The St Barbara Ltd (ASX: SBM) share price has started the week deep in the red.
In morning trade, the gold miner’s shares are down 6% to $1.38.
Why is the St Barbara share price sinking on Monday?
As well as being weighed down by a spot of weakness in the gold sector, the St Barbara share price has come under pressure after announcing an acquisition.
According to the release, the company has entered into a binding scheme implementation deed under which it will acquire Bardoc Gold Limited (ASX: BDC). This follows the successful completion of a strategic review of the Bardoc Gold Project initiated by Bardoc in September 2021.
The release explains that St Barbara has offered 0.3604 new St Barbara shares for each Bardoc share. Based on the St Barbara share price at the close of play on Friday, this values Bardoc at approximately $157 million and each Bardoc share at 53 cents.
This represents a 29.2% premium to the closing price of Bardoc shares on 17 December. Judging by the St Barbara share price performance, the market may believe St Barbara is paying too much to acquire Bardoc.
Bardoc also notes that it will be looking at spinning out its Woodie Manganese Project in Western Australia into a new separate vehicle, creating additional value for Bardoc shareholders.
Leonora Province expansion
St Barbara’s Managing Director and CEO, Craig Jetson, notes that the acquisition allows the company to expand its footprint in the Leonora Province.
He said: “St Barbara has been focused on expanding our footprint within the Leonora Province to fill the mill by growing our deposits, through acquisitions and exploration. Acquiring Bardoc Gold unlocks access to extensive land packages near our Leonora Operations.”
“The location of the Bardoc Gold Project, situated near the rail line and highway to the south of Leonora, brings the Bardoc ore bodies within economic haulage range of our Leonora processing plant. Combined with our existing regional opportunities such as Tower Hill and Harbour Lights, the acquisition of Bardoc facilitates the accelerated delivery of a multi-decade province of satellite mines feeding the Leonora processing plant. This provides St Barbara with significant operating flexibility and value as part of the Leonora Province Plan,” he concluded.