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PGL
PGL
PGL - Pallinghurst Resources - Interim Results ended 30 June 2009
Pallinghurst Resources Limited
(formerly Pallinghurst Resources (Guernsey) Limited)
(Incorporated in Guernsey)
Guernsey registration number: 47656
(South African external company registration number: 2009/012636/10)
Share code on the BSX: PALLRES
ISIN: GG00B27Y8Z93
Share code on the JSE: PGL
("Pallinghurst" or the "Company")
Interim Results
NAV per share: US$0.76 16.7%/R6 7.7%
Based on an exchange rate of US$1=ZAR8 at 30 June 2009 compared to US$1=ZAR10 at
31 December 2008
Arne H Frandsen, CEO, commented: "Each investment has made significant progress
since December 2008, and the successful capital raising of US$100 million has
put in place the funding required for each of our platforms. We are now well
positioned to aggressively drive all four platforms up the value curve and
realise value for all our shareholders. However, until we see firm signs of
global economic growth resuming, we will continue to adopt a conservative
approach to investment valuations."
Highlights of the period to 30 June 2009
- Platmin`s Pilanesberg Platinum Mine ("PPM") entered its commissioning period
and is expected to reach full-scale production in second half of 2009;
- The Tshipi feasibility study was completed in March, with inferred and
indicated resources of 163.2 million tonnes manganese ore at an average grade of
37%;
- The Company significantly increased its ownership stake in Jupiter during
March;
- Posco agreed to acquire part of the Company`s investment in Tshipi for US$6.9
million, in June.
The period since 30 June 2009 has seen the following:
- Gemfields` first London auction of rough emeralds raising US$5.9 million in
July;
- Posco agreeing to invest AUD7.81 million into Jupiter in July;
- Additional Jupiter shares issued to the Company for no further consideration
in September;
- Platmin`s share price has risen since its JSE listing in July, so that the
investment valuation is currently well above cost;
- Successful US$100 million capital raising by the Company;
- Successful capital raising of US$35 million by Faberge, in September;
- The successful international launch of the reunited Faberge brand on
9 September.
Condensed Consolidated Income Statement
01-Jan-09 01-Jan-08 01-Jan-08
to to to
30-Jun-09 31-Dec-08 30 June 2008
(reviewed)
(reviewed) (audited)
US$ US$ US$
Income
Revenue
Dividends - 84,000 -
received
Unrealised net 23,592,455 (27,466,529) 59,545,397
gains/(losses)
in the fair
value of
investments
Unrealised net 4,748,500 (10,940,413) 693,075
foreign
exchange
gains/(losses)
in the
portfolio of
investments
Fair value loss (364,831) - -
on initial
transfer of
Mindax shares
for Jupiter
shares
Fair value gain 821,409 - -
on Mindax
shares
Foreign (14,330) - -
exchange loss
on Mindax
shares
28,783,203 -38,322,942 60,238,472
Portfolio
income
Loan interest 51,767 497,433 228,224
income
51,767 497,433 228,224
Revenue and 28,834,970 -37,825,509 60,466,696
income/(losses)
from operations
Expenses
Investment (1,526,932) (2,556,643) (1,269,900)
Manager`s
Benefit
Performance - - (12,609,544)
Incentive
accrual
Administrative (761,298) (2,476,545) (210,095)
expenses
Other losses (119,990) (2,037,036) (313,189)
including
foreign
exchange
Other gains 683,256 - -
including
foreign
exchange
(1,724,964) (7,070,224) (14,402,728)
Profit/(loss) 27,110,006 (44,895,733) 46,063,968
from operations
Net finance 395,001 1,349,047 1,308,723
income
Profit/(loss) 27,505,007 (43,546,686) 47,372,691
