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PGL - Pallinghurst Resources Limited - Annual results for the year ended 31

Release Date: 16/03/2010 07:30
Code(s): PGL
Wrap Text

PGL - Pallinghurst Resources Limited - Annual results for the year ended 31 December 2009 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") Annual results for the year ended 31 December 2009 NAV per share: US$0.68 up 5% / EPS US$0.20 up from US$(0.27) Arne H. Frandsen, CEO, commented: "In a year undoubtedly filled with many challenges we continued to improve the value of our investment platforms. Platmin is now in production and increasing its PGM output to expectation. We are consolidating our manganese and iron ore interests to create a South African-Australian approach which is well positioned to participate in this attractive growth segment. The historic relaunch of Faberge was well received and the luxury brand is making further inroads from its flagship store in Geneva. Lastly, Gemfields benefited from better price realisation after introducing landmark international auctions." Highlights of period to 31 December 2009 - Platmin`s Pilanesberg Platinum Mine ("PPM") entered its commissioning period and produced the first PGM concentrate. - Commencement of the Bankable Feasibility Study on Magazynskraal. - The Tshipi feasibility study was completed in March 2009, with inferred and indicated resources of 163.2 million tonnes of manganese ore at an average grade of 37%. - Posco agreed to invest into the Tshipi project in June 2009, and will acquire part of the Company`s stake in Tshipi for US$7 million. - The Company significantly increased its stake in Jupiter to 25%. - Posco agreed to invest AUD8 million into Jupiter in July 2009. - Successful US$107 million/ZAR800 million capital raising by the Company completed in September 2009. - Gemfields` successful London and Johannesburg auctions of rough emeralds raised US$12 million in the second half of 2009. - The successful international launch of the reunited Faberge brand in September 2009. - In December 2009, Faberge opened its first exclusive boutique in one of Geneva`s most prestigious locations, the rue Pierre Fatio. On 1 March 2010, after the year-end, Pallinghurst announced a transformational Tshipi/Jupiter transaction. Condensed Consolidated Income Statement Year ended Year ended 31 December 2009 31 December 2008 (audited) (audited) US$`000 US$`000
Net fair value adjustments 53,195 (27,467) Net foreign exchange gain/(loss) 8,801 (10,940) Net gain from the Jupiter transaction 4,617 - Gains/(losses) on investments 66,613 (38,407) Loan income 102 497 Dividend income - 84 Portfolio income 102 581 Operating expenses (5,210) (7,070) Profit/(loss) from operations 61,505 (44,896) Finance income 599 1,383 Finance costs - (34) Share of profit/(loss) from associates 328 (2,884) Net profit/(loss) before taxation 62,432 (46,431) Income tax expense - - Net profit/(loss) for the year 62,432 (46,431) Restated
Weighted average number of ordinary 312,155 171,878 shares in issue (`000) Headline earnings, basic earnings per 0.20 (0.27) share and diluted earnings/(loss) per share (US$) 1 1 The denominator used to calculate the basic loss and headline loss per share in the prior year has been amended to be the weighted average number of ordinary shares in issue for 2008, not the closing number of ordinary shares in issue, increasing the basic loss and headline loss per share from (US$0.19) per share to (US$0.27) per share. Condensed Consolidated Statement of Comprehensive Income Year ended Year ended
31 December 31 December 2009 2008 (audited) (audited) US$`000 US$`000
Net profit/(loss) for the year 62,432 (46,431) Net exchange loss on translation of (17) - foreign operations Total comprehensive income/(expense) 62,415 (46,431) for the year Segmental information Year ended Year ended 31 December 31 December
2009 2008 (audited) (audited) US$`000 US$`000 Luxury Brands - Cayman Islands 86,633 46,858 Steel Feed Corporation - Australia 15,845 2,939 Steel Feed Corporation - South Africa 31,261 30,459 Coloured Gemstones - Zambia 8,330 13,317 Platinum - South Africa 96,273 57,358 Net assets not allocated to a 83,340 8,797 reportable segment Net assets 321,681 159,728
