Gold Fields to raise $269m in book-build as opts to go it alone on $860m Salares Norte

GOLD Fields has decided to go it alone with the
development of its $860m Salares North, a project in Chile,
announcing today a book-build worth $269m (R4bn).

Once developed, Salares Norte will produce average annual
production of 450,000 ounces of gold equivalent over the first
seven years. Pre-development will kick off post the capital raising
with the start of construction pencilled in for the last quarter of
this year.

Announcing its 2019 full-year results a day earlier than planned
because of the bookbuild, Gold Fields posted normalised profit of
$343m (2018: $27m) and a 91 South African cents per share final
dividend in line with payout policy. The total dividend paid was
some 160 South African cents per share.

As he has mentioned previously, Nick Holland, CEO of Gold
Fields, said the 2019 was the beginning of a highly cash generative
period for the company, having invested $1bn in new projects since
2016. As a result, gold production was expected to be as much as 5%
higher in the current financial year, equal to some 2.32 million
oz. This compares to 2019 gold output of 2.19 million oz (2018:
2.04m oz).

Gold Fields generated cash flow from operating activities less
net capital expenditure, environmental payments and redemption of
Asanko preference shares of $249m and had net debt as of December
31 of $1.3bn with a net debt to EBITDA ratio of 1.08x – ahead of
its budget. It was on this basis that Gold Fields board decided to
press ahead with Salares Norte.

According to a report by Reuters in January, Gold Fields hired
RBC Capital Markets in order to find a buyer for a 30% stake in
Salares Norte. Today, however, the group said it would issue 41.4
million shares at a price of R96.39 per share. Shares in the
company closed 3.5% lower on the Johannesburg Stock Exchange at
some R92.99/share. The share issue was equal to 5% of Gold Fields
issued share capital.

“Following a review of the alternatives available to the
company … the board believes that a combination of the proceeds
of the placing, operational cash flow and existing debt facilities
will allow the company to fully fund the construction of Salares
Norte, and allow Gold Fields to maintain a 100% interest in this
world-class project and exploration district,” it said in a

Salares Norte is expected to generate an internal rate of return
of 23% at a $1,300/oz gold price and $17.50/oz silver price with a
2.3 year payback period.


The other major highlight of Gold Fields’ numbers is the
performance of South Deep, its South African mine. Once scoped to
produce one million oz/year in production, the mine has struggled
to make money.

Following a restructuring last year, and aided by a higher rand
gold price, South Deep generated net cash of R221m in Gold
Fields’ 2019 financial year which compares to an outflow of
R1.92bn in 2018.

Holland described the performance as “remarkable” with
improvement across most production metrics of which a 41% increase
in gold production to 222,100 oz was among the highlights. Total
all-in costs decreased 31% to R585,482 per kilogram.

Asked last year about whether Gold Fields would consider selling
South Deep, Holland said the first stop was to get the mine
profitable before dwelling on its future.

The post
Gold Fields to raise $269m in book-build as opts to go it alone on
$860m Salares Norte
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Source: FS – Mining B.
Gold Fields to raise 9m in book-build as opts to go it alone on 0m Salares Norte

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