Wrap Text
Reviewed Interim Report for the six months ended 30 June 2017
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", the "Company" or "PRL")
PALLINGHURST RESOURCES LIMITED
INTERIM REPORT 2017
for the six months ended 30 June 2017
Highlights this year include:
- PRL was transformed from a closed-end investment vehicle into a long-life operating mining company, with effect from 1 August 2017.
- Gemfields plc was acquired via a public market offer, which succesfully completed post the period end.
- SPM dispatched 62,000 ounces of PGM’s in the first six months of the year, while building up to an accumulated 4.4 million fatality-free
shifts.
- Tshipi became the largest exporter of manganese ore from South Africa, selling 2.3 million tonnes in its financial year to 28 February
2017, and another 1.5 million tonnes in the six months to 31 August 2017.
- Tshipi distributed ZAR1 billion to its shareholders in February 2017, and a further ZAR500 million in September 2017.
- Gemfields achieved its highest ever single-auction revenue in June 2017 when US$55 million of rough rubies were sold in Singapore. Two
emerald auctions in the first half of this year, generated a further US$37 million.
“The period from January 2017 has proven to be one of the most important in PRL’s 10 year life. In June, a supermajority of the shareholders
supported the transformation of PRL into a long-life mining company. As our first transformational deal, backed by 96% of PRL’s shareholders,
we acquired all of the shares in Gemfields, which now becomes a fully owned subsidiary of PRL. The key aim of your management team is to
restore Gemfields to a strong financial position by revitalising its operations and to realise our vision of becoming “the coloured
gemstones equivalent of De Beers”. I am pleased to report that the integration is well advanced and significant cost benefits are being
realised. The new management team is in place with initial operating results from both Kagem and Montepuez being encouraging. In our steel
making materials division, Jupiter delivered an outstanding performance with PRL receiving its maiden distribution from that investment,
with a further distribution expected in the second half of 2017. Our Sedibelo PGM mine continues to operate in a most challenging
environment, and has successfully implemented drastic cost cutting measurements. Its safety record of almost 4.5 million fatality free shifts
remains one of the best in the industry.
We thank our shareholders for their support for both the transformation of PRL and the acquisition of Gemfields. Our team is motivated and
fully committed to developing PRL to its full potential as an operating mining company. Our revised business plan is well advanced, and
following approval, this will be communicated to all shareholders.”
Arne H. Frandsen
Chief Executive
Financial results
For the year to date, Pallinghurst Resources Limited (“PRL”, the “Company” or the “Group”) posted a Total Comprehensive Loss of US$81
million, of which almost all is due to unrealised write downs in asset valuations. There are two areas where the write downs took place:
Firstly, since the year-end 2016 valuation, the Gemfields share price has declined to 32 pence per share. Despite Gemfields being subject
to the PRL takeover offer and a third party unsuccessfully making an offer at 45 pence per share, accounting convention requires that the
listed share price of 32 pence at 30 June 2017 should be used in valuing this investment. Accordingly, PRL had to write down this
investment by US$64 million, accounting for 79% of the Comprehensive Loss for the period.
In addition, notwithstanding the SPM valuation of approximately US$3 billion in the recent Competent Person’s Report, the challenging
environment for platinum producers, and the political uncertainty in South Africa, in particular the unease and value destruction caused
by the release of the Mining Charter III, has led to an unrealised value adjustment of US$16 million.
Jupiter Mines had a strong performance due to Tshipi’s low-cost base and strong manganese prices, but no material valuation increase has
been made in these accounts. Should the strong financial performance continue, such an upward value adjustment may be applied at the end of
the financial year.
All three of the Company’s investments represent attractive value propositions for shareholders. In future years, PRL accounts will
consolidate Gemfields operating results, which should reduce these (sometimes radical) swings in asset values being reflected through the
Consolidate Statement of Comprehensive Income.
Platinum Group Metals ("PGM")
Whilst the US dollar prices of platinum and palladium increased by 3% and 24% respectively during the first half of the year, the PGM
environment remains challenging for all producers. The strengthening of the ZAR against the US dollar has added further pressure on all
South African PGM producers – including Sedibelo Platinum Mines Limited (“Sedibelo / SPM”) as most costs are denominated in ZAR and
revenues in US dollars.
