Lepanto offers South African firm stake in its gold project

MANILA, Philippines – Lepanto Consolidated Mining Co. has granted South Africa-based Gold Fields Switzerland Holdings AG (GFS) an 18-month option to acquire one-third of its stake in 60 percent-owned subsidiary Far Southeast Gold Resources Inc.

GFS is a wholly-owned subsidiary of Gold Fields Ltd., the fourth largest gold producer in the world with an annual production of over 3.5 million ounces. It plans to acquire a total of 60 percent interest in Far Southeast from major shareholders Lepanto and Liberty Express for $340 million.

The option requires GFS to solely fund pre-development expenses, including exploration and a feasibility study, of the project and contribute $110 million into Far Southeast Gold.

The agreement also calls for GFS to pay a non-refundable option fee of $10 million.

If the option is exercised by GFS, Lepanto’s interest in Far Southeast will be reduced from 60 percent to 40 percent.

The Far Southeast mine site is located within an existing mining camp and is in close proximity to two other mines historically operated by Lepanto, one of which is currently in production.

Located in Benguet, the mine site has ready access to established infrastructure, including roads, tailings facilities, power and water. While there has not been sufficient work completed to declare a mineral resource for Far Southeast, drilling undertaken over a number of years indicates the presence of a large, concealed gold-copper mineralised porphyry system.

“This transaction provides Gold Fields with a unique and exciting opportunity to gain exposure to what will undoubtedly prove to be a world-class deposit. It also advances our strategy of growing each of our three international regions to one million ounces, either in production or in development, by 2015,” Nick Holland, chief executive officer of Gold Fields, said.

“We now have exciting growth projects in each of the regions in which we operate. In South Africa we have the world-class South Deep mine; in South America we have the Chucapaca project in Peru; in West Africa the Yanfolila project in Mali, and now Far Southeast in the Philippines, which forms part of the Australasia region,” Holland added.

The Gold Fields Group has 48,500 employees in the 13 countries where it operates. Gold Fields Ltd.’s shares are listed on the stock exchanges of New York, Johannesburg and Dubai. It has a market capitalization of over $10 billion.

Lepanto voluntary sought the suspension in trading of its shares on Monday to make way for this material disclosure. Its stocks rose 15 percent yesterday to close at 38 centavos apiece from 33 centavos last Friday.

Aside from Far Southeast, Lepanto intends to develop the Victoria gold mine with a capital infusion of P600 million. The money will be used to expand the mine’s capacity from 1,000 to between 1,500 to 1,800 tons a day.

Lepanto is aiming to produce a total of 40,000 ounces of gold for the year, which should translate to net earnings of P100 million. In 2009, Lepanto incurred a net loss of P372 million.