PERTH (miningweekly.com) – Gold miner Northern Star Resources on Tuesday announced an $800-million transaction to gain gold miner Newmont Goldcorp’s 50% stake in Kalgoorlie Consolidated Gold Mines (KCGM), which holds the Super Pit.

The deal between Northern Star and Newmont followed a similar transaction between Saracen Mineral Holdings and Barrick Gold earlier this year, which saw Saracen acquire Barrick’s 50% stake in the Super Pit for $750-million.

Under the terms of the agreement with Newmont, Northern Star would pay $775-million for its interest in KCGM, and a further $25-million for associated assets, which comprise a separate parcel of nearby Kalgoorlie tenements which is fully owned by Newmont, a transitional service arrangement and a $25-million conditionally refundable option arrangement to acquire the Newmont power business, which supplies power to KCGM.

Northern Star executive chairperson Bill Beament on Tuesday said that the acquisition of KCGM would create substantial value and provide enormous short, medium and long-term opportunities for the company.

“The purchase of a 50% stake in the Super Pit meets our key strategic objectives of generating strong financial returns and growing our gold inventory from tier one mines in tier one locations.

“This is one of the world’s greatest gold systems, as shown by its 80-million ounce endowment and the fact that it contains up to 60 000 oz per vertical meter. To put this into context, our Jundee mine, which is itself a tier one asset, contains around 13 000 oz per vertical meter.”

Beament said that as well as being accretive across all key metrics, including earnings per share, the acquisition also comes with a significant upside, due to the combination of the nature of the gold system and the respective skill sets of Northern Star and its joint venture partner Saracen.

“Both companies have established outstanding track records for 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.”

The Super Pit currently has an estimated reserve of 7.3-million ounces, and has produced an average of 660 000 oz/y at an all-in sustaining cost of around A$1 100/oz over the last five years.

With the acquisition of its stake in the Super Pit mine, Northern Star has now forecast its 2020 production to reach between 120 000 oz and 140 000 oz, with all-in sustaining costs expected to reach between A$1 450/oz and A$1 550/oz.

US-listed gold miner Newmont on Tuesday said that the transaction generated exceptional value and further strengthens the company’s financial position by increasing proceeds from our 2019 asset sale agreements to more than $1.4-billion.

“Australia remains a core operating region for Newmont, and the sale of KCGM allows us to focus on investing in profitable growth and long-term value creation at our top-tier Tanami and Boddington complexes, in addition to our active exploration campaigns across the region. Northern Star is a well-established, Australian-based gold producer with a core competency in exploration, a commitment to community development, responsible environmental stewardship and, most importantly, excellence in safety,” said president and CEO Tom Palmer.

Palmer said that Northern Star’s all-cash offer supported Newmont’s disciplined approach to capital allocation, which includes strategically reinvesting in the business, strengthening the company’s investment-grade balance sheet and returning capital to shareholders.

The sale of KCGM also further streamlines Newmont’s portfolio, with 12 top-tier assets located on four continents in the world’s most favorable gold mining jurisdictions, he said.

Meanwhile, Northern Star on Tuesday said that the acquisition would be funded through a new A$480-million secured debt facility with the company’s existing lending group, as well as a fully underwritten institutional placement of some A$765-million and existing cash reserves of A$5-million.

Under the share placement, eligible institutional investors could purchase shares at a price of A$9 each, representing a 6.7% discount to Northern Star’s last closing price, and a 10% discount to its five-day volume weighted average share price.

The placement will be conducted under the company’s existing capacity, and will not require shareholder approval.

In addition to the share placement, Northern Star will also undertake a share purchase plan, targeting a further A$50-million.

Shareholders will be allowed to subscribe for up to A$30 000 worth of new shares in the company, priced at A$9 each.