Northern Star Agrees to Pay $82.5M for Newmont Gold Mine

With the purchase of Jundee Gold Mine, Northern Star Resources Limited will become the second-largest ASX-listed gold miner

The Australian gold producing company Northern Star Resources Ltd. (NST) has received the go-ahead to acquire the Jundee Gold Mine from Newmont Mining for $77 million.  It’s the company’s third acquisition since December.

The deal, which is expected to be completed by July, will include $77 million up front with a further payment of about $14 million for working capital. Northern Star will fund the acquisition from cash reserves and an increased debt facility of $100 million from Investec Bank Group.

"The acquisition is expected to lift Northern Star's production from about 350,000 ounces per annum to about 550,000ozpa in FY2015, making it the second-largest ASX-listed gold miner," Northern Star said in a statement on Tuesday.

Under the terms of the deal, Northern Star will acquire all of Jundee’s assets and liabilities, including all environmental and employee obligations.

The company’s first initiative for the mine is to continue with Newmont’s current mine plan and then increase the mine life with targeted and rapid drilling programs on identified high potential targets. Once that is completed, Northern Star will implement its own business model and initiatives for the mine.  

According to the company’s managing direct, Bill Beament, with five operating mines generating 550,000 ounces of gold, Northern Star would meet the key criteria of global investors.

"The international funds have made it abundantly clear that they want to invest in gold mining companies with a diversified production base and economies of scale that enable costs to be kept as low as possible," he said.

The Jundee underground gold mine, which began production in 1995, had an output of 279,000 ounces of gold in the 12 months to Dec. 31.  Northern Star said in a statement the mine may yield 200,000 ounces over the next two years.  

Since the agreement to sell, Newmont’s stock has been slowly rising, gaining 1.1 percent to $24.79 after the signing on Tuesday.

"We are pleased to announce our agreement with Northern Star. It demonstrates our continuing efforts to optimize our portfolio and increase shareholder value by focusing on lower cost, longer life operations," said Randy Engel, Newmont Executive Vice President for Strategic Development, in a press release.

The Acquisiton of Jundee follows Northern Star’s $75 million purchase in January of Barrick Gold’s majority state in the East Kundana joint venture and the Kanowna Belle mine.