Gold Fields sees upside in bid for Bolivar

Vancouver As part of a growth strategy to expand offshore production, Gold Fields (GFI-N) plans to pay US$330 million in cash to acquire Bolivar Gold (BGC-T), the Toronto-based operator of the Choco 10 gold mine in Venezuela’s Bolivar state.

Gold Fields already owns about 11% of Bolivar’s outstanding shares, plus about 32% of its Series A warrants. The proposed transaction has been approved by the boards of both companies, but awaits regulatory approvals and the approval of two-thirds of Bolivar shareholders and warrant-holders. A definitive agreement is expected by the end of November, and if all goes as planned, the transaction should be concluded early next year.

Ian Cockerill, chief executive officer, says the acquisition will give Gold Fields a strong operational presence in the prospective El Callao district, where Bolivar’s newly constructed mine is located. He added that the historic gold camp has geological similarities to West Africa, where Gold Fields operates several gold mines.

The Choco 10 open-pit mine achieved commercial production this summer, and is on target to produce about 48,000 oz. this year. Production is expected to reach 190,000 oz. in 2006.

Gold Fields sees potential to expand production in the years ahead, and cites Bolivar’s recent scoping study, which showed potential for throughput to be increased to 15,000-20,000 tonnes per day, triple the present rate. This would boost production to more than 400,000 oz. annually.

In a conference call with analysts, Cockerill expressed confidence that the company will be able to operate successfully in Venezuela, despite recent anti-capitalist rumblings from President Hugo Chavez. “We’re aware of the environment and know what we’re getting into. By no stretch of the imagination is this [deal] an impulsive buy.”

Cockerill says Gold Fields has been active in Venezuela since 1992, and has been an exploration partner with Bolivar since 2003. “We intend to be good corporate citizens and operate to the highest environmental and social standards.”

While company officials did not meet Chavez personally, they met with senior ministers of his government and were told that “south-south investment [such as between South Africa and Venezuela] is consistent with what Chavez is trying to encourage.”