ASX-listed St Barbara Limited has elected to retain and operate its Simberi mining operations in PNG after completing a Strategic Review of its assets.
The Strategic Review followed some approaches from outside interests in St Barbara’s PNG assets and included extensive internal analysis, expert financial advice from independent financial advisor Cutfield Freeman & Co and a thorough process to assess those third party interest in the PNG assets.
St Barbara said that while a number of potential buyers expressed interest in the PNG assets, their level of interest did not meet its assessment of the value of these assets, comprising the Simberi mine that has produced gold at above its target 100,000 ounce per annum rate for the last six quarters, the sulphide opportunity and the highly prospective exploration tenements across the Tabar Island group.
St Barbara’s MD and CEO, Bob Vassie said that the Simberi Strategic Review had been rigorous, and that it has provided certainty for the Simberi mine.
“We’ve tested each strategic option for the future of the PNG assets, and we are now clear about the preferred strategic direction. What we own in PNG would be difficult to replace in the current market.
St Barbara’s diligent work over the last few years has successfully turned around the Simberi operation, which is now consistently generating good cash flows.”
The company has also announced an Option and Farm-in Agreement with Newcrest for joint copper-gold porphyry exploration on nearby islands in the Tabar Group in New Ireland Province.
“We’re very proud of the Simberi team and the great results they are achieving,” Mr Vassie said. The prospectivity of the region, and the potential for exploration discovery on the Tabar Island group, is demonstrated by the significant option and farm-in arrangements with Newcrest. Our focus now will be on continuing to explore to extend the oxide mine life at Simberi, improve the sulphide opportunity, maximise the value from exploration interests and work with Newcrest to achieve success from our joint exploration.”
The key outcomes of the Strategic Review are:
- The St Barbara group will retain and continue to operate the Simberi mine. While a number of potential buyers expressed interest in the PNG assets, their level of interest did not meet St Barbara’s assessment of the value of these assets, comprising the Simberi mine that has produced gold at above its target 100,000 ounce per annum rate for the last six quarters, the sulphide opportunity and the highly prospective exploration tenements across the Tabar Island group.
- The St Barbara group (through its wholly owned PNG subsidiary Nord Australex Nominees (PNG) Ltd) has entered into an Option and Farm-in Agreement with Newcrest PNG Exploration Limited (a wholly owned subsidiary of Newcrest Mining Limited) for copper-gold porphyry exploration on the tenements on nearby Tatau and Big Tabar Islands, subject to final completion of normal conditions precedent. The Farm-in Agreement grants Newcrest the option to earn up to a 75% joint venture interest in the relevant tenement holdings. After an initial two year option period which requires US$3 million in exploration expenditure and 4,000 metres of diamond drilling, Newcrest can earn up to a 75% joint venture interest upon achieving a further US$25 million in exploration expenditure and 32,000 metres of diamond drilling, in two discrete stages which are subject to certain milestones over a period of up to six years.Under the Agreement, the St Barbara group will manage all exploration during the initial two year option period, and retains the rights over all oxide and sulphide material which is, or has the potential to be, mill feed for the existing oxide or contemplated sulphide plant on Simberi.
- St Barbara group’s own exploration across the Tabar Island group (including Simberi, Tatau and Big Tabar Islands) will continue as planned, with expenditure of A$6 million to $7 million anticipated for FY17. St Barbara is encouraged by recent drilling results, and positive outcomes may extend the existing oxide mine life, or improve the sulphide expansion project.
St Barbara group completed and announced last financial year the outcomes of a prefeasibility study for processing the sulphide ore reserves on Simberi Island. It is exploring nearby Tatau Island this financial year to determine whether the addition of higher grades and volumes of sulphide ore from that Island can improve the economics of the sulphide project. In parallel, further work to optimise the construction of, and recovery from, the proposed sulphide plant will be undertaken. The future tenure of the mine will depend on exploration success at both Simberi and the nearby Tatau and Big Tabar islands. As previously advised, the current oxide reserve supports a remaining mine life of approximately two years.