Evolution Mining pays $400m to consolidate Kalgoorlie mining hub in Northern Star deal
Northern Star Resources has slimmed down its scattered mining portfolio through a $400m asset sale to Evolution Mining.
Northern Star Resources has pulled forward its target date to become a 2 million ounce a year gold producer after slimming down its scattered mining portfolio through a $400m asset sale to Evolution Mining.
Northern Star will run its annual investor day on Friday, under the new leadership of Stuart Tonkin, who takes charge of the gold major as it looks to knock Newcrest Mining off its pedestal as Australia’s biggest home grown gold producer.
The company released its growth plans on Thursday, outlining a strategy to grow its output by more than 25 per cent over the next five years and hit the 2 million ounces annual production mark in 2026, a year earlier than flagged when the company completed its mega-merger with Saracen Mineral Holdings in 2020.
Thursday’s asset deal means Northern Star and Evolution have largely divided Kalgoorlie’s storied gold belt between them, with Northern Star focusing on the massive Super Pit in the heart of the city and Evolution the high-grade underground operations to the east of Kalgoorlie’s Golden Mile.
Evolution Mining will pay $400m to Northern Star to consolidate the gold operations east of Kalgoorlie, as the wave of consolation around the historic WA gold hub continues,
The deal will see Evolution pick up Northern Star’s share on the Kundana group of mines to add to its own Mungari operations, in a deal long seen as inevitable by analysts.
The price tag includes Northern Star’s 51 per cent share in the Raleigh, Hornet and Pegasus mines, part of the East Kundana joint venture with Rand Mining and Tribune Resources. It also includes Northern Star’s Millenium, Pope John and Moonbeam underground operations and a suite of near term development projects.
Collectively, the group of operating mines sit closer to Evolution’s existing Mungari processing plant than the plant Northern Star uses, and Evolution said the deal promised to deliver significant cost savings and turn its Mungari group of mines into a cornerstone asset for the company.
Northern Star picked up the Kundana operations in Barrick Gold’s fire sale of its Australian assets in 2014, paying $75m for half of the East Kundana joint venture and the nearby Kanowna Belle mine, which it will retain.
Evolution called a trading halt on Thursday as it looks to raise $400m to close the deal, issuing 104 million shares at $3.85 a share.
Evolution boss Jake Klein said in a statement the deal improved the company’s WA operations substantially, delivering a fourth cornerstone production hub to underpin its outlook over the next decade.
“It presents a unique strategic opportunity for Evolution to consolidate the Eastern Goldfields region given our existing presence at Mungari, resulting in Evolution being one of the largest tenement holders in the Kalgoorlie region,” he said.
“The transaction improves Mungari on a production, mine life, and Mineral Resources basis. We are also excited about the exploration potential that the consolidated land package holds, which represents further mine life extension opportunities for Mungari.”
Mr Klein told The Australian Evolution had coveted Northern Stars’ Kundana assets since it had bought the nearby Mungari project in a $300m scrip deal with Egyptian billionaire Naguib Sawiris’s La Mancha Resources in 2015.
While the two acquisitive miners have long been seen as fierce rivals within the gold sector, Mr Klein said negotiations over the future of the Kundana mining package were friendly and pragmatic.
“Everyone knows it makes sense, their ore gets trucked past our mill and goes 50 kilometres away to Kanowna Belle,” he said.
“We were all agnostic. We sat down and we said Evolution can be a buyer, or seller, or joint venture partner. And this is the deal we came up with. Both parties knew there were synergies to be extracted and created that weren’t available to either party on their own.”
Evolution’s effective stake in the operations is slightly greater than its 51 per cent holding in the East Kundana joint venture, as it holds a 20 per cent of Tribune Resources, which in turn owns 46 per cent of Rand.
While Mr Klein said Evolution had no immediate plans to move to complete ownership of the joint venture, speculation it will eventually do so sent shares in both companies surging on Thursday
Tribune closed up 51c, or 10.2 per cent, to $5.50. Rand gained 3c to $1.52.
Mr Tonkin said the sale represented an opportunity to liberate value from a package of assets that were no longer required for delivery of the company’s strategic objectives.
“The sale of these assets is consistent with our strategy to employ capital where we believe it will generate the greatest return,” Mr Tonkin said.
“This is a great outcome for all stakeholders, including all our employees working at these assets, who will be offered continuity under Evolution’s ownership.”
Northern Star shares gained 55c on Thursday to a $10.76 close, with Evolution last trading at $4.07 ahead of its capital raising.
Evolution boss Jake Klein said in a statement the deal improved the company’s WA operations substantially, delivering a fourth cornerstone production hub to underpin its outlook over the next decade.
“It presents a unique strategic opportunity for Evolution to consolidate the Eastern Goldfields region given our existing presence at Mungari, resulting in Evolution being one of the largest tenement holders in the Kalgoorlie region,” he said.
“The transaction improves Mungari on a production, mine life, and mineral resources basis.
“We are also excited about the exploration potential that the consolidated land package holds, which represents further mine life extension opportunities for Mungari.”
The acquisition comes as Northern Star consolidates its mega-merger with Saracen Mineral Holdings last year, promoting chief executive Stuart Tonkin to the role of managing director as former Saracen boss Raleigh Finlayson exits the company.
Mr Tonkin said the sale represented an opportunity to liberate value from a package of assets that were no longer required for delivery of the company’s strategic objectives.
“The sale of these assets is consistent with our strategy to employ capital where we believe it will generate the greatest return,” Mr Tonkin said.
“This is a great outcome for all stakeholders, including all our employees working at these assets, who will be offered continuity under Evolution’s ownership.”
Evolution shares closed at $4.07 on Wednesday, with Northern Star at $10.21.
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