South Africa’s Gold Fields Ltd. announced Monday it will acquire Australia’s Gold Road Resources Ltd. in a deal valued at 3.7 billion Australian dollars ($2.4 billion), as record-high gold prices fuel a wave of mergers and acquisitions in the sector.
Gold Road shares jumped as much as 12% after the announcement. The offer represents a 14.5% premium to the company’s last closing price.
The acquisition will give Gold Fields full control of the low-cost, long-life Gruyere gold mine in Western Australia, which the company currently operates as part of a joint venture with Gold Road.
It marks the third major transaction in the Australian gold sector in six months, a region that has become a global hot spot for dealmaking. Other recent deals include Northern Star Resources’ AU$5 billion all-share acquisition of De Grey Mining and Ramelius Resources’ proposed takeover of Spartan Resources, creating a combined AU$4.2 billion group.
Strong bullion prices and a relatively weak Australian dollar have made the country’s gold producers increasingly attractive to global buyers, industry analysts said.
Bellevue Gold, which has a market capitalization of AU$1.3 billion, is also expected to attract interest after hiring UBS last month to review its business. Asked about potential interest in Bellevue, Gold Fields CEO Mike Fraser said the company remained open to strategic opportunities.
“Given what we’ve just announced today, our near-term focus will be on integrating Gold Road, but we continue to look out for good opportunities to improve our portfolio,” Fraser said during a conference call with reporters.
In an interview with Reuters, Fraser said he expects continued consolidation in the gold sector, particularly with larger firms acquiring single-asset miners, despite high valuations tied to rising gold prices.
“If you believe the outlook for gold, gold equities remain relatively well-priced on a value basis,” Fraser said. “It wouldn’t surprise me to see more transactions emerge.”
Fraser added that the acquisition will also provide Gold Fields with access to a large landholding outside the current Gruyere joint venture, which could help boost output and extend the mine’s lifespan.
Under the terms of the revised offer, Gold Road shareholders will receive a fixed cash payment of AU$2.52 per share, plus a variable cash component reflecting the full value of each shareholder’s stake in Northern Star Resources. The latest offer improves on Gold Fields’ March bid of AU$2.27 per share plus the variable component, which Gold Road had dismissed as “highly opportunistic.”
As of Friday’s close, the revised offer equates to AU$3.40 per share.
Goldman Sachs and Gresham Partners advised Gold Road on the transaction, while JPMorgan advised Gold Fields.