File by Harmony Gold Mining Company Limited
Pursuant to Rule 425 under the United States Securities Act of 1933, as amended,
and deemed filed pursuant to Rule 14d-2(b)(2) of the
United States Securities Exchange Act of 1934, as amended
Subject Company: Gold Fields Limited
Commission File No. 001-31318
Date: October 18, 2004
CREATING A NEW INTERNATIONAL MAJOR
GOLD PRODUCER
October 2004
1
THE PROPOSED MERGER BETWEEN
HARMONY AND GOLD FIELDS
OUR OFFER
share for share offer for 100% of Gold Fields 1,275 Harmony share for every Gold Fields share the offer values Gold Fields at R52,9 billion (US$ 8,1 billion) represents a 29% premium to the volume weighted average market price of Gold Fields and 30 days prior to the announcement
Norilsk, Gold Fields’ largest shareholder, has irrevocably committed to accept the offer in respect of its entire holding of 20%
WE ARE SEEKING
a recommendation from the Gold Fields board
2
THE TRANSACTION
EARLY SETTLEMENT
Up to a maximum 34,9% of Gold Fields shares can be settled firm within approximately 30 days – pro-rata for all shareholders – to comply with all regulatory requirements Allows shareholders to realise in a short time period the premium inherent in the offer To the extent that some Gold Fields shareholders do not accept early settlement, other shareholders could receive early settlement for a greater percentage of their shares, up to 100% Effective minimum settlement is 44% (Norilsk has undertaken not to accept the early offer) Closing date of 26 November 2004 with settlement by no later than 3 December 2004 Subject ONLY to Harmony shareholder approval and SEC registration of the new Harmony shares 3
THE TRANSACTION
SUBSEQUENT OFFER immediate follow-on offer on the same terms as the early settlement offer for the balance of the issued share capital of Gold Fields
KEY CONDITIONS
IAMGold transaction not proceeding
Approval from the South African Competition Authorities
4
THE RATIONALE FOR THE
OFFER
continuation of our strategy of growth creation of the world’s largest gold producer value proposition of combined entity makes for a compelling investment case Harmony has a track record in unlocking value of turnaround assets and this can be achieved with the Gold Fields South African assets
5
OUR STRATEGY OF GROWTH CONTINUES
acquiring Gold Fields is consistent with our strategy of growth Harmony has delivered growth through 26 acquisitions, 17 of which have either been operating mines or listed companies
OUR SUCCESS
is driven by our ability to extract cost savings where other operators have failed, thus creating long term value for all stakeholders Harmony’s attributable production has grown from 650 000 ounces in 1995 to 3,3 million ounces in 2004
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THE ATTRIBUTES OF THIS
NEW MAJOR GOLD
PRODUCER
7
THE LARGEST BY .....
New Harmony Newmont AngloGold Ashanti Barrick Placer Dome Kinross Buenaventura DRD
Newcrest Goldcorp
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
Attributable production
(Ounces ‘000)
Newmont New Harmony Barrick AngloGold Ashanti Placer Dome Newcrest Buenaventura Goldcorp Glamis Kinross
0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000
Second largest by proforma market capitalisation US$(millions)
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OTHER MEASURES …
New Harmony
Barrick Newmont
AngloGold Ashanti Placer Dome
Western Areas Newcrest
Kinross Buenaventura
DRD
0 20 40 60 80 100 120 140 160
Attributable reserves
(Ounces millions)
New Harmony AngloGold Ashanti Barrick Placer Dome Newmont Newcrest DRD
Western Areas Buenaventura Kinross
(Ounces millions) 0 100 200 300 400 500 600 700
Attributable resources
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… WITH A COMPELLING
EQUITY STORY
FTSE/JSE Africa Top 40 Index
NYSE Composite Index
HSBC Global Gold Index
Harmony: #17
Gold Fields: # 10
# 6
Harmony: #616
Gold Fields: # 506
# 348
Harmony: #6
Gold Fields: # 5
