PI Global Investments

Gold Fields defends $5.2bn Yamana bid

The chief executive of South African miner Gold Fields has defended the timing of its $5.2bn bid for Yamana Gold, arguing the “opportunity” to create the sector’s fourth biggest producer might have disappeared if it had waited.

Chris Griffith said Gold Fields was aware that Yamana had talked to other companies as it prepared its all-stock offer.

“We know that other companies are interested in some of the assets,” he said in an interview with the Financial Times. “So I think it is not a certainty these assets will be around in two to three years’ time.”

Shares in Gold Fields slumped 20 per cent on the day the deal was announced in May, with investors alarmed at the 34 per cent premium offered for Toronto-listed Yamana.

Redwheel — a top investor in Gold Fields, which controls 3 per cent for clients — called on Griffith to withdraw the offer and focus on its “excellent organic growth options”, which include the Salares Norte gold mine in Chile, where production is due to start early next year. Redwheel said Gold Fields has “ample time to be opportunistic over the next few years rather than rushing into a significantly dilutive acquisition today”.

If the deal goes ahead Gold Fields shareholders will end up holding 61 per cent of the combined company, which will have a market capitalisation of more than $12bn at current prices.

Griffith, who became chief executive in April 2021, said he always knew the deal would require “substantial engagement” with investors. “Many of the Gold Fields shareholders don’t really know Yamana and the Yamana assets, and likewise with Yamana, many of them won’t know Gold Fields,” he said. “We still see a really, really strong underlying strategic rationale for this deal.”

Gold Fields, which was founded in 1887, argues that buying Yamana will add operations in Canada, Argentina, Chile and Brazil, and provide the Johannesburg-listed company with an extensive exploration pipeline to complement its portfolio of cash generative but mature mines.

Gold Fields will produce 2.3mn ounces of gold this year, rising to 2.8mn in 2024. However, this will fall to as low as 2.1mn by 2030 without a deal because of a natural decline in production.

Griffith said the offer price for Yamana was determined after a seven month due diligence process, and that it had to offer a large premium because the Canadian company was trading at a discount to net asset value and investors would have baulked at a lower price. Yamana is currently trading at a 12 per cent discount to the terms of the offer, a signal that some investors do not believe the deal will happen.

For the deal to go ahead, the transaction requires 67 per cent approval from Yamana shareholders and 75 per cent approval from Gold Fields investors at meetings later this year.

Griffith said he was confident that Gold Fields’ biggest shareholder, South Africa’s state asset manager Public Investment Corporation, would vote in favour of the transaction. “All the discussions that we’ve had with the PIC have been positive,” he said.

However, if the deal is voted down Griffith said Gold Fields would not be on the hook for a $450mn break fee and would continue to look for deals to underpin future growth.

“I think it would be a shame if this was voted down but it doesn’t mean that we are out of options and we can’t look at other options,” he said. “But they will not be . . . in our view of the same quality.”

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