GOLD Fields is to buy joint venture partner Gold Road Resources for A$3.7bn after increasing an offer in March by about A$400m.
If completed, the deal will see Gold Fields take 100% control of the 350,000 ounce a year Gruyere gold mine in Western Australia, as well as adjoining exploration properties.
The offer – which has been accepted by Gold Road’s board and 7.5% of its shareholders – represents a 43% premium to the Australian firm’s share price on March 21 prior to Gold Fields’s first bid.
The deal basics are that Gold Fields will pay A$3.30 per Gold Road share (compared to its first offer of A$3.01). This comprises a fixed cash sum equal to A$2.52/share, and a variable sum equal to the value of Gold Road’s 3.4% stake in Northern Star. As of today, the value of the Northern Star stake was A$0.88/share.
As part of Gold Fields’s takeover agreement, Gold Road will also pay a special dividend to its shareholders along with its applicable franking (tax) credits.
Shares in Gold Road gained about 9.4% on the Australian Securities Exchange (ASX) while Gold Fields edged down slightly in early Johannesburg trade.
The hope is that the transaction will be implemented in October. As the transaction structure is a scheme, court sanction is required while Gold Road shareholders will meet in September to vote on the scheme.
Gold Fields said that this second offer was final. It would not be drawn into a bidding contest should a third party emerge.
“Throughout the period of engagement on the scheme, we have noted our commitment to remaining disciplined and prudent in our acquisition strategy to ensure continued maximisation of Gold Fields’ shareholder value,” said Mike Fraser, CEO of Gold Fields.
Gold Fields has its hands full given it last year completed the $1.2bn takeover of Osisko Mining, a Canadian firm, on the way to developing the proposed 300,000 oz/year Windfall project which is expected to cost C$1.1bn.
But the Johannesburg headquartered firm said today it was confident it had the financial firepower. It would use its new bridge financing facility to fund the transaction after repaying the $750m sum on the facility used for the acquisition of Osisko Mining in March, by means of a bond.
The company also said it was highly cash flow generative given the strong gold price. Gold Fields ended its 2024 financial year (December 31) with $2.09bn in net debt, increased from a net debt position of $1.02bn in the 2023 financial year.
Gold Road rejected Gold Fields’s first offer and made a counter offer for Gruyere which the parties own 50% each – swiftly rejected by Gold Fields. “The offer attributes no value at all to the potential underground expansion of the Gruyere mine,” Gold Road said at the time.
However on Friday (May 2) Gold Road shares were suspended on the ASX amid media speculation about a change of control. Gold Fields confirmed in a notice to the JSE that there were active discussions under way with Gold Road.
