The $16bn merger between Northern Star Resources and Saracen Mineral Holdings is expected to be followed by a raft of other merger and acquisition deals in the goldmining space, according to market sources.
Some are pointing to an acquisition by Silver Lake of Bellevue Gold as the next deal, while others question whether De Grey Mining is a takeover target.
Apparently, various parties have been circling De Grey Mining of late. The obvious contender for the $1.72bn West Australian gold miner is Canada’s Kirkland Lake Gold, which owns a stake in the business worth less than 5 per cent and is known to have been looking around the Australian market for opportunities.
It recently participated in the De Grey equity raising to secure about $100m, which is rare for Kirkland Lake, given it has opted to pass on the opportunity with previous De Grey equity raisings.
Yet while the Toronto-listed Kirkland Lake, with a market value of more than $C17bn ($18bn), has been looking around Australia for acquisition opportunities, some question whether it will eventually be a takeover target itself by the newly merged Northern Star entity or even Northern Star’s long-time competitor, Evolution Mining.
The other gold miner known to have been knocking on doors is Australia’s largest, Newcrest Mining.
Several of the company’s mines are reaching the end of their lives and they need new projects to boost the level of ounces of gold produced.
St Barbara and Dacian Gold are also thought to fit into the category of companies that have reasonably short mine lives and need to refresh their portfolios.
The soaring gold price has fuelled deal activity in the goldmining space.
The Australian dollar gold price hit a record of $2873.56 an ounce on August 6, driven by the weakening US dollar and the search by investors for diversification.
At that time, gold was up 33 per cent from the start of the year, but it has since eased off and was down 0.3 per cent at $2639.03 on Thursday.
Another interesting situation unfolding in the Australian listed gold mining space is NTM Gold, which has a $63m market value.
Well-known West Australian mining investor Michael Ruane, who is on the board, recently lifted his interest in the company to close to 10 per cent, sending the stock soaring more than 19 per cent, amid speculation it is on the radar of various parties as a takeover target.
This week, goldmining analysts have thrown their support behind Northern Star’s merger with Saracen.
Analysts at Citi said in a research note that Saracen would need to sell the “merger of equals” to its shareholders as a valuation uplift to make it look attractive, given the absence of a premium. But Citi estimates the valuation uplift for Saracen following the deal is 15 per cent compared to 6 per cent for Northern Star.
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