Northern Star in overhaul of Pogo project
Gold miner Northern Star has asked for patience as it works to turn around its challenging Pogo mine in Alaska.
Northern Star Resources has asked for more patience as it continues to work on the turnaround of its challenging Pogo operation in Alaska.
Australia’s second-largest gold producer said it was making good progress with its overhaul of Pogo, which has been marred by high production costs since it was acquired by the company for $US260 million ($376m) last August.
Northern Star said it had produced 45,594 ounces of gold at Pogo during the June quarter at an average all-in sustaining cost of $1,724 an ounce.
That was a significant improvement on the March quarter, when Pogo’s production costs hit $2,062 an ounce and reversed a trend of rising costs under Northern Star’s stewardship, but was still significantly higher than the production costs at its mainstay Western Australian mines Jundee (where costs fell to $957 an ounce) and Kalgoorlie ($1,257 an ounce).
The company is working to introduce the skills and techniques used at its Australian mines to Pogo, and Northern Star chief executive Stuart Tonkin noted that Pogo was currently operating at around half the efficiency of its Australian operations.
The underground teams at Pogo, Mr Tonkin said, had lifted their monthly development rates from 100 metres to 200 metres a month, but that was still well below the 400 to 500 metres a month averaged by the Australian operations.
Mr Tonkin said Pogo should continue to narrow the gap on the company’s Australian mines.
“We have the fleet, and the team, and the skills there. It’s really now about the refinement and there’s enormous upside with the fixed cost base that’s in place,” he said.
The ongoing challenge at Pogo overshadowed what was record underlying cash flow of $104 million for the June quarter, despite investing $34m in growth capital and exploration. Its cash and equivalents increased $73m to $361m after investing $38m in dividends and $22m in tax.
The company said it would publish its annual resource and reserve statement and update its production and cost guidance on Thursday.
RBC Capital Markets analyst Paul Hissey said the production costs were slightly softer at first glance, while cash operating costs across all operations were higher than his estimates.
“Northern Star has had a strong share price run of late (along with peers) given general enthusiasm for gold exposure from investors, Mr Hissey said.
“It will remain important for the company to deliver an improving outlook to justify the premium in the stock currently.”
Shares in Northern Star were 34.5c or 2.6 per cent higher to $13.545 this afternoon.