Gold Fields Limited (Gold Fields) today announced that it has entered into a binding sale and purchase agreement with Barrick Gold Corporation (Barrick) to acquire its interests in the Granny Smith, Lawlers and Darlot gold mines (collectively the Yilgarn South Assets) in Western Australia, for a consideration of US$300 million, subject to downward working capital adjustments to a maximum of US$30 million.
Nick Holland, Chief Executive Officer of Gold Fields, said:
“This is an attractive, opportunistic, and conservatively financed acquisition which is consistent with Gold Fields’ strategy and focus. We see a clear path to value and, once fully integrated, these assets are expected to have a positive impact on Gold Fields’ production, free cash flow and global credit rating.”
The acquisition provides Gold Fields with:
- an additional 452,000 ounces of annual production, at an All-in sustaining cost (AISC) of US$1,137 per ounce1;
- 2.6 million reserve ounces at a cost of about US$115 per ounce2;
- 1.9 million resource ounces in addition to the reserve ounces; the total resource ounce acquisition cost is below US$67 per ounce3.
Upon completion, Australia will represent Gold Fields’ largest regional production centre with 42% of the Group’s production, with Ghana decreasing to 34% and Peru and South Africa remaining largely unchanged at 13% and 11% respectively.
“Gold Fields can add value to the Yilgarn South Assets through the application of its proven low cost, free cash flow focussed operating model, which has been successful in repositioning Gold Fields’ Australian operations competitively on the cost curve.”
In particular, we see considerable opportunity for cost synergies between Lawlers and the adjacent Agnew, one of the lowest cost producers in Australia. We plan to immediately consolidate these two operations and rationalise its processing infrastructure and on-site general & administrative expenses as well as capital. In addition to realising the obvious short-term operating synergies between these assets, we believe the consolidation of the Lawlers/Agnew operations within the Yilgarn belt will provide significant long-term benefits allowing for the considerable potential of this gold district to be maximised under one owner. As such, most of the consideration valuation is imputed to the Lawlers/Agnew camp.”
“In addition to the underlying modelled value, we expect the assets to benefit from our proven understanding of and track record with orogenic systems in the Yilgarn belt and our ability to discover new ore bodies. We have demonstrated this through the addition of 7.8 million ounces to St Ives’ and Agnew’s reserves over the past 12 years. From a geological perspective, the acquisition will consolidate ownership within a significant gold system.”
“The acquired assets are located in a preferred jurisdiction that we know well and where we have significant operational and management experience and infrastructure to maximise the value of the acquired assets. This acquisition further repositions Gold Fields as an international gold producer with a well-balanced global footprint, which should enhance our risk profile and global credit rating.”
“Our first priority after closing the deal is to determine the most appropriate way forward for each asset in our endeavour to maximise cash flow. We expect that it will take between 6 and 12 months to realise the full benefits of the acquisition.”
The consideration may be paid fully in cash or, at the election of Gold Fields, partly in shares issued to Barrick. To the extent that Gold Fields pays the consideration in cash, it may seek to use cash on hand in Australia, cash from existing bank facilities, raise funds through the capital markets, or a combination thereof.
Completion of the proposed acquisition is subject to certain customary and regulatory conditions precedent.
CIBC World Markets Inc. acted as co-financial advisor to Gold Fields in connection with the transaction.
JP Morgan acted as co-financial adviser to Gold Fields in connection with the transaction.
1 These are Barrick Gold’s published results for the 2012 financial year.
2 As per Barrick’s 2012 40-F filing. Barrick have used US$1,500 per ounce and an exchange rate of 1.00 $US/$Aus for their Yilgarn Reserves. Mineral Reserves are 36.7 Mt at 2.2 g/t for 2.6 Moz. This includes 1.1 Moz in the open pit at Granny Smith, which was not modelled by Gold Fields. The cost calculation is based on an acquisition price of US$300 million, excluding any possible downward working capital adjustments.
3 Barrick report their Mineral Resources exclusive of Mineral Reserves. Figures as per Barrick’s 2012 Annual Financial Report and 40-F filing. Mineral Resources are 11.7 Mt at 5.0 g/t for 1.9 Moz. Taking account of the Barrick reporting protocol, a view on the Resource and Reserve positions of the Yilgarn assets equates to a Resource acquisition price of below US$67 per ounce. Gold Fields report their Mineral Resources inclusive of Mineral Reserves. The resource cost calculation is based on an acquisition price of US$300 million, excluding any possible downward working capital adjustments.
Barrick report tonnage as short tons, this release refers to metric tonnes or Mt (million metric tonnes)