Gold Fields to Spin Off South African Assets

on Nov 29, 2012

On November 29, South Africa’s second largest gold miner Gold Fields (NYSE:GFI) announced the creation of a new gold mining company to be created by spinning off its domestic South African unit. The new company will be listed as a separate independent entity both on the Johannesburg and New York stock exchanges.

**Gold Fields Restructuring**
The spinoff will affect Gold Fields’ KDC and Beatrix gold mines in South Africa, which, as reported by the Financial Times, account for roughly 45 percent of the company’s production. Gold Fields will retain the rest of its South African assets, including the South Deep Gold mine near Johannesburg.
Bloomberg reports that Credit Suisse Group AG (NYSE:CS) and JPMorgan Chase & Co (NYSE:JPM) are acting as financial co-advisers on the transaction, with Credit Suisse also being an underwriter of the company’s debt facilities.

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As noted by the FT, this is the first such decision by a large gold mining company in South Africa, whose mining industry has been plagued by wildcat strikes in recent months. Bloomberg quotes Gold Fields’ CEO Nick Holland as saying that the labour unrest also contributed to the company’s decision. “If anything the strike has accentuated the need for a different focus so that we can stop a decline in production and increase in costs,” commented Mr Holland, as quoted by Bloomberg. “This is something we’ve been thinking about for some time.”

**Sibanye Gold**
As noted in the Gold Fields’ press release, the company will unbundle its wholly owned subsidiary, GFI Mining South Africa Proprietary Limited (GFIMSA), which holds the KDC and Beatrix gold mines. The new company, called Sibanye Gold Limited, will be listed as a separate and independent company on the JSE and the NYSE in February 2013, with the move pending approval by both exchanges. Sibanye shares will then be distributed to existing Gold Fields shareholders.

“By unbundling the cash-generative KDC and Beatrix mines into Sibanye Gold, its cash flows can be utilised to extend the life of the mines and improve dividend payouts to shareholders,” noted Mr Holland in the company press release. “The first priority, however, will be to achieve safe and stable production.” Neal Froneman, CEO of Gold One (ASX:GDO), an Australian gold miner with operations in South Africa, will head Sibanye Gold, whereas Mr Holland will remain group CEO of Gold Fields. Bloomberg quotes Mr Froneman as saying that while there will be opportunities for consolidation, Gold One will not be looked at initially.

**Gold Fields Share Price Up**
!m[](/uploads/story/932/thumbs/pic1_inline.png)Reuters reports that following the spinoff announcement, Gold Fields’ shares jumped by more than seven percent in Johannesburg trading. “It’s good because it separates the mature mines and splits out those mines which require different management techniques and structures,” noted SBG Securities Ltd analyst David Davis, as quoted by Bloomberg. “This is a change on the quality of the assets and I think it will be well received by the investor.”
Gold Fields noted that following the unbundling, it would focus on cash flow generation, more predictable dividend payouts as well as on growth by means of expansion of its existing mines in Ghana, Peru and Australia. The company however pointed out that it would continue to invest in the South Deep project in South Africa.


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