Northern Star Resources has bought its second gold mine this year – this time spending close to $A400 million buying the Pogo underground gold mine in Alaska – north America’s 8th largest mine.
The company is raising $175 million in a placement to institutions as part of the financing for the deal – the remainder will come from the company’s existing cash.
The company’s shares were halted yesterday to allow the fund raising to take place. They last traded at $6.96.
The placement is being made at $6.70 a share and Northern Star said “Funds and accounts under management by BlackRock Investment Management (UK) Limited currently have a substantial holding in Northern Star and intends to subscribe for New Shares in the Placement at the issue price.”
Shares to be issued in the placement will rank for the final 5 cents a share dividend paid in respect of the 2017-18 financial year.
It follows the $80 million purchase of the South Kalgoorlie mine from Westgold Resources in February.
Northern Star said yesterday the mine with its 4.1 million ounces of gold reserves, will cost $US260 million (or more than $A387 million at current exchange rates).
Pogo is currently owned by Japan’s Sumitomo Metal Mining Co., Ltd (85% JV interest and the mine operator) and its parent, the Sumitomo Corporation trading house with a 15% interest.
Pogo is located 145km south-east of the city of Fairbanks in the US state of Alaska. Underground production began in 2006 and ore is processed through a 1 million tonnes a year plant.
Northern Star says Pogo is a world-class ~8 Million oz gold endowment; It has produced 3.8 million oz at an average mine grade of 13.6 grams per tonne over the past 12 years with an average annual production of around 300,000 ounces.
“In Calendar Year 2017, Pogo produced 271,273 oz at an All In Sustaining Cost (AISC) of $US882/oz at a head grade average of 10.8 grams per tonne making it the 8th largest gold mine in the US.”
“Pogo has a non-JORC reserves and resources of 4.1Moz at 12.2 grams per tonne. This total reserve and resource has been sustained around this level for the past 12 years despite depletion; This includes reserves of 760,000 oz at 11.9 gramps per tonne, the third- highest reserve grade in North America, North Star said in a statement to the ASX
Northern Star said yesterday it will receive the full financial benefit of Pogo from July 1, this year,” putting it on track to add 250,000-260,000oz to Northern Star’s Fiscal Year 2019 production at an AISC of ~A$1,175/oz (US$880/oz).”
“As a result, Northern Star’s FY2019 guidance has been increased to 850,000-900,000oz at an AISC of A$1,050-1,150/oz (US$787-862/oz).
Northern Star said yesterday its priorities at the Pogo mine will be to maintain continuity of operations with existing staff and contractors complemented by Northern Star integration team. Leverage off the existing strong operational performance to generate strong operating cashflow.; invest in targeted intensive drilling programs to extend mine life through resource growth and reserve conversion with a focus on completing JORC-2012 Mineral Resources and Ore Reserves by August 2019. and develop opportunities to increase productivities and efficiencies including unit cost improvement to strengthen margins and cashflow generation.”
