Northern Star Revives Gold’s Stalled M&A Spree With Saracen Deal

(Bloomberg) — 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 ($11.5 billion).


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Adding Saracen’s assets in Australia will 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 country’s second-largest gold miner, said Tuesday in a statement.

The combination of the companies, which already jointly run Australia’s giant Super Pit may mark a revival of major deal-making in the gold sector, which has ebbed since a two-year long spree through last year that included Newmont Corp.’s mega-merger with Goldcorp Inc.

Deals in the sector worth about $9.8 billion have been completed, or agreed, so far this year, compared with about $26 billion in 2019, according to data compiled by Bloomberg. Northern Star has added more than $1 billion of acquisitions since August 2018, the data show.

chart, bar chart: Deal Decline

© Bloomberg
Deal Decline

“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 will 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.

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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’s Managing Director Raleigh Finlayson said on the call. “We’ve had try-before-you-buy here over the last nine months,” he said.

Spot gold prices touched a record in August, surging above $2,000 an ounce on increased geopolitical risks and as sliding U.S. real yields enhanced the metal’s haven status. Bullion was little changed Tuesday, trading at $1,912.76 an ounce as of 10:25 a.m. in Sydney.

chart: Spot gold hit an all-time high in August

© Bloomberg
Spot gold hit an all-time high in August

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 will also receive a special dividend of 3.8 Australian cents a share, according to the statement. Northern Star will own 64% of the new entity.

The boards of both companies have recommended the transaction, which is expected to be completed in February.

Northern Star’s Chief Executive Officer Stuart Tonkin will remain in his post, with Finlayson to act as managing director for 12-to-18 months before taking on a corporate development role. Beament will remain in his position until July, when he’ll become non-executive chairman.

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