Gold Fields in Phillippines venture

[] — GOLD Fields said on Monday it may pump up to $340m in cash for control of a gold deposit in the Phillippines in an effort to derive 1 million ounces of gold per year from Australasia by 2015.

The world’s number four producer signed option agreements with Lepanto Consolidated Mining Company and Liberty Express Assets that could lead to a 60% stake in an undeveloped gold/copper deposit called Far Southeast. The deposit is situated in the northern part of Luzon, the largest island of the Phillippines.

The Far Southeast deposit does not yet have a mineral resource, but Gold Fields decided to pursue the potential investment following more than 80 diamond drill holes identifying a “large, concealed gold-copper mineralised porphyry system”, it said.

Gold Fields CEO, Nick Holland, declared himself convinced of the deposit’s prospects: “This transaction provides Gold Fields with a unique and exciting opportunity to gain exposure to what will undoubtedly prove to be a world class deposit”.

“It also advances our strategy of growing each of our three international regions to one million ounces, either in production or in development, by 2015,” he added. Gold Fields wants to mine a million ounces of gold a year from each of the Australasia, African and South American regions.

Shares in Gold Fields nudged up half a percent to close the day at R107.12/share in Johannesburg.

In terms of the deal structure, Gold Fields has an 18 month option on Far Southeast during which time it will conduct a drilling programme. It will pay $10m in option fees to Lepanto and a $44m non-refundable down payment to Liberty on signing of the option agreements.

If, after 12 months, Gold Fields decides to pursue the opportunity, it will pay a further non-refundable down payment of $66m to Liberty with a final payment of $220m when the option period expires.

“We now have exciting growth projects in each of the regions in which we operate,” said Holland. “In South Africa we have the world class developing South Deep mine, in South America we have the Chucapaca project in Peru, in West Africa the Yanfolila project in Mali and now Far Southeast in the Phillippines which forms part fo the Australasia region,” he added.

Gold Fields has had mixed fortunes investing in offshore mines. It bought well when acquiring control of Tarkwa and Australian assets including the St Ives mine, but has struggled in other investments.

In 2006, it spent $360m buying the El Choco mine from Bolivar for $360m, selling control in October 2007 to Rusoro Mining for $150m and a combination of options and shares.

It also bought 100% of the Arctic Platinum project from Outokumpu in September 2003 for a total of some $47m which it then shelved five years later.

Commenting on Far Southeast, Gold Fields said the deposit is part of an established mining camp and is close to two mines historically operated by Lepanto, one of which is currently in production.

“FSE (Far Southeast) has ready access to established infrastructure, including roads, tailings facilities, power and water. The existing workforce on the doorstep of FSE is part of a supportive community established around mining over the past 70 years,” the company said.