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St Barbara Ltd FY19 results – Weak Result

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

St Barbara Ltd (ASX: SBM) is an Australian based gold producer and explorer. St Barbara’s assets include the Leonora Operations in Western Australia, the Simberi Operations in Papua New Guinea, and the Atlantic Gold Operations in Nova Scotia, Canada. St Barbara has a market capitalisation of A$2.5 billion.

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What are the results from St Barbara FY19?

Today (Wednesday 21 August 2019) St Barbara released its FY19 annual results. The main points are as follows:

  • Underlying NPAT for FY19 is A$142 million, down 30 per cent from FY18.
  • Cash flow from operating activities for FY19 is A$241 million, down 24 per cent from FY18.
  • Underlying earnings per share (basic) for FY19 is 27 cents, down 39 per cent from FY18.
  • Total dividends per share for FY19 is 8 cents (fully franked), down 33 per cent from FY18.

Specific results on company operations are as follows:

  • Gwalia mine produced 220,169 ounces of gold in FY19, down 18 per cent from FY18.
  • Simberi mine produced 142,177 ounces of gold in FY19, up 5.6 per cent from FY18.
  • Total production at Gwalia and Simberi of 362,346 ounces, down 10 per cent from FY18.

What were the drivers of this result?

The decrease in total production for FY19 was mainly attributed to a reduction in production from the Gwalia mine. This disappointing result was largely due to a  combination  of  ventilation  constraints  limiting  parallel  work  activities  in  the  underground  and  Gwalia  Extension Project activities.

A positive for St Barbara is that the Simberi mine hit record production. This result partially offset the decrease in production from the Gwalia mine, but did not offset production enough for total production to increase.

What is the outlook for St Barbara?

The general global outlook for gold is positive. This assessment reflects a number of global political and economic concerns. A few concerns include the continuation of the proliferation of trade barriers in the form of tariffs mainly from the US and China, significant uncertainty around whether the new Prime Minister of the UK Boris Johnson can reach a successful Brexit deal, continued nuclear tensions in the Middle East surrounding the US and Iran and continuing tensions in Hong Kong.

The outlook for St Barbara is not promising. St Barbara noted that total gold production from Gwalia and Simberi mine is expected to be in the range of 310,000 – 335,000 ounces. This is down from FY19 total production of 362,346 ounces, which represents a 13 per cent reduction in gold production for FY20.

Guidance for the Atlantic Gold operations in 2020 will be determined after due consideration following completion of the acquisition.

What is the market reaction?

The initial market reaction to St Barbara FY19 is slightly positive. St Barbara’s share price is up around 2.5 per cent and is currently trading at around A$3.68 (10.30am, 21 August). However, this increase may not be attributed to St Barbara FY19 performance, but instead to a slight increase in the price of gold overnight. St Barbara trades at P/E ratio in the mid-teens and an annual dividend yield of 3.3 per cent (fully franked).

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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