Westgold Resources has agreed to sell its South Kalgoorlie Operations (SKO) to Northern Star for a total consideration of A$80 million. The purchase consideration is made up of $20 million in cash and $60 million in unrestricted fully paid ordinary shares in Northern Star calculated at a backward-looking 10-day VWAP.

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Image credit: Westgold Resource

The acquisition comprises the project's operating processing facility, which has an annual throughput capacity of 1.2 million tonnes, a JORC Resource of 4Moz, including 250,000oz in Reserves, and 800sqkm of prospective gold tenure.

In recent years the HBJ Underground Mine has operated as the core feed with additional smaller open pit and low-grade stockpile sources providing approximately 60% of plant capacity. The remainder of plant capacity has been filled by toll processing third party ores from the region.

Westgold has agreed to sell its wholly owned subsidiaries that collectively make up the SKO: Dioro Exploration, HBJ Minerals and Hampton Gold Mining Areas.

Westgold will retain its lithium royalties over the Mt Marion Lithium Mine and the rights to lithium exploration and mining over Location 53 and 59.

Northern Star Executive Chairman Bill Beament said the acquisition would be an economical means of ensuring the Company met its 300,000ozpa production target from organic sources at its Kalgoorlie Operations.

The transaction would also provide an outstanding example of how gold companies can work together to rationalise their operations, generate economies of scale and ultimately increase returns for both groups of shareholders.

"Our highly successful exploration strategy in Kalgoorlie has generated huge growth in our inventory and paved the way for us to grow production there to 300,000ozpa," Mr Beament said.

"To capitalise on this success, we were considering the option of expanding our Kanowna Belle facility.

"However, the South Kalgoorlie Operations purchase will enable us to achieve our organic growth target in a more timely and economical fashion and at the same time provide us with significant exploration potential, including a Resource inventory.

"The 1.2Mtpa South Kalgoorlie processing facility is one of the best-run facilities in the district and is well within trucking distance of our Kundana Operations."

Westgold Managing Director Peter Cook agrees that the deal is beneficial to both parties.

"The deal provides Northern Star with additional and instant plant capacity in the Kalgoorlie region for its expanding gold operations. It divests our shortest life asset, provides a cash boost and upgrades the overall quality of our gold portfolio. As at 30June 2017, SKO had Ore Reserves containing 252,000 ounces which was 7.45% of the group's total Ore Reserves. SKO has produced 24,000 ounces in the first half of this financial year".

Settlement of the transaction is due for completion on 01 April 2018.

Source: http://westgold.com.au

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