JOHANNESBURG (Business Day) -- Gold Fields [NYSE:GFI] will spend R637 million ($83.4 million) to increase its stake in Chinese gold miner Sino Gold [ASX:SGX] to 19.9% and has broadened its alliance with the company to include smaller projects, it said yesterday.
CEO Nick Holland told the group's March quarterly presentation two weeks ago that the group would pursue aggressive international growth and would consider smaller deposits that offered exceptional returns. This contrasts with a statement by his predecessor, Ian Cockerill, who said in August that Gold Fields would focus on high-quality ounces at larger mines.
Sino Gold, which is listed on the Australian Stock Exchange, is building what will be one of China's largest gold mines, the 180,000 ounces a year Jinfeng project in Guizhou province. It is also developing a second mine at White Mountain in Jilin province.
Sino Gold said it would raise A$136 million ($131 million) through a rights issue to eliminate its gold hedge book, which stood at 278,657 ounces at the end of last month.
Gold Fields, which has a 15.5% stake in Sino Gold, would follow its rights in the capital raising, and would also inject another A$68 million ($65.5 million) into Sino Gold to raise its stake to 19.9%, it said. That is a key threshold level for Australian Stock Exchange regulations. If its stake went above that level, Gold Fields would be obliged to make a general offer to Sino Gold shareholders.
Gold Fields spokesman Andrew Davidson said Gold Fields would continue to review its investment in Sino Gold. Its 19.9% investment was worth R1.9 billion ($248.8 million) based on Sino Gold's prevailing share price.
The two companies have also broadened the terms of their 50:50 exploration alliance, they said. Under the original agreement signed in November 2006, they would search for deposits of 5 million ounces of gold or gold equivalent (which includes by-product credits), capable of producing 500,000 ounces of gold a year.
They have now decreased the cut-off point to 3 million ounces and annual production capability of 300,000 ounces a year. For an asset to stay in the alliance, both parties must contribute equally to exploration and development.