In announcing the sales, Gold Fields chief executive officer Ian Cockerill emphasises that although this development reduces the company’s international footprint, it remains fully committed to its often-stated strategy of international growth. “We have definitely not changed course, and our aspirations to grow our international portfolio with appropriately sized, valueadding assets remain as strong as ever,” he insists.
The surprise announcements were made on successive days in October. First came the news that agreement had been reached in terms of which Gold Fields would sell its current 60% stake in the Essakane project, in the west African state of Burkina Faso, to its partner in the project, Orezone Resources Inc. (Orezone) for a minimum total consideration of US$200 million (R1.4 billion). Orezone is to pay Gold Fields US$150 million (about R1 billion) in cash and US$50 million (R350 million) in Orezone securities, or US$200 million (R1.4 billion) in cash, at Orezone’s election.
Orezone is an explorer and emerging gold producer with a pipeline of advanced and grassroots projects in politically stable areas of West Africa, which is one of the world’s fastest-growing gold producing regions.
“While Essakane is expected to make a good return and deserves to be built,” says Cockerill “our relatively small stake in the project mitigates against it becoming a Gold Fields franchise asset. We believe that Orezone is well positioned to turn this asset to account,” he adds. To date Gold Fields has spent a total of US$47million (R330 million) on the project, and the sale price represents a significant return on investment.
PROCEEDS FOR DEBT REDUCTION AND CAPITAL FUNDING
The proceeds from the sale will be re-invested to create value for Gold Fields’ shareholders. Options under consideration include, inter alia, debt reduction and the funding of the extensive Gold Fields capital investment portfolio.
The Essakane project is the largest gold deposit in Burkina Faso. The definitive feasibility study envisions a surface mine and CIL facility processing an average of 5.4 million tonnes per annum. The deposit has 4 million ounces of measured and indicated resources and 1.3 million ounces of inferred resources at a 0.5 g/t cutoff. Reserves contained within a US$500 gold price mine plan are 2.65 million ounces.
The project will take 18 months to construct at a total capital cost of US$346 million (R2.4 billion). Once operational, the mine is expected to produce an average of 292 000 ounces of gold per annum at cash cost of US$356 per ounce.
The day after the Essakane announcement, Gold Fields revealed details of an agreement in terms of which it will effectively dispose of its assets in Venezuela to Rusoro Mining Ltd. (Rusoro) for a total consideration of approximately US$532 million (R3.7 billion).
Rusoro will pay Gold Fields a minimum of US$150 million (about R1 billion) in cash, US$30 million (more than R200 million) in convertible debt, and 140 million Rusoro shares, which will be approximately 38% of the outstanding shares of that company after the transaction has been concluded. The transaction includes Rusoro acquiring the Gold Fields stake in the Choco 10 gold mine, as well as the contiguous mineral rights owned by Gold Fields.
“The offer from Rusoro has presented us with the opportunity of a return of approximately 25% on our total investment of US$425 million (almost R3 billion),” says Cockerill. The proceeds from this sale will also be reinvested to create value for Gold Fields’ shareholders, and again the options under consideration include debt reduction and the funding of the company’s extensive capital investment portfolio.