Northern Star executive chairperson Bill Beament
Photo by: Bloomberg
PERTH (miningweekly.com) – Gold miner Northern Star Resources will spend $260-million to acquire the 4.1-million-ounce Pogo underground gold mine, in Alaska.
The ASX-listed company on Thursday told shareholders that the acquisition will be funded from existing cash and a fully underwritten A$175-million placement to institutional investors.
Executive chairperson Bill Beament said Pogo is a world-class project with an 8-million-ounce endowment, and has produced 3.8-million ounces, at 13.6 g/t gold over the past 12 years, at an average rate of 300 000 oz/y.
The project has a non-Joint Ore Reserves Committee- (Jorc-) compliant reserve and resource of 4.1-million ounces, at 12.2 g/t gold, with the resource and reserve sustained around this level for the past 12 years, despite depletion. This included a reserve of 760 000 oz, at 11.9 g/t gold, the third highest reserve grade in North America.
In 2017, the mine produced 271 273 oz of gold at an all-in sustaining cost (AISC) of $882/oz, and a head grade average of 10.8 g/t gold, making it the eighth largest gold mine in the US.
“All the metrics of this acquisition are enviable. The price, at $63/oz, creates an opportunity to generate substantial value,” Beament said on Thursday.
“We will also invest in growing the resource and reserves, as we have done at our tier-one projects in Western Australia, with a particular focus on upgrading it to a Jorc status.”
Beament said that any acquisition by Northern Star was required to meet all of the company’s criteria, without exception, noting that the Pogo project was a tier-one project in a tier-one jurisdiction, with a long track record of producing about 300 000 oz/y.
“Globally, there are only 17 mines that produce more than 300 000 oz/y in the tier-one jurisdictions of Australia, US and Canada. Pogo, along with our Jundee and Kalgoorlie operations, gives Northern Star the potential to have three mines in that exclusive club in the coming years.”
Beament said that Pogo was also an “absolutely perfect project” for Northern Star to apply its highly successful recipe for investment in extensive exploration and development, which in turn is expected to drive increases in resources and reserves, mine life, production and free cash flow.
Pogo is currently owned by Japanese major Sumitomo Metal Mining, which holds an 85% interest in the project joint venture, and Sumitomo Corporation, which holds the balance.
With the acquisition expected to close in October this year, Northern Star should receive the full financial benefit of the project from July 1, putting the company on track to add between 250 000 oz and 260 000 oz to its 2019 production at an AISC of around A$1 175/oz.
To fund the acquisition, Northern Star will use its existing cash reserve of A$443-million, and will conduct a fully underwritten placement to certain eligible institutional investors to raise a further A$175-million.
The placement will be conducted at a price of A$6.70 a share under the company’s existing placement capacity, with the offer price representing a 3.74% discount to Northern Star’s closing price on August 29, and a 3.5% discount to the company’s five-day volume weighted average share price.
The placement will occur on September 3 and will be settled on September 5.