Northern Star Resources has agreed to acquire rival Australian gold miner De Grey Mining in a deal valuing the latter at around A$5bn ($3.25bn).
The merger of both Australian Securities Exchange (ASX)-listed gold producers will create a combined entity with pro forma mineral resources of 74.9 million ounces and ore reserves of 26.9 million ounces.
The enlarged company will operate across two Tier-1 jurisdictions and four production centres.
Under the terms of the binding scheme implementation deed (SID), shareholders of De Grey Mining will exchange each of their shares for 0.119 new shares of Northern Star Resources. This equates to an implied offer price of A$2.08 ($1.35) per share.
The consideration represents a premium of 37.1% on De Grey Mining’s closing price on 29 November 2024. It is also a premium of 43.9% on its 30-day volume-weighted average price.
Post-transaction, shareholders of Northern Star Resources will hold approximately 80.1% of the merged group, with De Grey Mining shareholders owning the remaining 19.9% stake.
The deal will be executed through a court-approved scheme of arrangement under the Corporations Act 2001 (Cth). It will enable Northern Star Resources to gain full ownership of De Grey Mining’s flagship Hemi gold project located in Western Australia’s Pilbara region.
The Hemi project is a low-cost, long-life, and large-scale gold development project. It has estimated mineral resources of 11.2 million ounces and ore reserves of six million ounces.
Once operational, the Western Australian undeveloped gold project is expected to produce 530,000 ounces of gold annually over its first decade.
De Grey Mining managing director Glenn Jardine said: “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.
“The Transaction that we have entered 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.”
The Hemi project’s definitive feasibility study (DFS), completed in September 2023, projected construction to begin in mid-2024. First gold production is slated for mid-2026.
A final investment decision (FID) on the gold project is subject to finalisation of project approvals and project debt financing. The project also requires state and federal environmental approvals before progressing to FID.
In addition, Northern Star Resources’ shareholders expect the deal to bolster production capacity to approximately 2.5 million ounces per annum.
Northern Star Resources managing director and CEO Stuart Tonkin said: “The acquisition of De Grey is strongly aligned with Northern Star’s strategy and contributes to our purpose of generating superior returns for shareholders.
“De Grey’s Hemi development project will deliver a low-cost, long-life and large-scale gold mine in the Tier-1 jurisdiction of Western Australia, enhancing the quality of Northern Star’s asset portfolio to generate cash earnings.”
De Grey Mining’s board of directors has unanimously recommended the deal.
The company plans to dispatch a scheme booklet to shareholders by March 2025, with a vote on the proposal scheduled for April. If approved, the transaction is expected to close in late April or early May 2025.
Northern Star Resources has engaged Macquarie Capital as its financial adviser and King & Wood Mallesons as legal counsel. De Grey Mining has appointed Azure Capital, Barrenjoey, and Barclays as financial advisers with Gilbert + Tobin and Steinepreis Paganin as legal advisers.
