St Barbara (ASX:SBM) share price craters 8% on production fall

St Barbara Ltd (ASX: SBM) shares have lost their shine today after the gold miner released its third-quarter report to the market.

At the time of writing, the St Barbara share price is down 8.13% to $1.865. So, what was in the report that has sent investors scrambling?

What’s impacting the St Barbara share price?

Unfortunately for St Barbara shareholders, the finance side of things was the complete opposite of what investors hope to see. Typically, the desire is for production to increase and costs to fall – which means profits grow.

But the St Barbara share price is suffering today after the company showed a fall in production. Specifically, gold production drifted 8.2% lower to 82,303 ounces compared to the previous quarter. Adding to the margin compression, all-in sustaining costs (AISC) climbed 8.7% to $1,649 per ounce.

The result is a reflection of further deterioration in the COVID-19 situation in Papua New Guinea. Sadly, a significant increase in community transmissions occurred during the quarter. St Barbara stated that this affected a number of employees and community members.

Furthermore, gold sales fell 28.3% to 71,329 ounces compared to the December quarter. Although, on a positive note, the average realised gold price increased 5.7% to $2,247 per ounce.

Looking ahead

To alleviate future production issues, St Barbara continues to progress with its “Building Brilliance Program”. The program aims to improve operations and deliver brownfield expansion projects.

As part of ‘Uplift 1’ of the program, the company has been focusing on debottlenecking operations to achieve improved production at a reduced cost – exactly what shareholders would be looking for, given today’s results.

Additionally, ‘Uplift 2’ entails St Barbara pursuing increased production from its Leonora Province site.

CEO offers glimmers of hope

St Barbara managing director and CEO Mr Craig Jetson commented on the results, saying:

The business performance during the month of March, across all three operations, reflects this positive improvement. Since Building Brilliance was launched in September 2020, it has delivered significant operational efficiencies and cost reductions. Of the targeted A$30 to A$40 million annualised cash contribution benefit for FY21, A$18 million has been achieved as at the end of March 2021. Many of the production related improvements were realised in the latter part of the March quarter, including a record milling month and improved gold recovery at Atlantic, and ‘filling the mill’ at Leonora.

Importantly, St Barbara is not alone in its share price selloff today. Other gold miners including Northern Star Resources Ltd (ASX: NST) and Evolution Mining Ltd (ASX: EVN) are also tumbling lower. These moves come following a fall in the spot gold price overnight. 

More reading

• What’s with the St Barbara (ASX:SBM) share price today?
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• ASX 200 shares thrown in the bargain bin: Here’s 3 ideas
• 5 things to watch on the ASX 200 on Friday
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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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