Gold Fields, Asanko Form Joint Venture In $202.6 Million Deal
(Kitco News) - SouthAfrican producer Gold Fields Ltd. (JSE:GF; NYSE: GFI) is buyinga 50% joint-venture interest in AsankoGold Inc.’s (TSX: AKG, NYSE American: AKG) Asanko Gold Mineand other properties in Ghana, with the deal valued at $202.6 million, thecompanies announced Thursday.
Canada-based Asanko has a 90%interest in the Asanko Gold Mine. The government holds the other 10%.
Asanko will receive $185million, including $165 million upon closing of the joint-venture transaction,expected before the end of the third quarter, plus and another $20 million onan agreed Esaase development milestone but no later than the end of 2019. Additionally, Gold Fields will purchase a 9.9% shareholdinginterest in Asanko for approximately $17.6 million by obtainingsome 22.4 million shares at a cost of around 79cents each, the companies announced.
Asankowill remain manager and operator of the Asanko Gold Mine and will be paida joint-venture management fee of around $6 million annually.
Asankosaid it will use the proceeds from the deal primarily to repay its outstandingRed Kite debt of $164 million.
“This transaction presents a unique opportunity for Asanko to de-riskits future production targets whilst at the same time eliminating corporatedebt. With a healthy balance sheet and robust operational cash flows, togetherwith a strong technical endorsement, our life-of-mine plan is assured,” said Peter Breeze,Asanko president and chief executive officer.
“After carefully weighing the benefits of this transaction, we havedetermined that it is superior to the alternative of engaging with Red Kite toextend our debt. With the repayment of the Red Kite debt, Asanko has achievedsignificant financial flexibility moving forward as we seek to continue to growour business over the medium term.”
Gold Fields is one of the top gold producers in the world and alreadythe second largest miner in Ghana.The company said it will fund the transaction from cashand/or by drawing down on its existing debt facilities. Gold Field also said thetransaction exceeds its requirement for a return of 15% at a gold price of$1,300 an ounce, with a payback period of five years out of an anticipatedlife-of-mine of at least 15 years.
“We view the Asanko Gold Mine as ahigh-quality asset and a great addition to our existing portfolio of open-pitgold operations in the country,” said Nicholas Holland,CEO of Gold Fields.
Asankoprojected that the mine will produce between 200,000 and 220,000 ounces of goldthis year at all-in sustaining costs of between $1,050 and $1,150 an ounce.Output is forecast to range between 220,000 and 280,000 ounces between 2019 and2023, with AISC ranging from $775 to $905.
By Allen SykoraFor Kitco News
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