Relocation, Relocation, Relocation

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What's going on?

Gold miner Gold Fields announced on Tuesday that its agreed to buy Canadian rival Yamana Gold.

What does this mean?

Gold Fields has shifted focus away from its home turf of South Africa in the last few years, where its been wrestling with power cuts, higher costs, and the worlds deepest deposits. This latest deal, then, should help it expand into mining-friendly countries like Canada, Argentina, Chile, and Brazil, and allow it to grow long term even as its existing production drops off. Itll also turn the miner into a powerhouse: the combined companies will boast an annual gold production of around 3.4 million ounces, overtaking South African rival AngloGold Ashanti to become the worlds fourth-biggest gold miner. Gold Fields is offering Yamanas shareholders 0.6 of its own shares for each Yamana share, which values the company at $6.7 billion around 34% more than Yamana was worth before the deal was announced (tweet this).

Why should I care?

The bigger picture: Analysts will be pleased.
This deal is just the latest in the industry after Newcrests $3 billion acquisition of Pretium Resources and Agnico Eagles $11 billion merger with Kirkland Lake late last year. Its about time too: analysts think there are too many gold miners, and that the industry notorious for spending too much on projects and execs is overburdened with costs. Gold Fields deal should help put their minds at rest: the companys estimating that itll save $40 million a year when it teams up with Yamana.

Zooming out: No one likes a gold digger.
Investors have been shunning gold miners in the last year, with an index tracking some of the worlds biggest down 18% versus the US stock markets 1%. Thats partly because the gold price which usually comes into its own during times of economic uncertainty has been under pressure: rising interest rates have opened up opportunities elsewhere, while a stronger US dollar has made the dollar-denominated metal more expensive to international buyers.

Originally posted as part of the Finimize daily email.

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