St Barbara gears up for Leonora merger

Leonora centrepiece St Barbara has copped a big loss ahead of its merger with Genesis Minerals, as new miner Red 5 pushes its case as a “logical” processing hub for players in the prominent gold province.  

St Barbara realised a $407.1 million statutory loss for the first six months of the 2023 financial year, largely driven by a $74 million impairment against its Papua New Guinea gold operation, Simberi, and a $420 million impairment at its Atlantic operations.

Both assets have struggled operationally during the past 12 months, facing declining grade, weather issues and replacement work.

Excluding one-off accounting items, St Barbara’s losses were $8.6 million.

The company attributed this mainly to lower production at its leading asset, Gwalia, which comprises an underground gold mine and a 1.4 million tonne per annum processing plant.

Gwalia had been due for processing plant upgrades which were put on hold for at least 12 months in October because of labour shortages and rising costs.

Despite a tough six months, St Barbara managing director Dan Lougher said there was plenty to look forward to in the second half of the year, alluding to the planned merger with Raleigh Finlayson’s Genesis Minerals.

Genesis Minerals and St Barbara struck a deal in December 2022 to form a new Leonora-focused company named Hoover House, after almost six months of negotiations.

As part of that deal, it was 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.

Mr Lougher, who replaced chief executive Craig Jetson just before the St Barbara deal crossed the line, said St Barbara was starting to make progress on both fronts.

“Atlantic has transitioned well into its stockpile processing phase and is poised to deliver on its guidance with an appropriately sized workforce. Simberi has recovered to breakeven cashflow for the half year,” he said.

“In December, the company announced the proposed merger of our Leonora operations with Genesis to form the new Hoover House, together with the demerger of Atlantic and Simberi to create Phoenician Metals.

“St Barbara has held preliminary integration planning discussions with Genesis as we commence preparations for what could be an exciting future of the Leonora Province.”  

The merger is set to be implemented in May this year. 

Genesis has also recently secured more than an 80 per cent stake in Laverton gold miner Dacian Gold, which is currently in the process of putting its Mt Morgans operation under care and maintenance. 

Meanwhile, new Leonora gold miner Red 5 has approached investors for another $80 million, after raising $60 million less than five months ago to cover ramp-up costs at its King of the Hills operation. 

Red 5 and St Barbara have previously been in discussions regarding potential "operational synergies" and have spruiked the possibility of processing ore feed from each of their operations. 

Red 5 managing director Mark Williams today affirmed the company was firmly on track at the mine and made note of the operation’s potential in Leonora.

“KOTH is positioned to be the lowest cost processing plant in the Leonora district and is a logical long-term processing hub for mines in the surrounding area,” he said.

"Studies are underway to evaluate an expansion of the KOTH process plant and open pit mine for future growth, with a tangible opportunity to accelerate mining to support larger mill throughput of 6 – 8Mtpa."

Canaccord Genuity and Petra Capital are acting as joint lead managers and joint bookrunners to the placement

Ord Minnett Limited acted as co-manager to the placement.

St Barbara shares were off 10.94 per cent to trade at 57 cents. 

Red 5 shares are locked in a trading halt and last changed hands at 18 cents. 

Genesis Minerals shares were off 6.42 per cent to trade at $1.02.