Hoover House might look slightly different to what was expected as Genesis and St Barbara negotiate “potential alternative transaction structures” for the new entity.
This comes as St Barbara continues to navigate its troubles.
After St Barbara announced a statutory net loss after tax of $407 million in its half-year to December 31, the company revealed in early March that its Atlantic gold operations in Nova Scotia, Canada could be placed on care and maintenance.
St Barbara continues to experience difficulties at its Leonora operations in WA, with the suboptimal blasting of three key stopes curbing productivity in the March quarter. Leonora produced 30,942 ounces (oz) of gold in the three months to March 31, down from 32,175oz produced in December quarter of 2022.
This has forced St Barbara to reduce its FY23 Leonora production guidance from 145,000–160,000oz to 130,000–135,000oz. The company has also retracted its FY23 Leonora all-in sustaining cost (AISC) guidance.
Before Hoover House is created, a series of conditions must be met. This includes St Barbara’s net debt position being no more than $163.2 million at the end of the month prior to when the second court hearing for the scheme of arrangement occurs.
While gold production has been down, St Barbara improved its net-debt position from $117 million at the end of the December quarter to $112 million in the three months just gone. The company said lower gold production at Leonora had been offset by favourable gold prices.
And despite St Barbara’s trials and tribulations, the transaction still makes sense in some shape or form.
“St Barbara and Genesis are committed to advancing the transaction given the industrial logic of consolidating the Leonora province,” St Barbara said in a statement.
“However, in light of the recent operational and financial performance, and the ongoing evolution of the mine plan at Gwalia, St Barbara and Genesis are in discussions regarding potential alternative transaction structures and capital requirements.”
The upside is still there. In a statement, Genesis reiterated that Hoover House has a long-life, plus-300,000-ounce-per-annum “margin over ounces” production plan.
This would see “high-grade, selective mining” targeting 120,000–130,000oz per annum taking place at the Gwalia mine, complemented by the addition of Genesis’ new Ulysses mine, leading to 200,000oz per annum of combined production between the two.
As St Barbara and Genesis carry out discussions around alternative transaction structures and capital requirements, the two companies said it was appropriate for them to enter into a trading halt until an outcome from the discussions is known.
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