Buyout Points to South Africa’s Dwindling Gold Resources

The decline of South Africa’s gold mining industry has triggered Gold Fields, Ltd. to spend nearly $7 billion in stock to purchase Canada’s Yamana Gold. Inc. The deal is the latest sign that South Africa, once the world leader in gold mining, is virtually tapped out; gold, increasingly, is becoming a rare commodity in the country.

Aside from a new mine in Chile, Gold Fields Chief Executive Chris Griffith conceded, “We don’t have any projects in the pipeline or any way of countering the decline in production that is due to come from Gold Fields over the next number of years.” 

The deal will make the combined company the fourth largest gold miner in the world. But it is also a grim reminder of the limited global supply of gold—only so much can be mined from the earth. 

Gold mining in South Africa peaked in 1983. Since then, annual production has plummeted by 86 percent. The country has fallen from being the world’s leading gold producer as late as 2006, to now ranking number 11 in production.

By purchasing Yamana Gold, Gold Fields will gain mines in Argentina, Brazil, Canada, and Chile. A reflection of the South African company’s desperation is that it paid a whopping 34 percent premium to Yamana’s stock price to purchase the Canadian miner.

Gold mining is a consolidating business that has seen a growing number of mergers, the largest of which was Newmont Mining’s $10 billion purchase of Goldcorp in 2019.