Genesis Minerals has been forced to resume negotiations with St Barbara as the asset at the heart of their planned merger battles a litany of costs and production problems.
Genesis Minerals has been forced to resume negotiations with St Barbara to potentially devise an ‘alternative transaction’ as the asset at the heart of their planned merger battles a litany of costs and production problems.
Both companies placed their ASX securities in a trading halt this morning as St Barbara disclosed it would be reducing its gold production guidance for the 2023 financial year and withdrawing its all-in-sustaining-cost guidance for its flagship Leonora operation entirely.
Expected output from St Barbara’s primary operation has been lowered to between 130,000 ounces and 135,000 ounces for FY23 from a previous 145,000 to 160,000 ounces range.
In a statement today St Barbara said suboptimal blasting of three key stopes and subsequently reduced mining rates meant ore that had meant to mined this quarter had to be pushed back to June.
With their merger to form a new Leonora-focused gold company dubbed Hoover House scheduled for May, the pair say they are now exploring alternative transaction structures on the back of the update.
“St Barbara and Genesis are committed to advancing a transaction given the clear industrial logic of consolidating the Leonora province,” a statement from Raleigh Finlayson-led Genesis said.
“However, in light of recent operational and financial performance and the ongoing evolution of the mine plan at Gwalia, Genesis confirms it is in discussions with St Barbara regarding potential alternative transaction structures and capital requirements.
“Given the status of these discussions, the boards of both Genesis and St Barbara consider it appropriate to place the respective company shares into trading halt until an outcome of these discussions is known.”
As part of the Hoover House deal agreed to last December, it was also agreed that St Barbara would shed its struggling Simberi and Atlantic operations in Canada and list them as a new company on the ASX called Phoenician Metals.
By its own admission, St Barbara has said all conditions agreed to as part of the transaction were still outstanding as of today, including keeping its debts below $163.2 million.
As far as cost-saving measures go, it has brought mining operations under a single contractor, saving about $1 million per month, and cut staffing levels to ‘meet operational requirements’.
The companies have not indicated when they expect an update on the transaction.
Under the scheme of arrangement, each Genesis shareholder is to receive 2.0338 St Barbara shares for each Genesis share held.
Genesis Minerals last changed hands at $1.10, while St Barbara shares were last at 64 cents.
