Analysts welcome Northern Star’s Echo buy

Northern Star boss Bill Beament. Picture: Bloomberg

Echo Resources has been described as “a logical fit” for Northern Star by analysts at Credit Suisse following the company’s $243 million acquisition of the smaller miner.

Northern Star already owns a 22 per cent stake in Echo and revealed this week it would spend up to $193m to buy the miner’s remaining stock at 33c a share.

Echo has a 1.8 million-ounce resource just down the road from the Australian major’s Jundee operations.

The deal was flagged by DataRoom last week.

“Strategically, the acquisition of Echo has always been a logical fit for Northern Star, but even more so now when it brings additional mill capacity when even low grade stockpiles are cash generative at current gold prices,” Credit Suisse analysts said in a research note.

Credit Suisse says that from a value perspective, time would determine the outcome of the acquisition.

The acquisition comes as the gold price is holding above $2200 an ounce, despite the recent decline in the share price of listed gold miners.

The comments from analysts came as smash repairs company AMA was also highlighted as likely to embark on takeovers, with UBS saying the company was well placed to play the lead role of consolidator in the fragmented, cottage industry of panelbeaters.

“AMA’s relationships with the major insurers, proven track record in greenfields and acquisitions and access to capital underpins a pathway to solid long-term sustainable growth through further acquisitions and development of greenfield sites,” UBS analysts said in a research note.

The note from UBS comes amid speculation that AMA is eager to buy Suncorp’s Capital Smart smash repairs business when a sales process is launched through Luminis Partners.