The acquisition of the mine will cost Northern Star (NST) A$82.5 million and will be funded out of cash reserves and an increased to its current debt facility with Investec to A$100 million. This will see NST’s output in fiscal year 2015 from 350,000 ounces to 550,000 ounces. The company expects the all-in sustaining cash cost will be approximately A$1050 an ounce – continuing the NST mantra of high grade operations with a low cost model.
That is substantially cheaper than an NCM or a KCN and the value of the transaction will de-risk the portfolio further as it provides increased operation diversification and increased economies of scale. The Jundee mine reserves are estimated to stand at 411,000 ounces, with 508,000 ounces in recourse, which is expected to expand with further exploration. Jundee’s all-in cash cost in 2013 was A$930 an ounce, making this a premier pick-up.
Expectations will be for the acquisition to be 2015 accretive and considering the gold price is still averaging US$1285 an ounce should see NST maintaining its record over its peers as a cash-positive, earnings growth business.