UBS tips more M&A action in gold sector as Northern Star closes in on De Grey Mining

Kingmaker Gold Road has declared its hand in favour of a De Grey Mining takeover, as the action ratchets up among precious metal miners.

Northern Star Resources shares were trading at a record high of $21.49 on Monday with the likes of Goldman Sachs and UBS predicting the gold price could continue climbing.

Northern Star Resources has all but sealed what is now a $6.1bn takeover of De Grey Mining after a steep rise in the value of gold mining stocks fuelled by Donald Trump’s return to the White House and an escalation of trade wars.

Gold Road Resources, itself the target of a takeover, said on Monday that it would vote in favour of Northern Star’s all-scrip takeover offer for De Grey Mining.

The Duncan Gibbs-led Gold Road was seen as the kingmaker in the deal given its 17.3 per cent stake in De Grey.

Northern Star shares were trading at a record high of $21.49 on Monday with the likes of Goldman Sachs and UBS predicting the gold price could continue climbing well beyond an unprecedented $US3235 an ounce.

The Northern Star share price fell 7.6 per cent to $16.17 when what was a $5bn deal to acquire De Grey and its undeveloped Hemi project in the Pilbara was announced in December.

Northern Star will issue more than 286 million shares to De Grey meaning the value of what was already the highest price ever paid for an undeveloped gold project has grown to more than $6.1bn. De Grey’s market capitalisation has increased to $5.99bn since December.

De Grey shareholders are due to vote on the Northern Star takeover offer on Wednesday with the takeover expected to easily get the 75 per cent support required to proceed. Proxy votes were due in on Monday.

Gold Road had remained non-committal on how it intended to vote until Monday, leading to speculation its stake could be targeted by an interloper.

South Africa’s Gold Fields last month revealed it had made a spurned $3.3bn takeover offer for Gold Road, its partner in the Gruyere gold mine in WA.

Gold Fields said it has no interest in making a rival play for De Grey. Its rejected offer for Gold Road comprised a fixed portion of $2.27 a share plus a variable portion equal to the value of each shareholders’ proportion of Gold Road’s shareholding in De Grey.

Gold Road said on Monday that it would seek to maximise value for shareholders in any decision it made on its stake in Northern Star post the De Grey transaction.

Gold Fields has pointed to tax advantages for Gold Road shareholders under the structure of its offer.

UBS co-head of Australian mining research Levi Spry said the investment bank had increased its 2026 gold price average by $US600 an ounce to $US3500 an ounce, and was predicting more takeover activity.

UBS based its latest material upgrade on gold price forecasts on escalation in trade wars, a much weaker growth outlook and higher overall uncertainty.

“We have seen the M&A cycle ratchet up with mergers (especially on the Toronto exchange) and now cash bids but the thirst for reserve replenishment is never satisfied and we will see more deals,” UBS said.

Bellevue Gold said on Monday that it had received unsolicited takeover approach while grappling with problems at its namesake mine in WA.

Embattled Bellevue downgraded 2024-25 production guidance from 150,000-165,000 ounces to 129,000-134,000 ounces.

It also announced a $156.5m fully underwritten placement, a strategic review aimed at improving performance and the departure of chief operating officer Bill Stirling.

Bellevue, which has been given some breathing space by major backer Macquarie, will spend up to $110.5m closing out part of big hedge book that has prevented it taking advantage of the soaring gold price.

The Darren Stralow-led Bellevue is the worst-performed gold producer on the ASX over the past 12 months and the most heavily shorted gold stock. It has been suspended from trading since flagging the production downgrade on March 26.

De Grey’s Hemi is forecast to produce 530,000 ounces of gold a year over its first 10 years, with potential to hit 700,000 ounces annually a year by tapping into satellite deposits and through underground mining.

The deal to acquire De Grey is a departure from Northern Star’s “asset turnaround” playbook that has included a $16bn merger with Saracen Minerals in 2020 that consolidated ownership of the fabled Superpit mine on the outskirts of Kalgoorlie.

Originally published as UBS tips more M&A action in gold sector as Northern Star closes in on De Grey Mining