Gold Fields up Western Areas stake

With shares soured after a recent accident at the South Deep mine in South Africa, Gold Fields (GFI-N, GOF-L) has boosted its stake in the mine’s half owner Western Areas (WARSF-O).

Gold Fields picked up another 18.27 million Western Areas shares at 40 rand apiece to boost its stake to 23.27 million shares, or 15.47% of the company’s total share count.

“South Deep is a very significant gold project and we are pleased to have increased our exposure to it through this purchase,” said Gold Fields CEO Ian Cockerill in a prepared statement.

Cockerill believes there is significant potential for regional cooperation between South Deep and his company’s Kloof mine, adjacent to the south, especially during the second, deeper phase of development at South Deep.

“We aim to play a role in achieving that cooperation,” he concluded.

South Deep is home to proven and probable reserves totalling 147 million tonnes running 6.2 grams gold per tonne, for 29.3 million contained ounces. Another 109.9 million tonnes of measured and indicated material averages 7.3 grams gold per tonne, for 25.9 million contained ounces. The estimates are based on a gold price of US$400 per oz.

Of the reserves, some 14.6 million oz. contained in 73.5 million tonnes running 6.19 grams gold are classified as phase 2 reserves — material that lie beneath existing infrastructure. Gold Fields has previously shown that the reserves could be reached by tunneling some 3 km from the no. 4 shaft at the Kloof mine.

By comparison, Gold Fields’ recently tabled company-wide reserves at the end of 2005 came to 485.8 million tonnes running 3.9 grams gold, for 60.4 million contained ounces.

In March, rival Harmony Gold (HMY-N) picked up a 29.2% stake Western Areas earlier this year for around 44 rand a share or just shy of 2 billion rand in all. Harmony CEO Bernard Swanepoel subsequently took a non-executive seat on the company’s board.

Relations between Harmony and Gold Fields are surely still frosty at best after a protracted and often nasty takeover battle that saw the smaller Harmony scupper Gold Fields’ preferred plans with Iamgold (IMG-T, IAG-N).

Barrick Gold (ABX-T, ABX-N) inherited the other half of South Deep via its acquisition of operator Placer Dome earlier this year.

Production at South Deep is expected to be halved for up to one year after a loaded skip broke free of its winder drum during regular rope maintenance, and plunged some 1.6 km down one of the mine’s twin shafts. The skip was followed by 6.7 km worth of high-tensile steel rope that detached from eight clamping devices on the winder drum while the skip was around mid-shaft. The shaft suffered serious damage at several points.

The mine produced 461,119 oz. gold at a cash cost of US$387 per oz. in 2005, up from the 428,585 oz. poured at US$383 apiece a year earlier.