MARIAM ISA, Johannesburg | Wednesday
SOUTH Africa’s gold giants are set to unveil better earnings for the final quarter of 2000, but a merger between the two largest producers may eclipse the results, say analysts.
Speculation has mounted in the past week that world leader AngloGold would launch a bid for its smaller rival Gold Fields Ltd, possibly with Canada’s Barrick Ltd, which is said to be seeking a foothold in the country.
Analysts say the tie-up would make sense, as AngloGold would be able to replace the marginal assets, which it is disposing of with better quality ones, and improve a global rating hampered by a R5bn offshore debt burden.
However the world’s biggest producer would need a partner in the deal, as Gold Fields is valued at more than R13bn and key shareholders are said to be demanding a generous cash premium of about 50%.
”From an AngloGold perspective it would make quite a lot of sense, because they can improve their asset portfolio locally … their offshore growth portfolio is relatively limited at this stage because of their high debt bill,” one analyst said.
Shares in Gold Fields, which account for about 30% of the turnover on the Johannesburg Stock Exchange’s gold index, hit a nine-month high of R29.75 last Friday as speculation a deal was imminent reached fever pitch.
Although it lagged last week, AngloGold climbed 6.85% to R234 on Tuesday – clocking up gains of more than 20% since the end of November. Modest increases in the gold price to more than $267 per ounce were cited as a factor.
An outright merger would create a company with a market capitalisation of about R40bn and production of 11m ounces per year.
Rumours of a deal have been rife since London-listed Anglo American Plc, which has 54% of AngloGold, boosted its stake in Gold Fields to 17% in December.
All the companies involved have declined to comment on the speculation, but AngloGold chief Bobby Godsell said last December the country’s industry badly needed to rationalise in the face of low gold prices and underperforming domestic mines.
Gold Fields has been seen as a prime takeover target since the government blocked its planned $3.7bn merger with Canada’s Franco Nevada last September, on the grounds it would be bad for South Africa’s economy.
Analysts say the country’s gold sector as a whole – which accounts for around 20% of global production – was likely to notch up an eight to ten percent improvement in profits, mainly due to a higher rand-denominated gold price. – Reuters