#2 access to a greater investor universe
increased index weighting
increased liquidity
global scale and relevance
# Company FF Market Cap (ZARm) Weighting (%)
1 Anglo American 220,837 15.40
2 BHP Billiton 166,649 11.62
3 Richemont 93,856 6.54
4 SABMiller 89,485 6.24
5 Sasol 86,568 6.04
6 New Harmony 71,697 5.00
7 Standard Bank 66,933 4.67
8 MTN Group 52,174 3.64
# Company FF Market cap (US$m) Weighting (%)
345 United Microelectronics 8,705 0.059
346 AmSouth Bancorp 8,642 0.059
347 Swisscom AG 8,636 0.059
348 New Harmony 8,630 0.059
349 Edison International 8,520 0.058
350 Clorox Co 8,516 0.058
351 Stora Enso Oyj 8,515 0.058
# Company Market Cap (US$m) Weighting (%)
1 Newmont Mining Group 17,920 21.13
2 New Harmony 10,998 12.97
3 Barrick Gold Corp 10,854 12.80
4 AngloGold Ashanti 9,577 11.29
5 Placer Dome 8,095 9.54
6 Newcrest Mining 3,622 4.27
7 Minas Buenaventura 2,996 3.53
8 Goldcorp 2,502 2.95
9 Glamis Gold 2,405 2.84
10 Kinross Gold 2,264 2.67
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WE WILL HAVE A ROBUST AND BALANCED ASSET PORTFOLIO
VALUE CREATION
through margin increases
Win-win deal making
Deal making phase High impact initial transformation phase Restructure for optimal return phase Full value phase – continued improvements
TIME IN QUARTERS
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“Harmony Way” to generate growth within perceived mature Gold Fields portfolio
HARMONY OFFERS AN ENHANCED PLATFORM FOR
GROWTH
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SIGNIFICANT VALUE TO
BE UNLOCKED
significant reductions in Gold Fields’ cost base to be realised payback of premium requires unit cost reductions of 15% per annum in Gold Fields’ SA cost structure this is over and above Gold Fields’ current efficiency initiatives equates to approximately R1 billion per annum savings will be achieved through: reducing the corporate overheads improved
- operational efficiencies—services and procurement management—capital programme management
13
DELIVERED BY A TEAM WITH A
PROVEN TRACK RECORD
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OUR PROVEN TRACK
RECORD
re-capitalise mature assets for growth previously abandoned reserves turned into growth
20,000 16,000 12,000 8,000 4,000 0
Mineable reserve (‘000/oz)
Production (oz/annum)
1,600,000 1,200,000 800,000 400,000 0
Masimong Phakisa Masimong Phakisa
Elandsrand Doornkop South Reef Elandsrand Doornkop South Reef Tshepong Tshepong re-establish the viability and competitiveness of Gold Fields’ South African assets
15
THE MERGED ENTITY OFFERS....
the world’s largest gold producer with firepower to grow both the domestic and international businesses
apply “Harmony Way” to:
cut general company overhead costs
reduce fixed overhead cost burden on operations reduce cut-offs creating larger economic ore reserve create additional cash flow extend mine lives and preserve jobs
16
COST REDUCTION AT EVANDER
AND ST HELENA
The introduction of the “Harmony Way” delivers value
500 450 400 350 300
250
(R/tonne) 200
Pre-acquisition Post-acquisition
Evander
31%
500
450 400
350
300 250
(R/tonne) 200
Pre-acquisition Post-acquisition
St Helena
27%
17
COST REDUCTION AT RANDFONTEIN
AND FREE GOLD
Similar success at larger operations
500 450 400
350 300 250
(R/tonne) 200
16%
Pre-acquisition Post-acquisition
Randfontein
500 450 400 350 300 250
(R/tonne) 200
27%
Pre-acquisition Post-acquisition
Freegold
18
MORE BENEFITS AVAILABLE… implement operational synergies at SA assets
Gold Fields’ international assets offer value:
examine the real potential of Cerro Corona and APP review existing operating assets to create a long-term growth portfolio
continue to develop potential at Hidden Valley and Wafi/Golpu
all shareholders to participate in the full value and upside of international portfolio on any possible future proposals
19
THE IAMGOLD TRANSACTION –VALUE DESTRUCTION FOR GOLD FIELDS SHAREHOLDERS
20
GOLD FIELDS HAVE… undervalued their international assets proposed to sell them on the cheap:
