BLBG:Gold Fields to Split South Africa Mines as Strikes Add Costs
Gold Fields Ltd. (GFI), the fourth-biggest producer of the metal, will spin off part of its South African business as a wave of strikes and above-inflation pay gains add to costs and curb output for mining companies in the country.
Sibanye Gold Ltd. will trade in Johannesburg and New York and include the Kloof-Driefontein Complex, Africa’s largest gold operation, and the Beatrix mines, Johannesburg-based Gold Fields said today in a statement. Gold Fields will keep South Deep, its second-biggest facility, and mines in Peru, Ghana and Australia. The stock rose the most in three years in Johannesburg trading.
The company is partly reacting to rolling wildcat strikes that began in South Africa’s platinum industry, before spreading to gold, iron-ore, coal and diamond mining. About 29,000 Gold Fields workers walked out in the past two months, winning pay gains that added to rising power costs and capital spending.
“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,” Chief Executive Officer Nick Holland said. “This is something we’ve been thinking about for some time.”
Gold Fields has won approval from the South African Reserve Bank for the spinoff and is waiting for the Johannesburg Stock Exchange, where Sibanye will begin trading in February, he said.
Other companies may follow Gold Fields’ lead as costs rise.
AngloGold Options
AngloGold Ashanti Ltd. (ANG), the third-biggest producer of the metal, retains the option of splitting off its South African operations, Chief Executive Officer Mark Cutifani said Nov. 21. “Nothing has changed,” Alan Fine, an AngloGold spokesman, said today by phone. “He’s been consistent in that message.”
About a third of AngloGold’s metal comes from South Africa, the continent’s biggest economy, where it employs about 35,000. The stock rose by the most in 2-1/2 months in Johannesburg.
Labor unrest this year will shave 0.5 percentage point off economic growth in the country and cut exports by more than 12.5 billion rand ($1.4 billion), the National Treasury says. Mining, contributing 6 percent of the economy and employing almost half a million people, will take a year to recover from job losses after the strikes, Finance Minister Pravin Gordhan said Nov. 26.
The newly created Sibanye will be the largest gold-mining company in South Africa and be headed by Neal Froneman, CEO of Gold One International Ltd. (GDO), according to Gold Fields.
“There will be opportunities for regional consolidation,” Froneman said. Gold One won’t initially be looked at, he said.
Gold Fields gained as much as 7.8 percent, the most since Nov. 4, 2009, and was up 6.9 percent at 109.86 rand by 11:37 a.m. in Johannesburg. Anglogold rose 5 percent to 277.85 rand.
Well Received
“It’s good because it separates the mature mines and splits out those mines which require different management techniques and structures,” David Davis, an SBG Securities Ltd. analyst, said by phone. “This is a change on the quality of the assets and I think it will be well received by the investor.”
Credit Suisse Group AG and JPMorgan Chase & Co. are acting as financial co-advisers on the transaction, while Credit Suisse is also an underwriter of the company’s debt facilities.
Gold Fields’ dollar-denominated debt will remain with the company and it won’t have a stake in Sibanye, Holland said.
“We have met with the national leadership of the various union associations to explain the rationale,” he said. “We will look at a profit-share scheme. That will be critical.”
To contact the reporters on this story: Jaco Visser in Johannesburg at avisser3@bloomberg.net; Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net
To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net
