Mvela plans Gold Fields sale

Brendan Ryan | Thu, 17 Sep 2009 11:23
[miningmx.com] -- MVELAPHANDA Resources (Mvela) intends taking advantage of the current strength in the gold market to sell down its remaining holding of 39m shares in Gold Fields.

Mvela chairman Lazarus Zim commented in the group’s results for the year to end-June released today that, “the period between September and year-end is traditionally a period of strong fundamental demand for gold.

“Coupled with anticipated weakness in the US dollar and continued economic volatility globally, the outlook for gold remains positive. This should enable the group to realise significant value from the investment in Gold Fields.

“The proceeds from the Gold Fields shares will first be applied to redeeming Mvela Resources’ outstanding debt with excess cash being returned to shareholders or applied to grow Booysendal,” Zim commented.

Mvela received 50m Gold Fields shares on March 17 and immediately sold 11m raising R1.1bn to pay down debt.

Mvela investor relations officer James Wellstead said the intention was to sell off the entire remaining stake of 39m shares because, “ it makes no sense to keep a one or two per cent stake in Gold Fields.”

With the gold price moving convincingly through the $1,000/oz bench mark Gold Fields shares have risen recently to current levels around R110 compared with R107 at end-February and a 12-month low of R53.25 hit late last year. The 12-month high was R125.

Wellstead commented, “we have a target price in mind and Gold Fields shares are getting back near price levels where we are interested in selling. “

Wellstead declined to provide Mvela’s target price but commented Mvela could sell the shares through the market or directly to institutions wishing to take up large chunks of the stock.

There has been speculation that US hedge fund Paulson & Co is keen to buy Mvela’s remaining stake in Gold Fields. In March the fund spent $1.28bn buying Anglo American’s 11.3% stake in AngloGold Ashanti.

Asked about this Wellstead commented, “we have had a number of approaches from institutions expressing interest in buying the shares but it all comes down to price.”

Wellstead added, “we have no fixed plan for disposal of the shares. Gold Fields is a very liquid stock and we sold the first 11m shares through the market.”

Mvela shares have recovered from a low of R15,50 hit last last year to current levels around R42.55 on the back of the rising value of its stakes in Gold Fields and Northam Platinum. The 12-month high was R49.49.

Mvela announced in June that it intended unbundling its assets to its shareholders and would delist from the JSE probably during the first quarter of 2010.

The strategic aim of this was to increase value for Mvela shareholders by getting rid of the discount to NAV at which Mvela sat in relation to the value of its underlying assets.

Mvela was also under pressure from the JSE to sort out its pyramid holding company structure by August 2009. Zim confirmed the Mvela board remains committed to the unbundling strategy.

He commented, “unbundling the Northam shares will give Mvela shareholders direct exposure to the platinum group metals market through Northam’s Zondereinde mine which continues to generate cash as well as future exciting growth through Booysendal.

“At the same time, the discount inherent in the holding company structure will be unlocked releasing approximately R1.5bn of value trapped in the current structure to shareholders.”

The writer owns shares in Mvela.