DELIVERING PROFITABILITY

We are pleased to report a significant increase in Net Profit after Tax for the 2011 financial year of $68.6 million, including an underlying Net Profit after Tax of $54.4 million and a 238% increase in underlying earnings per share to 16.7 cents. This is a record result for St Barbara since acquiring and developing the Company’s current operating assets at Leonora and Southern Cross.

In a climate of global economic uncertainty, rising US gold prices, and a volatile but increasing A$ gold price environment, the Company is well placed to further grow earnings, supported by an expected 30% increase in gold production to 320,000 to 350,000 ounces in FY12. This will confirm St Barbara as one of the largest ASX listed, Australian based gold producers.

LEONORA OPERATIONS CONTINUES TO DRIVE THE COMPANY’S PROFITABILITY AND GROWTH

The cornerstone of the Company’s business continues to be the long life, high grade Gwalia mine at Leonora Operations in Western Australia.

During the year at Gwalia:

• Mineral Resources increased by 515,000 ounces at depth (below 1,640 metres) at a very low discovery cost of $16 per ounce;
• Ore Reserves increased by 135,000 contained ounces of gold (net of mining depletion) to Proved and Probable Reserves of 6.9 million tonnes at 8.9 grams per tonne of gold for 2.0 million ounces; and
• Gold production increased by 20% to 131,000 ounces.

Looking ahead, the Gwalia mined grade will continue to increase, with an expected average grade for FY12 of 8.0 to 8.5 grams per tonne of gold (g/t Au) (FY11: 6.3g/t Au), as the richer South West Branch lode becomes the primary source of ore. This 30% increase in grade is expected to drive a significant increase in production and a reduction in cash operating costs from $765 per ounce in FY11 to $610–$640 per ounce for FY12.

The satellite King of the Hills underground gold mine commenced gold production ahead of schedule in May 2011 and is expected to contribute 55,000 to 60,000 ounces of gold production per annum for at least the next four and a half years.

Projects underway to leverage further value from Leonora Operations include:

• A pre-feasibility study for haulage optimisation at Gwalia designed to lower unit costs further;
• A scoping study to consider a potential upgrade to the Gwalia processing plant from 1.2 million tonnes per annum (Mtpa) to 1.8 Mtpa;
• Planned drilling of high priority gold exploration targets in the surrounding Leonora region as potential ore sources for the processing plant.

The Gwalia ore body remains open at depth and has a number of undrilled areas close to planned mine development which represent potential additional ore sources for the future.

TARGETING NEW DISCOVERIES

The Company has a focussed and effective approach for targeting and drilling exploration areas. In addition to the highly successful, and technically challenging, deep drilling program at Gwalia, the Company has also had encouraging intersections from Copperhead and Frasers South at Southern Cross and East Lachlan in New South Wales.

Recognising the significant impact that a major discovery can have on the Company’s value, exploration activities will continue to focus on drilling the Company’s highest priority exploration targets in FY12. A minimum budget has been established for Discovery and Growth of $16 million per annum for at least three years, and with the Company’s strong cash reserves, can readily be expanded to fund drill out discoveries.

The Discovery and Growth team also conducts in-depth evaluations of gold discoveries, advanced exploration projects and project developments of other companies in Australia and South East Asia to assess value accretive opportunities that meet the Company’s investment criteria.

STRONG BALANCE SHEET WITH INCREASING CASH RESERVES

With $80 million cash at bank at 30 June 2011, low debt and strong expected cash flows from increasing gold production, the Company’s cash position is expected to grow strongly.

Capital management strategies include applying cash flows to further reduce debt, and appropriate price protection strategies to underpin the cash flows from non-core, higher cost activities.

As at 30 June 2011, the Company had estimated gross taxation losses in excess of $340 million and does not expect to be in an income tax payable position for a number of years.

SOUTHERN CROSS OPERATIONS CONTINUES TO GENERATE POSITIVE CASH FLOWS

Southern Cross Operations exceeded expectations in FY11, producing 120,000 ounces of gold at a lower than expected cash operating cost of $890 per ounce, and continues to generate positive cash flows.

Mining at Marvel Loch is anticipated to continue until August 2012, following which the processing plant is expected to be placed on care and maintenance. Appropriate strategies for an orderly wind down of operations are in place.

Drilling at Southern Cross Operations continues with the objective of incrementally extending the Marvel Loch mine life and testing priority exploration target areas in the region.

IN A TOUGH LABOUR MARKET, THE COMPANY CONTINUES TO ATTRACT CAPABLE PEOPLE

The Company continues to attract capable people for key positions by providing competitive remuneration packages and working conditions, encouraging diversity in the workforce and actively engaging with personnel at all levels.

SAFE PRODUCTION IS CENTRAL TO THE COMPANY’S CULTURE AND OPERATIONS

The twelve month rolling Total Recordable Injury Frequency Rate as at 30 June 2011 of 12.5 was higher than as at 30 June 2010 of 11.1, despite a comprehensive safety regime incorporating safety leadership, training and induction, hazard awareness and developing a better understanding of the risks of the business.

COMMUNITIES AND GOVERNMENT ARE IMPORTANT STAKEHOLDERS

Management regularly meets with Aboriginal and other community groups in the Leonora and Southern Cross regions to discuss the Company’s planned activities and matters of mutual interest. The Company also engages with government at local, state and federal levels, as important stakeholders in the Company’s current and planned activities.

THE COMPANY HAS STRONG INSTITUTIONAL OWNERSHIP

The Company’s share register has a strong and stable institutional shareholder base, with over 80% of shares on issue at 30 June 2011 held by institutions, and more than half of the register held by international investors.

ACKNOWLEDGING EFFORT AND ACHIEVEMENT

We acknowledge the significant contribution made by fellow Directors and personnel at all levels in the Company during a year of growth and profitability.

OUTLOOK

St Barbara enters the 2012 financial year in a strong position.

Gwalia unit costs are reducing while gold production is expanding, the King of the Hills mine is now operating at full capacity, and active exploration continues in Western Australia, South Australia and New South Wales. The Company’s strong balance sheet and projected cash flows will be available to fund internal opportunities that meet approved investment return criteria as well as on-going targeted exploration expenditures.

We will continue to explore a range of options within and outside the Company to increase margins and leverage increased returns.