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Gold Fields brought a bakkie-load of cash this time around and sealed the deal.
The JSE-listed gold producer announced on Monday that it had entered a definitive agreement to acquire all of the shares in Canada’s Osisko mining for over $2-billion in Canadian loonies, or just shy of R28.6-billion. This still needs approval from Osisko’s shareholders and some regulatory green lights but it is expected to be complete by the end of the year, and both boards are on board.
The jewel in the crown of this deal is the Windfall project in Quebec, which the two companies have been developing as a JV.
Gold Fields has acquired the lucrative Windfall Project in Quebec. (Photo: Supplied)
“Windfall is among the largest gold deposits in Canada, and a top 10 gold deposit globally by head grade. Full ownership of Windfall enables Gold Fields to streamline decision-making and increase flexibility with respect to the development and subsequent operation of Windfall,” Gold Fields said.
It is expected to produce 300,000 ounces of gold a year for 10 years at an all-in sustaining cost of $758 an ounce, which Gold Fields says will make it one of its lowest-cost mines.
Gold Fields’ last attempt at a major acquisition was a $6.7-billion all-share offer in 2022 for Canada’s Yamana Gold, which triggered a backlash from shareholders worried about dilution.
A counter bid that included cash won the day when Gold Fields decided against a bidding war, and its then CEO Chris Griffith stepped down.
Read more: Chris Griffith falls on his sword, quits as Gold Fields’ CEO over failed Yamana transaction
Current CEO Mike Fraser, who took over on 1 January this year, has been fast out of the blocks with a deal and this time around, cash is king.
“We believe there is still value in our share price relative to our peers and therefore going out with a dilutionary share offer would probably not be the right answer,” Fraser said during a conference call about the transaction.
“Second, we have fairly low gearing in our portfolio so it made sense to use cash. Also with the ramp-ups of the current projects in our pipeline, we see ourselves deleveraging our balance sheet pretty rapidly. And last, it enabled us to move pretty quickly on executing this transaction.”
Gold Fields has secured the high-grade Windfall Project in Quebec after acquiring the Canadian mining company Osisko. (Photo: Supplied)
Gold Fields maintains it is in a financial position to fund this deal, with $424-million in cash at the end of March and $1.8-billion available in undrawn debt facilities. And with the gold price near record highs, the company is clearly generating cash at the moment.
It must be said that investors do not seem thrilled – Gold Fields’ share price had lost over 5% by late afternoon trade on Monday.
There is a hefty premium in the offer price of 55% to Osisko Mining’s 20-day volume-weighted average trading price for the period ending 9 August 2024. One mining analyst told Daily Maverick that the assets in the current deal were “good but expensive”.
But Gold Fields’ share price tanked 20% when the Yamana bid was announced, so shareholders are not nearly as freaked out by this prospect.
Gold Fields’ strategy is to acquire quality, low-cost assets that also have a low carbon footprint, and the Windfall project ticks all those boxes – it is fully powered by hydroelectricity.
Whether or not it translates into a Windfall remains to be seen. DM
