Northern Star Resources (NST) has announced the acquisition of the Pogo Gold Mine in Alaska from Sumitomo Metals Mining Co., Ltd (Sumitomo) for US$260m (A$347m). Pogo has a non-JORC Resource of 4.1Moz @ 12.2g/t Au and a Reserve of 760koz at 11.9g/t Au. The acquisition will be funded 50/50 from existing cash and via a fully underwritten A$175m placement to institutional investors at an issue price of A$6.70ps. Pogo is forecast to produce 250-260koz Au in FY19 at an all-in sustaining cost (AISC) of A$1,175/oz). Pogo is a quality acquisition and we see value upside in not only mine life extension, but the application of NST’s rigorous cost template and aggressive investment in exploration. Importantly, NST is maintaining a significant cash balance post-deal suggesting further M&A could be in the pipeline short term. HOLD maintained and target price of $6.77ps.
is still trading on undemanding multiples and we maintain our BUY call.
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