Northern Star to pay US$800M for Newmont Goldcorp’s Super Pit stake

The Kalgoorlie Super Pit gold mine, adjacent to the city of Kalgoorlie–Boulder, 600 km east of Perth, Western Australia. Credit: KCGM.

Northern Star Resources (ASX: NST) announced on Dec. 16 that it has agreed to buy Newmont Goldcorp’s (TSX: NGT; NYSE: NEM) 50% stake in Western Australia’s Kalgoorlie Super Pit mine and its associated assets for US$800 million ($1 billion). Once completed, the iconic mine would have full Australian ownership for the first time in its operating life.

Earlier this year, Northern Star was the rumoured frontrunner for Barrick Gold’s (TSX: ABX; NYSE: GOLD) 50% stake in the Super Pit mine, which was snatched up by fellow Australian miner Saracen Mineral Holdings (ASX: SAR) in November for US$750 million ($987 million).

This time, Northern Star secured the rest of the highly coveted gold asset with its all-cash offer.

To fund the purchase, Northern Star has arranged a fully underwritten private placement of shares at a 6.7% discount to the closing price to raise A$765 million ($690 million).

This acquisition would create “substantial value” and provide enormous “short-, medium- and long-term opportunities” for Northern Star, executive chairman Bill Beament said in a media release.

Total resources across the company’s operations would increase to 28.3 million oz., including 9.8 million oz. in reserves.

The Super Pit is one of the most significant gold systems in the world, with an estimated 80 million oz. endowment and a world-class gold content of 45,000 to 60,000 oz. per vertical metre.

The mine has an estimated reserve of 7.3 million oz. and has produced on average 660,000 oz. per year at an all-in sustaining cost of around A$1,100 ($992) per oz. over the last five years.

“Under the assumption that the Newmont stake in KCGM was not immediately for sale we had valued its position at US$527 million with a 5% discount rate,” Jackie Przybylowski of BMO Capital Markets said in a research note to clients. “The selling price is a significant premium to our fundamental valuation.”

The analyst also noted that the sale brings the total value of Newmont Goldcorp’s asset sales in December to US$1.4 billion ($1.8 billion), which she says “will be well supportive of the company’s US$1-billion share buyback plan and its ongoing growth projects.”

The transaction is expected to close in early January 2020.

The Super Pit deal would not be the only move by Northern Star in recent years. Last November the company gained control over Echo Resources (ASX: EAR) and its Yandal gold project in Western Australia through a A$242.6-million ($218.8-million) takeover deal. Towards the end of last year, Northern Star also spent US$260 million ($342 million) to acquire the 4.1 million oz. Pogo underground gold mine in Alaska.

This article first appeared in our sister publication,


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