Profitable performer has star potential

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 25 Jul 2012   Posted by admin


IN September 2011, shortly after announcing a maiden full-year net profit after tax of $16.3 million, Northern Star unveiled a two-stage plan to increase its total gold production from about 75,000 ounces per annum to 200,000ozpa.
Stage one, involving expansion of its flagship Paulsens operation to 100,000ozpa  at a total cost of $10 million, is due for completion in the second half of 2012.
Additional feed for this expansion will be sourced from a combination of open pit material and increased underground ore production, as well as oxide and transitional ore from the company’s neighbouring
Ashburton project.
Stage two will comprise a feasibility study aimed at establishing a standalone operation at the 1 million ounce Ashburton sulfide resource, with Northern Star expecting a development decision by mid-2013.
Paulsens
The Paulsens open pit and underground gold operation is 190km west of Paraburdoo, on the border of the Ashburton and West Pilbara mineral fields in WA. Purchased from Intrepid Mines for $40 million in July 2010, the Paulsens mine, as well as the surrounding 365 square kilometre tenement package, has proved a spectacular triumph for Northern Star. The acquisition included a fully operational mine, a 350,000
tonnes per annum processing facility and modernised camp facilities, which have a total replacement value of more than $30 million.
Northern Star was able to repay the full acquisition price from Paulsens cash flow within seven months. On top of a record 2011 financial performance – when more than 87,000oz of gold was recovered – the company announced a resource  upgrade of 318,000oz in February 2012. Despite the latest quarter falling 6000oz shy of estimates due to production issues, the Paulsens success story has continued, with    remarkable April and May drilling results  from Paulsen’s Voyager One and Two lodes continuing the company’s golden run.
On April 12 2012, the company announced that Paulsens was again poised for a substantial resource increase after its latest drilling program returned results of up to 2330 grams per tonne from the Voyager One lode – which has produced all of the gold mined at Paulsens to date – and the adjacent, and relatively underexplored,
Voyager Two lode.
Voyager One results included 2.3m grading 1115.4g/t of gold including 1.1m at 2330g/t, and 19m at 75.8g/t including 4m at 251.7g/t, indicating that the lode extends far deeper than originally thought.
With only 135,000oz mined to date out of Voyager One, the company believes this lode will be the mainstay of production for a number of years.
Voyager Two is down plunge of and beneath Voyager One, with an exploration target of 100,000 to 250,000oz. Latest results augur well for a maiden resource due later in the year, with a host of high-grade intersections highlighting the increasing value of this lode. The results include 0.4m at 1075g/t, and follow the recently announced Voyager Two intersections of 0.8m at 12,178g/t and 1m at 3390g/t, believed to be some of the highest grades ever recorded in Australia.
However, Northern Star managing director Bill Beament said Voyager Two will take a back seat until the company is better able to define the Voyager One lode.
“The problem we have – if you could call it that – is that the Voyager One lode has commanded a lot of our focus because it just seems to be expanding,” Mr Beament said. “So a lot of our drilling focus is on that
lode because that’s what we are mining and that’s what we will be mining in the near future as well,” he said.
“The issue we have with Voyager Two is that we haven’t found the bottom of Voyager One yet. So until we find the bottom of that pay run, Voyager Two won’t really kick off in earnest, even though we have drilled
some fantastic results there.”
On the back of these incredible results, the company has announced a three-pronged drilling plan for Paulsens as it seeks to increase and better delineate the massive resource. Program one involves ongoing drilling at Voyager One, immediately down plunge from known mineralisation. The lode has historically had been extended down plunge at the rate of 150m to 200m a year, and this drilling program looks to continue this trend.
“The Voyager One down plunge extensional drilling is very critical because it is extending mine life, so that translates into cash flow,” Mr Beament said. Program two is a deep drilling program targeting mineralisation up to 1km down plunge of the current limits of Voyager One. Northern Star believes that this drilling, which began in early April, has the potential to double the 750,000oz of mineralisation outlined at Paulsens to date.
