The St Barbara Ltd (ASX: SBM) share price has fallen 15% after coming out of a trading halt this morning. The drop was in response to a new acquisition.
About St Barbara
St Barbara is an Australian-based gold producer and explorer. Current assets include the Leonora Operations in Western Australia and the Simberi Operations in Papua New Guinea. As at 30th June 2018, St Barbara held Ore Reserves of 3.9 million ounces of contained gold. Total gold production in 2018 was 403koz.
Acquisition And Entitlement Offer
St Barbara announced two days ago that it will acquire Atlantic Gold Corporation, a Canada-based gold producer which owns and operates Moose River Consolidated.
Atlantic Gold’s CY18 production was 91koz and plans are in place to expand production to 200+koz as three further pits are developed. Current production levels would boost St Barbara’s production by around 22.5%.
Atlantic Gold currently has mineral reserves of 1.9Moz. St Barbara will acquire 100% of all outstanding Atlantic shares at an offer price of C$2.90 per share, or a total enterprise value of C$802 million. St Barbara says this represents an attractive acquisition cost of $428 per ounce of reserves.
St Barbara announced this morning that the institutional portion of the entitlement offer has been completed, and approximately $355 million was raised at an offer price of $2.89, a 13% discount to St Barbara’s previous closing price.
Eligible retail shareholders will be able to participate in the offer from 21st May 2019 to raise the remaining $135 million needed.
St Barbara’s managing director and CEO, Bob Vassie said:
“We are extremely pleased with the support for the acquisition and entitlement offer shown by our existing institutional shareholders, and also welcome a number of new domestic and international institutional shareholders. The success of the entitlement offer provides a strong endorsement that investors share our confidence in St Barbara’s strategic direction and the significant opportunity for shareholders provided by the acquisition of Atlantic Gold.”
Clearly, though, investors weren’t too happy about the price that the money was raised at. With more money still to be raised yet, I’d be avoiding these shares for now.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.