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Gold Fields sells Venezuela assets for $520 mln
(Update 5-Adds fresh CEO quotes)
By James Macharia
JOHANNESBURG, Oct 12 (Reuters) - South Africa's Gold Fields (GFIJ.J: Quote, Profile, Research) sold its Venezuelan assets for $520 million a day after selling a West African project and it said on Friday it would focus on quality mines internationally.
Canadian-listed and Russian-owned Rusoro Mining Ltd. (RML.V: Quote, Profile, Research), a junior gold producer, said it had agreed to buy Gold Field's Venezuelan assets, including its Choco 10 mine, for $150 million in cash, $30 million in a convertible vendor loan and 140 million Rusoro shares.
Gold Fields, the world's fourth-biggest gold producer, will own 38 percent of Rusoro and valued the shares at $340 million, based on a 10-day volume weighted average price.
Gold Fields Chief Executive Ian Cockerill said while the sale had reduced Gold Fields' international footprint, the company was committed to its strategy of global growth, but that it would focus on quality mines.
The firm has said it would continually review its portfolio of assets and dispose of those that do not meet its aim of having few, high quality mines over the next six to seven years.
"We have definitely not changed course and our aspiration to grow our international portfolio with appropriately sized, value adding assets remain as strong as ever," he said in a statement.
"Additional capital investment is required to realise the full potential of the Choco 10 gold mine. However, after careful consideration we have concluded that, given the current environment, this investment is better made by others."
He told a conference call Gold Fields was looking at several opportunities to buy mines globally, but gave no details, and said the socio-economic landscape in Venezuela had moved more towards the risk side than the rewards side.
HUGO CHAVEZ FACTOR
Asked if the fact that Venezuela's President Hugo Chavez was ruling by decree was behind his firm's decision to sell Choco 10, Cockerill said: "Clearly it was a factor in our decision."
He said another factor was that the offer from Rusoro presented Gold Fields with a return of some 25 percent on its total investment of $425 million in the project, which was Gold Fields' smallest operation and has had problems recently.
Gold Fields bought the mine for $360 million from Canada's Bolivar Gold Corp in March 2006, but has battled with water problems and strikes.
Cockerill said although the firm wanted to reach a target of 1.5 million ounces by 2009 from its mines outside of South Africa, it would not do so at any cost. By selling Choco 10, the company had fallen short of that target by some 900,000 ounces.
Gold Fields, which produces about 4.0 million ounces of gold yearly, has mines in South Africa, Ghana, Australia and Peru.
"We are going to try to reach that target, but we will not slavishly add ounces just to reach a target, by adding profit-less ounces," he said.
On Thursday Gold Fields announced the sale of a 60 percent stake in the largest gold deposit in Burkina Faso in West Africa to Canadian partner Orezone Resources (OZN.TO: Quote, Profile, Research) for $200 million.
Gold Fields said it would use the cash from both sales to reduce debt or fund its expansions.
It is focused on expanding output at its South Deep project in South Africa, where it wants to triple output to 800,000 ounces a year in five years from about 270,000 now.
Rusoro said it planned to use its Venezuelan operating experience to resolve the hurdles encountered by Gold Fields.
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