PERTH (miningweekly.com) – Gold miner Northern Star Resources has made a A$242.6-million takeover offer for fellow-listed Echo Resources, offering shareholders 33c in cash for every Echo share held.
The offer price represented a 39.4% premium to Echo’s last trading price on August 19, and a 42.1% premium to the company’s ten-day volume weighted average share price.
Northern Star is currently Echo’s largest shareholder, holding a 21.7% interest in the company.
Echo holds the Yandal gold project, in Western Australia, which covers some 1 600 km2 of tenement area. The company’s assets include the 1.8-million-tonne-a-year Bronzewing processing plant and infrastructure.
Northern Star told shareholders on Tuesday that the acquisition of Echo would allow the company to consolidate the mineralisation at the Yandal gold project for further evaluation on both an exploration and development basis, while also providing Northern Star with the ability to process gold at the Bronzewing processing plant, if an evaluation of a restart is successful.
The independent Echo directors have unanimously recommended the offer to shareholders, in the absence of a superior offer, with MD and CEO Victor Rajasooriar saying that the offer reflected the strategic nature of the Yandal project and its unique combination of mineralisation, untested exploration upside, established processing infrastructure, and a detailed feasibility study at Bronzewing.
The takeover offer is subject to a number of conditions, including a 90% minimum acceptance.
Northern Star on Tuesday also reported a fall in underlying net profit after tax for the full year ended June, following a A$50-million investment in the Pogo gold mine, in Alaska.
Underlying net profits for the full year declined from the A$211.5-million reported at the end of the 2018 financial year, to A$179.2-million.
Group earnings before interest, taxes, depreciation and amortization increased from A$443.3-million to A$479.7-million, while operating mine cash flows increased from A$485.1-million to A$587.6-million.
Executive chairperson Bill Beament told shareholders that during the 2019 financial year, the company had laid the foundations for its next chapter of growth.
“We started applying our proven business model at Pogo as soon as we acquired it, investing heavily in a more efficient mining method, including new mobile fleet and an extensive exploration programme.
“The results of that investment are already flowing through in the form of increased production, lower costs and a much bigger mineral inventory.”
Beament said that the acquisition could not have been better timed, considering that the gold price was around A$1 650 oz at the time of the acquisition, compared with the current spot price of A$2 220/oz.
“When this sharply higher price is applied to our 2020 guidance of between 800 000 oz to 900 000 oz, the true benefits of our investment strategy become clear.”