before share in
loss of
associates
Share in 629,428 (2,883,815) (15,235)
profit/(loss)
of associates
Profit/(Loss) 28,134,435 (46,430,501) 47,357,456
before tax
Income tax (74) (144) -
expense
Net 28,134,361 (46,430,645) 47,357,456
Profit/(Loss)
for the
financial
year/period
Earnings, 0.11 (0.27) 0.28
diluted
earnings and
headline
earnings/(loss)
per share
Condensed Consolidated Balance Sheet
30-Jun-09 31-Dec-08 30-Jun-08
(reviewed) (audited) (reviewed)
US$ US$ US$
Assets
Non-current assets
Investments in 2,506,504 1,804,765 178,022
associates
Financial asset - - 1,588,339
investment
2,506,504 1,804,765 1,766,361
Investment
portfolio
Quoted investments 57,721,204 48,617,689 67,988,266
Unquoted 122,521,049 101,795,361 78,715,943
investments
Loans receivable 1,195,663 519,327 15,970,758
181,437,916 150,932,377 162,674,927
Total non-current 183,944,420 152,737,142 164,441,288
assets
Current assets
Trade and other 12,597 764,546 26,583,810
receivables
Loan receivable 76,689 11,127,017 -
from associates
Cash and cash 4,254,586 20,939,970 41,606,595
equivalents
4,343,972 32,831,533 68,190,405
Total assets 188,288,292 185,568,675 232,631,693
Liabilities
Current
liabilities
Trade and other 426,692 25,841,436 267,975
payables
Performance - - 12,609,544
Incentive accrual
426,692 25,841,436 12,877,519
Total net assets 187,861,600 159,727,239 219,754,174
Capital and
reserves
attributable to
equity holders
Share capital 2,474 2,474 1,695
Share premium 200,689,164 200,689,164 166,928,777
Foreign exchange 17,463 17,463 17,463
translation
reserve
Retained (12,847,501) (40,981,862) 52,806,239
earnings/(deficit)
Total equity 187,861,600 159,727,239 219,754,174
NAV and tangible 0.76 0.65 1.3
NAV per share
Condensed Consolidated Statement of Cash Flows
1 Jan 09 to 1 Jan 08 to 1 Jan 08 to
30-Jun-09 31-Dec-08 30-Jun-08
(reviewed) (audited) (reviewed)
US$ US$ US$
Net profit for the 28,134,361 (46,430,645) 47,357,456
period
Adjustments for:
Additions to (2,112,817) (128,602,782) (28,064,192)
investments
Additions to - - (1,901,528)
financial asset
investments
Loan interest (51,767) (36,542) (211,155)
reinvested
Fair value net (23,592,455) 27,466,529 (59,545,397)
(gains)
/losses in investment
portfolio
Other losses - - 313,189
Unrealised foreign
exchange
(gains)/losses
on Investment (4,748,500) 10,940,413 (693,075)
portfolio
Loans extended to
investments - (15,622,082) (23,461,113)
Loan repayments from
investments - 15,622,082 10,000,000
Loan repayments/
extended)from/(to)Rox 11,146,799 (13,390,382) -
Conduit
Revaluation of loan
to Rox Conduit
(96,471) 2,358,776 -
Accrued interest on
loan
to Rox Conduit - (95,411) -
Net finance income (395,001) (1,349,047) (1,308,723)
Share in
(profit)/loss of
associates (629,428) 2,883,815 15,235
Cash flows from 7,654,721 (146,255,276) (57,499,303)
operating activities
before changes in
working capital and
provisions
(Increase)/decrease 751,949 24,844,991 (974,273)
in trade and other
receivables
(Decrease)/increase (25,414,744) 25,621,718 48,257
in trade and other
payables
Increase in - - 12,609,544
Performance Incentive
accrual
-24,662,795 50,466,709 11,683,528
Cash outflows from (17,008,074) (95,788,567) (45,815,775)
operating activities
Investing activities
Investments in (72,311) (4,495,323) -
associates
Net cash used in (72,311) (4,495,323) -
investing activities
Financing activities
Issue of ordinary - 33,761,166 -
shares
Interest received 438,989 1,383,199 1,308,723
Interest paid on (43,988) (34,152) -
finance activities
Net cash generated 395,001 35,110,213 1,308,723
