St Barbara Ltd (OTCPK:STBMF) Q4 2022 Earnings Conference Call July 26, 2022 9:00 PM ET
Company Participants
Craig Jetson – MD, CEO & Director
Conference Call Participants
Reg Spencer – Canaccord Genuity
Alexander Barkley – RBC Capital Markets
Peter O’Connor – Shaw and Partners Limited
Matthew Greene – Crédit Suisse
Andrew Bowler – Macquarie Research
David Radclyffe – Global Mining Research
Operator
Thank you for standing by, and welcome to the St Barbara FY ’22 Q4 June quarterly report. [Operator Instructions]. I would now like to hand the conference over to Mr. Craig Jetson, Managing Director and CEO. Please go ahead.
Craig Jetson
Thank you for that, and good morning, everybody, and thank you for joining us on St Barbara’s Quarter four June FY ’22 quarterly report briefing. I’m pleased to join you on this call from Perth, the land of Whadjuk as the Noongar people. Please note the disclaimer on Slide 2. As always, I would like to begin by recognizing the traditional land owners of the First Nations people of the lands on which St Barbara operates in Australia, Canada and Papua New Guinea. I am paying my respects to Elders past, present and emerging.
So moving on to safety. And I always start with our safety performance. Safety remains our number one commitment right across the organization. One of our key challenges continues to be absenteeisms and mitigation of increasing COVID-19 in case numbers. This is placing pressure on our maintenance and daily operations, including all of our contractors.
With the TRIFR for FY ’22 of 3.4, there has been a slight improvement year-on-year. However, our TRIFR for quarter four highlights the importance of not becoming complacent. And we all know that we have a lot of work to do in this space. In terms of our key achievements, it’s pleasing to present our quarter four results. Production at all our operations has been sustainably normalized through proactive and effective management. We have reached both production and cost guidance at all sites for the year with a very strong financial — final quarter and promising outlook and start to FY ’23. The performance of the last 2 quarters, in particular, demonstrate that our results are improving and are repeatable. I have now spent time on the ground across our business. After the hiatus of COVID — this is clearly helping the team deliver better outcomes in all jurisdictions, including Nova Scotia’s permitting and First Nations relationships.
For St. Barbara, one of the most noticeable impacts of COVID to our business was the inability for the executive and technical experts, both internal and consultants to spend time up on ground supporting our business.
Turning to the numbers. Group production as a solid result of 86,000 ounces of gold, up 40% on last quarter. Our focus on reducing costs has contributed to a decrease in all-in sustaining costs been down 12% at $207 per ounce quarter-on-quarter. A stronger realized gold price, combined with higher production, has delivered a 25% increase in cash to $99 million. And to note, this is after spending $28 million of replacing the DSTP, Simberi being nonoperational, already in gold production, for at least 6 months, and funding for the $34 million of acquisitions such as Kin Mining and Nova Scotia Gold.
We now have an aspirational target of $10 million in cost reductions through the consolidation of our corporate functions to Perth. We are announcing an inaugural ore resource of Old South Gwalia, which is adding a further 1.9 million tonnes of resource at 3.7 grams per tonne. This will add further mining fronts in significantly shallower depths at Gwalia and help with more optionality at these lower depths. Simberi is under strategic review. It’s pleasing that multiple parties are interested, which is a testament to strong value of this operation and the sulfide project. This quarter results also highlight the value Simberi can add. Our organic approach and our strategic approach in developing the Leonora province has given us the opportunity to think about Atlantic in a similar way with a holistic province plan approach.
This thinking will drive organic and inorganic growth across and the business continuity for many years, creating further value. Our province strategy is very visible and is working. The quarter results demonstrate this. Our strategy for Leonora has been to stabilize and then improve operations, do more development, fill the mill, while we progress steadily in our province plan.
Gold production for both quarter-on-quarter year-on-year, in fact, is up 25%. For the quarter, this was due to our ability to access stopes previously blocked by the seismic event at Leonora in November 2021. For the year, this was driven by increased ore mill due to the management’s decision to remove historical waste and opening up additional mine headings some 12 to 18 months ago. All mines for the quarter was slightly down, driven by the availability (sig) unavailability of maintainers and operators, primarily due to COVID. As flagged in last quarter, productivity from 4 new jumbo drills has resulted in development meters increasing by 26%.
Looking back at the full year tonnes milled. For the last 4 years, this has seen an increase of 58% from 652,000 tonnes in FY ’19, ’20 to 1.1 million tonnes in FY ’22. This significant increase in mill performance shows us delivering on our strategy to fill the mill through more effective management at Gwalia. The productivity increase is an operating strategy. It’s not driven by capital. The Leonora province plan is well underway. Our acquisition of Bardoc certainly supports this. Bardoc assets have been properly assimilated into our business with Zoroastrian on track for first production in the next 12 months. Management have identified the commissioning strategy that enables Bardoc to be bought on live 6 months earlier than initially thought. This strengthens our position to fill the mill much sooner. On the Simberi, Simberi has returned to full production and had a great quarter. The year has been impacted by the DSTP replacement followed by the outbreak of COVID that everybody can remember in February of 2019.
