In a move to focus its efforts on its larger long-life Murchison gold assets, Westgold Resources will sell its South Kalgoorlie Operations to Northern Star Resources for $80 million.
South Kalgoorlie Operations (SKO) includes the HBJ underground mine, a number of open pits and the 1.2 million tonne-per-annum Jubilee Mill.
The operations – which are currently producing at a rate of 30,000-40,000ozpa – are strategically located within 50km from Northern Star’s Kundana operations.
SKO has ore reserves containing 252,000 ounces which was 7.45% of the group’s total ore reserves. SKO has produced 24,000 ounces in the first half of this financial year.
In recent years, the HBJ mine has operated as the core feed with additional smaller open pit and low-grade stockpile sources providing approximately 60 per cent of plant capacity at Jubilee.
The remainder of plant capacity has been filled by toll processing third party ores from the region.
This is a nice deal for both parties,” Westgold Managing Director Peter Cook said.
“It provides Northern Star with additional and instant plant capacity in the Kalgoorlie region for its expanding gold operations.
“For Westgold, it divests our shortest life asset, provides a cash boost and upgrades the overall quality of our gold portfolio.”
Northern Star Executive Chairman Bill Beament said the acquisition would be an economical means of ensuring the Company met its 300,000ozpa production target from organic sources at its Kalgoorlie Operations.
The purchase consideration is made up of $20 million in cash and $60 million in unrestricted fully paid ordinary shares in Northern Star calculated at a backward-looking 10-day VWAP.
Settlement of the transaction is due for completion on 1st April 2018.
Westgold will retain its lithium royalties over the Mt Marion Lithium Mine and the rights to lithium exploration and mining over Location 53 and 59.
Shares in Westgold were trading 0.3c lower at $1.557 at noon AEDT.