Gold Fields: Who is Next?
GOLD Fields’ unbundling of a large portion of its local assets could start a wave of similar actions by mining companies in a bid to ring fence their local operations and keep investors happy.
It will spin off two old mines into a new gold company called Sibanye Gold, which will see its exposure reduced to about 30% in 2016 when South Deep achieves full production.
Even if it was not touted as such, the decision this week by Gold Fields to hive off its “mature” South African assets is one of the strongest votes of no-confidence in domestic investment to date.
Its share price jumped 7% after Thursday’s announcement and another 1.5% on Friday. The Gold Fields share price has gained only 6% over the past year.
The move will allow Gold Fields to focus on lower-cost, lower-risk operations.
Rating agency Moody’s, however, was not as pleased and placed Gold Fields on review for a credit downgrade shortly after the JSE closed on Friday.
It said the review reflects the potential negative effect of the proposed unbundling on Gold Fields’ business risk profile, cash flows and strategies, which could subsequently affect bondholders.
Gold Fields CEO Nick Holland said the company would separate its old deep-level, narrow-vein underground operations Beatrix and KDC in South Africa from its early-stage open-pit offshore operations.
It will keep its new fully mechanised South Deep mine near Johannesburg. This is expected to be finalised in February, depending on various approvals.
The price-to-earnings ratios of South African gold companies are 60% lower than those of international senior gold producers and achieve half the price-to-cash-flow values of their global counterparts.
“It is no secret that South African miners trade at significant discounts to their international peers as most investors take a dim view of the country’s socio-political issues and black empowerment,” said CIBC analyst Leon Esterhuizen.
Most of South Africa’s gold mines are old, deep and difficult to mine, taking the glitter out of the country’s gold for investors.
Read Full Article>>> BDLive
GOLD Fields’ unbundling of a large portion of its local assets could start a wave of similar actions by mining companies in a bid to ring fence their local operations and keep investors happy.
It will spin off two old mines into a new gold company called Sibanye Gold, which will see its exposure reduced to about 30% in 2016 when South Deep achieves full production.
Even if it was not touted as such, the decision this week by Gold Fields to hive off its “mature” South African assets is one of the strongest votes of no-confidence in domestic investment to date.
Its share price jumped 7% after Thursday’s announcement and another 1.5% on Friday. The Gold Fields share price has gained only 6% over the past year.
The move will allow Gold Fields to focus on lower-cost, lower-risk operations.
Rating agency Moody’s, however, was not as pleased and placed Gold Fields on review for a credit downgrade shortly after the JSE closed on Friday.
It said the review reflects the potential negative effect of the proposed unbundling on Gold Fields’ business risk profile, cash flows and strategies, which could subsequently affect bondholders.
Gold Fields CEO Nick Holland said the company would separate its old deep-level, narrow-vein underground operations Beatrix and KDC in South Africa from its early-stage open-pit offshore operations.
It will keep its new fully mechanised South Deep mine near Johannesburg. This is expected to be finalised in February, depending on various approvals.
The price-to-earnings ratios of South African gold companies are 60% lower than those of international senior gold producers and achieve half the price-to-cash-flow values of their global counterparts.
“It is no secret that South African miners trade at significant discounts to their international peers as most investors take a dim view of the country’s socio-political issues and black empowerment,” said CIBC analyst Leon Esterhuizen.
Most of South Africa’s gold mines are old, deep and difficult to mine, taking the glitter out of the country’s gold for investors.
Read Full Article>>> BDLive