Johannesburg, September 30, 2010 -- Moody's Investors Service assigned a Baa3 senior unsecured rating to the
proposed issue of senior unsecured notes issued by Gold Fields Orogen
Holding (BVI) Limited, a wholly-owned subsidiary of Gold
Fields Limited ("Gold Fields", rated Baa3/stable). The notes
will be fully and unconditionally guaranteed by Gold Fields, GFI
Mining South Africa (Proprietary) Limited, Gold Fields Operations
Limited, and Gold Fields Holding Company (BVI) Limited. The
outlook for the rating is stable.
RATINGS RATIONALE
The new guaranteed notes are senior unsecured obligations and will rank
equally (pari-passu) with all other existing and future unsecured
and unsubordinated debt obligations of Gold Fields. Proceeds from
the bond issuance will be used to repay existing debt maturities and for
general corporate purposes. The Baa3 rating of the proposed notes
assumes that the final transaction documents will not be materially different
from draft legal documentation reviewed by Moody's to date and that these
agreements are legally valid, binding and enforceable.
"The Baa3 rating reflects Gold Fields' position as the world's fourth-largest
gold producer with an annual attributable production of 3.5 Moz
in fiscal year (FY) 2010, as well as the group's very sizeable reserve
base of 81 Moz in proved and probable ore reserves and industry-leading
reserve life in excess of 20 years as at 30 June 2009," explained
Moody's Vice-President Senior Analyst, Soummo Mukherjee.
"However, the group is also less diversified than some of its key
peers, with key producing assets (approximately 80% of reserves
and 50% of production) located in SA. In this context,
Moody's views positively Gold Fields' plans to reduce its exposure to
South Africa (SA) by growing its international presence, so as to
achieve a 60-40 production split between its international and
South African operations in the long term," added Mukherjee.
Gold Fields' rating is supported by solid operating margins, despite
a significant proportion of underground, deep-level mines
in its asset portfolio, which are labour-intensive and costly
to mine, as well as its ability to generate sizeable cash flow to
fund the significant capital expenditure requirements associated with
the ramp up of its key project, South Deep, and the maintenance
and improvement of its SA legacy assets. In this context,
Moody's takes comfort in Gold Fields' low financial gearing, underpinned
by a conservative financial policy framework, which includes a strict
policy of not engaging in gold hedging strategies and a track record of
using disposal proceeds to repay debt.
The rating also considers Gold Fields' operating environment, including
the inherent volatility in the gold price, given the fully unhedged
position of the group, and the risks arising from a potential turn-around
in the recent rally of the gold price, should global economic conditions
recover. Further, we note that the mining industry has been
subject to rising operating costs in recent years, as ore reserves
have become more expensive to recover while price increases for most commonly
used consumables have been running well ahead of general inflation.
The group's significant presence in South Africa has left it exposed to
heightened energy and wage inflationary pressures, exacerbated by
the strength of the South African rand relative to the US dollar.
In this context, Moody's believes that Gold Fields' group-wide
cost optimisation initiatives should mitigate persistent inflationary
pressures going forward.
The stable outlook for the rating is based on Moody's expectation that
Gold Fields will maintain healthy operating margins and a conservative
financial profile, allowing the group to remain within management's
financial target of Net debt/EBITDA of around 1.0x. The
outlook is equally predicated on the rating agency's assumption that,
going forward, Gold Fields will continue to maintain its good liquidity,
underpinned by the group's sizeable cash balance, healthy cash generation,
and availabilities under medium-term committed facilities,
in order to meet its ongoing funding needs. In this context,
Moody's notes the group's efforts to diversify its sources of funding
and extend the maturity profile of its debt obligations.
Given Gold Fields limited geographic diversity, its single-product
business profile and its resultant sensitivity to the volatile gold price,
an upward movement in the rating is unlikely in the short-term.
However, longer-term, an upward movement may be possible
if the group successfully implements its cost optimisation programme and
achieves further geographic diversification of operations while maintaining
its strong cash flow generation in a lower gold price environment.
Downward pressure on the Baa3 rating could result from a deterioration
in the gold price and ultimately in the group's operating performance
and/or financial profile, which would lead to a sustainable increase
in the group's net debt/EBITDA ratio above the 2.0x range and cash
flow from operations after dividends to debt below 30%.
Downward pressure on Gold Field's senior unsecured rating could also arise
if the company increases materially its current level of secured or priority
debt raising subordination concerns.
The principal methodology used in rating Gold Fields Orogen Holding (BVI)
Limited was Global Mining Industry rating methodology published in May
2009. Other methodologies and factors that may have been considered
in the process of rating this issuer can also be found on Moody's website.
Headquartered in Johannesburg (South Africa), Gold Fields is a global
gold mining company with sales of ZAR31.6 billion (US$4.2
billion) and an annual attributable production of 3.5 Moz of gold
in fiscal year 2010.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service's information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
MOODY'S considers to be reliable including, when appropriate,
independent third-party sources. However, MOODY'S
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Johannesburg
Soummo Mukherjee
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service South Africa (Pty) Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
David G. Staples
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service South Africa (Pty) Ltd.
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Moody's assigns Baa3 rating to Gold Fields' proposed notes
