Business Context and Reporting Period
This Form 6-K, dated November 29, 2012, announces a strategic corporate restructuring by Gold Fields Limited. The company plans to unbundle its 100% owned subsidiary, GFI Mining South Africa (GFIMSA), to create a new, independent South African gold mining entity named Sibanye Gold Limited. The unbundling includes the KDC and Beatrix gold mines and various service companies. The transaction is scheduled for completion in February 2013, subject to exchange approvals, with Sibanye Gold shares distributed to existing Gold Fields shareholders on a 1:1 basis.
Key Financial Metrics
The filing provides unaudited financial data extracted from the 2011 audited consolidated statements to illustrate the scale of the entities involved.
- Sibanye Gold (2011 Unaudited): Revenue of R16.6 billion; EBITDA of R6.8 billion; Gold production of 1.4 million ounces; Mineral reserves of 22 million ounces.
- Gold Fields (Excluding Sibanye Gold, 2011 Unaudited): Revenue of US$3.5 billion; EBITDA of US$2.0 billion; Production of 2.2 million gold-equivalent ounces; Mineral reserves of 64 million ounces (40 million at South Deep, 24 million international).
- Debt Allocation: Sibanye Gold will retain approximately R4 billion of South African net debt. Gold Fields will retain approximately US$1.4 billion of offshore net debt.
- Capital Expenditure: Over R700 million committed to upgrading employee accommodation at KDC and Beatrix mines between 2009 and 2014, with approximately R500 million spent to date.
Material Changes and Strategic Outlook
The primary material change is the separation of Gold Fields' South African operations into two distinct listed entities. Following the unbundling:
- Sibanye Gold Strategy: Will focus on extending the life of the KDC and Beatrix mines, improving dividend payouts, and achieving stable, safe production. It will pursue synergistic consolidation opportunities in the South African gold industry.
- Gold Fields Strategy: Will focus on cash flow generation, predictable dividends, and growth through the expansion of mines in Ghana, Peru, and Australia. A core priority is the ramp-up of the South Deep project to 700,000 ounces per year.
- Dividend Policy: Gold Fields intends to distribute between 25% and 35% of normalised earnings to shareholders, prioritizing dividends on cash flows.
Management Commentary and Risks
Management emphasizes that the separation will allow both entities to operate more effectively and focus on specific strategic goals. CEO Nick Holland stated that the unbundling will liberate Sibanye Gold to maximize long-term value, while Gold Fields will retain its world-class development portfolio. The company confirmed there will be no job losses directly resulting from the unbundling and that employment conditions will remain unchanged.
Risks and Contingencies: The filing includes standard forward-looking statement disclaimers. Key risks include the ability to successfully complete the unbundling, the effect of the distribution on operations, implementation of strategy, future financial positions, capital expenditures, and projected gold prices. The transaction does not require shareholder approval but has been approved by the South African Reserve Bank.
Investor Verification Checklist
- Confirm the final listing date of Sibanye Gold on the JSE and NYSE (scheduled for mid-February 2013).
- Verify the exact 1:1 distribution ratio of Sibanye Gold shares/ADRs to existing Gold Fields shareholders.
- Review the upcoming pre-listing statement (expected mid-January 2013) for updated financials and governance details.
- Monitor the progress of the South Deep ramp-up to 700,000 ounces per year as a key growth driver for the remaining Gold Fields entity.
- Assess the impact of the R4 billion debt allocation on Sibanye Gold's future leverage and cash flow availability.