| Tue 16 Mar 2010, 7:30 | | PGL - Pallinghurst Resources Limited - Annual results for the year ended 31 |
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PGL
PGL
PGL - Pallinghurst Resources Limited - Annual results for the year ended 31
December 2009
Pallinghurst Resources Limited
(Previously 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")
Annual results for the year ended 31 December 2009
NAV per share: US$0.68 up 5% / EPS US$0.20 up from US$(0.27)
Arne H. Frandsen, CEO, commented: "In a year undoubtedly filled with many
challenges we continued to improve the value of our investment platforms.
Platmin is now in production and increasing its PGM output to expectation.
We are consolidating our manganese and iron ore interests to create a South
African-Australian approach which is well positioned to participate in this
attractive growth segment. The historic relaunch of Faberge was well
received and the luxury brand is making further inroads from its flagship
store in Geneva. Lastly, Gemfields benefited from better price realisation
after introducing landmark international auctions."
Highlights of period to 31 December 2009
- Platmin`s Pilanesberg Platinum Mine ("PPM") entered its commissioning
period and produced the first PGM concentrate.
- Commencement of the Bankable Feasibility Study on Magazynskraal.
- The Tshipi feasibility study was completed in March 2009, with inferred
and indicated resources of 163.2 million tonnes of manganese ore at an
average grade of 37%.
- Posco agreed to invest into the Tshipi project in June 2009, and will
acquire part of the Company`s stake in Tshipi for US$7 million.
- The Company significantly increased its stake in Jupiter to 25%.
- Posco agreed to invest AUD8 million into Jupiter in July 2009.
- Successful US$107 million/ZAR800 million capital raising by the Company
completed in September 2009.
- Gemfields` successful London and Johannesburg auctions of rough emeralds
raised US$12 million in the second half of 2009.
- The successful international launch of the reunited Faberge brand in
September 2009.
- In December 2009, Faberge opened its first exclusive boutique in one of
Geneva`s most prestigious locations, the rue Pierre Fatio.
On 1 March 2010, after the year-end, Pallinghurst announced a
transformational Tshipi/Jupiter transaction.
Condensed Consolidated Income Statement
Year ended Year ended
31 December 2009 31 December 2008
(audited) (audited)
US$`000 US$`000
Net fair value adjustments 53,195 (27,467)
Net foreign exchange gain/(loss) 8,801 (10,940)
Net gain from the Jupiter transaction 4,617 -
Gains/(losses) on investments 66,613 (38,407)
Loan income 102 497
Dividend income - 84
Portfolio income 102 581
Operating expenses (5,210) (7,070)
Profit/(loss) from operations 61,505 (44,896)
Finance income 599 1,383
Finance costs - (34)
Share of profit/(loss) from associates 328 (2,884)
Net profit/(loss) before taxation 62,432 (46,431)
Income tax expense - -
Net profit/(loss) for the year 62,432 (46,431)
Restated
Weighted average number of ordinary 312,155 171,878
shares in issue (`000)
Headline earnings, basic earnings per 0.20 (0.27)
share and diluted earnings/(loss) per
share (US$) 1
1 The denominator used to calculate the basic loss and headline loss per
share in the prior year has been amended to be the weighted average number
of ordinary shares in issue for 2008, not the closing number of ordinary
shares in issue, increasing the basic loss and headline loss per share from
(US$0.19) per share to (US$0.27) per share.
