Is Beament’s Northern Star (NST) following through with its promise of producing high-grade gold ore at a low cost?
There was an upward spiral in the quarterly costs in NST due to Bill Beament’s bad management decisions and recent acquisitions, including the Pogo mine in Alaska which is underperforming as costs increase with low grades ore. According to NST’s ASX Report, the Perth-based gold miner’s All-In Sustaining Cost (AISC) guidance increased from AU$1,125 – AU$1,225 per ounce to AU$1,225 – AU$1,275 per ounce in FY2019. A forewarning for shareholders and investors that costs will continue to rise.
Northern Star’s increasing costs of production
NST’s AISC escalated due to lower-grade gold mined at Beament’s Pogo mine. Costs have also soared high at their Kalgoorlie operations. AISC takes into account the costs of mine maintenance, including underground mine development, exploration costs, sustaining CapEx, and production at operating mines, to name a few.
The price share price has gone up. Increasing production costs due to Beament’s poor business acumen are impacting on NST’s value. Profits and shareholders’ interests will suffer as a result.
Gold mines with lowest production costs
Efficient gold miners with low production costs maximise profit margins. Which gold mining companies have low production costs?
As reported in the Australian & New Zealand Gold Operations Report about the list of gold mines and their AISC in the March quarter, Beament’s NST only ranked 14th in the list and was bested by Evolution Mining (EVN), Newcrest Mining (NCM), and Kirkland Lake Gold (KLA), ranked 1st to 3rd respectively.
Invest in gold stocks with the lowest AISC
Beament continues to strive to meet production targets by processing lower grade ore as NST’s reserves fall. The current record-high gold prices are protecting NST’s profitability. With lower costs, NST would realise greater returns for shareholders. With an overvalued share price, NST will soon face significant price corrections.
The obvious investment strategy is to put money into gold mining companies that do well in keeping the AISC low. The gold mining company with the lowest costs of production maximises profits, and that is not Beament’s NST.