| Wed 20 Mar 2013, 17:05 | | PALLINGHURST RESOURCES LIMITED December 2012 fina* |
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PGL
PALLINGHURST RESOURCES 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")
PALLINGHURST RESOURCES LIMITED
AUDITED ANNUAL RESULTS
for the year ended 31 December 2012
NAV increased by ZAR 700 million to ZAR3.7 billion.
Key milestones achieved:
Consolidation of Pallinghursts PGM interests.
Landmark investment of ZAR3.24 billion by the Industrial Development Corporation.
Building of Tshipi Borwa mine and first manganese ore shipped.
Merger of Faberg? and Gemfields.
Ruby mining activities commenced.
Jupiter completed successful capital raising.
The Company successfully raised ZAR640 million in rights offer.
CHAIRMANS STATEMENT
The turbulence created by the Global Financial Crisis in 2008 is still impacting the markets. Whilst we have recently seen the Dow and FTSE indices reach new highs, there remains a sentiment of pessimism about global growth and in particular the lack of growth from the developed economies. In the mining industry such uncertainty affects access to funding and delays the commitment to new projects. Added to this, the increase in legislation and regulatory restrictions is making the development of projects far more costly and time consuming.
Such an environment does however create opportunities and we continue to explore transactions in our existing investments and in new areas. The Companys balance sheet remains strong; we have no debt and have funded all our investments with equity capital. This investment philosophy has made us financially independent and provided the robustness needed in times of financial uncertainty.
The management teams of each of our Investment Platforms have made significant progress during 2012 and each is advancing towards the desired strategic outcome. I remain confident that all of the platforms will realise their inherent value potential, for the benefit of
all shareholders.
Particular highlights of 2012 were the consolidation of all the Companys PGM properties and the landmark investment by the IDC; the building of the Tshipi Borwa mine and its first successful shipment of manganese ore; and the merger of Faberg? and Gemfields, which will radically change the coloured gemstone industry, realising our vision of a De Beers for Coloured Gemstones.
It brings me pleasure to welcome Dr Christo Wiese to the Board. As one of Africas most successful businessmen, he brings unique insights from which we will all benefit greatly. Following Dr Wieses appointment, Ms Patricia White has stepped down from the Board. My thanks go to her for her substantial contribution over the past years in her roles as both a Director and an Alternate Director.
Finally, I extend my thanks for the hard work and substantial contributions of my fellow Directors and of the management teams of our portfolio companies.
Brian Gilbertson
Chairman
CHIEF EXECUTIVES STATEMENT
In my Chief Executives Statement last year, I predicted that our current investments would soon enter their harvesting season. That prediction was accurate and I am delighted to report that for the past 12 months the ripening has been significant for all our platforms, both due to the operational milestones achieved and as a consequence of significant consolidation activities.
Platinum Group Metals: We achieved the successful consolidation of all our PGM investments, creating Sedibelo Platinum Mines, a PGM producer with a unique growth profile and a substantial, shallow and contiguous resource base. With production levels now at almost 150,000 4E PGM ounces on an annualised basis, the harvesting will commence and the unlocking of value looks promising. Another milestone achieved was the successful completion of the IDCs ZAR3.24 billion investment for a 16.2% equity stake, giving Sedibelo Platinum Mines one of the strongest balance sheets in the industry and securing the funding needed to develop its attractive portfolio of assets. With its shallow resource base of approximately 70 million 4E PGM ounces and an aggressive growth plan, Sedibelo Platinum Mines is well-positioned to maximise value in an IPO which is expected to take place within the next 12 months.
Steel Making Materials: For the past year, Tshipi has been a hive of activity with 70 metres of overburden being removed to expose the manganese ore. Much of the processing and other necessary infrastructure has been installed, in particular a 7.9 kilometre rail siding. In the last quarter of 2012, the Tshipi mine shipped its first manganese ore. We have taken this investment from Greenfield-to-Producer and are confident that the mine will provide benefits for decades to come. The ramp up of production as well as potential Mamp;amp;A growth makes Tshipi a truly exciting investment, which is set to provide significant value for all stakeholders. In our Australian iron ore initiatives, the Mount Ida feasibility study identified a major reserve base with almost two billion tonnes of iron ore. However, the decision was made to hold further development on Mount Ida until there is more clarity regarding the logistics of the project as well as a firmer iron ore price. Mount Ida remains one of the largest magnetite resources known in the Yilgarn region of Western Australia. Optimisation work continues on Mount Mason and if port access can be secured, it has the potential to rapidly generate significant free cash flows.
