Gold mining major Gold Fields has announced the establishment of a new joint venture company which gives it immediate access to a gold producing mine in Ghana.
Gold Fields has, through a wholly-owned subsidiary, entered into a definitive agreement with Canada’s Asanko Gold to form a 50:50 joint venture with the company’s Ghana subsidiary.
The Gold Fields subsidiary has agreed to acquire a 50% stake in Asanko Gold Ghana (AGG)’s 90% interest in the Asanko gold mine, associated properties and exploration rights in Ghana.
The Asanko mine is a multi-deposit complex, with two main deposits, Nkran and Esaase, and nine known satellite deposits. The purchase consideration comprises an upfront payment of US$165 million on closing of the transaction and a deferred payment of $20 million.
In addition, Gold Fields’ subsidiary has agreed to subscribe for a 9.9% share placement in Asanko by way of a private placement of 22,354,657 Asanko shares at a price of approximately $0.79, for a total consideration of $17.6 million.
Upon completion, Gold Fields will hold a 45% interest in AGG. The remaining AGG shareholders will be Asanko (45% through its existing offshore holding structure) and the Ghana Government (10% free carried). In addition, Gold Fields will hold a 9.9% listed stake in Asanko.
The joint venture transaction and the subscription for shares in Asanko will be funded from cash and/or by drawing down on Gold Fields existing debt facilities. Importantly, the mine is an in-production asset that generates EBITDA and cash flow and does not require any additional investment by the JV partners.
The Asanko Joint Venture will give immediate access to low cost production ounces, increasing the quality of the Gold Fields portfolio – Asanko’s guidance for 2019-2023 is average annual production of 253 000 oz (100% basis) at all-in sustaining costs (AISC) of $860/oz, with a life-of-mine of at least 15 years.
Further, the sizeable resource base of the asset is immediately accretive to Gold Fields in terms of life, with the potential for further discoveries on the large, relatively unexplored, tenement package held by Asanko.
The transaction is also in line with Gold Fields’ current growth strategy of focusing on jurisdictions in which it already has an established footprint. As the mine is located in Ghana, the company is adding an asset in a country where Gold Fields has extensive experience, having operated in Ghana for over 20 years.
The transaction exceeds its requirement of a return of 15% at a gold price of $1 300/oz, with a payback period of five years out of the anticipated life-of-mine of at least 15 years.
Asanko’s principal assets are the Obotan operation which includes the Nkran deposit and the Esaase deposit (collectively the AGM), which are situated 100 km north of Gold Fields’ Damang operation along the prospective and under explored Asankrangwa greenstone belt in Ghana.
Asanko will continue to manage the operations and will remain the operator. A joint venture management committee, comprising representatives from Asanko and Gold Fields, will be formed for purposes of overseeing the operation of the mine, with material decisions (including budgets, capital expenditure) requiring unanimous approval. A technical sub-committee will also be formed to provide technical advisory services to the management committee.
The transaction is subject to customary conditions precedent including, among others, no Asanko material adverse event, and Ghanaian Ministerial approval for the indirect (by way of change of control) transfer of the various mining properties.
The completion date of the acquisition and formation of the Asanko Joint Venture will be the fifth business day after the conditions precedent have been satisfied. Completion is anticipated to occur in Q3, 2018.