Northern Star Resources Ltd. has announced plans to acquire De Grey Mining Ltd. in a deal worth approximately A$5 billion ($3.3 billion), as gold producers seek to secure more resources amid soaring gold prices. The acquisition, offering a 37% premium on De Grey’s Friday closing price, will give the Perth-based gold producer full ownership of the Hemi project—a tier-one, low-cost asset in Western Australia’s Pilbara region.  

Northern Star, Australia's largest listed gold producer, is prioritizing ore supply expansion. Last year, the company pledged A$1.5 billion to double processing capacity at its Kalgoorlie operations and is working to extend the life of its flagship Fimiston gold mine, also known as the Super Pit, to 2034.  

Shares of De Grey surged by up to 30% in early Sydney trading, while Northern Star’s stock fell by as much as 6.5%.  

The Hemi project, expected to produce an average of 530,000 ounces annually during its first decade, is poised to become one of Australia’s top five gold mines. However, it is still awaiting a final investment decision and government environmental approvals, with first production targeted for mid-2026. Northern Star emphasized its disciplined approach to deal-making, highlighting the importance of organic growth and existing project expansions.  

“This acquisition complements our strong organic delivery strategy,” said Chief Executive Officer Stuart Tonkin, who recently underscored the company’s focus on maximizing returns from current assets.  

The deal has the unanimous backing of De Grey’s board. Under its terms, De Grey shareholders will receive 0.119 new Northern Star shares, valued at A$2.08 based on Friday’s closing price. Northern Star shareholders will hold an 80.1% stake in the combined entity, with De Grey shareholders owning the remainder.  

Analysts noted the strategic value of the acquisition. "While Northern Star's assets face challenges like aging infrastructure and declining grades, this move aligns with its strong exploration capabilities and long-term value creation,” said Kate McCutcheon, a Citigroup Inc. analyst.  

This deal is part of a wave of recent mergers and acquisitions in the gold sector, such as Gold Fields Ltd.’s $1.6 billion acquisition of Osisko Mining Inc. and AngloGold Ashanti Ltd.’s $2.5 billion purchase of Centamin Plc.  

Gold prices have risen by about 30% in 2024, driven by factors like monetary easing by the U.S. Federal Reserve, increased central bank purchases, and geopolitical tensions. Analysts, including Goldman Sachs and UBS, predict record-high prices in 2025.  

Australia remains the world’s third-largest gold producer, following China and Russia, according to the World Gold Council.

Paraphrasing text from "Bloomberg" all rights reserved by the original author.