Gemstones amp;amp; Luxury: Our emerald operation now consistently produces significant quantities of quality stones and Gemfields has successfully positioned itself as the worlds largest and most prominent producer of emeralds. Gemfields has now commenced mining activities at the new ruby mine in Mozambique, and I expect to see the first auction of ruby production in the coming months. Given the long-life nature of our operations, we expect profitable harvests for years to come. Lastly, Faberg? has progressed in its planned build-up and the synergies of the combination of Gemfields and Faberg? will accelerate the development of the worlds preeminent coloured gemstone producer, with access to the significant parts of the value-chain from mine-to-market.
In spite of very challenging market conditions, the Company successfully completed one of the largest rights offers on the JSE in 2012, raising some ZAR640 million at ZAR2.24 per share. The funds were needed for our existing Investment Platforms while providing the ability to make new investments. The management of the Company is grateful for this vote of confidence from shareholders, and we believe that the funds will successfully contribute to the value growth of the Company.
Besides a continued focus on realising the inherent value potential of Pallinghusts investment portfolio, the key challenge of 2013 will be to get the Companys NAV more adequately reflected in the share price. The current share price performance is unsatisfactory and will have to be addressed in the year ahead. However, I have been consistent in saying that when we deliver the first harvest, the share price should respond as the market sees the significant value embedded in our Investment Portfolio being realised.
Arne H. Frandsen
Chief Executive
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2012
2012 2011
US$ US$
INCOME
Investment Portfolio
Realised gain on Sedibelo Platinum Mines transaction 50,932,811 -
Impairment of Faberg? loan (1,638,471) -
Realised loss on Jupiter foreign exchange contract (318,880) -
Realised fair value gain on Jupiter shares 3,250,521 -
Unrealised fair value gains 18,255,119 14,533,179
Unrealised fair value losses (119,429,986) (150,362,622)
Unrealised foreign exchange gains 12,148,997 -
Unrealised foreign exchange losses - (1,395,079)
Net loss on Platmin Note - (180,033)
Realised foreign exchange gains 1,440,847 -
Realised foreign exchange gain on Jupiter forward contract - 429,330
Realised fair value loss on acquisition of Jupiter shares - (1,478,098)
(35,359,042) (138,453,323)
Investment Portfolio revenue
Loan interest income 1,681,340 893,057
Structuring fee and other income 375,000 -
2,056,340 893,057
(33,302,702) (137,560,266)
EXPENSES
Investment Managers Benefit (5,102,237) (4,627,775)
Performance Incentive accrual reversal - 32,512,233
Operating expenses (806,588) (773,239)
Foreign exchange gains - 14,364
Foreign exchange losses (1,237,920) (17,984)
(7,146,745) 27,107,599
Loss from operations (40,449,447) (110,452,667)
Finance income 281,198 136,228
Finance costs - -
Net finance income 281,198 136,228
Loss before share in loss of associates (40,168,249) (110,316,439)
Share in profit/(loss) of associates 1,119,941 (4,105,703)
Loss before tax (39,048,308) (114,422,142)
Tax credit - 42,113,518
NET LOSS FOR THE YEAR (39,048,308) (72,308,624)
Basic and diluted loss per ordinary share (0.06) (0.15)
All elements of loss for the year and the comparative year are attributable to owners of the parent company. There are no non-controlling interests. The accompanying notes form part of these Condensed Financial Statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2012
2012 2011
US$ US$
NET LOSS FOR THE YEAR (39,048,308) (72,308,624)
Items of other comprehensive income - -
TOTAL COMPREHENSIVE LOSS FOR THE YEAR (39,048,308) (72,308,624)
All elements of total comprehensive expense for the period and all comparative periods are attributable to owners of the parent. There are no non-controlling interests. The accompanying notes form part of these Condensed Financial Statements.
CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2012
2012 2011
US$ US$
Non-current assets
Investments in associates 1,936,241 21,067,826
Investment Portfolio
Quoted investments 97,675,366 125,191,591
Unquoted investments 217,951,326 190,456,562
Loans and receivables 50,599,070 22,436,091
366,225,762 338,084,244
Total non-current assets 368,162,003 359,152,070
Current assets
Trade and other receivables 1,379,301 1,179,732
Cash and cash equivalents 31,975,952 5,274,327
Total current assets 33,355,253 6,454,059
Total assets 401,517,256 365,606,129
Current liabilities
Trade and other payables 159,344 203,642
Total current liabilities 159,344 203,642
Total liabilities 159,344 203,642
Net assets 401,357,912 365,402,487
Share capital 7,606 4,760
Share premium 375,227,145 300,226,258
Retained earnings 26,123,161 65,171,469
Equity 401,357,912 365,402,487
NAV and tangible NAV per share 0.53 0.77
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2012
2012 2011
US$ US$
Cash outflows from operations (5,777,691) (5,457,643)
Additions to investments (33,699,110) (5,568,750)
Loans extended to investments (28,120,111) (18,500,000)
Loan repayments from investments - 28,821,690
Finance income received 281,198 136,228
Net cash outflows from operating activities (67,315,714) (568,475)
Cash flows from/(used in) investing activities
Amounts invested in associates (141,729) (23,559,037)
Cash flows from associates 20,393,255 -
Net cash from/(used) in investing activities 20,251,526 (23,559,037)
Cash flows from financing activities
Rights Offer- proceeds 77,241,092 -
Rights Offer- costs (2,187,704) -
Rights Offer- foreign exchange losses (49,655) -
Net cash from financing activities 75,003,733 -
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 27,939,545 (24,127,512)
Cash and cash equivalents at the beginning of the year 5,274,327 29,405,459
Foreign exchange gain on cash - 14,364
Foreign exchange loss on cash (1,237,920) (17,984)
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 31,975,952 5,274,327
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AT 31 DECEMBER 2012
Share capital Share premium Retained earnings Total equity
US$ US$ US$ US$
Balance at 1 January 2011 4,760 300,226,258 137,480,093 437,711,111
Total comprehensive loss for the year - - (72,308,624) (72,308,624)
Balance at 31 December 2011 4,760 300,226,258 65,171,469 365,402,487
Rights Offer- proceeds 2,846 77,238,246 - 77,241,092
Rights Offer- costs - (2,187,704) - (2,187,704)
Rights Offer- foreign exchange losses - (49,655) - (49,655)
Total comprehensive loss for the year - - (39,048,308) (39,048,308)
Balance at 31 December 2012 7,606 375,227,145 26,123,161 401,357,912
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
Segmental reporting
The Groups segmental reporting is based around its four investment platforms (PGMs, Steel Making Materials, Gemfields and Luxury Brands) each of which is categorised as an operating segment.
The Chief Operating Decision Maker (CODM) is Mr Gilbertson, the Chairman, who measures the performance of each operating segment by assessing the fair value of the Groups Investment Portfolio on a regular basis.
The transaction whereby Gemfields acquired 100% of the shares in Faberg? completed on 28 January 2013. The Group will therefore present the Coloured Gemstones and Luxury Brands platforms as a single segment in future reporting periods and present restated comparative figures accordingly.
