St Barbara Shares Up 5.89% with Promising Q1 Results

At time of writing, Aussie mineral mining company St Barbara Limited [ASX:SBM] are trading shares at $3.68. This marks an impressive 5.89% spike from yesterday’s market price and, to the untrained eye, looks as though it occurred out of nowhere.

As of late, the company’s focus has been to invest and improve in the exploration, extraction and development of the precious metal gold.

Unfortunately, this left St Barbara tackling a difficult last quarter of FY18, with around $1.22 million of the $2.32 million insider shares being divested since March of this year.

Unsurprisingly, FY18 Q4 results — released back in July — were dismal. The quarterly AISC chart shows a 17% decrease from the third to fourth quarter, and unaudited expenditure on further exploration sat at $13.7 million.

But even then, St Barbara were voicing their optimism for FY19. And their Q1 September 2018 Production results — released on the ASX yesterday — gave grounds for this positivity.

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St Barbara meeting targets

Production results show to be on track with the company’s expectations and the FY19 Guidance figures.

Consolidated gold production was almost 100,000 ounces for this quarter, making the FY19 guidance of 350,000–375,000 ounces promising.

The Gwalia project, based in Western Australia, produced 62,845 ounces within the three months.

The Simberi mine in Papua New Guinea produced 35,863 ounces of gold, with a higher milled grade of 1.48 compared to the FY18 year average of 1.35. Both mining stations look to be heading in the right direction to meet their FY19 outlook figures.

St Barbara’s cash at bank is also sitting at a comfortable level. After paying off dividends of $28 million, income tax of $6 million, and investing $3 million in Peel Mining Ltd, St Barbara holds $350 million in cash. This is already $7 million up from the balance at 30 June 2018.

Gold spike leads to this spike?

Though these are impressive figures, they arguably aren’t enough to initiate such a significant climb. The massive spike in the spot gold price this week is likely a contributing factor.

Reports say gold’s price has risen alongside Italy’s 2019 budget reveal, showing an increase in the country’s spending and their deficit. It points to ignorance of EU guidelines, and a pattern that is mirroring that of the Greek crisis back in 2015.

When financial uncertainty is apparent, gold is looked to as an alternative investment. Thus we witnessed a 1.5% gold spike earlier this week to US$1,208 an ounce.

What this means for St Barbara

There’s still a fair way to travel for the company to hit their FY19 guidance figures, though this quarter has certainly put them in the right direction.

While the Eurozone debt crisis is still brewing, gold is likely to stay in high demand, keeping its price up.

Of course, the unpredictability of the market means anything can change this, at any time. Check this space regularly for the latest on the gold mining sector.


Ryan Clarkson-Ledward,
For Money Morning

PS: This recent spike may be causing you to feel compelled to stock up on some gold, but is it really the right time? Read this free report BEFORE you make your purchase: ‘Why You Should Wait to Buy Gold’. Download now.

Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

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