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UPDATE 3-S.Africa's Gold Fields to become fourth biggest gold miner with Yamana deal

·3 min read

* Gold Fields shares down 20% on JSE

* Largest EMEA-based cross-border mining deal since 2008

* Deal makes company a top four global producer

* Yamana part owns Canada's biggest gold mine (Updates share price moves, recasts)

By Nelson Banya

May 31 (Reuters) - South Africa's Gold Fields Ltd's is set to become one of the four biggest gold miners in the world after agreeing to acquire Canada-based Yamana Gold in a $6.7 billion all-share deal, the biggest in the region in years.

Shares in the South Africa-listed mining company fell 20%, though, and investors voiced concern about dilution on a call with Gold Fields CEO Chris Griffith and Yamana CEO Peter Marrone. Yamana shares rose as much as 8.6% on the deal, and were last up 4.2%.

Credit Suisse analysts said the premium Gold Fields agreed to pay for Yamana - 31% above Yamana's latest close - was "considerably higher" than in other recent gold deals.

"We are asking you to invest in this future value at what we think is a very, very attractive premium," Griffith told investors. "We don't expect the market instantaneously to have the same level of appreciation for this deal as we do."

The acquisition is the largest mining deal in the Europe, Middle East and Africa (EMEA) region in a decade, and the third-largest South African transaction since 2014 — all in a sector that analysts say needs consolidation to reduce costs.

The deal gives Gold Fields a coveted foothold in the Americas, Griffith told Reuters in an interview. Gold Fields will be propelled to fourth place in terms of gold production, behind Newmont, Barrick and Agnico Eagle .

The transaction will see Gold Fields shareholders owning about 61% of the combined group, while Yamana shareholders will own around 39% after the deal completes.

Marrone said Gold Fields was the best custodian for Yamana's assets.

Yamana, which produced 884,793 ounces of gold and 9.2 million ounces of silver in 2021, owns 50% of Canada's biggest gold mine, Canadian Malartic, and has operations in Chile, Brazil and Argentina.

Gold Fields has long eyed Canada, Griffith said, as it looked for assets that would complement its growth strategy and provide synergies.

"That's what the Yamana assets do, they tick all those boxes for us. They bring high quality assets in Canada, Chile and Brazil, with great pipeline projects in both Canada and Argentina in particular," Griffith said.

Apart from mines in South Africa, Australia and Ghana, Gold Fields operates the Cerro Corona mine in Peru and is developing the Salares Norte project in Chile, which it expects to start production in the first quarter of 2023.

"We will have some synergy savings in overheads and some savings by bulking up and putting our assets together in South America around supply chains," Griffith said.

After a pandemic-induced lull, merger activity in the gold industry is bouncing back, driven by a need to grow and prop up share prices that have suffered from poor performances. Canada's Agnico Eagle Mines Ltd bought rival Kirkland Lake Gold Ltd for more than $10 billion earlier this year.

Gold Fields said both companies' boards had unanimously approved the deal and recommended shareholders give their green light in a vote expected by the end of September.

Yamana shares will be delisted, while Gold Fields will continue trading in Johannesburg, where the combined group will have its headquarters. (Reporting by Nelson Banya in Harare, Amna Karimi and Yadarisa Shabong in Bengaluru; Additional reporting by Clara Denina; Editing by Uttaresh.V, Sherry Jacob-Phillips and Nick Zieminski)