Gold Fields CEO Mike Fraser is running out of options in his bid to consolidate control over the Gruyere gold mine.
The miner’s R38bn takeover offer for Gold Road, its Australian partner the crown jewel of which is its joint 50-50 ownership of the coveted mine, has been flatly rejected with Gold Road countering with a proposal to buy out Gold Fields’ stake. The public fallout has left the joint venture in tatters and Fraser with few options.
His predicament is clear: Gruyere is an important asset for Gold Fields, offering low cost, long-life production that the company needs to offset its ageing portfolio. It slots into the narrative Fraser has been building since he took over just more than a year ago, altering the company's growth trajectory with small, bolt-on acquisitions.
Analysts at Jefferies have pointed out the obvious — the grievances are now being aired in public and the gloves are off. And with diplomacy off the table, Fraser may have no choice but to go hostile. It’s a risky move, sure, but Fraser’s appeal to Gold Road’s shareholders could bypass management and potentially remain disciplined in capital allocation. After all, Gruyere isn’t just another mine, it boasts a substantial mineral resource of more than 6-million ounces of gold.
Fraser’s determination will be tested, but one thing is clear: diplomacy has failed. If he wants Gruyere, he will have to fight for it — hostilities and all.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.