South Africans eye takeover of Australia’s biggest gold miner

Gold Fields has expressed interest in acquiring Northern Star Resources, according to people with knowledge of the matter, in a potential blockbuster deal that would deepen the South African gold mining giant’s bet on Australia’s prolific deposits of the metal.

Gold Fields recently approached Northern Star about a transaction, the people said, asking not to be identified because the information isn’t public. Australia’s biggest gold miner rebuffed the overtures and Gold Fields has been considering its next steps, according to the people.

Shares of Northern Star have fallen 17 per cent in Sydney trading this year, giving the company a market value of $31.5 billion. Johannesburg-listed Gold Fields has declined about 9 per cent during the same period for a market capitalisation of $US35.7 billion ($50.8 billion).

A representative for Gold Fields declined to comment, while Northern Star didn’t respond to queries outside regular business hours over the weekend.

A multiyear rally in gold prices has driven a wave of dealmaking in the industry, with Gold Fields among the most acquisitive. Takeovers of WA gold producer Gold Road Resources and Canada’s Osisko Mining over the past two years have strengthened its global footprint, giving it full operational control of assets spanning Africa, Australia and the Americas.

Surging bullion prices have also heaped pressure on miners to maximise returns on their portfolios, with several producers considering spinoffs and asset sales after a series of cost blowouts and operational setbacks that have plagued the sector in recent years.

Perth-based Northern Star appointed a new chief executive officer in July amid pressure from activist investor Elliott Investment Management. This year, the hedge fund has criticised Northern Star’s underperformance and called for it to consider a sale or asset divestments. Elliott has also been pushing for an overhaul of the company’s board.

In June, Northern Star Chairman Michael Chaney wrote in a letter to shareholders that the company had been approached by several suitors about combinations over the last year but said it was not the right time to sell.

Northern Star has cut its production guidance several times over the past year, with issues at its Kalgoorlie processing plant in Western Australia constraining output and weighing on its performance relative to peers.

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