Saracen and Northern Star Join Forces to Create Top 10 Gold Miner

Aussie gold miners Saracen Mineral Holdings Ltd [ASX:SAR] and Northern Star Resources Ltd [ASX:NST] are looking to merge into one. If the deal goes through, the new entity will become a top 10 gold major with a $16 billion market cap.

Under the Merger Implementation Deed (MID) agreement they announced today, Northern Star will buy 100% of Saracen’s shares. Saracen shareholders will get $0.3763 Northern Star shares per Saracen share they hold. They’ll also be receiving a $3.8 cent special fully franked dividend.

That is, as long as the deal goes through.

The deal leaves Northern Star shareholders with 64% ownership and Saracen shareholders with 36%.

The merger combines their assets, which are all in tier 1 locations, as you can see below:

Saracen Minerals and NST Merger

Source: Saracen

The new company will also have 100% ownership of the Super Pit, the largest open pit gold mine in Australia. Located in Western Australia, Saracen bought a 50% share from Barrick Gold last year and Northern Star got the other 50% earlier this year from Newmont Corp.

The idea is to increase growth and save costs with the new company looking to produce 2 Moz per annum by FY27.

Saracen’s Raleigh Finlayson who will be staying on as Managing Director of the new entity said:

The benefits which will flow to Saracen shareholders from this merger are significant. The pre-tax synergies alone are expected to be worth in the order of A$1.5 to A$2.0billionover the next 10 years.

It is difficult to foresee anything like that reduction in our cost base outside of this merger.

What will happen next?

Both boards have recommended the deal to their shareholders.

The deal will go through pending court and shareholder approval, which is scheduled to happen around January 2021, with the deal completing by February 2021.

At time of writing, both Saracen and Northern Star shares are up by 7.5%.

Focusing on growth and cost savings when gold is trading at close to US$2,000 could turn out to be quite a good strategy.

One way to get exposure to higher gold prices is through gold. Another is gold stocks, like gold miners. But this can be risky.

Check out Greg Canavan’s free guide on ‘How to Pick Winning Gold Stocks’.

You can access it here.


Selva Freigedo

Selva Freigedo is a research analyst for The Rum Rebellion.

Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table.

Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default.

Selva has also lived in Brazil, Spain and the USA.

Back in 2000 she was living in the US as the dot com bubble popped…
And in 2008 she was in Spain as the property market exploded and then collapsed…

She has seen first-hand what happens when bubbles burst.

Selva joined Fat Tail Investment Research’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.

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