The Western Australia and Papua New Guinea gold producer got due recognition at this year’s Kalgoorlie Diggers & Dealers forum for the standout performance at the world’s deepest underground truck-haulage mine, Gwalia, and the turnaround at the former problem asset, Simberi in PNG, which contributed A$69 million of St Barbara’s FY17 $303 million operating cash flow torrent.

Cash from the two operations allowed St Barbara to turn into FY18 with no debt, $161 million in the bank, and vital capital projects underwritten by internal finances. The company increased gold reserves and resources at Gwalia, lifted exploration spending, and made strategic investments in promising junior explorers working in two of eastern Australia’s best endowed mineral belts.

It retired a staggering A$228 million of debt in 12 months, taking total debt repayment since mid-2015 to $432 million.

And has since announced a A6c/share dividend – the first dividend paid by the company for 22 years.

Vassie says paying off a “huge pile of debt” was “pleasing … and showed the strength of the cash flow”. The milestone has tended to overshadow others, but he says getting board approval for Gwalia’s $100 million mine extension project gave the flagship asset not only a “future story, but a way of achieving it”, while the decision to keep the 10-year-old Simberi mine in PNG’s New Ireland province had been vindicated by its strong cash flow contribution.

“That [Gwalia project] really does set us up for a longer future,” Vassie says, noting the vital new ventilation shafts and underground paste-aggregate stope-fill (PAF) plan change the economics of underground mining down to 2km vertical depth and out to 2024. The project is underway and scheduled to be completed in stages: the PAF first, in 2018, with the ventilation capacity delivered in 2020.

Mining at Gwalia is meanwhile continuing in a production ‘sweet spot’ between 1,500m and 1,800m after lengthening of the main Hoover decline last year, with current drilling aimed at extending resources below 2,000m. Success there would put extension of the new ventilation infrastructure on the review table. (The main decline is named after the 31st US president Herbert Hoover, who established the Gwalia mine back in 1897).

“If you cast your mind back a couple of years or so we didn’t even have a drill hole below 1,800m below surface, so we didn’t have that future story,” Vassie says.

Gwalia produced 265,000oz at AISC of A$785/oz (US$625/oz) in FY17 and is targeting similar production in FY18 at higher AISC (reflecting the A$50-55 million capex for PAF and shaft building). Average head grade in the year just completed was 10.7g/t.

At Simberi Island, an altogether different grade profile (average 1.3g/t in remaining oxide ore) is set to sustain production this year at 105,000-115,000oz at US$995-1,090/oz AISC. That’s a world away from the US$1,830/oz AISC of FY14 and St Barbara has given itself some time to work through options for the site’s 1.4Moz of 3-3.5g/t sulphide reserves (below the current openpit) by extending the oxide mine life for a further two years.

Vassie says as well as the cash Simberi is generating, the mine provided an operating base for project generation and execution of the company’s new exploration joint venture with ASX gold major Newcrest Mining on neighbouring islands, Tatau and Big Tabar, which are seen as highly prospective for Asia Pacific Rim copper-gold porphyries.

“It keeps our optionality open in PNG,” Vassie says.

“We did do a strategic review of Simberi and made a decision to retain the asset, and I think that’s proved to be the right decision because we’re now generating good cash flow and we’ve been able to extend the operation.

“Newcrest has done some excellent preliminary work to generate some good targets and we hope to be drilling on Tatau in October.”

The deal finalised with Newcrest last November sees the major paying A$3 million over a two-year earn-in period when it has to do 4,000m of diamond drilling. It can then take a majority stake by spending $25 million and drilling 32,000m of diamond holes.

The exploration opportunity is one of three significant ones Vassie sees for St Barbara now that it has comprehensively fixed its balance sheet and re-set operations at its primary cash flow hubs.

While Gwalia reserves grew a net 325,000oz after depletion in FY17, and resources by a net 1.19Moz, not surprisingly giving St Barbara its best returns on exploration spending for the year with the discovery cost at depth of A$23/oz, the company has 320sq.km of ground north of Leonora and the mine, covering 60km of a mineralised trend that sits amid one of Australia’s hottest gold exploration districts.

Vassie says the area has been the subject of little meaningful exploration over more than a decade due to the mine and surrounding tenement owner’s heavy focus on, and spending at, at Gwalia.

“It’s a very attractive land area and exciting for us now that we have the money to turn it over properly,” he says.

State-of-the-art 3D modelling of seismic survey data covering 15sq.km around the Gwalia mine is also expected to boost understanding of the Gwalia shear zone and possibly aid identification of Gwalia-like mineralised systems.

Elsewhere in WA, St Barbara has been aircore drilling at Pinjin in another of the state’s hot gold exploration areas, where it’s also done a 1,011 line-kilometre airborne electromagnetic survey.

St Barbara’s big groundholding is between the Lake Roe area where Breaker Resources has made its quality Bombora discovery – on which it has just raised A$10 million from investors, and is calling a potential “large, new gold camp in a premier mining jurisdiction” – and Saracen’s 200,000ozpa Carosue Dam mine.

“We’ve only just started to get through the [surface] cover there,” Vassie says.

“I think you’ll see a fair bit more focus from us on that area.

“We’ve got some really good ground around Gwalia, at Pinjin and on those islands that we just haven’t been able to put a lot of money into. You look at those areas and it’s clear if they were floated off in a [separate] company it would have a decent market cap.

“But it’s not really being valued in us at the moment because we’ve got to do something more with it and we’re now well positioned to do that.”

Vassie says an ongoing focus on operational excellence, delivering attractive margins and outstanding safety performance at Gwalia and Simberi, was at the centre of the company’s value-creation path going forward. “We won’t be taking the foot off that pedal,” he says.

Executing the Gwalia extension projects on time and budget, and pursuing organic growth in the form of exploration success, were other core FY18 aims.

On the “inorganic” growth front, St Barbara is finally positioned to consider M&A opportunities and will explore options that are “sensible and capable of adding value for our shareholders”.

The filter is important because the company has now set the return-on-capital bar very high.

“The story this year [at Denver] is a bit about that turning point for the company,” Vassie says.

“It was previously all about repairing the company and the balance sheet, and getting on with our organic growth – which is still a central part of the story. But now there is that element of how do we grow to diversify our gold production base, and do it sensibly?”