Condensed Consolidated Statement of Comprehensive Income
Year ended Year ended
31 December 31 December
2009 2008
(audited) (audited)
US$`000 US$`000
Net profit/(loss) for the year 62,432 (46,431)
Net exchange loss on translation of (17) -
foreign operations
Total comprehensive income/(expense) 62,415 (46,431)
for the year
Segmental information
Year ended Year ended
31 December 31 December
2009 2008
(audited) (audited)
US$`000 US$`000
Luxury Brands - Cayman Islands 86,633 46,858
Steel Feed Corporation - Australia 15,845 2,939
Steel Feed Corporation - South Africa 31,261 30,459
Coloured Gemstones - Zambia 8,330 13,317
Platinum - South Africa 96,273 57,358
Net assets not allocated to a 83,340 8,797
reportable segment
Net assets 321,681 159,728
Luxury Brands - Cayman Islands 20,633 5,579
Steel Feed Corporation - Australia 12,231 (5,745)
Steel Feed Corporation - South Africa 385 28,191
Coloured Gemstones - Zambia (5,456) (40,981)
Platinum - South Africa 38,915 (24,953)
Net fair value and foreign exchange 66,708 (37,910)
gains/losses and portfolio income
Other reportable segment - 84
Net income/(expenses) not allocated to (4,277) (8,605)
a reportable segment
Net profit/(loss) for the year 62,432 (46,431)
Condensed Consolidated Balance Sheet
Year ended Year ended
31 December 31 December
2009 2008
(audited) (audited)
US$`000 US$`000
Assets
Investments in associates 2,205 1,805
Investment portfolio 238,342 150,932
Non-current assets 240,547 152,737
Trade and other receivables 1,112 765
Loan receivable from associate - 11,127
Cash and cash equivalents 80,406 20,940
Current assets 81,518 32,832
Total assets 322,065 185,569
Liabilities
Trade and other payables 384 25,841
Current liabilities 384 25,841
Total liabilities 384 25,841
Net assets 321,681 159,728
Equity
Shareholders` equity 321,681 159,728
Capital and reserves attributable to 321,681 159,728
equity shareholders
Total equity 321,681 159,728
Net number of ordinary shares in issue 475,804 247,232
(`000)
Net asset value per ordinary share 0.68 0.65
(US$)
Net tangible asset value per ordinary 0.68 0.65
share (US$)
Condensed Consolidated Cash Flow Statement
Year ended Year ended
31 December 31 December
2009 2008
(audited) (audited)
US$`000 US$`000
Net profit/(loss) for the year 62,432 (46,431)
Non-cash items (66,965) 44,172
Cash items presented separately on the 219 (2,550)
cash flow statement
Movement in working capital (25,894) 25,912
Cash outflows/(inflows) from operating (30,207) 21,103
activities
Dividend received - 84
Taxation paid 1 - -
Additions to investments (20,720) (104,703)
Decrease/(increase) in loans to 11,127 (13,390)
investments
Proceeds from disposal of investments 19 -
Cash flows from operating activities (39,781) (96,906)
Net cash used in investing activities (72) (4,495)
Issue of shares net of costs 99,539 33,761
Finance income 599 1,383
Finance cost - (34)
Net cash generated from financing 100,138 35,110
activities
Net increase/(decrease) in cash and 60,285 (66,291)
cash equivalents
Cash and cash equivalents at the 20,940 86,114
beginning of the year
Exchange (loss)/gain on cash and cash (818) 1,117
equivalents
Cash and cash equivalents at the end of 80,406 20,939
the year
1 Taxation expenses amount to US$74 (2008: US$144)
Condensed Consolidated Statement of Changes in Equity
Year ended Year ended
31 December 31 December
2009 2008
(audited) (audited)
US$`000 US$`000
Balance at the beginning of the year 159,727 172,397
Shares issued - vendor consideration - 33,761
placing
Shares issued - capital raising 99,539 -
Net profit/(loss) for the year 62,432 (46,431)
Net exchange loss on translation of (17) -
foreign operations
Balance at the end of the year 321,681 159,727
Fair valuation of investments
Investment Opening Un- Un- Gains/ Accrued Closing
fair realised realised losses on interest fair
value fair foreign Jupiter US$`000 value
31 Dec value exchange trans- 31 Dec
2008 adjust- gain/ action 2009
US$`000 ments (loss) and other US$`000
US$`000 US$`000 addi-
tions/
dis-
posals
US$`000
Quoted equity
investments
Platmin Limited 32,361 20,984 5,432 - - 58,777
Gemfields plc 13,317 (7,056) 1,600 469 - 8,330
Jupiter Mines 784 6,129 1,475 7,457 - 15,845
Ltd
Mindax Ltd 2,147 - - (2,147) - -
Iron Mountain 8 7 4 (19) - -
Mining Ltd
48,617 20,064 8,511 5,760 - 82,952
Unquoted equity
investments
Faberge Ltd 1 46,858 20,633 - 19,142 - 86,633
Moepi Group 6,687 3,343 - - - 10,030
(Boynton)
Richtrau No. 18,311 9,155 - - - 27,466
123 Ltd
(Magazynskraal)
Tshipi 2 29,940 - - - - 29,940
101,796 33,131 - 19,142 - 154,069
Loan
investments
Tshipi 3 519 - 290 416 96 1,321
Total 150,932 53,195 8,801 25,318 96 238,342
investment
portfolio
1 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$88.07 a share, and the
investment has been valued at that level, in line with the IPEVC valuation
guidelines and IFRS.
