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An Aussie perspective on Alaska mining

Northern Star Executive Bill Beament talks about Pogo, people, Alaska's vast potential in this month’s 20 questions for 2020 North of 60 Mining News – March 1, 2020

Series: 20 Questions for 2020 | Story 2

Following the pouring of the 4 millionth ounce of gold at the Pogo Mine, Northern Star Resources Ltd. Executive Chairman Bill Beament sat down with Mining News to talk about what this milestone means for the Interior Alaska gold mine; the Australia-based mining company's progress since acquiring Pogo; keys to Northern Star's success; and the vast mineral potential at Pogo and across Alaska.

Q. Over the past decade, Northern Star Resources Ltd. has grown from a single-asset upstart gold miner to an international mining company with a market cap of around A$10 billion (US$6.7 billion). What is the secret to Northern Star's success?

A. People are our No. 1 asset and always have been. Good, high-caliber people find you good mines and will be able to operate them as efficiently as possible – they are able to increase reserves, increase mine-life, grow production, grow profitability and grow shareholder wealth.

Secondly, it is the culture you create. Initially, this comes from a high level but as you progress along it is your whole workforce. Unless you have the right culture in there, businesses come unstuck (fail) pretty quickly.

Culture has to be backed up by core values and we have got five core values (safety, teamwork, accountability, respect and results), and that is how we gauge ourselves on how we perform each day. Our whole workforce, our suppliers and service suppliers understand those core values.

There is no magic sauce – it comes down to hard work, backing your people, understanding risk, understanding the reward that comes with that risk and giving your people the opportunity to enact that as well.

Q. Pogo is the first mine Northern Star acquired outside of Australia. What attracted the company to this underground gold operation in Alaska?

A. For every asset we ever bought – and we have bought around 10 assets now – it is always geology first and Pogo is a fantastic gold system. When you look at the 4-millionth-ounce we poured today and we have a 6-million-oz resource, this is one of the highest grade gold mines in the last 10 or 15 years and it is still one of the highest grade resources in the world. It is a big system in a small footprint; hence you got the grade. That is what attracted us to Pogo.

We have a 4G philosophy in the company – geology, grade, geometry and government – and Pogo ranks high in all four.

Q. Today marks the 4-millionth ounce of gold poured at Pogo. What does this milestone mean for the mine and Northern Star Resources?

A. It is awesome for Pogo – to pour four million ounces out of any single deposit is huge!

For the company, we have not had Pogo long – 14 or 15 months – so, it is great to be involved in a short window of that. More important for us is we would like to pour the 8-millionth ounce and I am sure that we will out of this deposit.

It is a great milestone that re-emphasizes just how good of a deposit that it is.

Q. More importantly for Pogo moving forward, the operation produced nearly 25,000 oz of gold in December. Do you anticipate similar production from Pogo in the months to come?

A. For the quarter, we did about 45,000 oz, obviously dominated by December. When we bought this asset, we said it needed at least 18 months of re-investment into changes in mining method, equipment selection and stuff like that. We still have a lot of work, a lot of heavy lifting, but December really was the inflection point of introducing new mining methods, as well as applying new skill sets and new equipment.

December was a great month, but we will have quarter-on-quarter improvements going forward. The March quarter will be much better than the December quarter. The June quarter is a really important quarter for this operation because that is when we believe, as a company, that Pogo will start showing everyone what the sustainable long-term production rate of this asset will be.

Q. When Northern Star acquired Pogo, it implemented new mining techniques. Could you tell me a bit about the changes?

A. The bulk of the production over the years has come predominately out of one or two lodes and those lodes have mined out. There are plenty of other lodes but the best of the orebody has been ripped out of it, so unless we changed mining methods and lowered the unit costs per ton, then the mine would have been shutting down by now.

The other parts of the orebody also supported a change of mining method. The previous method did very well for the first couple of lodes because that is the geometry that suited it but moving forward the other parts of the orebody supports a different mining method, which is much more productive and lower cost.

We changed the mining method from cut-and-fill to now about 60% of that ore-feed is from long-hole stoping.

We also improved the ground-support regime quite remarkably – better mesh, better bolts – and we are doing that with the same machine that we bore the development ramp with. As far as I am aware that is not done anywhere else in North America, yet it is common in Australia. The productivity improvements of that are extraordinary.

Q. Northern Star also upgraded the underground mining fleet at Pogo. Can you tell me a bit more about the equipment and new technologies implemented at the mine?

A. It is not as though we are using different equipment, it is just the newest equipment with the latest technology. We are very aggressive on our capital – we will turn our trucks over in 24 months, our loaders in 30 months and our drills in four years. By doing that you get the latest technology.

