Johannesburg, South Africa — 30 November 2012 – Gold Fields Limited “’ the fourth-biggest producer of the precious metal “’ is to spin off part of its South African business as a wave of strikes and above-inflation pay gains add to costs and curb output for mining companies in the country.
“Sibanye Gold Limited will trade in Johannesburg and New York and include the Kloof-Driefontein Complex, Africa’s largest gold operation, and the Beatrix mines,” Gold Fields revealed in a statement here. The company will keep South Deep, its second-biggest facility, and its mines in Peru, Ghana and Australia, reports Bloomberg News.
Gold Fields is partly reacting to rolling wildcat strikes that began in South Africa’s platinum industry, before spreading to gold, iron-ore, coal and diamond mining. About 29,000 Gold Fields workers walked out in the past two months, winning pay gains that added to rising power costs and capital spending.
“If anything, the strike has accentuated the need for a different focus so that we can stop a decline in production and increase in costs,” CEO Nick Holland said. “This is something we’ve been thinking about for some time.”
Gold Fields has won approval from the South African Reserve Bank for the spinoff and is waiting for the Johannesburg Stock Exchange, where Sibanye will begin trading in February, he said.
Gold Fields gained 5.7% to R108.60 by the close “’ the most since 19 September last year. The stock is still down 15% since the end of 2006, while spot gold prices have almost tripled.
“We’ve seen a gold price that’s gone way beyond our wildest dreams in the last five or six years, and yet our equities are stuck in the mud, not just Gold Fields,” Holland told investors on a call. “If that continues into the future, then this industry will be in for a massive shakeup.”
“AngloGold Ashanti Limited, the third-biggest producer of the metal, retains the option of splitting off its South African operations,” CEO Mark Cutifani said last week. “Nothing has changed,” Alan Fine, an AngloGold spokesman, said today by phone. “He’s been consistent in that message.”
About a third of AngloGold’s metal comes from South Africa, where it employs about 35,000 people. The company’s stock rose by the most in three weeks, gaining 3.9% to R275.
Labour unrest this year will lower economic growth in the country and cut exports by more than US$1.4 billion, the National Treasury says. Mining, contributing 6 percent of the economy and employing almost half a million people, will take a year to recover from job losses after the strikes, Finance Minister Pravin Gordhan said Nov. 26.
The newly created Sibanye will be the largest gold-mining company in South Africa and be headed by Neal Froneman, who is resigning as CEO of Gold One International Limited, according to Gold Fields.
Source: Bloomberg News. For more information, click here.