Gemfields to unlock Sedibelo Platinum shareholding ahead of its 2021 listing date

Sean Gilbertson, CEO, Gemfields

GEMFIELDS would sell its 6.6% stake in Sedibelo Platinum Mines (SPM), a 100,000 (4E) ounce per year platinum group metals (PGM) miner, once it had unravelled an ownership structure that dates to when the firms were part of Pallinghurst Resources.

“We are still in the process of trying to extract the stake from an interposed vehicle called Ivy Lane,” said Sean Gilbertson, CEO of Gemfields today. Gemfields would get a better value for the stake if it could “market the share more widely,” he said.

Pallinghurst Ivy Lane Capital, an associate company of Pallinghurst Resources, has a 27.64% stake in SPM. It was a founding shareholder from about 2011, helping to bring about the consolidation of stranded PGM-bearing properties in the western part of the Bushveld Complex in South Africa.

The upshot means that Gemfields’ stake in SPM is indirectly held and unattractive to hold especially as SPM has revived listing plans, possibly by April.

Once the ownership structure had been effectively unlocked, Gemfields could put the stake before “a wider set of shareholders”, said Gilbertson who confirmed the prospect of SPM listing in 2021.

According to a first quarter report published on its website, SPM produced 26,109 oz of 4E PGMs generating sales of $55.7m. Mining is from three properties, including chrome recoveries, held in Pilansberg Platinum Mines. SPM controls about 100 million oz of PGM resources, but production in the past has been cash hungry.

After Pallinghurst Resources, the Bakgatla-Ba-Kgafela is the next largest shareholder in SPM with a 25.74% stake followed by the government-owned Industrial Development Corporation which has a 15.75% shareholding.

Gilbertson was commenting during questions following a presentation for the firm’s interim results. The company reported a three US cents per share interim loss after registering a single auction of rubies and emeralds after February. It also announced a fair value write-down of its stake in SPM of $12.5m to $45m or R726m.

Asked by an analyst why SPM attracted such a lowly valuation, Gilbertson said the number was per its June 30 half-year close whereas significant re-ratings of companies such as Impala Platinum (Implats) had occurred after that date.

Gemfields mines from its Kagem emerald operation in Zambia and Montepuez, a ruby mine in Mozambique, both of which were mothballed amid the Covid-19 pandemic. The company had hoped to restart auctions in the fourth quarter, but Gilbertson acknowledged that was unlikely to happen.

First sales have now been pencilled in for February although the company would hold ‘mini-auctions’ in November and December that would be “shuttered viewings”, and assisted by an online platform under development by a third party developer.

“We have had quite a few setbacks but no setback has knee-capped us quite like Covid-19,” he said.

The company’s balance sheet had edged into a narrow net debt position for “the first time in quite a while” and assuming auctions remained impossible to stage, would see the company burn an average of $5m to $6m per month, leaving it without liquidity by October 2021. “That is not our base case,” Gemfields CFO David Lovett stressed. “We expect auctions to resume next year.”