– selling assets at a substantial discount to Gold Fields’ own rating – most commentators assume that the international assets should contribute a higher rating to Gold Fields’ average
Relevant benchmarks, Gold Fields and Gold Fields’ international asset ratings
3.0x 2.5x 2.0x 1.5x 1.0x 0.5x 0.0x
International gold majors South African majors International mid-cap gold companies Gold Fields Gold Fields’ international assets
2.4x 1.9x 1.9x 2.1x 1.1x
Significant discount
21
IAMGOLD GOT IT ALL … companies’ relative share price performance shows the picture
Rebased to 10 August 2004, US$-denominated
IAMGOLD share price outperformance
160 150 140 130 120 110 100 90
10-Aug-04 13-Aug-04 18-Aug-04 23-Aug-04 26-Aug-04 31-Aug-04 3-Sep-04 8-Sep-04 13-Sep-04 16-Sep-04
Harmony USD IAMGOLD USD Gold Fields USD HSBC Global Gold Index USD
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IAMGOLD IS THE ONLY WINNER
Gold Fields contribution
IAMGOLD contribution
Net asset value Operating cash flow Resources Reserves Production
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
73% 72% 74% 76% 76%
30%
27% 28% 26% 24% 24%
Gold Fields IAMGOLD even prior to the C$0,50 per IAMGOLD share dividend
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MORE UPSIDE TO IAMGOLD
SHAREHOLDERS
Gold Fields contribution
IAMGOLD contribution
30% 21%
Revenues Operating profit pre D&A
Operating profit post D&A
Net earnings Reserves Resources - M&I
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Gold Fields IAMGOLD
75% 75% 79%
87% 79% 82%
25% 25% 21%
13% 21% 18%
AND US$400m in cash is being transferred
AND a US$60m dividend is to be paid to IAMGOLD shareholders
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IAMGOLD TRANSACTION
IS A PUNT … on a re-rating of Gold Fields International ?
for Gold Fields shareholders to break even the IAMGOLD share price has to rise to C$14,54
at C$14.54 IAMGOLD shareholders will have made US$900m, or a premium of 108%
IAMGOLD break even share price analysis (C$)
15 10 5 0
Pre-announcement 14 October 2004 Break even point
Ex-dividend Cum-dividend
0.50 6.99 0.50 9.55 0.50 14.04 25
GOLD FIELDS INTERNATIONAL’S
RE-RATING DILEMMA
no operating fundamentals to support a re-rating:
– IAMGOLD’s assets add little to the critical mass of Gold Fields International – no apparent upside in the IAMGOLD portfolio – no synergistic benefits – increased overheads through duplicated corporate structure no market fundamentals to support a re-rating: – a mid cap producer lacking in scale – substantial illiquidity due to a small free float
– SARB restrictions still impact additional potential value leakage through inefficient corporate structure: – potential holding company discount – multiple investment entry points – lack of financial flexibility to optimise allocation of scarce financial resources 26
GOLD FIELDS IS GIVING AWAY … nearly all of its cash the bulk of its current operating cash flow management and board control of the international assets
Gold Fields Operating Cash Flow Enlarged IAMGOLD—Board Composition
75% 25% 8 2
South Africa International Gold Fields Directors Independent Directors
27
GOLD FIELDS IS GIVING AWAY ITS
GROWTH POTENTIAL…
3,500 3,000 2,500 2,000 1,500 1,000 500 0
Gold Fields’ international asset production (‘000 oz)
2001 2002 2003 2004 Indicative
Cerro Corona
APP
CAGR 54 %
Gold Fields’ South African production (‘000oz)
3,500 3,000 2,500 2,000 1,500 1,000 500 0
2001 2002 2003 2004 Indicative
28
(6%)
CAGR
GOLD FIELDS HAS CONDEMNED SA ASSETS
TO A LINGERING DEATH
Gold Fields effectively receives: control of orphaned, mature, capex-intensive SA assets 70% interest in their own international assets and development portfolio potential dilution as IAMGOLD uses paper to fund acquisitions loss of management control without compensation growth confined to the SADC region following agreement to not compete
29
WILL GOLD FIELDS SHAREHOLDERS
STILL RECEIVE DIVIDENDS ???
