The man with the Mi­das touch

As re­cently as last year, St Bar­bara’s for­tunes were hang­ing by a thread. In a cli­mate where min­ing and down­turn were of­ten used in the same sen­tence, its PNG mine was op­er­at­ing at a sig­nif­i­cant loss, its Solomon Is­lands mine had not op­er­ated since be­ing

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When Bob Vassie took over the lead­er­ship po­si­tion at St Bar­bara he proved that min­ing wasn’t dead.

En­ter Bob Vassie, a man who you could say has some­what of a Mi­das touch. A turn­around was cer­tainly needed at St Bar­bara and Vassie has de­liv­ered.

He came on board this al­most sink­ing ship in July 2014 when the mar­ket cap­i­tal­i­sa­tion was $50 mil­lion and the share price 10.5 cents.

The num­bers give you an in­di­ca­tion of just how suc­cess­ful Vassie has been in this turn­around. To­day the mar­ket cap is $1 bil­lion and the share price a touch over $2.

“The share price had been heav­ily dis­counted as a re­sult of the com­pany’s debt pro­file and un­der­per­for­mance of the Pacific as­sets (Sim­beri in PNG and Gold Ridge in the Solomon Is­lands),” Vassie says.

“The com­pany was gen­er­at­ing cash from the Gwalia mine in Western Aus­tralia, but it was all go­ing into the loss mak­ing Pacific Is­land mines. The com­pany had bor­rowed heav­ily to fund the ac­qui­si­tion of the Pacific as­sets and the mar­ket was los­ing con­fi­dence in the com­pany’s abil­ity to re­pay its debts.

“It was ob­vi­ous the fi­nan­cial sit­u­a­tion needed to be sta­bilised quickly,” Vassie says. “We needed to im­prove cash flow which would en­able the com­pany to be­gin to pay down its debt.”

As Vassie told The Aus­tralian early in 2016, “The turn­around, an­chored by Gwalia, al­lowed the com­pany to pay off $US100m in debt which, in turn, prompted a move back into the S&P/ASX 300 and an­a­lysts slap­ping buy rec­om­men­da­tions on the stock.”

The com­pany in­creased cash flows from op­er­a­tions by over A$90m in FY15 and has re­paid A$159 mil­lion in debt since May 2015.

There were four key fac­tors in start­ing this turn­around: get­ting more out of the Gwalia Mine; the sale of Gold Ridge in the Solomon Is­lands; the turn­around at the Sim­beri mine in Pa­pua New Guinea; and re­duc­ing cor­po­rate over­head costs. Let’s start with Gwalia. Pro­duc­tion at the Gwalia mine in Western Aus­tralia was ramped up. While the mine was al­ready a strong per­former, the lo­cal team stepped up pro­duc­tiv­ity to record pro­duc­tion in fi­nan­cial year 2015 of 248,142 ounces of gold, up from 214,319 ounces the prior year.

“Gwalia is one of the best per­form­ing gold mines in Aus­tralia and the whole team is fo­cused on get­ting the best pos­si­ble per­for­mance now and well into the fu­ture. They in­tro­duced new min­ing meth­ods and also ben­e­fit­ted from a slightly higher ore grade,” Vassie says.

Costs at Gwalia were tightly con­trolled, but pru­dent in­vest­ment in in­fra­struc­ture con­tin­ued to sup­port min­ing well into the fu­ture. This in­cluded an in­no­va­tive ab­sorp­tion chiller plant that uses waste heat from the power sta­tion which was es­ti­mated to save over $2.5 mil­lion run­ning costs per an­num, and a 1400 me­tre ver­ti­cal high volt­age ca­ble drop (the long­est in the south­ern hemi­sphere), to du­pli­cate the power sup­ply deep into the mine.

At the same time the Gold Ridge mine in the Solomon Is­lands had been in sta­sis since April 2014.

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