| Mon 28 Mar 2011, 7:05 | | PGL - Pallinghurst Resources Limited - Provisional results for the year ended 31 |
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PGL
PGL
PGL - Pallinghurst Resources Limited - Provisional results for the year ended 31
December 2010
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")
NAV per share: US$0.92 up 36% / Net Profit US$116m up 86%.
"The US$116 million Net Profit for 2010 and the 36% increase in NAV are both
tangible evidence of the strong value-creation in our four investment platforms.
This positive momentum has continued in 2011 with major developments announced
in our PGM, Steel Feed and Gemstone businesses. Most recently, we announced the
transformational Platmin/Sedibelo West consolidation and the go-ahead of our
world-class manganese mine at Tshipi".
Summary
Your Company performed well during the year with the investment valuations
increasing by almost US$200 million (net of cash additions). Jupiter contributed
a substantial portion of the gains, both as a result of the transformational
acquisition of the Tshipi manganese asset and strong share price performance.
Gemfields also performed strongly as a result of a series of record breaking
auctions and robust production performance. Faberge built on its successful
international launch in the prior year, unveiling a second high jewellery
collection. In addition, following the year end, a series of transactions have
been concluded which provide the platform for the consolidation of the Company`s
PGM investments, PPM, Sedibelo and Magazynskraal. This is an important step in
the creation of value for the single largest investment undertaken by your
Company.
Although the recent tragic events across the globe, from earthquakes to civil
unrest, have reduced growth prospects in the affected regions, your Company`s
investments performed strongly over the past year and remain well positioned
to benefit from the strategic initiatives currently underway and from any
further improvements in the global environment.The following are among the
highlights of the financial year ending 31 December 2010:
- Platmin raised US$340 million in equity to fund the completion of the build-up
phase of mining operations at PPM and to participate in a consolidating
industry;
- The Magazynskraal feasibility study drilling programme was completed;
- Jupiter acquired the Pallinghurst Co-Investors` interests in Tshipi;
- Tshipi Borwa`s key new order mining right was granted by the South African
Department of Mineral Resources;
- Jupiter`s share price increased more than threefold during the year;
- Three successful Gemfields` rough emerald auctions realised record revenues of
US$34.3 million;
- An exceptional 6,225-carat rough emerald was discovered at Kagem; and
- Faberge undertook a series of focused client events across Europe and Asia and
launched the all-white-diamond "Carnet de Bal" collection, only its second high
jewellery collection since 1917. Since the end of the year:
- Platmin announced its agreement to the conversion of US$135 million of
convertible notes, at US$0.84 per share;
- A set of transactions to effect the consolidation of the three contiguous
properties of PPM, Sedibelo and Magazynskraal was announced;
- The Pallinghurst Co-Investors, Platmin and the Bakgatla jointly acquired
strategically important infrastructure assets from Barrick, including essential
water and electricity rights;
- Jupiter concluded an AUD150 million capital raising, to fund the Mount Ida and
Mount Mason feasibility studies and for construction of a world class manganese
mine at Tshipi Borwa; and
- Gemfields held a lower-quality rough emerald and beryl auction in Jaipur in
March 2011, realising record revenues of US$9.9 million, with per carat price
increases of 148%.
All figures are rounded to US$000s, meaning some casting differences may be in
evidence.
Condensed consolidated income statement
31 December 31 December
2010 2009
(reviewed) (audited)
US$`000 US$`000
Income
Gains on investments
Unrealised gains in the fair value of investments 135,831 53,195
Unrealised foreign exchange gains in the portfolio 10,770 8,801
of investments
Net gain on Platmin convertible note 47 -
Net realised gain on Tshipi Jupiter transaction 46,005 -
Net realised gain on POSCO transaction 7 -
Net realised gain on Jupiter Mindax transaction - 4,617
Portfolio income
Loan interest income 1,704 96
Structuring fee and other income 1,549 7
Net gains on investments and income from 195,913 66,715
operations
Expenses
Investment Manager`s Benefit (4,626) (3,533)
Performance Incentive accrual (32,512) -
Operating expenses (909) (1,436)
Net foreign exchange gains/(losses) 76 (242)
(37,971) (5,210)
Profit from operations 157,942 61,504
Finance income 494 599
Finance costs - -
Profit before share in net (loss)/profit of 158,436 62,104
associates
Share of net (loss)/profit of associates (292) 328
Profit before tax 158,144 62,432
Income tax expense (42,114) -
Net profit for the financial year 116,030 62,432
Basic and diluted earnings per ordinary share 0.24 0.20
(US$)*
* Headline earnings per share is equal to earnings
per share and diluted earnings per share.
