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Extreme flooding from torrential rain associated with Cyclone Ita, had put a stop to most operations in the region and St Barbara was no different. The mine was also overrun by hundreds of illegal miners.
“It was consuming cash and although the company had tried for some time, it had not been possible to deliver a way forward in the short to medium term that would work for the company, local communities and the Solomon Island government,” Vassie says.
“Following appropriate due diligence, the Gold Ridge mine was divested in May 2015 to a Solomon Islands company associated with local landowners, and we are confident it was the right decision for everyone involved,” he says.
Next on the agenda was St Barbara’s Simberi mine in Papua New Guinea.
The Simberi mine and plant was part way through an expansion when it was acquired by St Barbara, but the expansion took longer and cost more than anticipated, and it had never achieved its planned production rate of 100,000 ounces of gold per annum. As a result this operation was consuming rather than generating cash.
Vassie spent a lot of time in PNG (and still does). He set about delivering new resources to the local team to give them the support and backing they needed to bring their plan together.
“This team thrived under the increased focus and knowing how important it was to the overall company that this project start making money.”
It took until the end of the March 2015 quarter to achieve its planned rate of 100,000 ounces of gold per annum. The plant has been operating at that rate or above ever since and produced 107,553 ounces of gold in calendar 2015.
Simberi has been one of St Barbara’s success stories. It was losing money but started to make cash in December 2014 and St Barbara is now working on a study looking at extending the mine life.
One thing of note in the turnaround in performance of these mines is the company’s environmental record. It works hard to steer a clean ship and as such has been awarded two environmental awards: Golden Gecko Award and Water Wise business award.
What has also had an impact is Vassie’s commitment to workplace diversity. He is one of 32 CEO Ambassadors of the Workplace Gender Equality Agency pay equity campaign and St Barbara was certified by WGEA as an Employer of Choice for Gender Equality in 2014 and 2015, only one of 3 mining companies to gain that certification.
Finally, the St Barbara turnaround was due in part to a considered cost reduction program.
Vassie’s experience with Rio Tinto, with whom he spent over 18 years in various executive management roles had a significant impact in St Barbara. These roles put him in a strong position to tackle the problems St Barbara faced and ensured that the company moved in a forward direction from the onset of his tenure – which was vital to its survival.
In FY15 corporate costs were reduced by $6m, or 24% on the prior year. At the same time, exploration expenditure was halved from $16m in FY14 to $8m in FY15.
“We have flattened our corporate structure and given people more responsibility. This has reduced corporate staff numbers by just over 50%. We had to let a lot of talented people go, but it’s given the people who remain room to grow.”
Sometimes in business hard decisions have to be made, but Vassie has the experience to manage ‘right-sizing’, while galvanising those who remain. By giving people responsibility and ownership of their roles and by making them accountable, future success becomes more of a set proposition than a pipedream.
The price of gold has also played its part. Vassie says gold is generally viewed as a ‘safe haven in a time of crisis’. However, like the price of any commodity it fluctuates meaning you have to build in safeguards.
Gold prices increased for 10
straight years from 2001-2011 and peaked at US$1882 per ounce on 2 September 2011 in the lead up to its crash to US$1200 per ounce late in 2013.
The blow was softened by the Australian dollar.
Last year the declining dollar helped protect the Australian gold price, and it is currently sitting at around A$1600 per ounce.
That’s good news for gold miners such as St Barbara, who are proving that there is life yet in the Australian mining sector.
Improving prices and strong management make the world of difference.
St Barbara’s stocks have risen sharply since 7 cents in late 2014 – it posted the largest share price gain of its peers on the ASX in 2015, rising over 1200%. St Barbara had fallen out of the ASX all ordinaries index in March 2015, but was returned to the ASX 300 in September 2015, and admitted to the ASX 200 in March 2016.
And its strong results have continued.
“The company has had a strong half year result with record pro-
duction from both the Gwalia mine and Simberi mine,” Vassie says.
“Production forecasts have been upgraded for the full year to 354,000 to 379,000 ounces.
“Costs are under control and the company is continuing to pay down debt.”
Meanwhile Vassie has an eye on the future.
St Barbara aims to extend the Gwalia mine deeper. This is a mine with a rich history. It was discovered in 1896 and over the course of time has produced over 5 million ounces of gold, making it the largest producing mine in Western Australian history outside of the Golden Mile.
“Current ore reserves extend down to 1800 metres below surface and indicate that we can mine for at least the next seven years,” Vassie says.
“Exploration drilling shows that we still haven’t reached the bottom of the ore body.”
That means exciting times ahead for St Barbara as further drilling will increase the understanding of the ore body as it gets deeper to add more ounces into reserves and extend the mine life.
“We understand that we are currently the deepest trucking gold mine in Australia and possibly the world (i.e. to use trucks to haul ore up to the surface from an underground decline road).”
Gwalia is also one of the most cost effective gold mines in Australia.
“The current focus is on getting more information about the ore body at depth through more drilling to assess the most cost effective mining method going forward. Options include continuing to truck the ore up, or installing some kind of system to process the ore underground before it is lifted through some form of shaft or even a slurry pipe. We expect to be able to make a decision on the best way forward before the end of the calendar year and we expect many more years of production from the Gwalia mine.”
Furthermore St Barbara is also exploring opportunities to extend the mine life at Simberi.
Current mining is focused on the oxide resource, which sits over the top of a significant sulphide deposit. The study explores the economic feasibility of mining the sulphide deposit which could add significantly to the mine life of this operation also.
“We have exploration opportunities around the Gwalia mine and in PNG that we are continuing to work on.”
There is no rest for St Barbara. With Vassie on board, the company turned a big corner in 2015 and it is now expected to capitalise on all of its hard work.