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Mvela holds chip in Gold Fields’ plan
David McKay
Posted: Mon, 16 May 2005
[miningmx.com] -- NORTHAM Platinum will soon issue a shareholders’ circular detailing proposals to acquire Mvelaphanda Resources’ (Mvela) 50% share in the Booysendal project. Importantly, that would lift Mvela’s stake in Northam to 34% and make it the largest shareholder in the platinum firm.
The importance of this to Mvela is that it’s a first step in tackling its “value trap” – the discount investors apply to the net asset value of firms that don’t control their assets. A discount of about 21% is being applied in the case of Mvela.
“As with the traditional mining house structure that doesn’t directly influence strategy or control the cash flows of its operations, the market is applying a discount to the fundamental value of the company,” said James Wellsted, Mvela Resources’ investor relations manager. Our aim in the long term is to become an operating company by gaining control
of the assets we invest in.”
Mvela’s operating investments also include Trans Hex and Gold Fields. Said Wellsted: “We’ve got to be an operating company after the period of the Mining Charter is over.” South African mining companies have just less than four years to meet the initial terms of the first phase of the charter before its conditions are reviewed and, possibly, discarded.
Wellsted said that while there had been discussions, Remgro wasn’t ready to sell the rest of its 34% stake in Trans Hex, a diamond producer in which Mvela has a 6% direct and a fully diluted 21% stake.
But there could be activity in respect of Gold Fields, the firm emerging from a bruising battle with Harmony Gold, its frustrated suitor. Judging rom comments by its executives recently, Gold Fields was considering splitting into two separately listed entities, comprising an South African firm with some southern African assets and an international counterpart. While that was
unsuccessfully attempted last year, Gold Fields could reprise its internationalisation plans.
Crucially, Mvela may be handed voting control over Gold Fields’ SA assets. That could be the price of Mvela approving a split of Gold Fields’ assets.
Though Mvela Resources isn’t a shareholder in Gold Fields – its interest is being limited to the unlisted South African assets – anything that may affect the covenants concerning the debt structure that exists between the two must be negotiated.
Said Wellsted: “What’s important is that we have debt covenants relating to the South African assets, part of which is backed by Gold Fields, including the international assets. If there’s any intention of splitting them they’ll need to talk to us and our financial backers".
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