Northern Star Resources is planning one more acquisition after two recent purchases and an “aggressive” strategy made it Australia’s fifth largest ASX-listed gold producer.
Northern Star Resources is planning one more acquisition after two recent purchases and an “aggressive” strategy made it Australia’s fifth largest ASX-listed gold producer.
Managing director Bill Beament told shareholders at a general meeting today that Northern Star was well on its way to growing the company and that it was planning one more acquisition.
“Our production profile as of March 1 grew from 100-200,000 ounces per annum, to over 350,000 ounces per annum and that’s not where we’re going to stop, boys and girls,” Mr Beament said.
“We do see the ultimate size of this business as 500 or 600,000 ounces a year. We want to bed these (newly acquired) assets in, but that does mean we need to do one more transaction in a reasonable space of time.”
Mr Beament said at that size Northern Star anticipated it could generate $200 million to $250 million in free cash flow from operations.
“When you look at the ASX 100 gold producers we’ve got Newcrest and Regis (Resources), and then once you go below Regis at $1.5 billion market cap you come down to us and the Evolutions, St Barbara and Silver Lakes of the world so there’s a big value gap there that’s been missing and we think that that value gap can be filled,” he said.
“We talked about that strategy 18 months ago. We’re pretty aggressive and we got there quicker than what we expected as far as getting those assets and the market is starting to wake up to that.”
Northern Star currently has a market cap of $628 million and recently bought three Barrick Gold assets.
After dipping to 65 cents per share in December, Northern Star’s share price has since peaked at $1.23.
“We’ve effectively doubled the share price in the last two months so that’s a lot of credit for the assets and people that we’ve got with these transactions,” Mr Beament said.
Northern Star secured Barrick’s 51 per cent stake in the East Kundana joint venture and the Kanowna Belle mine for $75 million in January 2014, and Barrick’s Plutonic mine for $25 million in December 2013.
A recent $100 million fully underwritten share placement by RBC Capital Markets and $28.9 million non-underwritten share purchase plan at 86 cents a share provided the funds for the acquisitions.
Mr Beament said Northern Star would soon announce new major shareholders that had arisen from those deals, only revealing they were global investors.
Northern Star also recently took out $50 million debt as a standby facility with Investec Bank, but Mr Beament said the company was not interested in drawing on those funds unless it became necessary.
“We’re undrawn. All these mines make money so theoretically we shouldn’t have to draw down. Subject to timing of working capital, but that should really ultimately just be a standby,” he said.
Mr Beament said the company was targeting a group all-in sustaining costs of production of $1,050 per ounce.
“That’s all of our costs to do business. Probably at the moment when you add all the four mines together we’re probably sitting at the $1100 range so we don’t have far to drop there. We think that’s a reasonable target and probably give us six months to get there,” he said.
Mr Beament also said the assets Northern Star had recently acquired from Barrick, including the Pegasus, Rubicon and Hornet deposits, had better resources that its flagship Paulsens mine and it was planning to run a leaner operational model than Barrick had.
“We think Pegasus is one of the best high grade finds in Australia in the past 10 years,” Mr Beament told shareholders.
“The thing about these assets is they’ve been hidden in Barrick for a long period of time.”
Mr Beament said Northern Star would provide guidance on what its new assets could provide after June.
“We’re trying to keep our powder dry. We want to get in and understand these assets for three or four months and by the end of the June quarter we will have put our stamp on these assets ... so by the end of the June quarter we can come out and tell the market this is our full guidance for the next financial year,” he said.
Northern Star shares were trading at $1.17, down 6 per cent at 12.54WST.
All resolutions were passed at the general meeting which sought to ratify shares issued in the recent placements and approve issued shares to directors.