Luxury Brands - Cayman Islands 20,633 5,579 Steel Feed Corporation - Australia 12,231 (5,745) Steel Feed Corporation - South Africa 385 28,191 Coloured Gemstones - Zambia (5,456) (40,981) Platinum - South Africa 38,915 (24,953) Net fair value and foreign exchange 66,708 (37,910) gains/losses and portfolio income Other reportable segment - 84 Net income/(expenses) not allocated to (4,277) (8,605) a reportable segment Net profit/(loss) for the year 62,432 (46,431) Condensed Consolidated Balance Sheet Year ended Year ended 31 December 31 December 2009 2008 (audited) (audited)
US$`000 US$`000 Assets Investments in associates 2,205 1,805 Investment portfolio 238,342 150,932 Non-current assets 240,547 152,737 Trade and other receivables 1,112 765 Loan receivable from associate - 11,127 Cash and cash equivalents 80,406 20,940 Current assets 81,518 32,832 Total assets 322,065 185,569 Liabilities Trade and other payables 384 25,841 Current liabilities 384 25,841 Total liabilities 384 25,841 Net assets 321,681 159,728 Equity Shareholders` equity 321,681 159,728 Capital and reserves attributable to 321,681 159,728 equity shareholders Total equity 321,681 159,728
Net number of ordinary shares in issue 475,804 247,232 (`000) Net asset value per ordinary share 0.68 0.65 (US$) Net tangible asset value per ordinary 0.68 0.65 share (US$) Condensed Consolidated Cash Flow Statement Year ended Year ended
31 December 31 December 2009 2008 (audited) (audited) US$`000 US$`000
Net profit/(loss) for the year 62,432 (46,431) Non-cash items (66,965) 44,172 Cash items presented separately on the 219 (2,550) cash flow statement Movement in working capital (25,894) 25,912 Cash outflows/(inflows) from operating (30,207) 21,103 activities Dividend received - 84 Taxation paid 1 - - Additions to investments (20,720) (104,703) Decrease/(increase) in loans to 11,127 (13,390) investments Proceeds from disposal of investments 19 - Cash flows from operating activities (39,781) (96,906) Net cash used in investing activities (72) (4,495) Issue of shares net of costs 99,539 33,761 Finance income 599 1,383 Finance cost - (34) Net cash generated from financing 100,138 35,110 activities Net increase/(decrease) in cash and 60,285 (66,291) cash equivalents Cash and cash equivalents at the 20,940 86,114 beginning of the year Exchange (loss)/gain on cash and cash (818) 1,117 equivalents Cash and cash equivalents at the end of 80,406 20,939 the year 1 Taxation expenses amount to US$74 (2008: US$144) Condensed Consolidated Statement of Changes in Equity Year ended Year ended 31 December 31 December 2009 2008
(audited) (audited) US$`000 US$`000 Balance at the beginning of the year 159,727 172,397 Shares issued - vendor consideration - 33,761 placing Shares issued - capital raising 99,539 - Net profit/(loss) for the year 62,432 (46,431) Net exchange loss on translation of (17) - foreign operations Balance at the end of the year 321,681 159,727 Fair valuation of investments Investment Opening Un- Un- Gains/ Accrued Closing fair realised realised losses on interest fair value fair foreign Jupiter US$`000 value 31 Dec value exchange trans- 31 Dec 2008 adjust- gain/ action 2009
US$`000 ments (loss) and other US$`000 US$`000 US$`000 addi- tions/ dis-
posals US$`000 Quoted equity investments Platmin Limited 32,361 20,984 5,432 - - 58,777 Gemfields plc 13,317 (7,056) 1,600 469 - 8,330 Jupiter Mines 784 6,129 1,475 7,457 - 15,845 Ltd Mindax Ltd 2,147 - - (2,147) - - Iron Mountain 8 7 4 (19) - - Mining Ltd 48,617 20,064 8,511 5,760 - 82,952
Unquoted equity investments Faberge Ltd 1 46,858 20,633 - 19,142 - 86,633 Moepi Group 6,687 3,343 - - - 10,030 (Boynton) Richtrau No. 18,311 9,155 - - - 27,466 123 Ltd (Magazynskraal) Tshipi 2 29,940 - - - - 29,940 101,796 33,131 - 19,142 - 154,069 Loan investments Tshipi 3 519 - 290 416 96 1,321 Total 150,932 53,195 8,801 25,318 96 238,342 investment portfolio 1 The investment in Faberge was valued at US$61.16 a share at 31 December 2008. A recent capital raising has been successfully completed to a variety of investors, including the Company, at US$88.07 a share, and the investment has been valued at that level, in line with the IPEVC valuation guidelines and IFRS. 2 In the prior year, the comparative numbers for the Tshipi investment are described as the Kalahari joint venture. Tshipi was incorporated and assumed the interests of the Kalahari joint venture on 31 March 2009. 3 The Tshipi loan was originally provided to the Kalahari joint venture in terms of the agreement concluded with Ntsimbintle Mining (Pty) Limited. On 31 March 2009, Tshipi assumed the rights/obligations of the loan. The terms of the loan are that it is unsecured, and earns interest at the South African prime rate, currently 10.5% p.a. Investment Current Unrealised Unrealised Accrued Closing cost fair value foreign interest fair US$`000 adjust- exchange US$`000 value
