The St Barbara Ltd (ASX: SBM) share price is under heavy selling pressure on Tuesday morning.
At the time of writing, the ASX gold stock is down a sizeable 14% to 32.5 cents.
As a comparison, the S&P/ASX All Ordinaries Gold index is up 1%.
Why is this ASX gold stock crashing?
Investors have after the gold miner released a production and cost guidance update for FY 2025.
According to the release, St Barbara has downgraded its full year gold production guidance to between 50,000 and 52,000 ounces for FY 2025. This compares to 36,548 ounces that were already produced through to the third quarter.
Management was forced to update its guidance following heavy rainfall at the company's Simberi operations in Papua New Guinea. It notes that more than 100mm of rain fell during June, including 60mm in just three days.
The downpour significantly impacted the Pigibo Central pit, which is a key source of high-grade ore, and is now flooded and inaccessible until dewatering pumps catch up. Two final benches that were expected to deliver a strong June quarter production result will now be pushed into July.
Commenting on the news, the ASX gold stock's managing director and CEO, Andrew Strelein, said:
This rainfall event has disrupted access to higher grade feed from Pigibo Central at a critical time for achievement of guidance. The missed benches are however anticipated to be mined in July. The team has done an excellent job keeping the other ore sources, in particular Sorowar, in production despite the rainfall. However, these sources are insufficient to make up for the delay from Pigibo Central.
Cost guidance
In addition to the lower production guidance, the ASX gold stock's all-in sustaining cost (AISC) for FY 2025 is now expected to be in the range of $4,400 to $4,700 per ounce. That's a very high level by industry standards and well above most mid-tier gold peers.
The use of lower-grade or high-sulphur stockpiles to offset Pigibo's disruption is expected to further pressure recoveries and margins in the short term.
The good news is that despite the setback, St Barbara has assured investors that the impact on its balance sheet will be limited.
It revealed that it will draw down from existing excess gold-in-circuit balances, built up over the past three quarters, to smooth out its cash flow during this time. At the end of the third quarter, total cash, bullion, gold sale receivable and listed investments stood at A$200 million (including A$89 million of restricted cash).
Importantly, the miner also continues to carry no bank debt and no hedging, preserving its exposure to upside in the gold price.
