Canadian miner Osisko will be acquired by Gold Fields in a $1.57 billion cash transaction

On Monday, Gold Fields Ltd (GFIJ.J) announced that it has reached an agreement to acquire Osisko Mining (OSK.TO) for C$2.16 billion ($1.57 billion). This announcement comes just two years after a rival offer thwarted an attempt to acquire another Canadian miner.

In a statement, the Johannesburg-based gold producer announced that it will pay C$4.90 per share, which represents a 55% premium to Osisko’s trading price on August 9. The agreement will facilitate the South African producer’s expansion of its operations in the Americas region, where it currently operates mines in Chile and Peru.

Gold Fields shares extended losses to trade 5.6% down at 1431 GMT, at their lowest since early July, while Osisko shares surged 63% as trading opened in Toronto on Monday.

In an interview with Reuters, CEO Mike Fraser stated that Gold Fields was able to move swiftly and avoid a share dilution by making a cash offer.

“We are aware that certain competitors were attempting to engage in a share-based transaction in order to compete.” It is likely that they would have been compelled to compete at a higher price.

In 2022, Gold Fields’ all-share offer of $6.7 billion to acquire Yamana Gold was unsuccessful due to the Canadian miner’s endorsement of a $4.8 billion cash and share proposal from Agnico Eagle (AEM.TO) and Pan American Silver Corp (PAAS.TO).

Gold Fields, which was established in 1887 by Cecil John Rhodes, has since shifted its focus to lucrative deposits in Ghana, Australia, and the Americas due to the geological challenges associated with mining in some of the world’s deepest mines in its native country.

It stated that Gold Fields would “firmly solidify” its presence in one of the largest gold deposits in Canada as a result of Osisko’s ventures in Quebec.

In a previous statement, Fraser stated that the agreement would enable Gold Fields to fully control the Windfall Project, which it is currently developing in the province in collaboration with Osisko. Production is anticipated to commence in 2026.

Gold Fields was well-suited to bring the Windfall project into production, according to Osisko, which has recommended the arrangement to its shareholders.

Osisko’s Chairman and CEO, John Burzynski, stated that the premium offered by the South African miner is an early payout for investors and also demonstrates the potential of the Windfall project.

Still, Arnold Van Graan, an analyst at Nedbank Group, stated that the Windfall project’s transition to production could increase the execution and financing risk for Gold Fields, which has been experiencing difficulty in increasing production at its new Salares Norte facility in Chile.

“We question whether a deal done when the gold price is pushing all-time highs would be value accretive in the long run,” Van Graan stated in a written statement. “Windfall has all the hallmarks of a quality long-life asset, but the mine still needs to be funded and built.”

The agreement will be financed by Gold Fields’ cash and un-drawn bank facilities, with additional financing from a group of lenders.

Fraser stated that Gold Fields may contemplate the sale of assets, including Damang in Ghana and Cerro Corona in Peru, that are in the process of exhausting their commercially viable ore reserves. However, no definitive decision has been made.

($1 is equivalent to 1.3731 Canadian dollars)