It was a tough start to the week for the St Barbara Ltd (ASX: SBM) share price.
The ASX gold stock was down as much as 21% to 22 cents before eventually closing the session at 23.5 cents.
Image source: Getty Images
Why did this ASX gold stock crash?
Investors were hitting the sell button on Monday after the gold miner released an update on its guidance for FY 2024.
According to the release, the company's Simberi's gold operation has underperformed during the fourth quarter.
Management notes that Simberi's gold production for the quarter was anticipated to exceed 20,000 ounces. This was based on achieving access to another higher-than-average grade ore zone in the Sorowar pit in June.
Unfortunately, this important Sorowar ore zone will not be accessible until the first quarter of FY 2025. This means that more typical ore grades of around 1.0 g/t Au are now expected for the month of June. Management blamed this on poor excavator availability.
As a result of the above, the ASX gold stock anticipates production of approximately 14,000 ounces in the current quarter, rather than the targeted 20,000 ounces.
This means that its full year production and cost guidance for FY 2024 has been revised to 52,000 to 56,000 ounces (previously 60,000 to 70,000 ounces) at an all-In sustaining cost of A$3,700 to A$3,900 per ounce (previously A$3,200 to A$3,400 per ounce).
What else?
In addition, the company has warned that it is being impacted by delays with the arrival of component parts. This is being driven by the insufficiency and unpredictability of foreign currency available for Simberi's in-country supply chain.
Furthermore, these foreign currency supply availability and predictability difficulties in Papua New Guinea also continue to impact diesel fuel and jet aviation fuel supplies across the country.
The ASX gold stock has implemented alternative diesel fuel supply arrangements and has had limited disruption to fuel supply for mining operations and power generation. However, Simberi's air transport services provider has again had to curtail domestic flights across PNG at significant additional workforce travel cost to the company.
Management advised that the excavator fleet has since returned to target availability. However, St Barbara will now expedite the acquisition of an additional excavator that was originally planned for FY 2026. This will mitigate the potential impacts from excavator fleet availability issues due to any further supply chain difficulties.
All in all, this demonstrates the risks involved when operating outside tier one mining jurisdictions.
