Gold Fields Ltd. and Barrick Gold announced on August 22, that they had developed a binding agreement whereby Goldfields will acquire Barrick’s interests in the Granny Smith, Lawlers and Darlot underground gold mines in Western Australia. The transaction is valued at $300 million, subject to downward working capital adjustments to a maximum of $30 million, and may be paid fully in cash or, at the election of Gold Fields, partly in shares issued to Barrick.
The three mines produced 452,000 oz of gold in 2012 at all-in sustaining costs (AISC) of $1,137/oz and 196,000 oz in the first half of 2013 at AISC of $1,145/oz. Reserves at the three mines total 2.6 million oz, and resources in addition to reserves total 1.9 million oz.
Upon completion of the transaction, Australia will represent Gold Fields largest regional production center, accounting for 42% of its production. Ghana will drop to 34%, and Peru and South Africa will remain largely unchanged at 13% and 11%, respectively.
The three Australian mines are known collectively as Barrick’s Yilgarn South assets. The Granny Smith mine is located 950 km northeast of Perth. The Darlot mine is located on the Yandal greenstone belt 680 km northeast of Perth. The Lawlers mine is located on the Norseman/Wiluna greenstone belt 660 km northeast of Perth.
Gold Fields currently owns and operates the Agnew and St. Ives gold mines on the Norseman/Wiluna greenstone belt.
Goldfields CEO Nick Holland said, “These assets are expected to have a positive impact on Gold Fields’ production, free cash flow and global credit rating. In particular, we see considerable opportunity for cost synergies between Lawlers and the adjacent Agnew, one of the lowest-cost producers in Australia.
“We plan to immediately consolidate these two operations and rationalize their processing infrastructure and on-site general and administrative expenses, as well as capital. In addition to realizing the obvious short-term operating synergies between these assets, we believe the consolidation of the Lawlers/Agnew operations will provide significant long-term benefits, allowing for the considerable potential of this gold district to be maximized under one owner. As such, most of the consideration valuation is imputed to the Lawlers/Agnew camp.
“In addition to the underlying modeled value, we expect the assets to benefit from our proven understanding of and track record with orogenic systems in the Yilgarn belt and our ability to discover new ore bodies. We have demonstrated this through the addition of 7.8 million oz to St. Ives and Agnew reserves over the past 12 years. From a geological perspective, the acquisition will consolidate ownership within a significant gold system.”