Gold Fields, Asanko Form Joint Venture In $202.6 Million Deal
(Kitco News) - South African producer Gold Fields Ltd. (JSE: GF; NYSE: GFI) is buying a 50% joint-venture interest in Asanko Gold Inc.’s (TSX: AKG, NYSE American: AKG) Asanko Gold Mine and other properties in Ghana, with the deal valued at $202.6 million, the companies announced Thursday.
Canada-based Asanko has a 90% interest in the Asanko Gold Mine. The government holds the other 10%.
Asanko will receive $185 million, including $165 million upon closing of the joint-venture transaction, expected before the end of the third quarter, plus and another $20 million on an agreed Esaase development milestone but no later than the end of 2019. Additionally, Gold Fields will purchase a 9.9% shareholding interest in Asanko for approximately $17.6 million by obtaining some 22.4 million shares at a cost of around 79 cents each, the companies announced.
Asanko will remain manager and operator of the Asanko Gold Mine and will be paid a joint-venture management fee of around $6 million annually.
Asanko said it will use the proceeds from the deal primarily to repay its outstanding Red Kite debt of $164 million.
“This transaction presents a unique opportunity for Asanko to de-risk its future production targets whilst at the same time eliminating corporate debt. With a healthy balance sheet and robust operational cash flows, together with 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 have determined that it is superior to the alternative of engaging with Red Kite to extend our debt. With the repayment of the Red Kite debt, Asanko has achieved significant financial flexibility moving forward as we seek to continue to grow our business over the medium term.”
Gold Fields is one of the top gold producers in the world and already the second largest miner in Ghana.The company said it will fund the transaction from cash and/or by drawing down on its existing debt facilities. Gold Field also said the transaction 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 anticipated life-of-mine of at least 15 years.
“We view the Asanko Gold Mine as a high-quality asset and a great addition to our existing portfolio of open-pit gold operations in the country,” said Nicholas Holland, CEO of Gold Fields.
Asanko projected that the mine will produce between 200,000 and 220,000 ounces of gold this 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 and 2023, with AISC ranging from $775 to $905.