Gold Fields CEO Nick Holland. Picture: MARTIN RHODES
Gold Fields CEO Nick Holland. Picture: MARTIN RHODES

IN THE most sweeping strategic change since it unbundled all its South African mines except for South Deep into Sibanye last year, Gold Fields has now effectively shut down its “greenfields” exploration and development projects.

Instead, the group will look at buying gold companies that are in production and making profits, preferably in regions where Gold Fields is already operating.

Gold Fields CE Nick Holland would not be pinned down on possible acquisitions or areas of interest on Thursday, but the obvious target region is Australia.

Not only has Gold Fields made two successful acquisitions there in the past 12 years, but there is an opportunity to buy more mines following decisions by gold giants Newmont and Barrick Gold to refocus their operations.

Both these major groups have mines in Australia.

“Given where we are in the gold business cycle, we think there’s more value in buying gold than there is in discovering it,” Mr Holland said. “We’ve been exploring for 16 years. Expenditure on exploration has gone up significantly, but the number of discoveries and the grade of those discoveries has come down.

“Gold is scarce. It’s not easy to find the stuff,” he said.

Gold Fields announced in its March quarterly results that it had disbanded its growth and international projects division and earmarked projects for disposal. These included Talas in Kyrgyzstan, Yanfolila in Mali, Arctic Platinum in Finland and Woodjam in British Columbia.

Gold Fields said spending on Chucapaca in Peru and the Far Southeast project in the Philippines had been cut “to essential holding costs … pending decisions on the future of these projects”.

Mr Holland said Gold Fields would “rather use our firepower on stuff that is going to give us near-term benefits and, given the sort of valuations out there today, I think it’s a better prospect.

“I would rather do more deals like the one we have just done in Australia, which is to buy assets that are cash-generative from the get-go and that are potentially synergistic with other operations in the region,” he said.

The group had made optimistic predictions on the future of both Chucapaca and, in particular, Far Southeast, which is a gold and copper deposit.

The disposal of Arctic Platinum is linked to a recent decision by Gold Fields to confine itself to gold mining rather than following prior ambitions to diversify into a broader precious metals group.

Mr Holland said: “We are not interested in platinum.

“We want to be a gold company. Platinum is a fundamentally different business.”

Asked whether Gold Fields had any acquisition targets lined up, Mr Holland replied: “We scour the world. There are assets trading below net asset value (NAV) whereas historically they traded at or above NAV. You have to be careful because sometimes assets are trading at those levels for very good reasons.

“The probability of success is low for various reasons such as do-ability — are people prepared to sell at a price we are prepared to pay?”

Asked about the Barrick-Newmont situation, Mr Holland said: “We have to see if it actually happens. The two have danced before. I remember them talking six years ago about a tie-up.

“But, even if it does not happen, I think you will continue to see Barrick wanting to reduce its portfolio and maybe concentrate more on the Americas. It’s possible it may decide to lighten the load further in Australia-Pacific.

“I think Newmont is going through a similar process. We continue to monitor the situation. We’ll see where it ends up, but don’t put a high probability on us doing anything.”