2 In the prior year, the comparative numbers for the Tshipi investment are
described as the Kalahari joint venture. Tshipi was incorporated and
assumed the interests of the Kalahari joint venture on 31 March 2009.
3 The Tshipi loan was originally provided to the Kalahari joint venture in
terms of the agreement concluded with Ntsimbintle Mining (Pty) Limited. On
31 March 2009, Tshipi assumed the rights/obligations of the loan. The terms
of the loan are that it is unsecured, and earns interest at the South
African prime rate, currently 10.5% p.a.
Investment Current Unrealised Unrealised Accrued Closing
cost fair value foreign interest fair
US$`000 adjust- exchange US$`000 value
ments gain/ 31 Dec
US$`000 (loss) 2008
US$`000 US$`000
Quoted equity investments
Platmin Limited 32,317 - 44 - 32,361
Gemfields plc 54,401 (34,560) (6,524) - 13,317
Jupiter Mines Ltd 5,197 (3,029) (1,384) - 784
Mindax Ltd 3,350 (293) (909) - 2,147
Iron Mountain 61 (37) (17) - 8
Mining Ltd
95,326 (37,919) (8,790) - 48,617
Unquoted equity
investments
Faberge Ltd 1 41,461 5,397 - - 46,858
Moepi Group 13,373 (6,688) - - 6,687
(Boynton)
Richtrau No.123 36,621 (16,084) (2,226) - 18,311
Ltd
(Magazynskraal)
Tshipi 2 2,000 27,827 113 - 29,940
93,455 10,452 (2,113) - 101,796
Loan investments
Tshipi 3 521 - (37) 38 519
Total investment 189,302 (27,467) (10,940) 38 150,932
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 Tshipi 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.
Abridged Investment Manager`s Report
US$107 million capital raising
In August 2009, the Company announced an equity raising in the form of the
partially underwritten, renounceable rights offer on the securities
exchange of the JSE Limited ("JSE"), with a pre-placement. The rights issue
was conducted during September 2009, successfully raising the total ZAR800
million (approximately US$107 million) intended through the issue of
228,571,376 shares at ZAR3.50 per share. The offer was significantly
oversubscribed.
The rights issue will enable the Company to participate in its pro rata
funding entitlement for each investment platform.
Net asset value per share
The Company`s investment valuations, net of additions, increased by over
US$60 million in the year, and the net asset value per share increased by
5% to US$0.68, despite challenging market conditions. However, the net
asset value per share decreased by 12% in the six-month period since 30
June 2009, as a result of the dilutive effects of the capital raising in
September 2009, which increased the number of shares in issue by
approximately 92%. On a comparable basis, excluding the effect of the
additional shares, the net asset value per share would have increased by
40% during the year, to US$0.90.
Investment platforms
Platinum Group Metals ("PGMs")
African Queen strategy
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 African Queen strategy is to build Pallinghurst`s unique
portfolio of PGM investments into a significant PGM platform through the
acquisition and consolidation of low-cost operations, thereby creating a
new low-cost PGM producer of industry significance.
Background to the African Queen investments
The Company`s first PGM investment was Boynton, via the Moepi Group of
companies. Boynton is the 72.39% operating subsidiary of Platmin Limited.
