The merger between Northern Star Resources (ASX: NST) and Saracen Mineral Holdings (ASX: SAR), announced in early October, has sent ripples through the Australian gold mining industry.
The friendly alliance between the Australian owners of the Super Pit, managed by Kalgoorlie Consolidated Gold Mines (KCGM), will effectively create a new Top 10 global gold major with a $16b market capitalisation.
The completion of the merger, anticipated around February 2021, will target new production levels of 2mozpa by FY27 from its Tier 1 locations at Kalgoorlie, Yandal and North America.
Northern Star Resources executive chairman Bill Beament, who will transition to Non-Executive Chair in July 2021, says the company has only ever pursued growth that will create value for its shareholders.
“This merger-of-equals will create an abundance of value for both Northern Star and Saracen shareholders,” he said.
“This is a significant value-creating M&A [and] 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.”
Northern Star’s Australian assets include its Kalgoorlie operations at Kanowna Belle, Kundana, South Kalgoorlie and the KCGM (Super Pit) joint venture, as well as its Yandal operations at Jundee and Bronzewing.
The company, which enjoyed record throughput of 2.3mt at Jundee and 2.1mt at Kanowna Belle in FY20, including record product sales of 900,388oz, will hold its Annual General Meeting on November 25 as a fully virtual online event.
Saracen Mineral Holdings managing direct Raleigh Finlayson, who will transition to Managing Director of the new conglomerate, said significant benefits will flow to Saracen shareholders from the merger.
“The pre-tax synergies alone are expected to be worth in the order of $1.5b to $2b over the next 10 years,” he said.
“This is one of the most logical and strategic M&A transactions the mining industry has seen.
“Saracen shareholders will own 36% of the combined group and therefore share in the significant benefits of these synergies, which is value that would not have been available to our shareholders otherwise.
“The savings, the synergies and the growth opportunities it will generate make the transaction extremely compelling.”
Saracen held its last Annual General Meeting on October 6, celebrating record gold production of more than 520,000oz in FY20 from its three operations, all within 300km of Kalgoorlie (Super Pit, Carosue Dam and Thunderbox).
The Super Pit is now 100% Australian-owned and under single ownership for the first time in more than 125 years, leveraging Northern Star’s underground and Saracen Mineral Holding’s open cut expertise.
Gold was discovered along the “Golden Mile” in 1893, with Kalgoorlie Consolidated Gold Mines (KCGM) formed in 1989 to operate the Fimiston Open Pit, now known as the Super Pit.
The Golden Mile has produced more than 40moz of gold since discovery, while KCGM produces about 800,000oz of gold per year.
A Federal Government report indicates that Australia will overtake China as world’s largest gold producing nation in 2021.
