Nelson Banya

(Reuters) -South Africa’s Gold Fields (NYSE) Ltd’s will soon be one of the top four gold miners worldwide after it acquires Canada-based Yamana Gold (NYSE:) In a $6.7 Billion all-share agreement, it was the largest in the region for 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 up last 4.2%.

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 recent gold deals.

Griffith stated to investors, “We ask you to invest at this future value at what is we believe is a very very attractive premium.” 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. The deal will propel Gold Fields to the fourth spot in gold production behind Newmont Barrick, Agnico Eagle and Barrick (NYSE:).

After the transaction is completed, Gold Fields shareholders will hold approximately 61% and Yamana shareholders around 39% of the combined group.

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

Yamana was the producer of 884,793 troy ounces gold and 9.2million troy ounces sterling in 2021.

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 stated that they bring quality assets to Canada, Chile, and Brazil and great pipeline projects, in Argentina and Canada in particular.

Gold Fields has mines in South Africa and Australia, as well as Ghana. It also operates the Cerro Corona Peru mine and is currently developing Salares Norte in Chile. The company expects that production will begin in the first quarter 2023.

Griffith stated that there will be synergy in overheads savings and savings from bulking up assets and linking them together in South America to create supply chain networks.

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 Mines Ltd purchased rival Kirkland Lake Gold Ltd (NYSE:) Ltd earlier in the year for over $10 billion.

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

Yamana shares will no longer be listed. Gold Fields will still trade in Johannesburg. The combined group’s headquarters will remain there.