Northern Star (ASX:NST) share price slumps despite acquisition news

Here’s what’s moving the gold producer’s stock today.

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The Northern Star Resources Ltd (ASX: NST) share price is tumbling lower this morning on news the company will be undertaking an acquisition.

Northern Star has agreed to buy Newmont Corporation‘s power business for US$95 million by acquiring its holding company.

At the time of writing, the Northern Star share price is $9.86, 1.99% lower than its previous closing price.

Let’s take a closer look at the latest news from the gold producer.

Northern Star’s new acquisition

The market is bidding the Northern Star share price down after the company announced it was purchasing GMK Investments Pty Ltd, the owner of the Newmont power business.

GMK also owns NP Kalgoorlie Pty Ltd which, in turn, has a 50% holding in Goldfields Power Pty Ltd.

To complete the circle, Goldfields Power owns the Parkeston Power Station.

The Parkeston Power Station primarily supplies electricity to Northern Star’s 50%-owned Kalgoorlie Consolidated Gold Mines (KCGM). KSGM is the operator of Kalgoorlie’s Super Pit.

Northern Star purchased its share of KCGM from Newmont Corporation for US$800 million in 2019. As part of the 2019 acquisition, Northern Star paid US$25 million for the option to purchase the Newmont power business.

That US$25 million will come off the top of the acquisition price, leaving Northern Star with a US$70 million bill for its newly announced purchase.

Northern Star managing director Stuart Tonkin said the acquisition will give the company more control of its power supply. He also stated:

The purchase means our Kalgoorlie power supply will now form part of our studies into ways to meet our commitment to becoming carbon-neutral.

According to Northern Star, the acquisition will bring plenty of other synergies and value. One such synergy will see cheaper power costs for KCGM.

Northern Star share price snapshot

The Northern Star share price is 22% lower than it was at the start of 2021. However, it has gained almost 4% since this time last month.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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