Gold Fields loses big fish while RBPlat is on the Northam and Implats’ lines

10 Nov 2022

Gold Fields lost a big one this week but at least walked away with $300m in cash for its efforts. Meanwhile, Northam Platinum has raised the stakes in its angling contest with Impala Platinum to lure minority shareholders in Royal Bafokeng Platinum. It remains to be seen which company nets them.

Gold Fields CEO Chris Griffith is a keen fly angler and when he talks ruefully in the future about the one that got away, he will be forgiven for spreading his arms wide — because it was a lunker.

The lunker in question is Canadian gold producer Yamana Gold Inc, and Gold Fields’ quest to land it ended this week after Agnico Eagle Mines Ltd and Pan American Silver Corp cast their own fly into the waters.

Yamana’s board rose to it and Gold Fields’ line suddenly went slack — the ultimate agony for an angler after a long fight.

To wit, Gold Fields announced its intention in late May to acquire Yamana through an all-share deal of $6.7-billion that was offering a premium of 33.8% to Yamana’s 10-day volume-weighted average price of $5.20 on 27 May.

Yamana shareholders were to receive 0.6 Gold Fields shares for every Yamana share held, which would have given its shareholders close to 40% of the combined company.

There were signs from the start that this fish would not yield easily.

Reservations

Shareholders expressed reservations about the premium, and Gold Fields’ shares tanked over 20% initially, more than the deal makers anticipated, and never clawed back what was lost until the past few days — revealingly, after the deal was sunk.

That took the shine off the Gold Fields’ shares for Yamana investors, while Gold Fields’ own fretted about the dilution of their holdings.

Still, the deal made a lot of sense.

A declining ore body is a declining asset base, and Gold Fields needs growth projects in its pipeline to maintain and grow its production profile. Its last remaining project in the works is the $940-million Salares Norte mine it is building in Chile.

The move was also in line with Gold Fields’ diversification from South Africa, where it was founded in 1887 by Cecil Rhodes.

Read more in Daily Maverick: “Quite a lot that glisters actually is gold. Just ask Gold Fields”

And then along came Agnico Eagle and Pan American with an unsolicited $4.8-billion bid, which included $1-billion in cash. In angling parlance, the cash was the tempting nymph below the dry fly. Or, in terrestrial terms, the icing on the cake.

The upshot is that Yamana said it was a “superior” offer and it gave Gold Fields five business days to spruce up its offering.

Gold Fields effectively told Yamana to take a hike earlier this week, but it did have a clause embedded in the fine print — lawyers get paid big bucks for a reason — which forced Yamana to pay it $300-million for wriggling free. Pan American is paying half of that termination fee.

So Gold Fields did not bring in the big one, but $300-million in cash is not exactly a minnow either.

The company is mulling how to fillet it for distribution and the options include additional dividends or paying down debt. And it will no doubt be casting around for other merger prospects at some point, with a wary eye on any osprey that might swoop on its prey.

Another fish that has been swimming in the merger current is black-owned Royal Bafokeng Platinum (RBPlat), which has high grades assets that are shallow, making it attractive for its mid-tier size.

Implats and Northam have both been angling for it, and this week Northam threw in a new pattern to lure RBPlat’s minority shareholders.

Northam currently owns 34.5% of RBPlats while Implats has around 41%.

Northam rocked the boat in November last year after Implats thought it was reeling in RBPlat, snapping up over 34% at R180 a share. Implats had just made a mixed offering which entailed cash of R90 per share plus 0.3 Implats shares for each RBPlat share — a 23% premium at the time.

This week, Northam announced a new offer to acquire all or a portion of the remaining RBPlat shares for R172.70 per share.

“This is equivalent to the R180.50 paid to Royal Bafokeng Holdings in November 2021, less dividends subsequently declared by RBPlat,” Northam said on 9 November.

“It represents an approximate 15% premium to the Implats offer value (as of) 8 November 2022.”

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Gold Fields was not dragged into a bidding war and it remains to be seen if Implats will wade into such a fray. Implats has the better case for synergies but it already has a big stake in its quarry.

Expect more such tussles in the near future. World-class gold and platinum group metal assets are becoming rare, and the long-term price outlook for such commodities is not bad.

The World Gold Council said earlier this month that central bank purchases of the precious metal hit a record quarterly high in the third quarter of this year of almost 400 tonnes.

Gold is currently fetching more than $1,700 an ounce.

This is well off its 2022 peaks of almost $2,000 and its record high in 2020 of above $2,000, but it remains elevated by historical levels.

Meanwhile, PGM producers are branding their product as crucial to the green energy transition and it has been a while since anyone struck a new mother lode.

So more big fish will get away, while others will be caught. That’s the name of the M&A game. DM/BM

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