Yamana expects to turn Gold Fields skeptics into deal believers

Image: Yamana Gold

The few Gold Fields Ltd. shareholders who expressed reservations about the South African company’s $7 billion takeover offer for Yamana Gold Inc. will come around to the deal’s benefits.

That’s the view of Yamana’s executive chairman, Peter Marrone, who spoke in an interview two weeks after the all-stock deal for the Canadian gold producer was announced. The deal, which includes a relatively high premium by industry standards, requires approvals from shareholders of both companies.

“It will become very obvious that this is two pieces of a puzzle that fit nicely together,” Marrone said Tuesday from his Toronto office.

The friendly offer from Gold Fields is the latest in a revived shift toward consolidation in the gold industry. Rising costs are offsetting gains from elevated gold prices, while projects are getting pricier and trickier to develop, providing further impetus for companies to seek savings via deals.

Marrone said it’s understandable that some shareholders in a company on the cusp of delivering growth to wonder about the timing of a sizable transaction. Such questions will be answered as the two companies head into the next round of discussions with investors to better explain the compatibilities, he said.

“The more I learn of what their shareholders are asking in terms of information — and the little bits of what they do reveal in terms of where they’re leaning — it certainly suggests to me that they see that it is just as compelling for them as it is for the shareholders of Yamana,” Marrone said.

Marrone, a vocal proponent of consolidation in an industry that has faced underinvestment and depleting reserves, spoke on the same day as Newmont Corp. Chief Executive Officer Tom Palmer told a mining conference that more mergers and partnerships will be needed to to dig up harder-to-access deposits in an environmentally friendly way.

Yamana has mines in Canada, Argentina, Chile and Brazil, while Gold Fields is looking to expand in “mining friendly” jurisdictions across the Americas.

The merged company would immediately become the fourth-largest gold producer and in a year or so will leapfrog Agnico Eagle Mines Ltd. to take third place, Marrone said. Yamana and Gold Fields also share a focus on the bottom line rather than growth for growth’s sake, he added. 

The current uncertain macroeconomic and geopolitical environment means there is even greater reason to seek scale and diversification with gold prices set to rise, Marrone said.

(By James Attwood)

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