By Sherilee Bridge
Johannesburg – Gold Fields and Mvelaphanda Resources are believed to be close to concluding a R4 billion to R5 billion deal that will give the black economic empowerment firm a 15 percent equity stake in the gold major’s local business.
The deal, which has reportedly received approval from the Gold Fields board, could be completed within days.
Mvelaphanda Holdings releases its annual financial results today.
Mvelaphanda is expected to bring at least R1 billion to the table, and the balance is thought to be made up of debt financing and “innovative” deal structuring.
Up to 10 percent of the stake could be earmarked for broad-based empowerment.
Gold Fields, which has been perceived as lacking action on black empowerment, has been in no hurry to get the deal done.
South Africa’s second-largest gold producer has a market capitalisation of R44 billion and is a 4.7 million ounce gold producer.
Up to 63 percent, or 3.2 million ounces, of the company’s total production comes from its South African operations.
The company, the best performer among the local gold majors in the March quarter, makes an estimated R2.9 billion in annualised revenue in South Africa.
Gold Fields’ profit fell just 1.5 percent in the quarter to end March against the 43 percent drop in profit reported by AnglolGold and 49 percent recorded by Harmony Gold Mining, its closest rivals.
The fall in profits was blamed on the appreciation of the rand against the US dollar
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Gold Fields said at the time of its last quarterly results that meeting the requirements of the mining charter should not be a race to see who complied first.
South African mining companies are compelled in terms of the mining charter, which accompanies the Mineral and Petroleum Resources Development Act, to transfer 26 percent of their assets to black investors within the next decade. As much as 15 percent of the target must be transferred within five years.
Last month Harmony Gold Mining, the country’s third-largest gold producer, announced plans to merge with ARMgold, the only listed black-owned gold producer, to create a new-era mining company with a market capitalisation of R20 billion. ARMgold should end up with around 26 percent of the merged company.
While the market expected Gold Fields to opt for the joint venture empowerment model, bring an empowerment partner in on one or more of its greenfields growth projects, a tidy 15 percent equity deal was more the gold producer’s style.
And Mvelaphanda would be a logical choice for Gold Fields with Tokyo Sexwale on both boards.
Sexwale has been hunting done a gold deal to round of the Mvelaphanda Resources portfolio of diamonds and platinum. Mvelaphanda last year put a R1.2 billion value on its resource assets.
Gold Fields rose 88c to R93.52 and Mvelaphanda firmed 50c to R22.50.
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