Gold Fields to buy Osisko in US$1.6B cash deal

South Africa’s Gold Fields (NYSE: GFI; JSE: GFI) is buying Canada’s Osisko Mining (TSX: OSK) in a deal valued at $2.1 billion (US$1.6 billion) as record-breaking prices for the precious metal fuels mergers, acquisitions and expansions. 

The takeover, which grants the Johannesburg-based gold miner full ownership of the Windfall project in Canada, is its latest move to diversify beyond the home country. These efforts include an unsuccessful attempt to acquire another Canadian gold miner, Yamana Gold, two years ago.

Under the definitive agreement with Osisko, Gold Fields will pay $4.90 per share, a 55% premium to Osisko’s Aug. 9 trading price, it said in a statement. The deal will help the South African producer expand its presence in the Americas, where it already has mines in Chile and Peru.

Gold Fields has been developing the Windfall project in Quebec in a 50/50 joint venture with Osisko.

“Over the past two years, beginning with our initial due diligence in 2022 and throughout our joint ownership of the project since May 2023, we have developed a strong understanding of Windfall and its potential, and view it as the next long-life cornerstone asset in our portfolio,” CEO Mike Fraser said.

Gold Fields plans to bring the Windfall mine into production by the end of 2026 or early 2027, eventually ramping up to approximately 300,000 oz. annually. The project, along with the recently commissioned Salares Norte project in Chile, is central to the company’s growth strategy as it looks to replace output from aging assets in Ghana and Peru.

Board backs deal

Osisko’s board has given unanimous approval to the deal, calling shareholders to support it. Chairman and CEO John Burzynski said the transaction represented an early payout for Osisko investors and also reflected Windfall’s potential.

“In the span of nine years, we’ve transformed Windfall into one of the largest and highest-grade gold development projects globally, and this transaction is a testament to the extraordinary entrepreneurial effort of the Osisko Mining team,” Burzynski said in a separate statement.

Gold Fields anticipates completing the acquisition in the last quarter of the year, with funding sourced from both new and existing debt facilities, as well as cash reserves.

In a research note on Monday, BMO Capital Markets analyst Andrew Mikitchook said the strong cash bid of the deal reinforces the quality and scarcity value of Windfall. 

Timing questioned

But analyst Raj Ray, also from BMO, questioned the timing of Gold Fields’ move.

“While we acknowledge the transaction rationale behind consolidating the Windfall project and the large exploration potential around it, we are a bit surprised with the timing,” he wrote on Monday.

The metals and mining specialist noted that investors will likely focus on the fact that Gold Fields has “sacrificed a significant portion of its expected cash flows over the next 12 to 24 months”, while taking on development and execution risks.

“This transaction puts even more emphasis on Salares Norte ramp-up, which has not gone smoothly yet,” Ray said.

Founded in 1887 by Cecil John Rhodes, Gold Fields has reshaped itself along the years. It sold all but one of its South African assets a decade ago, refocusing on newer, more profitable deposits in Ghana, Australia, and the Americas.

Earlier this month, the company said it expected a 20% fall in overall production in the first half of the year due at its mines, as well as the delayed ramp-up of the Salares Norte mine in Chile.

The miner had already revised its gold output for the 2024 calendar year in June. It said at the time it expected to churn out between 2.2 million oz. to 2.3 million oz., down from the original range of 2.3 million oz. to 2.4 million ounces.

Gold Fields shares closed more than 6% down in Johannesburg, at their lowest since June 20. That leaves the company with a market capitalization of almost US$13.6 billion.