St Barbara Ltd (ASX: SBM) shares are heading into the Christmas break in the worst possible fashion.
In morning trade, the ASX gold stock was down as much as 38% to 19 cents.
The gold miner's shares have recovered a touch since then but remain down by 32% to 20.7 cents at the time of writing.
Why is this ASX gold stock crashing?
Investors have been rushing to the exits after the company released a bombshell announcement relating to its Simberi Gold operation.
According to the release, the Papua New Guinea (PNG) Internal Revenue Commission (IRC) delivered correspondence to Simberi Gold's tax agent in PNG.
This correspondence contains details of PNG tax assessments which included an assessment of additional taxes, inclusive of a 200% penalty imposition, that amount to PGK 523 million. This is the equivalent to approximately A$210 million at current exchange rates.
The release explains that the taxes relate to allowable capital expenditure asset values and depreciation deductions. It said:
An amount of PGK 435 million relates to income tax assessed in relation to the calculation of Allowable Capital Expenditure asset values since 2006 and the impact of that on depreciation deduction claims over the years 2017 to 2021. The balance of PGK 88 million relates to a deemed dividend withholding tax, assessed on a debt-to-equity transaction on the re-capitalisation of Simberi Gold in 2018.
St Barbara response
St Barbara advised that it rejects the IRC's arguments that underpin the assessments and are committed to working together to reconsider this "flawed assessment in its final determination."
St Barbara confirms the assessment will be appealed within the 60-day appeal period.
At the end of September, the company had total cash, bullion, and listed investments of $194 million.
It has since raised $100 million via capital raising. However, these funds are earmarked for the Simberi Sulphides Expansion, so the ASX gold stock can ill-afford to pay a $210 million tax bill right now.
Commenting on the news, the company's CEO, Andrew Strelein, said:
The receipt of this IRC Amended Assessment, backdating changes to 2008 and earlier, just as IRC were closing down its office for Christmas was disappointing – particularly when such positive progress has been made with Mineral Resources Authority and with Kumul Minerals Holdings Limited on the development of the Simberi Sulphides.
Nonetheless, we hope that with discussion and realisation of the miscalculations on top of the erroneous applications of the law in the IRC Amended Assessments, we can resolve this matter quickly. Simberi Gold will prepare its appeal which must be lodged by 17 February 2025 under the legislative provisions.