Boynton`s flagship project, PPM, is located north of the Pilanesberg
intrusion on the Western Limb of the BIC. In December 2008, the Department
of Mineral Resources approved the acquisition by the Company and certain
Pallinghurst Co-Investors, of an interest in Magazynskraal from the
Bakgatla.
The Company and certain Pallinghurst Co-Investors have also secured the
right to acquire 49.9% of the Bakgatla`s interest in Sedibelo at "fair
market value". Sedibelo is a property contiguous to both Magazynskraal and
PPM. This transaction is currently being finalised.
Key developments
June 2009 saw the commissioning of the Merensky circuit and the second
phase Eskom power was connected, giving PPM access to the full 37 MVA
required for production capacity.
In October 2009, Platmin announced significant changes to the executive
team, notably the appointment of mining veteran Tom Dale as chief executive
officer, following the retirement of Ian Watson. Brian Gilbertson was
appointed chairman of the board at the same time.
In January 2010, Platmin announced that the reaching of full capacity of
250,000 PGM ounces per annum would be delayed by some 12 months until early
2011.
Steel Feed Corporation ("SFC")
The Steel Feed Corporation strategy
Competition for raw material supplies (particularly iron ore, coking coal
and manganese) to the global steel industry is intensifying and the major
steel producers and end consumers are seeking to secure their raw materials
through equity ownership of mining companies. The Steel Feed Corporation
strategy is to develop a platform that supplies these key raw materials to
the steel industry.
Key developments
Tshipi
In March 2009, the manganese joint venture vehicle, Tshipi e Ntle Manganese
Mining (Pty) Ltd ("Tshipi"), was established between the Pallinghurst Co-
Investors and Ntsimbintle. Tshipi is owned 50.1% by Ntsimbintle, and 49.9%
by the Pallinghurst Co-Investors, of which the Company`s indirect see-
through interest in Tshipi is 9.98%.
During June 2009, the Company announced that an agreement had been
concluded whereby it would dispose of an indirect interest of 2.27% in
Tshipi for US$6.9 million, subject to the completion of certain conditions,
to a subsidiary of South Korea`s Posco, one of the world`s largest steel
producers.
Also in June 2009, a feasibility study on Tshipi`s southern property
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.
Jupiter
During 2008, the Company entered into a joint venture with AIM-listed Red
Rock Resources plc ("Red Rock") to pursue the Central Yilgarn iron ore
strategy.
The Company significantly increased its existing ownership of Jupiter
during the year to 25.15%.
Jupiter completed an extensive exploration and survey programme on its
manganese projects in the Pilbara at Oakover and completed its drilling
programme at Mount Ida during 2009.
Gemfields plc ("Gemfields")
The Gemfields strategy
The coloured gemstone industry has historically been overlooked, fragmented
and undercapitalised. It is characterised by the absence of large, reliable
suppliers able to consistently deliver meaningful quantities of gemstones
in a professional and transparent manner. Notwithstanding this, the
utilisation of coloured gemstones in the jewellery and fashion sectors has
increased during the last decade.
Gemfields` strategy is to create the leading integrated coloured gemstone
producer, pursuing consolidation and vertical integration on an
international scale. With an initial focus on the emerald sector, Gemfields
is working to put in place coordinated marketing and supply mechanisms akin
to those found in the diamond sector.
A core pillar of the Gemfields strategy is the ability to bring ethically
produced, conflict-free gemstones of certified provenance directly from the
mine to the market on an integrated basis.
Key developments
The Kagem mine is the largest emerald mine in Africa (and one of the
largest in the world) and is Gemfields` key asset.
Gemfields` successful London and Johannesburg auctions of rough emeralds
raised US$12 million in the second half of 2009.
Gemfields initiated a pioneering trial underground mining project in
February 2009 and announced the first production of emerald and beryl in
February 2010.
Faberge
Faberge strategy
The strategy is to re-establish Faberge as one of the world`s most
exclusive and valuable luxury brands.
Key developments
The renaissance of Faberge took place with a highly successful
international launch on 9 September 2009 at which Faberge`s first High
Jewellery collection since 1917, dubbed "Les Fabuleuses", was unveiled.
