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Northern Star makes takeover play for Echo Resources; FY'19 profit down 20%

Northern Star Resources Ltd. said Aug. 26 that it will acquire all shares in Echo Resources Ltd. it does not own for 33 Australian cents per share, representing a A$242.6 million value for the latter.

The offer represents a 39.4% premium to the volume weighted average price of 23.7 cents per share on Aug. 19, before its shares were placed on a trading halt, or a 42.1% premium to the 10-day volume weighted average price of 23.2 cents per share.

Directors of Echo Resources have unanimously recommended that shareholders accept the offer, in the absence of a superior proposal.

As of June 30, Northern Star held a 21.76% stake in Echo Resources, which is advancing the Yandal gold project in Western Australia, with the former paying up to A$193.0 million for the remaining shares it does not hold.

In a separate Aug. 27 statement, Northern Star's fiscal 2019 net profit was A$154.7 million, a 20% decline from A$194.1 million, due to its A$50 million investment in the Pogo gold project in Alaska, which it acquired in August 2018 for US$260 million.

Underlying net profit in the 12-month period — excluding impairment, fair value adjustment, among others — amounted to A$179.2 million, from A$211.5 million in the prior year, representing a 15% downward change.

The Australian gold miner declared a final fully franked dividend of 7.5 Australian cents per share, a 50% increase from 5.0 cents per share last year, taking its full-year payout to 13.5 cents per share, in line with its policy of distributing 6% of revenue to shareholders.

Revenue for the period grew 45.3% to A$1.40 billion, which was positively influenced by a 4% uptick in average realized gold price to A$1,764 per ounce and a 37% rise in gold sold to 781,013 ounces.

Full-year production was 900,268 ounces, exceeding its full-year upper guidance range of 900,000 ounces. Cash operating cost was A$1,084/oz, while all-in sustaining cost was A$1,296/oz, higher than revised guidance of A$1,275/oz.

Meanwhile, group ore reserves after mining depletion grew 35% to 5.38 million ounces of gold contained in 38.16 million tonnes grading 4.4 g/t gold. Resources as of June 30 increased 31% to 20.76 Moz contained in 156.03 Mt grading 4.1 g/t gold.

Northern Star set its fiscal 2020 group gold production guidance at between 800,000 ounces to 900,000 ounces. All-in sustaining cost is projected to range from A$1,200/oz to A$1,300/oz.