The Income Statement segmental information provided to the CODM for the year ended 31 December 2012 is as follows:
PGMs Steel Making Gemfields Luxury Brands Unallocated Total
Materials
US$ US$ US$ US$ US$ US$
31 December 2012
Income
Unrealised fair value gains - - 18,255,119 - - 18,255,119
Unrealised fair value losses - (65,879,656) - (53,550,330) - (119,429,986)
Unrealised foreign exchange gains 8,293,290 1,977,488 1,878,219 - - 12,148,997
Realised foreign exchange gain 1,440,847 - - - - 1,440,847
Realised gain on subscription for - 2,931,641 - - - 2,931,641
Jupiter shares
Realised gain on Sedibelo 50,932,811 - - - - 50,932,811
Platinum Mines transaction
Impairment of Faberg? loan - - - (1,638,471) - (1,638,471)
Loan interest income - - - 1,681,340 - 1,681,340
Net segmental income/(expense) 60,666,948 (60,970,527) 20,133,338 (53,507,461) - (33,677,702)
Other income 375,000 375,000
Net losses on investments and income from operations (33,302,702)
Expenses, net finance income,
share of loss of associates and
taxation (5,745,606) (5,745,606)
Net segmental profit/ (loss) 60,666,948 (60,970,527) 20,133,338 (53,507,461) (5,370,606) (39,048,308)
The comparative Income Statement segmental information for the year ended 31 December 2011 is as follows:
PGMs Steel Making Gemfields Luxury Brands Unallocated Total
Materials
US$ US$ US$ US$ US$ US$
31 December 2011
Income
Unrealised fair value gains - - 14,533,179 - - 14,533,179
Unrealised fair value losses (5,211,360) (145,151,262) - - -(150,362,622)
Unrealised foreign exchange gains - - - - - -
Unrealised foreign exchange losses (1,317,174) (49,059) (28,846) - - (1,395,079)
Net unrealised loss on Platmin Note (180,033) - - - - (180,033)
Realised foreign exchange gain on - 429,330 - - - 429,330
Jupiter forward contract
Realised loss on Jupiter shares - (1,478,098) - - - (1,478,098)
Loan interest income 343,506 - - 549,551 - 893,057
Net segmental (expense)/ income (6,365,061) (146,249,089) 14,504,333 549,551 -(137,560,266)
Other income - -
Net losses on investments and income from operations (137,560,266)
Expenses, net finance income,
share of loss of associates and
taxation 65,251,642 65,251,642
Net segmental (loss)/profit (6,365,061) (146,249,089) 14,504,333 549,551 65,251,642 (72,308,624)
The segmental information provided to the CODM for the reportable segments for the year ended 31 December 2012 is as follows:
PGMs Steel Making Gemfields Luxury Brands Total
Materials
US$ US$ US$ US$ US$
31 December 2012
Investment Portfolio
Listed investments - 38,106,215 59,569,151 - 97,675,366
Unlisted investments 184,495,453 - - 33,455,874 217,951,327
Loans and receivables - - - 50,599,069 50,599,069
Total segmental assets 184,495,453 38,106,215 59,569,151 84,054,943 366,225,762
Investments in associates, 35,132,150
current assets and liabilities
Net assets 401,357,912
The comparative segmental information provided for the year ended 31 December 2011 is as follows:
PGMs Steel Making Gemfields Luxury Brands
Materials
US$ US$ US$ US$ US$
31 December 2011
Investment Portfolio
Listed investments - 85,755,778 39,435,813 - 125,191,591
Unlisted investments 103,450,358 - - 87,006,204 190,456,562
Loans and receivables - - - 22,436,091 22,436,091
Total segmental assets 103,450,358 85,755,778 39,435,813 109,442,295 338,084,244
Investments in associates, 27,318,243
current assets and liabilities
Net assets 365,402,487
9. Investments
The reconciliation of the Investment Portfolio from 1 January 2012 to 31 December 2012 is as follows:
Investment Opening at 1 Unrealised Unrealised Unrealised Realised Additions Impairment Accrued Closing at 31
January 2012 fair value fair value foreign foreign and of interest amp;amp; December 2012
gains losses(4) exchange exchange disposals Faberg? structuring
gain gain (5),(6) loan(4) fee
US$ US$ US$ US$ US$ US$ US$ US$ US$
Listed equity investments
Gemfields plc 39,435,813 18,255,119 - 1,878,219 - - - - 59,569,151
Jupiter Mines 85,755,778 - (65,879,656) 1,977,488 - 16,252,605 - - 38,106,215
Ltd
125,191,591 18,255,119 (65,879,656) 3,855,707 - 16,252,605 - - 97,675,366
Unlisted equity investments
Faberg? Ltd 87,006,204 - (53,550,330) - - - - - 33,455,874
Moepi Group 3,373,315 - - - - (13,373,315) - -
(1)
Richtrau 36,621,344 - - - - (36,621,344) - - -
(1)
Sedibelo - - - - - - - - -
(1)
Platmin Ltd 53,455,699 - - - 1,440,847 (54,896,546) - - -
(1)
Sedibelo - - - 8,293,290 - 176,202,162 - - 184,495,452
Platinum
Mines(1)
190,456,562 - (53,550,330) 8,293,290 1,440,847 71,310,957 - - 217,951,326
Loans and receivables
Faberg? - 22,436,091 - - - - (22,942,061) - 505,970 -
US$25 million
loan(2)
Faberg?- - - - - - 51,062,172 (1,638,471) 1,175,369 50,599,070
US$50 million
loan(2),(3)
22,436,091 - - - - 28,120,111 (1,638,471) 1,681,339 50,599,070
Total 338,084,244 18,255,119 (119,429,986) 12,148,997 1,440,847 115,683,673 (1,638,471) 1,681,339 366,225,762
(1) The Group vended its interests in the Moepi Group, Richtrau (Magazynskraal) and Sedibelo into Sedibelo Platinum Mines for new shares during the year.
