SA investors offered chance to join mining legend Gilbertson
INVESTORS SHOULD WATCH CLOSELY movements in the share price of Pallinghurst Resources – Brian Gilbertson’s latest venture – now that it’s started trading on the JSE at levels around 900c/share. The reason being that should the stock be affected by the current doom and gloom conditions pervading South Africa’s junior mining sector, then investors just might get the chance to buy in at bargain levels.
Pallinghurst chairman Gilbertson – and partner Arné Frandsen, who is CEO – aren’t expecting that to happen, as the stock should be very tightly held. Frandsen comments: “I wouldn’t expect to see price weakness – but it’s an illusion to believe you can be listed and not be affected by market conditions.”
The shares were placed a year ago with a “select” group of 300 institutional and individual SA investors who put up a total of US$170m. Those bought in at R7/share through the initial listing on the Bermuda Stock Exchange, for which they had to use their foreign exchange investment allowances.
Those shareholdings will “migrate” to the JSE, which is now Pallinghurst’s primary regulator, and that will free up those initial investors’ foreign investment capital.
Though Pallinghurst’s projects look sound, the market has hammered junior resources companies across the board this year, regardless of the quality of their operations. The main cause has been forced sales by institutional shareholders who have had to cash in chunks of their portfolios to meet cash redemptions from their funds by investors.
Two of Pallinghurst’s first four projects are located in SA, with a third in southern Zambia. The company is also opening an office in Cape Town. Gilbertson quips: “I had an argument about that with Arné, because I thought Johannesburg would be better. But he maintains the fund managers are all based in Cape Town, while he also just happens to live there.”
The two SA projects involve manganese in the Northern Cape and platinum near Rustenburg, while the Zambian operations centre on the Kagem emerald mine. Pallinghurst controls Kagem through London AIM-
listed Gemfields Resources, which owns other emerald mines in the same region. Frandsen says investors will get a much better handle on Pallinghurst’s value at endAugust, when a directors’ valuation of the group’s assets will be published.
Gilbertson adds: “We indicated to our backers it would take time for us to implement our strategy but that doesn’t mean they have to sit back and wait for 10 years to get returns. We lost the battle for (Australian base metals mining group) Consmin last year but still made a 150% return on the funds we committed. We estimate our initial investment in Fabergé has increased fourfold in value.”
Frandsen says the manganese and platinum investments made in SA follow the mining equivalent of the property business adage of “location, location, location”. “We’ve bought into the best addresses for these metals. We’re carrying out the bankable feasibility study for a stand-alone platinum mine on our properties but we also continue to think strategically. This isn’t just about sinking shafts and building headgears. Next door to our Magazynkraal project is Barrick’s Sedibelo project, in which the Bakgatla are also partners.”
Pallinghurst’s other platinum venture links into Toronto-listed Platmin.
Frandsen adds a bankable feasibility study is also under way into developing an opencast mine to produce 2m t/year of manganese ore, which would be exported. “We’re in discussions with Transnet Freight Rail over the logistics of getting that material to the coast. Obviously, over the longer term we’d like to build a smelter to beneficiate that material – but then you run into the power constraint problems.”
Pallinghurst’s fourth venture is Fabergé, where the plan is to market top quality “coloured” gemstones – such as the emeralds to be produced from the Zambian operations. Says Gilbertson: “The profit margins in coloured gemstones are higher than for diamonds and I don’t want to sound grandiose but nobody has done in coloured gemstones what De Beers has done for the diamond industry.”
Gilbertson has been threatening to retire to Plettenberg Bay for years but keeps finding new ventures to get involved in. Asked about his latest retirement plans, he says: “It’s getting closer. I mean, the office will now be in Cape Town.”
Investing in the best mining addresses. Brian Gilbertson and Arné Frandsen