ments gain/ 31 Dec US$`000 (loss) 2008 US$`000 US$`000 Quoted equity investments Platmin Limited 32,317 - 44 - 32,361 Gemfields plc 54,401 (34,560) (6,524) - 13,317 Jupiter Mines Ltd 5,197 (3,029) (1,384) - 784 Mindax Ltd 3,350 (293) (909) - 2,147 Iron Mountain 61 (37) (17) - 8 Mining Ltd 95,326 (37,919) (8,790) - 48,617 Unquoted equity investments Faberge Ltd 1 41,461 5,397 - - 46,858 Moepi Group 13,373 (6,688) - - 6,687 (Boynton) Richtrau No.123 36,621 (16,084) (2,226) - 18,311 Ltd (Magazynskraal) Tshipi 2 2,000 27,827 113 - 29,940 93,455 10,452 (2,113) - 101,796 Loan investments Tshipi 3 521 - (37) 38 519 Total investment 189,302 (27,467) (10,940) 38 150,932 portfolio 1 The investment in Faberge was revalued in May 2008 in line with a third party round of funding, at US$78.7 million, significantly above cost of US$26.1 million. In August 2008, the Company invested a further US$15 million, at this price per share, increasing the total cost of investment to US$41.4 million and valuation to US$93.7 million. In line with the IPEVC valuation guidelines and IFRS, the valuation was then impaired by 50% from that level to US$46.9 million. 2 The Tshipi joint venture investment related to an unincorporated manganese joint venture in the Kalahari Basin. The joint venture agreement gave the Company the right to take an equity interest in Tshipi e Ntle Manganese Mining (Pty) Ltd, the entity which will hold the relevant mining rights. The entity has been incorporated and assumed the interests of the joint venture on 31 March 2009. 3 The loan was provided to the joint venture in terms of the agreement concluded with Ntsimbintle Limited, for the joint venture`s prospecting and exploration expenditure and working capital requirements. The terms of the loan are that it is unsecured, and earns interest at the South African prime rate. Abridged Investment Manager`s Report US$107 million capital raising In August 2009, the Company announced an equity raising in the form of the partially underwritten, renounceable rights offer on the securities exchange of the JSE Limited ("JSE"), with a pre-placement. The rights issue was conducted during September 2009, successfully raising the total ZAR800 million (approximately US$107 million) intended through the issue of 228,571,376 shares at ZAR3.50 per share. The offer was significantly oversubscribed. The rights issue will enable the Company to participate in its pro rata funding entitlement for each investment platform. Net asset value per share The Company`s investment valuations, net of additions, increased by over US$60 million in the year, and the net asset value per share increased by 5% to US$0.68, despite challenging market conditions. However, the net asset value per share decreased by 12% in the six-month period since 30 June 2009, as a result of the dilutive effects of the capital raising in September 2009, which increased the number of shares in issue by approximately 92%. On a comparable basis, excluding the effect of the additional shares, the net asset value per share would have increased by 40% during the year, to US$0.90. Investment platforms Platinum Group Metals ("PGMs") African Queen strategy PGMs are essential to a wide range of industries. It is estimated that 20% of all consumer products either contain PGMs, or require them in their production. The African Queen strategy is to build Pallinghurst`s unique portfolio of PGM investments into a significant PGM platform through the acquisition and consolidation of low-cost operations, thereby creating a new low-cost PGM producer of industry significance. Background to the African Queen investments The Company`s first PGM investment was Boynton, via the Moepi Group of companies. Boynton is the 72.39% operating subsidiary of Platmin Limited. Boynton`s flagship project, PPM, is