JOHANNESBURG (miningweekly.com) – Talk of the nationalisation of South Africa's mines was "hot air", Gold Fields CEO Nick Holland said on Thursday.

Holland divulged – in reply to Afrifocus Securities mining analyst Mark Madeyski at Gold Fields second-quarter results presentation – that he had gone as far as taking up the issue with President Jacob Zuma, who had assured him that the government had no intention of nationalising.

Madeyski had asked Holland whether Gold Fields should look into hiving off its foreign mines and listing them separately from their South African assets in order to insulate them from the South African mines in the event of nationalisation.

Holland replied, saying: "This week, nationalisation's on, the next week it's off, then it's on. I have spoken to the President directly on this. I don't believe it's an issue. I have spoken to the Mining Minister. I've spoken to the department. They assure me it's not going to happen.

"Is nationalisation likely to generate value for South Africa? It won't. We've seen what nationalisation has done in other parts of Africa. It destroyed the Copperbelt. The Copperbelt's never been the same, even after it was privatised again.

"I think it is a lot of hot air. I don't think we should get too worked up about it, and what we need to do is rather to focus on delivering the value in our business," Holland added.

He also dealt with the issue of South African gold stocks trading at a discount to their foreign peers, saying that what had baffled him at the first investment conference he attended as Gold Fields CEO 21 months ago was how South Africa's Gold Fields, which produced 3,6-million ounces a year and had 80-million ounces of reserve, was valued the same as a foreign company that was producing 400 000 oz a year and had only 13-million ounces of gold in reserve.

"It didn't make any sense to me then, and it still doesn't," he added.

The discounting of South African mining stocks internationally began with the leak of the Mining Charter in 2003 and the gap has widened further since then.

Holland said that even though foreign gold-mining companies that were valued much higher than South African stocks had their own significant challenges, they were still not discounted with the same severity that the South African companies were continuing to be discounted.

There was a misconception that costs in South Africa were rising. but that they were standing still in the rest of the world, which was not the case.

"There is a concern that the South African assets are on the decline. People believe that South African costs are escalating and the assets are declining. There is a view from investors that debt is always going to be manageable, but that it's what the underlying assets are doing that's important," he said.

Investors arrived at the enterprise value of mining companies by backing-out out the debt and deducting the cash.

Some investors were concerned that the enterprise value of South African mining companies was declining. "There is concern about where the South African portfolio is going, about power price increases and safety stoppages, and that is weighing stocks down," Holland added.

He believed that if Gold Fields could further improve and further stabilise its South Africa portfolio of gold mines, it would create value for the Gold Fields share price.