April 15, 2011 / 11:33 AM / in 7 years

UPDATE 3-Gold Fields ups Ghana presence with $667 mln deal

* To up stakes in Tarkwa, Damang gold mines

* Gold Fields owns majority stake in both ops

* Iamgold will have above $1 bln after deal

(Updates after conference call, adds details, bylines)

By Arnika Thakur and Ed Stoddard

BANGALORE/JOHANNESBURG, April 15 (Reuters) - Iamgold IMG.TO will sell its 18.9 percent interest in the Tarkwa and Damang gold mines in Ghana to Gold Fields GFIJ.J, the world’s fourth largest gold producer, for $667 million in cash.

The move pumps Toronto-based Iamgold full of cash and helps drive Gold Fields’ ambitious expansion plans.

“We cannot fully leverage our skills and experience in developing and operating mines if we are not the operator and have a minority interest in the mine,” Iamgold’s Chief Executive Steve Letwin said in a statement on Friday.

Gold Fields -- the No.2 producer in Africa with operations also in South America and Australia -- owns the majority stake in both the mines. It said the deal will lower production costs. Analysts said it was a good move.

“Tarkwa and Damang gold mines in Ghana are a relatively low-risk going concern and have low cash costs, and it certainly adds to Goldfields production,” said David Davis, an analyst with Standard Bank Group Securities.

Damang produced 227,500 ounces of gold in 2010 at a total cash cost of $660 per ounce.

On completion of the deal, Gold Fields will have raised its interest in each of the Tarkwa and Damang gold mines to 90 percent from 71.1 percent. The remaining 10 percent is held by the government of Ghana.

This is in keeping with Gold Fields’ strategy to own all or as much as it can of its assets to realise their full value.

Gold Fields is one of South Africa’s “Big Three” gold miners which are scrambling to diversify operations out of the country in the face of rising costs, deeper operations, labour unrest and regulatory uncertainty.

Ghana is Africa’s second largest gold producer and is regarded as a stable political environment -- a major plus given some of the countries where gold operators must operate.

And West Africa is touted to be one of the world’s fastest growth regions for gold production over the next four years, with output seen rising 30 percent, according to a study by GFMS, a metals consultancy. [ID:nN06250448]

Gold Fields expects to increase attributable production from West Africa by about 181,000 ounces per year, and attributable gold resources by 3.3 million ounces after the deal.

Its chief executive Nick Holland said on a conference call that the upside prospects were promising and that there was potential for a “much larger pit” at the Damang mine.

Gold Fields executives on the call said $500 million of the deal would be funded from an underutilised offshore facility while the rest would come from cash. They did not expect any issues with Iamgold shareholders.

CASH COW

Mid-tier gold miner Iamgold said it will have more than $1 billion in cash, cash equivalents and gold bullion (at market), after the deal’s close.

Iamgold, which has a $350 million undrawn credit facility, said the transaction is expected to close by July 31.

Toronto-based Iamgold shares closed at C$21.10 on Thursday on the Toronto Stock Exchange.

Gold Fields’ share price was 0.29 percent lower in late trade on Friday at 122.35 rand, almost in line with the Johannesburg bourse’s all-share index .JALSH which was 0.41 percent lower. (Additional reporting by Ruona Agbroko in Johannesburg) (Editing by Prem Udayabhanu, Jarshad Kakkrakandy and David Cowell)

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