The assets include the Beatrix, Driefontein and Kloof mines and ancillary service companies. Combined, the three mines churned out 3.1 million oz. gold at an average total cash cost of US$169 per oz. in 2002.
Gold Fields, South Africa’s second-largest producer of the yellow metal, says the mines represent 70% of its total value, based on its weighted average share price for the 30 business days prior to the deal’s unveiling.
Says Gold Fields CEO Ian Cockerill: “There was no pressure on us to do the deal. We analyzed many potential deals, and it was a board decision that any deal we did should take place at the equity level. We felt that that was sustainable in the longer term.”
Cockerill calls the deal with Mvela an extension of the pair’s existing exploration partnership in Africa. “It was almost a natural progression from what we already had with Mvela.”
The Mvelaphanda group plans to fund the acquisition with a combination of equity capital and debt financing arranged by Mvela Resources, and a R300-million (US$38 million) financing from Gold Fields. Details of the financing were not provided, but Cockerill says the plan will be of limited recourse to his company.
Cockerill says Gold Fields will not keep the R3.8-billion (US$480 million) cash balance on its books for long; the funds will be ploughed back into the company to fund growth opportunities.
Also included under the Mvelaphanda umbrella are community-based trusts and women and youth empowerment groups, which will be able to buy a minority position in the 15% empowerment stake.
As part of the deal, Mvelaphanda has agreed not to sell its stake until Gold Fields’ “old order” mining rights at the three mines have been converted into “new order” mining rights, or until the 5-year lock-in period expires.
Under South Africa’s new minerals bill, mineral rights are transferred back to the state, and companies are now required to re-apply for new order rights.
After the lock-in period, Mvelaphanda can exchange its stake for shares in Gold Fields; the major has a reciprocal right to require the exchange.
Under a 120-day exclusivity arrangement, neither side is allowed to pursue any similar transaction with other parties. If financing details and a formal agreement are not ironed out by the end of the period, the deal lapses.
Under South Africa’s mining empowerment charter, companies operating in South Africa must have 15% of their assets in the hands of sanctioned black economic empowerment groups within five years; in 10 years, the BEE stake must be 26%.
The charter also calls for 40% of South African mining companies’ management to consist of historically disadvantaged South Africans, and, within five years, for 10% of the industry’s labour force to consist of women.
“We’re certainly in a good position to satisfy the objectives of the charter,” says Cockerill. “This is a substantive transformation of Gold Fields as a company.”
He adds that his company has one or two other deals in the works and that these will easily bring it to the 26% requirement within the 10-year timeframe. Those deals don’t require Gold Fields to support the buyer financially.
Be the first to comment on "Gold Fields inks deal with Mvelaphanda"