Pallinghurst unveils buy-back, UK shift as metamorphosis continues

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PALLINGHURST Resources pressed on with a strategy to give fresh impetus to its investment case after earlier this year converting to an operating company, and buying out minority shareholders in Gemfields, its UK-listed precious gems investment since delisted.

In terms of two items in a six point plan, that also includes increasing the group’s exposure to steel feed minerals – such as iron ore and manganese -, the group will buy-back shares in order to improve prospects for long-term shareholders, and seek a primary listing on the London Stock Exchange where it believes more buying pressure exists.

The buy-back of Pallinghurst shares would begin immediately, the company said. No details were provided as to the value of the programme, however.

Brian Gilbertson, the founder of Pallinghurst Resources, will also relinquish his executive duties, opting to become non-executive chairman of the group this month – a turn of events that Pallinghurst said was in line with governance rules as set down in the King IV regulations. It also further streamlined the executive team to three – Arne Frandsen (CEO), Sean Gilbertson (head of gems), and Andrew Willis (CFO), thus cutting head office costs, including executive compensation which had been halved.

These are bold moves by Pallinghurst – especially attempts to win over the investment market in the UK where it was criticised this year for opportunistically buying out Gemfields at rock-bottom prices. Pallinghurst said in a statement that it had made important strides in improving Gemfields performance where debt had ballooned to $84m from $17m in less than three years, and the quality of emeralds recovered from its Kagem mine in Zambia had fallen precipitously.

As a guide to progress, Pallinghurst said it had achieved its second highest prices for emeralds from an auction in Lusaka generating revenue of $21m at an average price per carat of more than $66. Some 40,000 carats of ‘premium’ emeralds had been generated at Kagem compared to about 19,000 carats in the first two quarters of the calendar year. Pallinghurst hopes the outcome of producing higher yield goods is to ultimately haul back the company’s debt position.

“The management team’s focus is now on moving forward as one team, meeting our six key strategic objectives which in turn will unlock the full value of Pallinghurst’s assets for the benefit of all our shareholders,” said Frandsen in a statement to the Johannesburg Stock Exchange where it has its current primary listing.

Commenting on the intention to shift its investment focus to London – perhaps a view on the unattractive business environment in South Africa – Frandsen said that Pallinghurst’s shareholder base now consisted 65% of offshore clients and individuals as a result of the absorption of Gemfields.

Sedibelo Platinum Mines

Conspicuous by its absence, however, was any comment regarding the performance of Pallinghurst’s Sedibelo Platinum Mines. According to a Miningmx reader, the company lost $15m in its latest operating period leaving cash resources at $15m. This has not been verified by Pallinghurst and there is no apparent announcement about Sedibelo on Pallinghurst’s website under the announcements and news section.

Asked for details on Pallinghurst’s approach to Sedibelo, Johannes van Niekerk, spokesman for the company, said the team was working on “cutting costs”. Frandsen is currently travelling, but Miningmx will endeavour to get comment on the platinum firm’s prospects later today.

There are some potentially interesting developments regarding Pallinghurst’s investment in Jupiter Mines which owns a 49% stake in the manganese miner, Tshipi é Ntle Manganese Mining which operates in South Africa’s Northern Cape. Pallinghurst owns an 18.43% stake in Jupiter Mines and has already received two handsome dividends from the firm.

Pallinghurst said it would seek to improve its exposure to steel feed minerals through Jupiter Mines – an approach that now explains the shift of former Pallinghurst executive Priyank Thapliyal, who is now CEO of Jupiter Mines.

There are also questions about Pallinghurst’s future involvement in Fabergé which the company bought from Unilever in an effort to restore it to its luxury jewellery fabrication roots. The aim was that Fabergé would form the high value access to the gemstone retail market: with Gemfields mining and marketing gemstones, Pallinghurst would have involvement in all levels of the gemstone value chain.

Among options in the strategic review of Fabergé is the prospect of entering into possible joint venture or partnering relationships.

 

6 COMMENTS

    • Dear Brian Gilbertson,

      I hereby acknowledge that your reading of Sedibelo was correct…..
      Here are the figures:

      DETAILS Q3CY16 Q4CY16 Q1CY17 Q2CY17 Q3CY17
      Prod (oz 4E) 41282 43836 28 300 33 283 31 192
      Basket Price( R/oz PGM) 13305 12016 12793 12083 12526
      Unit costs ( R/t) 677 564 549 465 582
      Yield ( g/t 4E ) 1,47 1,50 1,03 1,12 1,05
      Break Even Yield ( g/t) 1,58 1,46 1,33 1,20 1,45
      Mine Site OPEX ($M) 42,15 36,83 33,98 32,81 31,39
      Cash Balance ($M) 68,98 50,31 43,43 22,78 15,91

      MORE WORRISOME NOTES
      1. MCC , the mining contractor, is off-site after unilaterally terminating their contract ( Perhaps Payment issues!).
      2. break-even grade has increased due to increased unit costs , when the PGM mining industry is experiencing cost deflation.
      3. By deferring critical stripping, the geological challenges of this mine have become pronounced and its marginality is now apparent as per their head grade declining faster than break-even grade
      4. Operationally, this crowd has been as lousy as you can get!

      I knew the gents where incompetent BUT did not expect this (MDA pg4) :

      ” Lower ounces dispatched and sold was a direct result of a mining strategy to reduce mining volumes and supplement feed to the concentrator with low grade DMS material. This strategy has had a negative impact on the overall head grade as well as ounces produced.”

      Now, fellow readers:
      YOU DON’T LOWER YOUR HEAD GRADE WHEN YOU HAVE A TWIN PROBLEM OF “LOW PGM BASKET PRICE” AND “HIGH UNIT COSTS”

      I suspect that actually , there was NO high grade material to mine given that these chaps had deferred stripping for too long thus fatally crippled their mining flexibility. With No money to spare , there wont be any stripping THUS have sunk this mine!

      • Hi Goldspeculator – I edited your initial post. I’m all for robust discussion, criticism … But there are laws against defamation. Whatever you may feel – rightly or wrongly – we need moderation in these comments or the relevance tends to be lost.

        Best

        David

  1. I predict another swindle :

    Herewith goes the playbook :

    1. Retail shareholders are being eliminated at this low share prices using cash flows from the business.
    2. As the share price appreciates , INSIDERS exercise their warrants and options to progressively increase their ownership stakes in the business
    3. When mining debt markets open, all of a sudden IT DOES NOT MAKE SENSE TO STAY LISTED ANYMORE.

    Then they all ride into the sunset with the business!

    The corporate governance of this company reeks all the way to Steinhoff….. Or Sorry I DID NOT KNOW THAT Wiese IS ALSO A DIRECTOR ( AND A MAJOR SHAREHOLDER) HERE AS WELL!

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