Canadian miner Pan American Silver has tossed its hat into the ring to acquire fellow miner Yamana Gold, teaming up with Agnico Eagle Mines in an unsolicited proposal to buy the company that South Africa-based Gold Fields has its eye on.
Pan American Silver and Agnico Eagle on Friday delivered a binding offer to the Yamana board, pursuant to which Pan American would acquire all the issued and outstanding common shares of the company and Yamana would sell certain subsidiaries and partnerships which hold its Canadian assets to Agnico Eagle.
This would include the Canadian Malartic mine, allowing Agnico Eagle to consolidate its ownership in one of the world’s biggest gold mines.
Under the offer, Pan American would acquire all the issued and outstanding common shares for total consideration consisting of $1.0-billion in cash and the issuance of about 153.5-million common shares of Pan American and about 36.1-million common shares of Agnico Eagle.
Shareholders of Yamana would receive $1.0406 in cash, 0.0376 of an Agnico share and 0.1598 of a Pan American share for each Common share held, for an aggregate value of $5.02 a share.
The offer is not subject to any financing condition or additional due diligence.
Yamana said in a statement that the new offer constituted a “superior proposal” in accordance with the terms of the arrangement agreement with Gold Fields. The South Africa-based gold major has five business days to match the offer.
Yamana noted that its board had not changed its recommendation regarding the pending transaction with Gold Fields and that the special meeting of shareholders to consider the Gold Fields arrangement remained scheduled for November 21. The board has unanimously recommended voting in favour of the Gold Fields arrangement.
Some investors have called into question the all-stock takeover by Gold Fields, currently valued at C$6.8-billion. Van Eck Associates, the biggest Yamana investor and the third-biggest shareholder in Gold Fields, is critical of the transaction, according to Canadian newspaper Globe and Mail. Portfolio manager Joe Foster called the deal “poorly structured” and said the market did not understand the strategy behind the deal. Another Gold Fields investor, Redwheel, has also called for the transaction to be scrapped.
GOLD FIELDS SAYS ITS DEAL REMAINS SUPERIOR
Gold Fields responded on Friday that it believed its offer was “demonstrably superior” to the joint offer by Pan American and Agnico Eagle.
The complementary nature of Yamana’s assets to the Gold Fields portfolio would create “significantly greater near-term and long-term value” for the shareholders of both companies than the new offer.
“It is clear that the Gold Fields offer remains strategically and financially superior to the joint offer with higher quality assets, lower operational and execution risk and higher sustained returns, given Gold Fields enjoys the free cash flow, balance sheet profile and technical capabilities to unlock the full potential of Yamana’s assets,” the company stated.
Gold Fields also noted that the emergence of another offer indicated that other mining companies were seeing the inherent value in Yamana’s assets.
PRECIOUS METAL MAJOR TO BE BORN
Meanwhile, Pan American said that the Yamana acquisition would establish it as a major precious metals producer in Latin America, with about 28.5-million to 30-million ounces of yearly silver production and about 1.1-million to 1.2-million ounces of yearly gold production.
“The combination of our existing portfolio with Yamana’s high-quality assets in Latin America would create a powerful precious metals mining company in the Americas with leading exposure to silver, and represents an exciting opportunity for growth for both Yamana and Pan American shareholders.
“Our established presence and expertise in Latin America will enable us to leverage the synergies and growth potential of Yamana’s assets in the region in a way that is highly complementary to Pan American’s existing mines there,” said Pan American president and CEO Michael Steinmann.
The companies further said that the consolidation of the Canadian Malartic mine would place the asset into the hands of the “best positioned operator” to develop the mine’s full potential. It gives Agnico Eagle operational control during the remaining development period of the Odyssey project and future projects.
Most importantly, Agnico Eagle has the unique ability to monetize future additional mill capacity at the Canadian Malartic mine, given its extensive operations and strategic land position in the region.
Agnico Eagle president and CEO Ammar Al-Joundi said the transaction was a continuation of the group’s strategy to operate in regions where it believed it had a competitive advantage, in this case over 50 years of operating history.
“The full integration of the Canadian Malartic team and landholdings into our operational base in the region would enhance our Abitibi operating platform, placing Agnico in the unique position to further optimize the asset and unlock potential value through exploration and the leveraging of existing infrastructure, people and regional relationships.”