Program three began in the second week of May on the other side of the gabbro rock unit, which has been seen as a natural ‘fence’ around the Paulsens mineralisation. The first round of drilling in this area
returned results up to 14g/t and Northern Star believes these quartz veins have the potential to increase the project’s resources substantially.
“The gabbro offset drilling is another game changer, where we could find another Paulsens parallel to it,” Mr Beament said.
Ashburton
The Ashburton gold project, purchased by Northern Star from Sipa Resources in the March 2011 quarter, comprises 961sqkm of mining and exploration tenements about  50km southeast of Paraburdoo. Sipa started
exploration in 1996, and by mid-1997 had established a large resource at the Mount Olympus deposit, as well as discovering the substantial satellite deposits Zeus, Peake and Waugh.
Mr Beament said Northern Star had been eyeing off the Ashburton tenements even as it was undertaking due diligence on Paulsens.
“The owners [Sipa] hadn’t spent money on the tenements and they really got themselves in a bit of a corner where the ‘use it or lose it’ rules were coming into play,” he said.
“They were literally going to lose it two weeks later, so we came along with perfect timing and struck a deal.”
“If you look at the main deposit Sipa mined there, Mt Olympus, it is a 1 million ounce deposit over 300 vertical metres; it’s a bigger and better deposit than Paulsens,” Mr Beament said.
“It’s open at depth and potentially open along strike also, so there is a lot of potential to upgrade that resource again.”
The updated Ashburton resource – which now stands at 11.588mt grading 2.7g/t of gold for 1.007moz gold after an upgrade in April – represents a 51 per cent increase in total contained ounces and has significantly strengthened company’s plans for a standalone 100,000ozpa operation.
This resource is an interim estimate. Northern Star has now accelerated drilling plans, with two rigs – one diamond and one reverse circulation – on site to help define the high-grade resource.
The company has also commenced a feasibility study, due for completion mid-2013, to evaluate further development of the Ashburton operation, including the Mt Olympus pit and a number of smaller pits: all within a 2km radius of Mt Olympus.
With a processing plant of between 500,000tpa and 6000,000tpa capacity the most likely choice, the cost of the milling infrastructure has been estimated at $80 million and total capital expenditure at $120 million. The Ashburton project also has considerable exploration potential. Ongoing drilling has focussed on infill and extensional resource activities at Waugh, Zeus and Mt Olympus, with assays pending. “Mt Olympus is the biggest deposit as it has 70 per cent of the resource base, but all the other pits they [Sipa] mined are open down dip as well,” Mr Beament said.
The company has also proposed that the free-milling ore from Ashburton be transported to the Paulsens mill to provide additional ore to satisfy the Paulsens operational upgrade.
“There is oxide on most of the pits at Ashburton. That was probably one the biggest steps in our resource upgrade a month ago: increasing free-milling ore 250 per cent, or 300,000 ounces,” Mr Beament said.
Further exploration
No other sizeable deposit exists within 50km of the Paulsens mine and there has been little or no regional exploration nearby for 10 to 15 years. Hence Northern Star is re-assessing its $30 million Ashburton
geological database, which it acquired with the project.
A $20 million exploration and drilling program that includes analysis of the area around both Paulsens and Ashburton is under way and delivering results.
The company started a targeted surface diamond drilling program at Paulsens in May, and has already found two gabbro offsets in positions of similar geology to Paulsens. The company believes that these have the potential to replicate the flagship mine, with ore grade intercepts of up to 14g/t received to date.
The company will drill for structural and geological understanding before focussing on the mineralisation.
“People have seen us as good miners: we have grabbed a mine that was unloved, turned it around and extended the mine life, and made it absolutely hum,” Mr Beament said.
“But the leg of our business people haven’t seen is the exploration side, which is really gathering momentum now,” he said.
“You see it time and time again: mining companies will find a great discovery, they rush into production, have a few hiccups, get focussed on that and then drop all their regional exploration.
“Paulsens is now more than a 750,000 ounce deposit and I’m sure in the near future that it is going to exceed a million ounce deposit; it would be very unusual not to find anything of note in the 50 kilometre radius around that.”

 

By Rueben Adams


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