In response to the current adverse PGM market environment, Sedibelo continues to focus on cost cutting and cash preservation rather than on
increasing output. This has enabled the company to withstand the currently depressed markets without seeking new shareholder capital.
Sedibelo’s subsidiary, Pilanesberg Platinum Mines, dispatched 62,000 ounces of 4E PGM in the half year, down by 23% over the comparative
period in 2016.
Sedibelo has also continued the development of its industry-changing Kell technology. The Kell technology is an innovative
hydrometallurgical alternative to the smelting of PGM concentrates. It is an environmentally friendly process which is significantly less
capital intensive, can operate at lower costs, and uses only approximately a fifth of the electricity required of a conventional PGM
refinery. A landmark agreement was reached between KellTech (in which Sedibelo holds a material interest) and the Zimbabwean government,
that could lead to a US$500 million investment in beneficiation in Zimbabwe. The beneficiation investment would be in the form of Kell
beneficiation plants, owned through a joint venture between the Zimbabwe Mineral Development Company and KellTech.
SPM places a strong emphasis on workplace safety and has recently achieved a record of over 4.4 million fatality-free shifts, a
considerable achievement in any mining environment. SPM continues to support the social and economic development of the local community,
including building health clinics, schools, water and road projects and offering internships to community members at the mine.
The cost-cutting initiatives and technological advances at SPM are providing support through the continued difficult market conditions.
The long-term supply and demand fundamentals remain positive. SPM, with its large and shallow resource base with a strong balance sheet
with no debt, is well-positioned to benefit from any recovery in the PGM industry.
Steel Making Materials
The manganese market had a volatile start to 2017 with the 37% FOB spot manganese price decreasing by 46% (from US$7.45 to UD$4.03/dmtu)
over the first six months of the year. This large decline in the first six months was partially due to industry-wide production increases
that took advantage of the high prices seen towards the end of 2016. Since then, the spot price has remained relatively strong at long-term
levels as China’s demand for steel has held firm.
Tshipi é Ntle Manganese Mining (Pty) Limited (“Tshipi”) is performing exceptionally well and responded rapidly to the stronger prices,
increasing production, whilst continuing to optimise its costs. Accordingly, Tshipi sold 2.3 million tonnes of manganese ore in its
financial year to 28 February 2017, 53% higher than the prior year. Tshipi saw record revenues and profit for the year and distributed
ZAR1 billion to its shareholders. Jupiter Mines Limited (“Jupiter”) received ZAR499 million in February 2017 and distributed approximately
US$54 million to its shareholders, with PRL receiving approximately US$10 million.
Tshipi is targeting exports of 3 million tonnes for the 2017/18 financial year and is well on target to achieve this with over 1.5 million
tonnes sold for the six months to 31 August 2017. Jupiter announced that Tshipi exported over 1.3 million tonnes for the five months to
July 2017 making Tshipi the largest exporter of manganese ore from South Africa, and at these levels is the third largest seaborne
manganese producer globally.
Tshipi’s commitment to the safety of its employees has resulted in zero lost time injuries being recorded in the first six months of 2017.
In September 2017, Tshipi distributed an additional ZAR500 million to its shareholders whilst retaining its debt-free balance sheet. Jupiter
will use its 49.9% share as part of a further distribution of US$25 million to be made to its shareholders by the end of the year, with PRL
due to receive approximately US$4.6 million.
Jupiter received US$2.3 million as a result of the exit from OM Tshipi (S) Pte Ltd (“OMT”), the joint venture set-up to market and sell
manganese ore produced by Tshipi. Subsequent to the exit from OMT, Jupiter now markets and sells its 49.9% share of the ore produced by
Tshipi.
Jupiter released its financial statements for the year ended 28 February 2017 recording a total comprehensive profit of AUD200 million
which was largely due to the reversal of the prior year’s impairment of its interest in Tshipi as well as its share of Tshipi’s profit.
