Gold Fields to acquire 50% stake in Osisko’s Canadian mining project for R8.1bn

Gold Fields lost out on its $6.7-billion bid last year to acquire Canadian gold producer Yamana Gold, but it remains on a drive to grow its asset base and production profile globally. But instead of trying to land one big lunker, the JSE-listed gold producer now seems intent on reeling in several smaller fish with the potential to grow into trophies.  

On Tuesday the company said it had entered into a partnership with Toronto-listed Osisko Mining to acquire a 50% stake in the feasibility stage of its Windfall project, including exploration potential, in Quebec for C$600-million (R8.1-billion).  

“Having carried out extensive due diligence, management interaction and site visits for just over a year, Gold Fields believes the Windfall project is on track to become a high-quality, low-cost underground gold mine with a relatively small surface footprint and considerable growth prospects,” Gold Fields said in a statement.  

The mine is seen producing an average of 294,000 ounces of gold annually for at least 10 years. Gold Fields has also acquired a 50% stake in Osisko’s Urban Barry and Quévillon district exploration projects. The company will spend C$75-million over the next seven years on exploration “with the goal of fast-tracking exploration discovery and transitioning the Windfall, Urban Barry and Quévillon belts into premier, multidecade mining operations”.  

“Gold Fields has funded the initial C$300m through existing cash reserves and debt facilities. We intend to fund the remaining purchase price and project capital from internally generated cash and debt facilities,” Gold Fields said, adding that the transaction would have no impact on its dividend payouts.  

Investing in Canada is also a further step in Gold Fields’ “derisking” strategy.  

“... [A] producing mine in Canada enhances the jurisdictional quality of our global footprint,” the company pointedly said.  

A decade ago, Gold Fields made a strategic shift to mechanised operations, mostly outside South Africa, where the sun has long been setting on the mining sector. It has only one operational asset left in its historic home base, its South Deep mine west of Johannesburg. And now it is going to spend more than R1-billion on exploration in Canada, which is a highly rated jurisdiction for exploration and wider mining investment.  

Meanwhile, South Africa’s share of global exploration expenditure remains below 1% and it has not been above 5% since 2004. Policy uncertainty, onerous BEE requirements, flare-ups of labour and social unrest, Eskom’s woes and surging costs have all undermined South Africa’s attractiveness as a destination for mining investment. Gold Fields’ move into the land of maple syrup is another example of how JSE-listed mining companies are finding sweeter pickings abroad. DM/BM