| Fri 15 Aug 2008, 11:53 | | PGL - Pallinghurst - Abridged Pre-Listing Statement |
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PGL - Pallinghurst - Abridged Pre-Listing Statement
Pallinghurst Resources (Guernsey) Limited
Registration Number: 47656
(Incorporated in Guernsey)
ISIN: ZAE000124707
BSX share code: PALLRES
JSE share code: PGL
("Pallinghurst" or "the Company")
ABRIDGED PRE-LISTING STATEMENT
This abridged pre-listing statement relates to the proposed inward listing of
Pallinghurst ("Inward Listing") on the securities exchange of the JSE Limited
("JSE") and is prepared and issued in compliance with the Listings Requirements
of the JSE ("Listings Requirements").
This abridged pre-listing statement is not an invitation to the public to
subscribe for shares in the Company, but is issued solely for the purpose of
providing information to the public in relation to the Company.
This abridged pre-listing statement contains salient information in respect of
the Company, which is more fully described in the Company`s pre-listing
statement dated 13 August 2008 ("Pre-listing Statement"). For a full
appreciation of the Inward Listing, the Pre-listing Statement, which is
available on request as set out in paragraph y10 hereto, should be read in its
entirety.
1. INTRODUCTION
Investors are hereby advised that as at the date of this abridged Pre-
listing Statement the JSE has approved the application for the Inward
Listing of all of the issued ordinary share capital of Pallinghurst on the
JSE with effect from the commencement of business on Wednesday, 20 August
2008. Although Pallinghurst is currently listed on the Bermuda Stock
Exchange ("BSX"), the JSE will become the Company`s primary regulator.
Pallinghurst will be listed in the "Equity Investment Instruments" sector
of the JSE under the abbreviated name "PALLINGHT" and with share code
"PGL".
Pallinghurst is incorporated in Guernsey and is deemed to be an African
Company in terms of the Exchange Control regulations of the South African
Reserve Bank.
On the date of Inward Listing, the issued share capital of the Company will
comprise 169,316,000 ordinary shares with a par value of USD 0.00001
("Shares") and 2 management shares with a par value of USD 1.00.
2. RATIONALE OF THE INWARD LISTING
In its prospectus dated 5 September 2007, the Company undertook, subject to
the receipt of the requisite regulatory approvals, to implement the Inward
Listing within the twelve-month period ending 14 September 2008.
In addition to complying with its undertaking, the Company is seeking to
implement the Inward Listing in order to achieve a number of strategic and
financial benefits including:
- facilitating investments by the Company within the Common Monetary
Area;
- enhancing the liquidity and tradability of Pallinghurst`s Shares;
- facilitating the incremental investment and direct investment in
Shares by South African institutional and retail investors
respectively;
- appealing to a broader set of prospective investors, thus providing
further access to capital markets in order to facilitate and
accelerate the Company`s growth and/or acquisition of investments
falling within the Company`s investment scope, which is set out in
paragraph y4.1 hereto ("Investment Scope"); and
- increasing the Company`s public presence and profile.
3. INTRODUCTION TO PALLINGHURST
Pallinghurst was incorporated on 4 September 2007 in accordance with
Guernsey Law, and was listed on the BSX on 26 September 2007. The Company`s
main objective is to carry on the business of an investment holding company
in investments falling within its Investment Scope.
To achieve its investment objectives, which are set out in paragraph y4.2
hereto ("Investment Objectives"), the Company has appointed the investment
manager, as described in paragraph y5 hereto ("Investment Manager"), a
specialist natural resources entity that seeks to develop strategic
partnerships for the Company with companies and/or other entities in order
to create and unlock value for investors over the investment term of the
Company. Pallinghurst is chaired by Brian Gilbertson, widely regarded as
one of the leading figures in the natural resources industry, with a
notable history and proven track-record of value creation.