Jupiter’s Mount Ida magnetite and Mount Mason hematite projects in the Central Yilgarn region of Western Australia remain on care and
maintenance. Jupiter continues to monitor the iron ore market and is ready to recommence work on these projects once market conditions are
favourable.
In March 2017, Jupiter and its partner Main Street 774 (Pty) Limited launched an initiative to investigate strategic options to realise
shareholder value from Tshipi. This may result in a trade sale or Initial Public Listing. Bank of America Merrill Lynch were appointed as
lead advisors to progress these options.
Coloured Gemstones
Gemfields plc (“Gemfields”) experienced a challenging period, with auction revenues declining by 24% to US$133 million in its financial year
ending 30 June 2017 (versus US$174 million in the prior year). While performance at the Montepuez ruby mine remained strong, the Kagem
emerald mine saw gem production fall more than 37% to 19 million carats, the lowest figure in seven years. Emerald prices remained robust,
but lower production, especially of high value gems, meant Kagem’s auction revenues fell 53% to US$47.5 million in its financial year ending
30 June 2017 (versus US$101.4 million in the prior year).
Gemfields held one rough ruby auction in the first six months of the year, in June 2017 in Singapore, and achieved its highest ever auction
revenue when US$55 million of rough rubies were sold at an average price of US$61.13 per carat. This was the eighth auction of rubies and
corundum produced at Montepuez, which have collectively generated revenues of US$281 million.
Demand for Gemfields’ emeralds remains strong with Gemfields holding two auctions in the first six months of the year. A higher quality
rough emerald auction was held in February 2017 in Lusaka, Zambia which generated revenues of US$22 million at an average price of US$63.61
per carat. In May 2017, a commercial quality rough emerald auction was held in Jaipur, India generating revenues of US$15 million at
US$4.68 per carat, the second highest average price ever achieved for a commercial quality rough emerald auction. 100% of the emeralds
offered at the Jaipur auction were sold, a strong indication of the continued demand for Gemfields’ responsibly sourced gems. Gemfields’
25 auctions of emerald and beryl mined at Kagem since July 2009 have generated US$474 million in aggregate revenues.
Kagem’s ore grade in its financial year ending 30 June 2017 fell to 158 carats per tonne, down 34% from 241 carats per tonne in the prior
year. During the same period, ruby and corundum production at Montepuez fell by 14% to 8.8 million carats from 10.3 million carats in the
prior year (on a grade that declined from 35 carats per tonne to 16 carats per tonne, reflecting the intended increase in processing of
lower grade but higher quality ore from the Mugloto pits).
Gemfields aims to promote excellence in mining coloured gemstones and to have as little impact on the environment as possible. At Kagem,
the Chapula Secondary School and Nkana Clinic continued to be supported during the period and were handed over to the community following
further improvements. The Masasa Bridge connecting the Lumpuma chiefdom was rehabilitated and work with the agricultural societies
continued to be strengthened with additional training and technical support. At Montepuez, support continues to be given to encourage
farmers to produce higher value crops with over 200 farmers benefitting from the project. A mobile clinic was officially launched, treating
some 4,000 patients per month, and Montepuez completed construction of a new school whilst rehabilitating two others.
Gemfields’ luxury brand, Fabergé, saw both an increase in the number of pieces sold and a decrease in operating costs during the first six
months of the year when compared to the prior year period. Fabergé’s presence at BaselWorld saw it launch the Visionnaire Chronograph
timepiece, alongside new jewellery pieces. The Visionnaire Chronograph has been shortlisted for the prestigious Grand Prix de Horlogerie de
Geneve, the third consecutive year in which a Fabergé timepiece has been shortlisted for what is widely regarded as the "Oscars of the
watchmaking industry”. Fabergé won an award in both 2015 and 2016.
Gemfields announced the cessation of operations in both Colombia and Sri Lanka. The withdrawal from Colombia was primarily due to the
conditions precedent not being satisfied in the stipulated timeframe. Gemfields interests in exploration licences in Sri Lanka are
currently being maintained. Gemfields is currently focussing on optimising its existing portfolio of core assets, namely Kagem, Montepuez
and Fabergé. Bulk sampling operations have also commenced at the Dogogo South emerald prospect in southern Ethiopia.
