of years.
Standard & Poor said Saint Barbara’s "improving operating performance has strongly boosted its free cash flows, enabling it to repay A$159 million of debt in the nine months to February 2016”.
St Barbara said the upgrade had not resulted in any change to its existing debt arrangements.
Starting the 2015 year at 10.5 cents, Saint Barbara shares surged through the year (especially in the closing months as world gold prices rose) to finish at $1.425 for a market cap of $705 million and a a rise over the 12 months of more than 1,200%.
That was supported by the solid interim results announced last month.
The company reported that statutory profit after tax for the half year to the end of December was $77 million, with the underlying profit after tax coming in at $60 million. “This represents a significant improvement on the corresponding prior period (2014: $20 million statutory loss, $1 million underlying loss)," Saint Barbara reported.
"Cash and cash equivalents on hand at 31 December 2015 was $100 million3 with total interest bearing debt of $293 million (June 2015: $347 million). The debt primarily comprised US$180 million senior secured notes and US$36 million Red Kite debt facility, which were reduced by US$ 55 million in total from 30 June 2015. Debt has been further reduced in the second half as announced previously,“ the company noted last month.
And earlier this month this conservatism emerged in an announcement that Saint Barbara was back in the hedging game.
"St Barbara Limited has entered into forward gold contracts to reduce the US dollar gold price risk associated with accumulating US funds for the future repayment of the remaining of US Senior Secured Notes.
"A total of 50,000 ounces of forward gold contracts are to be delivered in monthly instalments from July to December 2016 at a forward price of US$1,260 per ounce. This volume represents less than 15% of current annual Company production.
"The hedge provides gold price certainty at recent higher gold prices for a portion of the remaining US$168 million balance of US Notes. The US Notes have a maturity date of April 2018, however, the Company intends to continue its recent practice of reducing debt by repurchasing Notes in advance as the opportunity arises.
"In combination with the continuing strong cash flow generated from operations, it is anticipated the Company will pay out in full the US$36 million balance remaining on the Red Kite debt facility by the end of June 2016, twelve months ahead of the amortisation schedule,” Saint Barbara reported on March 18.
So that makes the 28% slide in the Saint Barbara share price a little hard to understand.