from financing
activities
Net decrease in cash (16,685,384) (65,173,677) (44,507,052)
and cash equivalents
Cash and cash 20,939,970 86,113,647 86,113,647
equivalents at the
beginning of the
period
Cash and cash 4,254,586 20,939,970 41,606,595
equivalents at the
end of the period
Condensed Consolidated Statement of Comprehensive Income
1 Jan 2009 to 1 Jan 2008 to 1 Jan 2008 to 30
30June 2009 June 2008
(reviewed) 31-Dec-08 (reviewed)
(audited)
US$ US$ US$
Net 28,134,361 (46,430,645) 47,357,456
profit/(loss)for
the period
Exchange - 17,463 17,463
differences on
translation of
foreign operations
Total comprehensive 28,134,361 (46,413,182) 47,374,919
income/(expense)for
period/year
Condensed Consolidated Statement of Changes in Equity
Share Share Retained Foreign Total
capita premium earnings exchange
l translatio
n reserve
US$ US$ US$ US$ US$
Balance at 1,695 166,928,777 5,448,783 17,463 172,396,718
1 January
2008
(audited)
Net profit - - 47,357,456 - 47,357,456
for the
period
Balance at 1,695 166,928,777 52,806,239 17,463 219,754,174
30 June 2008
(reviewed)
Net loss for - - (93,788,101) - (93,788,101
the period )
Issue of 779 33,760,387 - - 33,761,166
share
capital in
vendor
consideratio
n placing
Balance at 2,474 200,689,164 (40,981,862) 17,463 159,727,239
31 December
2008
(audited)
Net profit - - 28,134,361 - 28,134,361
for the
period
Balance at 2,474 200,689,164 (12,847,501) 17,463 187,861,600
30 June 2009
(reviewed)
Fair Valuation of Investments
Opening Unrealised Unrea- Gains/losses on
fair value fair value lised Jupiter trans-
adjust- foreign action and other
ments in exchange additions/disposal
period gains in s
period
Investment US$ US$ US$ US$
30 June 2009
(reviewed)
Quoted equity
investments
Platmin 32,361,042 2,089,111 1,937,488 -
Limited
Gemfields plc 13,317,430 (4,255,361) 1,955,967 468,856
Jupiter Mines 783,757 5,119,394 645,216 3,283,018
Ltd
Mindax Ltd 1 2,147,259 - - (2,147,259)
Iron Mountain 8,201 5,833 1,252 -
Mining Ltd
48,617,689 2,958,977 4,539,923 1,604,615
Unquoted
equity
investments
Faberge Ltd 2 46,858,032 20,633,478 - 92,210
Moepi Group 6,686,657 - - -
(Boynton)
Richtrau No. 18,310,672 - - -
123 Ltd
(Magazyns-
kraal)
Tshipi joint 29,940,000 - - -
venture 3
101,795,361 20,633,478 - 92,210
Loan
investments
Tshipi joint 519,327 - 208,577 415,992
venture
Total 150,932,377 23,592,455 4,748,500 2,112,817
investment
portfolio
Accrued Total
interest in valuation
period
US$ US$
Quoted equity
investments
Platmin - 36,387,641
Limited
Gemfields plc - 11,486,892
Jupiter Mines - 9,831,385
Ltd
Mindax Ltd 1 - -
Iron Mountain - 15,286
Mining Ltd
- 57,721,204
Unquoted
equity
investments
Faberge Ltd 2 - 67,583,720
Moepi Group - 6,686,657
(Boynton)
Richtrau No. - 18,310,672
123 Ltd
(Magazyns-
kraal)
Tshipi joint - 29,940,000
venture 3
- 122,521,049
Loan
investments
Tshipi joint 51,767 1,195,663
venture
Total 51,767 181,437,916
investment
portfolio
1. See the interim financial statements for more detail on the gains/losses
relating to the Jupiter transaction.
2. The investment in Faberge was valued at US$61.16 a share at 31 December 2008.
A recent capital raising has been successfully completed to a variety of
investors, including the Company, at US$88.07 a share and the investment has
been revalued at that level, in line with the IPEVC valuation guidelines and
IFRS.
3. The Company has committed to partially dispose of an indirect interest of
2.27% in Tshipi to POSCO for US$6.9 million, effective 1 July 2009. See the
interim financial statements for more detail.
