By Rhiannon Hoyle

Northern Star Resources agreed to buy De Grey Mining in an all-stock deal valued at about 5 billion Australian dollars (US$3.26 billion) as gold companies race to secure new mines at a time when prices for the precious metal are near an all-time high.

For Northern Star, the deal secures one of the gold industry's biggest undeveloped projects, which De Grey has estimated could become one of Australia's top producing and lowest cost gold mines.

Northern Star, which runs gold-mining operations in Australia and the U.S., has been eagerly expanding production under a five-year strategy it laid out in mid-2021 to be producing two million troy ounces of gold a year, or roughly 25% more, by fiscal 2026.

Valued at more than A$20 billion, the company is already Australia's biggest listed gold miner.

De Grey's flagship project, Hemi, is a low-cost, long-life and large-scale gold project in the mineral-rich Pilbara region of western Australia, said Northern Star Chief Executive Stuart Tonkin.

Buying it will make Northern Star's portfolio better, and allow for a further increase in group production to roughly 2.5 million ounces a year by fiscal 2029, he said.

Gold companies have been inking more deals as they seek to grow or replace aging mines. In August, Gold Fields agreed to buy Canada's Osisko Mining for about US$1.6 billion. A month later, AngloGold Ashanti agreed to buy Egypt-focused Centamin about US$2.5 billion.

The deals have been struck against a backdrop of strong gold prices, which surged as investors sought a hedge against geopolitical turbulence. The U.S. election and bets on interest-rate cuts also lured investors to buy the metal. For the first time, the price of a standard gold bar topped US$1 million.

Under the terms of Monday's agreement, De Grey shareholders would get 0.119 new Northern Star share for each De Grey one they hold, representing an implied offer price of A$2.08 a share and a 44% premium to De Grey's 30-day volume-weighted average price.

Northern Star shareholders would own roughly 80% of the combined group, and De Grey shareholders the rest. The deal has been unanimously recommended by directors of De Grey.

Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com

(END) Dow Jones Newswires

December 01, 2024 18:01 ET (23:01 GMT)

Copyright (c) 2024 Dow Jones & Company, Inc.