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.

The South Africa-listed mining firm saw shares drop 20%. Investors voiced concerns about the dilution during a conference call with Gold Fields CEO Chris Griffiths and Yamana CEO Peter Marrone. Yamana shares went up as high as 8.6% following the transaction, while they were at their highest level in four years.

Credit Suisse analysts stated that Yamana was paid 31% more than Yamana had at the close of its latest closing. This premium Gold Fields payment was significantly higher than other gold transactions.

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 said that the agreement gives Gold Fields a coveted presence in Americas. Griffith was speaking to Reuters. The deal will propel Gold Fields to the fourth spot in gold production behind Newmont Barrick, Agnico Eagle and Barrick (NYSE:).

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

Marrone stated that Yamana’s assets were best kept safe by 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 stated that Gold Fields had long been interested in Canada as it searched for synergies and assets to complement its growth strategy.

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 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 that shareholders should vote for it in the September election.

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