Business Context and Reporting Period
This Form 6-K filing by Gold Fields Limited, dated August 5, 2010, reports on the execution of a new order mining right for its South Deep gold mine by the South African Department of Mineral Resources (DMR). The filing also details the finalization and DMR approval of three Black Economic Empowerment (BEE) transactions designed to meet the company's 2014 equity ownership requirements. Gold Fields operates nine mines across South Africa, Ghana, Australia, and Peru, with total attributable mineral reserves of 81 million ounces.
Key Financial Metrics and Transaction Details
The filing does not report standard operational financial metrics such as revenue, profit, or cash flow for a specific period. Instead, it provides unaudited pro forma financial effects based on the fiscal year ended June 30, 2010, assuming the implementation of the BEE transactions on July 1, 2009.
- Transaction 1 (Employee Share Option Scheme): Issuance of approximately 13.5 million new shares (1.91% of current issue) to the Thusano Share Trust. The accounting cost to shareholders is approximately R1 billion.
- Transaction 2 (BEE Consortium): Issuance of 600,000 shares (0.08% of current issue) to a broad-based BEE consortium (BEECO) valued at approximately R60 million.
- Transaction 3 (South Deep Stake): BEECO subscription for a 10% holding in South Deep with full voting rights, acquired via a vendor-financed phased participation scheme at no cost to BEECO.
- Pro Forma Impact on Earnings: The transactions result in a non-recurring IFRS 2 charge of R1,058 million, reducing Earnings Per Share (EPS) from 515 to 358 cents (-30.6%) and Headline EPS from 449 to 293 cents (-34.7%).
- Pro Forma Impact on Assets: Net Asset Value (NAV) per share decreases from 6,438 to 6,312 cents (-2.0%).
- Share Count: The weighted average number of ordinary shares increases by 2.0% to approximately 719.5 million.
Material Changes and Operational Updates
The primary material change is the regulatory approval of the South Deep mining right, which now includes a contiguous property known as "Uncle Harry's" containing an estimated 14.5 million ounces of gold resources. This execution, combined with previous conversions for Driefontein, Kloof, and Beatrix, means all of Gold Fields' South African operations now hold new order mining rights. Additionally, the company has moved from planning to finalizing specific BEE transactions, subject to shareholder approval for Transactions 1 and 2.
Guidance, Risks, and Contingencies
Management Commentary: CEO Nick Holland emphasized that these transactions are central to the company's commitment to employee ownership and broad-based empowerment for historically disadvantaged persons.
Risks and Contingencies:
- Shareholder Approval: Transactions 1 and 2 are subject to suspensive conditions, specifically requiring shareholder approval.
- Financial Impact: The pro forma financial effects include a significant one-time expense (R1,058 million) that will reduce reported earnings for the period but is non-recurring.
- Dividend Structure: The BEECO's stake in South Deep includes a cumulative preferential dividend structure (R20 million per annum for the first 10 years) payable out of South Deep's profits, which may impact cash distributions.
- Lock-up Periods: Shares allocated to employees in the ESOP must be held for 15 years, and BEECO must retain ownership of South Deep for 30 years.
Key Facts for Investor Verification
- Verify the outcome of the shareholder vote required to approve Transactions 1 and 2.
- Confirm the final accounting treatment of the R1,058 million non-recurring charge in the next quarterly or annual report.
- Monitor the timeline for the completion of the three BEE transactions, which the company aims to finalize before the end of 2010.
- Review the detailed circular to be distributed to shareholders for full terms of the ESOP and BEECO agreements.
- Assess the impact of the preferential dividend obligations on South Deep's future cash flow and distribution capacity.