The mining newspaper for Alaska and Canada's North
The mining newspaper for Alaska and Canada's North
Aussie miner ups mine investments, expands Alaska portfolio North of 60 Mining News – August 2, 2019
Northern Star Resources' Pogo Mine in Interior Alaska boosted the Australian mining company's gold production to new highs during the second quarter.
Bill Beament
Thanks to improving gold output and lower costs at its Pogo gold mine in Alaska, Northern Star Resources Ltd. sold 232,042 ounces of gold during the final quarter of its fiscal year 2019, a record for the Australian gold miner.
During the three months ending June 30, Northern Star sold 48,009 oz of gold produced at Pogo, which is a 33 percent increase over the previous quarter.
The Perth-based miner expects gold output at Pogo to continue its upward trend.
"Pogo is on track for further production growth as this financial year progresses, with output in the second-half forecast to be in the range of 120,000-140,000 oz," said Northern Star Executive Chairman Bill Beament.
For Northern Star's full fiscal year 2020, which started on July 1, the Pogo Mine is forecast to produce between 200,000 and 240,000 oz of gold.
As gold production increases at this Interior Alaska operation the Perth-based miner acquired late in 2018, the costs are going down. The all-in sustaining costs (AISC) per ounce of Pogo gold sold during the quarter ending in June was US$1,207, which is an 18 percent drop from the US$1,468 during the previous quarter.
When you add in the production at its two Australia operations – Jundee and Kalgoorlie – Northern Star sold 232,042 oz of gold during the June quarter at AISC of US$866/oz.
For the full-year, sales from the company's three operations was a record 840,580 oz at AISC of US$907/oz.
With ongoing improvements at Pogo, the underground gold mining specialist expects gold production to continue to break new records as the average cost to produce each ounce drops during fiscal year 2020.
"The Australian operations are performing well and demonstrating their well-earned status as tier-1 mines," said Beament. "And the excellent progress now being made at Pogo vindicates our strong belief in the ability of this world-class gold system to form the third pillar at Northern Star."
Northern Star's Alaska pillar is being reinforced by new properties the Aussie miner has acquired in the Goodpaster Mining District where Pogo is located.
New vision for Pogo
When Northern Star agreed to acquire Pogo last year, the company saw an asset that fit ideally into its portfolio of world-class gold operations that could benefit from the company's underground mining expertise.
The previous Pogo owner, a joint venture between Japanese firms Sumitomo Metal Mining Company (85 percent) and Sumitomo Corp. (15 percent), produced nearly 4 million ounces of gold at Pogo before selling the mine to Northern Star last fall for roughly US$260 million.
In the years leading up to this acquisition, however, gold reserves and production at the mine had been dwindling. This was largely due to the availability of less ore to feed the mill.
Northern Star, which has grown into a multi-billion-dollar mining company in less than a decade by reviving similar underground gold mines in Australia, saw massive potential to turn Pogo into a third strong asset in its portfolio, possibly outperforming its Jundee and Kalgoorlie mines in Western Australia.
While Northern Star's underground mining strategy is multifaceted, one of the keys to its success is the use of longhole stoping, a more bulk tonnage approach to underground mining.
The use of this method is expected to drive down the cost to mine a metric ton of ore at Pogo to US$42, which is 69 percent lower than the US$136/t costs of mining with cut and fill, the mining technique being used at the mine when the Australian underground miner took over.
The company's new vision for Pogo, however, requires significant investment in the equipment need for longhole stoping and the exploration required to ensure there is enough ore to keep the mill running at maximum capacity.
"We are throwing money from Australia into that mine," Northern Star Pogo General Manager said during an update on Pogo earlier this year.
Working smarter
The money being invested into Pogo includes roughly US$35 million on state-of-the-art equipment that arrived at Pogo during the quarter.
"You, in Alaska, now probably have the most technologically advanced underground mine in the whole United States right now," Beament said during a May visit to Anchorage.
This modern mining fleet includes jumbos that can also do the bolting and meshing required to stabilize the underground mine, which increases efficiency and reduces the number of underground drills needed.
Another key component of this new fleet is remotely operated loaders.
Without the concern of shaking up an operator strapped into the loader, this earthmoving machine can cruise along its route at twice the speed of a similar piece of equipment with a worker in the driver's seat. When you couple that with a bucket that is twice the size of the conventional loader being replaced, this one piece of equipment can do four-times the work.
"This is technology and new equipment that is pretty much the first to be adopted in the U.S., said Beament. "It is cutting edge stuff, what we are doing out there."
The ultimate goal of this cutting-edge underground mining equipment is to produce more gold at lower costs by mining more ore.
