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St Barbara share price higher on production and acquisition update

The St Barbara Ltd (ASX: SBM) share price has bounced back from a morning in the red and is trading higher this afternoon.

At the time of writing the gold producer’s shares are up almost 1% to $3.14.

Why are St Barbara’s shares on the rise?

Investors appear to have responded positively to the release of an update on its production and acquisition of Atlantic Gold this afternoon.

According to the release, consolidated gold production in FY 2019 came in at 362,346 ounces, which was just a touch ahead of its revised guidance of 360,000 ounces.

The release explains that the WA-based Gwalia operation produced 49,966 ounces of gold in the final quarter and 220,169 ounces for the full year. This compares to its revised guidance of 220,000 ounces, which was reduced from 235,000 and 240,000 ounces following a temporary blockage in the paste reticulation circuit to the underground workings.

The company’s other operation, the Papua New Guinea-based Simberi operation, had a very strong finish to year. Simberi produced a near-record 36,231 ounces of gold in the final quarter and a record 142,177 ounces for the full year. This is the fifth consecutive annual production record.

Management explained that the record production was attributable to a combination of record recovery (87.4%) and higher grade ore mined in a supergene enriched zone adjacent to the sulphide/oxide boundary in the Sorowar South pit.

St Barbara finished the period with a cash balance of $890 million, up from $382 million a year earlier. This includes $480 million net proceeds from its Entitlement Offer in May 2019.

Of these funds, $779 million is earmarked for settlement of the Atlantic Gold acquisition in July. St Barbara also retains a $200 million three-year revolving debt facility, which is undrawn.

Atlantic Gold.

The release advises that St Barbara and Atlantic Gold are now proceeding with the customary closing conditions precedent under the Arrangement Agreement.

And whilst the transaction is subject to customary closing conditions, including court approvals, a successful Atlantic shareholder vote, and no material adverse change to regulatory approvals, management advised that most of the required regulatory approvals have already been granted.

In light of this, the transaction looks likely to compete on July 19.

Elsewhere in the industry today, the OceanaGold Corp (ASX: OGC) share price has crashed 11% lower due to issues at its Didipio operation and the Independence Group NL (ASX: IGO) share price has continued its push higher following yesterday’s production update.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 Scott Phillips.

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