The creation of Sibanye Gold Limited through the unbundling and separate listing of GFIMSA
Gold Fields Limited (“Gold Fields” or the “Company”) proposes to unbundle its 100% owned subsidiary, GFI Mining South Africa Proprietary Limited (“GFIMSA”) which has been renamed Sibanye Gold Limited (“Sibanye Gold”) and comprises the KDC and Beatrix gold mines as well as various service entities in South Africa, to Gold Fields shareholders.
Gold Fields’ mining operations can be divided into two categories: (i) deep level, narrow vein, underground operations housed in Sibanye Gold; and (ii) open-pit or shallow underground operations and, in the case of South Deep, deep-level, bulk underground mechanised operations which, together with the international exploration and development projects, are housed elsewhere in the Gold Fields structure.
These two categories of assets, which have divergent strategic focuses and require different management skills, are currently contained within one umbrella entity.
Gold Fields is committed to enhancing returns to shareholders through, inter alia, ongoing repositioning to improve leverage to the rising price of gold and ensuring that dividends have a first call on cash flows. To this end the Company has been engaged in an ongoing review of its strategy and operational portfolio against strategic objectives such as:
- Generating cash;
- Maximising returns on funds invested;
- Containing the cost of gold production as measured on an all-in-cost basis (operating cost plus capital expenditure) or, as Gold Fields reports it, on a Notional Cash Expenditure (“NCE”) basis;
- Deploying scarce capital only on projects that provide the best risk-weighted returns;
- Prioritising lower risk, higher return brownfields projects, and judiciously advancing only the strongest brownfields and greenfields projects;
- Leveraging the balance sheet to grow the Company’s value on a per share basis;
- Pursuing only opportunistic M&A of producing assets where the path to value is clear;
- Maintaining a focus on gold and global competitiveness; and
- Supporting the overall long-term sustainability of the business.
The review process assessed the sustainability of Sibanye Gold and its ability to deliver value against these key strategic objectives. While some parts of these assets have been in production for around 70 years, Gold Fields believes that the Sibanye Gold assets overall still have significant inherent quality and extensive resource and reserve potential.
The review process also concluded that the two categories of assets in the portfolio, namely the KDC and Beatrix mines on the one hand, and the other assets in the portfolio on the other, are at different stages of their life cycles; have different styles of mineralisation that require different mining methods, mining skills and mining technology; and have competing capital requirements to sustain and improve production.
It was also determined that, with the competing management and funding demands of a geographically, geologically and technically diversified organisation, Sibanye Gold will benefit from more focused and fully dedicated executive management that is directly accountable to a similarly focused and dedicated board of directors.
Consequently, it was decided to separate Sibanye Gold from Gold Fields into a fit-for-purpose company not burdened by the usual costs associated with a global company, including a world-wide exploration programme and the associated project development costs, and managed by a focused team that can better sustain these operations.
Both Sibanye Gold and Gold Fields will remain South African domiciled companies with their primary listings of shares on the Johannesburg Stock Exchange and secondary listings of American depository receipts (“ADRs”) on the New York Stock Exchange. The other existing secondary listings on the Dubai and Brussels stock exchanges for Gold Fields will remain unchanged.