Northern Star Resources has agreed with Newmont Goldcorp Corporation’s Australian subsidiary to acquire 50 per cent of the Kalgoorlie Super Pit gold mine for US$775 million and additional associated assets for US$25 million, taking the total consideration to US$800 million.
|The Super Pit in Kalgoorlie, Western Australia. Image ©KCGM|
The Company reports that the acquisition will be immediately accretive on an EV/Reserve, EV/Resource, P/NAV basis and earnings per share from the first full financial year of ownership (FY2021), additionally delivering Northern Star a half-share of one of the most significant gold systems in the world, with an approximate 80Moz endowment and world-class gold content of 45,000oz to 60,000oz per vertical metre.
The acquisition also includes a separate parcel of nearby tenements 100 per cent owned by Newmont and a transition services arrangement to ensure a smooth transfer of the asset into Northern Star’s portfolio.
Also, part of the transaction Northern Star has been granted an option to acquire Newmont’s 100 per cent-owned power assets, which supply power to KCGM. Under the terms of the option arrangement, Northern Star has an exclusivity period to conduct due diligence and finalise a transaction with Newmont. The US$25 million option fee will be credited against any price agreed or, if Northern Star elects not to proceed, will be refunded when Newmont sells Newmont Power to a third party.
Northern Star Executive Chairman Bill Beament said the acquisition would create substantial value and provide enormous short, medium- and long-term opportunities.
“The purchase of a 50 per cent stake in the Kalgoorlie Super Pit meets our key strategic objectives of generating strong financial returns and growing our gold inventory from Tier-1 mines in Tier-1 locations,” Mr Beament said.
“This is one of the world’s greatest gold systems, as shown by its 80Moz endowment and the fact that it contains up to 60,000oz per vertical metre. To put this in context, our Jundee mine, which is itself a Tier-1 asset, contains around 13,000oz per vertical metre.
“As well as being accretive across all key metrics, including earnings per share, this acquisition comes with huge upside due to the combination of the world-class nature of the gold system and the respective skill sets of Northern Star and Saracen.
“Both companies have established outstanding track records of unlocking value from acquisitions and I am delighted that we will be able to pool our skills and experience to create substantial value for our Shareholders and the local community through both mine development and exploration.”
KCGM is located in Kalgoorlie, Western Australia and is part of the globally significant “Golden Mile”, which has a total endowment of approximately 80Moz as CY2019. KCGM is a Top-5 Australian gold asset by production, for the past two calendar years it has produced on average approximately 590,000oz per annum at an AISC of US$913/oz.
Northern Star’s forecast production in FY2020 is 120,000 to 140,000oz at an AISC of A$1,450/oz to A$1,550/oz.
KCGM Operations include the Fimiston Open Pit (the Super Pit), the Mt Charlotte Underground Mine and the Fimiston and Gidji Processing Plants. As at 31 December 2018 and on a 100 per cent basis, KCGM had proven reserves (non-JORC) of 7.3Moz at 1.2gpt and resources of 11.7Moz6 at 1.3gpt, as well as significant upside, primarily through ongoing underground development, providing a foundation for long-life gold production.