JOHANNESBURG (miningweekly.com) – Vilified black economically empowered (BEE) mining company Mvelaphanda Resources on Monday received a R6-billion Saint Patrick’s Day gold bonanza when it cleared the way for the taking on board 50-million high-flying Gold Fields shares and simultaneously paid off debt.

Mvela executive manager: commercial James Wellsted told Mining Weekly Online that, contrary to market concerns about a “debt burden” threatening the future of BEE companies, the R6-billion gross value of the Gold Fields shares comfortably exceeded Mvela’s total R4-billion debt, leaving the company with more than R2-billion, a level of investment it intended eventually ploughing into the promising Booysendal platinum project.

Wellsted described the Gold Fields investment as an “outright success” for Mvela. Recalling Mvela’s structuring of the deal in 2004, Wellsted said that the company was positive on the outlook for the gold price and “certainly” on the outlook for Gold Fields.

“Operationally Gold Fields is coming into its own again,” he said.

What also boded well for Gold Fields was that gold-mine input cost pressures were easing locally, with steel and chemical prices coming off and inflation declining, which was likely to moderate wage demands.

“At the same time, you have the rand gold price, in particular, going up at a very good rate, and, for the first time in a while, the South African gold industry is actually in a very strong position,” he said, with analysts forecasting price-earnings ratios of ten and below, which had not been seen for some time.

“We’re fortunate enough to have invested in Gold Fields over the last five years and the timing of this transaction maturing is very good for us.

“We didn’t want to be forced sellers of the Gold Fields shares on March 17, but we obviously have an obligation to our mezzanine funders.

“So, we have secured funding for up to a year, during which time we can try to crystalise the value of the Gold Fields shares, which will position us to take that relative gold premium and reinvest it where we think that there is going to be a lot of value in the longer term, and that is in the Booysendal platinum project.

“By taking the extra cash and paying off our debt, we will have over R2-billion, which will be more than enough to get Booysendal up and running.

“The reason we got the flip-up to Gold Fields shares from the Gold Fields South Africa assets was so that Mvela could have a liquid asset with which to redeem its debt,” he added.

It had been planned, from the outset, that the company would have a liquid asset with enough value to enable the company to settle its debt at the appropriate time.

“It was quite well structured in that way,” Wellsted said.

On Monday, the company secured refinancing of the mezzanine debt, which had been incurred for the Gold Fields transaction. It so happened that the mezzanine debt fell due for redemption on March 17, Saint Patrick’s Day.

Including the rolled-up coupons, the debt would total R2,024-billion. Simultaneously, Mvela would receive the 50-million Gold Fields shares with an aggregate market value of more than R6-billion.

The funding secured had a term of up to 12 months and an estimated cost equivalent to 13,2 % a year, which was less than the weighted coupon applicable to the mezzanine debt.

Mvela announced earlier that it intended removing its pyramid structure by August, these actions being aimed at ultimately rerating Northam Platinum by recapitalising the Booysendal platinum project.

Mvela, which was founded by former anti-apartheid freedom fighter and politician Tokyo Sexwale, owns 62,8% of Northam, and a stake in diamond-miner Trans Hex, in addition to its interest in Gold Fields.

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