22/07/2021 - 15:48

Northern Star, Evolution strike $400m deal

22/07/2021 - 15:48

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Northern Star Resources has sold a large portion of its Kalgoorlie operations to Evolution Mining on the same day it appointed Stuart Tonkin as the goldminer’s new managing director.

Northern Star, Evolution strike $400m deal
Stuart Tonkin has been appointed as Northern Star's new managing director. Photo: Northern Star Resources

Northern Star Resources has sold a large portion of its Kalgoorlie operations to Evolution Mining on the same day it appointed Stuart Tonkin as the goldminer’s new managing director.

In an ASX announcement today, Northern Star said it would sell its Kundana operational assets and projects to Evolution for $400 million in cash.

That includes Kundana and East Kundana, which contributed more than 120,000 ounces to Northern Star’s total production for the full 2021 financial year.

The sale also includes the Carbine gold project; a 51 per cent interest in the East Kundana joint venture with Tribune Resources and Rand Mining; and a 75 per cent stake in the West Kundara JV with Tribune.

Northern Star’s Kalgoorlie assets are located close to Evolution’s Mungari operations.

Today, Evolution said it would fund the acquisition using the proceeds from a fully underwritten placement and accompanied share purchase plan (not underwritten), with the remaining costs to be funded through cash and available liquidity.

It said excess funds raised would go towards general corporate purposes.

Chairman Jake Klein said the deal would improve Mungari’s production, mine life and mineral resources.

“This is a pivotal transaction that will transform Mungari to establish the operation as the further cornerstone asset in the Evolution portfolio,” he said.

“It presents a unique strategic opportunity for Evolution to consolidate the Eastern Goldfields region given our existing presence at Mungari, resulting in Evolution being one of the largest tenement holders in the Kalgoorlie region.”

Mr Klein said Northern Star's assets were located close to Mungari’s processing infrastructure.

“This unlocks the ability to capture valuable unique synergies and provides significant operational flexibility for the combined operations,” he said.

“We are also excited about the exploration potential that the consolidated land package holds, which represents further mine life extension opportunities for Mungari.

“It also improves the overall scale, quality and mine life of the portfolio, which continues to operate exclusively in tier 1 mining jurisdictions.”

Evolution said its three-year gold production outlook had increased as a result of the sale.

It expects to produce between 700,000oz and 760,000oz in fiscal 2022, followed by 815-875,000oz in FY23 and up to 1 million ounces in FY24.

The company will issue 104 million shares through the placement, priced at $3.85 each.

The offer represents a 5.4 per cent discount to Evolution’s last closing price of $4.07 cents per share, on July 21.

JP Morgan is acting as lead manager, bookrunner and underwriter to the offer.

Evolution expects to raise as much as $50 million under the SPP, priced on the same terms as the placement.

The company entered a trading halt this morning, expected to lift on July 26. It last traded at $4.07 per share.

Evolution is being advised by financial consultancy Treadstone Resource Partners and legal firm Allens in relation to the Northern Star deal, expected to be completed in late August.

Northern Star said it would use the sale proceeds to advance the company’s pipeline of growth projects.

In a separate announcement, it announced the appointment of chief executive Stuart Tonkin as the company's new managing director, taking over from Raleigh Finlayson.

Mr Finlayson will transition to executive director for a two-month period before retiring from the board. He will rejoin Northern Star as a non-executive director in April next year.

In the time between, Mr Finlayson will work on completing an Advanced Management Program at Harvard University.

Today's announcement follows the appointment of Michael Chaney as chairman, who assumed the role this month when Bill Beament exited the company to join local copper explorer Venturex Resources.

Mr Beament announced his decision in February, in the same month Northern Star completed a multi-billion-merger with Saracen Mineral Holdings.

Mr Chaney said Northern Star’s new managing director was highly qualified for the role.

“He [Mr Tonkin] is highly regarded as one of the leading resource project operators in Australia and has more than 20 years’ experience as a senior executive in the industry,” he said.

“Having spent the past five years as chief executive of Northern Star and three years before then as the company’s chief operating officer, Stuart has firsthand knowledge of our business, with an extensive understanding of the assets, and especially our people.

“Stuart is perfectly placed to lead Northern Star as we seek to optimise the operational performance and financial returns of the exceptional asset base which the company has established as the result of an intense period of merger and acquisition activity.”

Mr Tonkin’s remuneration includes a fixed salary of $1.7 million plus performance rights.

He said Northern Star’s sale to Evolution was consistent with the company’s strategy to employ capital where it believed it would generate the greatest return.

“This is a great outcome for all stakeholders, including all our employees working at these assets, who will be offered continuity under Evolution’s ownership,” Mr Tonkin said.

Sternship Advisers is acting as financial adviser to Northern Star on the deal and Ashurst as legal adviser.

Northern Star’s shares closed up 5.4 per cent to trade at $10.76.

 

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