The launch also unveiled www.faberge.com, a pioneering online "Global
Flagship" store that replicates the traditional High Jewellery purchasing
experience, which has until today been confined to a traditional retail
environment.
Prior to the September 2009 launch, Faberge completed a capital raising of
US$35 million in new equity share capital, in which the Company
participated, to further fund the development of the business by extending
the product range and building sales momentum.
Faberge`s strategy of engaging directly and personally with its customers
saw carefully tailored events hosted in St Moritz and Gstaad in Switzerland
during February and March 2010 respectively.
Accounting policies
The audited results for the year ended 31 December 2009 have been prepared
in accordance with International Financial Reporting Standards ("IFRS"),
IAS 34 Interim Financial Reporting, the JSE Listing Requirements and The
Companies Law (Guernsey), 2008. The accounting policies applied are
consistent with those adopted in the Group`s annual financial statements
for the year ended 31 December 2008, other than as described below.
In the current year the Group has adopted IFRS 8 Operating Segments and IAS
1 (revised 2007) Presentation of Financial Statements (IAS 1R).
The adoption of IAS 1R has had no impact on the reported results or
financial position of the Group although the adoption of the standard has
resulted in a number of changes in presentation and disclosure.
IFRS 8 requires operating segments to be identified on the basis of
internal reporting used by the Chief Operating Decision Maker ("CODM")
(Brian Gilbertson) to assess performance and allocate resources. The
Group`s segmental reporting is presented in accordance with IFRS 8 and
comparatives have been restated accordingly.
Comparative information
Restatement of the cash flow statement
The cash flow statement has been restated to exclude the effect of a non-
cash outflow for the Magazynskraal purchase; exclude the impact of a non-
cash accrued expense from trade and other payables; and to include an
exchange gain on cash balances as a reconciling item between net profit for
the year and net cash outflows from operations.
Commitments
Commitment to invest AUD5 million into Jupiter
The Group committed in March 2009 to provide a further AUD5 million to
Jupiter for working capital purposes. Any expenditure is subject to the
investment criteria of the Group and there has been no actual cash outflow
to date of this announcement.
If the potential Jupiter/Tshipi transaction is successful it is likely that
the terms of the commitment will be amended or will lapse.
Entering into commitment for Sedibelo
The Company has a commitment to take up its share of the investment in
Sedibelo. This transaction is currently being finalised.
Contingent liabilities
There were no contingent liabilities in existence at 31 December 2009. All
liabilities in existence at 31 December 2008 have been extinguished.
Events occurring after the end of the year
In February 2010, the Group terminated its joint venture arrangement with
Red Rock Resources.
On 1 March 2010, the Company announced a proposed transaction where the
Pallinghurst Co-Investors` 49.9% interest in Tshipi would be sold into
Jupiter for new shares in Jupiter. The acquisition consideration implies a
value of approximately AUD490 million for 100% of Tshipi and AUD37.8
million for the Company`s indirect interest of 7.71% of Tshipi. Following
the implementation of the transaction, the Company will own approximately
17.79% of the enlarged Jupiter, and the Pallinghurst Co-Investors will
collectively hold approximately 85% of Jupiter.
Audit opinion
These results have been audited by the Company`s auditors, Saffery
Champness. The unqualified audit opinion is available for inspection at the
company`s registered office.
On behalf of the Board
Brian Gilbertson Arne H. Frandsen
Chairman Chief Executive Officer
Executive directors:
Brian Gilbertson, Arne H. Frandsen, Andrew Willis Independent
Non-Executive Directors:
Stuart Platt-Ransom, Clive Harris, Martin Tolcher
Administrator, Secretary and Registered Office:
1 Le Marchant Street, St Peter Port, Guernsey, GY1 4HP, Channel Islands
Transfer secretaries:
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
Auditor:
Saffery Champness
PO Box 141, La Tonnelle House
Les Banques, St Sampson, Guernsey, GY1 3HS, Channel Islands
Sponsor:
Investec Bank Limited
100 Grayston Drive, Sandown, Sandton, 2196, South Africa
www.pallinghurst.com
Date: 16/03/2010 07:30:01 Produced by the JSE SENS Department.
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