(2) The Group previously provided a commitment to loan Faberg? up to US$25,000,000 (excluding interest). At 31 December 2011, Faberg? had drawn down US$21,500,000. The loan was fully drawn down on 19 April 2012. The loan, including interest, was due for repayment by 31 August 2012. On 15 June 2012, a new loan facility was entered into with Faberg?, the US$25,000,000 loan was subsumed into the new loan arrangement, see below.
(3) The Group entered into a new loan facility with Faberg? on 15 June 2012. The original facility (US$25,000,000 excluding interest) was replaced by a new facility to loan Faberg? up to US$50,000,000 (including the original US$25,000,000, excluding interest).
The key terms of the revised loan facility were as follows:
A further US$375,000 structuring fee accrued upon drawdown of the loan.
The loan earns interest at three month US$ LIBOR plus 4% until 1 July 2013.
The balance of the loan, including interest, must be repaid by 31 August 2013.
The Group would be able to convert the loan into new Faberg? equity shares at US$35 per share. This conversion would only occur in certain circumstances; if the loan is not repaid by 31 August 2013, or if a transaction or corporate event occurs affecting more than 30% of Faberg?s shares in issue, such as a sale of shares or issue of new shares. The loan has been converted as part of the terms of the Gemfields/Faberg? Merger.
(4) The explanations for the unrealised fair value loss on the Groups equity investment in Faberg? and the impairment of the Groups loan to Faberg? are detailed in the Group~s Financial Statements.
(5) The Group has entered into various acquisitions and disposals during the year, as detailed below:
Transfer Additions and Sedibelo Platinum Mines Gain on Jupiter Total
disposals(4) additions and disposals(3) acquisition
US$ US$ US$ US$ US$
Listed equity investments
Gemfields plc - - - - -
Jupiter Mines Ltd - 13,320,964 - 2,931,641 16,252,605
- 13,320,964 - 2,931,641 16,252,605
Unlisted equity investments
Faberg? Ltd - - - - -
Moepi Group (Boynton) - - (13,373,315) - (13,373,315)
Richtrau - 1,855,949 (38,477,293) - (36,621,344)
Sedibelo - 18,522,197 (18,522,197) - -
Platmin Ltd - - (54,896,546) - (54,896,546)
Sedibelo Platinum Mines - - 176,202,162 - 176,202,162
- 20,378,146 50,932,811 - 71,310,957
Loans and receivables
Faberg? Ltd (26,067,061) 3,125,000 - - (22,942,061)
US$25 million loan
Faberg? Ltd 26,067,061 24,995,111 - - 51,062,172
US$50 million loan
- 28,120,111 - - 28,120,111
Total - 61,819,221 50,932,811 2,931,641 115,683,673
(6)The additions to equity investments balance in the Consolidated Statement of Cash Flows is US$33,699,110. This is the sum of additions into Jupiter, Richtrau and Sedibelo.
The loans extended to investments balance in the Consolidated Statement of Cash Flows is US$28,120,111. This is the sum of additions to the Faberg? US$25 million loan and the Faberg? US$50 million loan.