__________________________________________________
Pallinghurst’s offer for Gemfields
Pallinghurst has been the founding and largest shareholder of Gemfields since it and the Pallinghurst Co-Investors contributed Kagem to
Gemfields for shares and supported a contemporaneous share placing in July 2008. Gemfields is a core component of Pallinghurst’s value
proposition to its shareholders and unlocking its full value potential is of paramount importance to the Company. Despite many positive
developments, the share price of Gemfields did not reflect its inherent value, which has in turn adversely affected the share price
performance of Pallinghurst.
Gemfields remains an attractive and unique business but its structure meant that Gemfields was constrained by limited access to equity and
debt capital markets, low liquidity in the trading of Gemfields shares and a high cost base contributing to depressed profitability.
Pallinghurst believe that the restructuring and integration of Gemfields will enable it to perform to its full potential, materially
improving trading liquidity and promoting a re-rating of the enlarged Group.
Accordingly, on 19 May 2017, PRL announced the terms of an offer for the whole of the issued and to be issued share capital of Gemfields,
other than the shares already held by PRL (the “PRL Offer”). Each Gemfields shareholder was entitled to receive 1.91 PRL shares for each
Gemfields share they held. The PRL Offer valued each Gemfields share at 38.5 pence on 19 May 2017.
The “independent” Gemfields board of directors opposed the PRL Offer which led to Fosun Gold Holdings Limited (“Fosun”) announcing on 20
June 2017 the terms of a cash offer for the whole of the issued and to be issued share capital of Gemfields (the “Fosun Offer”).
The Fosun Offer valued each Gemfields share at 45 pence and the “independent” Gemfields board of directors agreed a US$2 million break fee
if the PRL Offer or any higher offer was declared unconditional. On 26 June 2017, the PRL Offer was declared wholly unconditional and the
Fosun Offer lapsed and the break fee became payable. Related financial and other advisory costs of approximately US$5 million was agreed by
the “independent” Gemfields board of directors in opposing the PRL Offer, which has added additional financial pressure to Gemfields, which
already had incurred record debt levels.
Gemfields was delisted from the AIM market of the London Stock Exchange on 28 July 2017. In August 2017, as the level of Gemfields share
acceptances surpassed 90% of the shares to which the PRL Offer related, the Company commenced the compulsory acquisition process of the
remaining Gemfields shares. Once the compulsory acquisition process is complete PRL will own 100% of Gemfields.
With Gemfields now under PRL’s control, a thorough review and analysis of the operations, including processes, plans, budgets and financial
position is underway. Certain operational improvements have already been made at Kagem and an encouraging increase in the recovery of
premium emeralds has already been seen. Premium emeralds are the highest grade of gemstones produced by Kagem and form the large majority of
Kagem’s total revenue. A selection of these premium emeralds will be offered as part of the predominantly high-quality emerald auction in
Lusaka, Zambia from 2 – 5 October 2017.
Pallinghurst (Cayman) GP L.P.
September 2017
Condensed Consolidated Statement of Comprehensive Income for the six months ended 30 June 2017
1 January 2017 to 1 January 2016 to 1 January 2016 to
30 June 2017 30 June 2016 31 December 2016
US$ ’000 US$ ’000 US$ ’000
Notes (reviewed) (reviewed) (audited)
INCOME
Investment Portfolio
Unrealised fair value gains 2 918 3,987 49,768
Unrealised fair value losses 2 (80,296) (34,177) -
Realised gain on disposal of Jupiter shares 4 5,337 - -
(74,041) (30,190) 49,768
Investment Portfolio revenue
Loan interest income 2 222 358 619
222 358 619
Net (loss)/gain on investments and income from operations (73,819) (29,832) 50,387
EXPENSES
Investment Manager’s Benefit 6 (2,442) (2,715) (4,988)
Operating expenses (552) (466) (904)
Gemfields acquisition - transaction costs 5 (4,387) - -
Foreign exchange gains 2 11 9
(7,379) (3,170) (5,883)
Net (loss)/gain from operations (81,198) (33,002) 44,504
Finance income 19 - 1
Finance costs (5) (2) (3)
Net finance income/(costs) 14 (2) (2)
(Loss)/profit before fair value gain of associates (81,184) (33,004) 44,502
Fair value gain of associates 2 2 61 71
(Loss)/Profit before tax (81,182) (32,943) 44,573
Tax (3) (2) (3)
NET (LOSS)/PROFIT AFTER TAX (81,185) (32,945) 44,570
Other comprehensive income - - -
TOTAL COMPREHENSIVE (LOSS)/INCOME (81,185) (32,945) 44,570
Basic and diluted (loss)/earnings per ordinary share–US$ 10 (0.11) (0.04) 0.06
All elements of total comprehensive (loss)/income 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 Financial Statements.
