At time of writing, the share price of St Barbara Limited [ASX:SBM] has plunged 30.32%, trading at $3.24.
The last 12 months have been characterised by two peaks and now, two troughs:
The latest news out of the company is an update centred on a feasibility study for the ‘Gwalia Mass Extraction’ project and lowered FY19 guidance at its Gwalia operation.
Why did the St Barbara share price do this?
The St Barbara share price fell due to a negative announcement.
The announcement is divided into two main sections. Both of which, when taken together, contributed to the sharp fall.
The first half of the announcement details the company’s effort to alter the current mining method as the mine deepens.
The related feasibility study determined that the current company technique of trucking will be continued as the two other hydraulic hoisting methods would not deliver the desired optimisations.
Perhaps one of the most important highlights of this section was that:
‘The combination of higher development requirements and the anticipated future orebody geometry does not consistently support the 1.4 Mtpa0F 1 throughput on which the initial FS was based.’
The company will now seek to investigate optimising the trucking option using ventilation and cooling with a capital expenditure of $100 million over the life of the mine.
The second section provides guidance on metrics associated with the Gwalia mine.
These include an updated gold production number and the all-in sustaining cost (AISC).
The new numbers are:
- Production of between 235,000 and 240,000 ounces down from 245,000–255,000 ounces
- AISC of between $980–$1000 per ounce up from $930–970 per ounce
Clearly, investors were disappointed by this outcome.
Buy the St Barbara share price dip?
It may be wise to see how the news filters through the market.
There may well be further volatility in the days and weeks ahead, so it might pay to wait and see if a positive trend forms in around a month/month and half.
That being said, St Barbara has been one of the strongest performers in the gold mining sector since October.
As geopolitical uncertainty increases over the course of the coming months, it is possible a recovery could take place sooner than expected — its revised metrics are still reasonably solid.
The sector as a whole has looked promising for months.
Finally, if you want a closer, in depth look at the best way to invest in gold, I would highly recommend Greg Canavan’s report on the precious metal, which can be downloaded for free here.
For Money Morning