JOHANNESBURG (miningweekly.com) – ASX-listed Northern Star Resources is acquiring ASX-listed Westgold Resources’ South Kalgoorlie operations (SKO) for A$80-million, comprising the project’s operating processing facility, which has a throughput capacity of 1.2-million tonnes a year, a Joint Ore Reserves Committee-compliant resource of four-million ounces, including 250 000 oz in reserves.

Noting that the disposal formed part of its strategy to focus its efforts on its larger long-life Murchison gold assets, Westgold MD Peter Cook said on Thursday that the deal provided Northern Star with additional and instant plant capacity in the Kalgoorlie region for its expanding gold operations, while Westgold divested its shortest life asset.

“This provides a cash boost and upgrades the overall quality of our gold portfolio,” he added.

Northern Star executive chairperson Bill Beament agreed, noting that the acquisition would be an economical means of ensuring the company met its 300 000 oz/y production target from organic sources.

“To capitalise on the success [of a Kalgoorlie exploration programme], we were considering the option of expanding our Kanowna Belle facility. However, the SKO purchase will enable us to achieve our organic growth target in a more timely and economical fashion and at the same time provide us with significant exploration potential, including a resource inventory,” he pointed out.

SKO, which is located 50 km from Northern Star’s Kundana operations, is currently producing at the rate of 30 000 oz/y to 40 000 oz/y. The plant is also toll-treating ore for third parties.

The A$80-million consideration would comprise 9.5-million Northern Star shares at a ten-day volume-weighted average price of A$6.30 a share, representing a total of A$60 million in Northern Star shares and A$20-million in cash.

“The transaction also provides an outstanding example of how gold companies can work together to rationalise their operations, generate economies of scale and ultimately increase returns for both groups of shareholders,” the companies said.

Settlement of the transaction is due for completion on April 1.