South Africa-based mining giant Gold Fields have increased their stake in Gold Road Resources to 10 per cent at a cost of $64.3 million.
Under the terms of a standstill deal agreed last year, Gold Fields is unable to increase their ownership share of Gold Road past this point without offering a takeover bid.
The shares were purchased from Resource Capital fund at 86¢ a share, a 27 per cent premium on Gold Road’s Thursday closing price of 67¢. Following the purchase, Gold Road’s stock rose by 5¢ a share to 72¢ at 11.55am on Friday.
RBC Capital Markets gold analyst Paul Hissey said the Gold Fields equity acquisition was a vote of confidence in its partner.
“We believe this investment by Gold Fields is a vote of confidence in Gold Road’s operations, with Gold Fields seeing the exploration potential in current programs throughout the Yamarna belt,” Mr Hissey said.
“We believe Gold Road presents as an attractive investment, with the company in the passenger seat with a global major developing it’s asset, an exciting exploration program in a relatively under explored region and valuation upside, with the stock still trading at a 34 per cent discount to our target price of 90¢.”