Will Gold Fields look to Australia to feed its ‘get bigger’ aspirations after Canadian groups Agnico Eagle Mines and Pan American Silver Corp seemingly gazumped the South African company’s all share bid for Yamana Gold Inc?
The two Canadian companies revealed their joint offer late last week and with $US1 billion of the offer value in cash, seem to have taken the front running for Yamana.
The new cash and share offer values Yamana at around $US4.8 billion and would see Agnico and Pan American split Yamana’s mines between them if successful.
On paper that’s worth a lot less than the original all paper offer from Gold Fields which had bid to take over Yamana in an all-share deal worth it at $US6.7 billion in May.
But a slump in Gold Fields shares after the deal was announced (it’s facing opposition from some of its shareholders) and weaker prices for gold and other metals have pushed the bid lower to where Yamana was valued at just over $US4 billion and seemingly ripe for a counter offer with cash involved.
And that’s exactly what happened and in turn Gold Fields’ shares rose 11% on Friday in the wake of the new bid being announced – which confirms the original Gold Fields offer is dead in the water unless it can be freshened with cash.
Yamana shareholders would receive $US1.0406 in cash, 0.0376 of an Agnico Share and 0.1598 of a Pan American share for each share held. With gold prices weak, interest rates rising cash would be of more interest to investors than shares in a rival gold miner.
The Agnico and Pan American shares will be sold by many investors as well.
Yamana says the new bid is “superior” while Gold Fields said in a separate statement that its bid is superior, but added that it will provide a further update the status of its bid after the weekend. The betting seems to be that Gold Fields will withdraw and look elsewhere.
Success of the new offer would see Agnico move past Barrick Gold into second place among the world’s major miners from its current second spot – it owns the rich Fosterville underground gold miner near Bendigo in Victoria.
Pan American would get gold mining operations to add to its huge silver output (as well as smaller amounts of gold, copper lead and zinc)
Yamana shareholders are due to meet on November 21 to consider the Gold Fields offer. If the new bid prevails, the joint offer would see that meeting delayed while it is analysed
But if Gold Fields pulls the Yamana deal, it could look to Australia where it has a share in the rich Gruyere gold mine in WA with Gold Road Resources.
Gold Road owns 20% of De Grey and its very rich Mallina/Hemi strike in the Pilbara.
Gold Fields also has the St Ives, Agnew and Granny Smith mines in WA.
Gold Road is valued at a much cheaper $A1.4 billion on the ASX and a cash offer not Gold Fields shares would more acceptable to Australian investors.
And local investors got into shares in Gold Road and De Grey on Monday – both were up more than 6% amid a rise for all gold miners after Friday’s surge in Comex futures prices.
Gold Road shares rose 6.8% to $1.405 and De Grey shares were up 6.2% at $1.15.
