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Monday, October 15th, 2018 - Buy Gold - Bringing you trusted gold news and gold investing information since 2006

South Africa Miner Gold Fields and BEE Deals

A South African Tier I global gold miner, Gold Fields (JSE: GFI) has disclosed donations to its latest black economic empowerment (BEE) deals in the amount of R2.1 billion (US$298 million).

The disclosure is made in Gold Field’s 2010 annual report under the heading “share based payments on BEE transactions”.

The difference between this deal and previous BEE deals by Gold Fields is that in the past donations have been obliged to provide value. However, Gold Fields is shrugging off criticism of the 2010 deals, saying “[while the] value of these three transactions is approximately R2.1bn (US$298m)”, the “dilution of existing shareholdings is by between 2% and 3%”.

The market value (capitalisation) of Gold Fields is US$11.3 billion.

Some analysts have interpreted the BEE deals as a result of the revised South African mining charter that was unveiled on 20 September, 2010. The charter provides that “barring any unfavourable market conditions, some of the cash flow should flow to the BEE partner throughout the term of the investment”.

Gold Field’s three new BEE deals includes an Employee Share Option Scheme (ESOP) that acquire a 10.75% stake in GFIMSA, Gold Fields’s South African assets. In the second deal the company issues 600,000 shares at a close-to 100% discount to “a broad-based BEE consortium.” The third deal sees BEECO securing a 10% holding, with a 20 year phase-in participation phase, including full voting rights in South Deep.

Reality is that BEE partners bring little, if any, capital or cash to these BEE deals. This was shown last week when Anglo Platinum again had to bail out its BEE partner Anooraq by eliminating almost US$100 million in high-interest debt.

One analyst noted that the South African government “… desperately wants to make sure equity ownership requirements are met – regardless of the damage it does to the South African mining scene (less investment friendly and obviously much higher costs).”


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