Ashburton project on the back burner
Another Australian mining project has hit the skids with market darling Northern Star delaying its Ashburton gold project indefinitely.
Ashburton was planned to be Northern Star's next big hit after the successful revival of the Paulsens mine in Western Australia in recent years.
But the recent downturn in the gold price seems to have killed off hopes of going ahead with the mine, which was expected to cost several hundred million dollars.
Northern Star said it was cutting its exploration and development budget, which would mean Ashburton being delayed "until gold prices recover". "Minimum expenditure commitments will continue to be met to ensure the company retains ownership of what it believes will be valuable assets in the future," it said.
The deferral is a quick turnaround since the start of 2013 when Northern Star managing director Bill Beament began talks with investment banks over tapping bond markets to help fund the mine.
Ashburton was supposed to double Northern Star's gold production to about 200,000 ounces a year.
It is the latest example of a goldminer parking a future mine in response to the recent slump in the gold price.
Newcrest Mining recently slowed development of several new mines and expansions in Australia and Papua New Guinea.
Miners of other commodities have been shelving new projects for more than a year, with BHP Billiton's decision not to proceed with the Olympic Dam expansion in South Australia last year perhaps the most significant.
Northern Star's deferral decision will be complemented by cuts to exploration spending and other administration costs.
Investors are likely to be sympathetic to the company over the Ashburton mine given it was acquired for virtually no cost other than a royalty.
In May the company forecast it would produce between 100,000 and 115,000 ounces of gold in the year to June 30, 2013. On Tuesday it listed full-year production at just under 89,000 ounces, but added that "gold mined" in the year was just under 104,000 ounces.
Northern Star was a 5¢ stock in mid-2010, but rose steadily in the next couple of years to trade as high as $1.57 late last year.
That process won many fans for Mr Beament and investor Michael Fotios, but the shares have not recovered since Mr Fotios sold down more than 7 million shares in November 2012.
Mr Beament said he was confident the changes announced on Tuesday were the right strategy for the goldminer. "We have sought to strike the right balance between the need to ensure our business continues to generate satisfactory returns for shareholders while retaining the assets needed to grow over the longer term," he said.
"This means reducing costs to enable us to keep our team of people and protect our margins."
Northern Star shares closed 1.5¢ higher at 61.5¢.