Why St Barbara Ltd’s share price has surged 1,157% in 2015

Credit: Mark Herpel

This time 12 months ago, things were looking pretty bleak for St Barbara Ltd (ASX: SBM).

The miner had booked a total of $411 million in impairment charges during the previous financial year and ultimately recorded a $94 million underlying net loss for the period, down from a $29 million profit in 2013.

The pain was certainly reflected in St Barbara’s share price as well. The share price was sitting near their lowest price in 10 years, having fallen 62% during the previous 12 months and 96% since their peak in November 2010. They were trading at just 11 cents and carried a market value of $54 million.

It’s been a completely different story for St Barbara in 2015. In fact, the company is the second-best performing share on the ASX so far this calendar year, gaining an incredible 1,157%. The shares are now trading for $1.32, down from their 52-week high of $1.47, while the company has added a cool $600 million to its market value.

And it could have even further to go before the end of the year. On Thursday, Deutsche Bank upgraded the company’s shares to “Buy” from a previous “Hold” recommendation whilst increasing their price target to $1.50 per share.

As quoted by The Australian Financial Review, this change of recommendation was due to St Barbara becoming “a simpler story” while cash flows from Gwalia (the underground mine part of the group’s Leonora Operations) are “more than sufficient to repay debt by the end of (financial year 2018).”

In its latest Annual Report, St Barbara also said that Gwalia compares favourably against other ASX listed gold mines on grade, reserve size, production and cost per ounce, which is certainly important at a time when the spot price of gold is hovering near a six-year low. Local gold miners are being somewhat protected by the low Australian dollar.

Indeed, St Barbara is just one of many gold mining companies to have soared this year. The EVOLUTION FPO (ASX: EVN) share price, for instance, has surged 159.1% while Northern Star Resources Ltd (ASX: NST) and Newcrest Mining Limited (ASX: NCM) have risen 102.4% and 15.3%. That compares to a 6.9% decline for the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) over the same time.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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