Gold Fields has unveiled its plans for a R11.6bn mining project in Chile, the company’s first such greenfields project in more than a decade, but details of how it would be funded remained vague.
This would be the first Gold Fields project in that country. It has mines in Australia, Ghana and Peru as well as SA — its traditional home base, which now consists of a single, problematic deep-level mine called South Deep and its head office.
The Salares Norte gold and silver deposit high in the Andes in northern Chile has the potential to deliver annual production of 450,000 gold equivalent ounces, with the silver output converted to a gold value, in the first seven years.
This production was not factored into Gold Fields’s projected production of 2-million ounces a year over the next decade, CEO Nick Holland said.
However, the pressing question for analysts was how Gold Fields would fund the R11.6bn price tag, which is a quarter of
its R45bn market capitalisation.
Holland said there was no immediate need to come up with a financing model because final approval of the project’s environmental impact assessment was expected in 2020.
But he would like to have a sense of funding options by
the end of 2019 ahead of a board decision around the middle of 2020.
"This shouldn’t be a high-risk project to finance," he said.
The mining model targeted high-grade parts of the ore body in the early years, and output would exceed the plant’s capacity of 2-million tons a year.
Among the options was to project finance the mine and dual-stream processing plant to extract gold and silver, with interest from Chilean financial institutions to provide the capital.
Gold Fields is nearing completion on the revamped Damang mine in Ghana and the Gruyere mine it shares with a partner in Australia.
In the second half of 2019, Gold Fields expects to turn cash positive and start repaying debt, giving it flexibility and options by the time construction on Salares Norte starts in 2021.
"We would take a very hard look at this project before we would commit to doing it alone," Holland said.
Another option was to bring in a partner, which would either have technical expertise or be a silent partner, with Gold Fields wanting to retain operational control of the mine, he said.
The Salares Norte project was on just a small part of a large land holding on the mineralised belt, and Gold Fields has already started work exploring for additional deposits to feed into the
project, extending its life beyond 11 years.
The payback period on the project was projected at 2.2 years, with upfront spending of $80m on detailed engineering work, site preparation and the removal of 50-million tons of waste rock covering the deposit.
The balance of the $734m would be spent in roughly two equal tranches over a two-year period to build the project.
The mine will rely on diesel generators able to produce more than 17MW for the operation, which would need 13MW.
The intention is to have renewable energy sources accounting for 20% of power supply at the end of the first two years of the project.
The biggest risk to the project was a delay in securing the necessary permits, said Max Combes, Gold Fields’s country manager of the Americas region: Chile.
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