The chief executive of Northern Star Resources has moved to reassure investors after a major breakdown at the iconic Kalgoorlie Super Pit, combined with other operational issues, forced the gold miner to slash its annual production target.
Crusher Collapse Compounds Christmas Woes
Addressing analysts on Monday, Northern Star's top executives revealed that the primary ore crusher at the Fimiston plant failed just 12 hours after a temporary repair in early December. This critical breakdown led to a further two weeks of complete downtime.
Chief operating officer Simon Jessop admitted that sourcing specialist staff to fix the faults "took longer than expected" over the Christmas holiday period, exacerbating the disruption. Operations only resumed on Monday, January 5th.
This incident was the centrepiece of a disastrous quarter for the company, which also included a wall slip, carbon-in-leach tank failures, and crushing circuit problems at its Jundee operation, alongside grade issues at the Pogo mine in Alaska.
Financial Fallout and Market Reaction
The cumulative impact has been severe. Northern Star was forced to revise its full-year production guidance down from the 1.7-1.85 million ounce range to between 1.6 and 1.7 million ounces.
Chief financial officer Ryan Gurner warned that weaker gold sales in December, coupled with a scheduled $250 million tax payment, would push the miner into negative free cashflow for the quarter. This is despite the benefit of strong gold prices, which helped maintain the company's cash and bullion balance at a robust $1.17 billion at the end of December.
The market reacted harshly to the news late last week, with shares sold off sharply. They partially recovered on Monday, closing up 2.13 per cent at $24.95.
The Ageing Asset Conundrum
Fielding questions about the reliability of the Super Pit operation, known as KCGM, CEO Stuart Tonkin stressed the crusher failure was an isolated event. "It's rare. It just happened to be in our quarter two, very unfortunately," he said, noting previous incidents in 2021 and 2017.
However, he acknowledged the broader challenge of maintaining older assets, comparing it to driving a 30-year-old vehicle. "This is the eternal balance, you can see the hundreds of millions of dollars we're spending on sustaining capital, we're not underdoing it but trying to not overdo," Tonkin explained.
He directly linked the recent issues to the rationale for the company's massive $1.5 billion expansion project at Fimiston, announced two years ago. That project, which remains on track for a July ramp-up, is expected to bring an extra 500 workers to the Kalgoorlie site by mid-January.
The operational shortfall is significant. Simon Jessop estimated the crusher failure left the company about 650,000 tonnes behind its throughput schedule from its biggest mine during the December quarter. With half-year gold sales at 729,000 ounces, Northern Star faces intense pressure to ramp up output in the second half to meet its revised annual target.
The market awaits the formal quarterly report later this month for a complete assessment of the balance sheet impact from what has been a calamitous period for Australia's largest gold producer.
