Pallinghurst to focus on projects

Brendan Ryan | Tue, 05 May 2009 14:56

[miningmx.com] -- PALLINGHURST Resources has no plans to raise equity at present and no intention at all of taking on any debt, according to CEO Arne Frandsen.

In an interview in Johannesburg, he said: “If we were to raise any money, it would be for further developments concerning one of the four pillars that make up our business. But I have no active plans to raise any money at this point in time.”

In February 2009 Sean Gilbertson, a partner in the Pallinghurst control structure, told fund managers at the African Mining Congress in Livingstone that Pallinghurst may raise equity this year to make further asset acquisitions.

He said at the time: “We want to take advantage of the current market situation to buy attractive assets that are available.

“While now may not be a great time to raise funds given the drop in the Pallinghurst share price, this is the time to buy assets. Pallinghurst has funding partners it can call on, but it needs to be able to invest for the benefit of its own shareholders.”

Frandsen agreed with the assessment that now is a great time to buy assets, judging by the deals that Pallinghurst is being offered on a regular basis.

But he said he was focused on getting Pallinghurst’s four existing businesses into profitable operation.

“It is prudent at this stage to get cash flow going and to control costs. It does not make sense to go out and try to control the world under current economic conditions.

“It’s taken us two years to put the foundations in place. Give us another two years to complete building the house and then Pallinghurst will deliver big time for its shareholders,” he said.

Frandsen, who was a corporate banker with Goldman Sachs and JP Morgan Chase before going into the resources industry, said: “I do not need to raise money. I have no debt and I have no intention of taking on debt.

“The best way to have a healthy relationship with banks is by not being dependent on them.

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“I can sit out the current market situation but, should it subsequently make sense to accelerate one of our key projects, I would raise equity rather than debt,” he said.

Frandsen said Pallinghurst was already making the transition from exploration company and wannabe producer into being a real mining company.

He said: “Platmin started delivering the first concentrates for treatment to Northam Platinum on April 2. We should get the first cheque from them on June 2.”

Frandsen is reasonably upbeat on conditions in the platinum market, despite ongoing gloom and doom on the demand side because of the slump in the world’s automobile industry.

“People are not looking holistically at the platinum business. I cannot predict demand but I can take a view on supply and I see a very tight supply situation developing as juniors disappear and majors like Anglo Platinum chop back on production.”

Frandsen said the bankable feasibility study for the proposed Kalahari manganese mine was being finalised and would be released “in the next month or so”.

He said it was likely an opencast mine would be developed capable of producing 2 to 3 million tonnes/year, with production costs in the lowest quartile of the industry cost curve. Production could start in two years’ time.

Asked about the logistical problems in railing this ore to ports for export, Frandsen said: “I don’t think the situation with Transnet Freight Rail (TFR) is as grim as many believe.

“I believe the programme of de-bottlenecking being carried out by TFR will free up capacity to shift an extra 4 million tonnes of manganese ore within two years.”

*The writer owns shares in Pallinghurst Resources.

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