Any Aussie miner would do better job, says Gold Road boss

The takeover target has let fly at South African mining heavyweight after rejecting a $3.3bn all-cash offer.

The open pit at Gold Road and Gold Fields Gruyere gold mine. Picture: Supplied

Gold Road has come out swinging at spurned takeover suitor Gold Fields and revealed it made a $2.3bn counteroffer for control of their joint venture mine in Western Australia.

Perth-headquartered Gold Road said any Australian mining company could do a better job of running the Gruyere mine than South Africa’s Gold Fields as the two companies traded barbs.

The partners in the Gruyere mine have set the stage for a drawn out battle, with Gold Road accusing Johannesburg-listed Gold Fields of making a “low ball and opportunistic” takeover offer which took advantage of a recent production downgrade.

“I think any Australian company could do a better job of running that asset,” Gold Road boss Duncan Gibbs said on Tuesday.

“Basically, Gruyere is a very simple deposit. It has very simple and predictable geology, very good reconciliations. It has a well designed and engineered plant. The problem in one word here is management.”

Gold Road also alleges it has been kept in the dark about the potential for underground mining at Gruyere, which is managed and operated by Gold Fields.

The fight for the Gruyere mine and a strategic stake in De Grey Mining appears likely to draw in multiple gold players, with the Gold Road share price soaring more than 14 per cent to a record high of $2.80 in early trading on Tuesday.

Gold Fields has disclosed a $3.3bn takeover bid for Gold Road lobbed on March 7 which included the value of Gold Road’s 17.3 per cent stake in De Grey, which is in turn the target of a $5bn takeover offer from Northern Star.

The Gold Road board rejected the offer and countered by saying it was willing to pay $2.3bn for Gold Fields’ 50 per cent share in Gruyere — the same value ascribed to its 50 per cent stake by Gold Fields.

Gold Road chief executive and managing director Duncan Gibbs poses in front of the processing plant at the Gruyere Gold Mine. Picture: Paul Kane/Getty Images

Mr Gibbs, who previously had key roles developing and running AngloGold Ashanti’s world-class Tropicana mine in WA, said Gold Fields had presented a “low ball offer” and not budged from its position since two days of meetings in Perth last week.

“The nature of our counter proposal was basically to buy Gruyere at the same price that was implied by their offer,” he said.

“They’ve gone down what investment bankers call a bear hug path, and by making the whole situation public, are clearly seeking to rally the shareholders of Gold Road to put pressure on our board and to consider the offer.

“All of this has occurred in a backdrop where we’ve had to put out a downgrade on the performance of Gruyere. Unfortunately, in pretty much in every year of the JV, we’ve had similar circumstances where we’ve had to put production downgrades.”

The Gruyere mine has never consistently achieved production targets and its inconsistent performance has been a source of friction between the joint venture partners,

The Gold Road share price plunged on March 19 when it was revealed March quarter production would be lower than the record 91,631 ounces produced in the December period.

Gold Road said Gruyere would produce between 70,000 and 73,000 ounces in the three months to March 30 because of maintenance work on the primary crusher and two conveyor belt failures.

Mr Gibbs said the potential for underground mining at Gruyere could add years to the life of the asset and have a material value, but Gold Road was waiting for more information from Gold Fields.

“The most generous you could be here is that it’s a bumbling bureaucracy that can’t provide us with information in a timely manner. At worst, you’d have to say it’s quite nefarious actions to coincide the timing of a (takeover) proposal,” he said.

Gold Fields said on Monday it had no intention of using the acquisition of Gold Road to start a bidding war with Northern Star over De Grey and its Hemi project in WA’s Pilbara.

Mike Fraser-led Gold Fields said it wanted to own 100 per cent of Gruyere and intended to sell the De Grey stake to Northern Star.

The offer for Gold Road included a fixed portion of $2.27 per share plus a variable portion equal to the value of each shareholders’ proportion of Gold Road’s shareholding in De Grey.

Gold Fields is one of the world’s biggest gold producers and built the Gruyere mine east of Laverton which started production in 2019 at a cost of more than $620m alongside Gold Road.

Mr Gibbs said Gold Road could fund the acquisition of the Gold Fields stake in its own right or join forces with a co-bidder.

“We’ve had a number of inbound inquires that are broadly in that line,” he said.

Gold Road has been tight-lipped on plans for its De Grey stake, not wanting to make a commitment under Australia’s truth in takeovers laws.

Mr Gibbs said Gold Road had several options in regard to the stake. He floated a scenario where a third-party offered to buy the 17.3 per cent stake at a higher premium than the Northern Star offer.

“That’s an option that we want to keep on the table as being in the best interest of Gold Road shareholders,” he said.

Originally published as Any Aussie miner would do better job, says Gold Road boss