4. INVESTMENT STRATEGY
4.1 Investment Scope
The Company maintains a global focus across the commodities spectrum,
with a primary focus on underperforming assets and businesses that
lack direction, are poorly managed, or are stranded or distressed. The
Investment Manager, on behalf of the Company, seeks to develop
strategic platforms in pursuit of consolidation, vertical integration
and turn-around opportunities and expansion projects. The Company
targets investments in businesses that hold mines, smelters,
refineries and processing plants. The preference is for brown-fields
opportunities, although investments in businesses with attractive
development opportunities are also considered.
4.2 Investment Objectives
On the advice of the Investment Manager, the Company, whether
individually or with certain strategic equity partners, on a case-by-
case basis, utilises its financial ability and unique expertise and
execution skill in the natural resources sector to participate in
investments falling within the Investment Scope with the principal
objective of providing investors with a high overall rate of return.
Each investment vehicle, together with certain strategic equity
partners, on a case-by-case basis, attempts to secure board and
management control as a pre-requisite to influence the strategic
direction of each investment.
4.3 Investment Process
The Company has appointed the Investment Manager to provide it with
investment advisory and management services in relation to
investments. The Investment Manager is responsible for identifying
potential investments and making investment recommendations and
providing advice to the Company`s board of directors ("Board")
regarding investments or the realisation or refinancing thereof.
5. INVESTMENT MANAGER
Pallinghurst (Cayman) GP L.P., in terms of an investment management
agreement, has been appointed as the Investment Manager to the Company.
The partners of the Investment Manager have extensive experience in
creating value in the natural resources industry, with in-depth knowledge
of the assets, companies, people and trends and are recognised for their
strategic insight and vision. The senior executives of the Investment
Manager are well regarded by international mining investors and are
renowned for pioneering innovative transactions (such as the unbundling of
Gencor Limited, the creation of BHP-Billiton plc, and the creation of
Vedanta Resources plc, and the formation of the United Company RUSAL). The
strength of its contact network allows the Investment Manager to engage key
industry players at the highest levels, attract first rate management and
operational teams for investments and to utilise leading advisers and
specialists. The Investment Manager`s origination capabilities provide for
excellent deal flow, with a strong pipeline of existing opportunities
currently in progress.
Pallinghurst Resources LLP, a UK based limited liability partnership
regulated by the UK Financial Services Authority, acts as advisor to the
Investment Manager in identifying, evaluating and recommending suitable
investments, the financing and structuring thereof, and monitoring
investments and providing recommendations on re-financings, add-ons and
realisations.
6. OVERVIEW OF EXISTING INVESTMENTS
In the period since its incorporation, the Company has concluded a number
of attractive investments and is significantly advanced with a number of
prospective investments. A salient overview is set out below.
6.1 Faberge Limited
In January 2007, Faberge Limited, a company owned and controlled by
members of the Investment Manager and certain strategic equity
partners, acquired Unilever plc`s worldwide portfolio of trademarks,
licences and associated rights relating to the Faberge brand name.
Unilever plc had owned the Faberge brand since 1989, when it purchased
Faberge Inc (then a leading cosmetics company) for USD 1.55 billion.
In September 2007, the Company acquired an indirect majority see-
through interest in Faberge Limited. In accordance with the conditions
of the acquisition, minority interests in Faberge Limited were
subsequently sold at a profit, by the Company, to certain strategic
equity partners, pursuant to which the Company held a 46.8% see-
through interest in Faberge Limited for a net cost of USD 26.4
million.
In October 2007, Faberge Limited announced the historic reunification
of the Faberge brand with the Faberge family after over 50 years of
separation. Accordingly, the two great-granddaughters of Peter Carl
Faberge have been appointed alongside Faberge experts to the Faberge
Heritage Council to oversee the unified Faberge in its pursuit of
excellence and exclusivity.
In November 2007, Mark Dunhill left his position as President of the
eponymous luxury company Alfred Dunhill and joined Faberge Limited as
Chief Executive Officer. In a short space of time, Mr Dunhill has
assembled a formidable team from companies including Cartier, Conde
Nast, De Beers LV, UBS, Clifford Chance and Ernst & Young.
