Aussie miner, Northern Star Resources, has revealed its plans to acquire De Grey Mining in an all-share transaction valued at A$5B. This move is driven by the surge in gold prices, which has encouraged consolidation within the industry.
For Northern Star, the acquisition provides a pathway to low-cost, medium- to long-term growth through De Grey’s Hemi gold development project in Western Australia, expected to ramp up towards the end of the decade. The deal follows a significant rise in gold prices, particularly in Australian dollars, which reached a record high of over A$4,240 per troy ounce in late October, marking a roughly 33% increase over the past year.
Baden Moore of CLSA commented, “Obviously gold is expensive, but it’s a script deal so we are happy with that.” Despite this, Northern Star’s shares dropped by up to 5%, while De Grey’s shares surged by as much as 28%, eventually trading at A$1.93.
Under the terms of the agreement, De Grey shareholders will receive 0.119 new Northern Star shares for each De Grey share they hold, equating to an offer price of A$2.08 per share. This represents a 36.8% premium over De Grey’s closing price of A$1.52 on Friday.
Stuart Tonkin, CEO of Northern Star, stated, “De Grey’s Hemi development project will deliver a low-cost, long-life, and large-scale gold mine in the Tier-1 jurisdiction of Western Australia, enhancing the quality of Northern Star’s asset portfolio to generate cash earnings.” The Hemi project is projected to produce an average of 553,000oz of gold annually over its first five years.
Northern Star currently operates three production centres: Kalgoorlie and Yandal in Western Australia and Pogo in Alaska. Post-acquisition, Northern Star shareholders will own approximately 80.1% of the combined entity, with De Grey shareholders owning the remaining 19.9%.
Glenn Jardine, Managing Director of De Grey, highlighted the benefits for De Grey shareholders, including an upfront premium and continued exposure to Hemi, along with access to Northern Star’s diverse portfolio. De Grey’s board has unanimously recommended that shareholders vote in favour of the deal, which is anticipated to close by late April or early May.
Additionally, shares in Gold Road Resources, De Grey’s largest shareholder with about 17% ownership, rose by 10% following the announcement.
