Goldfields, Delta to merge

Vancouver — Goldfields and fellow Australian gold miner Delta Gold have inked a merger deal that will catapult the new company to the million-ounce-per-year level. The merged entity will rank as one of the largest gold firms Down Under, with a market capitalization of about A$825 million (US$405 million).

Delta shareholders will receive 187 Goldfields shares for every 200 Delta shares. Delta shareholders will therefore hold the equivalent to a 57% interest in the new company. The deal has yet to be approved by shareholders and regulators.

“Both companies have considered this combination for some time,” says Peter Cassidy, managing director and chief executive officer of Goldfields. “We are convinced that, given developments within the industry, capital markets and our respective portfolios of assets, this merger will unlock the full potential of both companies.”

Terry Burgess, managing director and CEO of Delta Gold adds that the merger will provide “obvious and compelling benefits” to shareholders of both companies.

The merger will also render the companies less susceptible to a takeover.

Delta Gold holds 100% of the Kanowna Belle, Golden Feather and Wirralie gold mines, as well as a 40% stake in the Granny Smith mine. Placer Dome (PDG-T) holds the remaining 60% of Granny Smith. All of Delta’s current operations are in Australia.

Goldfields owns the Paddington and Kundana mines in Western Australia, the Henty mine in Tasmania, and has a 25% interest in the Porgera mine in Papua New Guinea.

The proposed merger is expected to result in pretax cost savings of about A$15 million (US$7.4 million) per year. These savings would be derived from the resulting decrease in administration and overhead costs.

Combined 10%

The two companies combined account for almost 10% of the Aussie gold index, not far behind Newcrest Mining, which accounts for 12.4% and third-ranked Lihir Gold, which represents 12%. The market leader, Normandy Mining (NDY-T), Australia’s biggest gold producer, represents about 30% of the index.

For the fiscal year ended June 30, Delta posted a profit of A$51.9 million (US$25.5 million) on sales revenue of A$416 million (US$204.3 million), compared with a loss of A$114.8 million (US$56.3 million) last year on revenue of A$327.3 million (US$160.7 million).

A reduction in operating costs helped offset lower production and generated a 16% gain in operating profits, which rang in at A$32.2 million (US$15.8 million) for the year. Net debt was also reduced, to A$15.3 million (US$17.5 million) from A$108.6 million (US$53.3 million) at the end of fiscal 2000.

Goldfields reported profit of A$47.71 million (US$23.4 million) for the year on sales revenue of A$357.6 million (US$175.6 million), compared with a profit of A$26.34 million (US$12.9 million) on revenue of A$308.3 million (US$151.4 million) last year.

Goldfields produced 162,684 oz. gold in the fourth quarter ended June 30, 2001, bringing its production for fiscal 2001 to a record 614,769 oz.

Cash costs rang in at A$316 per oz. (US$155) for the 3-month period and A$295 per oz. (US$144.7) for the year. Total costs were A$449 per oz. (US$220.3) and A$417 per oz. (US$204.6), respectively. The company’s average realized gold price was A$549 per oz. (US$269.5) for the year.

South Africa’s Harmony Gold currently holds a 23% stake in Goldfields.

PacMin offer

In other Aussie news, Teck Cominco (TEK-T) has accepted Australia-based Sons of Gwalia‘s offer for PacMin Mining. Currently, the diversified Canadian miner holds an 80% stake in PacMin, and it expects to receive cash proceeds of $40 million and a 12% stake in Gwalia for its interest in PacMin. The cash and stock offer was made by the Australian tantalum and gold miner last month. Gwalia offered five of its shares for every 28 shares of PacMin.

“Teck Cominco remains committed to the gold business, but PacMin’s Tarmoola and Carosue Dam operations are not of a scale that will be significant economic contributors,” says Steven Dean, president of Teck Cominco.

PacMin Mining earned A$7.2 million (US$3.5 million) in the fiscal year ended June 30. The company produced 221,039 oz. gold during the year, with the Tarmoola mine contributing 155,447 oz., down from 180,000 oz. in 2000. The newly constructed Carosue Dam operation in Western Australia added 65,592 oz. to the company’s coffers.

The company realized an average gold price of A$537 per oz. (US$263.5 per oz.) over the year, A$36 per oz. (US$17.6 per oz.) above the average spot price in the comparable period.

For the year ended June 30, Perth-based Sons of Gwalia turned a profit of A$63.7 million (US$31.4 million), up 9% over the previous year. Revenue rose 16.6% to A$428.9 million (US$211.2 million). The company’s advanced minerals division produced and sold a record 1.6 million lbs. of tantalum concentrate from its Western Australia operations at Greenbushes and Wodgina. The advanced minerals division contributed A$61.3 million (US$30.2 million) to the company’s coffers last year. Gold production weighed in at 438,166 oz. last year and earnings tallied to A$63.6 million, (US$31.3 million), up 3.6% over fiscal 2000.