So why did Northern Star Resources (NST) shares rise yesterday? Was it the near 2% rise in the gold price in Asian trading, or the report of a solid profit for 2012-13, or that the company is going to delay its Ashburton gold project indefinitely?
Northern Star shares rose 2.5% or 1.5c to 61.5c yesterday as the gold price jumped to $US1,256 an ounce, up $US21 or 1.7%.
NST YTD – Northern Star earns more, cutting costs, delaying mine
But that came after the company has reported the delay to the Ashburton project, which was expected to be Northern Star’s next big mine after the successful revival of the Paulsens mine in WA.
But the recent sharp downturn in the gold price (before yesterday’s run) has ended hopes of going ahead with the mine, which was expected to cost several hundred million dollars.
In a statement, Northern Star said it was cutting its exploration and development budget, which would see Ashburton delayed "until gold prices recover".
The delay came despite the earnings news in yesterday’s statement (a case of a good news/bad news announcement from the company).
Northern Star said it enjoyed record production of 88,614oz for the year to June 30, an increase of 32% on the previous corresponding period.
"The Company expects to post a record unaudited after-tax profit of +$27 million when it announces its full-year financial results in August. This compares with $22 million in the previous year," directors said in the statement.
Northern Star’s said its "performance was underpinned by an average mill grade for the year of 7.3 grams per tonne (gpt).
"The grade for the last two months of the financial year averaged 8.1gpt as first stope ore from the Voyager 1 extension zone was introduced to the mill blend.
"Gold mined in the year totalled 103,566oz, up 44% on the previous corresponding period.
"The strong outcomes on these key benchmarks were crucial to offsetting the impact of lower gold prices in the second half of the year.
"But despite these results, Northern Star is embarking on another round of cost- cutting to ensure that its margins and returns to Shareholders remain robust in the face of lower gold prices.
"As part of this, Northern Star has reduced its regional exploration and project development expenditure.
"This will involve delaying its Ashburton Gold Project in WA until gold prices recover.
"However, minimum expenditure commitments will continue to be met to ensure the Company retains ownership of what it believes will be valuable assets in the future.
"Costs have also been cut across Northern Star’s administration and exploration office," the company said.
Managing director Bill Beament said it was essential that Northern Star continued to respond quickly to the changing financial environment while retaining assets and delivering returns to shareholders.
"This means reducing costs to enable us to keep our team of people and protect our margins," Mr Beament said.
That was the bottom line from the announcement yesterday – as we saw with Metallica and Ramelius and Terramin late last week.
Small miners and explorers are battening down the hatches to try and survive the recession in mining and exploration.
