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Highlights:
- Papua New Guinea (PNG) has accused St Barbara Ltd (ASX:SBM) of fraud and seeks 523 million kina (A$206.8 million) in back taxes, alleging errors in tax filings dating back nearly two decades.
- The claim, which includes a 200% penalty, is based on disputed deductions for depreciation and a 2018 debt-for-equity recapitalisation of the Simberi Gold subsidiary, and PNG’s Internal Revenue Commission (IRC) alleges violations beyond the five-year statutory limit.
- Following the announcement, St Barbara’s share price dropped by 34%, losing over $100 million in market value, although it has since recovered by 8.5%.
St Barbara Ltd (ASX:SBM), a prominent Australian gold mining company, has been hit with a significant tax claim from Papua New Guinea (PNG) authorities. The claim seeks 523 million kina (A$206.8 million) in back taxes, citing alleged errors in the company’s tax filings over nearly two decades. This includes a hefty 200% penalty, which has been imposed on St Barbara under allegations of fraudulent conduct.
The dispute revolves around two primary issues: the deductions for depreciation and a debt-for-equity recapitalisation that occurred in 2018 for the company’s Simberi Gold subsidiary. PNG's Internal Revenue Commission (IRC) contends that these actions violated the country's tax laws, with claims extending beyond the typical five-year statutory limitation period.
The news of the tax claim has sent shockwaves through the market, severely impacting investor confidence. St Barbara’s shares plummeted by 34%, dropping to just 20 cents per share on Tuesday. This decline wiped out more than $100 million from the company's market capitalisation. However, in subsequent trading, the stock regained some ground, rising 8.5% to 21.7 cents in the morning session.
In response to the tax claim, St Barbara’s CEO, Andrew Strelein, expressed his disappointment over the timing of the IRC’s amended assessments, which were delivered on Christmas Eve just as the tax office was closing for the holiday period. Strelein also criticised the IRC for what he described as miscalculations and legal errors in their assessment. The CEO emphasized that Simberi Gold had relied on reputable tax advisors during the relevant periods and had fully disclosed all material facts, strongly rejecting any suggestion of dishonest conduct.
The timing of the claim is particularly sensitive, as St Barbara is currently engaged in critical negotiations regarding the renewal of its Simberi mining lease. In addition, the company is in the midst of discussions with PNG’s state-backed Kumul Minerals, which is set to acquire a 20% stake in a joint venture for the Simberi project.
Despite the legal challenge, St Barbara remains focused on its growth objectives. The company is progressing with its Simberi Sulphides Project, which is aimed at increasing production to 230,000 ounces by 2034. For the current financial year (2024-25), St Barbara is targeting an output of 65,000 to 70,000 ounces.
The company has confirmed its intention to vigorously defend itself against the tax assessment, with the deadline for submission of its appeal set for February 17, 2025. The outcome of this dispute could have significant implications for St Barbara’s financial position and its operations in Papua New Guinea.
