Despite rejecting an unsolicited $3.3 billion takeover bid by South African rival Gold Fields, big gun gold producer Gold Road Resources (ASX: GOR) has held onto virtually all the upside to the share price since the offer was originally tabled.
Having risen 14% after receiving and rejecting Gold Fields' $3.3 billion offer, Gold Road's share price ($2.89) is now up 82% in one year and 40% year to date.
Undervalued and opportunistic
Whether Gold Fields - the second-largest gold miner in Australia – finally acquires Gold Road remains to be seen.
But the board has made it clear that the offer to acquire 100% of the Aussie miner’s shares for $3.05 per share materially undervalues the company, especially in light of the potential underground expansion of its prized Gruyere gold mine in WA.
Gold Road’s management has also expressed frustration with Gold Fields' lowballing following the mine’s earnings downgrade.
While Gruyere saw lower-than-expected production for the March 2025 quarter, the mine is still projected to produce 325,000–355,000 ounces in 2025.
The offer comprises a fixed portion of $2.27 per Gold Road share plus a variable portion of the miner's 17% stake in De Grey Mining (ASX: DEG). This mine is the target of a $5 billion takeover play from Northern Star (ASX: NST).
Market ripe for deals
Investor sentiment for gold – now trading around record prices – is reflected in recent M&A activity, including Ramelius Resources (ASX: RMS)' recent $2.4 billion bid to acquire Spartan Resources (ASX: SPR).
Given Gold Fields’ desire to take full ownership of the Gruyere gold mine in WA’s Goldfield – which is operated in a 50:50 JV with Gold Road – and is instrumental in improving its project portfolio, it’s unlikely to give up easily.
However, the standstill agreements suggest that Gold Fields' success in acquiring 100% of Gruyere will rely on negotiation rather than hostility.
It is understood that Gold Fields can’t buy more than 10% of Gold Road without the latter’s approval.
Gold Fields also needs to advise Gold Road of any plans to acquire any shares.
Gold Road wants its other 50% stake back
Meanwhile, rather than contemplating selling its 50% stake in Gruyere, Gold Road has said it now wants its the other 50% stake back, which Gold Fields acquired eight years ago as part of a JV agreement.
Unsurprisingly, Gold Roads’ counter offer for Gold Fields' 50% stake in Gruyere was unceremoniously rejected.
The sale of De Grey to Northern Star next month will clearly free up some needed capital should it get a deal over the line.
The company is understood to have also engaged in takeover talks with numerous parties last year, including Regis Resources (ASX: RRL).
While the fight for control of Gruyere appears to have reached an impasse, fund managers are keen for both parties to negotiate.
But to complicate matters, the top 20 Gold Road shareholders are also the top 20 shareholders in Gold Fields.
Gold Roads' market cap is $3.1 billion making it an ASX200 stock; its share price is trading at $2.92 this afternoon.
The stock appears to be in a strong bullish trend as confirmed by multiple indicators.
Consensus is moderate Buy.
This article does not constitute financial or product advice. You should consider independent advice before making financial decisions.
