LA Private

Northern Star doubles its asset

As widely forecasted, Northern Star Resources (ASX:NST) has greenlit the doubling in size of its major asset, the SuperPit gold mine of KGCM near Kalgoorlie, at a cost of $1.5 billion.

The company has been examining the pros and cons of the ambitious plan for months, and mining industry rumours had indicated that the decision would be made close to the end of the financial year on June 30, which it indeed did with 8 days to go.

The planned expansion has already commenced, with work already underway.

Peak activity and cost will occur in 2025 and 2026 when spending will increase for both the open pit and underground. Additionally, capital expenditure (capex) will be further boosted in both years to accommodate the expansion of the mine’s tailings storage areas to handle the increased throughput resulting from the doubling in size.

The construction phase will span three years until the 2027 financial year, followed by a two-year ramp-up period, which will see the mine more than double its annual throughput from the current 13 million tonnes per year to 27 million tonnes by 2029.

Production will rise to approximately 900,000 ounces of gold per year.

The company states that the expansion will lower the company’s All-In Sustaining Costs per ounce and increase cash flows once the expansion is fully implemented.

At present, the mine’s life has been extended until 2034. However, based on hints from Northern Star’s recent filings, the company is confident about discovering new reserves in the area.

Northern Star stated that the $1.5 billion cost would be funded from internal reserves and cash flow, and the current dividend policy would be maintained.

Some shareholders expressed dissatisfaction with the company’s decision to spend such a large amount, causing the shares to dip more than 3%. However, how can a miner be expected to grow if it cannot continually explore, discover, develop, and upgrade prospects into producing mines?

“Today is an exciting day for Northern Star and a historic new chapter for this world-class asset,” said Northern Star CEO Stuart Tonkin on Thursday.

“The board’s decision to approve the KCGM mill expansion and optimization represents the next stage in revitalising our largest asset, as well as the surrounding district, for decades to come.

“Expanding the processing capacity of KCGM will strengthen Northern Star’s portfolio, significantly increase our free cash flow generation, and advance our long-term strategy to be within the second quartile of the global cost curve,” Tonkin stated in Thursday’s statement.

With a mineral resource of 28.3 million ounces and an ore reserve of 12.2 million ounces, the SuperPit is one of the world’s largest gold mines in terms of sheer size.

The KCGM mill expansion forms the core of Northern Star’s five-year growth strategy, in which the company aims to sell between 1.8-2.2 million ounces of gold per annum by FY26. This will involve expanding production at Northern Star’s Yandal (WA) and Pogo (Alaska) mining operations.

Northern Star acquired 50% of KCGM starting from January 1, 2020, and subsequently assumed 100% control of KCGM following the merger with Saracen Mineral Holdings Ltd in February 2021.

Since then, Northern Star states that it has made significant progress in improving its understanding of the underground resource base at the Super Pit, as well as optimising the mine through the use of new machinery to facilitate increased material movements.