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Northern Star acquires the Tier-1 Pogo gold mine in Alaska for $260m

Northern Star Resources has announced that it has agreed to acquire the high-grade Pogo gold project in Alaska.

Northern Star acquired the interest from Sumitomo Metal Mining Co, Ltd (85% interest and the mine operator) and Sumitomo Corporation (15% interest) for $260 million (A$347 million).

Northern Star seized what it believes is an outstanding opportunity because Pogo meets all its key criteria, which centres on maximising financial returns by owning and investing in Tier-1 projects in Tier-1 jurisdictions.

Northern Star Executive Chairman Bill Beament said Pogo is a world-class project with an 8Moz gold endowment 6, producing 3.8Moz at 13.6gpt over the past 12 years at an average rate of ~300,000ozpa.

Mr Beament said the acquisition opportunity was made particularly compelling by its location in Alaska, a Tier-1 jurisdiction which was independently rated in the Fraser Institute Annual Survey of Mining Companies 2017 as a Top-Ten destination in the world for “Investment Attractiveness and Top-Five for Best Practices Mineral Potential”.

Pogo is in the Tintina Mineral Belt, the metal province is a 200km wide, 1,200km long arc stretching across much of interior Alaska through to the south-eastern Yukon. The region is host to mostly gold deposits, where over 50Moz of gold resources have been defined in the last 20 years, but also hosts copper, lead, zinc, silver and tungsten.

The Tintina Mineral Belt was the focus of the 1890’s Klondike gold rush and has experienced a resurgence of activity since the late 1990’s, stemming from major discoveries such as 45Moz Donlin Creek, 12Moz Fort Knox and 18Moz Casino deposits. Also, major miners including Barrick, Teck, South 32 and Newmont are extremely active in the region.

Mr Beament said the terms of the acquisition and the potential to grow Pogo’s resources and reserves, mine life, production and cash flow made it an exceptional deal.

“All the metrics of this acquisition are enviable,” he said. “The price, at $63 per ounce, creates an opportunity to generate substantial value.

“We will also invest in growing the resources and reserves, as we have done at our Tier-1 projects in Western Australia, with a particular focus on upgrading it to JORC-2012 status.

Mr Beament said the Pogo acquisition had numerous parallels with Northern Star’s acquisition of Jundee in 2014.

“We require any acquisition to meet all our criteria, without exception,” Mr Beament said. “Pogo is a Tier-1 project in a Tier-1 jurisdiction with a long track record of producing ~300,000oz a year.

“Globally, there are only 17 mines that produce more than 300,000oz a year in the Tier-1 jurisdictions of Australia, US and Canada.

“Pogo, along with our Jundee and Kalgoorlie operations, gives Northern Star the potential to have three mines in that exclusive club in the coming years.

“Pogo is also an absolutely perfect project for Northern Star to apply its highly-successful recipe of investment in extensive exploration and development, which in turn drives increases in resources and reserves, mine life, production and free cash flow.”

Mr Beament said the team which worked on Northern Star’s integration of Jundee would be put in place at Pogo.

“We are confident that the combination of Pogo’s skilled workforce, our highly experienced exploration and underground mining team and the investment we will inject will unlock significant value at Pogo as it has done at our Jundee and Kalgoorlie operations,” he said.

Northern Star intends to raise approximately A$175 million through a fully underwritten placement to certain eligible institutional investors to partly fund the Pogo acquisition. The balance of the purchase price will be funded by the Company’s existing cash reserves which stood at A$443 million at 30th June 2018.

Mr Beament said Sumitomo was handing over Pogo in outstanding condition. “The Sumitomo team has done a superb job in developing and operating this exceptional asset,” he said.

“Their track record in replacing the ounces they mined and their consistent production results without compromising social licence, over their 12 years’ custodianship of the mine, is a testimony to their skills, strong culture and diligence.”