Gold Fields is on the verge of completing another mega-transaction — its second deal in a space of six months — taking its total merger and acquisitions to nearly R70bn.
The company said on Monday it had made progress in its hot pursuit of Australian gold miner Gold Road Resources in a deal valued at A$3.7bn (R44bn), with more consolidation in the gold mining sector on the cards — fuelled by record gold prices.
Gold Fields has been aggressive in securing its future as production at its non-SA mines starts to decline in the coming decade. It said Gold Road’s board unanimously recommended that shareholders vote in favour of the transaction, “in the absence of a superior proposal” and subject to an independent expert concluding that it was in the best interests of Gold Road shareholders.
The Gold Road deal comes just six months after Gold Fields completed the purchase of Osisko Mining for about R25bn — in a transaction that consolidated Gold Fields’ 100% ownership of the Windfall Project and the surrounding exploration district in Québec, Canada.
Gold Fields CEO Mike Fraser has been more successful in completing deals than his predecessor, Chris Griffith, who lost his job after he failed to clinch Yamana Gold, which owns and operates gold, silver and copper mines in Canada, Chile, Brazil and Argentina.
Losing out on Yamana to a superior joint bid by Agnico-Eagle and Pan American Silver has not slowed Gold Fields in pursuing deals. Its then interim CEO Martin Preece in 2023 led a transaction to secure a 50% stake in the Windfall gold project in Canada. Under the current deal, Gold Road shareholders will receive a cash consideration equivalent to A$3.40 per share.
The consideration is higher than Gold Fields’ original offer and comprises a fixed cash portion of A$2.52 for each Gold Road share and a variable cash portion equal to the full value of each shareholder’s proportion of Gold Road’s shareholding in Northern Star Resources. On May 2, the variable cash consideration was A$0.88 per Gold Road share.
If the deal becomes effective, Gold Road intends to declare a special dividend, the quantum of which will be based on the prevailing franking account balance of Gold Road at the time of the distribution. On May 2, this implied a special dividend of about A$0.35 per share, or about A$379m.
The acquisition of Gold Road represented a strategically logical and low-risk opportunity to enhance Gold Fields’ portfolio through the consolidation of the Gruyere joint venture in which Gold Fields was the operator, it said.
Fraser said the consolidation of ownership in the Gruyere gold mine was aligned with Gold Fields’ strategy of improving portfolio quality through investment in high-quality, long-life assets and was immediately additive to the group’s cash generation. “We are grateful for our partnership with Gold Road, which has seen the asset evolve from exploration discovery to a high-quality operational mine. We look forward to maximising the potential of the Gruyere gold mine and Gold Road’s exploration package to the benefit of Gold Fields shareholders,” he said.
Coveted for its low-cost production and long operational lifespan, Gruyere boasts a substantial mineral resource of more than 6-million ounces of gold, making it one of Australia’s largest undeveloped gold deposits. Its ore reserve is estimated at 3.7-million ounces, with a mine life of more than 10 years. It produces about 35,000oz of gold a year.
The near completion of the Gold Road transaction will come as a relief to Gold Fields after the proposed mega joint venture between Gold Fields and AngloGold Ashanti in Ghana was cast in doubt in October when the West African government stalled the transaction, leaving the parties frustrated.
The deal, if it jumps Ghana’s regulatory hurdles, will bring together Gold Fields’ Tarkwa mine and AngloGold Ashanti’s Iduapriem mine, both of which are located near the town of Tarkwa in western Ghana.
In terms of the proposal, tabled with the government of Ghana in March 2023, Gold Fields will own 60% of the joint venture, AngloGold Ashanti 30% and the government 10%. The benefits of the transaction are almost immediate with higher combined production of 900,000oz at a cost of less than $1,000/oz over the first five years and the life-of-mine extended to 2038.
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