Gold Fields could buy Galiano’s stake in JV if mine’s production shortfall persists

Gold Fields CEO Chris Griffiths

GOLD Fields has raised the possibility of buying Galiano Gold out of a joint venture in the Asanko gold mine in Ghana.

The South African gold producer owns half of the Askano mine, but the operator is Galiano Gold, a Toronto-listed firm.

The mine has underperformed in recent years prompting Gold Fields CEO Chris Griffith to question whether it belongs in his firm’s portfolio of assets. “It’s definitely on our watch list,” said Griffith in an interview with Miningmx last month.

Full year gold production from Asanko gold mine was revised last year from 225,000 to 245,000 ounces to 215,000 to 220,000 oz due to lower mined grades at the mine’s Esaase section.

Galiano Gold said in an update last week that it may have to suspend the mine or undertake unbudgeted capital expenditure in order to fix lower-than-anticipated grades at the mine which is leading to lower production.

Its problems may relate to the mine’s processing facilities. Galiano said it had detected grades of 0.40 grams per ton in its tailings which compare to levels of 0.10g/t historically. “The company is working expeditiously to complete the program and will provide an update in due course,” said Galiano Gold.

Griffith said an option was to buy out Galiano from the joint venture held in local subsidiary, Asanko Gold Mines. “We’re not the operator so it could deliver value by making it part of the portfolio,” said Griffith. “We know how to manage complex orebodies.

“I can understand why Galiano will not view that positively, but for now they need to demonstrate that it belongs in the portfolio.”

The fact that Gold Fields excluded Asanko’s contribution from its production forecast for 2022 suggests “… the near term strategic focus will be on the best way to realise value,” said analysts for RMB Morgan Stanley.

Since becoming CEO of Gold Fields in April last year, Griffith has tended not to rock the boat, saying the company’s strategy was built on a firm foundation.

Commenting on the role at Gold Fields compared to his rigorous restructuring efforts soon after becoming CEO of Anglo American Platinum, his former position, Griffith said: “I didn’t want to be known only as someone who only turns around companies. Gold Fields is a nice change of scenery. I don’t need to break things down.”

On February 17, Gold Fields reported a 22% increase in headline earnings year-on-year to $890m. On a normalised earnings level, Gold Fields reported a 6% increase to $929m (2020: $879m) equal to share earnings of $1,05/share ($1.00/share).

One of the highlights of the year was the performance of South Deep in South Africa, a mine that has disappointed in the past.

“After a strong performance in 2021, South Deep is set to continue on the growth trajectory previously outlined,” said Griffith in the firm’s 2021 full year financial results. “We expect production to grow by a further 20 to 30% to 345,000 oz to 375,000 oz over the next three to four years,” he added.