South Africa’s Gold Fields (JSE, NYSE: GFI) and Canada’s Asanko Gold (TSX: AKG) are teaming up to develop one of Ghana’s newest gold mine, the Asanko Gold Mine (AGM), is located in the country’s Ashanti Region.
As part of the deal, Gold Fields is acquiring a 50% stake in Asanko’s local subsidiary, which gives it a 90% ownership in AGM, for a total of $203 million. The Vancouver-based firm is also getting associated properties and exploration rights in the African country.
Gold Fields is paying $165 million upfront on closing of the transaction and a deferred payment of $20 million. Its local unit has also agreed to subscribe to a 9.9% share placement in Asanko by way of a private placement of 22,354,657 Asanko shares at a price of approximately $0.79 cents.
The South African miner, whose net debt stood at $1.3 billion at the end of its last financial year, said the deal fitted in with its growth strategy, focused on improving its portfolio by lowering all-in costs and extending mines' lifespans to enhance cash generation.
It also mentioned it it could fund the joint venture and the share subscription through cash and existing debt facilities. The company has $400 million in cash and another $1 billion in credit facility.
The Canadian gold miner’s main assets in Ghana are the Obotan operation and the Esaase deposit, collectively the AGM, which are situated 100km north of Gold Fields’ Tarkwa and Damang operations along the prospective and under explored Asankrangwa greenstone belt.
AGM has a 15-year mine life, but Asanko president and CEO, Peter Breese, has long spoken of expansion. In June, his company completed a bankable feasibility study regarding the expansion of AGM in which it would increase production to some 230,000 ounces of gold a year through a expansion.
Asanko said at the time it would then extend annual gold output to 460,000 ounces, possibly from 2022, spending a total of $200 million. According to Gold Fields, its new business partner has the potential to make further discoveries.
The Canadian miner will remain the operator of the asset, although Gold Fields CEO, Nick Holland, said today in a conference call that his company would establish a joint steering committee, which would have oversight of budgets and planning.
