Why has the St Barbara share price leapt 20% so far this month?

A man wearing glasses sits back in his desk chair with his hands behind his head staring smiling at his computer screens as the ASX share prices keep risingA man wearing glasses sits back in his desk chair with his hands behind his head staring smiling at his computer screens as the ASX share prices keep rising

The St Barbara Ltd (ASX: SBM) share price has accelerated in July while its peers are falling by the wayside.

After hitting a multi-year low of 75 cents on 30 June, the gold miner’s shares are up 20% this month. This makes it one of the best performers across the sector.

In comparison, the Newcrest Mining Ltd (ASX: NCM) share price is down 8% while Northern Star Resources Ltd (ASX: NST) is up 4% over the same period.

Let’s take a look at what’s driving St Barbara shares higher lately.

What’s driving the St Barbara share price higher?

As reported by my Foolish colleague Monica, St Barbara appears to be in discussions with Genesis Mining regarding a merger.

The news has prompted investors to jump on board and take advantage of the recent St Barbara share price weakness.

Genesis Mining is apparently seeking to consolidate operations in the Leonora Province in Western Australia. Ultimately, this would give it access to the flagship Gwalia gold mine which accounts for a large slice of St Barbara’s profits.

In addition, it’s rumoured St Barbara might sell its overseas assets which would boost its coffers by up to $100 million. Another Foolish colleague Brooke noted the reasons here.

If the deal does go ahead, St Barbara shareholders could be set for a big payday.

Furthermore, St Barbara released its FY22 production update earlier this month.

This sent its shares almost 10% higher on the day as the gold miner finished the fourth quarter strongly.

Total gold production stood at around 86.4koz for the June quarter, up 40% over the previous comparable period. Full-year gold production came to 281koz.

What do the brokers think?

A number of brokers have rated the St Barbara share price with different price points in the past month.

The team at Macquarie upgraded its outlook on the company’s shares to “outperform” from “neutral”. The broker also raised its 12-month price target by 10% to $1.10 per share.

Based on the current share price, this implies an upside of 23% for investors.

On the other hand, Citi analysts reduced their rating on St Barbara shares by 28% to $1.15. Despite the cut, its analysts believe that the company’s shares still have some room to bounce higher.

At Friday’s market close, the St Barbara share price finished at 89.5 cents.

The post Why has the St Barbara share price leapt 20% so far this month? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has positions in Northern Star Resources Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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