South African gold miner Gold Fields is seen wrapping up the issue of empowerment on Tuesday with an announcement of the sale of 15% of its South African operations to empowerment group Mvelaphanda Resources.
Gold Fields has come under a lot of criticism from investors for its lack of progress on empowerment, especially with finding a partner at its South African operations, but widespread speculation is that this will be sorted out on Tuesday.
“A deal with Mvelaphanda would alleviate many of the concerns investors have about Gold Fields’s perceived lack of progress in achieving the empowerment charter’s targets,” an analyst said.
Under the mining empowerment charter South African mining companies must sell off 15% of their equity to empowerment concerns within five years of the charter’s promulgation, and 26% within 10 years. At present Gold Fields has no empowerment partner at its South African operations.
Early on Tuesday, in a joint announcement, Gold Fields and Mvelaphanda Resources said they had entered negotiations, which the market interpreted as saying that Mvelaphanda was on the brink of taking a stake in Gold Fields.
It is thought that Mvelaphanda Resources will now take a stake in Gold Fields as Mvelaphanda executive chairperson Tokyo Sexwale sits on Gold Fields’s board as a non-executive director.
However, Gold Fields’s investors didn’t seem to like the announcement knocking the stock’s share price down by 2,6% (or R2,43) to R91,55 while Mvelaphanda’s stock added 2,2% (or 50 cents) to R23.
Gold Fields, already under pressure on the back of a lower bullion price, lost even more ground on Tuesday afternoon after the announcement .
Mvelaphanda shares surrendered earlier gains in the wake of the announcement.
At 15:32, Gold Fields shares were trading at R90,50 — down 3,70% or R3,48 from Monday’s close — and just 50 cents off their intraday low. Mvelaphanda shares were trading unchanged at their intraday low of R22,50 after trading as high as R23,05 earlier in the day.
In May, Gold Fields said it was looking for an empowerment partner to come in at the corporate level at its South African operations.
The market will be looking at whether mining and commodity giant Anglo American would sell its 20,1% in Gold Fields to Mvelaphanda Resources.
The sale of 15% of Gold Fields’s South African operations to Mvelaphanda is valued at R4.1-billion.
Gold Fields is one of the world’s largest gold miners and produced 4,11-million ounces of gold in the 2002 calendar year.
Mvelaphanda Resources has mining interests in diamonds, platinum and oil and gas. Mvelaphanda has a 19,4% interest in diamond miner Trans Hex (TSX) and a 22,5% stake in Northam Platinum (NHM) as well as interest in other unlisted entities. – I-Net Bridge