PERTH (miningweekly.com) – Share trading of both St Barbara and Genesis Minerals was halted on Tuesday as the two companies discuss a potential alternative transaction structure and capital requirements for a merger.

St Barbara on Tuesday told shareholders that the discussions had been necessitated by the recent financial and operational performance of the company, as well as the "ongoing evolution" of the mine plan at the Gwalia operation, in Western Australia.

However, both companies have reiterated that they are committed to advancing the transaction, given the clear "industrial logic" of consolidating operations in the Leonora province of Western Australia.

St Barbara told shareholders that its Leonora operations produced 30 942 oz of gold for the March quarter of 2023 and 97 195 oz of gold for the financial year to date. Gold production at Leonora was impacted by suboptimal blasting of three key stopes in the quarter. Recovery of affected stopes, each containing between 8 000 t and 36 000 t of ore, required significant rework which reduced mining rates from these stopes and has slowed down the overall mining sequence.

As a result, some ore that had been expected to be mined in March has been delayed into the June quarter, which then cascades some ore from the June quarter into 2024.

The miner has updated Leonora’s production guidance for the full year to between 130 000 oz and 135 000 oz, and has also retracted the cost guidance for Leonora and the group until it can be updated in the March quarterly report.

St Barbara noted that while gold production at Leonora was lower than expected in the March quarter, the company had achieved several initiatives to secure the long-term future of the operation, including a number of cost savings initiatives, which were already bearing fruit. This included a cost saving of A$1-million a month by consolidating the mine operations under a single contractor.

Work done jointly by St Barbara and Genesis has also confirmed the presence of a consistent high-grade core within the South-West Branch lode, following recent infill drilling and reinterpretation of the ore lode geometries at Leonora. Current ore mining is occurring on the periphery of the orebody, which is characterised by inconsistent grades. However, grade consistency is expected to return to normal practice once mining enters the high grade core region of the orebody.

Under the current Hoover House agreement, Genesis shareholders receive 2.0338 new fully paid ordinary shares in St Barbara for each Genesis share held at the scheme record date, representing a nil premium to the 30-day volume weighted average price.

Genesis will raise A$275-million to fund the merged entity and facilitate the transaction, conditional on the scheme and demerger becoming effective.

Hoover House will have a production target of 300 000 oz/y, compared to St Barbara’s previous standalone 2023 production guidance of 145 000 oz to 160 000 oz for Leonora with year-to-date actual production of 56 000 oz.

Meanwhile, St Barbara will undertake demerger of its Atlantic, Simberi and other assets, including its shares in various ASX-listed entities, to St Barbara shareholders in conjunction with the scheme, to be held in a company to be known as Phoenician Metals, which will apply for an ASX listing.