In May 2008, a USD 12.1 million share placing was made to new and
existing strategic equity partners, diluting the Company`s see-through
interest to 43.2%, but resulting in an implied unrealised value of the
Company`s interest in Faberge Limited of approximately USD 79 million.
In August 2008, the Company invested a further USD 15 million,
increasing its see-through interest in Faberge Limited to 47.5%, for a
total aggregate cost of USD 41.4 million. The corresponding implied
unrealised value of the Company`s interest in Faberge Limited is
approximately USD 93.7 million.
The Investment Manager believes that there is significant scope for
redeveloping the Faberge brand with two primary objectives, which will
be housed in separate investment vehicles and run as independent
investments:
1. The first is to restore the Faberge brand as one of the world`s
leading luxury brands dedicated to the heritage of Peter Carl
Faberge, and focusing on the highest standards of design and
craftsmanship. Mr Dunhill and his specialist team from the luxury
goods sector have been tasked with implementing this strategy;
and
2. The second is to create a world leading company in the coloured
gemstone industry. This industry is presently fragmented and
undercapitalised, and has not had the benefit of the leadership
that De Beers brought to the diamond industry a century ago. It
is intended that this investment vehicle will produce, market and
sell its finest output as individually branded Faberge gemstones,
so guaranteeing the quality, provenance and the ethical sourcing
of the gemstones. This initiative is linked to Rox Limited, as
set out in paragraph 6.2 hereto.
Global expenditure on jewellery and watches is expected to accelerate
over the next five year period, growing by 35% to USD 318 billion per
annum. Within such expenditure recognised luxury brands are driving
growth, and spending in the luxury segment is expected to double over
the corresponding five year period to USD 94 billion per annum
(Source: Verdict, Global Jewellery Retailing 2008). The resilience of
the luxury market results from increasing global wealth, passion
investing and the strong demand from emerging markets for branded
jewellery and status symbol watches; and also reflects the ability of
luxury brands to pass on increases in commodity prices to the end
consumer, thereby maintaining gross margins.
The name Faberge enjoys excellent brand recognition globally, and will
benefit from the rapid growth in the premium jewellery market and the
strong appetite of high net worth individuals for superlative luxury
items. Faberge will be guided by the model pioneered by Peter Carl
Faberge, pursuing excellence in creativity, design and craftsmanship.
The worldwide debut of its new collection, which will focus on high
jewellery, is planned for the second quarter of 2009.
6.2 Rox Limited
In October 2007, the Company along with certain strategic equity
partners acquired, via Rox Limited (a newly incorporated company), an
indirect 75% interest in a Zambian emerald mining company, Kagem
Mining Limited, with the Government of Zambia owning the remaining 25%
interest. The major asset of Kagem Mining Limited is the Kagem mine
("Kagem"), a large open pit emerald mine located on the Fwaya-Fwaya
emerald belt near Kitwe, Zambia. Kagem is the largest emerald mine in
Africa but a lack of investment and inadequate working capital funding
had constrained its optimum development. Upon acquiring the asset,
significant investment was made by the Company and certain strategic
equity partners to improve mine efficiency. New equipment was
purchased and additional infrastructure developed, while security
measures (led by Indian army-trained security personnel who are now
based on-site) were upgraded. In addition, a management contract was
signed with AIM-listed Gemfields Resources plc ("Gemfields"), the
owner and operator of nearby emerald mines on the same emerald belt,
in terms of which Gemfields assumed the overall day-to-day management
of Kagem. Gemfields has a team of experienced emerald miners who have
overseen much of the recent development of Kagem.
On 18 December 2007, the reverse takeover of Gemfields by Rox Limited
was announced. The transaction, approved by Gemfields` shareholders on
5 June 2008, resulted in Kagem being vended into Gemfields (together
with an option to acquire a license to use the Faberge brand name on
superior-quality coloured gemstones) in exchange for a fully diluted
interest of approximately 55% of the enlarged group.
On 14 May 2008, Gemfields` shares were re-admitted to trading
following the release of a re-admission document that described the
terms of the transaction, and which announced a share placing of GBP
30 million (USD 58.9 million). The share placing was completed on 6
June 2008 with Rox Limited following its subscription rights for GBP
16.3 million (USD 32.0 million) of new Gemfields shares at 45 pence
(88 US cents) per share.
