“The Australian gold sector is in good shape – it’s trading at a discount,” Beament told analysts at Northern Star’s strategy day in Perth on Saturday.
Last Thursday, Northern Star mapped out a 10-year production plan, after spending A$150 million on exploration in the past three years.
The discovery cost per reserve ounce of gold added was just $21, while Beament pointed out the average greenfields discovery cost was $200/oz.
However, most of Northern Star’s North American peers have not been investing in new projects or exploration, or have scaled right back.
The majors, including Barrick Gold and Newmont Mining, have cleaned up their balance sheets in the past year or two and look keen to grow once again.
But Beament says capex per ounce was still at 2005 levels and believes the lack of investment in the past few years will come back to bite them.
“The majors are making money again, but for how long?” he said.
“You cannot keep that capex back for too long.”
Beament said it would be fun to watch what unfolded over the coming years in the gold sector.
“We’re in an interesting space,” he said.
“The North Americans and Canadians don’t actually make much money.
“You might think their balance sheets have been restored but I wouldn’t be too comfortable with US$5 billion of debt sitting on my balance sheet.”
Beament said income and growth were the holy grails in the gold sector.
For the December half, Northern Star posted a return on equity of 43% and a return on invested capital of 38%.
“We think that return on invested capital is simply stunning,” Beament said, hinting that those figures could be further improved with the release of the full-year results late next week.
“Our assets are now in a new league.”
Under the 10-year plan, Jundee and Kalgoorlie will return to 300,000 ounce per annum producers.
Beament noted that there were only 23 gold mines in tier one jurisdictions globally that produced more than 300,000ozpa.
“Northern Star has two mines that are about to join that exclusive club,” he said.
Beament noted that Northern Star is also poised to capitalise on another gold sector trend – the move deeper underground.
“Australia is the canary in the coal mine,” he said.
Beament noted that while only 20% of Australian gold mines were underground 20 years ago, it was now 56%.
“We can capitalise on that trend over the next decade,” he said.
“There’s not many people globally that have this skillset at the age of this management group.”
The strategy day featured presentations from Beament, as well as CEO Stuart Tonkin, chief financial officer Shaun Day, general manager operations Darren Stralow, investor relations manager Luke Gleeson, principal - environment, social responsibility and government relations Dr Guy Singleton, chief geological officer Michael Mulroney and general manager strategy and growth Luke Creagh.
Their average age is just 41.37 years old.
