St Barbara sees decade of gold at Simberi

St Barbara's Simberi operation in Papua New Guinea has had a bumpy few years, but the miner has defined a new sense of optimism it can profitably produce for another decade.

Since the sale of its Leonora operations and suspension of Atlantic in Canada, Simberi is St Barbara's only remaining producing asset, but it's at a transition point between dwindling oxide ore and sulphide material that requires a processing upgrade.

The company has just released a concept study that considered six development options with two flowsheet options and three different processing rates between 2-3.7 million tonnes per annum, and it has narrowed its thinking, with the larger option looking like the best.

Work to prepare for that suggests the circa 60,000-70,000 ounce per annum operation can be boosted to an average 170,000-190,000ozpa at much lower all-in sustaining costs.

The marginal mine has AISC of around US$2100-$3250/oz today, and that could tumble to between $1000-1200/oz.

Investment case

The cashed-up St Barbara estimates it may need to spend $213 million between FY25 and FY27 for upgrades, including a new ball mill and flotation circuit.

The aim is to recover 2Moz between FY25 and FY35 at rates between 70,000-75,000oz over the next three years and then up to 230,000ozpa after FY28.

While the mine plan is focused on the next decade, Simberi is expected to continue beyond that time, with its exploration upside not included in the plan.

St Barbara expects it won't need to spend significant amounts on its projects in Nova Scotia before Simberi's upgrades are completed. 

Road ahead

Managing director Andrew Strelein said the company now had a "compelling development pathway" towards taking the largest option at Simberi, confident in its ability to maintain oxide production into at least 2026 while it completed work on choosing a flowsheet.

While the base case is creation of a concentrate, studies suggest a mix of ultrafine grinding and cyanidation may deliver improved returns, trimming AISC and adding 117,000oz to the mine plan at an extra $10 million.

It recently worked with Stratum AI using algorithms to define around 143,000oz in sulphides that would previously have been considered unsuitable for the current CIL circuit.

Strelein is confident Simberi can continue to use the existing CIL facility beyond 2028 if needed. 

An update to the concept study is due later this year.

Upside available

In addition to completing metallurgical tests and updating reserves and resources, St Barbara will advance more detailed feasibility studies and a renewal of the Simberi mining lease that is set to expire in 2028.

It has also resumed diamond drilling on sulphide targets for the first since it acquired Simberi in 2012 and is confident of adding ounces.

Negotiations on the renewal are expected to include discussions on equity participation and economic benefits packages.

The company is not hurting for a quid right now, with some $250 million in cash and investments on hand.

St Barbara shares were up 10% today at 26.5c, capitalising it at $217 million.

The stock has traded between 13.7-32c over the past year.