CONDENSED CONSOLIDATED BALANCE SHEET
as at 30 June 2017
30 June 2017 30 June 2016 31 December 2016
US$ 000 US$ 000 US$ 000
Notes (reviewed) (reviewed) (audited)
ASSETS
Non-current assets
Investments in associates 2 1,267 1,255 1,265
Investment Portfolio
Listed equity investments 2 179,390 124,426 164,615
Unlisted equity investments 2 173,675 154,100 193,869
353,065 278,526 358,484
Total non-current assets 354,332 279,781 359,749
Current assets
Investment Portfolio
Loans and receivables 2 - 6,662 4,948
Cash and cash equivalents 12,935 1,690 1,218
Trade and other receivables 1,253 1,376 1,175
Other investments 14 21 12
Total current assets 14,202 9,749 7,353
Total assets 368,534 289,530 367,102
LIABILITIES
Current liabilities
Trade and other payables 5,470 150 207
Total current and other liabilities 5,470 150 207
Net assets 363,064 289,380 366,895
EQUITY
Capital and reserves attributable
to equity holders
Share capital 9 12 8 8
Share premium 9 475,896 375,227 375,227
Reserve for own shares 9 (23,319) - -
Retained losses (89,525) (85,855) (8,340)
Total equity 363,064 289,380 366,895
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 30 June 2017
1 January 2017 1 January 2016 1 January 2016
to 30 June 2017 to 30 June 2016 to 31 December 2016
US$ 000 US$ 000 US$ 000
Notes (reviewed) (reviewed) (audited)
Cash outflows from operations 7 (3,412) (3,431) (5,876)
Loans extended to investments - - (4,925)
Loans repaid by investments 5,000 3,500 10,000
Loan interest received 169 – 400
Proceeds from disposal of Jupiter shares 10,105 - -
Net cash flows from
operating activities 11,862 69 (401)
Cash flows fron financing activities
Gemfields Acquisition - share issue
transaction costs paid in the period (147) - -
Net cash outflow from financing activities (147) - -
NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS 11,715 69 (401)
Cash and cash equivalents at the beginning
of the period/year 1,218 1,610 1,610
Foreign exchange gain on cash 2 11 9
CASH AND CASH EQUIVALENTS AT THE END OF
THE PERIOD/YEAR 12,935 1,690 1,218
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2017
Share Share Reserve for Retained Total equity
capital premium own shares losses/earnings
US$ 000 US$ 000 US$ 000 US$ 000 US$ 000
Balance at 1 January 2016 (audited) 8 375,227 - (52,910) 322,325
Total comprehensive loss for the period - - - (32,945) (32,945)
Balance at 30 June 2016 (reviewed) 8 375,227 - (85,855) 289,380
Total comprehensive income for the period - - - 77,515 77,515
Balance at 31 December 2016 (audited) 8 375,227 - (8,340) 366,895
Gemfields Acquisition - shares issued in
exchange for Gemfields shares acquired 4 102,042 - - 102,046
Gemfields Acquisition - share issue
transaction costs - (1,373) - - (1,373)
Gemfields Acquisition - own shares
acquired - - (23,319) - (23,319)
Total comprehensive loss for the period - - - (81,185) (81,185)
Balance at 30 June 2017 (reviewed) 12 475,896 (23,319) (89,525) 363,064
The accompanying notes form part of these Financial Statements.
