Newmont to Sell Share of Super Pit to Northern Star Resources

Newmont Goldcorp ( TSX:NGT,NYSE:NEM) has agreed to sell its half of Kalgoorlie Consolidated Gold Mines (KCGM) — the operator of the Kalgoorlie Super Pit gold mine — to Australia’s Northern Star Resources (ASX:NST,OTC Pink:NESRF) for AU$1.17 billion, or US$800 million.

In a release on Monday (December 16), Newmont said it expects the transaction to close early in January.

“This transaction generates exceptional value and further strengthens our financial position by increasing proceeds from our 2019 asset sale agreements to more than US$1.4 billion,” said the president and CEO of Newmont, Tom Palmer.

For the US$800 million — which advisory company Raymond James describes in a note to investors as a fair price for Newmont’s 50 percent share of the Super Pit, as well as some associated exploration assets — Northern Star will be getting half of the mine’s annual production of 590,000 ounces.

The Super Pit (known officially as the Fimiston open pit) and its associated assets are classed as a top five gold asset by production within Australia, with KCGM’s proven reserves at 7.3 million ounces of gold.

The addition of Super Pit’s production will catapult Northern Star to being a more than a million-ounce-per-year gold producer, as the company already has four operational assets in Western Australia, the Northern Territory and Alaska.

The other half of the Super Pit’s production will be going to 50/50 joint venture (JV) partner Saracen Mineral Holdings (ASX:SAR,OTC Pink:SCEXF), which only just recently bought its share of the asset from another giant global gold company, Barrick Gold (TSX:ABX,NYSE:GOLD).

In its release, Northern Star Resources calls Saracen “an extremely favourable JV partner for Northern Star,” referring to the company’s work in management at the mine as “outstanding” in the short time it has been there.

Northern Star’s gold production guidance for the 2020 financial year has now been increased by 120,000 ounces to between 920,000 and 1,040,000 ounces.

Daily operations at the mine are currently run by Newmont, and the Canadian giant has agreed to maintain transitional service and provide key personnel for six months following the transaction to ensure that operations continue smoothly.

On the ASX, Northern Star was trading at AU$9.66 before it announced a trading halt on Monday (December 16). Newmont was at C$53.32 on the TSX at the same time, and was slightly down by 1.2 percent on Tuesday morning (December 17).

The sale of its share of KCGM means that Newmont has now reached its goal of selling US$1 billion in assets in 2019, as the KCGM sale puts it above US$1.4 billion.

Newmont’s previously released 2020 outlook for its share of KCGM envisages attributable gold production of 285,000 ounces of gold with gold costs applicable to sales estimated to be US$915 per ounce, and gold all-in sustainable costs at US$1,025 per ounce.

For now, the transaction just has to wait for approvals from the Western Australian minister of lands.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.