Gold Fields has done a deal with a mid-tier gold miner that shows again the company’s approach to growth: cautious with a healthy dose of risk mitigation.
The $203m transaction with Asanko Gold to buy a 50% stake in the Canadian company’s Ghana operating subsidiary, as well as a 9.9% stake in the listed subsidiary, could be the first step to increase exposure to the company as it ramps up to full production of 250,000oz a year at an all-in sustaining cost of $860/oz at its new mine.
First, this is a clear indication that there is no more acquisitive growth for Gold Fields in SA, where it is grappling to bring its R29bn South Deep mine to steady stage production.
Second, it is the way Gold Fields is looking for opportunistic growth, snapping up stakes in junior and mid-tier companies that are either in production or close to production.
CEO Nick Holland is clear the company wants to grow in countries in which it operates, with two big projects in Australia and Ghana, with the bolt-on acquisition with Asanko.
Holland says there was no money to buy the whole of Asanko and that in light of scarce gold finds that can make investors money these types of deal would become more common.
Gold Fields has almost the same set-up with Gold Road, an Australian company with the Gruyere project in which the South African company has a 50% stake and a 10% share of the listed company.
It is a way to minimise risk by sharing the cost and difficulties of a new project with another firm, something Anglo American CEO Mark Cutifani has spoken about, moving away from full ownership of big-ticket items. If mining companies, particularly in SA, are to survive in the long term, pragmatism rather than pride will be the only way boards can ensure growth.
Western Cape-based Tower Property Fund’s decision to ring-fence its Croatian assets in a new fund called TPF International could prove to be a shrewd move.
Tower had struggled to manage and grow its R1.3bn Croatian portfolio from SA having originally invested in the former Yugoslavian state in June 2015.
It didn’t help that its malls were anchored by Konzum, the largest retailer in that country, which fell into administration in 2017. But TPF International may just get the Croatian assets to work and expand into other European markets nearby, given the relative small size of the Croatian market.
Tower CEO Marc Edwards says TPF International will be incorporated into Mauritius, which is a tax-efficient and cost-efficient environment in which to launch a company, and that it will list on the Stock Exchange of Mauritius and the JSE soon.
Oryx Properties, the Namibian fund, will also invest R300m in TPF International.
Edwards will nevertheless have some input into TPF International’s operations and he will sit on its board as a nonexecutive director. Tower’s regional representative in Croatia, Ivan Bozac, has been appointed CEO of TPF International.
Eastern Europe is not an easy group of markets and the most successful South Africans in the region have been those who have done their homework before making any investments.
Tower is one of few South African funds to have ventured into Croatia. It would do well to invest in assets that appeal to tourists who visit the Adriatic Sea mainland coast.
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