Perth-based Northern Star Resources, the country's largest gold producer and owner of the Kalgoorlie Super Pit, has rejected an unsolicited takeover proposal from South African miner Gold Fields that valued the company at about $38.7 billion.

The proposal was worth about $27 a Northern Star share, with roughly 73 per cent of that to be paid in newly issued Gold Fields shares rather than cash. Northern Star's board said the offer undervalued its portfolio and had been timed to take advantage of the company.

If it went ahead, the deal would create the world's second-biggest gold miner, behind only US giant Newmont, and Australia's largest, producing about 2.4 million ounces a year here. Nearly 60 per cent of the combined group's production would come from Western Australia.

What the board said

Northern Star chair Michael Chaney said Gold Fields was trying to buy one of the world's best gold portfolios for far less than the board believes it is worth, and at what he called a "highly opportunistic time".

The board also objected to the structure of the offer. Because most of the price would be paid in Gold Fields scrip, Northern Star said its shareholders would be exposed to jurisdictional and operational risks they do not carry now. Gold Fields is listed in Johannesburg and New York and has said it would set up a Sydney listing so Australian investors could trade its shares.

Gold Fields isn't walking away

Gold Fields said the two companies had been in discussions over the past six months. Its chief executive, Mike Fraser, said the company was disappointed the board had "not yet chosen to engage", and that it remained open to talks.

The South African company estimates a merger could deliver up to US$5 billion in synergies and allow at least US$4 billion of asset sales. It already runs four major Australian mines, including Granny Smith and Gruyere in WA's Goldfields, and bought Gold Road Resources last year after a contested takeover fight.

The activist in the background

The approach puts fresh pressure on Northern Star, which has been under scrutiny since US activist investor Elliott Investment Management urged it in June to run a strategic review that could end in a sale. Elliott named Gold Fields as one of the few companies big enough to buy the miner.

"The board has an obligation to engage with any serious buyer." — John Pike, partner, Elliott Investment Management

Northern Star shares rose about 7 per cent after the proposal became public, while Gold Fields shares fell about 12 per cent in Johannesburg. The gap between Northern Star's share price and the implied offer value suggests the market thinks a deal is possible but far from certain.

Why it matters to WA

Northern Star is one of the biggest companies headquartered in Perth, and its mines — the Super Pit at Kalgoorlie-Boulder, Jundee, Thunderbox and Carosue Dam among them — employ thousands of West Australians, many of them fly-in, fly-out from Perth. A merged company would control six of Australia's 15 biggest gold mines by production, concentrating a large slice of the state's gold industry in one set of hands.

The bid is the largest in a wave of consolidation across the gold sector, as record prices push miners to buy reserves rather than find them. The biggest recent Australian deal, Newmont's $29 billion takeover of Newcrest in 2023, ended with a Melbourne-based miner coming under US ownership.

What happens next

The next move is up to Gold Fields: it can raise its offer, try to win over Northern Star shareholders directly, or walk away. With Elliott publicly pushing for talks, pressure on the Northern Star board to at least open its books is likely to grow in the coming weeks.

The story was flagged on X by The West Australian. Details of the proposal and the companies' statements are reported by Mining.com.

Photo: The Super Pit at Kalgoorlie-Boulder, operated by Northern Star. Chuq via Wikimedia Commons (CC BY-SA 4.0).