Northern Star Resources Ltd (NST) has announced a binding agreement to acquire De Grey Mining Ltd (DEG) in a deal valued at approximately $5 billion.
The acquisition, which is set to significantly enhance Northern Star’s position in the global gold market, will be executed through a recommended scheme of arrangement.
Under the terms of the Scheme Implementation Deed (SID), De Grey shareholders will receive 0.119 new Northern Star shares for each De Grey share held.
This exchange ratio implies an offer price of $2.08 per De Grey share, representing a substantial premium to De Grey’s recent trading price.
The acquisition aligns with Northern Star’s long-term strategy of expanding its high-quality asset portfolio and driving superior returns for shareholders.
De Grey’s flagship asset, the Hemi gold project in Western Australia’s Pilbara region, is one of the largest undeveloped gold projects globally.
Key benefits of this deal include improved scale and diversity for Northern Star; access to a low-cost, long-life, and large-scale gold development project; as well as the potential for increased production and reduced costs.
The Hemi gold project boasts impressive statistics:
- Mineral Resources of 13.6 million ounces
- Ore Reserves of 6 million ounces
- Estimated 12-year production life
- Expected annual production of 530,000 ounces over the first 10 years
Once operational, Hemi is projected to increase Northern Star’s production by approximately 25 per cent, potentially reaching 2.5 million ounces per year by fiscal 2029.
While the acquisition presents no immediate impact on Northern Star’s credit quality, it is expected to be credit-positive in the long term.
The company anticipates funding the Hemi gold project’s capital expenditure, estimated at least $1.3 billion, through internal liquidity.
Financial Position:
- Pro forma liquidity of approximately $3.3 billion
- Leverage (Moody’s adjusted debt to EBITDA) of 0.6x as of June 2024
The acquisition does increase development and execution risks for Northern Star, particularly as the company is concurrently undertaking the KCGM Mill expansion project.
However, Northern Star’s track record in asset development and business integration, along with its strong financial position, positions it well to manage these challenges.
The transaction is subject to several conditions, including Federal Court approval, De Grey shareholder approval, and an independent expert report confirming the deal is in the best interest of De Grey shareholders.
The acquisition is expected to close between late April and early May 2025, subject to these approvals.
This strategic move by Northern Star Resources represents a significant consolidation in the Australian gold mining sector and is poised to reshape the company’s future in the global gold market.
