Gold Fields has existed since 1887 and it has pioneered steadfast inventions in mining methodologies, including carbon-in-leach. Its acquisition of Yamana Gold is a combination of long-term value creation focused on quality growth, financial discipline and shareholder returns.
Despite gold equities receiving little to no attention from the investment community, it is widely believed that the outlook is positive and investors will eventually warm up to the precious metals.
The all-share offer by Gold Fields at an exchange ratio of 0.6 was made only recently. The share consideration for each Yamana share implies a valuation for Yamana of US$6.7 Billion. This represents a premium of 33.8% to the 10-day Volume-Weighted Average Price (“VWAP”) of Yamana’s Shares of US$ 5.20. It is anticipated that Gold Fields shareholders and Yamana shareholders will own approximately 61% and 39% of the combined group, respectively.
With experience in Western Africa, the benefits of the Gold Fields US$6.7 billion acquisition of Yamana Gold are deeper and perhaps less obvious than cost synergies, Yamana Gold Executive Chair, Peter Marrone noted.
“Gold is in a period where nobody likes it. It is challenged and everyone is pointing to the possible negatives. A point that is impressively positive is that we have come back to where this industry was before the last cycle: we are diligent, we study projects, we do detailed engineering before we decide to commit a shovel. The more seasoned companies are more capable of managing our portfolios and managing development-stage assets and we recognise that we are not prepared to take risks, as there is a lot to love. While the market today may be misunderstanding what is happening in the gold space, it is only a matter of time before it becomes very clear that it will come back,” Marrone continued to note.
With each company bringing in immense experience, it undoubtedly benefits the future development of the assets that the other companies have in Brazil, Canada and Chile.
“Here’s a company which has been doing it for generations. They manage conglomerate systems in Western Africa and one of the deepest shaft underground mines in the world, competently and effectively. We have a mine in Northern Quebec that will transition from a big open pit to a deep shaft underground mine. While we have an experienced partner, in Chile, they will be going through a development stage asset that transitions to operations. There’s no denying that they can do that on their own, but we already have two producing assets in the country so that transition becomes considerably different and a lot easier,” said Marrone.
“In Jacobina – Brazil, coupled with vast experience amassed over years, there is also potential to bring Gold Fields’ knowledge to bear on a geological environment in which it is an expert. We have a conglomerate reef construct which is almost a carbon copy of what one sees in Western Africa, with a company that has been doing these for generations. With this in mind, we are planning a multi-phased expansion at Jacobina, but just as importantly, we own a Greenstone belt. Plans are underway to also have a planned multi-phased expansion to get up to 350,000 ounces.” He added.
It is believed that further consolidation in the gold space is required, particularly in the intermediate and smaller companies, such as Yamana being acquired by Gold Fields and the recently announced takeover of Gold Standard Ventures by Orla Mining. This consolidation places Yamana Gold in a very elite club of the largest precious metals producers in the world.
Given the greater credibility of a company that in combination is three-and-a-half, soon to be four times the size in EBITDA and holds 56% of assets, it has a lot more credibility and is now more likely to be developed. It is predicted that the acquisition also has the ability to surface the value of its 56.25% participation in the MARA copper development project in Argentina.