Gold Fields to Buy Australia's Gold Road for Roughly $2.4 Billion -- 2nd Update

By Rhiannon Hoyle

Australia's Gold Road Resources agreed to a sweetened US$2.4 billion takeover by South Africa's Gold Fields, after rejecting an earlier bid amid surging gold prices.

Gold Fields approached its joint-venture partner in the Gruyere gold mine in Western Australia in March with a US$2.1 billion takeover proposal, but Gold Road's directors rejected that offer as highly opportunistic and materially undervaluing the company.

The new offer values Gold Road's equity at roughly 3.7 billion Australian dollars, equivalent to US$2.4 billion, and implies an enterprise value of A$2.6 billion. Shares in Gold Road jumped 9.4% on Monday.

Perth-based Gold Road sold a 50% interest in Gruyere--then just a project--to Gold Fields in 2016, after discovering the deposit three years earlier.

The companies jointly developed the mine, which began producing gold in 2019 and is operated by Gold Fields. Gold Road also has several exploration options in Australia, including in Western Australia's Yamarna Greenstone Belt, where Gruyere was discovered.

The deal comes as gold prices hit record highs, with the precious metal topping US$3,000 a troy ounce for the first time as economic uncertainty fuels demand for bullion as a safe haven asset.

Gold-mining companies have been actively striking deals amid the rally. Denver-based Newmont, the world's largest gold producer, has sold several assets after its US$17.5 billion acquisition of Australia's Newcrest Mining--the industry's biggest-ever takeover.

Two weeks ago, Barrick Gold agreed to sell its stake in an Alaskan gold project for up to US$1.1 billion to billionaire John Paulson's Paulson Advisers and Novagold Resources. In October, Gold Fields completed a US$1.4 billion acquisition of Canada's Osisko Mining.

Gold Fields Chief Executive Mike Fraser on Monday described the acquisition of Gold Road as "strategically logical and low risk" for the company, which operates mines in Australia, South Africa, Ghana, Chile and Peru.

"I think the moment we'd made that strategic decision to consider the consolidation of the asset, sooner was better than later," Fraser said of the Gold Road bid.

"There's going to be a lot of speculation about doing it when you're sitting under record gold prices," he told reporters. "But clearly, when we analyze an investment like that, we don't get caught up in the price of the day."

In March, when announcing its unsuccessful initial bid, Gold Fields argued that Gruyere would perform better under its sole ownership, which would eliminate inefficiencies tied to joint-ownership.

On Monday, Fraser said owning the mine outright would give Gold Fields more flexibility in running and planning operations.

Fraser didn't rule out further acquisitions, saying the company continues to explore opportunities to strengthen its portfolio. However, the focus in the months ahead will likely be on the Gold Road takeover, he said.

Gold Fields said it has strong cash flow--particularly at current gold prices--and will use new bridge financing to fund the acquisition.

Under the deal terms, Gold Road shareholders will receive about A$3.40 a share, representing a 43% premium to the stock's closing price before Gold Fields' proposal became public in March.

The offer includes a fixed cash payment of A$2.52 per share, minus any special dividend paid before the takeover closes. Gold Road intends to declare a special dividend of about A$0.35 a share if the deal proceeds, to use Australian tax benefits known as franking credits.

The offer also includes a variable cash component tied to Gold Road's stake in Northern Star Resources, worth about A$0.88 a share as of Friday. Fraser said Gold Fields has no specific strategic plans for Gold Road's 3.4% stake in Northern Star.

Gold Fields said the revised offer is its best and final, unless a rival suitor emerges with a higher bid.

Gold Road directors unanimously recommend shareholders vote in favor of the takeover. Investors holding about 7.5% of Gold Road's shares have expressed their intention to support the deal.

"The scheme provides Gold Road shareholders with an opportunity to realize certain value for their Gold Road shares at a compelling premium," said Duncan Gibbs, Gold Road's CEO.

In a March interview, Gibbs said price had been the key sticking point in early talks. The companies are assessing a potential underground expansion at Gruyere, but the initial bid attributed no value to that opportunity, according to Gibbs.

On Monday, Fraser told reporters that much work still remains to determine how much gold could be mined by expanding underground. He said the sweetened offer was aimed at satisfying shareholders than pricing in any future underground expansion, which he called "a long way out."

Gold Road shareholders are expected to vote on the deal in September, with the takeover slated to complete in October, if approved.

Write to Rhiannon Hoyle at [e-mail]

(END) Dow Jones Newswires

05-05-25 0426ET