Gold Fields selling Gold Roads stake for at least R1.3bn
Gold Fields nearly doubles the value of its investment in Australia’s Gold Road Resources as it sells out to repay debt
Gold Fields will raise at least R1.3bn as it sells its stake in Gold Road Resources, its Australian partner in the new Gruyere mine.
Gold Fields is realising profits from selling underlying investments and assets to repay its debt. Gold Fields had net debt of $1.79bn at the end of June.
“The sale is part of Gold Fields’ broader debt-reduction strategy and capitalises on significant gains from its original share investments in Gold Road in 2017,” said Gold Fields spokesperson Sven Lunsche.
Gold Fields bought the Gold Road shares for an average of A$0.81 in 2017. The shares closed at A$1.58 on Thursday.
In the latest sale, Macquarie is conducting a fully underwritten bookbuilding exercise to sell Gold Fields’ 9.9% stake in Gold Road in a process that will end when the New York markets close on Thursday evening. The realised price and total income from the sale will be known late on Thursday and released on the Australian Securities Exchange (ASX) on Friday morning.
Macquarie will sell the stake for no less than A$1.45 per share and is conducting the bookbuild bidding process in 2c increments, leading Gold Fields to hope for a total return better than the A$127m minimum it has been guaranteed.
Gold Fields has sold its stake in an Australian mining company called Red 5 for A$29.6m and its 19.9% stake in Toronto-listed gold and royalty streaming company Maverix for US$67m. In dollar terms, the sales realised $88m or R1.3bn.
“Similar to these two deals, the receipts from the Gold Road stake will be used to strengthen Gold Fields’ balance sheet by paying down its debt,” said Lunsche.
The transaction to sell its stake in Gold Road does not affect the two companies’ equally held joint venture at the Australian mine called Gruyere, where the first gold was poured at the end of June 2019, delivering 1,139 ounces of gold.
“Gold Fields remains fully committed to its 50% interest in the Gruyere joint venture with Gold Road,” Lunsche said.
The partners invested A$621m in Gruyere, which is now in ramp-up mode, will deliver up to 100,000 ounces of gold by the end of 2019.
The Gruyere mine should come into full production during 2020 and that at the high gold price of $1,500/oz it would deliver a profit margin of $1,000/oz before tax, Gold Fields CEO Nick Holland said in an interview last week. “That’s a lot of money,” he said. Gold Fields will manage and operate Gruyere, which will generate 300,000oz of gold a year over a 12-year life.