Northern Star Resources (ASX: NST) has announced the terms for the acquisition of Newmont Goldcorp’s Australian subsidiary’s 50 per cent stake in Kalgoorlie Super Pit gold mine.
Northern Star Resources reported that it has entered into a binding sale agreement with Newmont Goldcorp Australia, a subsidiary of Newmont Goldcorp Corporation, to acquire all the shares in Kalgoorlie Lake View Pty Ltd (KLV) for US$775 million and associated assets for US$25 million, for a total consideration of US$800 million (A$1.16 billion).
It may be noted that KVL holds a 50% interest in KCGM and in the operations and assets managed by KCGM (KCGM Operations).
The company said that the acquisition will be immediately accretive to Northern Star on an EV/Reserves, EV/Resource, P/NAV basis and earnings per share in its first full financial year of ownership (FY2021).
Northern Star Executive Chairman Bill Beament said the acquisition would create substantial value and provide enormous short, medium and long term opportunities.
Kalgoorlie Consolidated Gold Mines Pty Ltd (KCGM) is a 50:50 JV between Newmont and Saracen Mineral Holdings.
KCGM is located in Kalgoorlie, Western Australia and is part of the globally significant “Golden Mile”, which has a total endowment of ~80Moz as CY2019.
KCGM is a Top-5 Australian gold asset by production, for the past two calendar years it has produced on average ~590,000oz per annum at an AISC of US$913/oz.
KCGM Operations include the Fimiston Open Pit (“Super Pit”), the Mt Charlotte Underground Mine, and the Fimiston and Gidji Processing Plants.
KCGM has non-JORC Reserves of 7.3Moz and Resources of 11.7Moz1 (100% basis). The current mine life is 13 years.
Kalgoorlie Lake View Pty Ltd (KLV) holds a 50% interest in Kalgoorlie Consolidated Gold Mines Pty Ltd (KCGM) and in the operations and assets managed by KCGM (KCGM Operations).
US$800 million acquisition
Northern Star Resources reported that it will buy all the shares in the Newmont-owned Kalgoorlie Lake View Pty Ltd, which holds a 50 per cent interest in Kalgoorlie Consolidated Gold Mines KCGM), the company that owns the Super Pit, for or US$775 million and associated assets for US$25 million, for a total consideration of US$800 million.
Associated assets for US$25 million
The company said that the associated assets for US$25 million comprise of a separate parcel of nearby Kalgoorlie tenements 100 per cent-owned by Newmont, and a transitional services arrangement and a US$25 million conditionally refundable option arrangement to acquire the Newmont power business which supplies power to KCGM.
To be completed by Jan 2020
The company reported that the Transaction is expected to complete by early January 2020 subject only to approval from the Western Australia Minister of Lands, with economic benefit transferring to Northern Star from 1 January 2020.
Substantial benefits from acquisition
Northern Star said that the acquisition will generate a host of substantial benefits. The company said 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).
The deal will deliver Northern Star a half-share of one of the most significant gold systems in the world and a joint venture partner in Saracen Mineral Holdings (ASX: SAR)
Northern Star’s total Resources will also increase to 28.3Moz, including 9.8Moz in Reserves, with four Tier-1 assets in Tier-1 locations.
Advisors for acquisition
The company reported that Macquarie Capital (Australia) Limited is acting as financial adviser to the acquisition and as global coordinator to the Placement.
NST said that Macquarie and Canaccord Genuity (Australia) Limited are acting as joint lead manager, joint bookrunner and joint underwriter to the Placement.
Meanwhile, Ashurst are Northern Star’s Australian legal advisers in respect of the acquisition, Placement and the SPP.
Funding for acquisition
Northern Star said that the US$800 million (approximately A$1,168 million) cash consideration will be funded through a combination of new secured debt facilities of A$480 million with Northern Star’s existing lending group; a fully underwritten institutional placement of approximately A$765 million (Placement), and existing cash reserves of A$5 million.
In addition to the Placement, Northern Star said that it also plans to offer all eligible existing Shareholders the opportunity to participate in a non-underwritten Share Purchase Plan (“SPP”), under which Northern Star targets raising up to A$50 million.
Increased FY2020 guidance
Northern Star said that it expects its share of KCGM to add 120,000-140,000oz to its FY2020 gold production at an AISC of A$1,450/oz to A$1,550/oz, increasing Northern Star’s FY2020 guidance to 920,000oz to 1,040,000oz at an AISC of A$1,240/oz to A$1,340/oz
The company expressed confidence that the acquisition of KCGM will further elevate Northern Star’s global significance as a +1Mozpa gold producer with four Tier-1 assets in Tier-1 locations.
The company reported that its existing Australian operations are performing well within guidance, producing 158,707oz at an AISC of A$1,250/oz in the September quarter, 2019. Australian operations were forecast to produce 165,000oz to 175,000oz in the December quarter, 2019.
Northern Star Executive Chairman Bill Beament said: “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.
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.”