Kalamazoo Resources was trading up to 55 per cent higher on the ASX today after announcing the completed purchase of Northern Star Resources’ Ashburton gold project in the Pilbara.
Under the terms of the agreement, Kalamazoo will pay up to $17.5 million for the project, which was acquired by Northern Star in 2011.
Northern Star will receive $5 million on mining of the first 250,000 tonnes of ore, along with a 2 per cent smelter royalty on the first 250,000 ounces of gold produced, with a 0.75 per cent royalty on any subsequent gold produced.
The same royalty will also apply to other metals produced.
Kalamazoo chief executive Luke Reinehr said the purchase boosted the company’s Pilbara portfolio.
West Perth-based Kalamazoo has two gold projects in Victoria – the Castlemaine and South Muckleford projects – and the Snake Well project in Western Australia’s Murchison region.
“Kalamazoo is in the unique position of having major assets and tenure in two of the most highly rated gold exploration provinces in the world today – the Victorian Goldfields and the Pilbara,” Mr Reinehr said.
“We will progress our Victorian and Pilbara projects in tandem as we focus on adding value to our gold project portfolio.”
Kalamazoo said it aimed to substantially increase the existing gold resource of 1.65 million ounces at Ashburton.
Northern Star chairman Bill Beament said while the Ashburton project no longer fitted the company’s portfolio, it still had strong exploration and production potential.
“The royalty structure also enables Northern Star to retain an exposure to the project,” he said.
Northern Star was trading 0.5 per cent lower at 3:00pm AEST to $13.49. Meanwhile, shares in Kalamazoo were up 50 per cent to trade at 7.2 cents.