Gold Fields in R4bn rights issue
Gold Fields is raising about R4bn to fund its new Salares Norte gold and silver mine in Chile after failing to find a partner to share the cost of the project. The mine will cost $860m (R12.7bn) to build and add 450,000oz of gold a year for the first seven years.
Gold Fields is raising about R4bn to fund its new Salares Norte gold and silver mine in Chile after failing to find a partner to share the cost of the project.
The mine will cost $860m (R12.7bn) to build and add 450,000oz of gold a year for the first seven years of the operation, which will have an initial life of 11 years, but could be extended. Construction will start later this year and the first gold is expected early in 2023.
Production will have an all-in sustaining cost of $552/oz over the life of the mine, which is about a third of the prevailing gold price. It will take little more than two years to pay back the capital based on a gold price forecast of $1,300/oz and $17.50/oz for silver. The company will raise funds through the rights issue of 41.43-million shares representing about 5% of Gold Fields’ issued share capital.
The process will be through an accelerated book build managed by JPMorgan Securities and BMO Capital Markets.
Media reports said financiers are hunting for a partner to take up a 30% stake in the project.
Using the share placement, cash flows from its existing mines as well as debt facilities already in place, the Gold Fields board said the company could fully fund the project and “maintain a 100% interest in this world-class project and exploration district”. The new shares will start trading on the JSE on February 18.
Gold Fields released its fullyear results on Wednesday, a day earlier than expected because of the share placement, showing a net debt of $1.33bn at the end of December, down from $1.69bn the year before.
Last July Gold Fields secured a revolving credit facility of $1.2bn with a consortium of international banks. It has invested $1bn over the past three years in new growth in its portfolio, most notably by extending the life of its Damang mine in Ghana and its share of the new Gruyere mine in Australia.
This year is forecast to be one of growth and positive cash flows as Gold Fields reaps the benefits of these investments, CEO Nick Holland has said.
It declared a final dividend of R1 per share, bringing the total dividend for 2019 to R1.60 compared to the previous year’s R0.40. It increased production by 8% to 2.195-million ounces topping the upper end of its guidance of 2.18-million ounces. Gold was produced at an all-in cost of $1,064/oz, giving the company net cash flows of $249m compared to $122m outflow the year before.