Current Unrealised Unrealised Accrued Total
cost fair value foreign interest valuation
adjustments exchange
in period gains/
(losses) in
period
Investment US$ US$ US$ US$ US$
31-Dec-08
(audited)
Quoted equity
investments
Platmin 32,317,190 - 43,852 - 32,361,042
Limited
Gemfields plc 54,400,730 (34,559,320) (6,523,980) - 13,317,430
Jupiter Mines 5,196,693 (3,028,782) (1,384,154) - 783,757
Ltd
Mindax Ltd 3,349,775 (293,469) (909,047) - 2,147,259
Iron Mountain 61,468 (36,644) (16,623) - 8,201
Mining Ltd
95,325,856 (37,918,215) (8,789,952) - 48,617,689
Unquoted
equity
investments
Faberge Ltd 1 41,461,381 5,396,651 - - 46,858,032
Moepi Group 13,373,315 (6,686,658) - - 6,686,657
(Boynton)
Richtrau 36,621,344 (16,084,951) (2,225,721) - 18,310,672
No.123 Ltd
(Magazyns-
kraal)
Kalahari 2,000,000 27,826,644 113,356 - 29,940,000
joint venture
2
93,456,040 10,451,686 (2,112,365) - 101,795,361
Loan
investments
Kalahari 520,881 - (38,096) 36,542 519,327
joint venture
3
Total 189,302,777 (27,466,529) (10,940,413) 36,542 150,932,377
investment
portfolio
1. The investment in Faberge was revalued in May 2008 in line with a third-party
round of funding, at US$78.7 million, significantly above cost of US$26.1
million. In August 2008, the Company invested a further US$15 million, at this
price per share, increasing the total cost of investment to US$41.4 million and
valuation to US$93.7 million. In line with the IPEVC valuation guidelines and
IFRS, the valuation was then impaired by 50% from that level to US$46.9 million.
2. The Kalahari joint venture investment related to an unincorporated manganese
joint venture in the Kalahari Basin. The joint venture agreement gave the
Company the right to take an equity interest in Tshipi e Ntle Manganese Mining
(Pty) Ltd, the entity which will hold the relevant Mining Rights. The entity has
been incorporated and assumed the interests of the joint venture on 31 March
2009.
3. The loan was provided to the joint venture in terms of the agreement
concluded with Ntsimbintle Limited, for the joint venture`s prospecting and
exploration expenditure and working capital requirements. The terms of the loan
are that it is unsecured, and earns interest at the South African prime rate.
Investment Current Unrealised Unrealised Accrued Total
cost fair value foreign interest valuation
adjustments exchange
in period gains in
period
US$ US$ US$ US$ US$
30 June 2008
(reviewed)
Quoted
equity
investments
Gemfields 52,525,840 6,991,781 646,564 - 60,164,185
plc
Jupiter 4,707,201 (250,026) 41,296 - 4,498,471
Mines Ltd
Mindax Ltd 2,709,807 543,569 5,099 - 3,258,475
Iron 61,468 5,511 116 - 67,095
Mountain
Mining Ltd
60,004,316 7,290,835 693,075 - 67,988,226
Unquoted
equity
investments
Faberge Ltd 26,461,381 52,254,562 - - 78,715,943
Moepi Group - - - - -
(Boynton)
Richtrau - - - - -
No.123 Ltd
(Magazynskra
al)
Kalahari - - - - -
joint
venture
26,461,381 52,254,562 - - 78,715,943
Loan
investments
Kalahari 5,749,042 - - 97,267 5,846,309
joint
venture 1
Faberge 10,000,000 - - 124,449 10,124,449
Limited 2
15,749,042 - - 221,716 15,970,758
Total 102,214,739 59,545,397 693,075 221,716 162,674,927
investment
portfolio
1. The loan was provided to Pallinghurst Kalahari (Mauritius) Limited
("Pallinghurst Kalahari") to enable the latter to acquire an initial equity
participation in the joint venture, in terms of the agreement concluded with
Ntsimbintle Limited. The terms of the loan are interest bearing (at a rate of 1
month USD LIBOR +2%), unsecured and repayable within twelve months.
2. The loan to Faberge Limited was unsecured, bore interest at LIBOR plus 4%
until the repayment date. The loan was repaid on 31 July 2008 including accrued
interest of US$182,243.
Notes
Accounting Policies
The Company`s condensed consolidated interim financial statements have been
prepared in accordance with IAS 34 Interim Financial Reporting, applicable legal
and regulatory requirements of The Companies (Guernsey) Law, 2008, and the
listing requirements of the JSE Limited. The information contained in this press
release is based on the information contained in the condensed consolidated
interim financial statements ("interim financial statements"). A copy of the
interim financial statements will be sent to shareholders on or about 21
September 2009, and will be included on the Company`s website,
www.pallinghurst.com.