However, quarter four shows that we can still deliver. I have spent considerable time on the ground in Simberi. The new ideas generated at the time with a highly motivated team there has led a better mine and mill productivity, data maintenance processes and better availability and equipment reliability is certainly improving. We have achieved high levels of production in Simberi. Roadblocks have been removed and the operation is delivering above expectation. This has been an enabler both for senior management, consultants, technical experts being on the ground for the first time in 2 years to help the site management team and the operational team.
Management expects improvements that have been rolled out at Simberi over this time to continue through to FY ’23 based on the quarter four results. In terms of the strategic review, discussions remain ongoing, but are confidential, but I am pleased that there are multiple parties in the data room. This quarter results shows that where it is impossible to operate and how it is impossible to operate Simberi and grow Simberi.
Looking at the sulfide project. This extends mine life by greater than 10 years, has a strong NPV and creating enormous value notwithstanding, there have been price increases and scope changes. We’ll still work through those issues. It’s a strong project and attractive to many companies. In terms of Atlantic, access to high-grade ore was possible following removal of in-pit waste, which drove a 64% increase in gold production. I personally met with the Premier, Tim Houston of Nova Scotia. Premier Houston has been supportive of a more collaborative approach. We are working together and have already dealt with some of the permitting backlogs. For example, we can now submit multiple permits at any one time.
In this quarter, 2 delayed permits have already been approved, the ammonia treatment plant and the clay cutback. We are confident that the new approach will secure the tailings lift permit mid-August, delivering business continuity for the rest of this financial year. The approach we are taking in Canada flows on from Leonora province plan strategy. The potential of our province approach in Western Australia has been recognized across the sector and will transfer well into an approach similar in Canada.
The 2 extended trips I’ve made with Atlantic this year, I have been able to forge relationships, not only with government, but also including the First Nations and the premier himself. I’m heading off there again soon to continue building these relationships and looking forward to meeting with the Premier and the First Nations people once again. We are committed to the current plan at Atlantic to lift the current tailings wall and providing tailings capacity for the rest of the financial year, finish mining in the Touquoy pit by the end of this calendar year, process stockpile ore for the next 2 years while Beaver Dam is being permitted and constructed, secure the in-pit tailings permit to enable tailings capacity for the remainder of the operations, and also deliver the EIS approval for Beaver Dam in quarter four FY ’23.
With COVID and other road blocks, it’s taken time, but we now have a pathway. I’m on the ground supporting the Atlantic team quite often, and this is delivering the outcomes that we need. Our province plan strategy places Leonora essential to any consolidation in our view. St Barbara has the largest mineral resource and ore reserves in the Leonora region. Near-term growth from Old South Gwalia, new mines such as Zoroastrian and Aphrodite with Zoroastrian production within the next 12 months. We have a large landholding that grew significantly this year with the acquisition of Bardoc, which delivers on our proven strategy. We are also cash flow positive with $177 million from Leonora this year, we can fund our growth projects organically.
Our focus on Gwalia and Leonora province is generating early rewards with expansion of reserves and resources and extending St Barbara’s footprint across the region. Our province plan thinking is seeing undeveloped opportunities in the region beginning to approach us for future development. That’s very exciting.
We have over 122 million tonnes of ore to be processed containing 10.5 million ounces of gold. This represents decades of potential growth and sustainable production. All expandable at low cost. The hardest thing about gold mining is finding the gold, and we’re certainly doing that and we already have plenty of it and it’s growing. The first 2 mines to be developed in the near future is Zoroastrian and Aphrodite mines, which we acquired this financial year.
Bardoc assets have been promptly assimilated into our business. These 2 mines will not only fill the current 1.4 million tonne mill capacity, but also assist in the expanding 2.1 mill capacity justification. This will lift the amount of material processed at the Leonora plant from 650,000 tonnes that we did back in 2019, ’20 to 2.1 million tonnes by FY ’26 with minimal capital spend.
Zoroastrian will be in production in 12 months’ time. This is 6 months ahead of our original schedule. We’re expected to be delivering 300,000 tonnes per year on an average of 3 grams per tonne to that mill. The orebody is open in all directions, and we have plans to commence drilling as soon as possible. We have been investigating the possibility of starting some of the resource extension drilling from the surface. Originally, we thought the [indiscernible] people would make this too difficult, but our technical team has done some great work and have found locations where we can safely set up surface drills and commence this work early.
