Nelson Banya

(Reuters) –South Africa’s Gold Fields Ltd (NYSE:) Ltd is poised to be the fourth largest gold miner in the world, after agreeing the acquisition of Canada-based Yamana Gold (NYSE: ) A $6.7 billion all share deal was struck, making it the largest regional investment in many years.

However, shares in South Africa’s listed mining company plunged 20% and investors expressed concern over dilution when they spoke with Gold Fields CEO Chris Griffiths, Yamana CEO Peter Marrone, on a phone call. Yamana shares gained as high as 8.6% following the transaction, while they were at their highest level in four years.

Credit Suisse analysts claimed that Yamana’s premium Gold Fields agreement to pay Yamana 31% higher than Yamana’s most recent close was “considerably more” than any other gold deals.

Griffith explained to investors that Griffith asked them to make an investment in the future value of this company at a premium we consider very attractive. We don’t anticipate the market to appreciate this deal at the same rate as us.

The acquisition is the largest mining deal in the Europe, Middle East and Africa (EMEA) region in a decade, and the third-largest South African transaction since 2014 — all in a sector that analysts say needs consolidation to reduce costs.

Griffith spoke to Reuters about the deal, saying that it gives Gold Fields a coveted position in the Americas. Newmont Barrick, Agnico Eagle, and Newmont will all be in fourth place for gold production.

Gold Fields shareholders will now own approximately 61% of the group. Yamana shareholders will have around 39% once the deal is complete.

Marrone claimed that Yamana’s assets should be kept in the care of Gold Fields.

Yamana produced 8.2 million ounces silver and 879,793 gold ounces in 2021. It also owns half of Canada’s largest gold mine, Canadian Malartic. The company has other operations in Chile and Brazil.

Griffith explained that Gold Fields was long interested in Canada because it sought assets that could complement its growth strategies and create synergies.

Yamana assets tick every box for us. Griffith explained that the Yamana assets bring in high-quality assets from Canada, Chile, Brazil, as well as great pipeline projects for Argentina and Canada.

Gold Fields also owns mines in South Africa Australia and Ghana. In Peru, it operates Cerro Corona and is developing Salares Norte, which will be in Chile in the first half of 2023.

Griffith explained that “we will see synergy benefits in overheads as well as savings through bulking up, putting together our assets in South America around supply chain chains.”

After a prolonged, pandemic-induced slump, the industry’s merger activity is rebounding. The reason? A need to expand and support share prices, which have been hit hard by poor performance. Canada’s Agnico Gold Mining Ltd acquired rival Kirkland Lake Gold Ltd (NYSE) Ltd in a deal worth more than $10 Billion earlier this year.

Gold Fields reported that the boards of both companies had approved the deal unanimously and recommended that shareholders approve the deal in a vote to be held by September’s end.

Yamana shares are being delisted. Gold Fields, however, will trade in Johannesburg where they will maintain their headquarters.