The assets are situated in Western Australia and 42 per cent of the total group’s production will come from the region. gold Fields [DATA GFI:GOLD FIELDS LIMITED.] believes that the acquisition will consolidate their existing position in Australia as the Lawlers mine runs adjacent to their Agnew operation.
“One of the major benefits about the mines we are buying in Australia is that one of the mines is virtually contiguous and adjacent to our existing Agnew operation. Agnew is a low cost producer so I think this is going to consolidate our position,” Nick Holland, Chief Executive Officer of Gold Fields told CNBC Africa on Thursday.
He added that the consolidation of the two mines would assist them in achieving their strategic objectives of rationalising mining, processing, over heads, underground equipment as well as their general on site and administrative expenses.
The Granny Smith mine on the other hand will be contributing 200,000 ounces of gold per year to the group’s total production.
Holland also believes that the group performs well in Australia as they have been doing business in the country for several years and understand its gold sector very well.
“We've certainly been there for 11 years and got to know the country very well. We like Western Australia and I think the rules of the game are very clear, the skills are good and the safety ethics generally are also good,” he explained.
According to Holland, the acquisition is in line with the group’s goal of focusing on cash generation rather than ounce production as he believes that is what is lacking from the industry as a whole.
“It’s not about ounces anymore, it’s about how we actually make cash which is what the gold industry has failed to do for many years,” he said.
The gold industry as a whole, Holland pointed out, is on a downward spiral as investors begin pulling out investments.
“Investors are deserting the gold sector, and the question is why? It’s because we are all focusing on how we’re going to get more out of a declining pie,” he added.
“As a consequence, you're seeing billions of dollars being shelved on new projects that can have a material impact on global economies.”
Holland explained that the number of mining projects that have been shelved globally is alarming as an estimate of 41 countries in the world are heavily reliant on mining as it makes up 25 per cent of the country’s export revenue.
“The multiplier effects of mining are huge and we have not yet seen the impact down the road of what we're doing today and that’s what worries me. We cannot afford not to have a vibrant mining industry,” he concluded.