St. Barbara Limited (ASX: SBM) closed a forward gold contract on Friday for a total of 50,000 ounces of gold at a forward price of A$1,809 per ounce.
The forward contract would protect the company’s interest from short term price fluctuations in gold as 50,000 ounces of gold will be delivered in monthly instalments from January 2020 to December 2020 at a fixed forward price.
For Fiscal 2019, the company has previously entered into the forward contract for 68,000 ounces with delivery between November 2018 and June 2019 at A$1,750 per ounce. At the same price 50,000 ounces are hedged to be delivered in Fiscal 2020 between July and December period.
These forward contracts are intended to secure a reliable cash margin on a part of future gold production from Simberi in the Fiscal year 2020 and 2021.
Simberi is a St Barbara’s operated gold mine located north most to the Tabar group of islands within the easternmost province of Papua New Guinea. With the mining undertaken on the eastern half of the island covered by a 2,560 hectares of Mining Lease ML136, ore at Simberi is sources from series of open pits in the area. The life of Simberi mine has been extended to FY21 with continued mining operations throughout financial year 2019 and 2020.
The forward contract that has been inked today will be delivered in two tranches. It includes delivery of 24,000 ounces of forward gold contracts to be delivered in monthly instalments between January and June FY20 at A$1,809 per ounce while the remaining 26,000 ounces will be delivered at the same forward price in Fiscal 2021 between July and December 2020.
On Fiscal 2019 outlook, St Barbara anticipates gold production to lie within the range of 105,000 and 115,000 ounces from Simberi operations at an All-in Sustaining Cost (AISC) of between A$1,275 and A$1,375 per ounce.
Leonora operations at Gwalia Mine is another flagship project of the company. The Gwalia Mine, located three kilometers south of the town of Leonora, has 1.9 million ounces of gold reserves at a grade of 7.5 grams per tonne. Driven by high grades production, Gwalia returns strong margin and returns to the company.
Further, the company informed that Low grade stockpiles accumulated between the period of FY18 and FY20 will be processed in FY21.
The investors were positive on the company’s move to hedge against the uncertain gold prices for full calendar year 2020. Resultantly, St Barbara’s stock climbed up 1.399% to last trade at $4.350 on 26 October 2018 while the PE was 9.690 x with market capitalization of $2.25 billion. Over the past one year the stock has witnessed a performance change of attractive +43.48% but in the past three months it has slipped by 11.55%.
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