Northern Star nears final hurdle in De Grey takeover

Australian gold major Northern Star Resources (ASX: NST) is one step closer to taking control of developer De Grey Mining (ASX: DEG) and its world-class Hemi deposit in Western Australia’s Pilbara region.

De Grey agreed to a A$5 billion (C$4.4 billion) scrip takeover by Northern Star in December. The main question mark that hung over the deal was the intention of De Grey’s 17.26% shareholder Gold Road Resources (ASX: GOR), which had not publicly committed to vote in favour of the transaction.

That changed on Monday when Gold Road confirmed it would vote in favour, following the absence of any superior proposal. Its stake in De Grey is valued at more than $1 billion.

Analysts expect Gold Road to sell the shares it receives in Northern Star to pursue acquisitions. Gold Road, which jointly owns the Gruyere mine with Gold Fields (JSE: GFI), was previously the subject of an unsuccessful acquisition proposal by its partner but did not plan to rival Northern Star for De Grey.

Shareholders vote

At a shareholder meeting in Perth on Wednesday, more than 99% of De Grey shareholders approved the deal. De Grey chairman Simon Lill said the share exchange offered a 37% premium based on prices at the time of the deal’s announcement in December. 

De Grey shares closed at A$2.61 on Wednesday, while Northern Star closed at A$22.09, both record highs, taking the value of the deal to more than A$6 billion.

Northern Star managing director Stuart Tonkin welcomed the result, saying the acquisition fits squarely with the company’s strategy of generating strong returns.

“We believe De Grey’s Hemi project will deliver a low-cost, long-life and large-scale gold mine in a tier-one jurisdiction, further enhancing our portfolio and earnings potential,” Tonkin said.

The acquisition still requires final court approval, with a Federal Court hearing scheduled for Tuesday. De Grey shares will be suspended from trading the following day, with formal completion set for May 5.

Hemi advancing

The 13.6-million-oz. Hemi project is shovel-ready and has capital costs of $1.14 billion for a 10-million-tonne-per-year open pit operation. It is expected to produce 530,000 oz. of gold annually over its first decade, at all-in sustaining costs of $1,060–$1,150 an ounce. A 2023 definitive feasibility study valued the project at $2.56 billion post-tax, with a 36% internal rate of return based on a gold price of $2,388 per ounce. The current gold price is near $4,600 per ounce.

Further studies have indicated potential production could rise to at least 700,000 oz. annually, pending additional approvals. De Grey is targeting federal and state sign-offs in the September 2025 quarter.

With $657.3 million in cash and up to $999.7 million in proposed debt facilities at the end of March, funding for Hemi is expected to be fully covered. Northern Star, which operates production hubs in Western Australia and Alaska, plans to review and refine the development plan before kicking off construction.

Northern Star is expecting to produce between 1.65 and 1.8 million oz. of gold in the year ending June 30, 2025, at all-in sustaining costs of $1,640–$1,860 per ounce. It aims to lift annual production to 2 million oz. by 2027, not including any future contribution from Hemi.