mate - there was a really good article in MN - it was the NST brand that got the project:
Achieving brand status within the crowded gold space has required hard work and the occasional derring-do.
But it has also come with multi-level rewards, something which was on fully display with Northern Star's latest acquisition, the Pogo gold mine in Alaska from Sumitomo group companies for US$260 million (A$347 million).
That last week's Pogo deal is seen as a winner for Northern Star has been reflected in the company's subsequent near $1 billion increase in market value to $5.2 billion. It's something of a bonanza. But it only became a reality because the Northern Star brand was at work.
The brand is set to deliver new opportunities in the years ahead as an ill-prepared global gold industry finds itself short of the skills and knowledge that will be needed in increasing measure as depleting open-cuts are replaced by underground mining operations.
For Northern Star the brand, it will mean a deal flow of opportunities that will leave many of its competitors flat footed. It's why Northern Star's push towards annual production of one million ozs with the Pogo acquisition could well be a teaser of what is to come.
That it was the Northern Star brand that delivered the rich Pogo opportunity, and not an internal business development team out to justify its existence, was confirmed by its executive chairman, Bill Beament.
"We didn't find Pogo. Pogo found us. The opportunity to acquire this world-class asset was presented to us and we seized it,'' a clearly elated Beament said on the analyst and investor call for the Pogo acquisition last week.
Pogo's Tier 1 status has been slipping in the last five years. While its average annual production over the past 12 years was about 300,000oz, it slipped to 271,273oz in (calendar) 2017 on lower grades (still exceptionally high at 10.8gpt) and a mill that has not been not kept full.
For the mighty Sumitomo group of companies, a Pogo in decline became less of a priority for attention than it already was. While it could have cast the net far and wide to maximise its exit price, it did a typically face-saving Japanese thing - it sought out a buyer that delivered more than simply cash.
"They ran a (small) screening process of people that had the capacity, the capability, and that had the right track record of doing deals and transitioning sites. That was a huge, huge important thing," Beament said of the sales process.
"We spent a lot of time in our face to face meetings just talking about the people, looking after the people.''
"And once we ran through the Barrick and Newmont transactions of how we transitioned those workforces in to the Northern Star family, it gave them great comfort for us to be the counterparty," Beament said.
"It is fair to say they only tapped the right companies that had the ability to do this on all the different metrics. And it is fair to say we were on top of the screen, which is a really good compliment."
"We screened best on the initial approach and we got cold called. And once we got shown the asset, the initial reaction of my whole team was this is the Jundee playbook all over again. Once we delved in to it, it was a no-brainer."
The hard won brand had done its thing.
Northern Star's track record that created its brand is no overnight wonder. It has been built up over the eight years since the former explorer changed strategy to focus on acquiring operating mines, the first being the highly successful $40 million acquisition of Paulsens in WA in July 2010.
More WA mines were later acquired from Barrick and Newmont, the latter selling the seemingly clapped out Jundee mine to Northern Star in July 2014 for $82.5 million. Jundee's Tier I status has since been restored, cementing Northern Star's brand.
Like Pogo, Jundee was a mine in decline when it was acquired. It had given up on being a 300,000oz producer and reserves and resources were only good for two or three years of operation. The outlook has been transformed under Northern Star.
Investment in exploration, and productivity improvements in mining and processing, has resulted in resource/reserve upgrades now providing at least 10 years of mine life visibility and annual production increases back to 300,000oz this year after last year's 285,000oz.
The market's enthusiasm for the Pogo deal - and why Sumitomo sought out Northern Star as the buyer - is a response to the expectation that the turnaround and the major value capture at Jundee will be repeated at Pogo. That's certainly, what Northern Star is after.
"I have always said that if anyone can find me another Jundee, I will buy it every day of the week," Beament said.
"Pogo is another Jundee. It is the Jundee of North America, and hence Norther Star has jumped at the chance to buy it."
"Pogo presents Northern Star with the same opportunity we encountered at Jundee four years ago. By investing in exploration and development, we are confident we can grow the resource, production and mine life,'' Beament beamed.
There is work to do, and there is the tyranny of distance challenge of integrating a mine on the other side of the world in to the Northern Star way of doing things. But the reality is that Pogo comes to Northern Star in better shape than Jundee did.
That's because Pogo has (non-JORC) reserves and resources of 4.1Moz at 12.2gpt, including reserves of 760,000oz at 11.9gpt. Macquarie - the underwriter to Northern Star's swamped $175 million placement in support of the deal - estimated that the acquisition represented a 20% discount to EV/reserve deal averages since 2016, and a whopping 78% discount to the production multiples of ASX peers Evolution and Newcrest.
But again, there is work to do. The single biggest value creation Northern Star can achieve in the near-term is to get the 3.3Moz in the resource category to JORC-compliant status, and in to the mine plan.
The market is already prepared to factor in a mine life of 5-6 years at Pogo given Northern Star's track record at Jundee and elsewhere in WA, hence the $1bn market value jump in the first pass assessment of the acquisition.
Getting visibility around 10 years-plus would make things real interesting. Northern Star's brand will have become all the more powerful.
