Northern Star rising to Top-10 gold miner
Proposed merger would elevate market cap to US$11.5 billion North of 60 Mining News – October 7, 2020
Last updated 10/7/2020 at 8:06am
Pogo Mine owner Northern Star Resources Ltd. continues its growth with the proposed merger with fellow Australian gold miner Saracen Mineral Holdings Ltd.
In an all-shares deal announced on Oct. 5, the two companies will merge into the world's eighth largest gold producer, with a market capitalization of US$11.5 billion (A$16 billion) and gold producing assets in Australia and Alaska.
Under the proposed deal, Saracen shareholders will receive 0.3763 Northern Star shares for each Saracen share held at the time of the transaction. As a result, Northern Star shareholders will own 64% of the combined entity and Saracen shareholders will own the remaining 36%. Saracen has also agreed to pay a special dividend of A3.8 cents (US2.7 cents) per Saracen share when the deal closes.
Bill Beament will remain the chairman of the larger Northern Star, though in a non-executive capacity, and Saracen Mineral Holdings Managing Director Raleigh Finlayson will serve the same role in the merged company, and Stuart Tonkin will continue as Northern Star's CEO. The nine-member board of the merged company will include five directors from Northern Star and four from Saracen.
The two Australian gold miners expect the merged company to benefit from the skillsets each company brings to the table and roughly US$1.1 billion to US$1.4 billion (A$1.5 billion to A$2 billion) in synergies deriving primarily from their assets in Western Australia.
"Northern Star has only ever pursued growth when it will create value for shareholders, and this merger-of-equals will create an abundance of value for both Northern Star and Saracen shareholders," said Beament.
The biggest value driver is expected to be the consolidation of the Kalgoorlie Consolidated Gold Mines (KCGM) in the West Australian Goldfields under single ownership for the first time in its more than 125-year history.
Northern Star acquired a 50% joint venture interest in KCGM from Newmont Corp. in January – Saracen owns the other half of this iconic "Golden Mile" that has produced roughly 60 million ounces of gold and has a total endowment of about 80 million oz.
"Our position as joint venture partners at KCGM, the close proximity of the majority of the combined company's assets and a host of other synergies makes this a unique opportunity exclusive to Saracen and Northern Star shareholders," said Beament.
In addition to its 50% JV ownership of KCGM, Saracen owns two gold operations and several exploration properties within 185 miles (300 kilometers) of Golden Mile.
Northern Star assets in the Kalgoorlie area include Kanowna Belle, a 51% interest in the East Kundana JV, South Kalgoorlie, and the 50% JV interest in KCGM. The company also operates the Jundee Mine north of Kalgoorlie region of Western Australia and the Pogo Mine in Alaska.
The merged company will have 19 million oz in gold reserves and a whopping 49 million oz in gold resources.
It will also emerge as a roughly 1.5-million-oz-per-year gold producer and expects to be up to 2 million oz per annum by 2027. Roughly 300,000 oz of this gold production is expected to come from the Pogo Mine and the balance from the Australian operations.
"This is one of the most logical and strategic M&A (merger and acquisition) transactions the mining industry has seen," said Finlayson. "The savings, the synergies and the growth opportunities it will generate make the transaction extremely compelling."