Nice little article I dug up by Brad George of the investing...

Nice little article I dug up by Brad George of the investing network:

Bad news comes in threes, or so the saying goes. Mid-tier Australian gold miner St Barbara (ASX: SBM) will certainly hope that superstition rings true and it can now move forward having got its three out of the way.
The company capped off a bad few weeks when it announced on Friday that it has been forced into an unscheduled two-week shutdown of its Leonora gold plant in order to replace its main mill motor plinth. The company commented that the plinth’s condition had been monitored for some time, and a decision to move the maintenance program forward had been taken to remove the potential for a major failure at a later stage. Several other maintenance programs have also been brought forward to take advantage of the shutdown.
The mill supports two mines, Gwalia and King of the Hill, with a combined annual production guidance of between 240,000 and 270,000 ounces for the 2015 fiscal year. The company has stated that while production for the quarter may be negatively impacted, mining will continue during the shutdown; it is anticipated that the shortfall will be made up and thus leave the company’s full-year production guidance unchanged.
Interestingly, St Barbara’s share price actually increased slightly on the news, perhaps illustrating the new-found confidence the market has with the company’s new management and renewed focus on its domestic operations.
St Barbara has suffered in recent times as a result of yet another merger gone wrong. The company announced two weeks ago that it is in negotiations with the government of the Solomon Islands to transfer full ownership of its Gold Ridge mine to the government; it will effectively walk away from the country and the project.
Operations at Gold Ridge were suspended in April 2014 due to severe flooding of the area after heavy rains. The site was reoccupied in June 2014, but the company reported in July that it was unlikely to be able to restart production in 2014 due to two major issues that required significant input from Solomon’s government — the repair of the only heavy vehicle access bridge to the site, and the removal of several hundred illegal miners who had taken over the site during the company’s absence.
St Barbara acquired the Gold Ridge mine via its September 2012 takeover of Allied Gold Mining, which also brought with it the Simberi mine in Papua New Guinea (PNG). At the time of the transaction, the newly combined group boasted a market capitalization of roughly AU$1 billion, with the cash-and-scrip deal ascribing a value of $556 million to Allied. Following the Gold Ridge announcement last week, the market capitalization of St Barbara was slightly over $50 million — a 95-percent fall in value in less than two years.
Neither project ever performed near expectations. Simberi remains beset with technical issues, and the company seemingly never managed to become comfortable in the politically challenging Solomon Islands.
In June 2014, the company announced the sudden departure of its longstanding CEO, and then almost immediately in July revealed its intention to pull back from its Pacific Island expansion, telegraphing a complete writedown of Gold Ridge and a potential impairment of $200 million for Simberi.
St Barbara entered the gold industry in 2005 via the acquisition of several Western Australian gold assets from the liquidators of Sons of Gwalia, which had failed largely as a result of overly complex hedging issues. The assets were sound, but aged, and it was a desire for growth that drove the Allied acquisition.
The end result, however, was not as expected. The Pacific expansion has seemingly failed, while the Western Australian assets have outperformed, at least up until now. Gold production from the company’s Australian operations beat both production and cost guidance, with ongoing drilling consistently increasing resource tonnages — the cornerstone Gwalia mine boasts a reserve of 1.8 million ounces.
The company remains active in PNG, but with the demise of Gold Ridge, that may not last. A firm refocus on its backyard is showing dividends, and the market may demand the expensive offshore adventure be formally ended. In the meantime, this current maintenance issue has seemingly been dismissed by the market as routine, and perhaps even a welcome return to normal mining issues that can be more readily managed than complex political problems. A good sign.