Australian gold giant Northern Star buys rival in $5 billion deal
Gold miner Northern Star will acquire De Grey Mining in a $5 billion deal, beefing up its gold output and making it by far Australia’s biggest ASX-listed gold producer.
The acquisition means Northern Star will take over De Grey’s flagship project, Hemi: a low-cost, long-life, large-scale gold development in Western Australia’s Pilbara region.
Hemi is one of the largest untapped gold prospects in the world.
Northern Star owns and operates the “super pit”, a huge open-cut mine on the edge of the Kalgoorlie township in WA’s Goldfields-Esperance region, which produces about 437,000 ounces of gold annually.
It also operates the Thunderbox, Orelia, Carosue Dam and Porphyry mines.
Gold prices have been on a tear since October last year, and peaked above $US2740 ($4210) per ounce just before Donald Trump’s election in November, and underpinned by the strong US dollar, elevated interest rates, inflation, geopolitical uncertainty and buying by the world’s central banks, particularly China’s.
However, prices have since trended down to around $US2650 ($4075) on Monday.
Northern Star managing director and chief executive Stuart Tonkin said the Hemi project would enhance the quality of Northern Star’s assets and generate cash earnings.
De Grey’s board of directors said they unanimously supported the deal and would recommend it to shareholders. If accepted, the deal will be finalised in April.
De Grey managing director Glenn Jardine said the company was in the fortunate position of either developing the mine or choosing a merger or acquisition.
“The transaction that we have entered with Northern Star today is a highly attractive opportunity for De Grey shareholders in terms of the upfront premium, as well as retaining ongoing exposure to Hemi and gaining exposure to the broader Northern Star portfolio,” Jardine said.
De Grey’s shareholders will be paid in Northern Star shares under a scheme or arrangement, in an all-scrip transaction. They will receive 0.119 of a Northern Star share for each De Grey share, implying a value of $2.08 per share for De Grey’s scrip, and nearly $5 billion for the entire company.
In a recent commentary, the World Gold Council said gold’s negative reaction to the US election was the result of higher bonds yields, lower sanctions risks, a renewed bullishness in equity markets and cryptocurrencies.
But the Gold Council said there were still fundamental global concerns that were likely to support future prices, including protectionism and overvalued equity markets.
Source: https://www.watoday.com.au/