MNN Awards: Northern Star's biggest deal yet

NORTHERN Star Resources’ acquisition of 50% of the Super Pit brought an iconic Goldfields asset into Australian hands for the first time.
MNN Awards: Northern Star's biggest deal yet MNN Awards: Northern Star's biggest deal yet MNN Awards: Northern Star's biggest deal yet MNN Awards: Northern Star's biggest deal yet MNN Awards: Northern Star's biggest deal yet

The Super Pit in Kalgoorlie

Northern Star had been linked to the Super Pit for some time. The company was rumoured, but never confirmed, to be the second bidder in a 2016 process that did not result in a sale, and speculation ignited again when Barrick Gold put its 50% stake on the market again last year.

"Bill [Beament] from Northern Star has been charging around at Diggers & Dealers," Barrick boss Mark Bristow told Bloomberg in mid-August 2019.

"He's very much one of the front runners."

Northern Star didn't publicly address the comment, but two weeks later launched a takeover offer for Echo Resources and confirmed it would always look at an asset like the Super Pit if it was on the market.

Fast-forward to November and Saracen Mineral Holdings was announced as the buyer of Barrick's stake with a US$750 million bid.

Described by a close associate as a "master of opportunity", Beament then set out to secure Newmont's half.

While Newmont's half of the asset wasn't formally put up for sale, Northern Star had dealt with the company on assets in the past.

The Jundee mine wasn't for sale in 2013 when Northern Star knocked on Newmont's door, but the two eventually agreed on an A$82.5 million deal.

At US$775 million, the Super Pit deal was significantly larger - the largest in Northern Star's history, and came less than 18 months after its acquisition of Pogo in Alaska, which earned the company last year's MNN Awards Deal and/or Merger of the Year Award, as well as the Diggers & Dealers Dealer Award.

The Super Pit acquisition was announced on December 17, 29 days after Saracen's announcement.

According to MinesOnline.com, Northern Star paid $212 per reserve ounce, a 13% and 30% discount to its three-year and five-year normalised average operational transaction multiples of $245/oz and $305/oz, respectively.

Northern Star funded the deal via a fully underwritten A$765 million institutional placement, $50 million share purchase plan, and a $5 million placement to directors, at $9 per share, a 6.7% discount to Northern Star's previous closing price.

The company also secured a four-year, $400 million debt facility and renewed an existing undrawn three-year $300 million revolver facility.

Northern Star has already repaid $200 million of the debt, while its share price last week hit an all-time high of $16.77.

While Northern Star is yet to report guidance for FY21, the acquisition will almost certainly take it over 1 million ounces of gold production (Canaccord Genuity is forecasting 1.07Moz).

While the deal brought the asset into Australian hands for the first time, more importantly, it unlocked a massive opportunity.

Newmont had been the operator of the asset and any upside potential would have been subject to its capital expenditure plans.

The deal made Northern Star and Saracen - arguably WA's two most competent gold miners - equal partners with equal say on the asset's future.

"The potential is simply enormous, particularly from an underground potential basis," Beament said on the day the deal was announced.

"Our due diligence showed that the underground potential is huge. Underground mining will enable us to fully exploit what is a spectacular geological system.

"And with today's transaction, we have formed a Northern Star-Saracen ‘dream team' to unlock that full potential."

Beament described the underground potential as "virtually unlimited in terms of mine life".

The asset already has a 13-year mine life.

Despite the opportunity, Barrick's Bristow had already conceded defeat in Australia and waved the white flag.

"We [South Africans] might be able to beat you at cricket and rugby but not mining in your backyard. We're not going to take you on. I've seen too many guys get rogered there," he told MNN in September.

"We use a lot of Australian skills. Aussies are the best underground miners by a country mile."

Northern Star and Saracen are due to report maiden JORC resources and reserves for KCGM, as well as guidance and more details on future plans next month.

Northern Star Resources is a nominee for Deal and/or Merger of the Year in the 2020 MNN Awards.

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