In June 2008, the Company purchased a further 8 million shares (2.6%)
in Gemfields on the open market, increasing its see-through interest
in Gemfields to approximately 28%, for a total aggregate cost of USD
52.5 million.
Despite being a highly fragmented and undercapitalised industry, the
(non-diamond) coloured gemstone industry has been largely overlooked
by mining investors. This is partly attributed to the long-standing
success of De Beers in promoting diamonds as the gemstone of choice.
Yet recent auctions held by Sotheby`s Holdings Inc. and Christie`s
International plc indicate that per carat prices for emeralds, rubies
and sapphires can exceed the per carat prices achieved for diamonds.
This is particularly striking considering the lack of marketing
expenditure in the coloured gemstone industry.
Gemfields intends to become the leading producer and supplier of
coloured gemstones by pursuing consolidation and vertical integration
opportunities in the industry on an international scale. Gemfields`
operating scope will include acquiring and running mines of suitable
scale, in-house cutting and polishing of its high-grade material and
pursuing suitable marketing and branding programmes for coloured
gemstones. In addition, Gemfields has a world-wide exclusive licence
option to use the Faberge brand name on its superior-quality coloured
gemstones.
Gemfields will seek to further enhance the market appeal of its
coloured gemstones including improving consistency of supply, ensuring
ethical sourcing of gemstones and focusing on natural, untreated
gemstones.
7. ENTITLEMENT TO INVESTMENTS
The Investment Manager has, in accordance with the Investment Scope and
Investment Objectives, identified and secured prospective investments, an
overview of which is included in the paragraphs that follow. The
prospective investments have been presented by the Investment Manager to
the Board, who has reviewed and approved the Company`s entitlement to
participate, alongside certain strategic equity partners, in each of the
prospective investments ("Entitlements"), subject to the receipt of the
approval of the Exchange Control Department of the South African Reserve
Bank, which approval has been obtained, subject to the implementation of
the Inward Listing. Accordingly, on or after the implementation of the
Inward Listing the Company intends to exercise the Entitlements.
7.1. Ntsimbintle Pallinghurst Joint Venture
In accordance with the Company`s stated strategic objective of forming
a platform to source and supply raw materials to the steel industry,
the Investment Manager has secured a potential manganese investment
for the Company.
In November 2007, a subsidiary of the Company, along with certain
strategic equity partners, concluded a joint venture agreement with
Ntsimbintle Mining (Proprietary) Limited, a Black Economic Empowerment
group with manganese exploration rights within the primary manganese
region in South Africa, commonly referred to as the Kalahari Basin.
The Kalahari Basin contains approximately 80% of the world`s known
mineable manganese reserves. One of the properties subject to the
Pallinghurst Ntsimbintle joint venture is adjacent to and appears to
share similar geology to Samancor`s world-class Mamatwan Mine. The
purpose of the Pallinghurst Ntsimbintle joint venture is to create a
world-class manganese producer within the next three-year period.
Following the recommendations of an independent scoping study, a pre-
feasibility and bankable feasibility study ("BFS") has been initiated
and is expected to be completed by the second quarter of 2009.
The Investment Manager has negotiated an entitlement for the Company
to acquire a minority indirect shareholding in the Pallinghurst
Ntsimbintle joint venture.
7.2 Platinum Group Metals opportunity
The Investment Manager has identified and secured two prospective
investments in the Platinum Group Metals ("PGM") industry. Strong
demand combined with challenges in supply make the PGM industry a
promising area for investment.
PGMs are used across a wide range of industries and it is estimated
that 20% of all consumer products either contain PGMs or require PGMs
in their production. The uses of PGMs are primarily industrial,
particularly the automotive industry, which uses PGMs in catalytic
converters, spark plugs and sensors. In 2007, the automotive industry
consumed 4.2 million ounces of platinum, approximately 55% of global
consumption of 8 million ounces. Platinum has also become a very
popular choice for modern jewellery, and in 2007, the jewellery
industry consumed 1.6 million ounces of platinum. China is today the
largest and fastest growing market for platinum jewellery.
