South African gold heavyweight Gold Fields makes $3.3bn bid for its mine partner
South Africa’s Gold Fields has revealed a takeover bid for Gold Road after running out of patience with its partner in a West Australian gold mine.
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South Africa’s Gold Fields has unveiled a $3.3bn takeover bid for Gold Road after running out of patience with its partner in a West Australian gold mine.
The two companies have 50 per cent stakes in the underperforming Gruyere mine, and each wants to own the asset outright.
Gold Road’s other major asset in a 17 per cent stake in De Grey Mining, which is the target of a $5bn takeover play from Northern Star.
Gold Road has shaped as a potential kingmaker if a rival bidder emerged for De Grey, and so far has not declared it intentions on the Northern Star bid.
Gold Fields said on Monday that 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.
Johannesburg-listed Gold Fields said it wanted to own 100 per cent of Gruyere and intended to sell the De Grey stake into the Northern Star bid.
In response, Gold Road has said it wants to buy Gold Fields out of the Gruyere mine.
The standoff between the Gruyere partners comes amid consolidation in the gold sector that last week saw Ramelius Resources and Spartan Resources agree on a $2.4bn union.
It is understood Gold Fields boss Mike Fraser visited Perth last week for face-to-face discussions with Gold Road chairman, Tim Netscher, but became fed up with delays in reaching a deal.
Gold Fields, which has a number of ageing mines in WA, made an all-cash offer of $3.05 a share for Gold Road as of March 7.
The offer included a fixed portion of $2.27 a share plus a variable portion equal to the value of each shareholders’ proportion of Gold Road’s shareholding in De Grey.
Gold Fields – one of the world’s biggest gold producers – operates the Gruyere mine east of Laverton that was built at a cost of more than $620m and started producing gold in 2019.
Gruyere was hailed as only the second world-class new gold mine developed from a greenfield discovery in Australia this century, with De Grey’s Hemi project shaping as the third.
Gold Fields said it made sense for Gold Road to sell its non-operating stake in Gruyere and that it was “regrettable” the proposal has been rejected.
“As part of its rejection of the proposal, Gold Road expressed a preference to enter into an alternative transaction in respect of an acquisition of Gold Fields’ 50 per cent interest in the Gruyere mine,” Gold Fields said.
“Gold Road proposed this would be funded through a combination of Gold Road’s existing cash; monetisation of Gold Road’s marketable securities (the De Grey stake); existing and/or new debt facilities; and issuing new equity.
“Gold Fields has formally responded to Gold Road that it will not be progressing the alternative transaction.”
Gold Fields said it intended to sell the De Grey stake into the Northern Star bid in the absence of a superior proposal.
“As at the date of this announcement, Gold Fields has no intention to present a ‘competing proposal’ in connection with De Grey and is committed to seeing the full benefit of the De Grey/Northern Star equity position being delivered to Gold Road shareholders as part of the proposed acquisition,” it said.
The Gold Fields offer values Gold Road at $3.3bn and implies a total enterprise value of $2.4bn. The offer represents a 28 per cent premium on Gold Road’s closing share price of $2.38 on March 21.
The Gruyere mine has never consistently achieved nameplate 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 last three months of 2024.
Gold Road said Gruyere would produce 70,000-73,000 ounces in the three months to March 30 because of maintenance work on the primary crusher and two conveyor belt failures.
Gold Road boss Duncan Gibbs last year expressed frustration about the mine’s performance relative to the ore body.
Gold Road was contacted for comment on Monday.
Originally published as South African gold heavyweight Gold Fields makes $3.3bn bid for its mine partner
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