Gold mining companies Franco-Nevada Mining Corp. of Toronto and Gold Fields Limited of South Africa have agreed to merge and form a new company called Gold Fields International. The companies value the deal at $3.7 billion.
"This combination will create one of the world's largest and strongest gold companies with a common philosophy, belief in the future of gold and commitment to maximizing shareholder value," the companies said in a press release Tuesday.
The new company will rank third among the world's gold miners in production, behind AngloGold Ltd. of South Africa and Newmont Mining Corp. of North America. Gold Fields International is expected to produce 4.4 million ounces annually.
Gold Field's shareholders will receive 0.35 of a share of Franco-Nevada for each Gold Fields share, resulting in about 59 million new Franco-Nevada shares issued, the Associated Press reported. Each company's shareholders will own 50% of the new Gold Fields International. The new head office will be in Toronto, and the executive office will be in Johannesburg.
According to Reuters, the deal was attractive to Franco-Nevada because there was no more room for expansion in its traditional areas. In its 14 years of existence, the company had acquired all the royalties it could and was looking for other areas in which to grow. "This is a significant step in our strategic growth as a company and in the ongoing pursuit of value for our shareholders," said Seymour Schulich, chairman and co-CEO of Franco-Nevada. "We believe in gold, and this transaction will give our new company the greatest leverage to gold possible. The company will also be particularly well placed to lead further consolidation in the gold industry."
Gold Fields shareholders benefit greatly from the deal as well. The merger will put Gold Fields into the international arena and provide its shareholders with an offshore component to their investment, said Chris Thompson, chairman and CEO of Gold Fields. "This will ensure long-term growth in our assets and the sustainability of our consolidating industry. In short, this transaction is good for our company, our shareholders, our employees and our country."
- by Julia M. Duncan