Gold Fields sets sights on further growth with proposed buyout of Yamana

JSE- and NYSE-listed Gold Fields and Americas-focused gold producer Yamana Gold have entered into a definitive agreement under which Gold Fields will acquire all of the outstanding common shares of Yamana Gold pursuant to a plan of arrangement.

The transaction implies a valuation for Yamana of $6.7-billion.

Upon closing of the transaction, it is anticipated that Gold Fields shareholders and Yamana shareholders will own about 61% and 39% of the combined group, respectively.

The acquisition of Yamana by Gold Fields is expected to significantly strengthens the ability of the combined company to deliver on Gold Fields’ three strategic pillars – maximising asset potential; advancing environmental, social and governance (ESG) commitment; and growing the value and quality of its asset portfolio.

The combined group is said to have the potential to create considerable long-term value for shareholders through greater scale, an industry-leading portfolio of assets, an enhanced production profile with significant growth potential, operational and geological synergies, and a strengthened financial profile for future growth and shareholder returns.

Gold Fields CEO Chris Griffith told Mining Weekly the transaction was entirely aligned with part of Gold Field’s strategy towards growing the value and the quality of the company’s portfolio of assets.

He explained that, once the company finishes the construction of the Salares Norte project, in Chile, it will not have any new developments or exploration projects in the pipeline, and once it reaches a peak production of 2.8-million ounces of gold when Salares Norte comes on stream, its production profile would begin dropping off.

Therefore, Gold Fields has been evaluating many different companies and individual projects, and Yamana was identified as being the most suitable acquisition target owing to its portfolio of assets holding the potential to grow the quality and the value of Gold Fields’ portfolio of assets, Griffith notes.

Moreover, he says Gold Fields also wants to bulk up its South American operations, as it only has a single asset in Peru and a single asset in Chile, which is not an efficient approach towards the region.

Moreover, the company has also been keen to enter Canada for some time, and Yamana provides that access.

The combined company would have 14 operating assets, a production pathway to four-million ounces a year, a market capitalisation of $15.9-billion and gold-equivalent reserves of 81-million ounces.

Griffith said the company would continue to take a disciplined growth approach towards projects and investigate these and their potential carefully.

Following completion of the transaction, Gold Fields will remain headquartered in Johannesburg, and listed on the JSE with secondary listing on NYSE, Griffith informed.

Yamana shares will be delisted from the TSX, the NYSE and the LSE.

The combined company would undertake a regionalised model approach to running the business and operations across different regions.

Griffith outlined that, as the company is tax domiciled, growth will provide tax benefits to the South African government and Johannesburg will remain the hub of the business.

Griffith said shareholders of both Gold Fields and Yamana would vote on the proposed transaction during the third quarter, while the transaction is likely to be finalised in the fourth quarter.

Following completion of the transaction, Griffith said the combined company would become the fourth-largest gold miner by gold production.

He emphasised that this was not the main objective of the transaction, rather, it was to create value, take the company down the cost curve, increase cash flows, improve its jurisdictional attractiveness and create a pipeline of assets.

Griffith acclaimed that the transaction is aimed at long-term value creation, is complementary to the business, and in Gold Fields’ view, will create substantial shareholder value.

Gold Fields’ board believes that offering the Gold Fields consideration shares is the best way to capture and unlock growth opportunities, while still maintaining financial flexibility, capital and operational discipline, and providing attractive returns to shareholders.

Strong near-term operating cash flows from Gold Fields’ producing assets complement the manageable capital requirements of Yamana’s high-return project portfolio, providing greater capacity to fund the combined growth pipeline internally, while maintaining shareholder returns in line with Gold Fields’ existing policy, the company outlines.

Yamana is considered a natural strategic fit for Gold Fields, with its high-quality, diversified portfolio of long-life assets located in mining friendly rules-based jurisdictions across the Americas – including its five producing mines and pipeline of development projects and exploration properties – and with a shared focus on health and safety and ESG performance.

With the combination of Gold Fields’ and Yamana’s portfolio of assets, Gold Fields says it will become a new global gold major able to create value at every stage of its pipeline.

The combined group will maintain its presence in all regions, while continuing to honour commitments to stakeholders.

Gold Fields believes the transaction offers employees and communities more opportunities in the long term, given its record of ongoing investment in the regions in which it operates.

The transaction has been unanimously approved by the boards of directors of both Gold Fields and Yamana and is expected to close in the second half the year, subject to and following the satisfaction of the conditions precedent to the transaction.

RATIONALE
The transaction will merge two highly complementary gold portfolios, contributing to an enhanced long-term value proposition.

This is centred on growing the value and quality of Gold Fields’ portfolio of assets with a combined portfolio of high-quality assets comparing favourably to the scale, cost and life of the premium-rated majors, and an appropriate balance of existing production with future growth.

Moreover, the transaction boasts geographical diversification, with a combined portfolio of high-quality assets across the world’s premier mining jurisdictions in South Africa, Ghana, Australia, Canada, and South America, with risk mitigated through a balanced geographical spread and majority exposure to Organisation for Economic Cooperation and Development countries.

Moreover, the transaction is expected to strengthen the financial position driven by Gold Fields and Yamana’s complementary cash flow generation profiles with strong near-term operating cash flows from producing assets, healthy balance sheets and staggered major capital investment cycles. This would provide the combined group with greater capacity to fund its project pipeline without compromising balance sheet flexibility or shareholder returns.

The transaction will also grow the pipeline of production, combining Gold Fields’ record in portfolio optimisation and project development with Yamana’s current assets and deep pipeline with accelerated growth potential.

The combined group expects to benefit from the near-term growth of Gold Fields’ Salares Norte and South Deep mines, and longer-term growth from Yamana’s Wasamac, Malartic Odyssey and MARA projects, as well as additional opportunities in Yamana’s high-quality exploration pipeline.

The companies also have complementary cultures and aligned strategic priorities. The combined group will continue to commit to Gold Fields’ 2030 decarbonisation, environmental, safety and health, diversity and stakeholder value creation targets.

There is an initial target pre-tax synergies of about $40-million a year, anchored in operational integration, as well as potential financing synergies and a streamlining of overhead cost structures.

Gold Fields has engaged financial and legal advisers. The board of directors of Gold Fields has unanimously approved the arrangement agreement and it has recommended that Gold Fields shareholders vote in favour of the transaction.

After consultation with its outside financial and legal advisers, the board of directors of Yamana has also unanimously approved the arrangement agreement and has recommended to its shareholders to vote in favour of the transaction.

Further all of the directors and senior officers of Yamana have entered into binding voting support agreements with Gold Fields under which such individuals have agreed to support and vote their Yamana shares in favour of the transaction.