St Barbara Ltd (ASX: SBM) shares are slipping on Thursday despite the company announcing a major milestone for its next phase of growth.
In midday trade, the shares are down 0.46% to 65.2 cents.
The decline comes even though the update materially improves the company's funding position and clears the way for its next major development phase.
After the stock's strong recovery in recent months, it appears some investors may be using the news as an opportunity to lock in gains.
Here's what the market is weighing up.
Simberi deal completion clears the way for construction
According to the release, St Barbara has completed the strategic investment by Lingbao Gold Group and received $389 million in cash proceeds.
This includes the previously agreed $370 million plus a $19 million adjustment linked to working capital and cash holdings.
At the same time, both parties approved the final investment decision to begin construction of the New Simberi Gold Project. The total construction cost is estimated at US$333 million.
St Barbara said its share of the remaining development funding is fully covered, with only 50% of remaining costs to be funded from this point following the ownership reset.
Site works are expected to begin immediately.
The company also expects to recognise an unaudited gain on sale of about $500 million in its FY26 results. Management said there should be no tax leakage from the Lingbao transaction.
Management says execution risk has now eased
Managing Director and CEO Andrew Strelein said the transaction completion and final investment decision mark a major turning point in the company's outlook.
He said:
Today's completion of the Lingbao transaction and approval of the FID represents a major milestone for St Barbara.
Strelein added that the deal leaves the company fully funded for development and said the FID reduces execution risk as Simberi moves into its next production phase.
The expanded operation is expected to increase ore treatment capacity to 10Mtpa from 3.5Mtpa and lift annual gold production to more than 200,000 ounces.
St Barbara also said the updated mine plan points to an expected all-in sustaining cost of between US$1,100 and US$1,400 per ounce.
Ore reserves alone are expected to support a mine life of at least 13 years.
Foolish Takeaway
With the funding now locked in and development approved, the next phase for investors is all about execution.
The key question is whether management can keep the Simberi build on schedule and within the US$333 million budget while progressing toward the targeted annual production.
If management delivers on that pathway, today's share price weakness could prove to be a buying opportunity.
The post This beaten-down ASX gold stock just cleared a major hurdle. So why are investors selling? appeared first on The Motley Fool Australia.
Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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