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Gold Fields has agreed to buy Canadian rival Yamana Gold in a $6.7bn (R103bn) all-share deal, creating a top-four global gold major and underlining the SA mining titan's geographic diversification drive.
In a statement on Tuesday, the companies said Gold Fields will take full control of the Toronto-based miner in a share exchange at the ratio of 0.6 Gold Fields shares for every Yamana share, implying a $6.7bn value.
"Yamana's high-quality asset base in the Americas and strong development and exploration pipeline will further diversify the geography of our portfolio, creating a top-four global gold major, well positioned to deliver long-term value creation," Gold Fields CEO Chris Griffith said.
The acquisition is the largest outbound SA transaction yet and the third-largest SA transaction since 2014, according to BofA Securities, the only investment bank to be appointed to work on this transaction.
Yamana is listed in New York, London and Toronto and had 32.15-million ounces of reserves at the end of 2021, with significant gold and silver production.
It would add five producing mines to Gold Fields' network of mines, bringing the total number of operating assets to 14, as well as a pipeline of development projects and exploration properties. By output, Gold Fields will be behind only Barrick Gold, Newmont and Agnico Eagle.
The Yamana acquisition, with its deep pipeline of exploration projects and strong near- to medium-term project pipeline, avoids the significant costs of repopulating Gold Fields' project pipeline, Griffith said.
Two of the most promising developments are the MARA project, a copper, molybdenum, gold and silver deposit located in the province of Catamarca in Argentina, and Wasamac, a development-stage underground gold project in Canada.
In terms of market cap,
Yamana Gold is almost half the size of Gold Fields, valued at about $4.97bn (R77.05bn) on the New York Stock Exchange versus Gold Fields, with about R165.1bn on the JSE.
Griffith told Business Day that given its current expansion plans — including increasing output from South Deep mine in SA and adding output from a new mine in Chile scheduled to come online in 2023 — gold output is projected to increase from 3.4-million ounces to 3.8-million ounces by 2024. The miner said in February it expects gold output at South Deep to rise 20%30% in the next four years.
"Thereafter we could add another 1-million ounces of gold output over the next 10 years, but we will continue to pursue disciplined growth with a focus on growing the company, while also returning cash to shareholders," Griffith said.
The companies said the deal will help Gold Fields get the most out of its assets, meet its environmental, social and governance commitments and unlock the potential to "create significant long-term value for shareholders through greater scale, an industry-leading portfolio, enhanced production profile with significant growth potential, operational and geological synergies, and a strengthened financial profile for future growth and shareholder returns".
Yamana Gold executive chair Peter Marrone said the deal was an "outstanding opportunity" because it "delivers an immediate and compelling premium" for shareholders and reflected the "inherent fair value" of its assets and it would benefit from the creation of a new global gold producer.
"We saw significant merit in pursuing discussions with Gold Fields because of the quality of their company on a stand-alone basis and because of the quality a combination would create," he said.
The company will operate in SA, Ghana, Canada, Australia and South America, with its headquarters in Johannesburg.
Shares in Gold Fields plummeted nearly 20% to just over R150, reflecting fears about the dilutive impact of the all-paper transaction, which will see Gold Fields shareholders own 61% and Yamana shareholders 39% of the rare SA-Canada tie-up, while one analyst voiced worries about the timing of the deal.
"I think consolidation in the gold mining sector has been a long time coming," said Andrew Joannou, a portfolio manager at Ninety One.
"This deal certainly creates a major gold player as Gold Fields will now be the fourth largest in the world. It also gives Gold Fields the benefits of geographic diversification and will be cost competitive."
Sanlam Private Wealth's Nick Kunze said the gold sector may be entering a period of consolidation with other potential deals, but added that the timing of the deal is not ideal given the rising interest rate environment, which tends to take the shine off the gold price.
