Barry Fitzgerald | The Australian | November 15, 2016
St Barbara has pulled the sale of its Papua New Guinea gold assets — including the 100,000 ounce a year Simberi mine — after bids failed to match the company’s expectations.
“While a number of potential buyers expressed interest in the PNG assets, their level of interest did not meet St Barbara’s assessment of the value of these assets,’’ the company said.
Simberi has a mine life of about two years ahead of it, with a possible seven-year life extension if a $135 million development of the operation’s sulphide mineralisation was to proceed.
St Barbara stopped short of making any decision on the sulphide project but has come up with a possible life-extending oxide solution in a joint venture with Newcrest.
Under the deal between the pair Newcrest will explore for copper-gold on St Barbara’s tenements on the nearby Tatau and Big Tabar islands.
Newcrest could earn up to a 75 per cent interest by spending $US25 million ($33m), with St Barbara retaining the rights to oxide and sulphide material capable of being treated back on Simberi, either through the existing oxide plant, or the contemplated sulphide plant.
St Barbara itself will continue to push ahead with its own exploration across the Tabar island group for life-extending ore for Simberi, if not make a stand-alone discovery.
Managing director Bob Vassie said Simberi was now consistently generating good cash flows.
“We’ve tested each strategic option for the future of the PNG assets, and we are now clear about the preferred strategic direction,’’ Mr Vassie said.
Credit Suisse mining analyst Michael Slifirski said the decision to keep Simberi in part reflected St Barbara’s reduced need for cash for debt reduction given the strong cash flows from its Australian operations.
He said the high cost and scarcity of acquiring a replacement asset and the materially improved operating performance of Simberi were also likely to have been factors.
“But reserves (at Simberi) are depleting fast.’’
St Barbara shares were caught in yesterday’s sell-off in gold equities in response to continued gold price weakness, falling 25c or 9.8 per cent to $2.28. Gold has fallen from more than $US1300 an ounce before the US election to $US1223 an ounce late yesterday.