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Northern Star share price higher after completing $765 million placement

James Mickleboro
Businessman paying Australian money

The Northern Star Resources Ltd (ASX: NST) share price has returned from a trading halt and pushed higher this morning.

At the time of writing the gold miner’s shares are up 2.5% to $9.90.

Why is the Northern Star share price trading higher?

Northern Star shares were placed in a trading halt on Monday whilst the gold miner undertook an institutional placement to raise A$765 million.

These funds, combined with a A$480 million debt facility and a A$50 million share purchase plan, will be used to acquire Newmont Goldcorp’s 50% stake in the highly sought-after Super Pit asset in Western Australia.

Northern Star has agreed a fee of US$800 million for the Super Pit stake and its associated assets.

This compares to the US$750 million that Saracen Mineral Holdings Limited (ASX: SAR) paid for the other 50% interest in the Super Pit asset back in November.

Management is very optimistic on the acquisition. It believes significant short, medium, and long term growth potential exists through optimising mining schedules, underground production, expanding resource inventory and exploration.

It expects its share of the assets to add 120,000-140,000oz to its FY 2020 gold production at an AISC of A$1,450/oz to A$1,550/oz. This increases Northern Star’s FY 2020 guidance to 920,000oz to 1,040,000oz at an AISC of A$1,240/oz to A$1,340/oz.

Institutional placement.

This morning Northern Star completed its institutional placement, raising A$765 million at $9.00 per share. This represents a discount of 6.7% to its last close price.

According to the release, the placement was heavily over-subscribed. Management believes this highlights strong investor support for the acquisition and the new Northern Star-Saracen Mineral joint venture.

Northern Star Executive Chairman Bill Beament said: “The strong support for this equity raising reflects the outstanding benefits of the KCGM acquisition for Northern Star Shareholders. The deal is earnings-accretive for Northern Star from the first full financial year of ownership and it will immediately increase our free cashflow. The acquisition also comes with huge growth potential via further optimisation of the open pit and the development of underground operations.”

The company will now push ahead with its share purchase plan which aims to raise a further $50 million. This will also be undertaken at $9.00 per share, the same price as the placement.

The post Northern Star share price higher after completing $765 million placement appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019