A miner from Gold Fields walks near the exit of the South Deep gold mine in Westonaria, Gauteng, on Oct. 12, 2022.LUCA SOLA/AFP/Getty Images
The head of South African miner Gold Fields Ltd. is hoping some of its major shareholders will step up and publicly back its proposed acquisition of Canadian gold and silver producer Yamana Gold Inc., as uncertainty swirls over whether the deal will succeed.
Johannesburg-based Gold Fields GFI-N in May reached a friendly agreement to acquire Yamana YRI-T for US$6.7-billion in an all-stock deal. Gold Fields shares lost more than a fifth of their value the day the deal was announced, and have lost around 35 per cent total since then, amid a broader sell-off in the gold mining sector.
Some investors have been critical of Gold Fields’ intention to pay a 42-per-cent premium for Toronto-based Yamana, whose single biggest asset is a 50-per-cent share in Canadian Malartic, one of Canada’s biggest gold mines.
So far, no major Gold Fields shareholders have publicly endorsed the transaction, while one has voiced its disapproval. RWC Partners Ltd., known as Redwheel, denounced the deal soon after it was announced, saying Gold Fields had made a serious error, and labelling it a risky and expensive transaction. Redwheel declined to comment for this story.
In a media call on Monday, Gold Fields’ chief executive, Chris Griffith, said he hopes a few of the company’s other major investors will endorse the deal in public.
“It always helps if you get some large shareholders that are prepared to do that,” he said.
Mr. Griffith said Gold Fields is “making good headway” in convincing its shareholders of the merits of the deal. Buying Yamana would materially boost Gold Fields’ precious metals production and reserves. Last year, the firm produced 2.4 million ounces of gold from nine mines in Australia, Ghana, Peru and South Africa. Yamana during the same period produced just under 885,000 ounces of gold, and 9.2 million ounces of silver.
Shares in Yamana are trading about 5 per cent below the value of the offer based on the ratio Gold Fields is offering for the share exchange, which suggests continued uncertainty over whether the deal will succeed.
“There is risk with this transaction,” said Josh Wolfson, analyst with RBC Dominion Securities Inc. “The risk remains the Gold Fields shareholder vote.”
Shareholders in Gold Fields will vote on the deal on Nov. 22, with the company needing to obtain 75 per cent of votes cast to succeed.
Yamana shareholders vote on Nov. 21, with two-thirds of votes cast needed.
Before agreeing to the acquisition by Gold Fields, Yamana engaged with five other companies to explore other mergers and acquisitions transactions. According to Yamana’s management information circular, one party Yamana talked with ended up itself being acquired by another firm. A different company was willing to consider purchasing a major asset from Yamana at a premium price, but talks ceased when Yamana entered exclusive talks with Gold Fields.
Proxy advisory firms Institutional Shareholder Services (ISS) and Glass, Lewis & Co. are due to weigh in on the deal in the next few weeks and advise shareholders to vote either for or against the transaction.
Many institutional shareholders vote based on the recommendations of these firms, and their reports will have a “huge influence,” Mr. Wolfson said.
Mr. Griffith said Gold Fields is scheduled to meet with ISS and Glass Lewis later this week to present its case for the transaction.
Meantime, as Gold Fields sweats to bring the Yamana transaction over the finishing line, three executives who were involved in the deal have announced plans to leave the company. Last Friday, Gold Fields said Brett Mattison, executive vice-president, strategy, planning and corporate development, Taryn Leishman, executive vice-president, group head of legal and compliance, and Avishkar Nagaser, executive vice-president, investor relations and corporate affairs had all tendered their resignations.
Mr. Griffith said on the call Monday “it doesn’t feel good” that the individuals are leaving, but their rationale for quitting has nothing to do with the Yamana acquisition.
“All three of those executives have been absolutely supportive of, and committed to, the Yamana transaction,” he said.
The executives will officially depart from Gold Fields next March.