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

Northern Star Resources will buy De Grey Mining in a $5 billion deal that hands the Australian gold giant the keys to the country’s next major gold 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.

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. All the while, gold prices have surged nearly 30 per cent since the start of 2024.

Each De Grey shareholder is to be issued 0.119 NST shares under the transaction, pricing the target’s stock at $2.08 and the company at about $5 billion. 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.

But it remains to be seen what major shareholder Gold Road Resources, which owns nearly 20 per cent of De Grey and had for a while been considered a takeover threat, makes of the deal.

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

De Grey has 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 the first half of 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.

Hemi is estimated to cost about $1.3b and will need 1700 workers to build and run.

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.”

The Glenn Jardine-led developer had been aiming to make a final investment decision and start formal construction at the highly-anticipated $1.3 billion 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.”