Ora Banda Mining to raise funds for the development of its high-grade gold resource and reserve definition programmes. Credit: Alchemist-hp.

Australian firm Northern Star Resources has reached an agreement to purchase the high-grade Pogo underground gold project in Alaska, US, for $260m.

Pogo has an average annual production of around 300,000oz and is currently owned by Japanese firm Sumitomo Metal Mining (85%) under a joint venture with Sumitomo (15%).

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The project contains reserves and resources of 4.1Moz at 12.2gpt.

Located 145km south-east of the city of Fairbanks, the gold mine commenced underground production in 2006 and has a 1Mtpa ore processing plant.

The acquisition is in line with Northern Star’s strategy to own and invest in tier one projects in tier one jurisdictions.

“We will invest in growing the resources and reserves as we have done at our tier one projects in Western Australia, with a particular focus on upgrading it to JORC-2012 status.”

Northern Star Resources executive chairman Bill Beament said: “Pogo, along with our Jundee and Kalgoorlie operations, gives Northern Star the potential to have three mines in that exclusive club in the coming years.

“Pogo is also an absolutely perfect project for Northern Star to apply its highly successful recipe of investment in extensive exploration and development, which in turn, drives increases in resources and reserves, mine life, production and free cash flow.”

“We will invest in growing the resources and reserves as we have done at our tier one projects in Western Australia, with a particular focus on upgrading it to JORC-2012 status.”

As of 31 December last year, the Pogo project had resources of 3.34Moz at 12.3gpt and reserves of 760,000oz at 11.9gpt.

In order to fund the transaction, Northern Star will use existing cash reserves of A$443m and undertake a fully underwritten placement to raise around A$175m.

Subject to certain closing conditions, the acquisition is anticipated to be completed in October.

Following the closure of the transaction, Northern Star will carry out targeted intensive drilling programmes to extend mine life through resource growth and reserve conversion.

The company is aiming to complete JORC-2012 mineral resources and ore reserves by next August.