Our remote loaders are semi-autonomous – you hit a button and they drive through the drive and a bell goes off and a remote operator digs a bucket, hits a button and the loader drives the load back and dumps it. Where previously they were using line-of-site remotes – which is very dangerous and has pretty much been banned in Australia and a practice we would not endorse as a company. By bringing in semi-autonomous loaders on tele-remotes you are taking the person out of a high-risk environment. These loaders – we are doing it in Australia, and we will eventually do it here – can be operated from the surface. It is fantastic technology.

Pogo now is probably one of the most technologically advanced mines in the whole of North America – along with the semi-autonomous loader we have fully autonomous jumbos here, which drill out a face by themselves and we have the latest trucks.

Q. Is the Pogo Mine where Northern Star hoped it would be at this point into the transition?

A. We said about 18 months and we have got about three or four months to go on that and the inflection point was in December and it is trending really positively the right way. We can see the light at the end of the tunnel – we made money in December and January, which is the first time since we bought the asset. I think we have invested now US$100 million into the US$260 million we paid for Pogo, so that is a lot of investment, we are now starting to see a return on it as of December. That has only been achieved through the blood, sweat and tears of everyone on site. There has been a lot of hard work put in by everyone, from the catering staff to the manager. The world of everyone here was completely turned upside down when we came onboard, we literally changed everything, and the people's acceptance of that change has been remarkable.

Q. Since taking over during the second half of 2018, Northern Star has invested heavily into exploration at Pogo. What is the company's exploration philosophy?

A. If you don't drill you don't find, and if you don't find you don't mine – this is a very simple formula and a lot of resource companies don't get that. A very heavy part of our DNA and pedigree is exploration and drilling, and we pride ourselves a lot on the amount of money we put into the ground.

Pogo is a beautiful orebody as it is. You have to be careful when you get a new asset because it is a new shiny toy and people start looking at all the other parts of the shiny toy. I keep bringing people's focus back to the existing footprint at Pogo, the mine itself. We have a 6-million-ounce resource and we have 1.5-million-ounce reserve that we generated with only six months of drilling – so the orebody can generate reserves very quickly out those resources and those orebodies we are currently mining are all open in every direction so we need to narrow our focus to that.

When we started here there were two drill rigs underground, we have increased that to eight now and we have supported four surface rigs pretty much full time.

Q. The exploration has already shown great success, both in terms of expanding near mine resource areas and making new discoveries. Are you surprised by the success of the exploration drilling thus far?

A. Yes, the geology surprises on the upside every single time – it is a very well-endowed system here and a very well-endowed district. Did we know the geology was good? 'Absolutely, we picked that on every asset we every bought, but Pogo in particular is one of our star assets in terms of geological potential.' This orebody has a 10-million-oz gold endowment and only about 1 million meters of diamond drilling on the deposit. To put that in perspective, our Jundee Mine, which is the most profitable in our portfolio, is a 10-million-ounce endowment as well but has about 7 million meters of diamond drilling. So, Pogo can add ounces effectively seven times quicker than Jundee.

The growth that you can get on this orebody is really extensive – that is exciting and will always motivate capital for us.

Q. What is Northern Star's near-term exploration plans on the Pogo property?

A. This calendar-year, or in the next 12 months, we are completing 250,000 meters of diamond drilling, so effectively 20% on top of what has previously been drilled.

Q. Northern Star recently acquired Stone Boy, earlier staged gold exploration properties near the Pogo Mine in the Goodpaster Mining District. Does the company have any plans for exploring these properties in the near- or mid-term?

A. We got Stone Boy as part of our acquisition, which was a good win for us, and we think it is a very prospective claim. But it is a very low priority considering what we have right underneath us.

Q. Northern Star has made two discoveries – Central Lodes and Goodpaster – north of the immediate mine area. Do you see these areas as being the direction of mine development in the near term?

A. No, back in the existing mine the main loads are all still open, so there is huge potential just to go back into the existing mine – where there is already a 6-million-ounce resource that is open everywhere.

Q. Over the past couple of years, exploration has heated up in the Goodpaster Mining District. Is Northern Star keeping tabs on these projects around the Pogo Mine property?

A. We always keep tabs on any region we are in but we have a resource that will support 20 or 30 years at Pogo, and that is just this snapshot in time, and we have the Goodpaster discovery and we are looking at drilling that out this summer and putting a resource on it – and that is so close to the mine footprint.

I have a mill I am expanding now because I have too much dirt underground, so we are keeping tabs but we have so much opportunity underneath our nose at the moment.

Q. Do you believe the exploration success Northern Star has had at Pogo and the potential in the larger Goodpaster District speak to Alaska's larger mineral endowment?

