Northern Star to acquire Pogo gold mine for $US260m

Pogo

Northern Star Resources is set to acquire the 4.1 million ounce (4.1Moz) Pogo underground gold mine in Alaska in a deal worth $US260 million ($347 million).

Currently the 8th-largest gold mine in the United States, Pogo is owned by Sumitomo Metal Mining (85 per cent) and Sumitomo Corporation (15 per cent) in a joint venture (JV) arrangement.

Over the past 12 years, Pogo has produced 3.8Moz of gold at an average mine grade of 13.6 grams per tonne (g/t). Average production rate hovers at 300,000 ounces per year (oz/y).

Northern Star will receive the full financial benefit of Pogo from July 2018. This will add 250,000–260,000oz of gold to Northern Star’s 2019 financial year (FY2019) production at a cost of $1175/oz.

The company has increased its FY2019 production guidance to 850,000–900,000oz at a cost of $1050–1150/oz.

Northern Star chairman Bill Beament said, “Pogo presents Northern Star with the same opportunity we encountered at Jundee four years ago.

The Pogo acquisition was considered an outstanding opportunity as it meets all Northern Star’s key criteria, which are to own and invest in tier one projects in tier one jurisdictions.

Alaska was rated tenth in the global Fraser index of investment attractiveness, ahead of every Australian state except Western Australia.

“Pogo is 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 cashflow,” Beament said.

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

Pogo has non-JORC reserves and resources of 4.1Moz at 12.2g/t, a level that has been sustained for the past 12 years despite depletion. This includes reserves of 760,000oz at 11.9g/t, the third-highest reserve grade in North America.

The acquisition is expected to close in October this year. Northern Star will fund the acquisition with $443 million cash and a $175 million placement to institutional investors.

Once completed, all Pogo employees and contractors will become Northern Star employees and contractors.

Pogo rests in the Tintina mineral belt, a 200km-wide metal province that stretches 1200km across much of Alaska through to the south-eastern Yukon. Aside from hosting large gold deposits, the site also hosts copper, lead, zinc, silver and tungsten.

Other miners such as Barrick, Teck, South32 and Newmont are also extremely active in the region.

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