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Gold Fields says it is open to further talks after Northern Star rejected its $38.7 billion takeover offer as too low. The deal would create the world's second-largest gold producer.
Gold Fields, the South African mining giant, says it is open to further dialogue after Northern Star rejected its $38.7 billion takeover bid as too low.
The offer was received, considered and rejected by the Australian gold miner in mid-September. Gold Fields chief executive Mike Fraser said on Wednesday that the proposal deserved further consideration from the Northern Star board. He said the company is open to further discussions. What we are proposing is a stronger combined entity that we believe will deliver value for both sets of shareholders sooner, Fraser said.
Gold Fields Eyes Higher Bid Offer
His comments come amid growing speculation that Gold Fields may return with a sweetened offer. Reports from Bloomberg News, citing unnamed sources, suggested the company is weighing whether to increase the cash component of the deal. Speaking at an industry conference in Denver, Fraser said combining the two companies would create the world's second-largest gold producer. It would rank behind only Newmont Corporation of the United States.
He said the merger presented unique opportunities to consolidate their assets in Western Australia. That could form the second-largest gold mining hub anywhere in the world, with output of 2.4 million ounces a year. Both companies run multiple gold sites in WA, including around Kalgoorlie. Northern Star owns and operates the Super Pit there, one of Australia's biggest open-cut gold mines.
If you look at the position in WA, this provides a very unique opportunity to consolidate these assets, Fraser said. This combination will allow us to ensure that the right ore is fed into the right mills in that area. He said this would result in lower haulage and processing costs, which is one of the core tenements of the operational synergies identified.
Northern Star Rejects Valuation Premium
Under the offer, Northern Star shareholders would have received 0.3125 new Gold Fields shares and $7.25 in cash for each share. The bid valued Northern Star at $38.7 billion, a 22 per cent premium on pre-bid share prices. Northern Star chairman Michael Chaney argued Gold Fields had tried to buy one of the world's premier gold portfolios at a price that fell well short of its value.
He said the offer did not reflect the fundamental value of its assets in low-risk jurisdictions or its growth prospects. He also said the deal would expose shareholders to jurisdictional and operational risks to which they are not exposed today. Northern Star told investors the proposal was highly opportunistic and undervalued its assets spanning Western Australia and Alaska. US-based activist investor Elliott Investment Management has pressured Northern Star's board to make sweeping changes.
The hedge fund criticised Northern Star's sharemarket underperformance this year and urged it to consider a sale or asset divestments. The approach comes amid a multi-year rally in gold prices. The rise has been fuelled by intensifying geopolitical tensions, worsening inflation fears, erratic policymaking in the United States and an erosion of trust in the US dollar. Gold has been prized by civilisations for thousands of years for its rarity and use in jewellery.
Activists Push For Strategic Asset Sales
These days it tends to be most sought after by investors as a safe place to store wealth during periods of extreme financial uncertainty. Investors this week said the approach for Northern Star reflected the growing strategic appeal of gold miners. Gold miners are back in favour, said Betashares investment strategist Tom Wickenden. Central bank buying and concerns over US debt and currency debasement are adding to that support, he said.
We could very well see more merger and acquisition activity among gold miners and the materials sector more generally.
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smh:This story was compiled and edited by the HeadTopics newsroom and HT AI from the reports above.
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