Gold Fields Limited (GFI) has announced that it will sell its 51% stake in Canteras del Hallazgo S.A.C – an entity that manages the Chucapaca project in Peru – to Compania de Minas Buenaventura S.A.A. for $81 million and a 1.5% net smelter royalty on future sales of gold, copper and silver produced in the current Chucapaca concession. Buenaventura is the company’s joint venture partner in the project.
Gold Fields’ shares fell 1.9% on Aug 19 to end the day at $4.11. The stock is up roughly 30% so far this year.
The acquisition price and the royalty deal ensure that Gold Fields' investments in the project are recouped. The acquisition price equals to $26.20 per attributable gold resource ounce, which is in sync with weighted average enterprise values of open-pit projects worldwide.
Per Gold Fields, the sale of its stake is in line with its strategy of increasing its cash flow and moving away from greenfields exploration. The company is also looking at new project developments in order to acquire in-production ounces and near-mine exploration and development.
The Chucapaca project fits perfectly in Buenaventura’s portfolio as the latter has all the requisite resources and expertise to develop underground mining operations that will lead to the maximization of shareholder value.
Chucapaca is an underground mining project and as of Dec 31, 2013, had gold mineral resources of 6.1 million ounces. The project also has tremendous potential to produce gold resources.
Gold Fields, a prominent mining company along with AngloGold Ashanti Ltd. (AU) and Sibanye Gold Limited (SBGL), is an unhedged gold producer with 8 operating mines across Australia, Ghana, Peru and South Africa. The company currently carries a Zacks Rank #3 (Hold).
Another company in the gold mining industry with favorable Zacks Rank is Harmony Gold Corporation (HMY) having a Zacks Rank #2 (Buy).
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