Gold Fields bids for WA, expanding Driefontein, Kloof

Coincident with its deal to acquire Barrick Gold’s (ABX-T, ABX-N) half stake in the South Deep gold mine in South Africa, which is co-owned by Western Areas (WARJF-O, WAR-J), Gold Fields (gfi-n) is boosting its existing ownership in Western Areas and launching an offer to buy all of Western Areas’ remaining shares.

Gold Fields is increasing its 18% interest in Western Areas to 34.7% by buying 17 million shares from South Africa’s JCI Limited, exchanging 35 ordinary Gold Fields shares for every 100 Western Areas shares. The parties have also agreed to a reciprocal call and put option that could see Gold Fields further increase its stake in Western Areas to 41%.

JCI shareholders will vote on the deal on or before Nov. 15, 2006.

Gold Fields is also offering Western Areas’ remaining shareholders 35 ordinary Gold Fields shares for every 100 Western Areas shares tendered. Based on the closing price of Gold Fields shares on Sept. 7 (R150.20), this represents a value of R52.57 per Western Areas share, or a 16.8% premium.

Gold Fields plans to operate South Deep as a single unit with its adjacent Kloof gold mine.

Meanwhile, Gold Fields plans to expand its two largest South African gold mines in a 4.7-billion-rand ($708 million) program to start in mid-2007.

The Driefontein mine will see an investment of 3.3 billion rand ($497 million) to deepen the No. 9 inclined shaft to 4,121 metres. It currently goes to 1,988 metres, and the new shaft would be the world’s deepest mine.

The shaft will give Gold Fields access to a reserve of 33 million tonnes grading 8.2 grams gold per tonne on the Witswatersrand basin’s Carbon Leader Reef. The reserve would extend Driefontein’s mine life to 2035.

Sinking is planned to start on the shaft in October 2007 and take just over four years to complete; fitting out the shaft should take another year. Production would start in 2014, following drift development, and would reach a plateau of 170,000 tonnes per month in 2019.

At Kloof, Gold Fields has budgeted 1.4 billion rand ($211 million) for an inclined shaft-sinking program that would extend the workings to 4,020 metres. The new workings would open up the Kloof Extension mineralization, where Gold Fields has pegged a reserve of 5 million tonnes grading 12.1 grams per tonne. The mineralization is on the Ventersdorp Contact Reef.

Sinking would start next July and mining would begin in 2009. The Extension project would last until 2021.

Both projects are based on a rand-denominated gold price of R100,000 per kg (US$423 per oz. at current rates of exchange). Feasibility work indicated cash production costs of US$279 per oz. at Driefontein and US$246 per oz. at Kloof.

The deepening program is of a piece with ambitious deep-mining programs at other properties in the Witswatersrand basin. AngloGold Ashanti (AU-N, AGD-L, ANANO-J) has previously discussed plans to develop Western Deep Levels South to 4,000 metres and Western Ultra Deep Levels to 5,000 metres. Currently, the deepest of the West Rand shafts, TauTona, goes to 3,500 metres.

DRDGold (DROOY-Q, DRD-J) is at the prefeasibility study stage on the Argonaut project, which would exploit mineralization downdip from its East Rand mine down to about 5,000 metres; the current East Rand shaft reaches 3,585 metres below surface.

“Including the recently announced extensions to Kloof and Driefontein gold mines, Gold Fields has now committed more than twenty-five billion rand to growth projects in South Africa, providing Gold Fields with a solid foundation from which to pursue its existing commitment to international growth, said Gold Fields CEO Ian Cockerill in a statement.