THE improvement in the gold price and weakness in the Canadian
dollar has made Gold Fields’s $1.2bn purchase of Osisko Mining in October look “significantly cheaper”, said the gold miner’s CEO, Mike Fraser.“It wasn’t an easy call to buy 50% of Osisko but as the Canadian
dollar weakened, and as the gold price is up nearly 30% it is on both terms of trade a significantly cheaper deal,” said Fraser. “It was a big deal for us but then we were also buying control.”Gold Fields bought the balance of Osisko Mining in October for C$1.93bn (US$1.39bn) having bought an initial 50% in May 2023 for the much lower sum of C$600m (then US$440m). The price paid for the second tranche raised eyebrows, especially as Gold Fields will spend C$1.1bn (in 2022 terms) developing Osisko’s Windfall project.“On a fundamnetal value basis, given the [Windfall] asset, where it was, and the expansion potential, it will still be a good deal,” said Fraser.“Some parts of the team were asking why pay at the top of the cycle,” he said. “But who knows where gold will go, and we need to continue to develop the portfolio. Two years from now, Windfall will be a lot more expensive,” he said.Gold Fields risked being outbid had it not bought the asset in two stages. Had that happened, it would have been another failure to compete on the international stage for the Johannesburg-headquartered firm. In 2022, it lost out to a joint $4.8bn bid from Agnico Eagle and Pan American Silver, resulting in the resignation of Chris Griffith, Gold Fields’s then CEO.Fraser said the board had learned a lot of lessons from that episode. The company would continue to look out for M&A opportunities, but in smaller packages, he said.Fraser is Gold Fields’s first CEO since Griffith’s departure (South African operations head Martin Preece was acting CEO for about a year). His first six months in charge, however, were choppy. Operational problems, not least the failure to ramp-up the Chile project Salares Norte to plan, resulted in production and cost revisions.“It was definitely a year of two halves,” said Fraser who acknowedges his team were “naive” in thinking Salares Norte could be ramped up as quickly as they hoped. “But in the second half we regained credibility and you will see in the fourth quarter we have come through very nicely.”Shares in the company are just over 30% higher year-to-date having recovered from the back end of last year. “We were in the naughty corner last year after the production downgrade, but over the last five years we have tended to outperform,” said Fraser. “But compared to where gold’s gone we’ve not got full credit for what the portfolio can deliver.”Production will be in the low ‘two millions’ (of ounces) in 2025 but once Salares Norte is fully ramped up – to a nameplate capacity of about 550,000 oz/year – production will hit about 2.5 million oz. Thereafter, Osisko’s Windfall project will start to deliver.“Windall is a long life portfolio. It’s analogue is St Ives (Gold Fields’s mine in Australia). Given the size of the land package there will be another Windfall deposit on the property.“The ounces we are bringing on are low cost so there will be margin expansion and with a high gold price there is a good tailwind. We still think on peer group basis that we are under-valued partly as we’ve had poor production recently, but if we can deliver we have got a good story to tell.”The post Gold Fields’s Osisko deal looking “significantly cheaper” appeared first on Miningmx.
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