Gwalia is almost 130 years old yet we’re still finding new resources. The inaugural resource that we announced today for Old Gwalia South adds a further 1.9 million tonnes of resources at average grade of 3.7 grams per tonne. This is an area between 600 to 1,000 meters below surface, much shallower than the digs that we’re currently seeing or transported today. Over the coming quarters, we will continue to find the rest of the orebody that looks like it may extend to the surface. In the September quarter, we are targeting Inaugural Tower Hill Open Pit Reserve, followed up in the March ’23 quarter with the Inaugural Harbour Lights Open Pit Ore Reserve. Again it’s very exciting for us.
We may have the largest ore reserves in the region already, but we are keen to continue to add to our high-quality portfolio. In terms of exploration, our exploration teams are keen to commence drilling on extensive land holdings, which came with the Bardoc acquisition. 25 priority targets have already been identified in these new areas. We are chasing high-grade deposits and have plans to drill 22,000 meters through FY ’23.
In terms of plant expansion, I believe we are in an enviable position. I’ve been able to expand our processing plant at very low cost. With a modest investment, we will increase the processing capacity by up to 50%. And with improvements at Gwalia, the new lines in Zoroastrian and Aphrodite, we will be in a position to immediately fill the mill. Established infrastructure with processing capacity available at low-cost future expansions significantly differentiates us from all the others in the province of where we operate.
I think this table clearly articulates a central region of consolidation and where we are. Our current rate of processing would take us 87 years to process all the material, accelerating the delivery of high-quality resources that we have in our portfolio will deliver outstanding value to our shareholders. This quarter and the second half of FY ’22 demonstrate the transformation is underway. We are delivering on uplifts 1 and 2 and 3, which is our growth strategy. This quarterly performance is an indicator that future on the Leonora province plan maturing, Atlantic’s potential to be transformed in a similar province approach and strategic review of Simberi underway will also create significant and deliver significant value to St Barbara.
Our Leonora province plan demonstrates that we have the largest mineral resource and reserves in the Leonora region, continued near-term growth, including Old South Gwalia. A new high-grade mine is Zoroastrian is on track to commence in production in the next 12 months, a large and exciting land holding, we believe that offers the best opportunity to find high-grade additions to our leading portfolio, a low-cost mill expansion and the ability to fund these exciting projects and growth projects through our own cash flow.
Production is up. Per ounce is stable — cost per ounce is stable. Some work to do to improve our safety performance. All in all, a solid quarter that reveals our potential and confirms our ability to achieve it. So with that now, I will open up all the lines for questions that people may have, and thank you for joining me. So open for questions.
Question-and-Answer Session
Operator
[Operator Instructions]. Your first question comes from Reg Spencer of Canaccord.
Reg Spencer
Craig and Tim, thanks for the presentation this morning. My first question is on FY ’23 guidance. It’s your last update to the market, you flagged that you would provide an FY ’23 outlook at the quarterly. Should we read anything into the delay of the provision of FY ’23 guidance until your results next month? I don’t want to speculate, obviously, with strategic reviews underway at Simberi. But could we read into — that might mean there’s a pending asset transaction? Or I was just wondering if you could help me out here?
Craig Jetson
Yes. Look, it’s a really good call out. I think the main driver is clearly the strategic review of Simberi is #1, but also what made that might affect this more so than that, to be honest, would be the permitting of the tailings facility in Nova Scotia. As you would know, we need that I guess, to be able to finish the Touquoy pit. It’s about a week to 2 weeks away before doing that. So if I set guidance for the business now and something happened, I’m quite positive we’ll get the lift given what’s happening at Nova Scotia now. So that’s not really the major concern, our major concern is setting guidance and then 2 weeks later if that permit doesn’t come through, have to reset guidance again. So we will say we will be doing in 2 to 3 weeks from now when the full year results are done.
Reg Spencer
Understood. That makes a lot of sense. My next question is just about general industry cost pressures. Obviously, you’ve pointed two lower grades at Leonora or Gwalia next year. You also highlighted that you might look to suffer from some labor availability issues next financial year as well. Are you starting to see any indications of any alleviation of these inflationary or labor issue pressures? Are you hearing any anecdotes from any of your suppliers or contractors. Are we currently going through the worst of this and I think it’s starting to get better?
Craig Jetson
Look, I’d like to be optimistic and say absolutely, but I can’t. I’m not seeing the labor pressures, any different than they were in previous quarters. What I’m saying is, we’re managing the cases much better, and we’re preparing and planning much better because of what we’ve learned over the last 18 months and the systems and standards that we’ve put in place. I’m not seeing an influx of labor from the east to the west, for example, now that the Board has opened up. What I am seeing is increasing cases here in the West creating significant issues for us in our operations in Western Australia. But what I think we’ve been able to manage around and get through, but it’s certainly not where we need to be. We’re not running the equipment anywhere near capacity because of that. And I don’t see that changing in the very near future as much as we try.
Reg Spencer
So Craig, does that mean that we should probably expect when you bring out your guidance, obviously, pending an outcome that Atlantic that to be probably more on the conservative side given those headwinds?
