Northern Star Resources to buy De Grey Mining and Pilbara beast Hemi amid record gold prices

Northern Star Resources is set to buy De Grey Mining in a $5 billion deal that hands the Australian gold giant the keys to the country’s next major mine amid record prices for the yellow metal.

The pair told the Australian Securities Exchange on Monday they had locked in a scheme of arrangement, under which Northern Star will buy 100 per cent of the explorer.

The price tag is believed to be a global record for a gold company without a mine in production.

Northern Star chief executive Stuart Tonkin said the deal was “strongly aligned” with the Super Pit owner’s strategy and would reinforce its place as a top 10 global producer.

The company will take control of De Grey as it prepares to start building the Hemi discovery in the Pilbara that propelled the explorer to fame nearly five years ago.

It also comes as Northern Star delivers on a massive upgrade to double processing capacity at the Kalgoorlie Super Pit’s Fimiston mill by 2029 and lift the iconic mine’s annual output to 900,000 ounces.

All the while, gold prices have surged nearly 30 per cent since the start of 2024 and broached $4000 an ounce in October.

Each De Grey shareholder will receive 0.119 NST shares per security under the transaction, pricing the target’s stock at $2.08 and the company at about $5b. De Grey shares were trading at about $1.52 last Friday, marking a sizeable 37.1 per cent premium on its share price then and a 43.9 per cent premium on its 30-day volume-weighted average price.

Northern Star shareholders will own about 80.1 per cent of the company and De Grey shareholders will own the rest. De Grey’s board has unanimously approved the deal.

Major shareholder Gold Road Resources owns 17.3 per cent of De Grey and will be a crucial voice in the deal, which needs 75 per cent approval to pass.

Environmental approvals are due to be signed off for Hemi in early 2025 after a slight delay to the project’s timeline.

De Grey had lined up nearly $1b in mostly debt to bankroll the brand Hemi new gold mine and processing plant, which is expected to deliver maiden gold in mid-2026 and churn out 553,000oz a year in its first five years.

Those numbers will make it one of the biggest gold mines in Australia.

Northern Star turned out about 1.62 million ounces of gold in 2024, meaning the addition of Hemi — once up and running — and a supersized Super Pit could propel the WA-based miner towards global a top 10 producer territory by the end of the decade.

Hemi is estimated to cost about $1.3b and will need 1700 workers to build and run. It’s expected a final investment decision will be made once Hemi’s State and Federal approvals are locked in.

Mr Tonkin said the project team handling the Super Pit expansion would transition to the Hemi build.

“The 27Mtpa KCGM mill expansion is the largest Australian gold project in over 10 years and provides Northern Star with the unique opportunity to de-risk the Hemi development pathway through our experience and relationships with contractors and suppliers,” he said.

“We recognise the excellent work the De Grey team has completed to date in taking the asset from an exploration discovery to a near shovel-ready mine.”

As well as the Super Pit in Kalgoorlie, Northern Star owns the Yandal production centre also in WA and the Pogo operations in Alaska.

De Grey, led by Glenn Jardine, had been aiming to make a final investment decision and start formal construction at the highly-anticipated project during the second half of 2024.

“Given the high-quality nature of Hemi, De Grey is in the fortunate position to have had many avenues to progress the asset, including M&A,” he said.

“The transaction that we have entered with Northern Star today is a highly attractive opportunity for De Grey shareholders in terms of the upfront premium, as well as retaining ongoing exposure to Hemi and gaining exposure to the broader Northern Star portfolio.”

Shares in De Grey launched 29.4 per cent on the news to $1.97. Northern Star shares were off 6.25 per cent to $16.42.