Condensed consolidated statement of comprehensive income
31 December 31 December
2010 2009
(reviewed) (audited)
US$`000 US$`000
Net profit for the year 116,030 62,432
Other comprehensive income, net of tax:
Exchange differences on translation of foreign - (17)
operations
Total comprehensive income for the year 116,030 62,414
Condensed consolidated balance sheet
31 December 31 December
2010 2009
(reviewed) (audited)
US$`000 US$`000
Assets
Non-current assets
Investments in associates 1,614 2,205
Investment portfolio
Quoted equity investments 302,349 82,952
Unquoted equity investments 137,001 154,069
Loans and receivables 31,865 1,321
Platmin convertible note 9,183 -
480,397 238,342
Total non-current assets 482,012 240,547
Current assets
Trade and other receivables 1,213 1,112
Cash and cash equivalents 29,405 80,406
30,618 81,518
Total assets 512,630 322,065
Liabilities
Non-current liabilities
Deferred tax liability 42,114 -
Current liabilities
Performance Incentive accrual 32,512 -
Trade and other payables 294 384
Total current liabilities 32,806 384
Total liabilities 74,919 384
Net assets 437,711 321,681
Capital and reserves attributable to equity
shareholders
Share capital 5 5
Share premium 300,226 300,226
Retained earnings 137,480 21,450
Equity 437,711 321,681
NAV and tangible NAV per ordinary share (US$) 0.92 0.68
Condensed consolidated statement of cash flows
31 December 31 December
2010 2009
(reviewed) (audited)
US$`000 US$`000
Operating activities
Cash inflows/(outflows) from operations (5,643) (30,208)
Additions to investments (14,731) (20,720)
Loans extended to investments (28,845) -
Acquisition of Platmin convertible note (9,136) -
Loan repayments from investments - 11,127
Proceeds from disposal of investment 6,868 19
Finance income received 494 599
Net cash from operating activities (50,993) (39,183)
Investing activities
Increase in investments in associates (30) (72)
Net cash used in investing activities (30) (72)
Financing activities
Issue of ordinary and management shares - 106,509
Share issue costs - (4,558)
Net foreign exchange losses on share issue - (2,412)
Net cash from financing activities - 99,539
Net (decrease)/increase in cash and cash (51,023) 60,284
equivalents
Cash and cash equivalents at the beginning of the 80,406 20,940
year
Exchange gain/(loss) on cash 22 (818)
Cash and cash equivalents at the end of the year 29,405 80,406
Condensed consolidated statement of changes in equity
Share Share Retained Cumulative Total
capital premium earnings Translation equity
US$`000 US$`000 US$`000 adjustment US$`000
reserve
US$`000
Balance at 1 January 2009 2 200,689 (40,982) 17 159,727
Issue of ordinary shares 2 106,507 - - 106,509
Share issue costs - (4,558) - - (4,558)
Net foreign exchange losses - (2,412) - - (2,412)
on share issue
Net exchange loss on - - - (17) (17)
translation of foreign
operations
Net profit - - 62,432 - 62,432
Balance at 31 December 2009 5 300,226 21,450 - 321,681
Total comprehensive income - - 116,030 - 116,030
Balance at 31 December 2010 5 300,226 137,480 - 437,711
Condensed segmental information
Luxury Steel Feed Coloured PGMs Total
brands Corporation gemstones US$`000 US$`000