The reconciliation of the Groups Investment Portfolio from 1 January 2011 to 31 December 2011 is as follows:
Investment Opening Unrealised Unrealised Unrealised Realised Net realised Additions Accrued Platmin Closing
at 1 fair value fair value foreign foreign loss on and interest amp;amp; Reclassi- at 31
January gains losses exchange exchange aquisition of disposals structuring fication December
2011 losses gain on Jupiter shares fee (4) 2011
Jupiter and loss of
forward Platmin Note
contract
US$ US$ US$ US$ US$ US$ US$ US$ US$ US$
Listed equity
investments
Platmin Ltd 50,981,604 - (5,211,360) (1,317,174) - - 9,002,629 - (53,455,699) -
Gemfields plc 24,931,480 14,533,179 - (28,846) - - - - - 39,435,813
Jupiter 226,436,117 - (145,151,262) (49,059) 429,330 (1,478,098) 5,568,750 - - 85,755,77
Mines Ltd
302,349,201 14,533,179 (150,362,622) (1,395,079) 429,330 (1,478,098) 14,571,379 - (53,455,699) 125,191,591
Unlisted equity
investments
Faberg? Ltd 87,006,204 - - - - - - - - 87,006,204
Moepi Group 13,373,315 - - - - - - - - 13,373,315
Richtrau 36,621,344 - - - - - - - - 36,621,344
Platmin Ltd - - - - - - - - 53,455,699 53,455,699
137,000,863 - - - - - - - 53,455,699 190,456,562
Loans and receivables
Faberg? Ltd(1) 3,386,540 - - - - - 18,500,000 549,551 - 22,436,091
Platmin Ltd(2)28,478,184 - - - - - (28,821,690) 343,506 - -
31,864,724 - - - - - (10,321,690) 893,057 - 22,436,091
Platmin Note
Platmin Note(3)9,182,662 - - - - (180,033) (9,002,629) - - -
9,182,662 - - - - (180,033) (9,002,629) - - -
Total 480,397,450 14,533,179 (150,362,622) (1,395,079) 429,330 (1,658,131) (4,752,940) 893,057 - 338,084,244
Investment
Portfolio
(1) The Group previously provided a commitment to loan Faberg? up to US$25,000,000, which could be drawn down until 31 July 2012. At 31 December 2011, Faberg? had drawn down US$21,500,000. The US$375,000 structuring fee for the arrangement of the loan accrued at the date of the first drawdown. The loan earned interest at three month US$ LIBOR plus 4%. A further US$3,000,000 was drawn down subsequent to 31 December 2011; the outstanding balance of US$24,500,000 (excluding interest and structuring fee) was due for repayment by 31 August 2012.
(2) The Group provided a loan to Platmin during 2010. Platmin repaid the outstanding loan of US$28,821,690 including accrued interest and the structuring fee on 28 February 2011.
(3) The Group acquired an indirect interest in a convertible note issued by Platmin (the Platmin Note) during 2010. The Platmin Note was converted to equity in full on 31 March 2011. The Group realised a loss on conversion of US$180,033.
(4) Platmin delisted from AIM, the JSE and the TSX during 2011. Platmin suspended its listing on the JSE on 23 December 2011, and the last JSE trading day was 22 December 2011. Accordingly, the Groups investment in Platmin was reclassified from listed to unlisted equity investments in the Platmin reclassification column.
Basis of preparation
The Directors are responsible for preparing the Annual Report and Financial Statements (the Financial Statements) in accordance with The Companies (Guernsey) Law, 2008, the AC500 Standards issued by the Accounting Practices Board of the South African Institute of Chartered Accountants (the APB), the JSE Listing Requirements and the BSX Listing Regulations.
The Group has prepared Financial Statements under IFRS for the year ending 31 December 2012. These Financial Statements have been audited by the Companys auditors, Saffery Champness; their audit opinion was unqualified, and did not draw attention to any emphases of matter. The audit opinion is available for inspection at the Companys registered office. The Financial Statements will be mailed to shareholders during March 2013, and made available on the Companys website, www.pallinghurst.com.
This preliminary announcement, which includes condensed financial statements (the Condensed Financial Statements) does not contain sufficient information to fully comply with IFRS. The Condensed Financial Statements have been prepared in accordance with IAS34 Interim Financial Reporting, the Companies (Guernsey) Law, 2008, the AC500 Standards issued by the APB, the JSE Listing Requirements and the BSX Listing Regulations.
Accounting policies
The Groups accounting policies were last disclosed in full in the Group`s financial statements for the year ended 31 December 2011. No standards were introduced during 2012 which had an impact on the Groups reporting or Financial Statements. The Group adopted a revision to IAS12 Income Taxes during 2012. The adoption of this revision has not had any significant impact on the Condensed Financial Statements or Financial Statements. The Group early adopted IFRS13 Fair Value Measurement during 2011.
Various new and revised accounting standards, amendments to standards and new interpretations have been issued by the International Accounting Standards Board but are not yet effective. The Directors have not yet fully determined what the impact of each new standard, amendments and interpretation will be. The accounting policies applied are consistent with those adopted and disclosed in the Group`s financial statements for the year ended 31 December 2011 other than in respect of these changes.
