Northern Star Resources is set to acquire the stake it does not already own in Echo Resources for up to $193 million.
The proposed deal will allow Northern Star to consolidate the mineralisation at the Yandal gold project in Western Australia to evaluate potential for further exploration and development.
Northern Star, which operates the near-by Jundee gold mine, will also gain the ability to process gold at the Bronzewing process plant, currently under care and maintenance, if a successful restart is evaluated.
Perth-based Northern Star is already Echo’s largest shareholder with a 21.7 per cent stake in the company.
The two companies have entered into a bid implementation agreement that will see Northern Star offer to acquire the remaining shares in Echo with an off-market takeover offer.
Under the agreement, Northern Star will offer 33 cents for each remaining Echo share, representing a 50 per cent premium on the target’s 20-day volume weighted average price (VWAP).
The proposed offer values Echo at approximately $242.6 million and has been recommended by its board members independent of Northern Star.
Echo managing director and chief executive officer Victor Rajasooriar said the offer reflected the strategic nature of the Yandal project.
The gold project “has a unique combination of mineralisation, untested exploration upside, established processing infrastructure at Bronzewing and a detailed feasibility study,” Rajasooriar said.
“The board of Echo is pleased to recommend the offer to Echo shareholders in the absence of a superior proposal, and we look forward to working with Northern Star to implement the transaction.”
Yandal comprises more than 1600 square kilometres of contiguous tenements in the Yandal greenstone belt.
The tenements, approximately 400 kilometres north of Kalgoorlie, include the 1.8 million tonne per annum Bronzewing plant and associated infrastructure.
Northern Star’s offer is subject to a number of conditions, including that a minimum of 90 per cent of Echo’s shareholders accept the bid.
The Bill Beament-led company has also recently been involved in speculation that it will make an offer for Barrick Gold’s share in the Super Pit gold mine in Kalgoorlie-Boulder.
Barrick chief executive officer Mark Bristow confirmed in an interview that Northern Star was a frontrunner in the bidding process for the Canadian company’s 50 per cent stake.
Northern Star also announced it would expand into North America almost exactly a year ago through a $US260 million ($350 million) acquisition of the Pogo underground gold mine in Alaska.