Photo by: Bloomberg
PERTH (miningweekly.com) – The board of gold miner Northern Star Resources has approved a A$1.5-billion investment into the Kalgoorlie Consolidated Gold Mines (KCGM) mill expansion project.
The expansion project will increase and modernise KCGM’s processing capacity from the current 13-million tonnes a year to 27-million tonnes a year, with the operation expected to reach steady-state production in 2029.
The expanded project will produce 900 000 oz/y of gold at steady state, with the current mineral and ore reserves supporting a mine life of more than 20 years, with all-in sustaining costs targeted at A$1 425/oz during steady-state production.
Based on a gold price of A$2 600/oz, the expanded project will have a post-tax internal rate of return of 19% and a pay-back period of 4.6 years.
“Today is an exciting day for Northern Star and an historic new chapter for this world-class asset. The board’s decision to approve the KCGM mill expansion and optimisation represents the next stage to revitalise our largest asset as well as the surrounding district for decades to come,” said Northern Star MD Stuart Tonkin.
“This project is financially compelling, and a significant enabling step towards delivering our strategy to generate superior returns for our shareholders. Our confidence in the economics of KCGM to remain a long-life, low-cost gold mine has been further reinforced through the feasibility study phase. Expanding the processing capacity of KCGM will strengthen Northern Star’s portfolio, materially increase our free cash flow generation and progress our long-term strategy to be within the second quartile of the global cost curve.
“Further, the project is important in our sustainability journey and will also sustain hundreds of local jobs, economic and social investment, and local procurement opportunities in the Goldfields region.”
Northern Star told shareholders that the new plant would have a high level of process automation, control and condition monitoring. Furthermore, increasing the plant throughput combined with simplifying the existing flow sheet would also deliver a number of other benefits, including a sustainable reduction in unit rate processing costs, a reduction in fixed operating costs, a 50% reduction in potable water use per tonne of ore processed, the conversion of stockpiles to cash with improved margin, and a reduction in the sustaining capital on a dollar per ounce basis.
The expansion project would be fully funded by cash on hand and forecast cash flows, Northern Star said, with the company’s balance sheet forecast to remain strong with all current banking covenants and financial targets comfortably met over the expected three-year build phase.