Two of WA’s biggest gold miners are merging to create a $16 billion giant that will bring Kalgoorlie’s famous “Golden Mile” under one owner for the first time in its 125-year-plus history.
Under the plan announced on Tuesday, Northern Star will absorb its Super Pit joint venture partner Saracen.
Northern Star’s shareholders will own 64 per cent of the combined entity, while Saracen shareholders will hold the remaining 36 per cent.
Saracen shareholders will receive roughly one-third of a Northern Star share for each Saracen share they have and a special, fully franked dividend of 3.8 cents per Saracen share.
The tie-up will create a top-10 global major gold producer and Australia’s second biggest miner of the precious metal behind Newcrest.
The Super Pit – so close to Kalgoorlie it has caused cracks in structures over the years – was only recently snapped up by the two companies, which bought it from Canada’s Barrick Gold and US-based Newmont.
It is Australia’s biggest gold mine, measuring a whopping 3.5 kilometres long, 1.5 kilometres wide and more than 600 metres deep.
The mine is based on the “Golden Mile”, one of the world’s richest goldfields. After its initial discovery in the late 1800s, a gold rush ensued, and the idea of creating the Super Pit to amalgamate various operations into one epic open pit was hatched by the late Alan Bond in the 1980s.
Most of Northern Star and Saracen’s other assets are close by.
In a joint statement, Saracen managing director Raleigh Finlayson said the deal was one of the most logical and strategic mergers the mining industry had seen.
“The savings, the synergies and the growth opportunities it will generate make the transaction extremely compelling,” he said.
“The pre-tax synergies alone are expected to be worth in the order of $1.5 to $2 billion over the next 10 years.”
Both companies said the merged company would benefit from the combined skills and experience of the two management teams.
“This merger-of-equals will create an abundance of value for both Northern Star and Saracen shareholders,” Northern Star executive chair Bill Beament said.
The market applauded the proposal, sending shares in both companies more than 7 per cent higher in intraday trade.