Northern Star Resources is poised to acquire US giant Newmont Goldcorp's 50 per cent stake in Western Australia's famous Super Pit mine.
The Super Pit gold mine in Kalgoorlie. Carla Gottgens
The $6.26 billion gold producer is expected to launch an equity raising to fund the acquisition and brokers Macquarie Capital and Canaccord Genuity have been tapped to oversee the deal, as first reported by this column.
It is understood the brokers were refining details around pricing and structure on Monday. A deal was expected to launch on Tuesday.
The offer size for the capital raising is about $700 million, sources said.
Sources said Northern Star would pay a bit more for its 50 per cent stake than Perth-based Saracen Mineral Holdings did when it bought Canadian rival Barrick Gold's half-share in the Kalgoorlie gold mine for $1.1 billion, given it will inherit Newmont's operator status at the mine.
?Northern Star Resources 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), which holds a 50%interest in KalgoorlieConsolidated Gold Mines Pty Ltd (KCGM)and in the operationsand assetsmanaged by KCGM (KCGM Operations),for US$775 million and associated assetsfor US$25 million,for a total consideration of US$800million
?The associated assets for US$25 million comprise:a separate parcel of nearby Kalgoorlie tenements 100per cent-owned by Newmont,atransitionalservices arrangementand a US$25 million conditionally refundableoption arrangement to acquire the Newmontpower businesswhichsuppliespower to KCGM
?KCGM is a 50:50 JV between Newmontand Saracen Mineral Holdings and includes the Super Pit in Kalgoorlie, Western Australia, among other deposits
?The Transaction delivers NorthernStar a half-share of one ofthe most significantgold systems in the worldwith anendowmentof~80Mozand aspectaculargold content of ~45,000to60,000ozper verticalmetre
?Saracen is an extremely favourable JV partnerfor Northern Star considering itsdemonstrated trackrecord in expeditiouslyunlocking value from assets it has acquired, complementaryskillsetsand theirfamiliaritywith the Western AustralianGoldfields
?Theacquisitionwill be immediatelyaccretive toNorthern Staron an EV/Reserves, EV/Resource, P/NAVbasis and earnings per share inits first full financial year of ownership (FY2021)
?KCGMfor the past two calendaryears has producedon average ~590,000oz per annum at an AISC of US$913/oz
?KCGM has non-JORC Reserves of 7.3Moz and Resources of11.7Moz1(100%basis); Currentmine life is13 years2. The acquisition price equates to less thanUS$140 per Resource ounce
ASX: NST1FY21 production guidanceis 940koz-1,060koz; Production forecast to rise to ~1.15Mozin FY22, ~1.25Moz in FY23and ~1.3Moz by FY27; AISC to fall 10%over next 2to 3 years;Resources increase by 12.7Moz, underwriting longerminelives and increased cashflowHIGHLIGHTSResourcesat June 30, 2020?Group Resources increased by67%(12.7Moz)to 31.8Moz (after depletion of 912,000oz and acquisitionsofKCGM and the Bronzewing Project);Resources per share have grown by +179% over the past five years?Importantly, Measured and Indicated Resources increased 94% to 20.8Moz; This underpins continued replacement of Reserves in coming years?Increased inventory will underpin further organic production growth,longer mine livesand cashflow?Resources breakdown:KCGMat9.6Moz?All other assets up 3.2Moz to 22.3MozReserves at June 30, 2020?Group Reserves increased 102%, or 5.5Moz, to 10.8Moz (after depletion of 912,000oz);Results underpin strong growth in forecast production and long mine life visibility?Reserves per share have grown by 348% over the past fiveyears (despite production of 3.6Moz) ?Reserves are calculated conservatively using an assumed gold price of A$1,750/oz and US$1,350/oz compared with the current spot price of ~A$2,700/oz(US$1,940/oz)*?Reserves breakdown: KCGMat 4.85Moz?All other assets up 12%, or 600,000oz, to 6Moz?Considerable opportunityto further grow Reserves with conversion of the 31.8Moz Resource base Guidance?FY21 production guidance for Australian operations is 760,000-840,000oz at AISC of A$1,440-A$1,540/oz(US$1,035-US$1,107/oz)?KCGM (50%) 220,000-240,000oz at A$1,470-A$1,570/oz (US$1,057-US$1,129/oz)?JundeeOperations270,000-300,000oz at A$1,200-A$1,275/oz (US$863-US$917/oz)?Kalgoorlie Operations270,000-300,000oz at A$1,650-A$1,750/oz (US$1,186-US$1,258/oz)?FY21 production guidance for Pogo is 180,000-220,000oz at AISC of US$1,200-US$1,400/oz; Guidance takes into account the impact of COVID-19on operational restrictions?FY21 expansionary capital budget of A$198M, comprising:?A$99M at KCGM, majorityassociated with pit cutbacks to de-risk operation and provide multiple mining fronts?A$99M for all other assets (ex-KCGM)Explorationand Production Growth?A$101M is budgeted for exploration in FY21 as part of thestrategy for ongoing growth in production,mine livesand cashflow; Includes; Pogo A$21M, Jundee A$28M, Kalgoorlie $A35M, Regional A$11M, KCGM (50%)A$6M?Northern Star?s total production is forecast to rise to ~1.15Mozin FY22, ~1.25Moz in FY23and ~1.3Moz by FY27;AISC forecast to fall by 10% to ~<US$1,000/oz over next two to three years due mainly to the increased