Contingent liabilities and contingent assets
The Group has acted as a limited guarantor for the lease of Faberg?s New York retail outlet at 694 Madison Avenue since 31 August 2011. The circumstances relating to the guarantee have not changed since 31 December 2011. Since the completion of the Gemfields/Faberg? Merger, it is the intention that Gemfields now undertake this guarantee on Faberg?s behalf and arrangements are being made to transfer the guarantee into Gemfields name. The Directors assessment is that the maximum amount of the Groups contingent liability continues to be US$219,000.
The Group had no other significant contingent liabilities or contingent assets at 31 December 2012 or 31 December 2011.
Commitments
The Group had no material commitments at the date of signature of these Financial Statements.
Events occurring after the end of the year
Completion of Gemfields/Faberg? Merger
The Gemfields/Faberg? Merger completed on 28 January 2013. The Group valued its interests in Faberg? based on the prevailing Gemfields share price and exchange rate at 31 December 2012. By the date of completion of the transaction, the Gemfields share price had fallen to GBP0.2688 per share.
The Group therefore incurred the following loss on completion of the Gemfields/Faberg? Merger at 28 January 2013:
Realised fair value loss on disposal of Faberg? equity shares
US$
Fair value of 60,290,905 Gemfields shares receivable 25,503,494
Fair value of Faberg? equity interest at 31 December 2012 (33,455,874)
(7,952,380)
Realised loss on conversion of Faberg? loan to Gemfields shares US$
Fair value of 91,184,694 Gemfields shares receivable 38,571,793
Previous carrying value of Faberg? loan at 31 December 2012 (50,599,070)
(12,027,277)
Fall in valuation of interests in Gemfields
The valuation of the Groups interest in Gemfields has fallen since 31 December 2012. The estimated impact of this non-adjusting event is as follows:
The Gemfields share price on 18 March 2013 was GBP0.3288 and the exchange rate was US$1:GBP0.6618. The Group had agreed to the terms of the Gemfields/Faberg? Merger prior to 31 December 2012 and the Groups interests in both Gemfields and Faberg? were valued based on the Gemfields share price at that date.
At 18 March 2013, the fair value of the Group~s investment in Gemfields was US$128,605,563. This valuation is US$15,018,532 lower than the valuation of US$143,624,095 included in the Consolidated Balance Sheet. This valuation represents the Groups equity investments in Gemfields and Faberg? plus the Groups loan to Faberg?, at their respective year end valuations. This unrealised loss includes the impact of the completion of the Gemfields/Faberg? Merger as disclosed above.
Approval of Annual Report
The Annual Report was approved by the Directors and authorised for issue on 20 March 2013.
Pallinghurst Resources 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(1) NON-EXECUTIVE DIRECTOR: Dr Christo Wiese(2) INDEPENDENT NON-EXECUTIVE DIRECTORS: Stuart Platt-Ransom(3), Martin Tolcher, Clive Harris, Patricia White(4) PERMANENT ALTERNATES: Chris Powell(1), Brian OMahoney(3) ADMINISTRATOR AND COMPANY SECRETARY: Legis Fund Services Limited, 11 New Street, St Peter Port, Guernsey, GY1 2PF, Channel Islands REGISTERED OFFICE: 11 New Street, St Peter Port, Guernsey, GY1 2PF, Channel Islands SOUTH AFRICAN TRANSFER SECRETARY: Computershare Investor Services (Pty) Limited, 70 Marshall Street, Johannesburg, 2001, South Africa AUDITOR: Saffery Champness, PO Box 141, La Tonnelle House, Les Banques, St Sampson, Guernsey, GY1 3HS, Channel Islands JSE SPONSOR: Investec Bank Limited, 100 Grayston Drive, Sandown, Sandton, 2196, South Africa BSX SPONSOR: Capital G BSX Services Limited, 25 Reid Street, 4th Floor, Hamilton, HM11, Bermuda
(1) Mr Powell has acted as Permanent Alternate to Mr Willis since 15 March 2013. This appointment is subject to the requisite notifications being made to the GFSC.
(2) Dr Wiese was appointed to the Board effective 11 February 2013.
(3) Mr OMahoney acts as Permanent Alternate to Mr Platt-Ransom.
(4) Ms White resigned from the Board on 15 March 2013.
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