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Why the St Barbara (ASX:SBM) share price is under pressure today

digital asx share price graph against backdrop of gold nuggets
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The St Barbara Ltd (ASX: SBM) share price is edging lower on Wednesday following the release of its first quarter update.

In afternoon trade the gold miner’s shares are down almost 1% to $2.92.

How did St Barbara perform in the first quarter?

St Barbara had a difficult start to FY 2021 due largely to issues at its Gwalia operation in Western Australia.

According to the release, first quarter gold production was 72,990 ounces, down 32.7% on the fourth quarter.

This comprised Atlantic Gold production of 27,226 ounces, Gwalia production of 22,625 ounces, and Simberi production of 23,139 ounces.

Also heading in the wrong direction was its costs. St Barbara reported an all‐in sustaining cost (AISC) of A$1,711 per ounce. This was up 31.5% from A$1,301 per ounce in the previous quarter.

This was driven by a sharp increase in costs at Gwalia due to its lower production. Gwalia’s AISC came in at A$2,592 per ounce, up from A$1,389 per ounce in the previous quarter.

In light of this poor operational performance, St Barbara reported a sharp decline in its cash contribution. It came in at A$27 million for the quarter, down from A$126 million in the fourth quarter.

Outlook.

Despite the poor start to the year, the company’s production guidance implies solid growth in FY 2021 if it achieves the high end of its range.

St Barbara is forecasting production of 370,000 to 410,000 ounces, compared to FY 2020’s production of 381,887 ounces.

And if it hits the low end of its AISC guidance, it will mean a small cut to its costs this year. St Barbara’s AISC guidance is A$1,360 to A$1,510 per ounce, compared to FY 2020’s AISC of A$1,369 per ounce.

The company’s Managing Director & CEO, Craig Jetson, appears confident on the future and notes that St Barbara is working hard to unlock value.

He commented: “Our project pipeline is central to Building Brilliance; this is of particular relevance to our Atlantic Gold and Simberi Operations. Delivering on our potential in a timely, cost‐appropriate way is key to driving deliberate and value‐accretive growth.”

“In the second quarter of FY21, we will elaborate on our aspiration to unlock value in our organisation, improve safety, deliver cost savings and improve our productivity,” he concluded.

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Returns as of 6th October 2020

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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