GFI 201803290021A
Category 2 transaction: Joint Venture in Ghana with Asanko Gold, Inc
Gold Fields Limited
Incorporated in the Republic of South Africa)
Registration Number 1968/004880/06)
JSE, NYSE, DIFX Share Code: GFI
ISIN: ZAE000018123
"Gold Fields" or ‘‘the Company’’)
CATEGORY 2 TRANSACTION ANNOUNCEMENT: Joint Venture in Ghana with Asanko
Gold, Inc
1. Introduction
Gold Fields Limited (Gold Fields) (JSE, NYSE: GFI) is pleased to announce
that it has, through a wholly-owned subsidiary, entered into a definitive
agreement with Canada’s Asanko Gold, Inc (TSX/NYSE AMERICAN: AKG)
(Asanko), subject to certain customary conditions, to form a 50:50
incorporated joint venture (the Joint Venture Transaction) with a
subsidiary of Asanko, being Asanko Gold Ghana Limited (AGG). The Gold
Fields subsidiary has agreed to acquire a 50% stake in AGG’s 90% interest
in the Asanko Gold Mine, associated properties and exploration rights in
Ghana (the AGM). The AGM is a multi-deposit complex, with two main
deposits, Nkran and Esaase, and nine known satellite deposits. The
purchase consideration comprises an upfront payment of US$165m on closing
of the transaction and a deferred payment of US$20m.
In addition, Gold Fields’ subsidiary has agreed to subscribe for a 9.9%
share placement in Asanko by way of a private placement of 22,354,657
Asanko shares at a price of approximately US$0.79, equal to the five-day
VWAP on the day prior to date of this announcement, for a total
consideration of US$17.6m. The subscription will close shortly after the
date of this announcement, and is not conditional on completion of the
Joint Venture Transaction.
The Joint Venture Transaction and the subscription for shares in Asanko
will be funded from cash and/or by drawing down on Gold Fields existing
debt facilities. Importantly, the AGM is an in-production asset that
generates EBITDA and cash flow and does not require any additional
investment by the JV partners.
2. Description of the business carried out by Asanko
Asanko is a Canadian-based gold producer (listed on the TSX and NYSE) with
operations in Ghana. Asanko’s principal assets are the Obotan operation
(which includes the Nkran deposit) and the Esaase deposit (collectively
the AGM), which are situated 100km north of Gold Fields’ Damang operation
along the prospective and under explored Asankrangwa greenstone belt in
Ghana.
Following Asanko’s acquisition of PMI Gold Inc. in 2014, Asanko combined
its Esaase gold project with PMI’s Obotan gold project to form the AGM and
pursued a phased development and expansion strategy. The construction of
the first phase, essentially the Obotan gold project, including a 3 Mtpa
carbon-in-leach processing facility and associated infrastructure, was
completed in early 2016. Commercial production was declared on 1 April
2016, and the operation reached steady-state production levels by the end
of the second quarter of 2016.
3. Particulars of the Proposed Transaction
Upon completion, Gold Fields will hold a 45% interest in AGG – the
Ghanaian company that holds the assets of the AGM. The remaining AGG
shareholders will be Asanko (45% through its existing offshore holding
structure) and the Ghana Government (10% free carried). In addition, Gold
Fields will hold a 9.9% listed stake in Asanko.
The aggregate consideration comprises:
- Upfront consideration: US$165m payable on closing of the Joint
Venture Transaction, which will be used to immediately retire the
AGG’s existing external debt, being a loan from the Red Kite group of
US$164m, leaving Asanko debt free.
- Deferred consideration: US$20m payable on the earlier of an agreed
Esaase development milestone or 31 December 2019.
- Share placement: Gold Fields will subscribe for a 9.9% share
placement in Asanko by way of a private placement of 22,354,657
Asanko shares at a price of approximately US$0.79, equal to the five-
day VWAP on the day prior to date of this announcement, for a total
consideration of US$17.6m.
Gold Fields and Asanko will establish a 50:50 incorporated joint venture
in respect of their 90% interest in the AGM. Asanko will continue to
manage the operations and will remain the operator. A joint venture
management committee, comprising representatives from Asanko and Gold
Fields, will be formed for purposes of overseeing the operation of the
mine, with material decisions (including budgets, capital expenditure)
requiring unanimous approval. A technical sub-committee will also be
formed to provide technical advisory services to the management committee.
Asanko and Gold Fields have provided warranties and indemnities to each
other that are standard to a transaction of this nature.