For the past 10 years, South Africa has consistently produced between
70-80% of the world`s primary PGMs and according to the South African
Department of Minerals & Energy, 87.7% of the world`s platinum
reserves are located in South Africa. Recent supply failures
encountered by the existing South African PGM miners include deeper
level mining, smelter failures, uncertain power supply and shortages
of skilled workers.
These combined demand and supply-side pressures led to a series of
record prices for platinum and other PGMs during 2008. Although
platinum is currently trading below its peak, long-term price
expectations remain strong, and the prospects for a new entrant to the
industry continue to be attractive.
The senior partners of the Investment Manager have strategic and
operational experience in PGMs through their earlier associations with
Rustenburg Platinum Mines Limited ("RPM"), Impala Platinum Holdings
Limited and Incwala Resources (Proprietary) Limited ("Incwala"), a
Black Economic Empowerment PGM investment vehicle with an 18% interest
in Lonmin plc. Mr Gilbertson and Mr Frandsen played key roles in the
formation of Incwala, respectively in the roles of Chairman and Chief
Executive Officer.
The Investment Manager, for and on behalf of the Company and certain
strategic equity partners (collectively, "PGM Consortium") has
concluded an agreement with the Bakgatla-Ba-Kafela Tribe ("Bakgatla"),
in terms of which the parties will form a broad-based and black-
controlled PGM investment vehicle ("PGM SPV"), to be held initially as
to 50.1% by the Bakgatla and 49.9% by the PGM Consortium. In terms of
the shareholders` agreement that regulates the parties` relationship
as shareholders of PGM SPV, the parties will endeavour to exploit PGM
opportunities in accordance with the Company`s Investment Policy and
Investment Objectives in order to realise superior returns for its
investors.
On 24 December 2007, the Investment Manager concluded an agreement
with the vendors of Moepi Group (Proprietary) Limited ("Moepi Group"),
in terms of which PGM SPV would acquire 100% of the shares in Moepi
Group, a company holding an approximate effective indirect 25%
interest in Boynton Investments (Proprietary) Limited ("Boynton"),
subject to the fulfilment of certain conditions precedent.
Boynton is a private company whose primary assets are situated in the
Western Limb of the Bushveld Igneous Complex ("BIC"), north of the
Pilanesberg, South Africa and is controlled by Platmin Limited
("Platmin"), a USD 500 million company incorporated in Canada and
listed on the Toronto Stock Exchange and Alternative Investment Market
of the London Stock Exchange. Platmin focuses on the exploration and
development of PGM deposits in South Africa exclusively through its
approximate 73% effective interest in Boynton.
Concurrently with the Moepi sale and purchase agreement, the Company
provided a guarantee over loan funding of USD 25 million in order for
the Moepi Group to acquire a further 7.80% interest in Boynton,
thereby increasing Moepi Group`s total effective interest in Boynton
to approximately 25%. The guarantee over loan funding was the first
step towards PGM SPV acquiring 100% of Moepi Group, which transaction
was declared unconditional on 4 June 2008.
The Investment Manager has negotiated an entitlement for the Company
to acquire a 9.26% interest in PGM SPV as the platform for a broader
PGM strategy. It is anticipated that the Company will exercise its
entitlement on or shortly after the Inward Listing.
In addition, the Investment Manager, for and on behalf of the PGM
Consortium, secured a further prospective PGM investment pursuant to
which the PGM Consortium concluded an agreement on 31 May 2008 with
the Bakgatla, subject to requisite regulatory approvals, to acquire a
40% interest in Richtrau No. 123 (Proprietary) Limited, a PGM
exploration company whose sole asset is a new order prospecting right
in respect of Magazynskraal 3, Registration Division J.Q., North West
Province ("Magazynskraal"), a farm situated in the Western Limb of the
BIC, north of the Pilansberg. In terms of the Magazynskraal sale and
purchase agreement, the PGM Consortium will procure 100% of the BFS
funding required for the completion of the BFS in respect of
Magazynskraal and pay the Bakgatla an undisclosed consideration once
the Magazynskraal transaction has been declared unconditional in
accordance with its terms. Currently, the necessary regulatory
approvals (including those from the Competition Authorities and the
Department of Minerals and Energy) are being obtained. The approval
process is anticipated to take up to 4 months.
