STOCK TAKE | Will Gold Fields come up short?

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Will Gold Fields come up short?

Gold mining, after all, is about destinations, not journeys

Billionaire Warren Buffet famously said investors shouldn't hold stocks for ten minutes if they aren't willing to hold them for ten years. Economist John Maynard Keynes, meanwhile, famously warned that in the long run "we are all dead".

Both had points, hence the famous quotes, and debate still rages over short- and long-term investing, even though it seems clear that individual needs and preferences vary, and neither approach is going anywhere.

But to underscore how it isn't straightforward, activist investors, for example, sometimes get criticised for seeking to promote overly short-term solutions to unlocking value. Meanwhile, CEOs and company boards, generally the foes of such activists, may face the exact same criticism, given the potential moral hazard posed by their incentive structures in fostering short-termism. 

Gold Fields, meanwhile, may be heading for a potentially messy case study on the issue.

The precious metals group, whose business model involves years and years of consistent digging, announced in May it was looking to acquire Canada's Yamana Gold in an all-share deal. Offering 0.6 of its shares for each Yamana share, the offer from Gold Fields was worth about $7 billion in May (R103 billion then). But its shares have since plummeted, and the offer now only comes to $4.9 billion (R87.5 billion).

The crash in Gold Field's shares followed concern by investors that it was overpaying. But the company, while acknowledging the hefty premium being paid, rebuts this. It says it relies on long-term considerations, while acknowledging shareholders are being diluted in the short term.

Yamana, with five operating mines, would add to Gold Field's nine, extend the life of its assets, give it a footprint in Canada, and add significant exploration assets in South America.

A rival consortium comprising Pan American Silver and Agnico Eagle Mines has now entered the picture, with a combination cash-and-share offer worth just under $5.2 billion as of Monday. It won the designation of "superior proposal" from Yamana, although the Yamana board officially backs the Gold Fields offer.

After spending a weekend to consider, Gold Fields said on Monday it wasn't changing the terms of its deal, now putting its hopes on Yamana's shareholders seeing the merits of a longer-term tie-up, rather than taking a quick payout.

If it fails, short-termism may be blamed. But in a world that recently emerged from a pandemic, only to worry about the threat of the war in Ukraine going nuclear, who can blame any investor for worrying about being dead?

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Source: Statistics SA

UCT earns 40% of its revenue from "other sources" like donations and grants, the highest in South Africa, followed by Stellenbosch University (32%), according to a new Statistics SA report. UCT and Stellenbosch University only earn 28% of their revenue from tuition fees. Mangosuthu University of Technology, based in Durban, depends on tuition fees the most (56% of revenue). 

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Share of SA electricity generated by coal, down from 87.7% in 2019. Electricity generated from renewables increased from 1 141 GWh in 2006 to 13 106 GWh in 2021. Source: Statistics SA 


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