Ann: Northern Star to Become the 2nd Largest ASX , page-23

re: Ann: Northern Star to Become the 2nd Larg... "Not sure I trust what's said here but you seem to be implying that they said that before dividends and acquisition costs they are about cash flow neutral."

I wasn't implying that at all. I just asked why the cash was lower in the presentation compared to the qtrly. I was told there were a number of reasons other than the dividend including cash payments for the previous acquisitions. I didn’t ask for details because the co sec seemed to be quite busy at the time and I wasn’t sure if I was asking for too much info (info not released to market). There wasn’t that much of a drop in cash to worry me. Cash in bank at end of qtr was 67.8mill. It was $60mill in the recent presentation but approx $5.8mill went to dividends so the div almost fully accounts for the drop. However as you point out, the qtrly does state settlement of acquisitions occurred during the qtr so I am wondering if the co secretary was clear on my question being directed at post end of qtr. I will call back tomorrow to ask again. Hopefully she will have more time to talk.

I only bought in today so still doing a lot of catch up reading. This quote from the qtrly sounded like it was coming from a very confident MD;
“Northern Star Managing Director Bill Beament said the results left him in no doubt that the Company was well on track to achieving its goal of producing 350,000ozpa-plus at an all-in sustaining cost of A$1,050/oz.”

What I like with this latest acquisition is a now very strong leverage to POG upside with the much higher production profile without dilution. MC has barely changed with no fresh dilution for the acquisition despite gold production for at least the next 2 or 3 years now jumping strongly to an expected 550,000oz/yr plus. With low debt and reasonably low all in sustaining cost, this stock should now have a lot of room for gains in sp especially on any gain in POG. The leverage comes from a good price paid for an extra 200,000oz/yr of production. The plant and infrastructure alone would be worth much more than the price paid. The 400,000oz reserve (500koz resource) I believe is likely to be expanded. They said that they did not buy this with plans to shut it down in 2-3 years and I believe that. Paulsons is evidence of what they are likely to expect with their acquisitions. Few underground mines have reserves much beyond 2-3 years yet most have mine lives well beyond that timeframe. Paulsons is obviously a great example. They are also having early exploration success at Pegasus with;
“The assay results received during the quarter from Pegasus, which is yet to be developed, have extended the known strike length of the current 355,000oz resource by 500m and the known vertical depth of the high-grade zone by 100m to 550m (refer to Figure 3).
A number of the new drilling intersections contained visible gold while the hit at depth was 3.2m at 49.9gpt.”
“In addition, recent intersections confirm the existence of a new mineralised structure at Pegasus named the ‘Pode’ Vein. This mineralisation is outside of the main K2 vein that hosts the Pegasus Resource, providing further scope for an increase in resources (refer to Figures 4 and 5).
Infill drilling at Pegasus also returned strong results which confirm the continuity of the resource model. These results will be included in a resource upgrade and in a maiden reserve estimation expected in the June Quarter 2014. Drilling continues with further assays pending for Pegasus K2 and Pode veins”.
They are also having strong ongoing success with resource extensions at Paulsons.


Interesting that gold in cct at end Mch is as high as 17,877oz (up from 1300oz in the previous qtr). That’s worth 25mill. Gold in transit was 6100oz (2100oz prior qtr).
All in sustaining costs were A$1167 leaving a margin of around $230/oz. Looks like this cost includes everything but one off expansion capital expenses and Greenfield exploration.
“All in Costs including cash costs, corporate costs, mine exploration and sustaining CAPEX (Non-GAAP Measures)
(1) Mine Development and sustaining capital includes all capitalised mine development expenditure and all mine capital expenditure except for expansion capital (ie. once off capital).
(2) Includes all resource definition drilling costs.
(3) Corporate costs allocated on an ounces sold basis.”

They are now targeting (for 2015 fin year), below $1050/oz AISC on greater than 550,000oz/yr which should result in cash flow of around $200mill per year (before tax, greenfield exploration and any 1-off expansion capital- if any) at current low gold prices. This base seems good for anyone bullish on gold like I am. While being bullish on gold, I know I can be wrong on gold direction for a lengthy period so prefer the goldies that can easily survive without heavy dilution and make decent profits now until a higher POG arrives- hopefully just around the corner!

This should be a good trading stock and I see good short term upside from this acquisition. Gold now up to $1308 should help as soon as tomorrow if it holds above $1300 by morning.