Blue-chip miner Northern Star Resources has predicted the rest of the industry will be forced to follow its lead in making radical and costly changes to their operations to deal with the fallout from the COVID-19 pandemic.
Blue-chip miner Northern Star Resources has predicted the rest of the industry will be forced to follow its lead in making radical and costly changes to their operations to deal with the fallout from the COVID-19 pandemic.
The company disclosed today its March quarter production would be 10-15 per cent below previous guidance and has withdrawn its full-year guidance because of the uncertain outlook.
The gold miner has also postponed the payment of its 7.5 cents per share interim dividend to the end of October.
The $55 million payout was due at the end of the month.
Executive chairman Bill Beament said Northern Star was "well ahead of the curve" in its response to COVID-19.
It started making changes in mid-February, well ahead of government policy moves on travel, and the rest of the industry would need to follow.
“This will not be the last call of this type from a mining company,” Mr Beament told an investor conference call this afternoon.
“The FIFO rules are very strict and radically changing across the sector.
“You will notice every company putting in radical procedures and policies.”
Specific measures included social distancing on planes, chartering of extra planes and buses, heat checks at airports and most fundamentally extending FIFO rosters.
With less people on site and less flexibility, this had adversely affected production and productivity.
Northern Star has also postponed exploration activity and capital expenditure, to help deal with the FIFO restrictions and preserve cash.
Asked about the extent of the cutbacks, Mr Beament said “it’s pretty simple”.
“If you are not a revenue generating employee in the mining industry, nobody wants you in there.”
Mr Beament said the company’s prime focus was on the safety of its people and communities, and it also wanted to continue production through the crisis.
“This is the only responsible and commercially prudent option,” he said.
“If we stuff it up, we will lose our social licence to operate.”
He also indicated the company was erring on the side of caution.
“If we look back in three months and we’ve overreacted, well happy days and we’ll all crack the champagne.”
Northern Star’s shares closed 15 per cent lower today at $11.47.
The stock hit a peak of $15 in February before touching a low of $9.19 last week.
Northern Star said the only asset that would meet its March quarter production guidance was the half-owned Kalgoorlie Super Pit, as it had a 100 per cent residential workforce.
It’s other operations in WA and Alaska relied on fly-in, fly-out workers.
The company also noted that its supply chain had not been an issue.
In regard to financial management, as well as postponing its dividend, the company has extended the maturity of some undelivered gold hedges.
Northern Star had $700 million in debt, as at March 25, comprising a $400 million four-year loan and a three-year $300 million revolving credit facility.
Its only debt repayment in the next 12 months is for $25 million on December 31.
Cash on hand and bullion awaiting settlement stood at $34 million.
DISTANCING: Iron ore miner BHP has adopted social distancing practices at its Pilbara operations. Supplied pic
Northern Star’s update came on the same day that two major contractors updated the market on their operations
Mining and civil contractor NRW Holdings said it had been trading in line with internal forecasts but to be prudent has deferred its interim dividend from April to August.
Engineering company Lycopodium has withdrawn its earnings guidance but will proceed with its planned interim dividend.
The company had previously provided guidance for FY20 of around $220 million in revenue and net profit of $14.1 million.
It had noted in February COVID-19 was a developing issue that could potentially impact these results.
Managing director Peter De Leo said today the company expected further impacts as the “volatile situation” continued to develop.
He said, however, the company was in a strong position to manage economic challenges ahead.
Lycopodium will proceed with a fully franked interim dividend payment of 15 cents per share, to be paid on April 9.
Company shares were up 6.6 per cent to trade at $4.20 at 2:45pm AEDT.
Yesterday, mining contractor Perenti Global deferred its $24 million interim dividend, with the group saying it would focus on immediate measures to conserve cash during the pandemic.
At the junior end of the market, Trigg Mining is the latest explorer to implement cost-cutting measures to support the businesses during the COVID-19 pandemic.
Trigg has suspended all field-based exploration at its Lake Throssell potash project in Western Australia in light of regional travel restrictions by the state government.
The company said while it maintained cash balance of around $2 million, it would be implementing cash conservation measures, such as reductions in director and staff fees.
MEETINGS: This supplied photo shows social distancing in practice during a team meeting at BHP's Pilbara operations.
