MELBOURNE: Australian gold miner Northern Star Resources offered to buy smaller peer Saracen Mineral Holdings in an agreed $5.76 billion Australian dollar ($4.14 billion) deal that will create a global top-10 gold
miner by market value.
In a joint statement, the boards of both companies backed the shares and cash proposal, which would create a roughly $11.5 billion company, the eight-biggest gold miner in the world by market capitalization.
It comes after the price of gold hit a record above $2,000 an ounce in August in a scramble for safe-haven assets as the coronavirus pandemic triggered global economic fears. As miners court renewed appetite for the sector among major institutional investors, Australia’s top gold miner Newcrest Mining on Tuesday announced plans to list shares in Toronto.
The prospective deal — recommended to investors by both boards in the absence of a superior offer — catapulted shares in each firm about 10 percent higher by the close of trading. It would see Saracen shareholders receive 0.3763 new fully paid ordinary shares in Northern Star for each share held, plus a special dividend of 3.8 Australian cents per share.
Northern Star will own 64 percent of the combined entity and Saracen will own the remaining 36 percent, the two companies said. A shareholder meeting to formally approve the proposal will be held in January 2021.
“It will make a globally competitive gold miner. I think it’s quite positive for Northern Star shareholders,” said Warren Edney, research analyst at EL&C Baillieu.
The combined company, with mines in both Australia and Alaska, will be aiming for 2 million ounces of gold production by 2027 — a 30 percent increase in production from 1.6 million ounces currently. By production, the combined Northern Star-Saracen firm aims to rise to the top seven globally over that time.
The pair already have strong links through a major joint venture, having last year acquired a 50 percent stake each in the Super Pit gold mine, the country’s largest open cut gold mine.
“This deal gives the scale and liquidity to attract both gold and generalist investors,” said Bill Beament, Executive Chair of Northern Star, who will retain the same position in the new entity until July 1, 2021.
A combined, strong balance sheet, he said, would allow the new company to better access “accretive M&A opportunities.”
The miner will split itself into three production centers: Kalgoorlie, based around the super pit in central Australia; Yandal, which will consolidate both miners’ small mines and mills in the nearby desert region; and North American operations that hinge on Northern Star’s Pogo mine.
“The pre-tax synergies alone are expected to be worth in order of $1.5 billion to $2.0 billion Australian dollars over the next 10 years,” said Saracen managing director Raleigh Finlayson, who will take over the same role in the combined group.