Craig Jetson
Look, I think it will be on an achievable side. I don’t think it’s conservative. I think we’ll set guidance as we know it. We’ve obviously gone through our yearly budgets internally, and we’ll set guidance on the back of those, but our budgets are certainly taken in and considering all aspects of COVID impacts on what we may think happen in the future, and we’re planning for those. So I think if you look at the grade drop, but if you also look at the productivity improvements that you’re seeing at Gwalia, even with the issues we’ve had in the last quarter and the quarter before the COVID, the productivity increases and the ore to the surface, for example, has been significantly growing even with all those headwinds.
So if it was ever one day where we had everything we may have and all the development completed, meters drilled that we would like, everything was really lining up, it just shows you how good that asset could be. So guidance will be achievable, and it will be based on the budget and the mine plans that we’ve currently got internally.
Reg Spencer
One last question, if I can. Simberi strategic review. What would you say would be the replacement cost of the mining and processing infrastructure on the island today? And does that feed into your consideration on any asset transaction and what you guys might think is an acceptable price for that asset if there was a firm bid?
Craig Jetson
Yes. Look, absolutely. The first thing, I think, Reg to point out, there are multiple people interested in the asset. So that’s great. But it just shows you that people understand how much value Simberi to mine, the mine of today and a current operation can deliver, but also the strength of the sulfide project. Yes, it’s got cost pressures and there’s been scope changes. There’s been all sorts of increases. But the fact of the matter, there is very strong NPV and people in the data room now are certainly seeing that.
In terms of value, I’m not prepared to go into what I believe the value of the asset would be. That would be probably not the right thing for me to say. It will not be a fast, so that will be a strategic decision once we understand if there is a sale or if there is another way to be able to deliver on the sulfide project other than fully St Barbara owned. This is a strategic review. It’s not a fast sell. So is it for sale? Everything is, right, at the right place. So we’ll have a look at all options available to us once people will do their work in the data room, and we do more work ourselves.
Operator
Your next question comes from Alex Barkley of RBC.
Alexander Barkley
Craig. So looking at the briefing book, you well highlighted the long resource life at Leonora out to 87 years. And at 2.1 million tonnes per annum, that’s still going to be a more than healthy life as well. Would you think about expanding that capacity quite a bit above 2.1 million tonnes per annum at some point? Alternatively, is there a combination with some additional milling capacity in the region that via M&A could come about?
Craig Jetson
I think you’re absolutely on point. What you’re seeing us talk about today is our province from where we’re going short term to medium term. I think in the longer term, and I touched on it a little bit in the regional consolidation, there is significant opportunity in the Leonora region to be able to bank all these reserves and resources much sooner than we’ve got in our pipelines at the moment. So the answer to your question, given the infrastructure that we have at Leonora is central all the hub to all things’ growth, in my view, in the province. We could absolutely consolidate further, build further, expand further, because the infrastructure is already there and combining some of those assets makes absolute sense given the reserves and the resources that’s available to everybody.
Alexander Barkley
Okay. And was there a PFS update probably coming out of Q1? Is that when we might learn a bit more about that?
Craig Jetson
We certainly learn a bit more about what we’re doing. Tower Hill, Harbour Lights, in particular, the expansion greater than 2.1 potentially. What we find with Zoroastrian with the drilling and what that might open up and the extension of life of mine there, hopefully, with Aphrodite and Zoroastrian on board. So look, there will be changes for the better going forward. I think the baseline of where we are today is exactly that. It is a baseline for potential growth.
Alexander Barkley
Okay. And a quick 1 on Simberi. Recovery was pretty good in the quarter, up to 77% despite some lower head grade. Is that sort of an above average blend percentage of oxide ore? Or is — should we expect good recoveries going into FY ’23?
Craig Jetson
Yes, we’re going to get mixed recovery towards the second half, but we have got a robust mine plan now that gives us a very solid result for FY ’23, that I’ll talk about when I set our guidance. I think the — for me, the production throughput in quarter four is normal. That’s what we should be expecting quarter-on-quarter. Now there’s going to be quarters of mill shuts like, we’ll have to do a mill [indiscernible] or if we have a mill value, whatever the headwinds are, may slow us down, but a normalized quarter with the operations running stable, that quarter four performance, in my view, would be a normal quarter.
Operator
[Operator Instructions]. Your next question comes from Jeffrey Crainfield of Rover Investments [ph].
Unidentified Analyst
Good morning, Craig. Congratulations on a great turnaround, good results. As you know, my comments and questions come more from a shareholders’ point of view rather than an analyst point of view. Look, probably the first and most pressing concerns that we have been — we do have serious concerns regarding what we’ve been reading and what’s been reported in media more so than anything regarding talks, merger talks with Genesis, we see this as just a ridiculous thing at a merger of equals. St Barbara’s shareholders have taken a fair bit of pain with — as lot of shareholders of gold mining companies in Australia has. Share price has been beaten down, but — are you able to — quite frankly, we don’t have a lot of confidence in the Board of St Barbara to negotiate following a series of bad decisions going back to the way that Atlantic was purchased basically relying on the due diligence reports or lack of relying on what Atlantic Gold had told them. So are you able to tell us anything about where those talks might be or if they are ongoing or if they are or they’ve been ceased?
