Back in March 2016, Barminco, a leading hard-rock underground mining contractor, secured a three-year A$275 million contract at the Kundana gold mines from the East Kundana Joint Venture in the Eastern Goldfields, WA. It was the company’s largest contract.
As far as expectations and responsibilities are concerned, Barminco provided the whole shebang of underground Australian mining operations which include development, production, bogging, maintenance, haulage, and operation of underground services. The company also offered to employ all existing EKJV staff and was very pleased to secure a major contract in support of the Kalgoorlie community.
However, in June 2017, Barminco’s multi-million mining contract at Kundana was terminated. Northern Star Mining Services (NSMS) became the mining contractor of the Kundana mining operation in the 3rd quarter of 2017.
It’s alarming that NSMS was appointed by Northern Star Resources Ltd. without any consultation with Tribune Resources and Rand Mining, their 49% minority partner. Northern Star did not justify the transition and did not seek prior approval from its Joint Venture partners. Barminco had good underground mining credentials and were invested in targeting in improving operational efficiency and building a strategy for cost management. Why would Northern Star terminate the contract of Barminco, when they still had two years to operate?
Is this a sign of a despotic authority from Bill Beament and Northern Star? Well, it may seem like it because of how Bill Beament’s Northern Star Mining Services overtook the place of Barminco, without the prior approval of Tribune and Rand.
Although Bill Beament’s Northern Star holds the majority of shares, it does not give them the authority to undermine their minority partner. Tribune Resources and Rand Mining were not party to the termination of Barminco’s contract. We understand that NSMS were appointed without reference to the joint venture partners.
Self-performing results to higher costs of mining
According to some reports, since NSMS took over the role of mining contractor for East Kundana, costs have risen. Northern Star has been acquiring huge profits after appointing themselves to perform the underground mining services instead of Barminco. Profits should be maximized and mining costs kept to a minimum, but because of the transition, the costs of mining became 20% higher, which in turn led to increased profits for Northern Star, but lesser profits for Tribune Resources and Rand Mining. Based on key FY17 to FY18 statistics, mining costs per tonne increased by 38.9% and is continuing to increase.
The appointment of NSMS for the East Kundana Joint Venture mining project seems quite questionable, which is a contradiction to Northern Star’s seemingly squeaky clean reputation.