The agreement is subject to closing conditions, including clearance by Australia's Foreign Investment Review Board, consent of the Western Australian Minister for Mines for the transfer of the property tenements, and the assignment of certain supply contracts.
The deal offers Gold Fields an option to deliver up to half of the consideration in its own shares to Barrick. Pricing of the shares will be based on the five day volume weighted average price, prior to, but not including closing. The acquisition will provide Gold Fields with an additional 452,000 ounces of production from the mines.
The move testifies Barrick’s strategy of focusing on aggressive cost cutting and low costs assets and doing away with the non-profitable ones in order to improve its free cash flow profile. The company also slashed its dividend by 75% in the most recent quarter in the wake of falling gold prices.
Barrick’s Pascua-Lama mine in the Andes, which is the highest gold mine in the world, has also been going through a rough patch. Construction at the mine has been delayed due to the falling gold prices, rising costs and challenging market conditions. Barrick announced that Copiapo Court of Appeals have issued a ruling that the company must build a water management system at the Pascua-Lama project before restarting construction activities in Chile.
Barrick also recorded a hefty after-tax impairment charge of $8.7 billion in the second quarter of 2013 due to falling gold prices. Lower metal prices weighed on its bottom line. Adjusted earnings (excluding one-time items) fell to 66 cents per share in the quarter from 82 cents per share in the year-ago quarter, but was ahead of the Zacks Consensus Estimate of 56 cents.
Barrick has maintained its gold production forecast for 2013 at 7-7.4 million. The company also backed its full year all-in sustaining cost guidance at $900-$975 per ounce.
Westar Energy is keen on adding renewable generation assets in the next few years. The company stated that its first preference will be for projects located in Kansas. The company will provide a part of its Ironwood development rights in Ford and Hodgeman counties as part of the proposal. The developers can work on their own sites as well.
The proposals are due Sep 13, 2013. The company is mostly interested in projects that will bode well for the Kansas economy. The state has been known for its large wind resource base but Westar Energy is eager to welcome other alternative energy proposals.
As of now, the company has about 700 MW of renewable capacity under its belt and the current proposal will aid Westar Energy to achieve the 2016 Kansas renewable energy standard.
However, the final decision will depend on several factors like overall cost, availability of adequate transmission infrastructure to supply energy to the consumers, service reliability, state’s renewables policies and regulatory laws.
The latest move comes on the heels of the greenhouse gas legislations adopted by the federal authorities and positive market dynamics for renewables. Given the increasing awareness of the pitfalls of coal, electricity generation from renewables is projected to rise to 16% by 2040 from 13% in 2011 as per Energy Information Administration’s prediction, Westar Energy’s decision looks well timed in terms of its future growth objectives.
The proposed green energy additions will also provide an impetus to the company’s RENEW program, allowing customers to receive electricity at cost-effective rates. Nevertheless, renewables will likely confront stiff competition from abundant coal and natural gas sources in the energy race.
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