Gold miner’s worthless ‘pile of rubble’ now worth billions

An Australian gold miner says its stockpile of once worthless rubble is now worth $2 billion dollars.

An Australian gold mining company says its stockpile of once worthless rubble is now worth $2 billion dollars after a fall in the cost of processing gold.

The value of Northern Star’s rubble has been revised after its Supermit mill expansion in Kalgoorlie, WA was approved, lowering gold processing costs and turning previously uneconomic stockpiles into cash cows.

The gold miner, which is one of the largest in the world with operations across WA, the NT and Alaska, made the unusual move on Thursday to “write back” the value of a stockpile it had determined was worthless in 2021 after it acquired fellow gold miner Saracen at a time when the gold price was much lower and the economics of processing the stockpile did not stack up.

Northern Star’s former executive chairman Bill Beament and fellow miner Saracen’s CEO Raleigh Finlayson. Picture: Colin Murty / The Australian

In its 2023 annual report on Thursday, Northern Star boss Stuart Tonkin said the stockpile was sitting right next to the mill, meaning once the expansion of the mill is complete, the value of the stockpile will be realised because it can be processed “well under” $20 a tonne.

“So you can see the cash margin inside that stockpile. We’re talking about a couple of billion dollars,” Mr Tonkin said, per Nine newspapers.

In June, Northern Star announced it will double its gold output at the mill, making the Kalgoorlie project the largest of its kind in Australia and fifth-largest in the world once it is complete by 2029.

The company’s share price rose 5.4 per cent to $11.17 after the announcement.

A stockpile at Kirkland Lake’s gold mine in Bendigo, Victoria. Picture: Carla Gottgens/Bloomberg via Getty Images

The gold producer’s 2023 profit reached $585 million, up 29 per cent. Revenue increased 8.5 per cent to $4.1 billion, while earnings before interest, tax, depreciation and amortisation rose 10 per cent to $1.9 billion.

Financial markets are typically sceptical of accounting write backs — when a company adds to its profit due to a future cost it no longer has to pay — but Barrenjoey analyst Dan Morgan said, in this case, he believed overlooking the value of Northern Star’s stockpile would be a “mistake”.

Mr Morgan said it may mean mining companies have larger amounts of economically viable material than they previously thought.

He told Nine newspapers: “What it foreshadows and of potentially greater benefit may be the impact of the milling expansion on in-pit reserves. There is both inferred resource and mineralised waste being mined and stockpiled. Will this lead to a material reserve increase and life extension over time?”

Originally published as Gold miner’s worthless ‘pile of rubble’ now worth billions