US$`000 US$`000 US$`000
31 December 2010
Investment portfolio
Quoted investments - 226,436 24,931 50,982 302,349
Unquoted investments 87,006 - - 49,995 137,001
Loan and receivables 3,387 - - 28,478 31,865
Convertible note - - - 9,183 9,183
Total segmental assets 90,393 226,436 24,931 138,637 480,397
Investments in (42,686)
associates, current
assets, and liabilities
Net assets 437,711
31 December 2009
Investment portfolio
Quoted investments - 15,845 8,330 58,776 82,952
Unquoted investments 86,633 29,940 - 37,496 154,069
Loan and receivables - 1,321 - - 1,321
Total segmental assets 86,633 47,106 8,330 96,272 238,342
Investments in 83,339
associates, current
assets, and liabilities
Net assets 321,681
Fair valuation of investments
Investment Openin Unrealis Unrealise Net Additi Accrue Closing
g fair ed fair d foreign realised ons d fair
value value exchange gains on and intere value at
at 31 adjustme gains/ Jupiter dispos st and 31
Decemb nts (losses) transacti al struct December
er US$`000 US$`000 on US$`00 uring 2010
2009 US$`000 0 fees US$`000
US$`00 US$`00
0 0
31 December
2010
Quoted
equity
investments
Platmin 58,776 (22,465) 3,156 - 11,514 - 50,982
Limited
Gemfields 8,330 16,621 (349) - 329 - 24,931
plc
Jupiter 15,845 129,177 8,011 74,886 1,483 - 226,436
Mines Ltd
82,952 123,333 10,818 74,886 10,360 - 302,349
Unquoted
equity
investments
Faberge Ltd 86,633 - - - 373 - 87,006
Moepi Group 10,030 3,343 - - - - 13,373
(Boynton)
Richtrau 27,466 9,155 - - - - 36,621
(Magazynskr
aal)
Tshipi 29,940 - - (29,933) (7) - -
154,06 12,499 - (29,933) 366 - 137,001
9
Loans and
receivables
Faberge - - - - 3,000 387 3,387
Ltd?
Tshipi 1,321 - (48) 1,058 (2,431 100 -
)
Platmin? - - - - 25,845 2,633 28,478
1,321 - (48) 1,058 26,415 3,119 31,865
Total 238,34 135,831 10,770 46,012 37,141 3,119 471,215
investment 2
portfolio
Openin Unrealis Unrealise Net Gains/ Accrue Closing
g fair ed fair d foreign realised (losse d fair
value value exchange gains on s) on intere value at
at 31 adjustme gains/(lo Jupiter Jupite st 31
Decemb nts sses) transacti r US$`00 December
er US$`000 US$`000 on Mindax 0 2009
2008 US$`000 transa US$`000
US$`00 ction
0 and
other
additi
ons
and
dispos
al
US$`00
0
Investment
31 December
2009
Quoted
equity
investments
Platmin 32,361 20,983 5,432 - - - 58,776
Limited
Gemfields 13,317 (7,056) 1,600 - 469 - 8,330
plc
Jupiter 784 6,129 1,475 - 7,457 - 15,845
Mines Ltd
Mindax Ltd 2,147 - - - (2,147 - -
)
Iron 8 7 4 - (19) - -
Mountain
Mining Ltd
48,618 20,063 8,511 - 5,760 - 82,952
Unquoted
equity
investments
Faberge Ltd 46,858 20,633 - - 19,142 - 86,633
Moepi Group 6,687 3,343 - - - - 10,030
(Boynton)
Richtrau 18,311 9,155 - - - - 27,466
(Magazynskr
aal)
Tshipi 29,940 - - - - - 29,940
101,79 33,132 - - 19,142 - 154,069
5
Loans and
receivables
Tshipi? 519 - 290 - 416 96 1,321
Total 150,93 53,195 8,801 - 25,318 96 238,342
investment 2
portfolio
Investment platforms
Platinum Group Metals ("PGMs")
African Queen Strategy
The "African Queen" Strategy is to build Pallinghurst`s portfolio of PGM
investments, through acquisition and consolidation, into a profitable PGM
producer of industry significance.
