More than two hours’ drive from the nearest town, Paraburdoo (population just 1607 at the last count), and served by a gravel airstrip that can be washed out for weeks on end by heavy seasonal rains, Northern Star Resources’ Paulsens gold mine is rapidly emerging as one of Australia’s most promising producers of the yellow metal.
Bill Beament, managing director of Northern Star, has a background that sets him apart from the typical run of managers heading ASX-listed companies – and it shows in the way he has been able to turnaround the fortunes of Paulsens.
On graduating from the Western Australian School of Mines as a mining engineer, Beament chose not to take the conventional route of spending the bare minimum two years in mining operations before stepping on to the management ladder.
Instead he opted to invest extra time to really learn the ropes of underground mining, spending four years as an underground worker with mining contractor Eltin.
“In that time I turned my hand to everything I felt I needed to do to really understand what makes underground mines work,” said Beament.
“I started as a general labourer, graduated to jumbo operator, and worked my way via other roles to shift boss. On the way through, I used my practical experience to accumulate all the statutory tickets I would need later in my career,” he said.
Significantly, Beament’s early drilling experience was on Sandvik jumbos – “we called them Tamrock in those days” –giving him an early understanding of the company’s expertise in that field and its strong grip on the underground drilling market.
“When it comes to underground drills, no-one comes close to Sandvik,” says Beament.
On completion of what he calls “my four-year rock-face apprenticeship”, Beament was invited to join leading underground drilling contractor, Barminco, where he spent more than eight years, rising to the position of general manager of operations, with overall responsibility for 1000 employees across 12 mine sites in Western Australia.
Coincidentally, one of these was Paulsens Gold Mine, destined to feature prominently in his future.
From his complex contracting role with Barminco, Beament was head-hunted in 2008 to head up Northern Star Resources,then a greenfields gold exploration company; he was driven by the desire to head a gold mining company rather than simply provide services to others.
Beament’s first task was to recapitalise the company and, in 2010, with the backing of a major investor, Northern Star acquired the Paulsens Gold Mine in Western Australia’s iron ore rich Pilbara region for $40 million.
At that stage, the previous owners had put a life of only six more months on the mine, but Beament had other ideas, based on his prior knowledge of the mine as a contractor.
“I had studied the mine very carefully before I put in the successful Barminco tender, and I supervised operations there for three and a half years on the contracting side, so I had a pretty fair idea what was under the ground – and in all the projects we had looked at before moving on Paulsens, I can say I hadn’t seen a better patch of dirt,” he said.
“As soon as we acquired the mine we focused on underground exploration drilling, ramping up from one drill to three, and were quickly able to show that Paulsens had a lot more life in it than the forecast six months.
“In fact, we’ve extended mine life to five years, and we’re not finished yet,” he said.
Because the company was still running on a very slim budget, Beament’s first priority was to build a new cost-driven culture – and, ironically, the first casualty was his old employer, Barminco.
“We decided we could do a better job of operating Paulsens ourselves, so we did not renew the contract and established our own in-house contracting division, which operates as an independent cost centre,” he said.
The move included acquiring Barminco’s on-site equipment, among which was a Sandvik Tamrock Minimatic twin boom development jumbo and a used Sandvik Solo 5 long hole drill.
He placed an immediate order for a new SandvikDD421 jumbo, which was delivered mid-2012, followed by a new Sandvik DL431-7 long hole production drill delivered just before the end of the year.
“The choice of the two new rigs was a no-brainer – these are simply the best development and production drills available anywhere in the world,” said Beament.
“In underground mining there are three key production equipment areas – drills, loaders and trucks. In an ideal world you’d have the best of all three, but for my money I rank the drilling component first every time.
“If you’re not drilling the metres, the best load and haul combo in the world won’t get you over the line production-wise,” he said.
Northern Star’s new jumbo is delivering 86% availability, and two months after its arrival the company broke site records for metres developed, along with both development ore and waste tonnes broken and trucked.
The DL431, used for production and long hole drilling, is delivering a similar level of availability, and both are performing well in excess of the equipment they replaced.
“We’re getting excellent feedback from our operators. The comfort and layout of the rigs means they can spend more time at the face, which means they are boosting productivity without being put under strain,” said Beament.
“The maintenance crews are also rapt with the ease of access for servicing and repairs, which helps to account for the excellent availability we are achieving.”
Although Northern Star is still operating a fleet of Atlas trucks that the company acquired from Barminco, Beament says he is keeping a close eye on the new Sandvik TH663 63-tonne truck.
“From what I’ve seen they have done a very good job designing this new model and I’m very keen to see how it performs,” he said.
How has Northern Star’s new equipment fleet and private contracting operation performed?
“It’s been a stand-out from the very start,” said Beament.
“We organised the change-out without missing abeat, even though we had to replace all 60 contract staff with new people.
“And within 18 months we had managed to double production, from 250,000 to 500,000 tonnes a year, at the same time reducing production costs by more than 20%.
“Importantly, we were able to repay the $40million acquisition cost in less than seven months,” he said.
Beament said the company’s strong cash flow relates to the quality of the resource – Paulsens has the third highest grade of any gold mine in Australia - and, thanks to the success of the in-house contracting division, production costs are in the bottom quartile for the country.
"In the first half of the 2012/13 fiscal year, cash costs were $640/oz (including royalties) and total cost was $899/oz.In addition, we have saved $3.6 million compared with the previous contractor’s rates.
“Sandvik equipment and service have helped us achieve this performance. As I said, drilling is the key to mine productivity,” Beament said.