Norilsk takes South African foothold (March 29, 2004)

Russia’s largest miner Norilsk Nickel has bought Anglo American‘s (AAUK-Q) 20% stake in South African gold miner Gold Fields (GFI-N) for US$1.16 billion in cash.

Norilsk bought some 98.5 million ordinary shares in the world’s fourth largest gold miner for 77.50 rand per share, or about 7% less than the issue’s closing price on the Johannesburg Stock Exchange on Mar. 26.

“Norilsk Nickel believes the purchase of a 20% stake in Gold Fields, with its world-class gold mining assets, to be an excellent investment. We think particularly highly of Gold Fields’ management. This share acquisition is wholly consistent with Norilsk Nickel’s strategy to increase our position in the gold mining industry,” said Norilsk vice-chairman Leonid Rozhetskin.

Gold Fields’ CEO, Ian Cockerill, called the transaction a "welcome new development" and believes it will help stabilize Gold Fields shares, especially after recent market speculation about Anglo American’s intentions for its stake.

"Norilsk has done a great deal and we trust we will make them as much money as we did for Anglo American and all our other shareholders" added Cockerill.

The two companies are in talks aimed at exploring the potential for co-operation with regards to their respective gold assets.

The deal leaves Norilsk as Gold Fields’ largest shareholder, and solidifies its position among the world’s top ten gold miners. The Russia miner already ranks as the world’s largest producer of nickel and palladium, and a major producer of platinum, copper and cobalt. Gold Field’s brings with it attributable annual gold production of 4.3 million ounces from operations in South Africa, Ghana and Australia. Gold Fields also has attributable mineral resources of 195 million ounces and reserves of 84 million ounces.

Anglo says it will realize a gain of about US$480 million on the sale; proceeds will go to pay down the London-based company’s South African debt and to finance its ongoing efforts there.

The latest investment is Norilsk’s second overseas deal. In 2003, Norilsk acquired an initial 51% interest in Denver-based palladium-platinum producer, Stillwater Mining (SWC-N) for US$100 million in cash plus around 877,000 ounces of palladium. Later that year, the Russian boosted its stake by 5% by buying another 4.35 million shares at US$7.50 apiece.