[miningmx.com] — GOLD Fields CEO Nick Holland described the BEE transactions approved today by government as “a package deal’ through which the group would achieve the 26% BEE ownership target required by 2014.
He refused to break it down to reveal the exact credits that Gold Fields had finally been granted for the prior deal struck with Mvelaphanda Resources (Mvela) which was supposed to provide a 15% empowerment level for GFIMSA – the holding company that controls Gold Fields’ South African mines.
The question arises from comments made by Minister of Mineral Resources Susan Shabangu on June 30 at the signing ceremony for the Stakeholders’ Declaration On Strategy For The Sustainable Growth And Meaningful Transformation of South Africa’s Mining Industry.
Shabangu singled the group out as an example of her contention that, “once empowered does not mean always empowered’ because Mvela was selling off its Gold Fields shares and would have to be replaced.
Holland commented, ” we have never relied on a “once empowered-always empowered’ approach and these BEE deals confirmed today allow us to follow the spirit of the Mining Charter.
“We have found that if you engage with the DMR (Department of Mineral Resources) with a positive attitude then you get positive results.’
Holland said the deals created “clear fungible value’ for Gold Fields; were “cost effective’ and fully met the 2014 BEE ownership requirements irrespective of what Mvela did with its remaining Gold Fields shares.
Assessment of one leading gold analyst was that , “the financial impact calculations are complex but Gold Fields does not appear to have given away excessive value through these deals which had to be done to comply with the new mining legislation.’
The “accounting cost’ to shareholders of the first BEE transaction – the employee share option scheme (esop) – would be about R1bn calculated on the July 30 share price of R98.35.
The esop involves the issue of 13.5m Gold Fields shares – equivalent to a 10.75% stake in GFIMSA – which would be issued to the Thusano Share Trust at 50c each equivalent to a 99.5% discount on the 30 day VWAP (volume weighted average price) as of July 30.
The shares would be allocated to about 47,100 employees and about 12.6m would go to HDSA (historically disadvantaged South African) employees.
Thusano would hold the shares for 15 years during which time employees would receive dividend payments on them.
In the second transaction a broad-based BEE consortium – dubbed Beeco – will get 600,000 Gold Fields shares also at 50c but with no restrictions on their ownership of the equity.
Holland highlighted the make up of Beeco as indicative of where the money would be spent which was to the overall benefit of the country.
A broad-based education trust will hold 54% of Beeco while 36% will go to “a selected number of black business and community leaders who will not be related parties as defined by the JSE listings requirements’ while the remaining 10% would go to a broad-based community trust.
In the third deal Beeco will also acquire a 10% direct stake in the South Deep mine “through a unique vendor financed, phased participation scheme that will see the shareholding acquired at no cost to the Beeco.’
Beeco will hold B-class shares in South Deep that will have full ownership and voting rights.
Beeco will be entitled to a cumulative preferential dividend on its stake of R20m a year for the first 10 years, R13.3m a year for the next five years and R6.7m a year for the following five years. After 20 years the preferential dividend falls away.
Holland said this financial structure was intended to ensure Beeco was not penalised during the lengthy development period at South Deep while the mine was expanded and ramped up to full production.
Beeco has to retain ownership of its South Deep stake for 30 years which is the term of the new order mining right.
Holland said he intended to have the three transactions completed before the end of the year.
The writer owns shares in Gold Fields.
