Qatar has come to the rescue of Toronto-listed European Goldfields and, in its own small way, to Greece itself.
The company, officially based in Whitehorse but run from London, announced Monday morning that a Qatari sovereign investor had committed to lend the company $750-million (U.S.) to fund the development of its two Greek gold mines. Once they are in operation, Goldfields will become Europe’s biggest gold producer, with annual output of 350,000 ounces.
Qatar Holding will lend Goldfields $600-million over seven years, at an interest rate of 7 per cent over six-month Libor (London Interbank Offered Rate), secured against Goldfields’ Greek assets, plus an additional $150-million unsecured loan. In return, Qatar will receive options to buy 15 per cent of Goldfields at $9.08 (Canadian) a share.
Qatar Holding already owns a 9.9-per-cent stake in Goldfields and has share options for another 5 per cent. If Qatar exercises all its options, it would own 30 per cent of the company, making it the largest shareholder.
Both Goldfields and Greece needed all the help they could get. The company was having trouble financing its gold projects because of the plunging mining market and the Greek debt crisis. In a statement, Martyn Konig, executive chairman and president, said: “These transactions deliver a definitive solution to a number of key issues overhanging the company: We have secured debt financing which, in terms of both size and coupon, is otherwise unavailable in today’s challenging market conditions, thereby delivering a complete financing solution to our projects.”
Greek prime minister George Papandreou pumped up the Qatari investment as evidence that Greece, in spite of its deepening recession as the austerity programs kick in, is not a lost cause. "We have built a very strong bond of mutual respect, and we Greeks are especially pleased that this bond leads to investments in our country," he said after a meeting with Ahmad al-Sayad, CEO of Qatar Holding.
Qatar Holding has been exploiting the falling values in Europe. A year ago, it and Greece Greece signed a memorandum of understanding. Their goal is to identify billions of euros of investment opportunities in the country.
Qatar Holding owns Harrods department store in London. Its parent, Qatar Investment Authority, Qatar's sovereign wealth fund, has been an aggressive buyer of high-profile foreign assets in recent years. Among the investments in its portfolio are Volkswagen, Fisker Automotive, London Stock Exchange, Miramax Films and French soccer team Paris Saint-Germain.
The two Goldfields’ mines in Greece are expected to reach full production in 2015 and generate about 1,500 jobs. The company is also active in Romania, where rival Toronto-listed mining company Gabriel Resources has been struggling for more than a decade to develop its vast Rosia Montana project in Transylvania. The project has been fought every step of the way by heritage and environmental groups.
Goldfields’ has gold reserves of ten million ounces in the European Union. Its Stratoni lead-zinc-silver mine in Greece is in production. On the Toronto exchange, the shares have had a bad run, finishing Friday at $8.31, less than half of their 52-week high of $17.37. The shares also trade on London’s AIM market.