Northern Star Resources to acquire De Grey Mining in landmark $5b gold sector takeover

Merger and acquisition (M&A) activity in the Australian mining sector has finished the year with a bang, with Northern Star Resources (ASX: NST) and De Grey Mining (ASX: DEG) agreeing to a $5 billion takeover featuring one of Australia’s most significant new mines.

The binding scheme implementation deed will see Northern Star acquire De Grey and the Hemi gold development in Western Australia’s Pilbara region.

The board of De Grey has unanimously elected to support the scheme and recommended that De Grey shareholders vote in favour of the scheme, in the absence of a superior proposal.

Global gold miner

After completion of the merger, the combined Northern Star Group will operate across two Tier-1 jurisdictions and four production centres, with pro forma mineral resources of 74.9 million ounces and ore reserves of 26.9Moz.

With mineral resources of 11.2Moz, ore reserves of 6.0Moz and forecast annual gold production of 530,000ozpa over its first ten years, Hemi is one of the largest undeveloped gold projects in a Tier-1 mining jurisdiction.

Northern Star said that, following the Kalgoorlie Consolidated Gold Mines (KCGM) mill expansion and the development of Hemi, the company will be positioned in the first half of the global cost curve.

The 27Mtpa KCGM mill expansion is the largest Australian gold project in more than a decade.

Unlocking long-term value

Northern Star chief executive officer Stuart Tonkin said the company’s extensive exploration, mine development and operating expertise is expected to unlock the long-term value potential of Hemi.

“De Grey’s Hemi development project will deliver a low-cost, long-life and large-scale gold mine in the Tier-1 jurisdiction of WA, enhancing the quality of Northern Star’s asset portfolio to generate cash earnings,” Mr Tonkin said.

“We remain committed to our profitable growth plan to two million ounces per annum by FY26, with the KCGM mill expansion and addition of Hemi driving a significant further increase in Northern Star’s production to approximately 2.5Moz per annum by FY29.”

‘Attractive opportunity’

“Given the high-quality nature of Hemi, De Grey is in the fortunate position to have had many avenues to progress the asset, including M&A,” De Grey managing director Glenn Jardine said.

“The transaction that we have entered into 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.”

“We have assembled a wonderful project team to undertake the work required to bring this generational asset to its current position and the integration of this team into Northern Star will ensure continued momentum and sharing of Hemi knowledge.”

Terms of the offer

Under the terms of the scheme, De Grey shareholders would be entitled to receive 0.119 new Northern Star shares for each De Grey share held.

This represents an implied offer price of $2.08 per De Grey share – a 37% premium to the most recent closing price of $1.52 – and a total equity value for De Grey of approximately $5b.

Northern Star shareholders will own approximately 80.1% of the merged company upon implementation of the transaction, with De Grey shareholders owning the remaining 19.9%.