Northern Star Will Purchase Other Half of KCGM

The Super Pit (above) has produced 590,000 oz/y of gold on average. (Photo: KCGM)
Northern Star Resources has struck a deal with Newmont Goldcorp’s Australian subsidiary to acquire its 50% stake in Kalgoorlie Consolidated Gold Mines (KCGM), which operates the Super Pit gold mine, for $775 million and additional associated assets for $25 million, taking the total consideration to $800 million. A month ago, Barrick Gold sold its 50% interest in KCGM to Saracen Mineral Holdings Ltd. for $750 million.

Northern Star’s total resources will increase to 28.3 million ounces (oz), including 9.8 million oz in reserves, with four Tier-1 assets in Tier-1 locations. The acquisition also includes a separate parcel of nearby leases owned by Newmont and a transition services arrangement to ensure a smooth transfer of the asset into Northern Star’s portfolio.

Northern Star also has been granted an option to acquire Newmont’s power assets, which supply power to KCGM. Under the terms of the option arrangement, Northern Star has an exclusivity period to conduct due diligence and fi- nalize a transaction with Newmont. The $25 million option fee will be credited against any price agreed or, if Northern Star elects not to proceed, will be refunded when Newmont sells Newmont Power to a third party.

Northern Star Executive Chairman Bill Beament said the acquisition would create substantial value and provide enormous short-, medium- and longterm opportunities. “This is one of the world’s greatest gold systems, as shown by the fact that it contains up to 60,000 oz per vertical meter,” Beament said. “To put this in context, our Jundee mine, which is itself a Tier-1 asset, contains around 13,000 oz per vertical meter.” Located in Western Australia, KCGM is part of the globally significant “Golden Mile,” which has a total endowment of approximately 80 million oz. A topfive Australian gold asset by production for the past two calendar years, it has produced on average about 590,000 oz per year (oz/y) at an all-in sustaining cost (AISC) of $913/oz. Northern Star expects its share of KCGM to add 120,000 oz to 140,000 oz to its FY20 gold production at an AISC of $997/oz to $1,066/oz, increasing Northern Star’s FY20 guidance to 920,000 oz to 1,040,000 oz at an AISC of $852/oz to $921/oz.

KCGM Operations include the Fimiston Open Pit (the Super Pit), the Mount Charlotte underground mine and the Fimiston and Gidji processing plants. As of December 31, 2018, and on a 100% basis, KCGM had proven reserves (non- JORC) of 7.3 million oz at 1.2 grams per metric ton (mt) and resources of 11.7 million oz at 1.3 g/mt, as well as significant upside, primarily through ongoing underground development, providing a foundation for long-life gold production.

The $800 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; and a fully underwritten institutional placement of approximately A$765 million, and existing cash reserves of A$5 million. Completion of the acquisition is subject only to approval of the Western Australia Minister of Lands, with the acquisition expected to close by early January.

As featured in Womp 2020 Vol 01 -