Pursuant to the implementation of the Magazynskraal transaction, each
of the Bakgatla and the PGM Consortium will hold a 40% interest in
Magazynskraal, with RPM holding the remaining 20% interest. The PGM
Consortium and Bakgatla`s interests will be regulated in accordance
with the PGM SPV`s shareholders` agreement for the benefit of the PGM
SPV. In terms of the Magazynskraal sale and purchase agreement, the
PGM Consortium will be appointed as a contractor to complete the BFS
in respect of Magazynskraal.
The Investment Manager has negotiated an entitlement for Pallinghurst
to acquire an effective 9.26% interest in the Magazynskraal
transaction (40% to be acquired by the PGM Consortium).
The PGM Consortium and the Bakgatla plan to exploit each of the Moepi
Group and Magazynskraal transactions, and the PGM SPV may consider
further acquisitions and/or development opportunities where the
investment proposition and return propsects are favourable.
8 DIRECTORS AND MANAGEMENT OF PALLINGHURST
The following table sets out the details of the directors of Pallinghurst,
and the partners of the Investment Manager:
Name Business address
Board of directors of
Pallinghurst
Brian Gilbertson 54, Jermyn Street
(Chairman) London SW1Y 6LX
United Kingdom
Arne H Frandsen (Chief 54, Jermyn Street
Executive Officer) London SW1Y 6LX
United Kingdom
Stuart Platt-Ransom (Non- 1 Le Marchant Street
executive Director) St Peter Port
Guernsey
GY1 4HP
Channel Islands
Clive Harris (Non- Box 30142 SMB
executive Director) Grand Cayman
Cayman Islands
Partners of the
Investment Manager
Brian Gilbertson 54, Jermyn Street
London SW1Y 6LX
United Kingdom
Arne H Frandsen 54, Jermyn Street
London SW1Y 6LX
United Kingdom
Priyank Thapliyal 54, Jermyn Street
London SW1Y 6LX
United Kingdom
Sean Gilbertson 54, Jermyn Street
London SW1Y 6LX
United Kingdom
Andrew Willis 54, Jermyn Street
London SW1Y 6LX
United Kingdom
9 FUTURE PROSPECTS
The investments currently held by the Company are at an early stage of
implementation of their intended strategies, but promise significant value
uplift through organic growth, synergistic acquisitions and/or vertical
integration opportunities. The Investment Manager continues to seek
attractive investment opportunities for the Company. The Company is
currently evaluating a number of prospective investments which meet the
Company`s Investment Scope and Investment Objectives, with the principal
objective of providing investors with a high overall rate of return.
10 COPIES OF THE PRE-LISTING STATEMENT
Copies of the Pre-listing Statement are available, in English only, and may
be obtained during normal business hours from the registered office of the
Company, investment bank and sponsor and transfer secretary from Monday, 18
August 2008 to Monday, 1 September 2008, at the addresses set out below:
Company 1 Le Marchant Street
St Peter Port
Guernsey
GY1 4HP
Channel Islands
Investec Bank Limited 100 Grayston Drive
Sandown
Sandton
2196
South Africa
Computershare Investor Computershare Investor
Services (Proprietary) Services
Limited Ground Floor
70 Marshall Street
Johannesburg
2001
South Africa
15 August 2008
Sandton
Investment bank and sponsor Legal advisers in South Africa
(Investec Corporate Finance Logo) (ENS logo)
Investment adviser Legal advisers in Guernsey
(Pallinghurst logo) (Ozannes Logo)
Pallinghurst Resources LLP
Date: 15/08/2008 11:53:13 Produced by the JSE SENS Department.
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