St Barbara (SBM) announced June Q production of 86koz and full year FY19 production of 362koz at an all-in sustaining cost (AISC) of $1,080/oz, above the top end of revised production and below the bottom end of cost guidance. FY20 costs are projected to increase largely as a result of lower forecast production at Gwalia and high levels of sustaining capex as the dual decline strategy is implemented. At Simberi, FY19 production of 142koz was the fifth consecutive record and FY20 is relatively conservative at 110koz and likely to outperform again. The key to value longer term will hinge on the longer-term production profile for Gwalia due at the end of CY19, the Simberi Sulphide Study (due in Sept Q) and the guidance and costs at the Atlantic assets (due in Sept Q). SBM is a solid operator, but spreading operations across three jurisdictions is not without its risks. Our target price falls to $3.21ps (from $3.23ps) after revisions to our model to adopt updated FY20-22 forecasts. We move to a HOLD recommendation (prior BUY) after recent share price strength.
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