Gold Fields’ proposal to acquire Yamana Gold in a R120bn deal hangs in the balance after two rival companies tabled a joint counteroffer, setting the scene for what could be a bidding war for the Canadian company.
Nasdaq-listed Pan American Silver and Agnico threw their hat into the ring on Friday when they tabled a joint $4.8bn offer to acquire Yamana, catching the markets off guard.
The counter-proposal came less than three weeks before shareholders of Gold Fields and Yamana are due to cast their vote on the merger, which, if successful, would catapult Gold Fields into fourth place among the world’s gold producers.
Yamana has given Gold Fields until Friday to match the cash and share offer, which it deems to be “superior”.
But the SA-based gold miner stood its ground on Friday, saying its $6.7bn offer “remains strategically and financially superior to the joint offer with higher-quality assets, lower operational and execution risk and higher sustainable returns”.
“The emergence of another offer indicates that other mining companies see the inherent value in Yamana’s assets,” Gold Fields said in a statement, but stopped short of detailing its next move.
Ore grades
The potential tie-up comes as Gold Fields and other mining companies look for revenue sources beyond the traditional SA market, where ore grades have been declining while costs have escalated.
Gold Fields shares jumped as much as 17% on Friday, the most since the early days of the Covid pandemic, when the news of the counterbid emerged, before settling 11.23% higher at R154.05 on the JSE.
“Gold Fields could amend its original offer; it’s really interested in the Yamana assets. But personally I don’t [think] it would, because of the opposition by some of the shareholders,” said Willem Oldewage, an analyst Nitrogen Fund Managers.
CEO Chris Griffith has been drumming up shareholder support after the violent market reaction when the proposal was announced in late May, with some shareholders raising concerns that Gold Fields would overpay for the Yamana assets.
One of the largest shareholders in both companies, fund manager VanEck, has told the Toronto Globe & Mail that it “couldn’t comprehend the rationale” for the deal and cited the “horrible” market reaction.
VanEck was referring to a 20% crash in the value of Gold Fields shares in May when the news first came to the market.
But Griffith, who has been in charge for only 18 months, says he believes that shareholders will benefit in the long term.
The proposed merger will add assets in Canada and Brazil to the list of jurisdictions in which Gold Fields already operates, which includes Australia, Ghana, Peru, Chile and SA.
Foothold
Canada and Australia are viewed globally as particularly attractive mining investment destinations, and Gold Fields has long wanted a foothold in Canada. But the deal would also add the Mara development project in Argentina, which the independent valuation puts at $800m-$1bn of the Yamana total.
The proposed acquisition is the largest outbound SA transaction yet and the third-largest SA deal since 2014, according to Bank of America Securities, which acted as exclusive financial adviser for the transaction.
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