[miningmx.com] — THE underperformance of Pallinghurst Resources’ (Pallinghurst’s) share price despite the rise in the company’s net asset value (NAV) was a “source of worry’, according to chairperson Brian Gilbertson.
Replying to questions at a presentation to analysts on Pallinghurst’s 2010 annual results in Johannesburg on Monday, Gilbertson said: “Clearly such a large discount is not in the interests of shareholders and it is a worrying factor that we need to deal with.
“It’s something we are looking at, but we have not come to any conclusions at this stage on how to best address this issue.’
Asked by an analyst specifically whether a share buyback scheme was being considered, Gilbertson replied: “We have some more creative thoughts than just a share buyback, but it’s too early.’
Pallinghurst reported a 20% increase in earnings for the year to end-December 2010 to $0.24 a share (2009 – US$0.20) and an 86% rise in total profit for the year to $116m ($62.4m).
The company’s NAV increased to R6.10 a share at end-December from R5.02 a year previously, but the share price has actually fallen over this period from a high of R5.42c to a low of R3.32c before recovering to current levels of around R4.15c.
At its current JSE share price, Pallinghurst sits at a discount to NAV of about 32%.
As one analyst at the presentation pointed out to Gilbertson, that has potentially serious implications for Pallinghurst should the company need to raise funds.
Gilbertson acknowledged the point but stated Pallinghurst was not looking to raise new capital “at the moment’.
Pallinghurst has four growth “platforms’ which are: platinum group metals (pgms); steel feed corporation; coloured gemstones and Faberge.
Three of those platforms are represented by listed operating companies – the pgm interests are focused in JSE-listed Platmin, the steel feed corporation in ASX-listed Jupiter Mines and coloured gemstones through London-listed Gemfields.
Platmin has performed badly over the past year, dropping from R11.04 to R4.30 before recovering to current levels of around R5.30, but both Jupiter Mines and Gemfields have soared.
In the last six months Jupiter Mines shot up from A$0.30 to A$0.80 before pulling back to current levels of around A$0.55, after the company raised A$150m in January at A$0.70 per share to help fund construction of the Tshipi Borwa manganese mine in the Northern Cape.
According to Pallinghurst CEO Arne Frandsen the Jupiter share price “exploded’, making 2010 the “the year of the steel feed corporation’ for Pallinghurst.
The Gemfields share price has also rocketed over the past year from a low of 9.13p to a high of 20.75p, before pulling back to current levels of around 17p.
Pallinghurst holds a direct 18% stake in Jupiter and a direct 33% stake in Gemfields. However, the value increases of these operating companies have not flowed through to the Pallinghurst share price itself.
Frandsen said he believed 2011 would be “the year of the platinum group metals for Pallinghurst’, following the agreements now put in place to start consolidation of the three contiguous properties at Platmin.
He described the deals concluded recently as “landmark transactions (which) represent a significant first step to the development of the last, shallow pgm resource on the western limb of the Bushveld Complex’.
Frandsen noted that Platmin had doubled pgm production during 2010 and expected to double it again during 2011. The acquisition of Sedibelo West for $75m added an extra 6 million pgm ounces to the resource that would be mined.
He added that, despite the share price underperformance, shareholders “should still be happy’ given the positive trend of the company’s NAV.
The writer owns shares in Pallinghurst.
