Yamana Gold (AUY) shares surged higher Tuesday after the Canada-based gold producer agreed to a $6.7 billion takeover by South Africa's Gold Fields (GFI).
Gold Fields will pay 0.6 of its American depositary shares for each Yamana share, the companies said Tuesday, with the all-stock deal valuing the Toronto-based group at a 34% premium to its 10-day average. Gold Fields investors will own 61% of the combined group, which includes the Canadian Malartic mine -- the country's largest -- with Yamana shareholders holding the remaining 39%.
The deal, the Africa and middle east region's largest in more than decade, will allow both Gold Fields and Yamana to reduce costs amid the fastest inflation in forty years and a slump in global demand, which is being impacted in part by China's Covid lockdown and a weaker-than-forecast Indian wedding season.
“The combination of Yamana and Gold Fields creates a world-class, globally diversified company with regional relevance across premier, rules-based mining jurisdictions that is underpinned by low cost, long life mines," said Yamana's executive chairman Peter Marrone. "The combined entity will be well positioned to deliver long-term value creation with its enhanced scale, management strength and improved capital markets profile."
"Yamana and Gold Fields also have complementary corporate cultures and values with an ESG-first operating model with a strong focus on supporting host communities and environmental stewardship," he added. "We believe that Yamana's shareholders’ ownership of the Combined Group reflects the fair value of the contribution that each company brings.”
Yamana shares, which will be de-listed from north American exchanges once the deal is closed later this year, were marked 8.22% higher from their Friday close in early New York trading to change hands at $5.60 each.
Gold Fields shares, meanwhile, slumped 20.66% to $9.68 each.
Spot gold prices are only up around 1.1% so far this year, and were last seen trading at $1,848.30 per ounce, after hitting a multi-year high of $2,502.14 in early March.
The SPDR Gold Trust ETF (GLD), the world's largest, was marked 0.2% lower in pre-market trading Tuesday at $172.51 each, a move that would trim its year-to-date advance to around 2.6%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.16% higher at 101.829, extending its year-to-date gain to around 6%.
