North­ern Star

North­ern Star’s 600,000 ounce per an­num pro­duc­tion tar­get rate was ticked off the list in June. Now, the miner’s fo­cus turns back to ex­plo­ration to firm up re­serves and – with luck – find the next big Gold­fields de­posit.

The Australian Mining Review - - CONTENTS - EL­IZ­A­BETH FABRI

FOUR years ago, North­ern Star was fresh from com­plet­ing its land­mark Jundee and Kal­go­or­lie op­er­a­tions ac­qui­si­tions.

At the time the miner only had one pro­duc­ing as­set to its name, the 100,000ozpa Paulsens mine.

In a few short years North­ern Star has spent $200 mil­lion on ex­plo­ration, adding 5 mil­lion ounces of re­serves and more than 9moz of re­sources; and its mar­ket cap has re­sponded in kind, grow­ing from $424 mil­lion in Jan­uary 2014 to $4.4 bil­lion in 2018.

In June this year the miner reached its 600,000oz run rate mile­stone, six months ahead of sched­ule.

North­ern Star ex­ec­u­tive chair­man Bill Bea­ment said June quar­ter suc­cess – which saw it pro­duce 183,949oz – was the cul­mi­na­tion of a big year across its port­fo­lio.

“There was a lot of ma­te­rial changes that were han­dled very well by the team through­out that 12 month pe­riod to de­liver that full-year pro­duc­tion,” Mr Bea­ment said.

There was the wind down at Paulsens in the first half of FY18; the ramp up and first com­mer­cial pro­duc­tion at its brand-new 50,000ozpa Mil­len­nium mine; and plant up­grades and op­ti­mi­sa­tion at Jundee and Kanowna.

Then the big one; the $80 mil­lion ac­qui­si­tion of West­gold Re­sources’ South­ern Kal­go­or­lie op­er­a­tions in a highly prospec­tive area near the Kal­go­or­lie Su­per Pit.

Ac­quir­ing South Kal­go­or­lie

The strate­gic pur­chase of the South Kal­go­or­lie op­er­a­tions has in­creased North­ern Star’s Kal­go­or­lie pro­cess­ing ca­pac­ity to 3.2 mil­lion tonnes per an­num.

The ac­qui­si­tion in­cluded a 1.2mtpa pro­cess­ing fa­cil­ity, a 4moz JORC re­source in­clud­ing 250,000oz in re­serves, and an 842sqkm gold ten­ure.

The new as­set would de­bot­tle­neck pro­cess­ing ca­pac­ity in and around Kal­go­or­lie for North­ern Star, which had been an is­sue for the miner.

“We were con­sid­er­ing the op­tion of ex­pand­ing our Kanowna Belle fa­cil­ity,” Mr Bea­ment said in April.

“How­ever, the South Kal­go­or­lie Op­er­a­tions pur­chase will en­able us to achieve our or­ganic growth tar­get in a more timely and eco­nom­i­cal fash­ion and at the same time pro­vide us with sig­nif­i­cant ex­plo­ration po­ten­tial, in­clud­ing a Re­source in­ven­tory.

“The fa­cil­ity is one of the best-run fa­cil­i­ties in the district and is well within truck­ing dis­tance of our Kun­dana Op­er­a­tions.”

North­ern Star also had the op­tion of util­is­ing ca­pac­ity it had ac­cess to through toll treat­ing agree­ments in the Gold­fields.

“We’ve got some se­cured there for the next 24 months – that’s the buf­fer so if there is op­por­tu­ni­ties to keep mar­gins strong, we can ac­tu­ally go above the 3.2mt of our own se­cured milling ca­pac­ity and go up to 4mtpa,” Mr Bea­ment said in a July con­fer­ence call.

In August, the miner also con­firmed the as­set con­tributed to a 5.7 mil­lion ounce port­fo­lio-wide in­crease in gold re­sources.

In FY19, pro­duc­tion is set to grow to about 640,000oz per an­num – with Jundee and Kal­go­or­lie each con­tribut­ing 300,000ozpa-plus.

FY19: A Year of Ex­plo­ration

De­spite grow­ing its re­sources, pro­duc­tion and pro­cess­ing ca­pac­ity, the work was “far from over”, Mr Bea­ment said.

“We have al­ready em­barked on the next leg of or­ganic growth,” he said.

“We’ve bud­geted $60 mil­lion to­ward ex­plo­ration in FY19 and that is a record spend for the com­pany, and an in­crease of a third on what was al­ready a sig­nif­i­cant com­mit­ment last year.

