Northern Star Resources which bought Intrepid Mines’ used Paulsens gold mine in Western Australia for A$40 million ($42 million) in 2010 struck a good deal.
Two years down the road Northern Star Resources is one of the top performing gold producers listed on the Australian Securities Exchange.
The company describes itself as aggressive and opportunistic, strategically buying an already used mine, and extracting unrealized value out of it.
Bill Beament, the Managing Director of Northern Star Resources says the company’s flagship project is in a sweet spot right now.
“The Paulsens gold mine is a very high grade, high margin mine, and we’re rapidly expanding that project as we speak and we’re about to go into quite interesting times as a company in the next 6 months as we upgrade our plant and we upgrade our mine,” Beament said.
Last week, Northern Star Resources upgraded its gold reserves to 403,000 ounces and upgraded its production guidance to up to 115,000 ounces in 2013, and Beament is confident the high growth trajectory can continue.
“Our forecast production, we think, is reasonably conservative and is quite achievable,” he said.
Patersons Securities’ Resource Analyst Gary Watson told CNBC that “their recycling strategy has worked very well. Bill Beament already knew the Paulsens mine quite well and saw that he could add value to it, and that the acquisition would be value accretive.”
Silver Lake Resources also bought the decommissioned Daisy Milano gold mine from Perilya in 2007 for A$ 14.5 million. Since then, Silver Lake has gone on to recommission Daisy Milano, as well as develop the Mount Monger and Moyagee operations, to produce 83,347 ounces of gold in the last financial year.
These strategies have proved to be a cash bonanza for the two junior miners, who also manage to produce high grade gold at low costs.
In the last financial year, Northern Star Resources operating cash costs were at A$650 per ounce, and Silver Lake’s were at A$602 per ounce, while mining costs in Australia are generally much more than that.
Ben Crowley, Resources Analyst at Hartleys told CNBC that “Northern Star Resources have done a great job. They’ve taken what a lot of people thought was a marginal operation and turned it into a really good operation with high margins and a great growth profile in the future.”
On Monday Silver Lake Resources took the next step in its growth phase, announcing that its plans to acquire Integra Mining forA$426 million, in a move that will create a A$1 billion company.
The merged entity will be targeting annual production of 200,000 ounces of gold, and more than doubling that to 400,000 ounces per annum in 2014.
By CNBC's Yolande Chee