Gold fields to pay Iamgold $667m for minority stakes in Ghana mines

FE Team | Published: April 18, 2011 00:00:00 | Updated: February 01, 2018 00:00:00

JOHANNESBURG, Apr 17 (Bloomberg): Gold Fields Ltd. (GFI), the fourth- largest producer of the metal, agreed to buy Iamgold Corp (IMG)'s interests in its Tarkwa and Damang mines in Ghana for $667 million to increase its output and reserves. It's a "relatively low-risk transaction that should increase the company's international production and lower its overall cost of producing gold," Gold Fields said today in a statement. The company already operates the mines and has a 71.1 per cent stake, while Toronto-based Iamgold owns 18.9 per cent. Gold Fields is expanding as prices soar. Gold rose to a record $1,488.18 an ounce in London today as faster inflation and a weaker dollar boosts demand for the metal. Tarkwa and Damang made up about a fifth of Gold Fields' 3.5 million ounces of production in 2010 and were its lowest-cost mines in Africa. "It's a great deal," Leon Esterhuizen, an analyst at RBC Capital Markets, said from London today. "They're buying about 5 per cent additional production with about 5 per cent of their market value." The deal could boost Gold Fields' quarterly adjusted earnings per share by about 10 per cent, he said. The company, based in Johannesburg, is also increasing its stake in its Peruvian unit, Gold Fields La Cima S.A.A., with a bid for the 8 per cent it doesn't own scheduled to close on April 20, Chief Executive Officer Nick Holland said yesterday. Gold Fields declined 0.6 per cent to 122 rand by the 5 p.m. close of Johannesburg trading. Iamgold slumped 8.7 per cent to C$19.27 at 4:18 p.m. in Toronto, the biggest decline since Dec. 17, 2009. The government of Ghana owns 10 per cent of each of the mines, as required under domestic law. Iamgold is also seeking majority stakes in assets, and said in February it will be able to use the proceeds from selling minority holdings to achieve that goal. "Upon completion of this transaction, we will have more than 1 billion dollars in cash, cash equivalents and gold bullion," CEO Steve Letwin said in a separate statement. "This sale is the first of several strategic initiatives." The deal gives Gold Fields an additional 181,000 ounces of annual production at a cash cost of about $540 an ounce and 2.1 million ounces of reserves at about $302 an ounce, Holland said. It will be funded with $500 million of an unused offshore facility and about $160 million of the company's cash, Chief Financial Officer Paul Schmidt said.