St Barbara forecasts write-downs

ST BARBARA says a solid operational June quarter has maintained the company’s gold production volumes but asset write-downs are expected to impact year-end financial reporting.
St Barbara forecasts write-downs St Barbara forecasts write-downs St Barbara forecasts write-downs St Barbara forecasts write-downs St Barbara forecasts write-downs

Assessment of carrying values of the shuttered Gold Ridge operation in the Solomon Islands and the Simberi mine in Papua New Guinea is expected to result in write-downs of $A179 million for Gold Ridge and up to $200 million at Simberi.

Newly appointed managing director and chief executive Bob Vassie addressed the ongoing financial review in a webcast today.

"Given the suspension of operations at Gold Ridge and the uncertainty about the ability to resume operations, we anticipate that a full impairment write-off of the reportable segment assets will occur," he said.

"While I and the team are hopeful that we can get some outcome there with the stakeholders around Gold Ridge, given the situation on the ground there and the level of uncertainty, it's prudent to take that impairment approach."

Vassie said while no decision had yet been made in respect to the Simberi mine, it was likely the impairment would be in the range of $100-200 million.

"I should point out that that's quite a wide range but I think it just indicates that we've really got to do the work to understand which end of that we're in," he said.

"While we have seen the underlying operating costs of that asset and the cost of fixing some of the issues we see there in the plant … go straight through to the valuation, there's always opportunity to improve that."

"And, of course, that's why I'm focused so much on Simberi and I'm going to be getting out there and looking at how we can improve it.

"My view on how we can improve it over the next couple of weeks will perhaps feature into our assessment of that range of impairment figures of $100-200 million."

Results of the company's audit and review of the impairments will be included in a financial statement to be released late next month.

The news coincided with a steady operational quarter for the company, with gold production down 1% compared to the prior period at 91,565 ounces.

This performance helped increase production for fiscal 2014 by 3% year on year to 364,601oz of gold.

Gold output at Leonora in Western Australia was up 19%, with a 21% rise in production from the Gwalia mine.

Simberi, meanwhile, improved production by 18% over the quarter to 12,755oz of gold.

Group consolidated cash operating costs were down 26% quarter on quarter to $847 per ounce.

Looking forward, the company said it expected Gwalia to achieve production of 180,000-200,000oz for fiscal 2015 at a cost of $720-750/oz.

Guidance for Simberi is expected to be updated following an engineering and maintenance program on the processing plant.

Shares in St Barbara were resilient to the uncertainty surrounding the impending write-downs, reaching close to 9% above their opening price before last trading 6.7% up at 11.2c.

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