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JOHANNESBURG — When the wave of violent strikes erupted across the country, Nick Holland’s security advisers cautioned him to stay away from his gold mines. He went anyway – and soon found himself facing an army of 5 ,000 angry miners marching across the fields, waving machetes and sticks.
“I always like to be at the front,” says Mr. Holland, chief executive officer of Gold Fields Ltd., the world’s fourth-biggest gold producer. “But it gave me a really scary feeling in the pit of my stomach, that we were about to have something blow up.”
Gold Fields survived the wildcat strikes that left dozens dead at other mines in South Africa last year, but now Mr. Holland faces an even greater challenge: How to save his company from a national mining-industry crisis of rising costs, deteriorating production, high political risk, labour pressures and the threat of new taxes.
It’s a daunting moment for South Africa’s gold industry, the biggest in the world for nearly a century but now in steady decline. At a time when innovation is crucial, Mr. Holland has become a pioneer, orchestrating a bold move to divide Johannesburg-based Gold Fields by spinning off its older South African mines into a new company, leaving its most modern and international mines in the hands of Gold Fields itself.
The spinoff, Sibanye Gold, was listed on the Johannesburg and New York stock exchanges last month. It creates two options for investors: a purely South African vehicle, Sibanye, with declining but still profitable assets; and a global company, Gold Fields, less exposed to South Africa’s political risks and labour clashes.
Analysts are lauding it a potential model for the rest of the South African mining sector, which is already wrestling with planned restructuring and layoffs as the threat of more strikes looms again this year. Other South African companies such as AngloGold Ashanti are believed to be mulling a similar spinoff of assets.
The unbundling of Gold Fields could be a key step in rationalizing South Africa’s troubled mining sector and preventing an escalation of job losses, Mr. Holland said. “I think this could potentially save the industry,” he said in an interview at his Johannesburg headquarters.
“I think consolidation in the industry could save it: tearing down the farm fences, looking for opportunities between contiguous ore bodies, which up until now had been jealously guarded by each mining house. Putting unloved assets into, say, Sibanye Gold might create a new lease on life for those assets, when the mother ship is more interested in pursuing other opportunities outside South Africa.”
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