Craig Jetson
Well, Jeff, let me start by saying it’s great to have a shareholder dialing and asking questions, and I really appreciate you taking the time out today to do that. I think there is probably many hours to be able to answer your questions effectively. Let me start with, I think, the Atlantic purchase, I’ve spent a significant amount of time in Atlantic this year now. Now that COVID has gone, I have been up with the team. As I’ve stated in the release today, I have met with the premier, met with a minister) Halman, who’s the Minister for Environment and his team and everybody else. And I think for the first time, I can actually say everybody’s working together to achieve the business continuity outcome for the Atlantic assets.
The acquisition of the assets are still strong in my view. They are good mines. They are good operations once developed, and they will certainly deliver good NPV and good cash once permitted. The headwinds have been the permits up and to me, not the asset purchase, not the assets themselves and actually in fact Touquoy has been a very good cash generator over the last 3 to 4 years in the last 2.5, 3 year since St. Barbara owned it. So that in itself has been producing safe, reliable cash.
Unfortunately, it’s running out of life of mine now and running down and will be in the lower grade stockpiles. It still has a couple of permitting headwinds. But what I will say, working very closely to government, having the executive team, including myself, being able to be on the ground now, working with the team, working with government, working with the regulators, we’ve been able to achieve two old, I guess, applications of permits in the last month or so, which gives me courage that the process that we’ve put in place that’s been cooperative with the government, working together for business continuity, we’ll get the other permits in time. So I think that business over time will be developed into the cash machine that was first envisaged during the acquisition. The gold is still in the ground. It’s gone nowhere. We will get it. We will permit it, we will move on.
It’s just this hiatus between how long does it take and when can we do that? We are getting closer to be able to nail that and realize the benefit. So I think the acquisition itself was very, very sound. Obviously, not here at the time, but on the ground looking at it, it has the potential to be a very, very good business once permitted.
There are some strategies to be had, and I won’t talk about that in this call, but there are some changes potentially in strategy and how we operate, what we commissioned first — so we’ll do all that work and the internal [indiscernible] that come out with the best strategy we can once we’ve got the permits in place.
In terms of the talks, there’s a lot of chatter in the market, it is the river. And I do take on board your comment about the pain that the shareholders have endured particularly over the last, what, 3.5 years and more so in my time in the last 2.5 years. But that’s been for a lot of reasons, not one single reason. I won’t go into the backlog of excuses. But when you start — when people start to see and other business leaders start to see the opportunity that Leonora would provide as a centralized hub, a lot of people start talking. A lot of people want us. A lot of people approach me about, is there business continuity opportunities between us, is there synergies between us. Absolutely.
In terms of Genesis, yes, I speak — I’ve spoken to them and talks are continuing. I’m not ruling out any business opportunity at this point in time. But what it will do is make good sense and make and create value to the current shareholder proposition, shareholder value and to our business. It won’t be a reckless change or consolidation, if at all any, and that there are other opportunities of the Bardoc’s in the region as well, as I’ve said today in today’s call, people now are coming to me asking me about their business opportunity, what they’ve got and the synergies that they could bring to Leonora.
It’s great that we are the center of attention in terms of value creation. I’d rather people be saying, gee, I wouldn’t mind a piece of [indiscernible], I’d like a piece of that profit plan. I want to be part of that, then don’t do that on — we knew where they are — so we’ve got the right strategy. We’ve certainly got the right endowment. We’re talking to the right people, not just one group of people, we’re talking to multiple groups. That’s what business development do, and Andrew Strelein, Chief Development Officer is doing a great job in that space. Talking to multiple parties on a whole range of different opportunities, which one we land on, Jeff, not decided, no decisions, but we’ll certainly do everything we can to support the growth and the value of our share price.
Unidentified Analyst
Yes. Okay. Look, thanks, Craig. I appreciate, look, the acquisition of Bardoc and as you say, it’s going ahead of plan, extremely positive and other consolidations in the area would be great. It just was — we do have concerns with Genesis. And anyway, look, thanks very much for that explanation. And we look forward to St Barbara really making some positive moves from here on in.
Craig Jetson
Yes. Thank you, Jeff, and it’s great to get your feedback and the questions that really bothers shareholder, but as I said, we’ve delivered 2 quarters now — 2 quarters that are very solid, 1 in particular, just watch this space and we’ll keep delivering.
Operator
Your next question comes from Peter O’Connor of Shaw and Partners.
