ASX:SBM
St Barbara Ltd
Investment Summary
The fund managers believe St Barbara Ltd represents a compelling value opportunity, underpinned by a series of strategic and operational developments that could unlock significant shareholder value. In their opinion, the company’s flagship Gwalia mine is well-positioned for improved performance following a period of reinvestment, with scale efficiencies likely from an expanded mill. Similarly, they view the Simberi mine as having turned a corner operationally, making it a viable candidate for a value-accretive sale. One of the central themes highlighted by the fund managers is the potential for value creation through asset streamlining and district consolidation. The merger with Genesis Minerals—forming Hoover House to consolidate the Leonora gold district—is seen as a key catalyst, expected to deliver up to $200 million in synergies and eliminate or defer $400 million in capex. They express strong confidence in the proposed management team’s ability to deliver on these opportunities. Additionally, the spin-off of Atlantic and Simberi into a new entity, Phoenician Metals, is viewed as another value-unlocking move, enhancing operational focus and strategic clarity. Overall, the fund managers believe St Barbara remains one of the most undervalued gold producers globally on a per-ounce basis, with meaningful upside potential driven by improved execution and structural change.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.
Commentary From The Manager
L1 Capital
Date
31 July 2022
Price
$0.50
Medium
Monthly Report
Commentary
L1 Capital Long Short Fund continues to hold St Barbara Ltd due to the company's improved operational outlook and attractive valuation. St Barbara's shares rose following strong Q4 FY22 results, which showed positive cash flow generation and solid production from its flagship Gwalia mine. The company is well-positioned for further efficiency gains, particularly with its expanded mill at Gwalia. Additionally, St Barbara has resolved operational issues at its Simberi mine, and the potential sale of this asset could reduce capital expenditure and provide a cash boost. L1 Capital sees several catalysts over the next 12 months, including the streamlining of St Barbara's asset base, consolidation of the Leonora gold district, and enhanced operational execution. The company remains one of the cheapest gold producers globally, with significant upside potential in its resource base and reserves, making it an attractive holding for the fund.
L1 Capital
Date
31 Dec 2022
Price
$0.34
Medium
Monthly Report
Commentary
L1 Capital Long Short Fund continues to hold St Barbara after a significant 28% share price increase in December, following the announcement of a merger with Genesis Minerals. This merger will combine their Leonora gold operations into a new entity, Hoover House Limited, while the remaining assets, including Atlantic and Simberi, will be spun off into Phoenician Metals. L1 Capital had previously identified the consolidation of the Leonora gold district as a key catalyst for St Barbara. The merger is expected to unlock substantial synergies, with an estimated $200 million in NPV synergies and $400 million in deferred or eliminated capital expenditure. With a new, highly regarded management team at the helm, L1 Capital believes St Barbara is well-positioned to deliver these benefits. Additionally, the separation of Phoenician Metals should unlock further value, providing a more streamlined asset base that could facilitate future consolidation opportunities.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.