Gold Fields (NYSE:GFI) has reached a deal to acquire full ownership of Australia’s Gold Road Resources in a transaction valued at A$3.7 billion ($2.4 billion USD), consolidating control of the Gruyere gold mine in Western Australia. The two companies currently operate the mine as 50-50 joint venture partners. The agreement was announced Monday and follows weeks of renewed negotiations. Gold Road had previously rejected an earlier A$3.3 billion offer from Gold Fields in late March. Its managing director, Duncan Gibbs, later signaled the door remained open for a revised bid. Talks resumed shortly after, leading to the finalized offer.

Under the terms of the agreement, Gold Fields will acquire Gold Road through an Australian scheme of arrangement. Shareholders will receive A$2.52 per share in cash, with additional variable consideration based on Gold Road’s indirect stake in Northern Star Resources. This indirect exposure stems from Gold Road’s 17.3% holding in De Grey Mining, which converted into Northern Star shares following Northern Star’s A$6 billion acquisition of De Grey earlier this year.

The total implied value of the Gold Fields offer reached A$3.40 per share as of last Friday, representing a 43% premium to Gold Road’s undisturbed share price on March 21. That price also reflects a 12% premium over the original offer that was rejected. Gold Road shares rose 9.4% on Monday to close at A$3.25.

Gold Road’s board has unanimously endorsed the offer. Institutional investors accounting for 7.5% of the register have also agreed to vote in favor, assuming no better offer emerges and an independent expert deems the deal fair and reasonable. Shareholders are set to vote on the transaction in September, with completion targeted for October. As part of the arrangement, Gold Road intends to declare a fully franked special dividend. The final amount will depend on the company’s franking account balance. Gold Fields CEO Mike Fraser estimated this would add roughly 14 Australian cents per share in value, on top of the headline bid.

Fraser called the deal a “unique liquidity event” for Gold Road shareholders and emphasized that full ownership of Gruyere would improve operational efficiency and cashflow. Gold Fields already operates the mine and sees strategic benefit in eliminating joint decision-making constraints. He also confirmed that while Gruyere’s underground expansion potential exists, it was not factored into the revised offer price.

The Gruyere mine has been a significant gold asset in the region since its discovery by Gold Road in 2013. The company sold a 50% interest in the project to Gold Fields in 2016 for A$350 million but retained a royalty interest. The mine began production in 2019 and has produced more than 1.5 million ounces of gold. Production guidance for 2025 is between 325,000 and 355,000 ounces. Output dipped in the March quarter to 71,226 ounces due to maintenance issues, down from a record 91,631 ounces in the December quarter.

Gold Road dismissed Gold Fields’ initial approach in March as poorly timed, pointing to the temporary production decline and early signs of underground potential at Gruyere. However, the revised offer brought a higher premium and enough certainty for the board to accept.

The takeover of Gold Road marks the third major gold acquisition on the ASX this year, following Northern Star’s takeover of De Grey Mining and the pending purchase of Spartan Resources by Ramelius Resources. Together, the moves reflect a trend of consolidation in the Australian gold sector, as larger producers seek greater scale and control of existing assets.

For Gold Fields, the acquisition deepens its footprint in Australia. Four of its nine mines are already based there — Gruyere, St Ives, Granny Smith, and Agnew. In 2024, its Australian operations delivered 48% of the company’s total gold production and free cashflow, generating 992,000 ounces and $552 million, respectively. The company also allocated nearly all of its $72 million exploration budget to Australia.

Fraser described Australia as a “stable jurisdiction” and said the deal reinforces the company’s commitment to growth in the country. He declined to comment on recent speculation around Bellevue Gold, which has received takeover interest, but didn’t rule out further M&A activity in the future.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.

Gold Fields (NYSE:GFI) announced it will acquire Canadian gold mining company Yamana Gold (TSX:YRI), and will become the fourth biggest gold miner in the world once the acquisition is completed. For gold mining companies, the M&A process has become a way to increase gold production amid declining yields and fewer new discoveries.

The acquisition will give Yamana shareholders 0.6 of a Gold Field share per every outstanding Yamana Gold share. This is a 34% premium over its average share price from the past 10 trading days. The Yamana Gold board unanimously approved the deal that should close in H2 2022.

