Gold

Why is this ASX All Ords gold share crashing 16% today?

A woman holds a gold bar in one hand and puts her other hand to her forehead with an apprehensive and concerned expression on her face after watching the Ramelius share price fall today

Image source: Getty Images

The St Barbara Ltd (ASX: SBM) share price is having a day to forget on Wednesday.

At the time of writing, ASX All Ords gold share is down 16% to 75 cents.

As you can see below, this latest decline means the St Barbara share price is now down 42% since this time last year despite a recent rebound.

Why is this ASX All Ords gold share being hammered today?

Investors have been hitting the sell button today after St Barbara released yet another abject quarterly update.

According to the release, for the three months ended 31 December, the company delivered gold production of 60,976 ounces at an all-in sustaining cost of A$2,666 per ounce.

This represents a disappointing mix of lower production and higher costs quarter on quarter. For example, compared to the first quarter, production was down 4.3% and its ASIC was up 7.1%.

And with St Barbara commanding a realised gold price of A$2,591 per ounce for the period, it was costing the ASX All Ords gold share more to mine the precious metal than it received from customers.

Another cause for concern is the company’s balance sheet. St Barbara ended the period with total debt owing of C$80 million and A$50 million on its syndicated facility. This compares to its cash balance of just $38 million.

Outlook

Shareholders will no doubt be hoping that the company’s proposed merger with Genesis Minerals Ltd (ASX: GMD) to form Hoover House will be the start of better things.

Hoover House will be one of Australia’s leading gold houses, with a production target of +300,000 ounces per annum, a long-life, high quality asset base and substantial potential for organic growth.

The merger is expected to unlock substantial, near-term synergies for both sets of shareholders, as well as resetting the combined entity’s corporate support model.

Overall, the merger is expected to either defer or eliminate ~A$400 million of capital expenditure, reducing near-term execution risk and funding requirements.


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