located north of the Pilanesberg intrusion on the Western Limb of the BIC. In December 2008, the Department of Mineral Resources approved the acquisition by the Company and certain Pallinghurst Co-Investors, of an interest in Magazynskraal from the Bakgatla. The Company and certain Pallinghurst Co-Investors have also secured the right to acquire 49.9% of the Bakgatla`s interest in Sedibelo at "fair market value". Sedibelo is a property contiguous to both Magazynskraal and PPM. This transaction is currently being finalised. Key developments June 2009 saw the commissioning of the Merensky circuit and the second phase Eskom power was connected, giving PPM access to the full 37 MVA required for production capacity. In October 2009, Platmin announced significant changes to the executive team, notably the appointment of mining veteran Tom Dale as chief executive officer, following the retirement of Ian Watson. Brian Gilbertson was appointed chairman of the board at the same time. In January 2010, Platmin announced that the reaching of full capacity of 250,000 PGM ounces per annum would be delayed by some 12 months until early 2011. Steel Feed Corporation ("SFC") The Steel Feed Corporation strategy Competition for raw material supplies (particularly iron ore, coking coal and manganese) to the global steel industry is intensifying and the major steel producers and end consumers are seeking to secure their raw materials through equity ownership of mining companies. The Steel Feed Corporation strategy is to develop a platform that supplies these key raw materials to the steel industry. Key developments Tshipi In March 2009, the manganese joint venture vehicle, Tshipi e Ntle Manganese Mining (Pty) Ltd ("Tshipi"), was established between the Pallinghurst Co- Investors and Ntsimbintle. Tshipi is owned 50.1% by Ntsimbintle, and 49.9% by the Pallinghurst Co-Investors, of which the Company`s indirect see- through interest in Tshipi is 9.98%. During June 2009, the Company announced that an agreement had been concluded whereby it would dispose of an indirect interest of 2.27% in Tshipi for US$6.9 million, subject to the completion of certain conditions, to a subsidiary of South Korea`s Posco, one of the world`s largest steel producers. Also in June 2009, a feasibility study on Tshipi`s southern property established inferred and indicated resources of 163.2 million tonnes open- pit "Mamatwan-type" ore at an average grade of 37% manganese (Samrec compliant) to a depth of 250 metres. Jupiter During 2008, the Company entered into a joint venture with AIM-listed Red Rock Resources plc ("Red Rock") to pursue the Central Yilgarn iron ore strategy. The Company significantly increased its existing ownership of Jupiter during the year to 25.15%. Jupiter completed an extensive exploration and survey programme on its manganese projects in the Pilbara at Oakover and completed its drilling programme at Mount Ida during 2009. Gemfields plc ("Gemfields") The Gemfields strategy The coloured gemstone industry has historically been overlooked, fragmented and undercapitalised. It is characterised by the absence of large, reliable suppliers able to consistently 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 integrated 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 the Gemfields strategy is the ability to bring ethically produced, conflict-free gemstones of certified provenance directly from the mine to the market on an integrated basis. Key developments The Kagem mine is the largest emerald mine in Africa (and one of the largest in the world) and is Gemfields` key asset. Gemfields` successful London and Johannesburg auctions of rough emeralds raised US$12 million in the second half of 2009. Gemfields initiated a pioneering trial underground mining project in February 2009 and announced the first production of emerald and beryl in February 2010. Faberge Faberge strategy The strategy is to re-establish Faberge as one of the world`s most exclusive and valuable luxury brands. Key developments The renaissance of Faberge took place with a highly successful international launch on 9 September 2009 at which Faberge`s first High Jewellery collection since 1917, dubbed "Les Fabuleuses", was unveiled. The launch also unveiled www.faberge.com, a pioneering online "Global Flagship" store