Gold Fields Eyes Further Consolidation In Gold Mining Sector

South Africa-based gold miner Gold Fields has not yet abandoned its plans to acquire Australia’s largest gold miner, Northern Star Resources.

Gold Fields proposed to acquire Northern Star in a cash plus equity deal that valued Northern Star at A$39bn (US$27bn) on 14 September, which Northern Star subsequently rejected, according to the Australian company.

Northern Star Chairman Michael Chaney says: "Gold Fields has sought to acquire one of the world's premier gold portfolios at a price that falls well short of what the Board considers to be its fundamental value and at a highly opportunistic time.” 

Northern Star also noted that it was about to commission and ramp-up production at its Fimiston Mill project, within its wider KCGM complex in Western Australia.

The project is intended to increase mill capacity to 27m tonnes per year by FY29 (including a two-year ramp up), becoming one of the largest milling complexes in Australia.

The expansion is expected to help ease some of the production issues that the company has seen at its Kalgoorlie processing plant.

Northern Star also described the timing of the bid, shortly before new incoming Chief Executive Officer Suresh Vadnagra takes office, as “opportunistic and unsolicited.” 

Northern Star announced the appointment of Suresh, who will join Northern Star from Glencore, where he was head of Glencore Nickel and Zinc Industrial Assets based in Zug, Switzerland, in July.

Gold Fields sees value in a combination

In response, Gold Fields stresses that it is willing to continue discussions with Northern Star, and would consider a secondary stock market listing on the ASX in Sydney, Australia to assuage investors concerns.

No less importantly, Gold Fields continues to see commercial advantages for a proposed combination between Northern Star and Gold Fields. 

A combination between the two companies would create the world’s second-largest gold producer behind Newmont. Close to 60% of the company’s gold production would be produced in Western Australia.

Gold Fields estimates that the company would be able to achieve cost savings of up to US$5bn through synergies.