we question the ability of IAMGOLD to pay dividends to Gold Fields Gold Fields has a history of healthy dividend payouts before Gold Fields can pay a dividend, it must satisfy its own cash requirements capital expenditure requirements of its current South African assets growth prospects financing the approximately R400 million annual interest payment on the loan from Mvelapanda Resources
30
THE HARMONY OFFER – A FULL AND FAIR UPFRONT PREMIUM
31
A DEAL MAKING PREMIUM
an upfront premium of 29%
Premium
35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0%
Harmony offer South Africa (2001 - 2003) Nedbank - Standard Bank
29% 22% 20%
Premium compares favourably to premia paid in the South African market...
Premium
35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 29% 25% 24%
Harmony offer Rest of the World all share unsolicited offers over US$500m (2001 to date) - 1 month premium Rest of the World all share unsolicited offers over US$500m (2001 to date) - 1 day premium
…and in the rest of the world
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A GOOD OFFER IN ANY MEASURE
the implied Gold Fields P/NPV of 2.4x compares favourably to:
P / NPV (x)
3.0 2.5 2.0 1.5 1.0 0.5 0.0
2.4x 2.4x 1.9x 1.9x
Harmony’s offer international gold majors South Africa gold majors International mid-caps gold companies
The trading multiples of comparable companies
3.0 2.5 2.0 1.5 P / NPV (x) 1.0 0.5 0.0
Harmony’s offer US$1bn since 1998 Since 1999 South Africa target since 1998 South Africa acquiror since 1998 AngloGold Ashanti
2.4x 1.7x 1.4x 0.9x 1.3x
1.6x and the P/NPV multiples paid on comparable transactions since 1998
33
NO VALUE LEAKAGE
TO THIRD PARTIES
shareholders will retain: cash and cash flow to: fund capex investment pay dividends financial flexibility to allow for optimum cash allocation unrestricted access to growth: locally and internationally prospective exploration potential full management control of all of its assets
South African assets revitalised rather than harvested simple corporate structure avoids potential value trap of IAMGOLD structure
34
HARMONY - A BETTER DEAL FOR GOLD FIELDS SHAREHOLDERS
Harmony IAMGOLD
Gold Fields shareholders receive an immediate premium Assets sold to IAMGOLD at a substantial discount
World’s largest gold producer Creation of two mid cap businesses, lacking in scale
Clear strategy for future value creation Future value from financial re-rating ?
Significant synergies and cost savings No synergies or cost savings
Retention of cash and cashflow to fund development and growth Loss of financial flexibility and stunted growth prospects
South African assets to be revitalised South African assets prematurely placed into harvest mode
Operational control by one management team Loss of management control
Single corporate structure Complex and inefficient corporate structure
Continued ability to pay dividends Ability to maintain dividends ??
