Northern Star delays gold mine
Ashburton was planned to be Northern Star's next big hit after the successful revival of the Paulsens mine in WA over recent years.
But the recent downturn in the gold price appears 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 see Ashburton 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," the company 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 per year.
It's the latest example of a gold miner 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 in response to the low gold price.
Miners of other commodities have been shelving projects for more than a year, with BHP Billiton's decision not to proceed with the Olympic Dam expansion in South Australia perhaps the most significant.
Northern Star's deferral decision will be complemented by cutbacks 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.
The company in May forecast it would produce between 100,000 and 115,000 ounces of gold in the year to June 30. On Tuesday it listed full-year production at just under 89,000 ounces.
Northern Star was a 5¢ stock in mid-2010, but rose steadily over the next couple of years to trade as high as $1.57 late in 2012.
That process won many fans for Bill Beament and investor Michael Fotios, but the shares have not recovered since Mr Fotios sold down more than 7 million shares last November.
Mr Beament said he was confident today's changes were the right strategy for the gold miner.
Northern Star shares closed 1.5¢ higher at 61.5¢ on Tuesday.
Frequently Asked Questions about this Article…
Northern Star delayed the Ashburton gold project indefinitely because the recent downturn in the gold price made the multi‑hundred‑million dollar development uneconomic for now. The company said it will defer the project "until gold prices recover."
Ashburton was expected to roughly double Northern Star's production to about 200,000 ounces a year, so delaying the project means that forecasted production growth has been put on hold.
Northern Star said it is cutting its exploration and development budget and trimming administration costs. It also confirmed it will continue to meet minimum expenditure commitments to retain ownership of assets it sees as valuable for the future.
That means Northern Star will still spend the required amounts to keep its mining licences and retain rights to the Ashburton assets, even while major development is deferred. For investors, it signals the company is preserving optionality without committing to large new capital outlays.
Northern Star forecast in May it would produce 100,000–115,000 ounces in the year to June 30, but on Tuesday it listed full‑year production at just under 89,000 ounces. The shares have not fully recovered from earlier selling and closed up 1.5¢ at 61.5¢ on the day the story ran.
Yes. The article notes Newcrest Mining slowed development of several new mines and expansions in Australia and Papua New Guinea for the same reason, and other miners (including BHP Billiton delaying Olympic Dam expansion) have been shelving major projects amid weaker commodity prices.
The Ashburton project was expected to cost several hundred million dollars, which is why the fall in the gold price has made the timing and economics of going ahead less attractive.
The article mentions managing director Bill Beament, who began talks about funding the mine earlier in 2013 and said he supports the current strategy, and investor Michael Fotios, who sold down more than 7 million shares last November — an action that has been noted in the company’s recent share history.
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