Gold Fields’ spin-off

being considered for some time before that.

In reports issued between January and July this year, SBG Securities analyst David Davis said at least six SA gold mines, including KDC and Beatrix, had reached the point where their declining gold reserves would make it impossible to meet projections of constant or increasing production. If the gold price did not increase faster than inflation and no action was taken, these mines’ shrinking margins could result in bankruptcy within a few years.

Restructuring and downsizing over the next 12-36 months was “an imperative”, Davis said.

Holland says the purpose of Gold Fields’ restructuring is to separate two distinct types of mining operation: those with deeplevel, narrow-vein ore bodies which are characterised by underground mining, like KDC and Beatrix; and “others”, which are largely mechanised. The decline in Gold Fields’ European shareholder base shows investors want alternatives, he says.

After unbundling, Gold Fields will still rank among the world’s eight largest gold miners, with annual production of about 2,2m oz. Moody’s says it will have reduced exposure to risks in SA gold mining, like silicosis litigation, labour unrest and aboveinflation cost increases.

Sibanye Gold, despite declining reserves, has some short-term investment appeal. With annualised production of about 1,4m oz a year, it will still be slightly larger than AngloGold’s or Harmony’s SA operations. Sibanye Gold will be a high-yield investment, with a policy of paying good dividends. Spinning off its ageing SA gold mines, KDC and Beatrix, into a new listing, Sibanye Gold, will relieve Gold Fields of a growing problem.

And it could encourage other mining groups with a mix of local and international operations to do the same. AngloGold Ashanti is an obvious candidate and some analysts have suggested that whoever replaces Cynthia Carroll as Anglo American’s CEO might consider it.

Gold Fields will retain South Deep in SA and mines in Australia, Ghana and Peru.

Though the recent strikes by thousands of miners at KDC and Beatrix present an obvious reason for Gold Fields to want to exit from them, CEO Nick Holland says the move was

THE LOW D OW N Gold Fields will unbundle its older mines into a separate listed company Sibanye Gold, headed by Neal Froneman, will own the KDC and Beatrix mines