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TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH NORTHERN STAR RESOURCES LIMITED (ASX:NST) MANAGING DIRECTOR, BILL BEAMENT
Rebecca Richardson: Hello Rebecca Richardson reporting for the Finance News Network. Joining me is Managing Director of Northern Star Resources, Bill Beament. Bill welcome to FNN.
Bill Beament: Thank you.
Rebecca Richardson: Can you start by introducing Northern Star Resources?
Bill Beament: Northern Star Resources is obviously a gold mine producer and explorer in the Ashburton Region in W.A. And obviously we picked up a gold mine off Intrepid Mines [in the] middle of last year and it’s been a roaring success for us, and it’s given us a good platform to grow the Company and grow the asset base, and hopefully add value to shareholders along the way.
Rebecca Richardson: Thanks Bill, so how long have Northern Star Resources been going, and can you tell me a little bit about the history of the Company?
Bill Beament: Yeah the Company’s been around for – it got listed in December ’03 and it was based on some exploration tenements in the Kimberleys and very green fields exploration type tenements. And I came along basically the end of 2007 and the projects had been getting to their mature stage, and we basically just came in and cleaned the Company up; gave the exploration assets a very good go in 2008 and put a team together to try and either make or break them.
And obviously at the back of 2008 the GFC hit and our projects didn’t shape up, and you know, we ran out of cash. So, it was really wind the Company up in a shelf and pretty much at the end of ’08 early ’09, and then we basically brought a new investor into the Organisation. We re-capitalised the Company at the back of ’09 and then we sort of spent the next six months reviewing projects across Australia and overseas. [We] probably reviewed about 40 projects over six months and Paulsens was, you know, by far and away the best project out of the lot. And the rest is history from that point in time.
Rebecca Richardson: Starting with your operating mine Paulsens in the Pilbara, you acquired it from Intrepid Mines in July 2010 for $40 million. Has it been a good investment so far?
Bill Beament: I think it’s been a fantastic investment, we paid that 40 million back in less than seven months. And this is not a very big mine, we’ve only got 110 to 115 people there at the site, probably 80 or 90 at any one time. So it’s a very small mine, but it’s in the lowest quarter of Australian producers by far and that was one of the attractions to the asset. So yes, it’s been a fantastic investment so far, and I think the [Australian] Financial Review last year gave Northern Star as the best investment in 2010 out of property, gambling, horses and shares, so, we went up 1,250% last year and I think it was this time last year, we had a market cap of $1 or 2 million and you know we’re currently standing at about $110 to 120 million market cap.
So, yeah it’s been a good ride, I think we’ve still got a lot further to go. Once the market sort of cottons on to what we’re doing and maybe another quarter under our belt, then I think maybe the penny will drop.
Rebecca Richardson: Thanks Bill. So what’s annual production, the mine’s life and the potential for an upgrade?
Bill Beament: Well we’re currently doing our plans – I guess you’ve got to step back into the history of Paulsens. It’s been running for 6.5 years, does 70-80,000 ounces per annum and it’s doing exactly that at the moment. Our 2011 plan – calendar year plan – is to do 75,000 ounces; we are well on track to doing that. I think the first four months alone now we’re up to about 28,000 ounces in the first four months, so I think we’ll achieve our target of 75 this year. And that’ll drop, you know, probably surplus cash flow of about 40 million into our banks. So, with our current balance and the way we’re going, it’s, you know, probably by the end of this year, half our current market cap which is our cash back.
Rebecca Richardson: Great, now to your new project Ashburton. Who did you acquire it from and on what terms?
