Northern Star, Saracen agree to create $11.5 billion gold miner

October 7, 2020

Northern Star Resources announced that it will buy Saracen Mineral Holdings in an agreed deal valued at $4.14 billion (A$5.76 billion).

The merger of the companies which operate gold mines in Australia and Alaska will create a company worth approximately $11.5 billion, making it the 8th largest gold mining company in the world by market value.

In a joint statement, the boards of both companies backed the shares and cash proposal.

The deal comes as major institutional investors turn to gold as a safe haven while the COVID-19 pandemic continues. In August, the price of gold rose above $2,000/oz.

Reuters reported that 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.

The combined company will be aim 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 in Western Australia, the country’s largest openpit 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.

“There’s a lot more interest in gold with the whole COVID crisis, which has shown what a resilient investment gold is as a countercyclical investment,” Chief Executive Sandeep Biswas told Reuters in a telephone interview.
 

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