Northern Star Resources managing director Bill Beament

ONE OFF THE WOOD: Northern Star Resources (ASX: NST) is now the second biggest ASX-listed gold miner by production. It has five operating gold mines, all located in Western Australia with total JORC Resources-Reserves of 6.7 million ounces of gold.

The company’s managing director, Bill Beament dropped by to give us the low down on just what makes Northern Star the current success story it is.

Resources Roadhouse: One year ago Northern Star was a one-mine company producing around 100,000 ounces per annum, then you went on a bit of a shopping frenzy acquiring the Jundee mine from Newmont and Plutonic, Kundana and Kanowna Belle mines from Barrick Gold.

Bill Beament: What we loved about the assets we bought was that between them, they have produced 20 million ounces of gold over the past 20 years.

These are world class systems, and they’re not ten, twenty, or one hundred thousand ounces scattered across multiple deposits across a 100 kilometre haul road. These are all single systems.

Take Plutonic, for example, with what has already been mined there and what’s remaining – it is a seven million ounce ore body. Jundee is a plus-seven million ounce ore body, and growing.

Kanowna Belle is 6.45 million and Kundana plus-five million ounces.

RR: Mines like these only keep growing with continual exploration. What plans to you have in that area?

BB: The core focus of our business at the moment – around 95 per cent – is all around mine life extension.

We plan to spend around $50 million on extensional exploration activities over a 12 month period, which we are now about five to six months into.

One thing we obtained from the acquisitions we made was a significant pipeline on which we can concentrate our exploration spend.

We don’t have to go out and find a new Kundana or Jundee in the next couple of years, that’s already been done for us.

RR: Okay, let’s look at each mine on its merits one at a time, starting with Kundana.

BB: Kundana was a great buy off Barrick. We initially mined three deposits there – Raleigh, Rubicon, and Hornet – that has now moved out to four with Pegasus recently coming into production.

Pegasus is a wonderful discovery – this is what we bought the Kalgoorlie operations off Barrick for – at the time people thought Barrick was selling Kanowna Belle, but in reality we were actually buying Kundana.

We believe we have a good eye for detail and an ability to identify value in assets other people don’t see.

We just announced our second Resource upgrade on Pegasus to 1.12 million ounces at 11.6 grams per tonne gold, and 70 per cent of that Resource is in the Indicated category.

It only cost us $10 million to bring Pegasus into production, so its return on invested capital – just on a small portion of the ore body – is in excess of 500 per cent.

Not bad when you consider it still has an expected mine life of 10 to 15 years.

We released more drill results from there that were not part of that Resource estimation. So we know Pegasus is going to continue to grow.

RR: Still at Kundana – what can you quickly tell us about Millennium?

BB: We discovered Pegasus after our head geologist came up with a new geological theory on the Kundana Trend.

We then applied that theory and geological model on our tenements – Kundana is a Joint Venture, however we still own 100 per cent of the past producing mines there.

We found a new discovery there last year, called Millennium, This will be a mine in the years to come.

We are now applying that theory to another seven targets that are very similar to Pegasus.

 

RR: Jundee is still rated as one of the country’s best mines?

BB: Jundee had been one of Newmont’s mainstays in Australia for a long time. It has had a two year Reserve life for the past decade.

One thing we liked about Jundee is its track record of replacing its Reserves. We have done two Reserve Resource statements, one very recently.

The mine used 250,000 ounces last calendar year – we have replaced all those Reserves and Resources, and actually added some.

There are some 40 drill results that did not make it back in time to be included, which meant five or six lodes weren’t calculated in time for the cut-off.

We’re now running those models, so we expect around mid-year those Reserves are going to be replenished again.

RR: And Kanowna Belle? First production in 1994 but doesn’t look like slowing down?

BB: This has been a great asset for a long period of time. We are realistic so we only have a mine plan there that takes us out until the end of next year.

It does about 80,000 to 85,000 ounces per annum – but we didn’t actually buy it for the underground mine, we bought it for the associated milling infrastructure.

It does all the milling of the ore from our Kundana operation.

One thing it has been, however is a great cash flow operation.

RR: Completing the full circle we come back to Paulsens – the cornerstone of your operations.

BB: You should never forget where you come from. Paulsens is our cornerstone asset. It is what we built the company on starting four and a half years ago.

It’s where we developed our company culture and our operating model, our systems and procedures.

Paulsens just received a new big kick in January with the discovery of a massive extension to mineralisation of around three metres down-plunge, called Voyager 2.

This Voyager 2 extension is going to underpin this mine for further five years.

It has experienced a couple of rough quarters with grades dropping a bit, to around five grams per tonne, however historical grades are around seven grams per tonne.

We anticipate hitting ore in Voyager 2 in development by the end of March and expect to be producing from there by the end of the June quarter.

So come next financial year, Paulsens will be back producing at the margins we are used to.