Business Context and Reporting Period
This Form 6-K filing by Gold Fields Limited, dated December 8, 2006, announces the closing date of its offer to acquire the entire issued share capital of Western Areas Limited. The report details the finalization of offer terms and the status of the acquisition as of December 7, 2006.
Key Financial Metrics and Transaction Details
- Offer Consideration: 35 Gold Fields ordinary shares for every 100 Western Areas ordinary shares.
- Acceptance Rate: Valid acceptances received for 56,445,831 Western Areas shares, representing 66% of the offer shares.
- Post-Transaction Ownership: Combined with 66,122,050 shares already held, Gold Fields will hold an effective voting interest of 75.8% in Western Areas.
- Derivative Liability Exposure: The filing notes a long-dated derivative structure regarding South Deep gold production with a marked-to-market close-out value of negative R3.88 billion (including deferred premium).
- Liquidity Support: Gold Fields has agreed to fund cashflow shortfalls for Western Areas for a 12-month period following the acquisition, excluding shortfalls resulting from the exercise of rights by derivative counterparties following an Event of Default.
Material Changes and Derivative Structure Resolution
The primary material change is the successful fulfillment of the final condition precedent for the acquisition. A critical contingency involved a derivative structure entered into by Western Areas in 2001, where a change of control could trigger an event of default. Gold Fields secured consent from two major counterparties (Investec Bank Limited and Barclays Bank PLC) to waive the change of control provisions. These counterparties agreed not to exercise rights following any event of default for a period of one year, provided Gold Fields retains control.
Outlook, Risks, and Management Commentary
- Offer Status: Gold Fields confirmed it will not increase the offer consideration.
- Risk Mitigation: The agreement with derivative counterparties mitigates the immediate risk of the R3.88 billion liability being called upon due to the change of control.
- Contingencies: The funding agreement for Western Areas' cashflow shortfalls is subject to acquiring control and necessary regulatory approvals. Specific funding terms are to be agreed upon with the Western Areas Board.
- Unusual Items: The filing highlights the complexity of the derivative structure and the specific conditions required to prevent a default event upon acquisition.
Key Facts for Investor Verification
- Verify the final regulatory approvals required to complete the acquisition and the funding of Western Areas' cashflow shortfalls.
- Confirm the status of the third derivative counterparty not explicitly named in the consent agreement (Investec and Barclays covered the required majority).
- Monitor the specific terms of the funding agreement Gold Fields will enter with the Western Areas Board to cover operating and capital expenditure shortfalls.
- Assess the impact of the 75.8% voting interest on Gold Fields' consolidated financial statements and future gold production guidance.