Northern Star Raises Capital to Acquire Pogo Gold Mine

Northern Star Resources (ASX:NST) has completed its AU$175-million capital raise to help fund the acquisition of the Pogo underground gold mine located in Alaska, the company announced on Monday (September 3).

At the end of August, Northern Star agreed to acquire Pogo from Sumitomo Metal Mining and Sumitomo for AU$347 million, leading to the placement, which was completed at AU$6.70 a share. Approximately 26.1 million new shares were placed with institutional investors, with current shareholder BlackRock Investment Management committing to AU$57 million of new shares.

“Existing shareholders, fund managers and analysts from around the world have said they share our view that Pogo is an exceptional acquisition, which meets our criteria of owning tier one assets with strong growth potential in tier one locations,” said Bill Beament, executive chairman.

“They also share our view that the acquisition is consistent with Northern Star’s policy of maximizing financial returns, rather than growing production for the sake of it,” he added.

Northern Star noted that the placement had been heavily oversubscribed, which further demonstrated shareholder support for the Pogo acquisition, as well as the company’s business model.

When all is said and done, the funds from the placement will assist Northern Star in acquiring the 4.1-million ounce Pogo underground mine, which produced 271,273 ounces of gold at an all-in sustaining cost (AISC) of US$882 per ounce last year.

As for the balance of the acquisition price, it will be funded through the company’s existing cash reserves.

On August 23, the company released its FY2018 financial results, reporting revenues of AU$964 million from the sale of 570,110 ounces of gold at an average price of AU$1,704 per ounce. AISC were at AU$1,029 per ounce and mine operating cash flow was up by 6 percent to a record AU$463.7 million.

Additionally, Northern Star noted that it made AU$512 million in cash and equivalents during FY2018, up from AU$447 million year-on-year, after paying AU$63 million in dividends, investing AU$110 million in production growth, spending AU$21.5 million on acquisitions and carrying AU$14 million of mining costs at its South Kalgoorlie operations but generating no revenue. The company has no debt.

Finally, total resources ticked up by 5.7 million ounces to land at 15.9 million ounces, while measured and indicated resources increased 55 percent to 9.8 million ounces, which will pave the way for a substantial increase in reserves for 2019.

As of 11:45 a.m. EST on Tuesday (September 4), Northern Star was trading at AU$8.10.

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