Key developments
Following the year end, the Investment Manager facilitated a set of transactions
to provide for the consolidation of the three contiguous properties of PPM,
Sedibelo and Magazynskraal (the "Consolidation"), as intended from the outset of
the African Queen Strategy. The transactions include loan funding by the
Pallinghurst Co-Investors to the Bakgatla to acquire Barrick Platinum South
Africa (Pty) Limited`s ("BPSA") 10% interest in Sedibelo, and the Bakgatla`s
participation in a new vehicle also owned by Platmin, and the Pallinghurst Co-
Investors, to acquire certain of BPSA`s long-lead infrastructure items,
including certain strategic water and electricity rights necessary for the
Consolidation. In addition, as announced on 23 March 2011, Platmin will acquire
the area of the Sedibelo property known as Sedibelo-West for US$75 million, an
incremental six million 4E in situ ounces. Furthermore, the Pallinghurst Co-
Investors have increased their aggregate interest in Magazynskraal to 40% (an
additional 6.6%) and will acquire a 49.9% interest in the balance of the
Sedibelo property and certain assets, rights and obligations in respect of the
Consolidation.
These transactions represent an important development in the African Queen
Strategy, and provide the platform for the planned Consolidation and the
potential for significant synergies.
Outlook
Metal prices performed strongly during the year, with palladium being the best
performing commodity, closing at US$802, almost double its opening price of
US$408. Despite certain recent events, including the tragic earthquake in Japan,
global industrial demand is expected to strengthen over the coming years. In
addition, escalating cash costs and missed production targets continue to affect
many companies in the PGM industry. Accordingly, the Company`s PGM investments
are well placed to benefit from an improved environment as Platmin continues its
build-up to full production capacity and as the Consolidation is implemented.
Steel Feed Corporation ("SFC")
Steel Feed Corporation Strategy
The SFC Strategy is to develop a platform to supply the key raw materials
required in the production of steel (in particular manganese, iron ore and
coking coal).
Key developments
On 1 March 2010, Jupiter announced the acquisition of the Pallinghurst Co-
Investors` collective 49.9% equity and loan interests in Tshipi in return for
1.2 billion new shares issued at a price of AUD0.211 per share, valuing the
49.9% stake at AUD245 million.
On 19 January 2011, Jupiter announced an inferred magnetite resource in the
central section of its Mount Ida Magnetite Project of 530 million tonnes at
31.9% Fe, exceeding the initial objective of 400 million tonnes. The central
section represents only 30% of the target length of the strike and supports the
initial conceptual expectation of 1.1-1.3 billion tonnes of magnetite iron ore.
On 15 March 2011, Jupiter announced the completion of its Mount Ida scoping
study that provides for the extraction of 25 million tonnes per annum of ore to
produce ten million tonnes per annum of high grade magnetite concentrate, with
an estimated iron grade in excess of 68%, and low levels of impurities. A
120,000 metre drilling programme at Mount Ida and Mount Mason is planned as part
of a feasibility study and is expected to result in an increase in the resource
base and test the economic viability of establishing an initial DSO/haematite
operation prior to any magnetite operation.
Outlook
Demand for steel in the emerging nations, particularly in China (which now
accounts for almost half of global steel production) and India (expected to
become the world`s second largest steel manufacturer by 2016), remains strong.
The Company`s Steel Feed Corporation investments are well positioned to benefit
from this growing demand for steel (and, therefore, input raw materials) in an
improving economic environment.
