Gold Fields Buys 3 High-Cost Aussie Mines of Barrick for $300M
Gold Fields agreed to buy three high-cost gold mines in Australia from Barrick Gold, the world's largest gold producer, for $300 million.
The change of ownership is part of Barrick's reassessment of its portfolio and focus on lower-cost assets in a bid to improve its balance sheet amid weaker metal prices and soaring expenses at its Pascua-Lama gold venture in the South American Andes.
As a consequence of the dipping price of the yellow metal, Barrick had an $8.7 billion writedown and cut its dividend by 75 per cent, while it registered a net debt of $11.6 billion when it took over Equinox in 2011. It also reduced by 30 per cent its corporate staff.
Barrick would sell the Yilgam South mines - Granny Smith, Lawlers and Darlot in Western Australia, which jointly account for 6 per cent of Barrick's gold output in 2012 and comprise less than 2 per cent of the miner's proven and probable reserves as of Dec 31, 2012.
The sale is expected to close in early October, subject to regulatory approvals. Barrick Chief Executive Jaime Sokalsky said the company would use the proceeds of the sale of the 3 mines for general corporate purposes and to repay its debts.
The sale placed the value of assets at $115 per ounce which is much lower than the $280 per ounce average price of the North American group.
"Although the price received is lower than we expected, we view the sale as necessary to help pay down Barrick's high debt level," Scotiabank analyst Tanya Jakusconek wrote in a note to clients, quoted by Reuters.
News of the sale boosted the value of Barrick share by 3.1 per cent to $19.63 at the New York Stock Exchange.
Barrick started to explore the sales of the mines when it failed to sell its majority stake in African Barrick Gold to a Chinese firm in early 2013, which would have provided the Canadian miner $3 billion.
With the sale of the 3 mines, Gold Fields now considers Australia its largest regional production hub. It also owns the St Ives and Agnew mines in WA. The three new mines would provide the miner additional yearly gold output of 452,000 ounces, 2.6 million ounces of reserves and an extra 1.9 million ounces in the resources category in WA.
"We see a clear path to value and once fully integrated, these assets are expected to have a positive impact on Gold Fields' production, free cashflow and global credit rating," Gold Fields Chief Executive Nick Holland was quoted by The Australian. He described the buy-in as attractive, opportunistic and conservatively financed.
With its expanded ownership of WA mines, Australia would now account for 42 per cent of Gold Fields' total production, followed by Ghana at 34 per cent, Peru 13 per cent and South Africa 11 per cent.
