Gold Fields aims to compete globally

Gold Fields (GOLD-Q), the world’s third-largest producer of the yellow metal, is taking steps to expand its asset base, according to statements made by the senior vice-president of exploration.

Speaking at the Africa Indaba mining conference in Cape Town, Craig Nelsen told delegates that that the company intends to diversify its holdings and become more competitive globally. He said the company will try to achieve this through partnerships and joint ventures.

“Our business approach is entrepreneurial — the ball park is wide open,” said Nelsen, who formerly was CEO of Littleton, Colo.-based Metallica Resources.

Gold Fields was formed two years ago from the merger of the gold assets of Gencor and Gold Fields, both of South Africa. Subsequently, in 1999, the company merged with Driefontein. As a result, in fiscal 2000, Gold Fields is expected to produce more than 4 million oz. at a cash cost of US$221 per oz.

Besides Driefontein, Gold Fields owns and manages the Kloof, Beatrix, Oryx and St. Helena underground gold mines in South Africa, as well as the 71%-owned Tarkwa open-pit mine in Ghana. The major has 146 million attributable ounces of mineral resources and 74 million attributable ounces of proven and probable reserves.

The company has established its main exploration office in Denver, from which it administers to regional offices in Accra, Ghana; Johannesburg, South Africa; Santiago, Chile; and Perth, Australia.

This year’s exploration budget is US$40 million, including US$5 million for overhead costs. Though most of this will be directed at gold showings, the company also plans to investigate large copper-gold projects, and has even broadened its search to platinum group elements (PGE).

Nelsen announced that Gold Fields recently signed a joint-venture agreement with Outokumpu on a platinum-palladium play in central Finland.

The Finnish major spent more than US$10 million exploring these platinum projects during the 1980s. Much of the early work targeted the area for nickel and copper. More than 600 holes have outlined five prospective targets.

Past drilling in the Penikat area has identified three reef-type horizons in a 25-km-long, layered, ultramafic intrusive. Mineralized drill intersections averaged 1 metre of 8 grams PGE. Nelsen says the average ratio of palladium to platinum is about 3-to-1. The reef has yielded thicker, higher-grade intersections to the north at Sompujarvi, including 2.3 metres of 17 grams PGE.

At another prospect area, several small shallow-reef resources have been defined, including 1.1 million tonnes grading 7.1 grams PGE and 0.9% copper, and 1.1 million tonnes of 4.8 grams PGE and 0.22% copper, plus what Nelson described as a “small jewel box” of 320,000 tonnes grading 14.7 grams PGE and 4.6% copper.

Drilling is set to begin immediately.

Previously, Gold Fields was interested only in 5-million-oz., elephant-size deposits. Now, the target size is roughly 2 million oz.

“We’ve had to re-tool our targets,” said Nelsen. “The rule of twos is the basic text of what we’re looking for in a gold project worldwide: the potential for 2 million oz. as the minimum size range; production rates of greater than 200,000 oz. per annum; cash costs should be about one-half the gold price; and an early payback of two years.”

Commenting on Gold Fields’ exploration plans, Nelsen said: “We felt we could comfortably handle, worldwide, four grassroots or greenfields projects, eight drilling projects, four resource definition projects, two prefeasibility projects and one feasibility project.”

The company recently subscribed to a 2.1-million-unit private placement with Aquest Minerals (AQU-V) at 35 per unit. Each unit consists of one share and a half-share purchase warrant. A whole warrant is exerciseable at 50 for a period of one year. The funds will be used to conduct a second phase of drilling on Aquest’s Anabella gold-antimony project in Guatemala.

Gold Fields has also invested US$500,000 in a special warrant financing of Brazilian International Goldfields (BGZ-V), giving it the right to earn up to a 70% interest in the Cachoeira gold project in northern Brazil. Drilling is under way.

The South African major holds a joint venture agreement with Harmony Gold Mining (HGMCY-Q) on the Khunwana gold prospect in South Africa. The partners are awaiting permitting approval before drilling can begin. Gold Fields must spend US$648,000 to earn a 51% interest in the project, which is being operated by Harmony.

Gold Fields has also picked up two drilling prospects along the Battle Mountain gold trend of Nevada, where drilling is to begin in March or April.

Meanwhile, the major has begun reconnaissance work on three projects — one in Nevada, one in the Antofagasta region of Chile, and on in the Drummond basin of Australia.

Gold Fields continues to hold on to an exploration joint venture with Organizacion Diego Cisneros regarding the 290-sq.-km Chicanan West property in Venezuela. A platinum and palladium deposit was discovered there two years ago. The first round of drilling yielded significant thicknesses of sub-ore grade platinum, palladium and gold mineralization. Typical averages included widths greater than 25 metres grading 0.5 gram PGE per tonne.

In Indonesia, the company is participating in a joint venture with Freeport-McMoRan Copper & Gold (fcx-n) on the 250-sq.-km Nabire Bakti project in Irian Jaya. Freeport can earn a 65% interest in the project by providing the next US$20 million in exploration and development financing.