Peter O’Connor
Good Craig. Your energy and enthusiasm is clearly noted today, and the presentation was very well rounded and had great narratives. First question is on Gwalia and the Leonora hub. Just a free milling ore opportunity, Craig. So within that expansion is to 1.4 and then to 2.1%. And I note on Slide 16, you add the Albion component as well. How long can you free mill with what you’ve got at higher rates before you need to take an extra step?
Craig Jetson
Yes. Look, as soon as, I guess, we get Zoroastrian on that goes a long way to filling the current 1.4 million tonnes. But we really need the mill expansion over the next 18 months post that to be able to accept up to 2.1 million tonnes from Aphrodite or even beyond in our view. So I think the Albion timing on that, we’ll put out a lot more information at the full year to give people an idea of where the capital cash is going to flow and what project, on the timing. But we could and we will, and we plan to put Aphrodite material with Zoroastrian and with Gwalia. This will hurt our recovery somewhat, but still good business to be able to mix them if the Albion plant is not ready. But really, we need the Albion plant and one other mine other than Aphrodite along at the same time to maximize the benefit from the Albion circuit, and we’re still working through that.
But again, as I said, with Tower Hill and Harbour Lights, we’ll talk a lot more about where they fit in the scheme of that, which will tie into the Albion expansion at the same time at the full year result.
Peter O’Connor
And then switching to Simberi. The data room, can you give any more detail about the point at which you’re in it at that process? Are you at nonbinding stages, binding stages. And when you talk about the parties involved, are we thinking multi geographically located parties, not just from China? And also, are we thinking about operators that are currently in the PNG or looking to get into PNG or both?
Craig Jetson
Yes. Look, there are operators in PNG that are interested for sure. And there are operators in Australia that are certainly interested in PNG as well and people like myself that have got plenty of PNG experience are interested. But there’s a significant shift in mining, in PNG at the moment with quite a few assets being reviewed or in strategic reviews or just blindly up for sale. So that’s an interesting field at this point in time. So — the thing for — that we’re looking for, this is not a fast sale to remove Simberi. This is a strategic review of what’s the best outcome to achieve the sulfide project. And if that’s not with St Barbara then who’s it with. So let’s look and see who is interested.
The other part would be is we’re not going to sell it just to anybody. And there’s a lot of reasons for that. We have values of operating in PNG and that’s going to be a significant important piece to whoever successful if we do go into a sales agreement of how they would operate in PNG, past experience in PNG would be another one. And our St Barbara values would be a third one. So there’s quite a bit of, I guess, nonfinancial thinking going into that. But what I’ll have to say at this point in time, there’s nothing binding at all. People already are having a look in the data room that are interested first.
Operator
Your next question comes from Matt Greene of Credit Suisse.
Matthew Greene
Craig, if I could just ask on Atlantic. So it sounds like you’ve been there a fair bit and also from your commentary, it sounds like things are sort of on the permitting side stepping up a bit. So I guess just with the benefit of hindsight here in the last few years, being on the ground there, what do you get the sense has caused all these delays? And I appreciate this is always an issue with this industry on the permitting side. But what’s your sense? Was this more a bureaucratic issue? Or is it a St Barbara personnel issue in Canada?
Craig Jetson
Yes. Look, it’s certainly a combination of both, Matt. And let me say, we are not squeaky-clean in everything that we do and in hindsight, whatever, we should — we could have done things much differently. The one of the stark surprises that I got was when I went to the premier’s building, not his office on the first day on the second day, sorry, but the first day when I went to his building, that even though COVID restrictions had lifted and I’m going to blind COVID a little bit here, but over 80% of Nova Scotia government were still not back at work. And I found that incredible. And of course, the frustration for me buried in Australia of not been able to get out at most of the time, buried in my house in Queensland, not been able to get out, getting the frustrating e-mails, the lack of response and whatever.
I now understand why all people were actually not at work. And government, people work in significant teams supporting each other. And without those people been able to do the inspections on the ground, the face-to-face meetings, the technical challenges been able to resource the technical people just stalled all applications of many different types. And it made the whole process dysfunctional. And for 2 years, we’ve been in this dysfunctional state of not being able to work together on the ground in the office or anyway to be able to deliver in significant projects in a timely manner, and people were not making decisions.
On our side, we certainly struggled with technical drilling, geotech drilling. We struggle with all sorts of different technical people not traveling, not been able to bring in technical experts from other jurisdictions in mining that help us answer the questions, whether it be from any information request from some of the IRs, whatever it was. So it was really a combination of many different fronts of inability to be able to continue growth or continue development or continued business processes. It was really about can we survive of what we’ve got today. Can we support the size to safely deliver gold ounces, and that’s where the focus was.
All things permitting, all things, government, all things outside the mine just stalled and stopped and it’s only just opening up now, but it’s great to see the recovery plan. Now we’ve got a change of government in Nova Scotia as well. And I’d have to say that Premier Houston is certainly, across business development and growth, very encouraging in terms of what St Barbara want to do and need to do and very supportive.