4. Rationale for the Acquisition
Portfolio management is one of Gold Fields’ strategic objectives, as we
continually seek to improve the quality of our portfolio (by lowering our
all-in costs (AIC) and extending mine lives) to enhance Gold Fields cash
generation.
The Asanko Joint Venture will give immediate access to low cost production
ounces, increasing the quality of the Gold Fields portfolio – Asanko’s
guidance for 2019-2023 is average annual production of 253koz (100% basis)
at all-in sustaining costs (AISC) of US$860/oz, with a life-of-mine of at
least 15 years. Further, the sizeable resource base of the asset is
immediately accretive to Gold Fields in terms of life, with the potential
for further discoveries on the large, relatively unexplored, tenement
package held by Asanko.
The transaction is also in line with our current growth strategy of
focusing on jurisdictions in which we already have an established
footprint. As the AGM is located in Ghana, we are adding an asset in a
country where Gold Fields has extensive experience, having operated in
Ghana for over 20 years.
The transaction exceeds our requirement of a return of 15% at a gold price
of US$1,300/oz, with a payback period of five years out of an anticipated
life-of-mine of at least 15 years.
5. Conditions Precedent
The transaction is subject to customary conditions precedent including,
among others, no Asanko material adverse event, and Ghanaian Ministerial
approval for the indirect (by way of change of control) transfer of the
various mining properties.
6. Completion Date of the Joint Venture Transaction
The Completion Date of the acquisition and formation of the Asanko Joint
Venture will be the fifth business day after the conditions precedent have
been satisfied. Completion is anticipated to occur in Q3 2018.
7. Pro Forma Financial effects
Net asset value and profit attributable to the acquisition of a 45%
interest in AGG
The net asset value of AGG and its subsidiaries that would be attributable
to Gold Fields at 31 December 2017 was approximately:
Net asset value US$’m
Net asset value excluding shareholder loans 198.4
Shareholder loans (196.1)
Net asset value 2.3
Profit after tax for AGG and its subsidiaries that would be attributable
to Gold Fields for the year ended 31 December 2017 was approximately
US$6.8m before any acquisition accounting entries.
The aforementioned information of AGG and its subsidiaries was extracted
from Asanko’s consolidation workings which agreed to the audited
consolidated financial statements of Asanko for year ended 31 December
2017 issued on 13 March 2018. The audited consolidated financial
statements were prepared in accordance with International Financial
Reporting Standards. The above information is extracted from unpublished
management accounts of Asanko and the Company confirms that it is
satisfied with the quality of such management accounts.
Acquisition of a 9.9% interest in Asanko
The net asset value of the 9.9% interest acquired in Asanko at 31 December
2017, being Asanko’s most recent reporting period, was approximately
US$42.5m before any acquisition accounting entries. The profit after tax
attributable to the 9.9% interest acquired in Asanko for the year ended 31
December 2017 was approximately US$0.6m before any acquisition accounting
entries. The aforementioned information has been extracted from the
audited consolidated financial statements of Asanko for the year ended 31
December 2017, prepared in accordance with International Financial
Reporting Standards. The 9.9% interest will be disclosed by Gold Fields as
an asset carried at fair value through other comprehensive income.
8. Classification of the Transaction
The Acquisition is classified as a Category 2 Transaction in terms of the
Listing requirements of the JSE Limited.
9. Conclusion
The transaction exceeds our requirement of a return of 15% at a gold price
of US$1,300/oz, with a payback period of five years out of an anticipated
life-of-mine of 15 years. The transaction is demonstrably accretive to Gold
Fields. We are comfortable that despite our current investment programme
(Damang and Gruyere) this acquisition is well within our balance sheet
capacity, particularly as it is a producing asset.
29 March 2018
Sponsor
JP Morgan Equities South Africa (Pty) Ltd
Forward-looking statements
This announcement contains certain forward-looking statements which
reflect Gold Fields’s intent, beliefs or current expectations about the
future and can be recognised by the use of words such as “expects,”
“will,” “anticipate, “or words of similar meaning. These forward-looking
statements are not guarantees of future performance and are based on
assumptions about Gold Fields’s operations and other factors, many of
which are beyond Gold Fields’s control, and accordingly, actual results
may differ materially from these forward-looking statements. Forward-
looking statements contained in this announcement regarding past trends or
activities should not be taken as a representation that such trends or
activities will continue in the future. Gold Fields expressly disclaims
any obligation or undertaking to update or revise any forward-looking
statement (except to the extent legally required).
Date: 29/03/2018 09:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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