GOLD Fields CEO Chris Griffith bought R3m worth of shares in the company as critical attention of its proposed $6.7bn takeover of Canada’s Yamana Gold continued to exert downward pressure on the stock.
Griffith bought 20,000 shares in the company at an average weighted price of R153.67/share. Its shares are currently trading at around R145/share – it lowest level for eight months. The share is down nearly 4.5% today in Johannesburg.
Shares in Gold Fields have fallen nearly a quarter since the company unveiled its plans for Yamana Gold. Discussions had been underway since the end of last year, it said.
Analysts have been critical of Gold Fields’ bid for Yamana saying it implied significant dilution to shareholders. Adrian Hammond, an analyst for Standard Bank Group Securities said in a note last week that Gold Fields faced 20% earnings dilution for 2022.
However, Gold Fields real headline earnings were expected to grow 30% by 2024 when its $820m Salares Norte project comes on line “suggesting that management could have waited to acquire Yamana for less,” he said. A re-rating of Gold Fields/Yamana Gold was not warranted and that “the biggest challenge is likely to be the integration of the companies,” Hammond added.
Gold Fields is offering one of its shares for 0.6 Yamana shares, but as Yamana shares are higher rated the South Africans are at an immediate disadvantage.
According to BMO Capital Markets analyst, Jackie Pryzybylowski, Gold Fields’ offer was even beginning to look a bit light given the weakness in its share price.
“We suggest the proposed price is now no longer a fair value to Yamana shareholders, although it’s not clear if the offer could be re-priced or a cash component could be added to support the valuation ahead of the transaction potentially closing late Q3/22 or within H2/22,” said Pryzybylowski.
Griffith said last week he expected his company’s share price to take a bit of a battering as the market took time to become comfortable with the deal. He is currently meeting with shareholders with a view to getting them over the line ahead of a third quarter deal approval requiring 75% of Gold Fields shareholders to vote their approval.
In the meantime, the slide in Gold Fields’ share price could encourage a rival bid for Yamana, according to analysts.
“The senior gold miners are trading at 1.5x NAV, a significant premium to Yamana; therefore, in an environment where there have been few major discoveries, we believe that it is highly likely that a competing bid will emerge as existing Americas-focused operators and highly-rated Australian miners seek to acquire assets in North America,” said Berenberg Bank analysts Jonathan Guy and Richard Hatch.