Gold production at Pogo is constrained by the amount of ore available.
While the ore mined at Pogo over the past six months has averaged 9.7 grams per metric ton gold, there has not been enough of this ore to keep the mill operating at full capacity. This shortfall has been filled by supplementing the mill feed with low-grade ore that diluted the average to 7.6 g/t gold.
With the new equipment, Northern Star plans to increase the amount of ore mined to more than 1 million metric tons per year, which will keep the mill fed with high-grade ore, increasing gold production and lowering costs.
"It is not about making people work harder, it is about introducing these technologies and systems that will allow us to be more productive as we build a better business," said McLoughney.
More gold, exploration
In order to have enough ore for this new fleet to mine, Northern Star is also investing heavily into exploration – an exercise that has resulted in substantial increases to the reserves and resources at Pogo.
According to a calculation published by the company on Aug. 1, Pogo hosts 6.1 million metric tons of proven and probable reserves averaging 7.5 g/t (1.5 million oz) gold. This marks the first Australian Joint Ore Reserves Committee- (JORC) compliant reserves calculated for Pogo.
These reserves are included in 19.3 million metric tons of JORC resources – measured, indicated and inferred – averaging 9.6 g/t (5.95 million oz) gold.
This is a 43 percent increase over a resource calculated last October and the largest in the history of the Interior Alaska mine.
Roughly 500,000 oz of this gold is encompassed in a maiden resource averaging 7.9 g/t gold in the Central Veins, a discovery Northern Star made late last year.
Located about 800 meters northwest of the deposits currently being mined, Central Veins is interpreted to be a stack of at least five Liese-style veins structures that are offset by a fault.
The company calculated a similar resource – 500,000 oz of gold in material that averages 8.2 g/t gold – for Hill 4021, a satellite deposit roughly 2.5 miles southeast of the mill.
Northern Star does not plan to let its foot off the throttle when it comes to resource and reserve expansion at Pogo in the coming year.
The company has budgeted A$64 million (approximately US$44 million) on exploration and expansion activities at Pogo during fiscal year 2020.
This includes A$20 million (roughly US$14 million) on exploration aimed at upgrading the 12.1 million metric tons of inferred resources on the property averaging 9.5 g/t (3.7 million oz) gold to higher confidence categories.
The balance will be invested into developing and bringing new mining areas into the Pogo mine plan, as well as about A$7 million (approximately US$5 million) on removing bottlenecks ahead of the mill to increase capacity.
Expanding the resource at Central Veins and growing Pogo reserves are expected to be high-priority targets of the drilling in the coming year.
"We are confident that with the operational gains we are making and the outstanding reserve and resource position we have established, Pogo is well on its way towards returning to its historical status as a Tier 1 asset," said Beament.
Adding Stone Boy
In addition to its work on the immediate Pogo property, Northern Star has acquired Stone Boy, a group of four earlier staged gold properties in the Goodpaster Mining District where its Alaska mine is located.
The Australian miner paid Stone Boy Inc., which is owned by subsidiaries of Sumitomo Metal Mining (95 percent) and Sumitomo Corp. (5 percent), US$1.2 million for these properties.
The Ink claims, located about 20 miles (32 kilometers) southeast of Pogo, was the primary focus of exploration carried out by Stone Boy over the years, including a US$1.3 million program completed in 2013.
Yuki Beppu, the geologist in charge of Sumitomo Metal Mining America's exploration in Alaska at the time, said much of the exploration at Ink focused on the Brink core zone, a bulk-tonnage gold deposit more akin to Fort Knox than the high-grade Pogo Mine.
At the time, Stone Boy had drilled 29 drill holes (8,903 meters) over a 500- by 1,700-meter area at Brink. The best hole, DH13-30, cut 514.4 meters averaging 0.427 g/t gold.
The Stone Boy properties also include Fog, immediately north of Ink, Skippy, adjacent to the east side of the Pogo property, and Shaw, which is west of the Pogo claim block.
"Another great stretch of country in a very good stretch of geology across Alaska," Beament said in May, referring to the Stone Boy claims.
Monte Cristo, a large property about 30 miles west of Pogo and is being optioned by Great American Minerals Exploration Inc (GAME), was not part of the Northern Star acquisition.
Beament said Northern Star plans to be in Alaska for a long time and is looking for other assets here that fits the company's model.
"If anybody has a great project and wants to go underground come see us," he invited.
Over his more than 16 years of covering mining and mineral exploration, Shane has become renowned for his ability to report on the sector in a way that is technically sound enough to inform industry insiders while being easy to understand by a wider audience.
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