Gold Fields wraps up South Deep deal
Posted: Fri, 01 Dec 2006
[miningmx.com] -- GOLD FIELDS has completed a $1.525bn transaction with Barrick Gold to acquire the Toronto-based company's 50% stake in the South Deep, widely seen as South Africa's last great untapped gold deposit.Harmony Gold said it has tendered its 45m Western Areas shares for Gold Fields shares. Western Areas owns the other half of South Deep. Gold Fields paid $1.2bn in cash and issued 18.7m of its shares worth $325m to Barrick Gold for its share of the deep-level and troubled twin-shaft mine near Johannesburg. Production has been hit hard by a skip dropping down one of the shafts in May, putting it out of commission until the end of this year. There has also been an underground fire. "We don't believe it is a troubled asset. It's had a difficult history and there are reasons behind all those things. For an asset of this scale it needs critical mass of management and technical support, which is what we can bring immediately," said John Munro, the Gold Fields business development director.
Gold Fields has operational control of the mine, taking over Barrick's stake in the joint venture management structure. Munro said it was too early to say what Gold Fields will do differently at the mine. "Our priorities are to settle the people down, settle the asset down, ensure the recovery from the shaft accident stays on track and we build up production safely in the new calendar year. Then we'll move to opportunities," he told Miningmx. The shaft will be re-commissioned by year-end and resume full production in the new year. Gold Fields plans to use its neighbouring Kloof infrastructure to expedite the exploitation of the deeper reaches of the South Deep deposit, which the Barrick/Western Areas envisioned bringing into production decades from now. Gold Fields wants to bring that forward and cut billions of rands out of the cost by using existing infrastructure. Barrick, which acquired the stake when it took over Placer Dome, said it will put the funds towards its projects, but did not give an indication of what it would do with the Gold Fields shares. "The proceeds from this sale further strengthen Barrick’s financial position as we advance our pipeline of projects, including the Sedibelo platinum project in South Africa,” said Barrick CEO Greg Wilkins. Gold Fields is not overly concerned about Barrick selling the shares, if the Canadian company decided not to hold onto them. "The volume is not overly significant. They're smart people and they'll know how to get rid of the shares if they want to," Munro said. Gold Fields will in the coming week set a closing date for its offer to Western Areas shareholders in September of 35 Gold Fields shares for every 100 Western Areas shares. Western Areas owns the other half of South Deep.
We don't believe it's a troubled asset