Gold Fields pays $36M for 12% of Founders Metals

Gold Fields (NYSE, JSE: GFI) agreed to pay about C$50 million ($36 million) to become the biggest shareholder in Founders Metals (TSXV: FDR), which is developing the Antino gold project in Suriname.

Johannesburg-based Gold Fields will acquire about 12 million Founders common shares – good for a 12% stake – at C$4.15 apiece, the Vancouver-based company said Monday. The deal is expected to close by Nov. 10, subject to customary conditions, including TSX Venture Exchange approval.

This is the second significant Canadian mining investment in as many years by Gold Fields, one of the world’s largest miners. It spent C$2.2 billion last year to acquire Toronto-based Osisko Mining to become the sole owner of the Windfall project and the surrounding exploration district in Quebec.

“Combining Founders’ position as the largest and most advanced gold explorer in Suriname with the technical capabilities of a company having decades of experience developing world-class gold deposits positions us to rapidly advance work at Antino,” Founders Metals CEO Colin Padget said in a statement. “This partnership further underscores Suriname’s potential as an emerging gold jurisdiction globally.”

The company said it intends to use the funds to expand its land holdings around Antino and advance regional-scale exploration across multiple targets it described as high-grade.

Founders shares jumped 10% to C$4.02 Monday morning in Toronto, giving the company a market value of about C$411 million ($292m). The stock has traded between C$2.53 and C$6.25 in the past 12 months.

Investor rights pact

The companies also reached an investor rights agreement that will give Gold Fields the right to appoint one nominee to the Founders board if its stake reaches or exceeds 12.5%. Gold Fields will also receive top-up rights, financing participation rights and technical committee representation rights.

News of the investment comes as Founders completes a 60,000-metre drilling program at Antino, where it has made five discoveries over the past 18 months.

Located 275 km south of the Suriname capital, Paramaribo, Antino sits across the Lawa River from French Guiana. The property has produced 500,000 oz. of artisanal gold historically, Founders says. The project also sits on the Guiana Shield, which extends to neighbouring South American countries and hosts Newmont’s (TSX: NGT) Merian and Zijin Mining’s Rosebel gold mines.

Key holders

Toronto-based B2Gold (TSX: BTO; NYSE-A: BTG) owns about 6% of Founders, having invested about C$12 million in the company a year ago. Key institutional holders include New York-based fund BlackRock and Toronto’s Dynamic Funds.

Rising bullion prices have translated into an active year for mergers and acquisitions in the Canadian mining space.

Recent transactions of note include Coeur Mining’s (NYSE: CDE) $7 billion deal Monday to buy New Gold (TSX, NYSE-A: NGD), Mexican precious metals miner Fresnillo’s (LSE: FRES) agreement last week to buy Probe Gold (TSX: PRB) for C$780 million and a pair of acquisitions last month by Canadian miner Iamgold (TSX: IMG; NYSE: IAG) that would more than triple its footprint in northern Quebec’s Chibougamau region.