Kalamazoo Resources share price rockets 42% on Northern Star deal

The Kalamazoo Resources Ltd (ASX: KZR) share price is flying today on the back of an acquisition from Northern Star Resources Ltd (ASX: NST).

| More on:
Green dollar sign rocket on the back of a man.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Kalamazoo Resources Ltd (ASX: KZR) share price is flying higher today on the back of an acquisition from Northern Star Resources Ltd (ASX: NST).

Yesterday, Northern Star announced its decision to divest the Mt Olympus Project, comprising most of the Ashburton Project in Western Australia, to Kalamazoo.

While Northern Star shares jumped 4% on the news, Kalamazoo shares were stuck in a trading halt and only resumed trading this morning. At the time of writing, the Kalamazoo share price has rocketed 42% to 69 cents.

Kalamazoo is a gold and base metals explorer. Its focus is on identifying commercial mineral deposits to explore at its Victorian gold projects and Western Australian gold-base metals projects.

What’s the deal?

Kalamazoo has acquired the Ashburton Gold Project, which is located on the southern edge of the Pilbara Craton in Western Australia.

The project produced 350,000 ounces of gold between 1998 and 2004. It currently holds a JORC Code (2012) resource estimate of 20.8 million tonnes at 2.5 grams per tonne gold for a contained 1.65 million ounces.

Under the terms of the agreement, Kalamazoo will pay Northern Star deferred contingent cash consideration of $17.5 million. This consists of:

  • $5 million on mining of the first 250,000 tonnes of ore;
  • A 2% net smelter royalty (NSR) on the first 250,000 ounces of gold produced, with a 0.75% NSR on any subsequent gold produced from the tenements; and
  • The same NSRs on any other metals produced from the tenements.

Kalamazoo views the acquisition as an important addition to its Pilbara gold assets. And in a similar investment strategy to the acquisition of its flagship Castlemaine Gold Project in Victoria, the deal structure enables the company to invest funds directly “into the ground”.

The company believes the project has significant regional greenfields and brownfields exploration potential; a large drilling, geological, geochemical, and geophysical database; and numerous walk-up drilling targets.

The exploration team will be led by Kalamazoo director Paul Adams, who was previously the managing director of Spectrum Metals. Exploration focus will include an immediate review of the exploration datasets, field reconnaissance of identified prospect areas, and target generation.

Management commentary

Commenting on the deal, Kalamazoo chair and chief executive Luke Reinehr said:

“This is a tremendous outcome for our shareholders and an outstanding addition to our prospective portfolio of gold projects in the Pilbara. Kalamazoo is in the unique position of having major assets and tenure in two of the most highly rated gold exploration provinces in the world today – the Victorian Goldfields and the Pilbara.”

Meanwhile, Northern Star executive chair Bill Beament said:

“The Ashburton project no longer fits in Northern Star’s portfolio but still has strong potential on both the exploration and production fronts. The royalty structure also enables Northern Star to retain an exposure to the project.”

Motley Fool contributor Cathryn Goh 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.

More on Resources Shares

A man wearing a shirt, tie and hard hat sits in an office and marks dates in his diary.
Resources Shares

Why did the Rio Tinto share price hit the brakes in FY22?

Rio Tinto shares recorded one of its most volatile years on record.

Read more »

Three miners wearing hard hats and high vis vests take a break on site at a mine as the Fortescue share price drops in FY22
Resources Shares

Broker names 2 ASX mining shares to buy in FY23

These ASX mining shares have been named as buys for FY 2023...

Read more »

a female miner looks straight ahead at the camera wearing a hard hat, protective goggles and a high visibility vest standing in from of a mine site and looking seriously with direct eye contact.
Resources Shares

How did the South32 share price perform in FY22?

Off to a new financial year for the diversified miner.

Read more »

a man in a hard hat, high visibility vest and gloves holds a stop sign and holds up a hand in a halt gesture on a road.
Share Market News

What’s happening with Firefinch shares following a $13 million lithium sale?

Firefinch shares are going nowhere today.

Read more »

A GWR Group female employee in a hard hat and overalls with high visibility stripes sits at the wheel of a large mining vehicle with mining equipment in the background.
Resources Shares

Why has the Pilbara Minerals share price soared 57% in FY22?

How did the Pilbara Minerals share price perform in the financial year?

Read more »

Three miners wearing hard hats and high vis vests take a break on site at a mine as the Fortescue share price drops in FY22
Resources Shares

Why did the Fortescue share price sink in FY22?

FY22 saw Fortescue’s fortunes follow the iron ore price, but the mining giant also advanced its green ambitions.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Resources Shares

Here’s what led the Mineral Resources share price to sink 25% in June?

Minerals Resources shares have struggled to regain composure.

Read more »

a group of three men in hard hats and high visibility vests stand together at a mine site while one points and the others look on with piles of dirt and mining equipment in the background.
Materials Shares

Why are these ASX 200 mining shares behind the eight ball today?

The ASX 200 is up, but not all shares are in the green.

Read more »