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Golden showdown: St Barbara’s cash pile attracts predators in the resources sector

St Barbara (ASX:SBM) looks like a very attractive cash pile that could be snapped up by any one of a handful of predators in the WA resources sector in the wake of the reshuffle of its Leonora gold mining assets with Genesis Minerals.

A combination of the cash and debt repayment from the Genesis deal, along with a surge in cash from better-than-expected gold production, especially from the Leonora assets, has left St. Barbara with a near $300 million pile of cash ($294 million). That is well in excess of the $212 million market value for St. Barbara at Wednesday’s close of 26 cents a share.

That’s up from $60 million at the end of March, and the larger amount includes $47 million in escrow to cover remediation costs at the Canadian gold mining assets.

According to a brief update for the June quarter and financial year, issued on Wednesday night well after trading ended, St. Barbara finally got its act together. Not only did it see improved performance from the Leonora assets, but also from its troubled mine in Eastern Canada and the Simberi mine in PNG – both of which are staying with the company post the Genesis deal.

Production for the year to 30 June for the Leonora assets totalled 138,050 ounces, higher than the guidance of 138,000 to 138,000 ounces.

Production from the Atlantic gold mining assets in Eastern Canada totalled 43,998 ounces against broad guidance of 40,000 to 50,000 ounces for the year to 30 June. Output from Simberi in PNG totalled 78,320 ounces, close to the top of the guidance range of 70,000 to 80,000 ounces.

St. Barbara said all three mines saw a significant improvement in the June quarter compared to earlier in the year when Atlantic and Leonora, in particular, struggled. Total output for the quarter was more than 77,000 ounces, the first for the company in 2022-23. Leonora saw a 32% rise in production in the quarter from the March quarter, and Simberi more than 50%.

Directors didn’t comment in the brief report to the ASX, except to say that the full June quarter and 2022-23 production report would be issued on 27 July (and will contain the all-important details of the company’s production costs, which should have improved in the final quarter with higher throughput).

Based on the 2022-23 performance, St. Barbara has started its new look with around 117,000 ounces of annual production and more than $200 million in cash to either buy more tonnes or be bought out.

Naturally, Silver Lake Resources, the spurned suitor in the battle with Genesis, could be interested in the cash pot.

It told the ASX last week that it had successfully negotiated a tough 2022-23, especially in the closing quarter in its Canadian operations. The company said it had a record June quarter sales result of 83,540 ounces thanks to the performance of the Deflector and Mount Monger operations.

That saw Silver Lake deliver 2022-23 sales of 260,370 ounces, “in line with the annual guidance range and 3% higher year on year.”

The delivery of Group guidance is particularly pleasing given the impact of forest fires in northern Ontario, which impacted the June production result at the Sugar Zone operation,” the company said.

“All-in-sustaining costs (“AISC”) for the fourth quarter are yet to be finalised but are expected to decrease to the lowest level for the year, with FY23 AISC expected to be within the guidance range of A$1,950 to A$2,050 per ounce.

“The strong fourth-quarter performance is consistent with Silver Lake’s ‘invest and yield’ strategy and reflects the investment through the first half to establish access to new higher-grade mining areas at both Deflector and Mount Monger,” the company said in the statement to the ASX.

Silver Lake ended the financial year with cash and bullion of $331 million, up from $268 million at 31 March, and “remains debt-free.