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2017
1. ACCOUNTING POLICIES
The financial statements within the Interim Report are for the period from 1 January 2017 to 30 June 2017 (the “Interim Financial
Statements”). The financial information for the year ended 31 December 2016 that has been included in these Interim Financial Statements
does not constitute full statutory financial statements as defined in The Companies (Guernsey) Law, 2008.
The information included in this document for the comparative year was derived from the Annual Report and Financial Statements for the year
ended 31 December 2016 (the “Annual Financial Statements”), a copy of which has been delivered to the Guernsey Financial Services
Commission, the Johannesburg Stock Exchange (“JSE”) and the Bermuda Stock Exchange. The auditor’s report on the Annual Financial Statements
was unqualified and stated that the Annual Financial Statements gave a true and fair view, were in accordance with International Financial
Reporting Standards (“IFRS”) and complied with The Companies (Guernsey) Law, 2008. The following emphasis of matter was included in their
report:
Emphasis of Matter – Upcoming expiry of initial life-span
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made
concerning the Company’s intention to extend its initial life-span. The initial life-span of the Company is scheduled to end on 14 September
2017 unless it is extended or the Articles of Incorporation are changed by resolution of the shareholders. The exact nature of any
extension to the Company’s life beyond 14 September 2017 cannot presently be determined as it is subject to shareholder vote at a general
meeting of the Company, which has not yet been held. The financial statements have been prepared on a going concern basis which we
consider to be appropriate.
Basis of accounting
These Interim Financial Statements have been prepared in accordance with IAS34 Interim Financial Reporting (“IAS34”) and applicable legal
requirements of The Companies (Guernsey) Law, 2008. They do not include all of the information required for full financial statements and
are to be read in conjunction with the Annual Financial Statements. The Annual Financial Statements were prepared under IFRS as issued by
the International Accounting Standards Board (“IASB”), the financial reporting guides issued by the Accounting Practices Committee of the
South African Institute of Chartered Accountants (the “SAICA Reporting Guides”) and the financial reporting pronouncements issued by the
Financial Reporting Standards Council of South Africa (the “FRSC Pronouncements”). The Annual Financial Statements also comply with the JSE
Listings Requirements and the BSX Listing Regulations.
The principal accounting policies applied are consistent with those adopted and disclosed in the Annual Financial Statements. The Interim
Financial Statements have been prepared on the historic cost basis, except for the valuation of certain equity investments held within the
Investment Portfolio. These equity investments are measured at fair value not historic cost. Historic cost is generally based on the fair
value of the consideration given in exchange for the assets. Other than information contained within the Condensed Consolidated Statement
of Cash Flows, the Interim Financial Statements have been prepared on the accruals basis.
Interim results
Materially all of the Group’s results are related to investment valuations and are not directly affected by seasonality or the cyclicality
of operations. An investment’s most recent financial results do not necessarily directly impact upon the fair value of that investment and
other factors are usually more relevant in determining fair value than seasonality or the cyclicality of operations.
Going concern basis of accounting
The Directors have considered the likely cash flows and costs of the Group, for twelve months subsequent to the signature of the Interim
Financial Statements, and have concluded that the Group has adequate resources to continue in its activities for the foreseeable future.
The Group has significant assets that could be either sold or leveraged for short term finance, should this be necessary. The Interim
Financial Statements have, therefore been prepared on the going concern basis.
Changes and amendments to IFRS
A number of amendments to IFRS have become effective for financial periods beginning on (or after) 1 January 2017, and are therefore
applicable for these Interim Financial Statements. These amendments have not had a material impact on the Group.
