UPDATE 2.30pm: Investors have given Northern Star Resources the tick of approval for its purchase of the Jundee underground gold mine near Wiluna for $US82.5 million in cash.
Shares in the acquisitive gold miner rose 8.5 cents, or 7.62 per cent, to close at $1.20 after news of the purchase from US gold mining giant Newmont was released early this morning.
The deal is set to propel the company to the title of the second biggest ASX-listed gold miner behind Newcrest.
Jundee is expected to lift Northern Star's production from about 350,000 ounces a year to about 550,000 ounces a year by 2015.
Northern Star said it would fund the acquisition from cash reserves and an increased debt facility.
Managing director Bill Beament said Jundee would immediately increase the company's free cashflow and had strong potential to increase reserves and resources via exploration at and around the mine.
"Jundee is a tier-one asset in the Australian gold mining industry by any measure," he said.
Jundee hosts reserves of 411,000 ounces at 4.3 grams per tonne with further upgrade potential. It operates at all-in sustaining costs of $930 an ounce.
Mr Beament said that with five operating mines generating 550,000ozpa, Northern Star would meet the key criteria of global investors.
"The international funds have made it abundantly clear that they want to invest in gold mining companies with a diversified production base and economies of scale that enable costs to be kept as low as possible," he said.
"The Jundee acquisition means Northern Star will tick all these boxes while still enjoying a conservative balance sheet and outstanding potential for growth through exploration at each of our five operating mines."
The purchase of Jundee follows the company's move to buy the Paulsens mine in 2010, followed by the more recent purchases of the Plutonic, Kundana and Kanowna Belle underground gold mines.
Under the terms of the deal, Northern Star will acquire all of Jundee's assets and liabilities including all environmental and employee obligations.
Production at Jundee began in 1995 from a complex of open pit mines that have now ceased operation.
Underground mining began in 1997 and continues today.
All existing fixed plant and onsite equipment owned by Newmont will be transferred to Northern Star and the majority of Jundee's non-contract staff will be offered continuing employment.
Jundee produced 279,000 ounces of gold last year.
Newmont's executive vice president for strategic development, Randy Engel, said the sale of Jundee represented the company's continuing efforts to optimise its portfolio and increase shareholder value by focusing on lower cost, longer life operations.