Abridged Investment Manager`s Report
PLATINUM GROUP METALS ("PGMs")
PLATMIN AND BOYNTON
PGMs are essential to a wide range of industries. It is estimated that 20%
of all consumer products either contain PGMs or require them in their
production. The uses of PGMs are primarily industrial, with the largest demand
from the automotive industry.
For the past ten years, the Bushveld Igneous Complex ("BIC") in South Africa has
consistently produced the vast majority of the world`s primary PGMs.
The barriers to entry for companies into the platinum industry in the BIC have
been high due to limited access to refining facilities and resources. However,
recent political, contractual, technological and economic developments have
created opportunities for new entrants to the market including the Company.
The Investment Manager`s PGM strategy is to actively drive the value of its
investments up the value curve, and if attractive, consolidate various PGM
properties into a regionally optimised mining complex in the pursuit of
maximising capital and operating cost efficiencies. The PGM strategy is being
pursued through a unique partnership between the Company, certain
co-investors and the Bakgatla community.
Platmin Limited ("Platmin") is a mineral exploration, development and producing
company engaged in the exploration and the development of PGM projects, all
located in the BIC, whose sole asset is its 72.39% interest in Boynton, the
remaining 27.61% interest being held by the Moepi Group of companies.
The Company`s interest in the African Queen projects was initiated when the
Investment Manager, for and on behalf of the Company and certain co-investors,
concluded an agreement to acquire a 25.13% interest in Boynton, through the
Moepi Group of companies (whose total ownership of Boynton is 27.61%). This
agreement was declared unconditional in June 2008.
In December 2008, as credit markets deteriorated and PGM prices fell, Platmin`s
intended debt facility to fund the final stage of PPM failed to materialise. As
a key shareholder in Boynton the Investment Manager approached Platmin to
provide immediate equity funding to enable Platmin to avoid insolvency.
The Company acquired a 16.12% see-through interest in Platmin for US$32.3
million during December 2008.
Boynton`s flagship Pilanesberg Platinum Mine ("PPM") is currently in the process
of ramping up production to full capacity of 250,000 PGM ounces per annum plus
gold, with a life of mine of 16 years. In addition, Boynton owns new order
mining rights over a number of other PGM properties.
The UG2 section of the milling and flotation plant at PPM was successfully
commissioned in March 2009, Eskom power was connected and the treatment of ore
commenced. The first metal was dispatched for smelting and refining in April
2009, with the first revenue from metal sales received in July 2009. In
addition, the commissioning of the Merensky circuit commenced in June 2009.
The South African platinum industry has been put under pressure in recent months
by industrial relations disputes and strikes, and the threat of a sector wide
stoppage in South Africa continues to be significant. Negotiations and disputes
are ongoing across many of the key industry players.
Platmin has not been immune to these problems and, on 12 August 2009, Platmin
notified its shareholders that mining activities at PPM had been interrupted
following the dismissal of approximately 500 employees of MCC Contracts (Pty)
Limited ("MCC"). MCC is the mining contractor engaged by Platmin to manage the
open-cast mining activities at PPM.
Platmin announced that mining activities had resumed at PPM on 9 September 2009.
Platmin continued to process stockpiled ore during the period of interrupted
activity. However, the ramp-up of its production suffered due to the industrial
actions.
MAGAZYNSKRAAL
Magazynskraal is also located on the Western Limb of the BIC in close proximity
to PPM and Sedibelo. Recent studies suggest that Magazynskraal has approximately
22.7 million ounces of inferred resources.
In May 2008, the Investment Manager concluded an agreement with the Bakgatla
whereby Pallinghurst and the co-investors would provide the necessary funding of
a bankable feasibility study and acquire a stake in Magazynskraal from the
Bakgatla. The Department of Minerals and Energy gave their approval to the
transaction on 9 December 2008, and Pallinghurst and the co-investors
collectively acquired a 33.38% interest in Magazynskraal.
STEEL FEED CORPORATION
Competition for raw material supplies (particularly iron ore, coking coal and
manganese) to the global steel industry is intensifying and the major steel
producers are seeking to secure their raw material supplies through equity
ownership of mining companies. Pallinghurst is developing a steel feed materials
investment platform through two vehicles, Tshipi e Ntle Manganese Mining
(Proprietary) Limited ("Tshipi") and Jupiter Mines Limited (a company listed on
the Australian Stock Exchange). This strategy is at an early stage of
development. Regardless, Posco, a co-investor and one of the world`s largest
steel companies, has recently invested in each of these vehicles.
