PERTH (miningweekly.com) – South Africa-based Gold Fields has agreed to buy TSX-listed Barrick Gold’s Yilgarn South assets, in Western Australia, for $300-million.
The Yilgarn South assets comprised the Granny Smith, Lawlers and Darlot mines, which produced 452 000 oz of gold in 2012 and 196 000 oz in the first half of 2013.
The projects have a combined 2.6-million-ounce reserve and a 1.9-million-ounce resource.
Under the terms of the transaction, JSE- and NYSE-listed Gold Fields would have the option to deliver up to 50% of the $300-million consideration in its own common shares to Barrick in lieu of the equivalent amount of cash consideration at closing.
The shares would be priced based on the five-day volume-weighted average price prior to closing.
“This is an attractive, opportunistic and conservatively financed acquisition which is consistent with Gold Field’s strategy and focus,” said CEO Nick Holland on Thursday.
He noted that the company saw a clear path to value and added that once fully integrated, the assets were expected to have a positive impact on Gold Fields’ production, free cash flow and global credit rating.
On completion, Australia would 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.
The group earlier this year spun out its Kloof, Driefontein and Beatrix gold mines in South Africa into a new listed entity, Sibanye Gold, keeping only the South Deep asset in the country.
Unloading its older assets was seen as a move by Gold Fields to make itself more attractive to investors, who are increasingly uncomfortable with South Africa’s labour risk.
Holland said the new Yilgarn South assets were located in a preferred jurisdiction that the group knew well and where it had significant operational and management experience and infrastructure.
He added that the acquisition further repositioned Gold Fields as an international gold producer with a well-balanced global footprint, enhancing its risk profile and global credit rating.
Meanwhile, Holland noted that Gold Fields could add value to the Yilgarn South projects through the application of its proven low-cost, free cash flow-focused operating model, which had been successful in repositioning the company’s 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 and administrative expenses as well as capital.”
Holland added that in addition to realising the obvious short-term operating synergies between these assets, Gold Fields also believed the consolidation of the Lawlers/Agnew operations within the Yilgarn belt would provide significant long-term benefits, allowing for the potential of this gold district to be maximised under one owner.
“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 orebodies. 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,” Holland said.
Meanwhile, Barrick CEO Jamie Sokalsky noted that the decision to divest of the Yilgarn South assets demonstrated further progress, as the company worked to optimise its portfolio and maximise free cash flow.