Not just luck in Gold Fields’s windfall
Interim CEO Martin Preece is off to a lightning start, thanks in part to deals in Ghana and Canada
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The wit and wisdom of Buffett and Munger played a huge role in my own personal and financial development, and if even a small part of that rubs off on the boys the trip will have been worth it.
Also, the meeting attracts investors from all over the world, and the networking opportunities are enormous. Our online world tends to isolate us, and travelling to Omaha is a deliberate action you can take to break out of it.
There are many other less important, but fun, reasons to attend in person, from the expo, where the Berkshire associate businesses all have stalls selling or promoting their wares, to the Berkshireowned stores in town offering special deals and the 5km run on Sunday morning. I managed to beat Berkshire Hathaway investment manager Ted Weschler in the run, a welcome reversal of our position with respect to assets under management.
And the expense? To attend the meeting itself costs nothing: all you need is to be a Berkshire Hathaway shareholder. Today, Berkshire A shares are priced at $497,000, never having been split since current management took the reins in 1965. Fortunately, you don’t need to be a millionaire to attend, as there are the low-voting B shares, which trade at $330 a share. These give you the same attendance (and proportional economic) right.
In fact, you could say Berkshire is paying you to attend the meeting the probability being that its shares will be worth more tomorrow than they are today. ● In the words of singer Taylor Swift, Gold Fields shook it off.
Five months after the resignation of CEO Chris Griffith, the gold miner’s share price is at a record high. Stand-in CEO Martin Preece tells the FM the dollar gold price is driving the stock, “but we hope the market is giving us a bit of credit as well a reference to two deals the company announced this year.
Last year was a nightmare for Gold Fields. On May 31, it bid $6.7bn in shares for Yamana Gold, a Canadian gold producer, only to be outbid by a joint offer from rival gold producers. Since then, it is joint ventures of its own in Ghana and Canada that have propelled the firm to a comeback and could boost Preece’s chances of permanent tenure.
“The board has indicated to us it has narrowed the field,” he says of the search for a new leader. “It wouldn’t be right to speak too much about the process, but I think interviews start next week.”
The first of the deals that have revived Gold Fields was a joint venture with AngloGold Ashanti involving neighbouring mines in Ghana. The second, a
C$600m purchase of a 50% stake in the Windfall project in Quebec, includes exploration potential on Windfall’s 2,400km² property.
John Burzynski, CEO of Osisko Mining, the Toronto-listed miner that sold the Windfall stake, says the project’s 7.4-million ounces in resources will definitely be increased, possibly to 10-million ounces. “We’ll knock over tables and chairs to find more,” he burred in that hyperbolic way that is entirely typical of North America’s mineral developers. Unlike South Africans, Canadian institutional investors are comfortable with mineral speculation.
Local analysts are positive about Gold Fields’s Windfall investment because, combined with the Ghana joint venture, it helps soften an otherwise hefty decline in production due to gather pace in 2025. “We see this deal as positive as it addresses the company’s longerterm production profile issues while adding further growth optionality,” says Arnold van Graan, an analyst for Nedbank Securities.
The deal is also less risky than the tilt for Yamana, which exposed Gold Fields to geopolitical and operational risk in Argentina.
Raj Ray, an analyst for BMO Capital Markets, describes Gold Fields’s recent dealmaking as “less transformational but more value accretive”.
That’s not to say Gold Fields isn’t paying up for this real estate. Canada is as costly a mining address as any in the world. Taking Gold Fields’s share of an estimated C$1.1bn in project costs at Windfall into account, a gold price of $1,650 an ounce would be required for net present value neutrality, say analysts at RMB Morgan Stanley.
There’s also construction risk, says Van Graan a mine still has to be built at Windfall.
Gold Fields hasn’t entirely remedied its production decline, which is projected to fall by 500,000oz between 2025 and 2030. Attributable output from Windfall will be about 150,000oz per year while the Ghana joint venture with AngloGold adds roughly 125,000oz. So the question is, will Gold Fields hazard more mergers & acquisitions?
Preece says he will take a breather from deals given that, in addition to Windfall and the Ghana deal with AngloGold, Gold Fields this year has to commission its 500,000oz per year Salares Norte project in Chile. Yet in comments with its first-quarter numbers,
Gold Fields said it remained on the lookout for more M&A. Ultimately, this ambivalence speaks to the uncertainty of who’ll be running the company in the long term.
“We’re comfortable with 2.4million ounces in production by 2030,” Preece says. But this wasn’t the approach taken by Griffith, who said on taking the Gold Fields job in 2021 that more production meant more attention for a company. Yet the drawback of outsize output is the pressure of having to maintain it.
BHP, the world’s largest diversified miner, bought Oz Minerals for $6.4bn last month, while Newmont has increased its offer for Newcrest Mining to $19.5bn. “Companies that do deals have no runway on resources,” Barrick Gold CEO Mark Bristow tells the FM. “Deals often don’t create value.”
No denying then that Preece has done well.