Now’s your chance

Finweek English Edition - - Portfolio Punts -

GRIM CON­DI­TIONS in world mar­kets are of­fer­ing in­vestors the chance to ride along with min­ing busi­ness­man ex­traor­di­naire Brian Gil­bert­son at a bar­gain price. The op­por­tu­nity has come up be­cause Pallinghurst Re­sources (Pallinghurst), which listed on the JSE in Au­gust, has now dropped be­low the price at which Gib­ert­son raised his ini­tial funds last year from a se­lect group of 300 well-heeled South African in­vestors.

They put up around US$170m at R7/ share to en­able Pallinghurst to list on the Ber­muda Stock Ex­change and they had to use their for­eign ex­change al­lowances to do so. A con­di­tion of the fund rais­ing was that Gil­bert­son com­mit to list­ing Pallinghurst on the JSE within a year, so that the SA in­vestors could “mi­grate” their hold­ings from Ber­muda to Jo­han­nes­burg and so free up their for­eign in­vest­ment cap­i­tal for other uses.

Pallinghurst listed in late Au­gust and its shares started trad­ing at R9, from which they promptly shot up to a high of R12,21.

From there it’s been down­hill traf­fic. Pallinghurst halved to a low of R6 and cur­rently sits around R6,50/share.

I warned that might hap­pen (28 Au­gust), point­ing out: “Should the stock be af­fected by the cur­rent doom and gloom con­di­tions per­vad­ing SA’s ju­nior min­ing sec­tor, then in­vestors just might get the chance to buy in at bar­gain lev­els.”

Pallinghurst CEO Arné Frand­sen com­mented at the time: “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 only real change to Pallinghurst’s fun­da­men­tals since mid-Au­gust is ar­guably to its plans to mine top qual­ity “coloured gem­stones” – in par­tic­u­lar, Zam­bian emer­alds – and mar­ket them us­ing the Fabergé brand. Re­cent de­vel­op­ments in the di­a­mond mar­ket show even se­ri­ously well-heeled con­sumers are start­ing to feel the pinch, as re­vealed by drops in prices be­ing paid for top qual­ity and in­vest­ment grade di­a­monds.

That aside, a de­ci­sion to in­vest in Pallinghurst re­ally boils down to a de­ci­sion to back Gil­bert­son in the be­lief he hasn’t lost his “Mi­das” touch.

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