The partners in the large, low-cost Gruyere gold mine in Western Australia are engaged a A$3.2 billion struggle for control with tit-for-tat offers exchanged between local discoverer Gold Road Resources and South African mining giant Gold Fields.
Gold Fields revealed late yesterday it had lobbed a $3.05 per share offer to acquire its 50% partner in Gruyere. The offer comprises a $2.27 per share cash offer for Gold Road and a variable cash amount based on each shareholder's proportionate interest in De Grey Mining, which is subject to a separate $5 billion friendly takeover from Northern Star Resources.
Gold Road rejected Gold Fields' bid, describing it as "opportunistic" and coming at a time of share price pressure due to a warning that production from Gruyere would take a hit in the March quarter.
Gross quarterly production is expected to be below 73,000oz due to maintenance on the primary crusher and the failure of two conveyor belts.
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The offer also arrived before the partners had a chance to understand the potential for Gruyere to transition from an open pit to an underground operation after the conclusion of an 18-month-long deep drilling program.
Gold Road said the Gold Fields offer "attributes no value at all to the potential underground expansion".
Its response was a counter-proposal to acquire Gold Fields' 50% stake in the Gruyere JV, to be funded by an existing mix of cash, debt, or new equity.
Gold Road is not hurting for money. It ended January with cash and equivalents of A$174 million. Its De Grey stake is now worth somewhere around $850 million.
Unsurprisingly, Gold Fields rejected the offer.
JV has soured
Discussions between the pair had been private until Gold Fields made its intentions public yesterday. Gold Roads was not happy.
"Gold Road views this behaviour of a joint venture partner, which Gold Road invited into Gruyere in 2017, as extremely disappointing," the company said.
Under the terms of the JV, the South African miner is blocked from securing more than 10% of Gold Road and is required to announce if it intends buying on-market.
The Johannesburg-based Gold Fields said it was regrettable its approach had been swatted away, accusing Gold Road of not engaging constructively.
No play for De Grey
Gold Fields indicated it would back the Northern Star/De Grey merger and had no indication to make a play for De Grey.
It will now push ahead with a hostile bid for Gold Road, which it describes as being at a 28% premium to the last traded price and a 44% premium to the see-through valuation after adjusting for its 17.3% stake in De Grey.
Gold Fields CEO Mike Fraser described his offer as "a compelling opportunity for Gold Road shareholders to realise an attractive and certain cash price for their investment", noting Gold Road did not control its two major investments.
"Consolidation of the remaining 50% interest in Gruyere will eliminate dis-synergies that arise through the current joint venture ownership," he said.
Royalty incoming
Gruyere has produced over 1.5Moz since June 2019, with 287,270oz produced in 2024 alone.
A 2% net smelter royalty owed to Gold Road is set to kick in when production ticks over 2Moz, reducing Gold Fields's share of profits.
Resources have been estimated at 6Moz.
Gruyere is expected to produce 325,000–355,000oz in 2025 at an attributable all-in sustaining cost of $2400–2600/oz, with output rising to 335,000–375,000oz until 2027.
Gold Fields entered the Gruyere JV in 2016, paying $350 million for a 50% stake in what was then a pre-development asset.
At the time, a definitive feasibility study outlined a 13-year operation producing an average of 270,000ozpa at $945/oz.
Gold Road shares have traded as low as $1.49 over the past year.
The stock was up 13% this morning to reach a 12-month high of $2.78, capitalising the miner at $3 billion.
De Grey shares were steady at $2.10, capitalising it at $5 million.
Gold Fields, which produced 2Moz last year, dropped 5% in New York overnight to US$20.57, valuing the miner at $18.35 billion.
Its Australian mines – Gruyere, Granny Smith, St Ives and Agnew – generated 992,000oz last year, making WA its largest producer.
Guidance for 2025 is for 2.25-2.45Moz at AISC between $1500-1650/oz.