Bill Beament: We acquired the Ashburton Project – a lot of it’s the old Mt. Olympus Gold Mine from Sipa Resources. And that was an operational mine from ’98 to 2004, back when the gold price was only about 500, you know 525 an ounce at the best – Aussie. So, it was a very good mine back in the days Linux & Sipa JV and I think it was about 3.3 head grind. They mined basically all the oxide out of the project. We do have a big resource on that asset, but about 80 per cent of that is in sulphide mineralisation, which is refractory so we’re not hiding behind that fact, there’s a lot of work to go into that, and we’ll put a proper strategy out into the market, probably in the next three to four weeks on that, but you know, we picked that asset up for nil consideration. And we’ve got to replace the environmental bonds of about $425,000, which is pretty standard and we’ve got a small production base royalty of about 1.75 per cent, and that’s after the first 250,000 ounces of production. So, we thought it was a very good deal, so right place right time.
Rebecca Richardson: Now Bill you also have a copper/gold project at Cheroona and tenements in the Kimberley. Can you briefly tell us about these?
Bill Beament: Yeah well obviously we’re diversifying out of the Kimberley – that was you know pre-GFC side of things and we had to trim that back. There’re still some good projects there but that’s not our core focus. But the Cheroona Project was a really good pick-up, we were quite fortunate on that. Back when we reviewed a heap of projects, we were looking at some past copper/gold mines there and we were very close to securing one there, but it didn’t happen.
But, we did look at the whole region there and our major shareholder is actually a geologist by trade and he has probably spent a third of his career in the Murchison. So, we were very familiar with that country and he’s spent a lot of his time in exploration. So when Sandfire first made that discovery, we were very quick to pull out the plans and see what was around, and we had a theory of the geological setting that’s in there. And I think there’ll be multiple discoveries over that basin in the years to come. You can’t find something like the size of and degree of surface of Sandfire and not find something similar. It just doesn’t work like that.
So, we put an application in, there was 15 other applications and we won a ballot, so we were the one powerable. So, we were very fortunate. And what we’re doing with that project at the moment is we’re basically – we’re just doing I guess the building blocks of the core. You know on ground stuff, we’ve done vteam and aerodynamics, all the geophysical surveys have just been completed and we’re about to get that data back very soon. We’ve already been out and done early reconnaissance work and we hopefully might be in a position to drill test that later this year. But, getting the Ashburton Project has probably pushed that down in the ranking at the moment.
Rebecca Richardson: Now to your financials. What’s your cash position and are you on track for a maiden profit in 2011?
Bill Beament: Well we actually made our maiden profit in the first half of last year – the second half of last year, which is pretty good considering we only bought the mine in July. So I think we made a $5 million profit, so that was our maiden profit. But obviously a lot of the debt and acquisition costs were sucked up into that, so I think we’re up to about $29 million of acquisition costs in that six months. Yet we still made a $5 million profit, so it was a good result but this year obviously we’re putting a lot of cash in the bank from this point of time.
We paid off Intrepid at the end of February. We’re debt free unhedged and you know just an example of April’s results we released yesterday - we did 9,000 ounces in the month of April and we netted about 7.2 in free cash. So it’s a very profitable little mine for such a small operation. But you know, we’ve put out there that this calendar year we should – you know the mine will generate surplus cash flow of about $40 million. We’re definitely exceeding the upper end of that guidance, the first four months we were exceeding that, so it’s a great result.
And yeah, we’ll probably go close this month to probably putting, having something like $15 to $20 million in the bank sometime at the end of this month, and you know in the next three months it’ll probably be closer to $30 million. So it’s starting to build up a substantial war chest for what we want to do as a company.
Rebecca Richardson: Last question Bill. Where would you like to see Northern Star Resources 12 months from now?
Bill Beament: We’re very aggressive, I’m a very aggressive nature and we’ve got a fantastic team around us and we’re a team that corporately people wouldn’t know, but operationally that’s our background. We’ve built a lot of new mines between us, that’s our careers and we’ve done that very successfully. So we want to grow very aggressively, like I say, we were not here twelve months ago literally to where we are now.
We’ve set an internal goal in the next 18 months to three years, we want to be midcap. We want to be, you know, a half a billion dollar company and we’ll do that organically, and through our position.
Rebecca Richardson: Bill Beament thanks for the introduction and congratulations on a great year.
Bill Beament: Thank you very much.
ENDS
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