Originally posted by bastowmichael
So as it happens when pogo was first acquired I suspected that management had a plan as to how they could lower the A$1500 AISC of pogo. it was finally clear why pogo was acquired for a fairly cheap figure.
I had my own thoughts and opinions as to how this was possible and obviously why northern star would purchased a big AISC anchor.
A few month ago I spoke to a senior geo about my concerns and I think I found some sort of an idea of what our management will try to achieve and obviously how.
so it goes, the original owners weren't business savvy and their only concern was a check at the end of each month thus giving the operators what ever they wanted as long as a check(return) was provided.
so not the best from a business perspective, and not much care was given to the mine and only the quick cash that could be generated from it.
the second thing comes down to the previous operators again, so I'm told the mine wasn't operating the best, the equipment is fairly old and outdated, I know for a fact that northern star is struggling to use the old equipment as a lot maintenance issues are on-going. Apparently the previous miners were leaving 10grams per tonne of gold behind in the tailings dump and that it was more of a "get in get out" mentality.
I know for a fact that management have had issue with getting equipment over to pogo this includes updated machinery. This isn't a mine next door the Kalgoorlie so getting industrial flow is going to be an on-going issue. I have been told that this is being thought through by BB and ST and it could take up to 12-24months to plan and deliver a business plan which would allow the company to reduce costs in all aspects.
Just as a side note, people tend to ignore the little things. one of the senior geo's over their was saying that it is -37 degrees over there at the moment, I can imagine what kind of issues they would face with the weather being so harsh. Australian gold miner now has to adapt to the opposite side of the climate that is so well known in Australia.
All that being said I personally don't believe northern star is $9.00 and neither does the market. I do believe they can lower cost by a few hundred dollars which is what they believe also. That being said though it's hard to say and only time will tell.
cheers,
Luke
hi
@bastowmichael
Thanks for that insight.
The problem IMO is also down to transparency.
It is pratically impossible to know how the Kalgoorlie operations are going as they have grouped 4 sets of mines under the same banner and AISC are averaged for the group. The mines comprise Kanowna Bell, Kundana EKJV (including the UG mines at Raleigh, Rubicon, Hornet and Pegasus), Kundana 100% (which includes a number of previously mined deposits and the Millennium UG mine) and the South Kalgoorlie Operatios where mining is conducted at the HBJ underground mine.
The quarterly reports only breaks the AISC up for Jundee, Kalgoorlie (as the above group) and Pogo.
The high quarterly AISC for Kundana of $1,406/oz was attributed by the compamy as follows
"At Kalgoorlie, the higher gold price allowed lower-grade ore to be mined, resulting in development ore tonnes rising 41% from previous quarter and lower production, which in turn led to higher costs; Production is forecast to increase and costs to fall in this half due to capitalising on the extra production areas"
This is not very transparent at all and not a basis that would allow me to invest. The company should go back to providing production and AISC breakdowns for all 4 mine centres at Kalgoorlie so that investors can understand how each group of mines is performing and how big a contribution each mining centre makes to the production profile, cost profile and life of mine profile. Currently it is just crystal ball gazing. I really don't understand how the big institutions put up with it. I suppose they are happy to be invested in this bankster bubble for now.
As far as the argument of sterilisation of the ore reserves it comes down to the mining method that is used at many of the Kalgoorlie mines which use paste fill mining methods.
Below (at the end of this post) is a company description of this paste fill mining method which is used at Kundana and KB. You see with this mining method the ore stopes are filled with a type of cement so can't be re-entered. The company must either mine the lower grade hallow ores or never at all. Other mining methods, for example sub-level cave mining and other UG mining methods that leave open stopes allow companies to re-enter old stopes to mine remnant ore, maybe towards the end of a mine's life or when a gold price rise makes mining worthwhile. For example RSG are currently accessing higher previously mined levels of their Mt Wright mine and mining low grade overdraw. Their new sub-level cave mine in Mali will also have the same ability to "store" mariginal ore in higher mining levels that may be able to be exploited in the future.
The only way to keep some sort of track on the various Kalgoorlie operations is from TBR/RND quarterly reports which give a read on the EKJV's contribution relative to the other Kalgoorlie operations. In FY2018 NST's 51% share in the EKJV mines contributed 23.7% of NST's total gold production and recently Bill Beament described TBR and RND's 49% share, fair and sensibly valued at $150 million. That's from the horse's mouth who must tell the truth to keep the market properly informed, so buyer be aware IMO. The only thing which will keep this bubble inflated is a rising gold price. Good luck. Esh
"Kundana also employs the method of underhand long hole bench stoping with paste fill similar to that of the Kanowna Belle operation. This method is used to ensure that high extraction rates of the orebody are achieved as the orebody can grade from 5.0gpt to +31gpt plus. This mining method also assists with minimising any future stress impact on the Operation.
Ore drives are mined along the strike of the orebody following the high grade laminated quartz vein. Once the strike ore drive is completed a vertical rise is established and extraction of the ore between two levels is commenced. The ore body is significantly narrower than the Kanowna Belle ore body with stope widths typically in the order of 1.0m to 2.5m wide (see Figure 3). Once a stope panel has been mined, typically 15-18m along strike a paste fill barricade is erected and the stope void is backfilled with paste fill (reconstituted mine tailings, sand, cement and water). The paste fill is reticulated from surface via steel pipe work and delivered in to the stope as a thick slurry. Over a period of 1-2 days the paste fill cures and hardens which then allows the next stope void to be extracted. This process continues until the entire level has been mined out."
(20min delay)
