Northern Star and Saracen mega-merger raises gold bar

The Northern Star and Saracen union creates the world’s sixth largest gold company and sets the stage for more merger activity in the sector.

The Kalgoorlie Super Pit is jointly owned by Northern Star Resources and Saracen Minerals. Picture: Bloomberg News

The gaze of ASX gold watchers has averted from the exploration minnows to the top end of town, after this week’s stunning “merger of equals” of Northern Star Resources and Saracen Minerals that will create the world’s sixth-biggest gold miner by market capitalisation.

We say stunning as no one really expected it although, in hindsight, it was an obvious ploy when you consider the duo’s dual ownership of the Kalgoorlie Super Pit and the much-vaunted $1.5bn-$2bn of benefits flowing from the union.

Given the buoyant gold price, there’s no doubt will be more such supersized plays as merger activity heats up across the gold sector. What’s perhaps more interesting is the acceleration of spin-off activity we are already seeing in the sector.

As veteran broker Richard Morrow from EL&C Baillieu puts it: “Many experienced mining execs will not make the merged team and will leave to create their own gold companies.

“Many projects won’t make the grade inside the $16bn Northern Star-Saracen monolith. These projects will find their way into new companies where the mining potential will be examined by fresh sets of eyes. Again, new companies and new mines will emerge.”

Meanwhile, the spin-off activity has begun in earnest. Here’s a look at the action:

North Stawell Minerals (NSM)

Over months of lockdown, the denizens of “Sicktoria” have endured a stream of quips from their liberated neighbours, such as the one about Australia being like the Spice Girls because everyone is doing their best except for Victoria.

But you can’t take away the state’s historical status as one of the world’s leading gold producers. The recent gold price retraction from record levels took the gloss off North Stawell’s much-anticipated listing, with the shares now well shy of the 50c issue price.

A spin-off of Victor Smorgon Group’s Leviathan Resources, North Stawell is exploring the notion that the rich gold resource that supports the Stawell gold mine extends 50km underground. North Stawell’s 262sq km of tenements are at the periphery of the so-called Golden Triangle between Stawell, Bendigo and Ballarat.

The goal is to unearth a clone of Kirkland Lake Gold’s revived Fosterville mine, which contains a monstrous 2.7 million ounces of gold at more than 30g a tonne. Armed with $20m from the raising, North Stawell will launch a $14m, 75,000m drill program over two years.

The Smorgon family retains a 36 per cent stake post-IPO. North Stawell enjoys the backing of Arete Capital Partners, a boutique resources fund chaired by WMC legend Hugh Morgan.

Siren Gold (SNG)

By comparing its New Zealand prospects to Victoria’s “mesothermal” (large and continuous) gold deposits, the latest ASX gold entrant stretches the “nearism” concept all the way across the Tasman.

In truth, Siren’s Reefton gold project on the South Island stands up on its own merits — the region produced two million ounces of hard rock and alluvial gold from 1870 to 1954.

Siren Gold shares recently debuted strongly on the ASX at a 45 per cent premium to their 25c- a-share issue price. We’re relieved to read the $10m raised will be “utilised in a cost-effective manner to advance the company’s business”.

Further afield, Megado Gold (MEG) is due to list this month, having raised $6m in an oversubscribed “whiparound”.

Megado’s shtick is not so much about nearism as Ethiopia, which is not known as a gold province but hosts several multi-million-ounce mines. Megado’s ground covers 510sq km, with geography “analogous to WA’s eastern goldfields” — so it is a “nearism” yarn, after all.

Still on distant locales, Pathfinder Resources (PF1) is seeking to raise $6m based on Argentina’s King Tut gold project that was last mined in the 1950s. And this one’s definitely not a nearism play because this King Tut is nowhere near Egypt.

Pathfinder is emerging from the shell of Winmar Resources, named in honour of former St Kilda AFL star and anti-racism advocate Nicky Winmar.

The company intends acquiring the King Tut project and retain two existing ventures — the Gowanda cobalt project in Canada and some iron ore turf in the Hamersley region of WA.

Pathfinder is slated to list on October 14.

Tim Boreham edits The New Criterion

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