The teams that we’ve put together now that sit together on a weekly basis to go through the permitting together have been able to backlog 2 permits that have been in the abyss all through COVID.
So with that, I think that’s why I’m really confident to be able to get our tailings dam raise permit in 2 to 3 weeks from now. And that should fall due at the time when I’m actually back in Nova Scotia for my next trip. So as you can see, I’m spending a lot of time developing those processes and relationships with government, but also the First Nations. So I’m a little more confident now about the asset that we have.
Matthew Greene
That’s great. Thanks, Craig. And I guess we’ve seen similar stories here in Australia on the permitting during COVID. And I guess there’s not a huge amount of mining in those discussions. So hopefully, the backlog isn’t too bad. But if we take the view here that you don’t get your tailings permits in time and you’re forced to wind down operations there. And of course, this is the worst case scenario. But what could that look like on care and maintenance. Is this a case of wind down, keep the labor pool on the payroll until you get, I guess, the permit and also sort of be Beaver Dam permits in place and then look to restart? Or could you look at a more extended period of care and maintenance if you’re about to go through a capital-heavy spend at Leonora? I’m just trying to get my head around what that could look like. And also just to add to that, once you do get these permits, does that trigger a timeline as to when you press that stop line?
Craig Jetson
So I’ll start with the last question first. So if we got the permits, then we would be in development on Beaver Dam. So it’s a Beaver dam, for example, we’re still probably 18 months away from getting that permitted. 12 months, I would hope. Now the actual construction of Beaver Dam is very simple and — whereas in terms of cutback and delivering ore, it’s very shallow. So it’s not going to take a long period of time. But the day that I got the permit providing First Nations were okay and that part of the permitting process, I would actually start mining and we’ll start to cut back. so that’s okay.
Now the — I guess the elephant in the room is about what to do with Atlantic operations if we don’t get the tailings dam lift, and we don’t get a follow-up within the next 12 months. The in-pit tailing solution, what do we do? So we’ve looked at internally many different scenarios, as you would expect that planning to do that. And one is a genuine care and maintenance. So you have a minimal team. So you have basically a [indiscernible] team, making sure that the asset is kept in a state that’s acceptable. And all I would write at that time would be the permitting team to make sure our permit sequences were continuing on and probably some engineering at the same time, making sure we don’t fall behind on the development, further development of Beaver Dam and Fifteen Mile Stream across Cochrane Hill. So a bit of engineering. We’ve costed that to be very, very cheap. It’s probably in the order of about a million dollars a month to take that on complete [indiscernible] care and maintenance, but still keep the continuity of permitting and construction of Beaver Dam Fifteen Mile Stream in train.
So it’s not a lot of cash outlay to put it on care and maintenance. The issue will be is, this is where I talk to the government quite a lot is we’ve got a couple of years of processing low-grade stockpiles that puts the operation, still puts the operation in the black from St Barbara perspective, still makes some free cash. But it also keeps a lot of the people, not the mining team, but the processing team and some of the mining team employed for the next 2 years as well. The last thing we want to be doing is be are laying off people. And then in 18 months’ time, trying to restart up again with no one. So if we’ve got the business continuity, and what that means is the tailings dam lift and the input tailings, we can process for 2 years, low-grade stockpile, be profitable doing that.
And by that stage, have Beaver dam permitted and have it cut back and delivering ore as an option. So I think the second part of what I’ve just played out for now is not the third option, but we’re looking at all 3. Now of course, if you go into care and maintenance, then it is — and we’ve completed the thinking. And we’ve looked at the plans, if you might want to stay down until you get business continuity, not just to finish and you wouldn’t finish low-grade stockpiles, you would look at, well, do we stay on care and maintenance until we’re fully permitted the Beaver Dam Fifteen Miles Stream, or one or the other and bring them on together.
So the thinking is in multiple facets. But I’m just trying to give you the thoughts that we’re looking in the future, we’ve got some scenarios mapped out and we could execute any of those. But what our holy ground is now in 2, 3 weeks’ time, or 3 or 4 weeks’ time, get the permit for the tailings lift to move on.
Operator
Your next question comes from Andrew Bowler of Macquarie.
Andrew Bowler
Craig, I think you’ve certainly answered all my questions on Atlantic. Just going back to Gwalia. Obviously, in the quarter, you talked about the grade decline over this year. I assume that’s talking about the Gwalia Deeps grade. And can you just give us a little bit more clarity on a longer-term Deeps grade outlook? Is it at the end of this financial year, we’ll be exiting at roughly that sort of 5.1 gram per tonne Gwalia Deeps grade? Or will there still be some lumpiness in the next couple of years in that ore coming out from the deeps of Gwalia?
