Monsters of Rock: A trio of gold miners deliver their numbers

The Covid-19 pandemic has played havoc with any number of things along the supply chain.

BHP (ASX:BHP) can’t get train drivers, diesel costs are soaring and borders imposed by Covid wary state and national governments have made staff hard to come by.

Northern Star Resources (ASX:NST) was the biggest name not called BHP to release its September quarterly results today.

It was a decent set of numbers; the Super Pit gold mine owner generated 386,120oz at AISC of $1594/oz, above its $1475-1575 FY22 guidance range but well within grasp of hitting it as the year goes on.

It is also helping out the fastidious investor by reporting all in costs in its quarterly, not something NST is required to do, at $1933/oz.

At an average realised gold price of $2345/oz, Northern Star still made $848 million in revenue in the September term, generate earnings of $165-175m and giving the company $756m in cash and bullion after paying $110m in dividends, $123m in growth and exploration and holding just $262m of bank debt.

But there may be a feeling it could all be going better, especially at the Pogo mine in Alaska where Northern Star produced 43,992oz at US$1751/oz, dragging on its more stable Kalgoorlie and Yandal operations.

Northern Star says gold production (and cost reductions) will be weighted more to the end of the year, particularly at Pogo where costs were elevated by a processing plant upgrade.

New Northern Star MD Stuart Tonkin, the long time CEO who has stepped into the big boots left by Raleigh Finlayson and Bill Beament, believes the vaccine rollout will see labour costs come down in the coming months.

“On the domestic or even general labour costs and input costs, that’s probably where we’re seeing those headwinds is labour and turnover,” he told analysts on a conference call today.

“The unnecessary cost of just churning labour … in this environment.

“I still think that in 6 months we’ll see relaxation of borders either international or interstate with vaccines becoming prevalent and therefore that will relax some of that as well as different commodities cycles.”

Northern Star, which is studying a big expansion in processing capacity at the Super Pit, has designs on organically growing its production base to 2Mozpa by 2026 to rival Newcrest (ASX:NCM) for the title of Australia’s biggest gold miner, something Tonkin says it can achieve from its existing cash balance.

Northern Star Resources share price today:

Silver Lake on track

Silver Lake Resources (ASX:SLR) is aiming to produce 235,000-255,000oz in 2021-22 at AISC of $1550-1650/oz and is well on track to do just that after turning out 64.947oz of gold and 251t of copper at $1562/oz in the September quarter.

That was largely driven by the success of the Deflector operations, where the addition of the high-grade Rothsay gold mine is paying off.

Deflector produced a record 31,033oz of gold, a 22% QoQ improvement, selling 28,074oz of the precious metal and 212t of copper at just $1249/oz.

Given it sold its bounty at $2467/oz its AISC margin was roughly double its production cost at Deflector.

Mt Monger was less rosy, with sales of 33,977oz at much higher AISC of $1821/oz, still generating a decent margin but well above Deflector.

Silver Lake also touched on WA’s border restrictions, saying it has increased ore stockpiles at Mt Monger to 122,000oz to provide “scheduling optionality and a bridge to a more normalised labour market”.

Silver Lake boasts a record company ore reserve of 1.36Moz, underpinning a planned expansion to 255,000-275,000ozpa over a three year period, with $359m of cash in hand.

Silver Lake Resources share price today:

Red 5 costs high, waiting on KoTH expansion

Red 5 (ASX:RED) is in a bit of a holding pattern from a production standpoint as it waits for the revamped King of the Hills operation to come online in the middle of next year.

The $226 million redevelopment should propel the junior comfortably into the ranks of Australia’s mid-tier gold miners.

Until then it will make do with production from the Darlot gold project and Great Western satellite open pit, where it expects to produce 62,000-72,000oz this year at an AISC of $2300-2400/oz.

That is really pushing at the margins based on the current gold price, with Darlot delivering 16,377oz in the September Quarter at $2686/oz.

That did include some development costs, about $390/oz of which was attributable to Great Western, and the long-term target for Darlot will be to convert it into a high-grade satellite mine for the new KoTH operation.

“This will facilitate a step-change in production cost and has also allowed us to execute a contract with underground mining specialist Redpath to undertake 12 months of underground mine development at Darlot,” Red 5 managing director Mark Williams said.

“In parallel, this facilitates an important workforce transition strategy for Darlot’s non-mining and processing personnel to relocate to KOTH and leverages the strategic strengths of the new KOTH operation.

“In future, the KOTH Processing Hub will be fed with three ore sources – the KOTH open pit, KOTH underground and Darlot underground. This will further de-risk the KOTH ramp-up and also alleviates labour force pressures given the transfer of our highly skilled Darlot surface team to KOTH.”