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JOHANNESBURG, March 29, 2018 /CNW/ - Gold Fields Limited (Gold Fields) (JSE, NYSE: GFI) is pleased to announce it has, through a wholly owned subsidiary, entered into a definitive agreement subject to certain customary conditions to form a 50:50 incorporated joint venture with Canada's Asanko Gold, Inc (TSX/NYSE AMERICAN: AKG) (Asanko). The Gold Fields subsidiary has agreed to acquire a 50% stake in Asanko Gold Ghana Limited's (AGG) 90% interest in the Asanko Gold Mine, associated properties and exploration rights in Ghana (AGM). The AGM is a multi-deposit complex, with two main deposits, Nkran and Esaase, and nine known satellite deposits. The purchase consideration comprises an upfront payment of US$165m on closing of the transaction and a deferred payment of US$20m.

In addition, Gold Fields' subsidiary agrees to subscribe to a 9.9% share placement in Asanko by way of a private placement of 22,354,657 Asanko shares at a price of approximately US$0.79, equal to the five-day VWAP on the day prior to date of this announcement, for a total consideration of US$17.6m. The subscription will close shortly after the date of this announcement, and is not conditional on completion of the joint venture transaction.

The acquisition will be funded from cash and/or by drawing down on Gold Fields existing debt facilities. Importantly, the AGM is an in-production asset that generates EBITDA and cash flow and does not require any additional investment by the JV partners.

Rationale for the Acquisition

  1. Portfolio management is one of Gold Fields' strategic objectives, as we continually seek to improve the quality of our portfolio (by lowering our all-in costs (AIC) and extending mine lives) to enhance Gold Field's cash generation.
  2. The Asanko joint venture will give immediate access to low-cost production ounces, increasing the quality of the Gold Fields portfolio - Asanko's guidance for 2019-2023 is average annual production of 253koz (100% basis) at all-in sustaining costs (AISC) of US$860/oz, with a life-of-mine of at least 15 years. Further, the sizeable resource base of the asset is immediately accretive to Gold Fields in terms of life, with the potential for further discoveries on the large, relatively unexplored, tenement package (c.540km[2]) held by Asanko.
  3. The transaction is also in line with our current growth strategy of focusing on jurisdictions in which we already have an established footprint. As the AGM is located in Ghana, we are adding an asset in a country where Gold Fields has extensive experience, having operated in Ghana for over 20 years.

The transaction exceeds our requirement of a return of 15% at a gold price of US$1,300/oz, with a payback period of five years out of an anticipated life-of-mine of at least 15 years. The transaction is demonstrably accretive to Gold Fields. We are comfortable that despite our current investment programme (Damang and Gruyere) this acquisition is well within our balance sheet capacity, particularly as it is a producing asset.