TSHIPI
The Investment Manager, for and on behalf of Pallinghurst and certain co-
investors, concluded an agreement to form a joint venture with Ntsimbintle, a
black economic empowerment consortium with new order manganese prospecting
rights in the Kalahari Manganese Basin. Subject to the requisite approvals by
the South African Department of Minerals and Energy, Ntsimbintle, Pallinghurst
and certain co-investors will exploit and develop the resources through Tshipi,
with the aim to create a world-class manganese producer within the next three-
year period.
The key property is the southern property which is adjacent to, and indicates
very similar geology to Hotazel Manganese Mine`s Mamatwan Mine (Samancor). A
feasibility study on the southern property has established inferred and
indicated resources of 163.2 million tonnes open-pit "Mamatwan-type" ore at an
average grade of 37% manganese (SAMREC compliant) to a depth of 250 metres. The
property is expected to produce 2.5 million run-of-mine tonnes per annum with a
potential life of mine in excess of 60 years.
Effective 1 July 2009, a subsidiary of South Korea`s Posco, one of the world`s
largest steel producers, concluded an agreement to acquire an indirect 11.36%
interest in Tshipi from Pallinghurst and its co-investors, for a total
consideration of US$34.3 million. The acquisition is subject to the approval by
the South African Department of Minerals and Energy of the transfer of the
mining right from Ntsimbintle to Tshipi. On completion, the Company will dispose
of an indirect interest of 2.27% for US$6.9 million, which will result in its
remaining indirect interest in Tshipi being reduced to 7.71%.
The Investment Manager believes that the Posco acquisition and off-take
arrangement constitute an endorsement of the investment.
JUPITER
A second initiative in the Steel Feed Corporation strategy is the pursuit of an
iron ore consolidation opportunity in the Central Yilgarn area of Western
Australia. The objective is to promote the consolidation of a number of small,
fragmented, early-stage iron ore companies and projects in the Central Yilgarn
area of Western Australia, which individually are not economically viable, and
bring them to production.
The Company entered into a joint arrangement with AIM-listed Red Rock Resources
("RRR") during May 2008 to pursue the strategy.
In March 2009, the Company and RRR entered into a transaction to significantly
increase their existing ownership of Jupiter, with the Company increasing its
ownership to 27.48%. The Company received 47,339,148 newly issued Jupiter shares
(the "manganese option" and the "Mount Alfred bonus option") in exchange for the
11,671,175 Mindax shares held by the Company and AUD1 million in cash. On 1
September 2009, the Company and RRR both received further shares in Jupiter as
the terms of the "manganese option" were met, increasing their ownership to
28.91% and 28.97% respectively.
On 1 July 2009, Jupiter announced the acquisition by Posco Australia
(Proprietary) Limited ("Posco Australia") of a stake in Jupiter for US$6.25
million and an arm`s length off-take agreement with Jupiter for up to 50% of
Jupiter`s direct shipping ore (DSO) grade iron ore production.
GEMFIELDS
The coloured gemstone industry has historically been overlooked, fragmented and
undercapitalised. The situation presents a unique opportunity to create an
integrated coloured gemstone producer, simplifying the coloured gemstone value
chain and thereby enhancing investment returns.
Gemfields is committed to bringing ethically produced, conflict-free coloured
gemstones of certified provenance directly from the mine to the market.
UPDATE ON PROSPECTS FOR GEMFIELDS AND KAGEM MINE
A number of key operational changes have been made at Kagem since the
acquisition by the Company and the co-investors, including a major improvement
in the capacity and condition of mining machinery, a revamping of management and
security, and a significant infrastructure upgrade. The sorting facility has
been expanded and the capacity of the washing plant increased. These
improvements resulted in significant increases in the amount of ore mined and
gemstones produced, with annual gemstone production having increased
approximately three-fold.
However, the current global economic crisis has negatively affected demand for
diamonds and coloured gemstones. Whilst signs of economic revival are appearing,
the markets for these gemstones have yet to show consistent signs of recovery.
Various initiatives have been introduced in response to these circumstances.
Opencast mining has been scaled back to known producing areas. In addition,
Kagem continues to minimise all non-essential capital, project development and
exploration expenditure.
