Intrepid to sell Paulsens mine for A$40M

Intrepid Mines (IAU-T, IAU-A) has squeezed A$13 million extra out of Northern Star Resources (NST-A) in the sale of its Paulsens gold mine in Western Australia, bringing the total offer to A$40 million.

Intrepid originally agreed to sell the mine to Northern Star for A$27 million — A$15 million in cash plus A$1 million for each 5,000 oz. gold sold to a max of 60,000 oz. gold for A$12 million.

But a weak Australian dollar and a rising gold price sent Intrepid back to the negotiating table with Northern Star.

The gold price was US$1,185 per oz. in early May when the Paulsens sale was announced but since then, gold has sailed upwards to US$1,240 per oz.

The Australian dollar has also weakened against the U.S. dollar making the Australian dollar gold price an impressive US$1,400 per oz.

Intrepid says a 10% change in the Australian dollar gold price amounts to a 21% change in cash flow.

Now the deal includes A$18 million in cash, a A$200 royalty for each oz. gold sold from June 1, to a maximum of 51,000 oz. gold, another royalty of A$135 per oz. gold sold also up to 51,000 oz. gold. Plus, a top-up cash payment of A$2.5 million contingent on gold production of 57,500 oz. and another top-up of A$2.5 million contingent on gold production totaling 62,500 oz.

Intrepid has the option to buy the Paulsens plant and infrastructure for $1 if gold production of 62,500 oz. is not achieved or the top-up cash payments are not made. Northern Star will assume the A$5 million liability for closure and rehabilitation costs.

The Paulsens mine came into production in 2005, and in 2009 it produced 75,000 oz. gold

Intrepid put the Paulsens’ 330,000-tonne-per-year mill on temporary care and maintenance in March this year and restarted on May 31.

As of February 2010, the mine had reserves of 145,000 tonnes grading 9.33 grams gold per tonne, with a 95% expected recovery (plus residual low-grade ore), amounting to 43,000 oz. gold.

Intrepid is also developing the gold-copper-silver Tujuh Bukit project on Indonesia’s Java Island. Inferred resources total 100 million tonnes grading 1 gram gold equivalent oz. for more than 2 million oz. gold, 80 million oz. silver or 3.3 million oz. gold equivalent at a cutoff of 0.5 gram gold equivalent.