GOLD Fields is buying Canadian gold junior Osisko Mining in a cash deal valued at C$2.16bn which gives the group 100% control of the Windfall gold project in Quebec in which Gold Fields had already taken a 50% stake in May last year.
Gold Fields will also gain control of “the entire exploration district” mainly through ownership of Osisko’s 70% stake in a JV with Bonterra Resources which covers an additional 225km2 of prospective exploration ground adjacent to the Windfall deposit.
The offer at C$4.90 per Osisko share gives a “fully diluted equity value” of C$2.16bn for Osisko and an “enterprise value” of C$1.48bn.
According to Gold Fields CEO Mike Fraser, “Windfall is among the largest gold deposits in Canada and a top ten gold deposit globally by head grade. Windfall is expected to produce approximately 300,000 ounces of gold at an all-in sustaining cost (AISC) of US$758/oz and this positions Windfall to be one of the lowest cost mines in Gold Fields portfolio with a current projected mine life of 10 years”.
Asked about the broader political and social requirements for operating in Quebec, Fraser commented, “Quebec is ranked at one or two in jurisdictions globally for ease of doing business. They are very pro-mining which is really helpful. Everyone wants to see resources developed for the benefit of the province and the country.
“We are engaging with the Ministry of the Environment in Quebec Province. They have already come back with their first round of questions and there’s nothing from those questions that would lead us to believe that there is any risk or concern.
“We are comfortable that Quebec is going to be a good place to do business. There is very strong community support and very strong state support.”
Gold Fields is paying a 55% premium to acquire Osisko which Fraser says is justified for a number of reasons. These include the competitive process to take over the company as well as the stagnation in the Osisko share price over the past year during which period Gold Fields has built up a detailed assessment of Windfall through the existing JV.
According to Fraser, “we have grown to like this asset and have been really attracted by the quality of it. Osisko has been trading sideways for the past 12 months which is not unusual for a single-asset development company. We see significant fundamental value and significant upside in this asset. On a 100% consolidated basis we are very comfortable with the price we paid for it. “
Fraser said settlement in cash would have no impact on Gold Fields dividend payments.
“We are very comfortable we will continue to maintain our current dividend policy. Paying in cash helps with the speed of being able to execute the transaction and it also put us in a stronger position to compete for the asset as there were other competitors who would have looked to use shares
“We still believe there is fundamental value in our share price so going out and diluting our stock right now is probably not the best way to think about it plus we have a fairly low gearing. We have the capacity on our balance sheet to fund this on an all-cash basis.”