Craig Jetson
Yes, Andrew, grade is an interesting base at Gwalia. So we are going to take a dip in grade for the next couple of years at least. Post 2 years, it does jump back up a little bit. But as you know, as we go deeper interior, the ore body knowledge we have at the moment would suggest that as we go deeper, the grade drops off. Now we’ve already criticized myself by saying in a couple of years that jumps back up a little, not back anywhere near I’d like, but it does pop back up again. But in terms of life-of-mine grade, we’re going to have to reset that at some stage. It’s not going to be the 6, 6.5 grams per tonne that’s been in the market for 2, 3 years, it is going to be much reduced. And we’re finding that as we get deeper as of this year, it will be in the 5s, no doubt.
Andrew Bowler
And I guess, just expanding on that grade question. I mean, obviously, the Old Gwalia resource, out today resource grade are a bit lower than what that deeps grade is, but obviously, check the mine as well. Is that — will you be looking to convert into reserves a fair amount of that resource? Or is there sort of a high-grade core you can chase to sort of keep as close as you can get dilution to that resource growth?
Craig Jetson
No, look, that decision hasn’t been made yet, and the team will come out with their reserves and resource statements and we’ll elaborate and expand on that further shortly. But I think the whole issue of grade — and we need to do some more extension drilling. We need to move a lot more development, and we certainly need more grade definition drilling as well. So there’s a lot of activity to be able to answer that question, Andrew, with any sort of accuracy coming to me at this point in time. I think the technical people are in a better position to make that assumption. And I’ll certainly talk about it at the half, at the full year.
Operator
Your next question comes from David Radclyffe from Global Mining Research.
David Radclyffe
Craig and team. A lot of questions have been answered. So just a couple of quick ones then. Just coming back to the new resource on Old South Gwalia, you do talk about that you’re still sort of working that up. And I guess you see upside both up and down sort of plunge there. Just trying to understand the potential scale of this. If I look at the section in the presentation, it does look like the maiden resource catches the bulk of the tonnage potential. Is that a fair assessment? So you sort of look at it and you see there’s a bit of upside, but it would be unlikely to double? Or is that maybe that diagram a bit deceptive?
Craig Jetson
Yes, there’s certainly upside, but I wouldn’t call it double.
David Radclyffe
All right. And then just maybe a follow-up one. I mean, just coming — you’re talking about business continuity and such like. I mean, given what’s happening with the corporate office, you’re cutting and relocating that at a time when there’s so much going on in the business. Is that — is that how is that going? And are you actually able on finding that you can fill the key roles that you need to in WA given this market, where everyone says that it’s very hard to find [indiscernible]
Craig Jetson
Certainly, what we’re seeing is our ability to be able to do that. We’ve got it in our plan. we’re still working through what critical and key roles need to do and can be relocated. And then our people in Melbourne in key positions will be offered the opportunity to relocate and some people are very keen to do that, most are not, which is fine. We’re also not replacing some of the roles and people that are leaving, and we’re working through that. But the fact of matter is, if I look at — if I look at the future, St Barbara, without a Simberi, and then I have 2 provinces, Atlantic and potentially Atlantic Gold as a province and Leonora in the West.
If I was managing 70% of my assets, 80% of my assets here at Leonora which takes up most of the management and the support and the corporate time, I would — I want them here in the west. So we’re doing that. From a technical perspective, the office here won’t be full of Melbourne people, full of equipment rolls. What we’re doing is making sure that everything that we can do at the site is done at the site by the site people. Anything from government’s risk capital, all other technical is supported here in Perth. So we’re asking the sites to be more owners of their business unit than having corporate buildings full of transactional people, if that makes sense.
And at the same time, looking at our own operating model because the executive operating model will change over time. As the business matures, as the business changes, as the business focus certainly changes. So it is time for — and St Barbara’s always had 2 offices, there’s been an office here in Perth for a long period of time. But to have the executive here to have the major technical hub, the risk management processes, the finances all here makes perfect sense than duplication or the extra in Melbourne, that is probably outdated now. And there are flexible works. They’re working from home. There’s all sorts of ways to achieve the Melbourne office closure that we’re currently working through. Now we’re getting back to our people in the end of October and November to talk about the next steps. And the office may cease some time in calendar next year.
Operator
There are no further questions at this time. I’ll now hand back to Mr. Jetson for closing remarks.
Craig Jetson
Again, thank you, everybody, for your interest in dialing in today some great questions, and it’s great to see shareholders dialing in and asking some difficult questions as well. So I really do appreciate that. I just want to recap by saying the management team are delivering on the strategy that we put out on 2020. It’s been a difficult couple of years with COVID, whatever it is, — but if you look at the last half, the last quarter, in particular, very strong results, and I just want to reach out and thank the team — my team in particular for delivering that on behalf of the shareholders. And thank everybody for your interest today and dialing in. It’s much appreciated. Thank you.
Operator
That does conclude our conference for today. Thank you for participating. You may now disconnect.
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