Ground Breakers: Northern Star continues ASX gold rush into North America

Northern Star Resources (ASX:NST) has had its difficulties at the Pogo mine in Alaska, since taking the project on from Sumitomo back in 2018.

But it still seems keen on North American expansion, announcing today it would subscribe for a C$154m ($169 million Aussie) convertible note that will give it an exclusive option for a 50% share in Osisko Mining’s Windfall project.

Unlike Pogo, which was a mature operation, Windfall is a high grade exploration and development asset in Canada’s Quebec Province, so Northern Star’s bosses will likely be dusting up their French dictionaries ahead of a decision to convert that note to equity.

As its name suggests, Windfall looms as just that for Toronto-listed Osisko.

It contains an indicated mineral resource of 1.857Moz at an ultra-high grade of 9.6g/t, with a further 4.24Moz at 8g/t in inferred resources.

That would underpin a mine with a 300,000ozpa capacity over its first 7 years, operating at all-in sustaining costs of just US$610/oz.

“This agreement gives Northern Star an exclusive right to negotiate to acquire a 50% interest in the Windfall Project,” NST managing director Stuart Tonkin said.

“Partnering with Osisko provides a de-risked entry to a high-quality gold province on an advanced development project and aligns with our strategy.”

“A prospective 50/50 JV leverages the skills from both teams to deliver strong returns for our respective shareholders.”

“The Osisko team are a complementary partner to Northern Star with a proven track record of discovery and development and a strong commitment to ESG principles.”

ASX gold miners continue to look to Canada for expansion

ASX-listed gold miners have made Canada and North America more broadly a second home in recent years.

Outside of Australia, it has offered miners flush with cash from several years of boom time operating conditions at home the opportunity to access gold projects of scale in a “Tier 1” jurisdiction, although there are some who have questioned the fixation on so-called Tier 1 jurisdictions as an investment strategy.

While Windfall represents the opportunity for Northern Star to get in at the ground level on a new greenfields gold discovery – Osisko expects to be in operation by 2024 – many of the projects Australian companies have gone into in recent years have involved renovation jobs and moves on mature assets.

These include Newcrest (ASX:NCM) at its Red Chris operations, Evolution (ASX:EVN) at Red Lake, and St Barbara (ASX:SBM) at Atlantic Gold.

That has continued this year, with Newcrest announced a US$2.8 billion deal to take over Canada’s Pretium Resources and its 300,000ozpa Brucejack mine in British Columbia, Evolution paid C$343 million to buy out Red Lake neighbour Battle North and Silver Lake Resources (ASX:SLR) has put itself in the box seat to hoover up Harte Gold’s high-grade Sugar Zone mine after acquiring the struggling Canadian miner’s debt facilities.

Gold takes a hit as Fed turns hawkish

Spot gold prices fell further overnight on comments from Fed Reserve chair Jerome Powell suggesting inflation was here to stay, with the timeline for asset-purchase tapering potentially being brought forward.

Powell’s comments prompted a spike in the US dollar, which saw gold fall 0.6% to US$$1,774.36/oz, or $2,502.03 Australian.

“Gold prices got punished after both Fed Chair Powell turned hawk and signaled a faster taper, and on optimism after reports that many of the Omicron cases across Europe have been mild or asymptomatic,” OANDA senior market analyst Americas Ed Moya said.

“Rate hike expectations are once again increasing but the real yields are not. The inflation risk is still the biggest risk on the table and that is why the Treasury curve is flattening.”

Moya believes gold will see support soon.

“Gold will eventually stabilise once it gets through this tough period of stimulus withdrawal,” he said. “The risks of a Fed policy mistake are growing and given what the long-end of the curve is doing, gold might start seeing support fairly soon.”

Big mining stocks were broadly positive this morning without any serious standouts, with the materials index up 0.36%.

Iron ore prices eased but remained above US$100/t on improving market sentiment following reports about restocking and lower than expected supply from Brazil’s Vale in the coming year.