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Two of Australia’s largest gold miners have agreed a A$5bn ($3.2bn) takeover deal as the booming price for the commodity continues to drive consolidation in the sector.
Northern Star Resources, which operates the huge Super Pit gold mine near Kalgoorlie in Western Australia, has agreed to take over rival De Grey Mining in an all-share deal pitched at a 37 per cent premium to the smaller company’s share price. De Grey shareholders would hold 20 per cent of the combined company.
It is the latest transaction in the global gold sector as producers take advantage of record prices to acquire smaller rivals.
US company Newmont acquired Australia’s largest player Newcrest for $19bn last year. In August Gold Fields paid $1.6bn for Canada’s Osisko Mining, pitched at a similar premium to the Northern Star-De Grey deal, and AngloGold Ashanti agreed to buy UK-listed Centamin for £1.9bn in September.
Northern Star shares dropped 5 per cent on the takeover news while De Grey’s stock surged 28 per cent.
The acquisition, which the De Grey board has recommended, will give Northern Star control over the promising Hemi prospect in the Pilbara, the iron ore-rich region in northern Western Australia, which is expected to generate more than 500,000 ounces of gold a year in its first decade of operation.
Northern Star, now one of Australia’s largest listed gold miners, has earned a reputation for improving gold mining assets that had fallen out of favour with larger players.
The Super Pit — officially the Fimiston Open Pit — is 3.5km long, 1.5km wide and 600 metres deep. The mine was previously jointly owned by Newmont and Barrick Gold. Northern Star acquired Newmont’s stake in 2019 and then struck a A$16bn merger with Saracen, which had acquired the Barrick stake, in 2021. This brought the giant deposit under single ownership for the first time in its near 130-year history.
Northern Star secured a A$1.5bn upgrade to its Kalgoorlie operations last year that will double processing capacity when completed in 2026. The company had been tipped to explore acquisition opportunities as a result of the booming gold price this year.
Analysts said the deal made strategic sense in a consolidating market and would potentially boost Northern Star’s output to 2.5mn ounces a year by the end of the decade, making it one of the world’s largest producers.
JPMorgan said in a note: “The acquisition is quite different to Northern Star’s historic strategy of acquiring older assets in production and recapitalising. However, with major projects like the (Kalgoorlie) expansion progressing well . . . we have limited concerns on delivery.”
