Gold Fields boss Mike Fraser is disappointed the board of Gold Road Resources has poured cold water over his $3.3 billion offer for the Gruyere mine joint venture partner.
Gold Fields boss Mike Fraser is disappointed the board of Gold Road Resources has poured cold water over his $3.3 billion offer for the Gruyere mine joint venture partner.
The South Africa-based producer is proposing to acquire ASX-listed Gold Road at $3.05 per share in cash, an offer the target's board has rejected.
The deal would consolidate the 50:50 joint venture ownership of the Gruyere goldmine east of Laverton, which is operated by Gold Fields.
Gold Fields said it was disappointed the Gold Road board had not “constructively engaged on key elements of the proposal”, which was presented earlier this month.
Duncan Gibbs-led Gold Road tabled an alternative deal to buy the bidder's stake in the Gruyere mine. But Gold Fields rejected that avenue, and is instead intent on engaging with the target on the proposed deal.
Gold Fields chief executive Mike Fraser said the company was disappointed that Gold Road’s board of directors had rejected the proposal.
“Gold Fields will continue to seek the engagement of the Gold Road board to consider the merits of the proposed acquisition and to advance the proposal,” he said.
“Consolidation of the remaining fifty per cent interest in Gruyere will eliminate dis-synergies that arise through the current joint venture ownership.
“The proposed acquisition would be consistent with our strategy to improve the quality of our portfolio through investment in high-quality, long-life assets, like Gruyere, similar to our recent acquisition of the Windfall project.”
Gold Road reiterated its rejection of the offer, which it said materially under valued the company and was highly opportunistic in nature.
The target said the offer didn't factor in the potential underground expansion of the mine, with studies yet to be released.
Further, Gold Road labelled Gold Fields' actions as "extremely disappointing".
It said the bidder opted to make the offer public rather than address its concerns privately.
Gold Road has a 17.3 per cent stake in De Grey Mining, the target of a $5 billion proposed acquisition by mining major Northern Star Resources.
Since the all-scrip deal was announced in December, Gold Road has remained coy on which way it plans to vote.
Gold Fields said it would intend for Gold Road’s shareholding in De Grey to wave through Northern Star Resources’ $5 billion offer.
It said it had no intention of presenting a competing proposal for De Grey. Northern Star is hoping to seal the deal in May.
Gold Fields' offer values Gold Road's equity at $3.3 billion, and implied total enterprise value of $2.4 billion. The bid includes a fixed portion of $2.27 per share plus a variable portion equal to the value of each shareholder's proportion of the target's shareholding in De Grey.
The bidder said its $3.3 billion offer represented a significant premium to Gold Road’s closing share price of $2.38 apiece, “when considering Gold Road does not control either of its major interests”.
Further, Gold Fields said: "There can be there can be no certainty that any further engagements will materialise in a transaction being successfully concluded."
Gold Fields bought its 50 per cent stake in the Gruyere asset from Gold Road in 2016, paying $350 million in cash and a royalty agreement, with construction of the project beginning the following year before coming into production in 2019.
The Gruyere asset has been hit with its share of challenges in recent years, from weather-induced production impacts to contractor concerns.
The proposed deal is the latest in the wave of gold sector M&A driven by a record price environment for the precious metal amid global instability.
It also comes after Mr Fraser told Business News at Diggers & Dealers last year that M&A was on the table, pointing to further consolidation in the sector.
Herbert Smith Freehills' Perth office and JP Morgan Australia were hired by Gold Fields for their expertise on the proposed deal.
Gold Road has Gresham Partners providing financial advice and Corrs Chambers Westgrath as its legal adviser.
