A blockbuster acquisition for Northern Star (NST)
The ASX woke on Monday to the news that Australia’s largest gold miner since the takeover of Newcrest, $19bn Northern Start (NST), was set to acquire De Grey Mining (DEG) for around $5bn in an all-scrip bid. DEG Hemi mine is a large and high-grade deposit, close to local infrastructure, in a stable legal jurisdiction and possessing a low All-in Sustaining Cost (AISC) estimated at $US1,250 – an exciting margin when we consider the likes of Citi, UBS, and Goldman Sachs recently upgraded their forecast consensus estimates for 2025 to around $US3,000/oz.
We like the deal announced for NST, enhancing it’s production potential while addressing ageing asset concerns. NST is set to secure a key asset in the Hemi gold project in W.A., one of Australia’s largest undeveloped gold mines. NST is positioning to increase annual production to 2.5mn oz by 2029 with the deal; yesterday’s knee-jerk -5.3% drop suggests that some think they overpaid; we disagree as assets are likely to increase in price as M&A is expected to increase across the space.
In our opinion, NST has been wise to “go early” as the competition for assets will likely intensify in 2025. In conclusion, we like the deal, given that NST has the expertise and capital (a whopping $1.3bn) to get the Hemi project up and firing. Note, De Grey’s asset is probably going to be 20 million ounces of gold by the time they’ve finished drilling!
- While we remain bullish toward gold, NST is an excellent large ASX proxy enhanced by its acquisition of DEG.
