A worker cleans gold bars at South Africa's Gold Fields South Deep mine in Westonaria, 45 km south-west of Johannesburg, South Africa, in 2017.Siphiwe Sibeko/Reuters
Gold Fields chief executive officer Chris Griffith says he’s not afraid of losing his job if the company’s proposed acquisition of Canada’s Yamana Gold Inc. is not successful, pointing out that the big South African gold miner has options in the event the deal falls through.
“This is not about me. This is about Gold Fields and the company and what we can create,” Mr. Griffith said in an interview with reporters. “It’s not like if this deal doesn’t go through that there’s absolutely nothing that we can’t look at in the future.”
Investors are skeptical of the all-stock deal, which was worth US$6.7-billion when it was announced in late May but has declined significantly in value since then, after an almost 28-per-cent sell-off in shares of Johannesburg-based Gold Fields Inc. The concern is that, by offering a 42-per-cent premium, Gold Fields is overpaying for Yamana YRI-T.
Since the current round of consolidation in the gold industry began in 2018, low- and no-premium acquisitions have become the preferred deal-making currency, with Barrick Gold Corp.’s ABX-T acquisition of Randgold Resources Ltd. held out as exhibit A. Deals involving steep premiums, such as Kirkland Lake Gold Ltd.’s acquisition of Detour Gold Corp. in 2020, have consistently garnered negative reactions among investors.
Institutional investor RWC Partners Ltd., known as Redwheel, has been particularly critical of the Yamana deal, saying Gold Fields has made a serious error and calling it a risky and expensive transaction. Mr. Griffith said his company met with Redwheel this week in Miami and described the conversations as “constructive” but “tough.”
Redwheel did not respond to a request for comment.
Gold Fields says that by buying undervalued Yamana it can address two key question marks hanging over its future – namely, reserve replacement and production growth. Yamana owns half of Canadian Malartic – one of Canada’s biggest gold mines – several smaller gold mines in Brazil and Chile and a promising copper and gold development project in Argentina.
Mr. Griffith said the gold miner is making progress in its attempt to win over skeptical shareholders, saying he has received a lot more positive feedback lately, and that the “probability of success is increasing.” However, when asked if he was confident of getting the required 75-per-cent support from shareholders, he said he didn’t have the data to answer that question.
Earlier this week, in an appeal to on-the-fence shareholders, Gold Fields pledged to pay out a higher proportion of its future earnings in dividends and said it intends to seek a listing on the Toronto Stock Exchange to complement its listings in Johannesburg and New York.
Mr. Griffith indicated that Gold Fields is unlikely to walk away from the deal, even if there is doubt heading into the shareholder vote in October, because doing so would mean having to pay Yamana a US$450-million break fee.
In addition to skepticism from shareholders, Gold Fields is also bumping up against a sour environment for the entire gold sector. Higher interest rates are bad news for bullion, in part because the precious metal yields nothing. Gold tends to move inversely to the U.S. dollar, and that scenario has played out in spades lately, with bullion falling 7 per cent over the past month to trade at roughly US$1,703 an ounce Friday.
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