that replicates the traditional High Jewellery purchasing experience, which has until today been confined to a traditional retail environment. Prior to the September 2009 launch, Faberge completed a capital raising of US$35 million in new equity share capital, in which the Company participated, to further fund the development of the business by extending the product range and building sales momentum. Faberge`s strategy of engaging directly and personally with its customers saw carefully tailored events hosted in St Moritz and Gstaad in Switzerland during February and March 2010 respectively. Accounting policies The audited results for the year ended 31 December 2009 have been prepared in accordance with International Financial Reporting Standards ("IFRS"), IAS 34 Interim Financial Reporting, the JSE Listing Requirements and The Companies Law (Guernsey), 2008. The accounting policies applied are consistent with those adopted in the Group`s annual financial statements for the year ended 31 December 2008, other than as described below. In the current year the Group has adopted IFRS 8 Operating Segments and IAS 1 (revised 2007) Presentation of Financial Statements (IAS 1R). The adoption of IAS 1R has had no impact on the reported results or financial position of the Group although the adoption of the standard has resulted in a number of changes in presentation and disclosure. IFRS 8 requires operating segments to be identified on the basis of internal reporting used by the Chief Operating Decision Maker ("CODM") (Brian Gilbertson) to assess performance and allocate resources. The Group`s segmental reporting is presented in accordance with IFRS 8 and comparatives have been restated accordingly. Comparative information Restatement of the cash flow statement The cash flow statement has been restated to exclude the effect of a non- cash outflow for the Magazynskraal purchase; exclude the impact of a non- cash accrued expense from trade and other payables; and to include an exchange gain on cash balances as a reconciling item between net profit for the year and net cash outflows from operations. Commitments Commitment to invest AUD5 million into Jupiter The Group committed in March 2009 to provide a further AUD5 million to Jupiter for working capital purposes. Any expenditure is subject to the investment criteria of the Group and there has been no actual cash outflow to date of this announcement. If the potential Jupiter/Tshipi transaction is successful it is likely that the terms of the commitment will be amended or will lapse. Entering into commitment for Sedibelo The Company has a commitment to take up its share of the investment in Sedibelo. This transaction is currently being finalised. Contingent liabilities There were no contingent liabilities in existence at 31 December 2009. All liabilities in existence at 31 December 2008 have been extinguished. Events occurring after the end of the year In February 2010, the Group terminated its joint venture arrangement with Red Rock Resources. On 1 March 2010, the Company announced a proposed transaction where the Pallinghurst Co-Investors` 49.9% interest in Tshipi would be sold into Jupiter for new shares in Jupiter. The acquisition consideration implies a value of approximately AUD490 million for 100% of Tshipi and AUD37.8 million for the Company`s indirect interest of 7.71% of Tshipi. Following the implementation of the transaction, the Company will own approximately 17.79% of the enlarged Jupiter, and the Pallinghurst Co-Investors will collectively hold approximately 85% of Jupiter. Audit opinion These results have been audited by the Company`s auditors, Saffery Champness. The unqualified audit opinion is available for inspection at the company`s registered office. On behalf of the Board Brian Gilbertson Arne H. Frandsen Chairman Chief Executive Officer Executive directors: Brian Gilbertson, Arne H. Frandsen, Andrew Willis Independent Non-Executive Directors: Stuart Platt-Ransom, Clive Harris, Martin Tolcher Administrator, Secretary and Registered Office: 1 Le Marchant Street, St Peter Port, Guernsey, GY1 4HP, 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 www.pallinghurst.com Date: 16/03/2010 07:30:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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