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Northern Star agrees to sell WA gold mine

AAP logoAAP 31/07/2016

Northern Star has cut its production guidance after agreeing to sell its Plutonic gold mine in WA for an initial $12.5 million, with royalties and other potential payments to follow.

The gold miner said on Monday it expects to produce between 485,000 and 515,000 ounces of gold in the current financial year - down from 2016's 561,153 ounces - after agreeing to sell the mine to Canadian-owned Billabong Gold.

It expects to produce around 600,000 ounces in calendar 2018, down from 700,000 ounces.

Northern Star will receive an initial $12.5 million if the sale is approved by bodies including the Foreign Investment Review Board, with other instalments to follow - such as $25 million or, if greater, a 33 per cent stake in Billabong's parent company if it lists on the Toronto Stock Exchange within six months of the deal.

"Our decisions are governed first and foremost by our commitment to maximising financial returns, not headline production figures," Managing director Bill Beament said.

Northern Star shares were placed in a halt for much of the day before resuming trade at 1500 AEST. They surged 14.5 cents, or 2.75 per cent, to $5.415 within five minutes.

Mr Beament said the sale was a step toward concentrating the miner's production to three major centres - in Kalgoorlie, Jundee and Paulsens - adding that Northern Star is set to spend $130 million on exploration and expansion at its remaining sites.

The sale includes Northern Star's Hermes mine which it purchased last year.

The miner also confirmed it had renewed a drilling contract for an additional two years with Swick Mining services at its Jundee site.

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