Gold Fields hammers debt

Allan Seccombe | Fri, 04 Sep 2009 15:25
[miningmx.com] -- GOLD FIELDS will use the U$293m from its sale of its 7% stake in Eldorado Gold towards paying down debt, part of which was incurred in the A$308m payment to terminate its royalty agreement at the St Ives mine.

Gold Fields sold its 20% stake in Sydney-listed Sino Gold Mining to Eldorado in exchange for almost 28 million shares, which were valued in early June at U$282m.

The thinking within the South African gold group was not to hold onto Eldorado as an exposure to gold prospects in China, but to sell its Sino shares to that company, which has more liquid shares, making it easier to exit the position.

That has now been done for a tidy profit of about $10m, giving Gold Fields cash towards reducing debt. There was no word on who the counterparty was in the deal.

Gold Fields will start work on its own in China rather than holding a minority stake in a company already operating there.

By then end-June 2009, Gold Fields had current liabilities of R7.7bn, of which R2.5bn was made up of loan repayments. It had cash on the balance sheet of R2.8bn.

Subsequently, Gold Fields spent A$308 in late August to extract itself from a royalty agreement with Morgan Stanley Bank that was in place when Gold Fields bought St Ives in Australia in 2001.

By the end of August, the royalty was calculated at A$100/oz, which ate into the operating margin of the mine and hampered the conversion of ounces into the reserve category.

There is talk that Gold Fields may have uncovered one of the largest gold discoveries in Australia in recent years at its St Ives project. While management isn’t keen to talk much about it, the reserves and resources statements due in October are bound to contain much more detail.

The Athena and Hamlet projects at St Ives are said by Gold Fields to contain at least 2.2 million oz of gold, of which a million are now in the resource category and 400,000 oz counted as reserves.

“The future of St Ives is so good we didn’t want to give away some of the cream, that’s we pounced on buying back the royalty. Now we can tell the world how great the prospects are there,” said a Gold Fields official.