Northern Star (NST) has reached a binding agreement to acquire Newmont Goldcorp’s 50% interest in the Kalgoorlie Consolidated Gold Mines Joint Venture (KCGM JV). The acquisition price is US$775m plus an additional US$25m for a total consideration of US$800m / A$1,168/oz (excl. stamp duty). In addition, NST has paid an option of US$25m to potentially acquire Newmont’s power business, which supplies power to KCGM. The transaction pushes NST’s group Reserves up 59%, Resources up 26% and FY20 pro-forma production up by 28-33%, making NST the second largest ASX gold producer after Newcrest (NCM). We take a positive view on the acquisition for several reasons including: i) value accretive acquisition price of ~7x forward looking EBITDA, ii) a potentially significant Resource increase at Fimiston South as a result of JORC reporting standards versus the current 43-101 standard, and iii) a supercharged operational strategy with aligned JV partners (Saracen Mineral Holdings [SAR]), which will see rapid turnaround on value enhancements. We upgrade to a BUY recommendation (from HOLD) and upgrade our target price to $11ps (prior $10.07ps).
To access the full report please log in under the Client Area at the bottom of this page.
Argonaut’s Client Area allows you to view delayed share prices, access Argonaut’s wealth of Research as well as create custom portfolios and set up company watch lists.
If you would like to access our research please contact us to create an account.