[miningmx.com] — IT’S not just Pallinghurst Resources (Pallinghurst) that is battling a depressed share price. Two of its three listed operating arms, Gemfields and Jupiter Mines, are also trading below their worth, according to the firms’ managements.
Pallinghurst said in September it was looking at a possible listing on the London Stock Exchange, in addition to its existing listing on the JSE, to “further broaden the shareholder base and stimulate demand for the company’s shares”.
Underlying reason for the move was the poor performance of Pallinghurst on the JSE where it traded as high as 900c when it listed in August 2008, but has since dropped to current levels around 320c.
Prior to listing on the JSE, Pallinghurst traded on the Bermuda stock exchange after a private placing at 700c to South African institutions and private investors.
The placing found widespread support from investors keen for the chance to back highly successful mining entrepreneur Brian Gilbertson in his latest venture.
In March, Pallinghurst shares stood at 429c, equivalent to a 30% discount on the net asset value (NAV) of 610c when the results for the year to December 2010 were reported.
That discount widened to 50% by September, when the shares stood at 314c, compared with the NAV of 634c as of end-June.
Pallinghurst has a 20.8% stake in a “steel making materials consortium”, which in turn holds a 79.2% stake in ASX-listed Jupiter Mines.
The Jupiter share price has dropped around 50% over the past six months to its current levels around A$0.33, prompting a A$12m on-market share buy-back programme.
According to MD Richard Mehan, Jupiter’s share price “does not appropriately reflect the company’s underlying asset value”.
He points out Jupiter has $127m cash on hand and will not need all these funds to meet its near-term spending commitments on its iron ore and manganese projects.
Pallinghurst also owns 52.3% of a “coloured gemstones consortium’ which in turn owns 63.3% of Gemfields.
At its current price of 21p a share, Gemfields has a market capitalisation of ₤65m – equivalent to about US$100m – but the company holds cash on hand of $35m plus another $19m in emerald inventories.
“Gemfields is a billion dollar asset,” said Gilbertson, but the question being asked by unhappy and impatient Pallinghurst investors is this: Why is the underlying value of these assets not being reflected in the Pallinghurst share price?
Interviewed in Johannesburg on Monday, Gilbertson told Miningmx that he does “not have the ability to manage the share price”.
“I believe we are making all the right decisions and that this will eventually pay off as we deliver against our stated objectives. But this takes time.
“The Jupiter share price has dropped to a level that is not sensible, which is why the company has decided to buy back some of its stock.
“I believe a London listing would improve the liquidity in Pallinghurst, which is thinly traded in Johannesburg so that the sale of small volumes of the shares has a disproportionate impact on the price.”
– The writer owns shares in Pallinghurst
