Do investors sense a South African predator in the Australian gold jungle, stalking some underperforming local operators after losing out on a major deal this week?
Shares in ASX-listed gold miners rose sharply yesterday even as the recent 4% run up in global prices for the metal eased touch in Asian trading yesterday.
The prices of Gold Road, De Grey, Evolution, Perseus, Northern Star and Regis Resources all rose 6.8% or more yesterday – a striking rise on a day when gold prices lost their recent oomph on the China re-opening story from last week.
There were reasons for Gold Road and De Grey shares to rise sharply, given that they are seen as the natural targets for Gold Fields now that it has dropped its takeover offer for the smaller Yamana Gold of Canada.
But Evolution? Regis? Northern Star?
The most curious rise was the out of nowhere 13% plus leap in the price of St Barbara shares yesterday.
St Barbara is on most lists to be taken over and in fact has all but been married off to the merging Genesis-Dacian Gold group in a rationalisation of the Leonora district gold mining industry.
Some analysts think the local gold miners are vulnerable because in terms of currency they are cheap to offshore giants with lots of greenbacks.
Small Australian techs are being snapped up by US dollar rich foreigners at the moment and some of the low valuations in Aussie dollars for gold companies could offer the same attraction for offshore buyers.
Gold Fields showed it is not flush with greenbacks by pitching an all paper offer for Yamana when it was told to use cash. But some of its shareholders would be rebelled if cash had been offered.
Agnico Eagle put up the $US1 billion cash component of its offer for Yamana with pan American. Some of that cash would have been generated by the Fosterville mine in Victoria.
Of all the local miners, two still stand out – Gold Road and De Grey because of their links to Gold Fields which would make them the first port of call (if market logic is any guide).
All this speculation follows Gold Fields formally throwing in the towel on Tuesday and withdrawing its all-paper bid for Yamana Gold, which will now be taken over by two Canadian rivals – Agnico Eagle and Pan American, the big silver producer.
Gold Road Resources is the first choice of market analysts because it is Gold Fields’ partner in the Gruyere mine in WA.
Gold Road also controls 20% of De Grey Mining and its rich Mallina-Hemi gold prospect in the Pilbara, so grabbing control of Gold Road offers a two for the price of one appeal.
Gold Road’s has a market value of around $A1.52 billion and the low value of the Aussie dollar would mean Gold Fields can grab control around $US1 billion. Gold Road shares were at $1.31 on Friday and are up more than 15% in three days. De Grey shares are up 16 cents or more than 15% in the same period.
But seeing it didn’t want to put up cash towards the Yamana bid, you’d have to believe Gold Fields can’t really afford to make a cash play for Gold Road. Gold Fields shares would not be attractive in Australia.
Yamana will have to pay a $US300 million break fee to Gold Fields for walking out of their deal, so that might help sweeten the pot.
Among the global majors, Newmont is already here with major mines at Boddington in WA and Tanami in the Northern Territory while Agnico Eagle controls the rich and growing Fosterville mine.
Russian majors are not allowed to invest any more so among the global giants, only Barrick is not here but has made noises about re-entering the Australian industry (it and Newmont once shared ownership of the SuperPit near Kalgoorlie.
The SuperPit is now owned by Northern Star and its shares rose 6.8% yesterday, making it too expensive for Gold Fields with a market cap of more than $A10 billion.
