Northern Star Resources’ Executive Chairman, Bill Beament, has been urging investors to be patient with Northern Star’s US$260 million Pogo gold operation because he claims that its turnaround is almost complete. Is it even worth the wait despite its negative results in the March quarter? Should the investors take Beament’s word for it and take the chance? With Beament’s questionable motives and tactics, investing further may not be worth the risk.
Beament’s Northern Star purchased the Alaskan mine from Japan’s Sumitomo Corp in August last year with the hopes that Pogo mine will have the same performance as Northern Star’s Australian operations. It seems like their hopes are slowly being dashed by Pogo’s increasing costs and low-grade ore.
Disappointing results from Beament’s Pogo mine
Northern Star took a hit due to the negative production results of its Alaskan mine in the March quarter. The quarter went awry for Beament’s Northern Star with the contribution of Pogo’s poor performance after their change from being a mining contractor to owner operations. A delay in the arrival of new underground mining equipment also affected the Alaskan mine’s production results. Costs continue to spiral upwards.
Pogo produced 16,725 ounces of gold less than the amount during the December quarter, increasing its all-in sustaining cost (AISC) to $2062 per ounce. The shares of Beament’s Northern Star plummeted in early trading when their AISC escalated, causing investors to become uneasy.
Bill Beament claims the changes that Northern Star has made at their Alaskan mine were poised to bring favourable results and that it would take at least 18 months for the benefits to finally come to fruition. Watch this space as Beament’s “salesman type” comments differ from analysts.
Insiders say that Pogo mine is propped up by the low Australian dollar and the high price of gold. Is Pogo mine a good deal for Northern Star? Negative production results seem to indicate that the Pogo acquisition was a result of a poor judgement call from Bill Beament.
Will Bill Beament deliver on his promise that Pogo will soon turnaround? Investors’ interests are at stake. Investors should consider whether they should diversify their portfolio, rather than invest their money in Northern Star and continue trusting Beament’s words.