South Africa’s Gold Fields (GOLD-Q) has succeeded in its bid to acquire Australia-based WMC Resources‘ St. Ives and Agnew gold operations in Western Australia.
The Gold Fields offer totals US$232 million, US$180 million in cash plus US$52 million worth of Gold Fields shares.
The total number of Gold Field s shares involved will be between 12 and 19 million, and will be based on the weighted average price of Gold Fields’ shares quoted on Nasdaq for the 20 trading days prior to completion of the deal.
WMC will receive a 4% net smelter royalty (NSR) on St. Ives’ cumulative future production (from the beginning of 2002) exceeding 3.3 million oz., provided the price of gold exceeds A$400 per oz. The company will also receive a 4% NSR on future Agnew production (from the beginning of 2002) exceeding 800,000 oz., subject to a gold price exceeding A$400 per oz. If the price of gold exceeds A$600 per oz., WMC will receive 10% of the difference between the spot gold price and A$600 per oz. of gold on all gold produced from St. Ives and Agnew. The royalties will be payable in cash on a quarterly basis.
WMC expects the royalty to deliver more than US$24 million to the effective price, brining the total present value of the deal to more than US$256 million. The sale should generate a before-tax profit of about US$69 million, not including the value of the royalty.
St. Ives, about 80 km south of Kalgoorlie, produced more than 408,000 oz. of gold in 2000. Reserves there are pegged at about 3.2 million oz. The Agnew operation is situated 25 km southwest of Leinster, and churned out more than 211,000 oz. in 2000. Reserves there stand at about 870,000 oz.
Unless the deal is wrapped up before Gold Fields’ annual general meeting at the end of October, the company requires shareholder approval to issue shares. If shareholders fail to approve the issuance, Gold Fields will up its cash payment for the two assets to US$225 million.
Gold Fields has arranged a fully underwritten US$200-million facility from Barclays Bank and Citibank to cover the acquisition and subsequent working capital requirements. The facility will be repaid from cash flow from the two assets.
The deal is subject to Australian regulatory. South African Reserve Bank has granted its approval.
The two sides expect the deal to wrap up by year-end.
WMC says it is currently in discussions with other parties regarding the sale of its shareholding in Central Norseman Gold Corp. and joint venture interest in the Meliadine project in Nunavut.
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