St Barbara Ltd (ASX: SBM)
Hi Team, Your thoughts and views on the SBM sale of its remaining interest in New Simberi Gold Project to Lingbao Gold. Keep up the good work as always. Michael C
The Latest Q&A
Answer
Hi Michael,
For reference, $1bn gold miner St Barbara (SBM) has struck a transformational deal to sell its remaining interest in the New Simberi Gold Project in PNG to China’s Lingbao Gold for $410m cash, plus the repayment of ~$43m in construction funding, taking total cash proceeds to ~$453m. Importantly, SBM retains meaningful upside through a 2.75% royalty on future New Simberi gold and silver production and a 1.5% royalty across the broader Tabar Island licences, while Lingbao assumes all future project funding requirements.
- This reminds us of BHP’s well-received US$4.3bn silver streaming deal with Wheaton Precious Metals Corp completed in April.
The transaction, targeted for completion in 1Q27, is expected to leave St Barbara with an impressive ~$880m in cash, no debt and no hedging, while the board is considering a further 13c fully franked special dividend. It also removes the funding and execution risk associated with developing New Simberi, allowing management to focus on its 100%-owned Nova Scotia gold projects while retaining capex-free exposure to future production through its royalties.
We like the deal and not surprisingly so does the market with stock popping ~20% on Thursday following the news, making 5-year highs. The transaction locks in significant value for SBM, transforms the balance sheet and removes a major source of future capital requirements, leaving investors with a cashed-up gold developer, the potential for capital returns and royalties exposure to New Simberi.
In summary, MM likes the deal and SBM ~85c but note it’s a leveraged gold play as the stock carries no hedging.
