PALLINGHURST Resources is prepared to bide its time with its stake in Sedibelo Platinum Mines despite pressing buttons in the rest of its investment portfolio which includes expanding its exposure to steel feed minerals, and even selling or partnering its stake in Fabergé, the gemstone retailer.
“Out stake in Sedibelo is only 6%*. If we are going to become an operating company, it’s a little rich to claim that we have a clear platinum strategy [at that level of exposure],” said Arne Frandsen, CEO of Pallinghurst which earlier this year converted from a private equity company into an operating company.
“The investment in Sedibelo is valuable in better markets and we are happy with the investment, but I can’t say yet we have made a clear decision,” he said. One option would be to exit Sedibelo were it to list on an exchange. “A year is a long time in mining. We all know that,” said Frandsen.
There does seem to be some distress, however, at Sedibelo. According to its most recent numbers reflecting the third quarter of the calendar year, cash and equivalents fell to $15m from $50m a year ago. It recorded a $15.7m loss in that period, and losses of $56.3m for the year-to-date.
Frandsen said in an interview that Sedibelo “doesn’t eat itself”, but it will certainly need working capital at the current rate of cash burn notwithstanding improvements in its operating costs. Current and long-term debt in Sedibelo also increased in the past 12 months by $400,000 taking total debt to just over $4.53m from about $4.1m in 2016.
Frandsen’s take on Sedibelo is its long-term potential. He acknowledges the company hasn’t met production targets as originally set down but that was because the firm didn’t want to waste ounces the market doesn’t want. The notion was to save Sedibelo’s expansion potential for when there was a better margin; that is, when the price for platinum group metals is higher. “We don’t want to end up in a Lonmin situation where the banks own the mine,” he said.
“The fact is we have 100 million ounces in the ground that aren’t turning sour. These are shallow and you can’t change that. We have had 4.5 million fatality-free shifts which is an amazing safety record,” he said.
Whilst Pallinghurst is content to keep in a holding pattern for Sedibelo Platinum, it intends to be proactive in respect of Jupiter Mines, an Australian business which owns a 49% stake in the manganese miner, Tshipi é Ntle Manganese Mining. Pallinghurst owns a 18.43% stake in Jupiter Mines and has already received two handsome dividends.
Said Frandsen: “If we want to be an operating company that 18% is too little. But we are the largest single shareholder in Jupiter so we can work with that”. The idea is to look at finding either another Tshipi, or expand into manganese or even metallurgical coal production, perhaps returning Pallinghurst again to Mozambique.
Frandsen told Miningmx in 2012 that it was considering potential coal investment in Mozambique – an area the firm’s non-executive chairman, Brian Gilbertson, knows well having established the Mozal aluminium smelter there as well as the Montepuez ruby mine for Pallinghurst. “We want to be an international company with operations in other places of Africa, an area we know well,” said Frandsen.
Less certain is the prognosis for Fabergé, bought by Pallinghurst from Unilever, in an effort to return the historic firm to its jewellery roots as an brand and shopfront for the gemstones Pallinghurst mines in Zambia and Mozambique. “I think it has been a success for us. Since 2009, we have opened about 45 outlets, but to develop it to its full potential 45 is not enough; we need 2,000,” said Frandsen.
“We will keep an open mind on Fabergé. We will ask the question: what would a partner with a presence [in international jewellery retail] bring?”.