Northern Star Resources Ltd agreed to buy smaller Australian rival Saracen Mineral Holdings Ltd to boost gold output amid surging prices and create a top 10 global producer with a market valuation of about A$16 billion (US$11.5 billion).
Adding Saracen’s assets in Australia would put the company on track to produce 2 million ounces a year from fiscal 2027 and deliver as much as A$2 billion in operational savings, Perth-based Northern Star, the nation’s second-largest gold miner, said in a statement yesterday.
SUPER PIT
The combination of the companies, which already jointly run Australia’s giant Super Pit may mark a revival of major dealmaking in the gold sector, which has ebbed since a two-year long spree through last year that included Newmont Corp’s megamerger with Goldcorp Inc.
About US$9.8 billion in deals in the sector have been completed, or agreed, so far this year, compared with about US$26 billion last year, according to data compiled by Bloomberg.
Northern Star has added more than US$1 billion of acquisitions since August 2018, the data showed.
“Between both portfolios we’ve got so many growth options. We’re not planning to divest anything and in fact we’re growing our production,” Northern Star executive chairman Bill Beament said on an investor call. “We’ve got plenty of feed to keep our expanded processing plants going for decades to come.”
The producer would operate three clusters of assets — in the Kalgoorlie and Yandal regions of Western Australia and around the Pogo mine in Alaska — and be in a position to accelerate growth opportunities, according to the statement.
Collaboration between the two companies this year at Kalgoorlie’s Super Pit, a site of gold production for more than 125 years, had shown the value of a broader combination, Saracen managing director Raleigh Finlayson said on the call.
“We’ve had try-before-you-buy here over the last nine months,” he said.
RECORD PRICES
Spot gold prices touched a record in August, surging above US$2,000 an ounce on increased geopolitical risks and as sliding US real yields enhanced the metal’s haven status.
Bullion was little changed yesterday, trading at US$1,912.76 an ounce as of 10:25am in Sydney.
Under the deal, Northern Star offered 0.3763 of its shares for every Saracen share, equivalent to A$5.20 a share, according to Bloomberg calculations.
Saracen holders are to receive a special dividend of A$0.038 a share, according to the statement. Northern Star would own 64 percent of the new entity.
The boards of both companies have recommended the transaction, which is expected to be completed in February.
Northern Star CEO Stuart Tonkin is to remain in his post, with Finlayson to act as managing director for 12 to 18 months before taking on a corporate development role.
Beament is to remain in his position until July, when he is to become non-executive chairman.
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