St Barbara Ltd (ASX:SBM) has been punished by investors as it revealed its Gwalia Mass Extraction feasibility study results pre-market this morning.
The study recommended an optimised trucking case as the preferring option over hydraulic hoisting extraction methods at the underground mine.
Furthermore, FY19 production was downgraded to 235,000-240,000 ounces at a AISC of A$980-1000 per ounce.
Using the midpoints, this is a decrease in production by 5% and increase in cost by 4.2%.
On a positive note, gold production guidance from the Simberi mine in PNG was upgraded to 130,000-135,000 ounces at AISC of A$1,245-1,300 per ounce.
This represented an upgrade of 6% in production and a lowering of costs by 4% using the midpoints.
The face value of today's announcement is difficult to reconcile with today's price action, which likely means investors had much higher expectations for the results of this study.
Capex for hoisting alternatives too high
St Barbara's managing director and CEO Bob Vassie said: “The Feasibility Study outcome favouring the trucking option is clear. Trucking at further depth is the superior way forward.
"It consumes significantly less capital while delivering greater operational certainty over the same life of mine.
“We vigorously pursued slurry pumping technology as a potentially innovative solution to the depth of the Gwalia orebody.
"The FS, however, identified that the geometry of the orebody does not support the necessary throughput to sustain pumping at sufficient scale, and the PFS had not anticipated some of the ventilation issues associated with the pumping options that contributed to significantly higher capex required for the pumping alternatives.
“The process to complete the FS has been objective, rigorous and definitive.
"Continued trucking achieves the primary objective of GMX to extend mine life and secures the future of Gwalia. Our challenge now is to optimise all aspects of trucking to maximise the value of Gwalia.”