The combined company may see total production rise to 3.8 million ounces by 2024, once Salares Norte begins to come online and contribute to production numbers. That could make Gold Fields the world’s third-biggest gold miner according to the company’s CEO, Chris Griffith. In the coming decade, he also said the possibility of output reaching 4.8 million ounces is a possibility.

The merger, which will create a company based in Johannesburg, will have a market value of $15.9 billion. Gold Fields investors will own around 61% of the miner’s stock, while Yamana owners will hold the remaining 39%. Despite investors’ worries about populist policies and risks of higher mining taxes in neighbouring countries, the acquisition is consistent with Gold Fields’ desire to expand across North America, particularly in the Southern Hemisphere.

In addition, the company’s asset portfolio includes the development-stage Wasamac project in Quebec, Jacobina gold mine in Brazil, Cerro Moro gold-silver operation in Argentina, and two early-stage projects in Chile. It also owns a 50% stake in Malartic, the largest open-pit gold mine in Canada.

Only one mine remains in its home base for Gold Fields, which operates in Australia, West Africa and the Americas — South Deep. Its portfolio includes three operations in Ghana: the Cerro Corona mine in Peru, and the Salares Norte project in Chile.

Gold mining has seen decreasing returns in recent years as high-grade deposits of the precious metal have proven more elusive. To counteract this, miners have looked to increase production through M&A and cost-cutting measures. One of the factors offsetting declining yields is a stable and rising gold price over the long run that has boosted prices for assets from juniors. The Yamana Gold acquisition represents a significant win for Yamana and Gold Fields shareholders over the long run, creating what could become one of the most important gold companies in the world.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.

S&P Global Market Intelligence’s new report highlights the significant impact the pandemic has had on capital expenditure in 2020. The year was a complicated one, with projects shutting down temporarily, and licenses for new mines suspended until the lockdowns began to ease around the world. 

Despite it all, the mining industry has fared well and continues to forge ahead with minimal disruption. However, the report found that among more than 400 mining companies examined, capital expenditures dropped 8% in 2020 when lockdown forced projects to stop work, and global supply chains began to crack under the dual pressures of shifting demands and lower production. 

Feeling Better

The first quarter of 2020 held some optimism for the year. The miners’ group forecasted a capex YoY increase of 9% to $162 billion. By the beginning of the second quarter, expectations had been revised and the spending plans reduced 4% lower to reflect the coming changes. Still, this would represent an increase for the year before, as no one had anticipated the length of the lockdowns or the severity of the pandemic. 

In the end, total capex for 2020 came in at $149.5 billion well below forecasts, but arguably strong considering the harsh mining environment of the year and the fact that global economic confidence was sucked out of the air faster than an airlock for a spaceflight.

A Realistic and Optimistic Outlook for 2021

S&P has set a positive tone for 2021, with a forecast of global gross domestic product growth of 5.5% in 2021, boosting capex and numbers across every. The company is forecasting a mining industry capex of $176 billion, up a substantial 18% fom 2020 and 2019. 

As projects were put on hold last year and confidence dropped off a cliff, mining companies needed to revise their expectations. Now that the situation is improving rapidly, companies are ramping-up their activity. Positive outlooks are not hard to come by for miners as strong prices for metals and minerals continue to push commodity prices higher, boosting profits.

The Rich Get Richer

The Eastern Hemisphere is leading the recovery right now, particularly China and Australia. The influx of capital expenditures won’t be balanced across metals companies or metals either. Precious metals companies are expected to spend the most, and increase their capex by over a third compared to 2019. The biggest spenders will likely be the usual suspects including Newmont (NYSE: NEM) (TSX:NGT) and Gold Fields (JSE:GFI) (NYSE:GFI). 

Large cap mining companies are always the first to jump into new projects with high capitalization levels and strong cash balances on hand. Most of these companies will recover stronger and faster, and S&P expects that companies with a $50 billion+ market cap will surpass their smaller peers for both forward guidance and spending. This would exacerbate the trend of the winners taking all, and the biggest players consolidating their gains and building on them. The largest market cap group is expected to spend 51% in 2021 compared to 2019, and the next three groups of companies expected to keep similar levels to 2019, averaging 12%, although they would be increasing their spending from 2020.

The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.