“It re­minds us of three years ago when we saw the vis­i­bil­ity across the ge­ol­ogy, and the abil­ity to do a step change in re­serves and re­sources, which we de­liv­ered last year.

“It’s like ground-hog day for us.”

Of the $60 mil­lion spend, about 65 per cent will be evenly split between Kal­go­or­lie and Jundee, con­vert­ing a sig­nif­i­cant slice of the com­pany’s 15.9moz re­source base to re­serves. The re­main­ing 35 per cent will be spent on re­gional ac­tiv­i­ties, largely around South Kal­go­or­lie.

“We’ve had the South Kal­go­or­lie op­er­a­tions for only three months, so it’s like a new car – it’s get­ting a bit of love and care and at­ten­tion, but we are con­ser­va­tive,” Mr Bea­ment said.

“We’ve got a large ex­plo­ration spend on the South Kal­go­or­lie op­er­a­tions.

“It’s only 10-15km along strike from the great Su­per Pit and hardly had any money has been spent on it over the past 20 years; we see a huge ge­o­log­i­cal up­side of six ma­jor struc­tural cor­ri­dors rip­ping through the guts of the 1000sqkm ten­e­ment pack­age.

“We’re quite ex­cited about South Kal­go­or­lie and what it can bring for North­ern Star.”

Mr Bea­ment said the com­pany ex­pected to de­liver a ma­te­rial up­grade to its cur­rent 10-year mine life in the mid­dle of next year.

“Our re­cent ex­plo­ration re­sults in con­tin­ued or­ganic re­source and re­serve growth over the past few years have pro­vided over­whelm­ing ev­i­dence that there is a lot more gold to be found around and in our ex­ist­ing as­set base,” he said.

“We look for­ward to grow­ing our re­source and re­serve base in the com­ing years.”

In ad­di­tion, a fur­ther $74 mil­lion has also been bud­geted for ex­pan­sion­ary cap­i­tal in FY19, in­clud­ing $34 mil­lion on dual pur­pose drill drives to de­liver sig­nif­i­cant re­serve/re­source and pro­duc­tion growth; $20 mil­lion on an­cil­lary projects for fu­ture years’ pro­duc­tion growth; and $11 mil­lion on a new 10-year ca­pac­ity tail­ings fa­cil­ity for Kanowna Belle pro­cess­ing plant.

Drilling ac­tiv­i­ties would also con­tinue at its Tanami re­gional project (100 per cent), and the Cen­tral Tanami project of which North­ern Star has a 25 per cent in­ter­est.

The Road Ahead

With a lot hap­pen­ing across its port­fo­lio, Mr Bea­ment as­sured the com­pany would not chase pro­duc­tion growth for growth’s sake.

“North­ern Star is al­ways a busi­ness first and a min­ing com­pany sec­ond,” he said.

“What mat­ters is that we achieved that in­crease through or­ganic growth.

“This means that the in­creased pro­duc­tion trans­lates di­rectly to in­creased fi­nan­cial re­turns for our share­hold­ers, and as [re­cent] re­sults show, we pro­duced gold last quar­ter at an all-in sus­tain­ing cost of $982/oz, gen­er­at­ing 50 per cent EBITA mar­gins.”

In­ter­est­ingly, Mr Bea­ment said its share­holder range had seen some “rad­i­cal” changes over the last two years, with an in­crease in for­eign own­er­ship.

“We’re now at about 56 per cent off­shore owned ver­sus 44 per cent do­mes­tic so that’s a huge change in the last cou­ple of years,” he said.

“This is def­i­nitely pre­dom­i­nately out of North Amer­ica (our largest share­holder Black­Rock is in Lon­don).”

Mr Bea­ment said af­ter at­tend­ing a cou­ple of ma­jor con­fer­ences in North Amer­ica ear­lier this year, it was clear sen­ti­ment was strong across the Aus­tralian min­ing in­dus­try – whether that was for iron ore, gold, nickel, or coal.

“We’re [Aus­tralia] the best in breed across the re­sources in­dus­try, and that is well and truly recog­nised glob­ally now. [That’s] why you’re see­ing in­vestors around the world look­ing at Aus­tralia’s great op­er­a­tions and [our] abil­ity to main­tain those op­er­a­tions and run them,” he said.

“We’re also in a tier one ju­ris­dic­tion and that can’t be un­der­stated.”

Al­lim­ages:North­ern­Star.

North­ern Star’s Paulsens mine in the WA Pil­bara was now in care and main­te­nance.

North­ern Star has bud­geted $60 mil­lion to­ward ex­plo­ration in FY19.

Kanowna Belle un­der­ground op­er­a­tion.

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