Full growth potential of international assets retained Growth potential of international assets diluted
35
A COMPELLING INVESTMENT CASE
THE MERGED ENTITY IS A COMPELLING
INVESTMENT PROPOSITION WHEN
COMPARED TO THE IAMGOLD TRANSACTION CURRENTLY
RECOMMENDED BY THE GOLD FIELDS
BOARD
36
NOTICE TO US HOLDERS
In connection with the proposed acquisition of Gold Fields, Harmony will file with the United States Securities and Exchange Commission (SEC), a registration statement on Form F-4, which will include a preliminary prospectus and related exchange offer materials, to register the Harmony ordinary shares (including Harmony ordinary shares represented by Harmony American Depositary Receipts (ADSs) to be issued in exchange for Gold Fields ordinary shares held by holders located in the United States and for Gold Fields ADSs held by holders wherever located, as well as a Statement on Schedule TO. Investors and holders of Gold Fields securities are strongly advised to read the registration statement and the preliminary prospectus, the related exchange offer materials and the final prospectus (when available), the Statement on Schedule TO and any other relevant documents filed with the SEC, as well as any amendments and supplements to those documents, because they will contain important information. Investors and holders of Gold Fields securities may obtain free copies of the registration statement, the preliminary and final prospectus and related exchange offer materials and the Statement on Schedule TO (when available), as well as other relevant documents filed with the SEC, at the SEC’s web site at www.sec.gov and will receive information at an appropriate time on how to obtain transaction-related documents for free from Harmony or its duly designated agent.
This communication is for information purposes only. It shall not constitute an offer to purchase or exchange or the solicitation of an offer to sell or exchange any securities of Gold Fields or an offer to sell or exchange or the solicitation of an offer to buy or exchange any securities of Harmony, nor shall there be any sale or exchange of securities in any jurisdiction in which such offer, solicitation or sale or exchange would be unlawful prior to the registration or qualification under the laws of such jurisdiction. The distribution of this communication may, in some countries, be restricted by law or regulation. Accordingly, persons who come into possession of this document should inform themselves of and observe these restrictions. The solicitation of offers to buy Harmony ordinary shares (including Harmony ordinary shares represented by Harmony ADSs (as defined below)) in the United States will only be made pursuant to a prospectus and related offer materials that Harmony expects to send to holders of Gold Fields securities. The Harmony ordinary shares (including Harmony ordinary shares represented by Harmony ADSs) may not be sold, nor may offers to buy be accepted, in the United States prior to the time the registration statement becomes effective. No offering of securities shall be made in the United States except by means of a prospectus meeting the requirements of Section 10 of the United States Securities Act of 1933, as amended.
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DISCLAIMERS
Statements in this announcement, including without limitation, those concerning the economic outlook for the gold mining industry, expectations regarding gold prices and production, financial projections, estimates and their underlying assumptions, Harmony and the enlarged Harmony group and statements regarding future performance include “forward-looking statements” that express or imply expectations of future events or results. Forward-looking statements are statements that are not historical facts. All forward-looking statements involve a number of risks, uncertainties and other factors, and Harmony cannot give assurances that such statements will prove to be correct. Risks, uncertainties and other factors that could cause actual events or results to differ from those expressed or implied by the forward-looking statements include, without limitation, the satisfaction of closing conditions, the acceptance or rejection of any agreement by regulators, delays in the regulatory processes, changes in the economic or political situation in South Africa, the European Union, the United States of America and/or any other relevant jurisdiction, changes in the gold industry within any such country or area or worldwide and the performance of (and cost savings realised by) Harmony. Although Harmony’s management believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of Gold Fields securities are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of Harmony, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in the public filings with the SEC made by Harmony and Gold Fields, including those listed under “Cautionary Statement Concerning Forward-Looking Statements” and “Risk Factors” in the preliminary prospectus included in the registration statement on Form F-4 that Harmony will file with the SEC. Harmony does not undertake any obligation to update any forward-looking information or statements. You may obtain a free copy of the registration statement and preliminary and final prospectus (when available) and other public documents filed with the SEC in the manner described above.
Information included in this circular relating to Gold Fields and its business has been derived solely from publicly available sources.
While Harmony has included information in this announcement regarding Gold Fields that is known to Harmony based on publicly available information, Harmony has not had access to non-public information regarding Gold Fields and could not use such information for the purpose of preparing this announcement. Although Harmony is not aware of anything that would indicate that statements relating to Gold Fields contained in this announcement are inaccurate or incomplete, Harmony is not in a position to verify information concerning Gold Fields. Harmony and its directors and officers are not aware of any errors in such information. Subject to the foregoing and to the maximum extent permitted by law, Harmony and its directors and officers disclaim all liability for information concerning Gold Fields included in this announcement.
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