Gold Fields, the world’s fourth-largest gold producer, will bring in close on R5-billion following the disposal of two of its international assets.
The company said on Friday it was selling its assets in Venezuela for a total consideration of $532-million (R3,6-billion).
The assets, which include Gold Fields’s smallest operation, the Choco 10 gold mine, will be sold to Canadian company to Rusoro Mining, which runs a project near the Choco 10.
This is the second international disposal announced by Gold Fields in as many days.
On Thursday the gold producer said it had sold its 60% stake in the Essakane project in Burkina Faso to its project partner, Orezone Resources, for a minimum total consideration of $200-million (R1,4-billion).
Gold Fields said the proceeds from the disposals would be used to either reduce its debt or fund its extensive capital-investment portfolio.
The terms of the Venezuelan deal will result in Rusoro paying Gold Fields a minimum of $150-million in cash, $30-million in convertible debt and 140-million Rusoro shares.
These shares, representing about 38% of Rusoro’s outstanding shares after the transaction has been concluded, allow Gold Fields to still benefit from the upside to the asset.
Rusoro will acquire Gold Fields’s stake in Choco 10, as well as the contiguous mineral rights owned by the South African gold producer.
Choco 10 has been operational since 2006 and its targeted output for the combined assets is 150 000 ounces per year by the end of 2008.
“Additional capital investment is required to realise the full potential of the Choco 10 gold mine,” said Gold Fields CEO Ian Cockerill.
“However, after careful consideration we have concluded that, given the current environment, this investment is better made by others, with Gold Fields retaining exposure to the upside inherent in the assets,” he said, adding that the offer from Rusoro presented the company with an attractive opportunity to achieve this objective, as well as a return of approximately 25% on its total investment of $425-million.
Gold Fields also made an attractive return on its West African assets. The company spent a total of $47-million on the Esskane project, the largest gold deposit in Burkina Faso.
The Essakane sale will bring in $150-million in cash and $50-million in Orezone shares.
“While the Essakane project is expected to make a good return and deserves to be built, Gold Fields’s relatively small stake in the project mitigates against it becoming a Gold Fields franchise asset,” said Cockerill.
A definitive feasibility study at Essakane envisioned a surface mine that would produce an average of 292 000 ounces of gold per annum, as well as a carbon-in-leach facility that would process an average of 5 400 000 tonnes per annum.
The project will take 18 months to construct at a total capital cost of $346-million.
Cockerill said while this sale reduced Gold Fields’s international footprint, the company remained fully committed to its strategy of international growth.
“We have definitely not changed course and our aspiration to grow our international portfolio with appropriately sized, value-adding assets remain as strong as ever,” Cockerill said.
Gold Fields is an unhedged producer with attributable production of four million ounces per annum. — I-Net Bridge