Gemfields appointed a new Chief Executive Officer on 12 February 2009,
Mr Ian Harebottle, a veteran of the coloured gemstone industry. In May 2009,
Gemfields appointed Mr Adrian Banks as Product Director, responsible primarily
for rough sales and therefore the successful delivery of the first auction in
London.
LONDON ROUGH EMERALD AUCTION
Since June 2008, Gemfields had not made any significant sales of either rough or
polished gems, having favoured a policy of inventory building, in an effort to
meet the market`s need for reliable and consistent supply. In July 2009,
Gemfields released the results of its first London auction, along with an
operational update. The auction mainly consisted of Gemfields` higher-quality
rough emeralds, and total sales were US$5.9 million, with 99% of the emerald
lots (by weight) sold.
High-quality rough emeralds represent approximately 5% of Gemfields` production
by volume, and the price per carat rapidly decreases as grade decreases.
Achievable values for rough emerald sales can vary widely from lower-quality to
higher-quality material, ranging from US$0.01 per carat through US$500 per
carat. Since Gemfields has not yet sold any meaningful quantities of lower-
quality material, it remains difficult to forecast the average per carat
revenues that will be derived from Gemfields` overall production profile.
Whilst the immediate future for Gemfields is likely to be challenging in the
current economic environment, the success of the London auction was a small but
significant step towards realising the strategy. The Directors believe that the
steps taken by Gemfields, particularly the concentration on reducing production
costs and improving efficiency, will leave the business well placed for the
eventual recovery in global markets and anticipated increase in demand and
prices for gemstones.
FABERGE
Faberge is one of the most revered names in history and to this day remains
synonymous with artistry and craftsmanship of the highest order. In 2007, the
Investment Manager facilitated the acquisition by the Company and certain co-
investors of their pro rata entitlement to the global portfolio of trademarks,
licences and associated rights relating to the Faberge name from Unilever.
Faberge has (with very modest sums compared to industry standards) made
remarkable progress during the last 18 months. Faberge is now poised to be re-
established as one of the worlds most exclusive and valuable luxury brands. The
first high jewellery collection, "Les Fabuleuses", comprises 132 unique pieces
of which 100 were ready at the 9 September 2009 international launch. The
pieces, all one-off items, range in price from US$40,000 to US$7 million. The
collection, designed by Paris-based artist-jeweller Frederic Zaavy, emphasises
extraordinary colouration, artistry and innovative design, elevating jewellery
into works of art. Initial signs are that the launch collection has been well-
received with significant press coverage.
The first retail presence will be a boutique in Geneva (opening in November
2009), supported by www.faberge.com, a pioneering online Global Flagship store,
which went live on 9 September 2009. The site, imbued with a strong sense of
Peter Carl Faberge`s original sense of style and modernity, replicates the
traditional High Jewellery purchasing experience, which has until today been
confined to a traditional retail environment. The next steps will be to continue
the awareness-building campaign, extend the product range and build sales
momentum.
The successful international launch and enthusiastic media response have
significantly decreased the risks associated with the investment in Faberge and
puts it on track to liberating the significant value inherent in the name.
The unqualified interim review opinion from the auditors, Saffery Champness, is
available from the registered office of the Company.
On behalf of the Board
Brian Gilbertson Arne H Frandsen
Chairman Chief Executive Officer
PALLINGHURST RESOURCES LIMITED
Directors: Brian Gilbertson, Arne H Frandsen, Andrew Willis, Stuart Platt-
Ransom, Clive Harris, Martin Tolcher
Administrator, Secretary and Registered Office: Legis Fund Services Limited, 1
Le Marchant Street, St Peter Port, Guernsey, GY1 4HP, Channel Islands
Investment Manager: Pallinghurst (Cayman) GP L.P., Walker House, 87 Mary Street,
George Town, Grand Cayman, Cayman Islands
Investment Advisor: Pallinghurst Advisors LLP, 54 Jermyn Street, London, SW1Y
6LX, United Kingdom
Auditor: Saffery Champness, La Tonnelle House, St Sampson, Guernsey, GY2 4BF,
Channel Islands
Sponsor: Investec Bank Limited, 100 Grayston Drive, Sandown, Sandton, 2196,
South Africa
www.pallinghurst.com
15 September 2009
Date: 15/09/2009 17:24:02 Produced by the JSE SENS Department.
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