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St Barbara Ltd – FY20 Production And Cost Guidance Update

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.

St Barbara - FY20 porduction

What is the production and cost guidance update?

St Barbara management announced that the Gwalia (Australia) gold production for  FY20  is  revised to between 175,000  and  190,000  ounces  (previously  200,000  to  210,000  ounces),  with  All-In  Sustaining  Costs of between A$1,390  and  A$1,450 per ounce (previously A$1,230 to A$1,290 per ounce). Sustaining Capex is forecast to be between A$60 to A$65 million (previously A$55 to A$65 million), and growth Capex between A$32 to A$38 million (previously A$30 to A$35 million).

The main reason for the production update is that the remaining Gwalia Extension Project (GEP) construction and raise-boring program is competing for constrained ventilation with scheduled production and development activities.

St Barbara management also announced FY20 guidance for Atlantic Gold (Canada) is forecast to produce between 95,000 and 105,000 ounces, with All-In Sustaining Costs of between A$900 and A$955 per ounce, with sustaining Capex of between A$13 to A$17 million, and exploration of between A$11 and A$13 million.

Investors could closely monitor this situation, further commentary on the operations will be provided in the Q1 September FY20 quarterly report scheduled to be released on 21 October 2019.

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.

However, the spot price of gold has slightly dropped in the last few weeks. This is in light of a potential new US-China trade deal (11 October Trump announced that China and the US had reached a tentative agreement for the first phase of a trade deal) and a new potential Brexit deal. If these deals are reached, global economic and political concerns may ease, causing gold to not be as favourable, as it has been in the last number of months.

What is the market reaction?

The initial market reaction to St Barbara production update is negative. St Barbara’s share price is down around 7% and is currently trading at around A$2.59 (11.00 am, 18 October). This decrease can be attributed to the reduction in production guidance at the Gwalia mine, as other gold producers are slightly up today. St Barbara trades on a P/E ratio in the low-teens and an annual dividend yield of 2 per cent (fully franked).




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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