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Gemfields to write down Kagem
David McKay
Posted: Tue, 31 Mar 2009
[miningmx.com] -- GEMFIELDS, the UK-listed precious stones miner controlled by Johannesburg's Pallinghurst Resources, is expected to announce the write-down of its Kagem mine later today.
Speaking at the release of Pallinghurst's full-year results to end-December, Brian Gilberston, the group's chairman, described conditions under which Gemfields was trading as "very challenging".
"The decision has been taken to write down the whole of Kagem (to market value)," said Gilbertson who added the Kagem mine, which is situated in Zambia and is the world's largest emerald mine, was one of the "top assets in the industry".
In June 2008, Gemfields approved a reverse takeover by Rox Ltd, a company controlled by Pallinghurst Investors. In terms of the deal, Rox sold Kagem into Gemfields in return for 55% of the enlarged group.
"The current global financial crisis and the sharp falls
in gemstone prices experienced since October 2008 have resulted in significant uncertainty about emerald prices and demand for the remainder of 2009," said Pallinghurst in comments to its year-end results announcement.
"Gemfields has taken a number of actions to address this situation, including a reduction in the scale of its mining activity at Kagem and a focus on higher-grade areas," it said.
Pallinghurst Resources has a number of investments including control of the Toronto-listed platinum junior mining firm, Platmin, and interests in iron ore assets in western Australia and a large manganese project in the Kalahari.
Its year-end results did not feature any income, as it is still investing in assets, but was notable for the decline in cash and cash equivalents to $21m as of 31 December 2008 compared to $86m in cash at the beginning of the period.
The group said it did not intend raising capital at the current time. "There are no plans to raise
capital. We have sufficient cash to meet our obligations," said Arne Frandsen, CEO of Pallinghurst Resources.
In February, Sean Gilbertson, a partner in the Pallinghurst control structure, raised the prospect of a shares for cash issuance notwithstanding a severe decline in Pallinghurst shares. The share is now trading at R2.65/share on the JSE compared to a high of R10.70/share in 2008.
The group's net asset value per share had fallen 37% in dollar terms and was last calculated at R6.50/share. Frandsen said he was sure the discount would be narrowed in time.
Manganese project
In more positive news, Frandsen said the group expected to unveil a bankable feasibility report on its Kalahari manganese project in about four or five weeks which, he said, indicated it was "arguably one of the world's top three manganese assets".
The project is contained in a joint venture between Pallinghurst Investors, representing management interests and
those of Pallinghurst backers such as Investec and AMCI, a US energy group, and Ntsimbintle, a black economic empowerment grouping.
The investment consists of two properties located within the north and south portion of Kalahari Basin respectively. "The key property is in the south of the basin and is adjacent to, and indicates very similar geology to, Samancor's Mamatwan mine," Pallinghurst Resources said in its results commentary.
Platmin
Pallinghurst Resources' platinum ambitions are held in Platmin which recently commissioned the UG2 section of the milling and flotation plant at its main asset, the Pilansberg Platinum Mines (PPM).
Gilbertson warned, however, that Platmin's mine was still in the early start up phase. "I have started quite a few mines in my career, and I must doff my hat at the way the mine has been commissioned on time and in budget. But every night we say our prayers that things will go well."
Platmin said on March
23 that it intended to list on the JSE, possibly in May. Pallinghurst Resources ultimately stands to own 69.8% of Platmin.
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