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
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.