Politician-turned-businessman Tokyo Sexwale on Wednesday hailed the deal between his empowerment group Mvelaphanda Resources (Mvela) and world number-four gold group Gold Fields as an industry-changing deal.
Earlier, Gold Fields and Mvela announced the exact terms and structure of the R4,1-billion deal that will see Mvela take a 15% stake in Gold Fields’ South African operations.
The two parties also on Wednesday signed a binding agreement after signing a non-binding memorandum of understanding regarding the R4,1-billion deal in June.
“This is an empowerment deal that arises out of the legislative and power relations in which South Africa is situated,” Sexwale said at an investor presentation following the release of the deal’s funding details.
However, he emphasised that the deal was based on commercial logic and would only be successful if it remained market-driven.
“Empowerment is an opportunity for those formerly excluded to enter the South African economy,” Sexwale said.
The deal will see Gold Fields receive R4,1-billion on the conclusion of the deal and the money will be used to fund the group’s organic growth and exploration activities.
Concluding the terms and structure of the deal took longer than expected particularly due to complications around the mezzanine financing of the transaction, Sexwale said.
The transaction will be financed by way of commercial bank debt of R1,349-billion, mezzanine finance of R1,1-billion, and the balance of R1,690-billion raised by Mvela through an issue of ordinary shares, which includes R100-million of equity, which Gold Fields will subscribe for at the book-build price.
Gold Fields executives say they are quite comfortable about the funding of the deal, especially since gold is currently in a bullish phase.
During November, Gold Fields raised $195-million in two-and-a-half hours in the United States market and world number-one gold miner US group Newmont recently raised $1-billion overnight, Gold Fields chief financial officer Nick Holland said.
“We currently have a fantastic gold bull market,” he added.
However, the deal does have risks and was based on a rand gold price of between R95Â 000 and R98Â 000 per kilogram compared to the current price of R81Â 000/kg.
Prior to the current deal, Gold Fields and Mvela had an existing relationship in the form of an exploration deal and Sexwale also served on Gold Fields’ board.
Gold Fields has also approached the South African Revenue Service to get a tax break on the interest earned on the deal and the response to the group’s approach has been positive, Holland said.
The deal is valid for five years, after which Mvela’s debt will need to be refinanced if the group has not paid the debt off. — I-Net Bridge