Norilsk takes South African foothold (April 05, 2004)

Russian miner Norilsk Nickel has bought Anglo American‘s (AAUK-Q) 20% stake in South African-based Gold Fields (gfi-n) for US$1.16 billion in cash.

Norilsk bought 98.5 million ordinary shares in the world’s fourth-largest gold miner for 77.50 rand per share, or about 7% less than the issue’s closing price on the Johannesburg Stock Exchange on March 26.

“Norilsk Nickel believes the purchase of a 20% stake in Gold Fields to be an excellent investment,” states Norilsk Vice-Chairman Leonid Rozhetskin. “We think highly of Gold Fields’ management, and this share acquisition is wholly consistent with Norilsk Nickel’s strategy to increase our position in the gold mining industry.”

Gold Fields CEO Ian Cockerill calls the transaction a “welcome new development” and believes it will help stabilize Gold Fields shares, especially after recent market speculation about Anglo American’s intentions for its stake.

“Norilsk has done a great deal and we trust we will make them as much money as we did for Anglo American and all our other shareholders,” adds Cockerill.

The deal leaves Norilsk as Gold Fields’ largest shareholder and solidifies its position among the world’s top 10 gold miners. The Russian miner already ranks as the world’s largest producer of nickel and palladium and is a major producer of platinum, copper and cobalt as well.

Gold Field’s has attributable annual gold production of 4.3 million oz. from operations in South Africa, Ghana and Australia. Gold Fields also has mineral resources of 195 million oz. and reserves of 84 million oz.

The company has interests in advanced-stage gold and platinum projects in Peru and Finland.

Anglo says it will realize a gain of about US$480 million on the sale; proceeds will be used to pay down the London-based company’s South African debt and finance ongoing work in that country.

This latest investment is Norilsk’s second overseas deal. In 2003, it acquired an initial 51% interest in Montana-based palladium-platinum producer Stillwater Mining (SWC-N) for US$100 million in cash plus 877,000 oz. palladium. Later that year, the Russian boosted its stake by 5% by buying another 4.3 million shares at US$7.50 apiece.