Merger and acquisition activity has created a buzz this week with Northern Star Resources publicly rebuffing a circa A$39 billion takeover bid from South Africa’s Gold Fields.
Northern Star on Monday described the conditional offer as highly opportunistic and at a “price that falls well short”.
It’s the latest move in a series of M&A action in the gold space over the past 18 months, including Ramelius Resources $2.4 billion takeover of Spartan Resources, Northern Star’s $5 billion acquisition of De Grey Mining, plus Genesis and Vault Minerals’ $12.6 billion merger.
However this plan is at a bigger scale, with Gold Fields saying the combination would create the second largest global gold producer, behind Newmont.
There was a hostile bid by Barrick Gold to acquire Newmont about seven years ago, designed to create the world’s largest gold producer, which instead resulted in the Nevada Gold Mines joint venture.
Also at the top end of town, but outside the gold space, Glencore and Rio Tinto ended their latest M&A talks and BHP abandoned its tilt at Anglo American within the past year.
The mining sector was burnt by a series of acquisitions about 20 years ago that led to write downs when commodity prices fell.
Yet there is talk that Glencore’s upcoming ASX listing could reopen the door to further Rio discussions.
There is consolidation pressure in the industry, with scale offering financial strength to handle the cost of multibillion-dollar operations and developments.
And although the gold price has softened of late, it’s still at historically high levels.
Returning to Northern Star, there is speculation about other possible suitors.
Gold majors such as Agnico Eagle Mines, AngloGold Ashanti, Newmont and China’s Zijin Mining are among the names being mentioned.
Northern Star chairman Michael Chaney AO told shareholders in June that the company was “always open to serious approaches from outside parties and you will not be surprised to learn that given our share price underperformance, over the last year Northern Star has been approached by several companies about considering various corporate combinations.”
He said those discussions did not proceed because they were not in shareholders’ best interests, and the board this week pointed to near-term value catalysts, including the commissioning and ramp-up of the Fimiston Mill.
So will the new leadership team at Australia’s biggest gold miner be open to a sale, amid agitation for change from activist shareholder Elliott Investment Management?
Former Glencore executive Suresh Vadnagra takes the helm as managing director and CEO at Northern Star next week, and deputy chairman Michael Ashforth will succeed Chaney as chairman in November.
As for Gold Fields’ stance, CEO Mike Fraser said the company would remain open to “constructive dialogue and continue to seek engagement with the Northern Star board”.
He continued to push the merits of the proposed transaction during his presentation at Mining Forum Americas in Denver this week.
Miners are continuing to look to build scale – but not growth at any cost.
