Iamgold, Gold Fields ink merger deal

Iamgold (IMG-T) and South African-based Gold Fields (GFI-N) have signed a definitive agreement cementing the pair’s previously announced plan to bundle assets under the banner of Gold Fields International.

Under the deal, the world’s fourth-largest gold producer will receive nearly 351.7 million shares of Iamgold in return for all of its assets outside of the “Southern African development community,” which includes Angola, Botswana, Democratic Republic of Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, United Republic of Tanzania, Zambia and Zimbabwe.

In the end, Gold Fields would own about 70% of the new Gold Fields International, with Iamgold shareholders holding the remainder. Iamgold shareholders will also receive a special cash dividend of 50 per share ($75 million in all) shortly before the deal’s closing.

The transaction still needs regulatory approval, and must be okayed by each company’s shareholders. Shareholder meetings will be held by mid-December, with closing expected by the end of the month.

The new company will boast six operating mines with combined production of 2 million oz. per year — enough for the new company to rank as the world’s seventh-largest gold producer. Operating costs are forecast at around US$250 per oz. The producing assets include the Tarkwa-Damang complex (which would be 90%-owned) in Ghana, where the two are already paired; the 38%-owned Sadiola and 40%-owned Yatela mines in Mali (from Iamgold); and Gold Field’s wholly owned St. Ives and Agnew mines in Australia.

Combined gold reserves reportedly tip the scales at 14.7 million oz., with additional measured and indicated resources totalling 26 million oz., excluding the 12-million-oz. Arctic platinum project in Finland. Resources in all categories weigh in at 45 million oz.

The market cap would come to US$350 million, and operating cash flow for 2005 is pegged at about US$265 million, based on a gold price of US$400 per oz.

Gold Fields has already obtained regulatory approval in South Africa. The company will be required to maintain at least a 50.1% stake in the new vehicle.