Northern Star Resources has acquired the Paulsens gold mine in Western Australia from Intrepid Mines for a deal worth up to $40 million.
According to a statement released this morning, Intrepid’s directors have unanimously accepted a revised offer for the mine.
The directors had earlier recommended the company’s shareholders accept a $27 million offer, but retracted that decision when the mine’s production expectations were increased by 8000 ounces.
Intrepid said the new offer delivers an acceptable return for the additional life of mine forecasts and the improved gold price.
According to Northern Star, the gold price has risen by more than $200 per ounce since the original offer was made.
The mine is expected to produce a further $19 million to the surplus cashflow over the next nine months.
The deal includes a $15 million lump-sum payment, an additional sum of $3 million to be paid in two instalments, as well as royalty and production target arrangements.
Intrepid will receive $335 for each ounce of gold sold up to 51,000 ounces.
The company will also receive two top-up payments of $2.5 million if production reaches 57,500 ounces and 62,500 ounces respectively.
As part of the deal, Intrepid can also buy back the Paulsens plant and infrastructure for $1 if the of 62,500 ounce production target is not reached or the top-up cash payments are not made.
“In either circumstance, Northern Star assumes liability for closure and rehabilitation costs estimated at $5 million, which Intrepid would otherwise have incurred,” the company said.
Intrepid chief executive Brad Gordon said the revised agreement addressed the “valuation issues arising from changed market conditions and the amended Paulsens production profile.”
“We are now working with Northern Star to ensure completion of the transaction in a timely manner, to allow our team to focus on the Tujuh Bukit Project in East Java, Indonesia,” he said.
This revised agreement remains subject to shareholder approvals and other approvals and conditions usual to an agreement of this type.
Both companies hope to have completed the agreement by 30 July.
A break fee of $400,000 is payable if the shareholders of either company fail to approve the transaction.
Intrepid shareholders will meet on 21 July, while Northern Star shareholders will also meet sometime next month.