GOLD Fields was prepared to walk away from a bid for Northern Star Resources, saying on Monday its $27bn offer did not “define” the company.
“We really don’t feel we need to do this [at all costs],” said Alex Dall, CFO of Gold Fields, in an interview earlier today. “We really don’t see this as something we have to do; it doesn’t define us. We’ll remain completely disciplined and prudent in how we consider this, as well as other opportunities we see to improve the quality and value of Gold Fields.”
The offer, a combination of cash and shares, nearly matches Gold Fields’s $31bn market value following a 12% decline in the stock in Johannesburg today.
Northern Star, Australia’s largest gold producer, said its board had unanimously rejected the offer, citing Gold Fields’s high jurisdictional risk.
Gold Fields is waiting on the Ghanaian government to renew the mining permit for its Tarkwa mine, which accounted for 19.5% of the group’s 2.44 million ounces of gold production last year. Gold Fields CEO Mike Fraser said in August the firm submitted a “commercial proposal”, but it had yet to receive a reply.
This comes against a background of heightened tension between Ghana and South Africa amid xenophobic attacks in South Africa. Ghana has also promulgated legislation increasing royalties on gold miners’ revenue. If the gold price is $4,500/oz or more, miners pay 12.5% of gross revenue.
In addition, Gold Fields is waiting on the Canadian government for an environmental permit for its C$1.6bn to C$1.8bn Windfall project. The project is scheduled to produce first gold at the end of 2029, and any delay could cause Gold Fields’s production to plateau for the next five years.
These concerns have resulted in a derating of Gold Fields’s shares relative to its peer group. The shares have fallen 19% over the past 12 months, during which time the gold price has gained 14%. Newmont leads the way with a 37% share price gain, followed by AngloGold Ashanti (+28%) and Barrick (+24%).
Analysts have warned that Gold Fields should not overpay. Arnold van Graan, an analyst at Nedbank Securities, said Gold Fields’s offer was “light” considering the scale of the transaction. If consummated, a combination of Northern Star Resources and Gold Fields would create the world’s second-largest gold miner, with output of 4.1 million oz a year before $4bn in possible asset sales identified by Gold Fields.
Elliott Investment Management, the activist hedge fund, said Northern Star ought to entertain an offer. It holds 6% of Northern Star and is thought to favour a meeting between the Australian and South African gold miners. Asked whether Gold Fields had spoken to Elliott, Dall said: “We don’t comment on discussions with individual shareholders.”
Nor has Gold Fields canvassed the views of its own shareholders. Its last foray into blockbuster M&A was its failed offer for Canada’s Yamana Gold in 2022, when its shareholders were reluctant to follow Gold Fields’s then management into a higher offer.
Another pressure on Gold Fields would be the entry of third-party predators for Northern Star Resources. The Australian miner said it had received multiple approaches over the past six months. Asked for his view, Dall said his company was unaware of rival bids. “We’re not aware of any other offers or bids in the mix. We’re focused on our portfolio and generating value for our shareholders,” he said.
“We see price escalation as the key risk for GFI shareholders,” said Steve Friedman of UBS in a note to the bank’s clients.