A. Alaska has been blessed by Mother Nature. When you are finding Pogos, Donlin Creeks and Pebbles – all of these 10-million-, 50-million-, 100-million-ounce gold deposits in a first-world jurisdiction – that is telling you what your geological potential is. You have two of the largest undeveloped gold deposits in the world at the moment (Pebble and Donlin) and they are in a tier-one location.

I love the geology of Alaska. Look at the grade of the Pogo deposit. Who is finding half-ounce-per-tonne gold deposits that have already produced 4 million oz anywhere in the world?

Q. According to Mining News calculations, Australian companies are slated to invest around US$100 million into exploration and development on Alaska mineral projects during 2020. Why do you think ASX-listed mining and mineral exploration have become so interested in Alaska in recent years?

A. It has great geology and it is underexplored. When it comes to climatic conditions, topography and location, it has its challenges, hence why there is so much mineral potential.

Q. From an Australian mining company perspective, what are Alaska's biggest advantages in terms of attracting investments to the mining sector?

A. Again, it is the geology first. Also, we have felt very welcome from all the regulators and the government side, so I think that is excellent.

Q. What can Alaska do better to attract more exploration and mineral development spending?

A. Alaska has some great geology, being able to access that geology in terms of capital and infrastructure is the challenge. If you cut roads and establish infrastructure it is easy to explore, but when you need to put in your own roads it is very expensive.

The other thing Alaska can do is incentivize people to explore, to me that is one of the big drivers and there are plenty of jurisdictions around the world that do it. In Western Australia we have an exploration incentive scheme that the government chips in half the money for high-risk exploration and the company chips in the other half, that has been a huge success – analysis has shown a 20-to-one return on that investment. There has been a lot of great discoveries that are now very large and profitable mines in Western Australia that have come out of that incentives program. The state government only invests about A$12 million (US$8 million) per year and the junior explorers get that. The way it works is you put up a program and the government will chip in up to A$150,000 and you have to match it. It has been an unbelievable success that has been a win-win for both parties.

Q. Northern Star recently acquired 50% interest in the Kalgoorlie Consolidated Gold Mines (KCGM) open-pit gold operation in Australia. Can you tell me more about this project and what it means for Northern Star moving forward?

A. KCGM is Australia's most iconic gold mine. It has been mined for more than 100 years and around 60 million ounces of gold has come out of the system and it has total endowment of about 80 million ounces. To put that in context, it is about the third or fourth largest gold system in the history of the world. We now own half of it, so that is pretty cool! It is an awesome operation – a large open-pit with a small underground to the north – it will be a large-scale multiple underground operation in the future, but it still has a very long life as a large scale open-pit.

It is about 20% of our group production, so about 250,000 oz of our share at the moment. For the Northern Star team, we have four children now – Pogo, KCGM, Jundee and our other Kalgoorlie operations – and we treat them equally.

The KCGM operation does not distract us from Pogo, we see massive growth in production from the reserve and resource base, it is probably one of our stars of growth in our portfolio in the coming years. Pogo is turning the corner and standing on its own two feet now. If it keeps going the direction it is now, it has great growth opportunity to invest back into the orebody, the community and the operation.

Q. Would Northern Star Resources consider adding other Alaska gold projects to its portfolio?

A. Not at this stage, we are very disciplined on how we do M&A (mergers and acquisitions) and we have a saying, 'you have to earn your right to grow.' We are still in that 18-month plan for Pogo, so we are not getting distracted – there is so much value to create by getting Pogo exactly where we want it to be.

When I bought Pogo, I told all of my investors that we are not transacting in North America at all until we get Pogo where we want it to be and demonstrate that run-rate for a period of time. Once you start understanding the geology and the growth options that come with that, it makes you wonder whether you need to acquire anything else.

That said, when we do get comfortable and think we can grow here, we have grown our company through M&A, there will be a time that we do look here in North America. But we are here to make sure we have our culture right, our skillset right – it takes years to get that embedded in a new workforce. If I grow in America, I want to do it with Americans.

Q. What is your forecast for gold prices over the next few years?

A. If I knew that mate, I wouldn't be sitting here. It is extraordinary what is happening in the local currencies – Euro, Australian dollar, Rand. I am positive in terms of U.S. gold price – it is a long way from its peak and I don't see anything around the world that tells me it going to retreat.

Bill Beament is a mining engineer with more than 20 years of experience in the resource sector. Prior to his role as executive chairman of Northern Star Resources, Beament held several senior management positions, including general manager of operations for Barminco Ltd., with overall responsibility for 12 mine sites across Western Australia, and general manager of the Eloise Copper Mine in Queensland. He is the current chairman of the Western Australia School of Mines Alumni Patrons Group and a trustee of the Channel 7 Telethon Trust.

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Shane Lasley, Publisher

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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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