Gold Fields plans to create a new South African gold mining company, Sibanye Gold, by spinning off the KDC and Beatrix gold mines in South Africa as well as various service companies. Sibanye translates as: We are One.
Gold Fields will retain the rest of its properties, including the South Deep gold mine in South Africa, existing mines in Ghana, Peru and Australia, and several development and exploration projects.
Outlining the economic rationale for splitting Gold Fields into two distinct companies, Gold Fields CEO Nick Holland pointed out that the share prices of major gold mining companies, including Gold Fields, have been flat or down over the past seven years. Looking for a way to deal with this disconnect, Gold Fields focused on the fact that it has two distinct types of mining assets: 1) mature, deep-level, narrow-vein, tabular orebodies in South Africa, typically dipping at 30° to 35°, mining 1- to 3-m reef packages, which means they are typically labor intensive; and 2) open-pit and shallow underground international operations, the exception being the massive, deep-level South Deep development in South Africa, which will be a fully mechanized operation.
A decision was made to separate these asset types into two companies, rather than trying to manage their sometimes competing needs under a single corporate umbrella. KDC and Beatrix are mature operations that mine deep to ultra-deep, narrow-vein, tabular orebodies. Mining depths range from 600 m to 3,345 m below surface at KDC and from 600 m to 2,155 m below surface at Beatrix.
In calendar year 2011, KDC produced 1.1 million oz of gold at total cash cost of $946/oz; Beatrix produced 347,000 oz at total cash cost of $957/oz. Production at both mines has declined steadily over recent years, and production costs per ounce have risen sharply. As of December 31, 2011, the two mines had a combined total of 22 million oz of gold in reserves and 79 million oz of gold in resources.
Spinning off KDC and Beatrix into Sibanye Gold will create a company that can focus on the specific requirements of these operations and that will not have to compete with other Gold Fields operations for capital. Cash flows from KDC and Beatrix will stay with Sibanye Gold. Goals for the new company include reversing the declining production trend at the mines, extending the life of the mines, and ensuring the long-term sustainability of the company. Sibanye Gold will have more than 35,000 employees; nearly 26,000 at KDC and 9,250 at Beatrix.