Gemfields plc ("Gemfields")
Gemfields Strategy
The coloured gemstone industry has historically been overlooked, fragmented and
undercapitalised. It is characterised by the absence of large, reliable
suppliers consistently able to 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 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 Gemfields` strategy is to bring ethically-produced,
conflict-free rough gemstones of certified provenance directly from the mine to
the market. Key developments
Gemfields held two higher-quality rough emerald auctions during the year ending
31 December 2010, each achieving both record revenues and record per carat
prices. The July 2010 auction in London achieved total revenues of US$7.5
million from 0.8 million carats sold, representing an average price of US$9.35
per carat. The December 2010 auction in Johannesburg achieved
total revenues of US$19.6 million from 0.75 million carats sold, representing an
average price of US$26.20 per carat. Compared with the first auction of higher-
quality material in July 2009, the December 2010 auction achieved a threefold
increase in total revenue and an increase in average per carat prices of nearly
sixfold, a significant endorsement of Gemfields` formalised and consistent
method of selling coloured gemstones by auction. Kagem`s total production of
18.7 million carats for the six months ending 31 December 2010 exceeded the
entire production of 17.4 million carats in the prior year (ending 30 June
2010). Kagem`s unaudited total operating costs for the six months ending 31
December 2010 totalled US$6.6 million, implying an average unit production cost
of US$0.36 per carat of emerald and beryl (versus US$0.73 per carat for the year
ending 30 June 2010).
Outlook
The ongoing successful auctions, combined with the operational improvements and
innovations, provide a solid platform from which to pursue future growth as the
global economy improves. There continue to be encouraging signs of increasing
demand for emeralds from all key markets, with prices expected to remain strong.
Faberge
Faberge Strategy
The strategy is to re-establish Faberge as one of the world`s most exclusive and
valuable luxury brands.
Key developments
Faberge is expanding its client base through diversification of the product
portfolio, whilst maintaining the highest standards of design, craftsmanship and
materials. To coincide with London`s Russian Week in December 2010, Faberge
launched the all-white-diamond "Carnet de Bal" collection, only its second high
jewellery collection since 1917. Fusing tradition and modernity, and with pieces
priced at up to US$1 million, the "Carnet de Bal" collection draws inspiration
from winter themes and works by Peter Carl Faberge to deliver contemporary
interpretations of styles reminiscent of the Belle Epoque.
During August 2010, Faberge finalised the termination of the licensing agreement
held by Franklin Mint of the United States since 1986. Only one licence now
remains of those inherited from Unilever. The termination of the prior licensing
agreements gives increased control over the brand. Outlook
Building on the successful international launch in the prior year, Faberge`s
rising profile and increased control of the brand have put Faberge on track to
liberate the significant value inherent in the revered name.
Accounting policies
This preliminary report has 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 accounting policies applied in this preliminary report are consistent with
those adopted and disclosed in the Group`s annual report for the year ended 31
December 2009. There have been various amendments to accounting standards and
new interpretations issued by the International Accounting Standards Board,
applicable from 1 January 2010. None of these amendments and new interpretations
has had a material impact on the Group.
Commitments and events occurring after the end of the year
The Company had a commitment to take up its share of the investment in Sedibelo
at 31 December 2010.
A set of transactions to proceed with the African Queen Consolidation has been
facilitated since the year end, as described more fully above.
Contingent liabilities
The Group had no significant contingent liabilities at 31 December 2010 or 31
December 2009.
Review report
This provisional report has been reviewed by the Company`s auditor, Saffery
Champness. The review opinion from the auditor is available from the registered
office of the Company. The review opinion confirms that nothing has come to the
auditor`s attention that might cause them to believe that the provisional
financial statements in the provisional report were not prepared, in all
material respects, in accordance with IAS34 Interim Financial Reporting, and in
accordance with The Companies (Guernsey) Law 2008. The audited annual report
will be mailed to shareholders during May 2011 and made available on the
Company`s website www.pallinghurst.com.
On behalf of the Board
Brian Gilbertson Arne H. Frandsen
Chairman Chief Executive
www.pallinghurst.com 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")
Executive directors: Brian Gilbertson, Arne H. Frandsen, Andrew Willis
Independent non-executive directors: Stuart Platt-Ransom, Clive Harris, Martin
Tolcher, Patricia White 1 Administrator, secretary and registered office: 11 New
Street, St Peter Port, Guernsey, GY1 3EG, 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
1 Appointed Permanent Alternate to Stuart Platt-Ransom and Martin Tolcher on 7
September 2010.
Date: 28/03/2011 07:05:04 Produced by the JSE SENS Department.
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