Mount Gibson picks up Northern Star’s Tanami Gold share in NT in $50 million shift from iron ore

Mount Gibson Iron is looking to make the jump from mining iron ore off the Kimberley coast to digging for gold in the Northern Territory, after signing up to buy tenements from Northern Star Resources.

The small-scale iron ore miner will draw from its substantial reserves of $460 million and stump up $50m in cash to buy Northern Star’s share of the undeveloped Central Tanami gold project.

Mount Gibson had hinted in a recent quarterly update that it had been “in a good position for opportunistic investments and acquisitions” and was reviewing potential targets as its iron ore operations at Koolan Island reach the end of their life.

Chief executive Peter Kerr said the deal was a compelling opportunity to jump into gold for an “attractive” price and was encouraged by the sector’s strong fundamentals that have seen prices rocket 36 per cent since this time last year.

“Involvement in the Central Tanami gold project provides Mount Gibson with an opportunity to leverage the success of its Koolan Island iron ore operation to establish the foundations of a gold production business,” he said on Wednesday.

About 40 million tonnes of high-grade haematite ore has been shipped since Mount Gibson restarted mining at Koolan Island in 2007.

But with the operation expected to have run its course within the next 12 to 18 months, the cashed-up miner has had to start looking for its next commodity.

Both Mount Gibson and the other half of the Tanami joint venture — a listed company also named Tanami Gold — share the same majority owner in a Hong Kong-listed resources investment group, APAC Resources.

And the pair also share a board member in Brett Smith, who is chair of Mount Gibson and a non-executive director of Tanami Gold. Mr Smith has abstained from board decisions at Mount Gibson regarding the transaction.

The transaction will need Foreign Investment Review Board approval to proceed.

The joint venture covers more than 2100skqm of mining and exploration tenements in the Central Tanami region of the Northern Territory and claims to hold 1.6 million ounces of contained gold, according to an update in 2023.

Mount Gibson will also take over gold exploration tenements from Northern Star spanning about 3600sqkm.

Provided the transaction is locked away, Mount Gibson and Tanami plan to be in a place to make a development decision within the next 12 to 18 months.

The market took to the deal, with Mount Gibson shares lifting 5 per cent to 32¢ in early trade on Wednesday, while Tanami Gold shares rose 3.3 per cent to 6.3¢ apiece.

Azure Capital and Gilbert & Tobin were advisers to the buyer.