Australian gold miner Northern Star Resources has agreed to acquire Saracen Mineral Holdings in an all-stock deal valued at A$5.76bn ($4.14bn).

The two companies will merge to create an A$16bn ($11.47bn) global gold producer.

The deal comes after the gold price hit a record high above $2,000 an ounce in August, owing to the metal’s status as a safe-haven asset as the Covid-19 pandemic triggered fears over global economy, Reuters reported.

Northern Star executive chair Bill Beament said: “Northern Star has only ever pursued growth when it will create value for shareholders, and this merger-of-equals will create an abundance of value for both Northern Star and Saracen shareholders.

“This is significant value-creating M&A. Our position as joint venture partners at KCGM, the close proximity of the majority of the combined company’s assets and a host of other synergies makes this a unique opportunity exclusive to Saracen and Northern Star shareholders.”

The proposed merger will create a new gold major with a “world-class” portfolio and three large-scale production centres in Kalgoorlie and Yandal in Western Australia, as well as in North America.

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By GlobalData

Under the terms of the proposed merger deal, Saracen shareholders will receive 0.3763 Northern Star shares for each Saracen share held.

If approved, the deal would see Northern Star shareholders owning a 64% interest in the combined entity, while Saracen shareholders would own the remaining 36% stake.

Saracen Mineral managing director Raleigh Finlayson said: “The benefits which will flow to Saracen shareholders from this merger are significant. The pre-tax synergies alone are expected to be worth in the order of A$1.5bn ($1.07bn) to A$2bn ($1.43bn) over the next 10 years.

“Saracen shareholders will own 36% of the combined group and therefore share in the significant benefits of these synergies, which is value that would not have been available to our shareholders otherwise. It is difficult to foresee anything like that reduction in our cost base outside of this merger.”

The merger is expected to be closed early next year. It is, however, subject to approval from Saracen Mineral’s shareholders and other customary closing conditions.