Vancouver – Gold Fields (GFI-N) has inked a deal with South African-listed Mvelaphanda Resources allowing the black economic empowerment company to take a 15% stake in the world’s fourth largest gold company.
The US$644 million deal (4.14 billion Rand) paves the way for Gold Fields to comply, at least in part, with the government’s target of having 26% of South Africa’s mining industry in black hands within 10 years, and 15% within five years.
The complicated transaction includes the major’s South African gold mining assets, namely the Beatrix, Driefontein and Kloof mines and ancillary service companies. The assets make up some 70% of Gold Fields’ total value.
Gold Fields will create a wholly owned subsidiary, GFI Mining South Africa, which will acquire the gold mining assets and Mvelaphanda will advance a loan of US$644 million to the subsidiary. Financing will take place through a commercial bank debt of US$210 million, mezzanine finance of US$171 million, and the balance of US$263 million raised by Mvelaphanda through an equity issue, which includes US$15.6 million of equity that Gold Fields will subscribe to at the book-build price.
At the end of five years the loan will be repaid and Mvelaphanda will subscribe for 15% of GFI SA.
"That would allow us to collapse the structure we have created for the deal, and simplify the structure,” says Gold Field’s Chief Executive, Ian Cockerill.Cockerill said.
The deal marks the the second largest mining empowerment deal in South African history.
"This transaction not only satisfies the significant ownership requirement of the Mining Charter, but has been undertaken on commercial terms and for fair value so that it will benefit all shareholders," adds Cockerill.
Mvelaphanda is one of the prime movers in the empowerment arena. The company recently announced a merger with the Khumama platinum consortium on the Booysensdal project and parent company Mvelaphanda Holdings just announced that it would take a 10% stake in one of South Africa’s largest banking groups, Absa.
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