Pallinghurst gets nod to take control of Gemfields
Pallinghurst Resources landed a prize catch, securing the 75% of London-listed Gemfields shares it needed to take the world’s leading listed gemstone producer private and allowing it to take operational control of underperforming mines.
Pallinghurst Resources, the JSE-listed mining investment company, had secured control of Gemfields and would delist it once its offer for the company expired on July 4, by which time it hoped to raise its stake well above the 75% stake it now held, said CEO Arne Frandsen.
In securing 96% support from its own shareholders for the nil-premium, all-share offer for Gemfields, Pallinghurst saw off a premium cash offer from China’s Fosun Gold for the miner with an emerald mine in Zambia and a ruby mine in Mozambique. Gemfields shareholders would retain exposure to any improvement in Gemfields rather than lose all exposure the Fosun deal would have resulted in, Frandsen said.
By Tuesday morning, Pallinghurst increased the shares tendered for its offer to above 75% from 62% at the time of the rival bid from Fosun.
Pallinghurst had originally controlled 40.7% of Gemfields, by folding the Kagem mine in Zambia into the company as well as the Faberge jewellery brand. However, Pallinghurst has for a while felt the Gemfields mines have not performed optimally and that the share price has reflected this over the eight years it has been involved in the
IT IS THE WORLD’S BEST EMERALD MINE AND IT’S NOT PERFORMING THE WAY IT CAN
gemstone miner. “Just look at the latest Gemfields results. Revenue at Kagem is down by about $50m this year. It is the world’s best emerald mine and it’s not performing the way we think it can,” said Frandsen.
He declined to blame the executive team at Gemfields and said he and Pallinghurst chairman and veteran miner Brian Gilbertson now had full access to the company’s books, plans and mine management to formulate plans for both operating assets. “We see the two mines like two pistons that are not firing properly. That must be our focus now, not expansion, but getting those two pistons to fire successfully and make a lot of money,” Frandsen said.
The transaction clearly had the “broadest support” from shareholders of Pallinghurst and Gemfields, he said, indicating a belief in Pallinghurst’s ability to make the mines profitable.