MELBOURNE, May 5 (Reuters) – South Africa’s Gold Fields will acquire Gold Road Resources in a sweetened deal valuing the Australian miner’s equity at A$3.7 billion ($2.4 billion), as sky-high bullion prices drive a wave of tie-ups.
Gold Road’s shares rallied as much as 12% on the offer, which was pitched at a 14.5% premium to the company’s last closing price.
The buyout, announced on Monday by both companies, will allow Gold Fields to consolidate ownership over the low-cost, long-life Gruyere gold mine in Western Australia, which it operates under a joint venture with Gold Road.
It is the third notable deal in six months in the sector that is one of the hottest spots globally for mergers and acquisitions, as rising geopolitical uncertainties power a record rally in the yellow metal.
Australian gold miner Northern Star Resources agreed to buy De Grey Mining in an all-share deal worth A$5 billion, while Ramelius Resources said it would take over smaller peer Spartan Resources to build a combined A$4.2 billion group.
The strong gold price and Australia’s relatively weaker dollar have made Australian gold producers particularly attractive, said one investment banker.
Bellevue Gold, with a A$1.3 billion market capitalisation, is expected to be the next to follow suit after it last month hired UBS to conduct a review of its business.
LOOKING OUT FOR GOOD OPPORTUNITIES
Asked if Gold Fields was interested in Bellevue Gold, Gold Fields CEO Mike Fraser said the company continued to look at opportunities to strengthen its portfolio. Gold Fields operates the Agnew mine not far from Bellevue’s own project.
“Given what we have just announced today, I think our focus in the coming months will be on that, but we continue to look out for good opportunities to improve our portfolio,” he told reporters on a conference call.
Fraser told Reuters in an interview that the gold sector was likely to see more transactions with larger miners acquiring smaller, single asset companies despite relatively high valuations due to the gold price rally.
“If you believe the outlook for gold, I still think that gold equities are relatively well priced on a value basis and therefore it wouldn’t surprise me to see more transactions emerge,” he said.
He added that the Gold Road acquisition would give Gold Fields access to a huge land package that is currently not consolidated in the Gruyere joint venture, with potential to lift output and extend mine life.
Under the terms announced on Monday, Gold Road shareholders will receive a fixed cash consideration of A$2.52 per share and a variable cash component equal to the full value of each shareholder’s stake in Northern Star Resources.
That was up from Gold Fields’ offer in March of A$2.27 cash per share plus the variable cash component which Gold Road rejected as “highly opportunistic”.
As of Friday’s close, the deal equates to A$3.40 per Gold Road share.
Goldman Sachs and Gresham acted for Gold Road, while JPMorgan acted for Gold Fields.
($1 = 1.5504 Australian dollars)
(Reporting by Himanshi Akhand in Bengaluru, Melanie Burton in Melbourne and Nelson Banya in Harare; Editing by Kim Coghill, Sonali Paul and Emelia Sithole-Matarise)