2. INVESTMENT PORTFOLIO
The reconciliation of the Investment Portfolio valuations from 1 January 2017 to 30 June 2017 is as follows:
Accrued
Unrealised Unrealised interest and Additions
Opening at 1 fair value fair value Realised structuring and Closing at 30
January 2017 gains losses gains fee disposals June 2017
US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000
(reviewed) (reviewed) (reviewed) (reviewed) (reviewed) (reviewed) (reviewed)
Investment
Listed equity investments
Gemfields (1) 164,615 – (63,952) – – 78,727 179,390
164,615 – (63,952) – – 78,727 179,390
Unlisted equity investments
Jupiter (2) 79,461 918 – 5,337 – (10,105) 75,611
Sedibelo
Platinum Mines (3) 114,408 – (16,344) – – – 98,064
193,869 918 (16,344) 5,337 – (10,105) 173,675
Total non-current 358,484 918 (80,296) 5,337 - 68,622 353,065
Loans and receivables
Gemfields
- US$5 million loan (4) 4,948 – – - 222 (5,170) -
Total current 4,948 – – - 222 (5,170) -
Total Investment
Portfolio 363,432 918 (80,296) 5,337 222 63,452 353,065
(1) The unrealised fair value loss on Gemfields of US$63.952 million includes an unrealised foreign exchange loss of US$10.297 million. The
Group acquired an additional US$78.727 million interest in Gemfields as part of the Gemfields Acquisition during June 2017. The additional
interest acquired has been valued at the PRL share price (on the day of each tranche of acceptances) converted at the 1.91 Offer ratio and
the daily US$/ZAR exchange rate.
(2) The unrealised fair value gain on Jupiter of US$0.918 million does not include any foreign exchange as the valuation is denominated in
US$. The realised gain on Jupiter of US$5.337 million does not include any foreign exchange as the cash receipt was denominated in US$. The
Company disposed of 6% of its shares to Jupiter at a price of US$0.40 per share. The transaction completed on 13 March 2017 with the Company
receiving US$10.1 million, see Note 4 Realised gain on Jupiter Buy-Back.
(3) The unrealised fair value loss on SPM of US$16.344 million does not include any foreign exchange as the valuation is denominated in US$.
(4) The Group made a loan to Gemfields of US$4.925 million (US$5 million less an arrangement fee of US$0.075 million). The loan, including
interest and arrangement fee was repaid by Gemfields on 30 June 2017.
The reconciliation of the Investment Portfolio valuations from 1 January 2016 to 30 June 2016 was as follows:
Accrued
Unrealised Unrealised interest and Additions
Opening at 1 fair value fair value structuring and Closing at 30
January 2016 gains losses fee disposals June 2016
US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000
(reviewed) (reviewed) (reviewed) (reviewed) (reviewed) (reviewed)
Investment
Listed equity investments
Gemfields (1) 158,603 – (34,177) – – 124,426
158,603 – (34,177) – – 124,426
Unlisted equity investments
Jupiter (2) 35,705 3,987 – – – 39,692
Sedibelo
Platinum Mines 114,408 – – – – 114,408
150,113 3,987 – – – 154,100
Total non-current 308,716 3,987 (34,177) – – 278,526
Loans and receivables
Gemfields
- US$10 million loan (3) 9,804 – – 358 (3,500) 6,662
Total current 9,804 – – 358 (3,500) 6,662
Total Investment
Portfolio 318,520 3,987 (34,177) 358 (3,500) 285,188
(1) The unrealised fair value loss on Gemfields of US$34.177 million includes an unrealised foreign exchange loss of US$15.104 million.
(2) The unrealised fair value gain on Jupiter of US$3.987 million does not include any foreign exchange as the valuation is denominated in
US$.
(3) The Group made a loan to Gemfields of US$9.776 million (US$10 million less an arrangement fee of US$0.224 million). The loan, including
interest and arrangement fee was repaid by Gemfields on 9 December 2016.
The reconciliation of the Investment Portfolio valuations from 1 January 2016 to 31 December 2016 was as follows:
Accrued
Unrealised Unrealised income and Additions
Opening at 1 fair value fair value structuring and Closing at
January 2016 gains losses fee disposals 31 December 2016
Investment US$ 000 US$ 000 US$ 000 US$ 000 US$ 000 US$ 000
(audited) (audited) (audited) (audited) (audited) (audited)
Listed equity investments
Gemfields(1) 158,603 6,012 - – – 164,615
158,603 6,012 - – – 164,615
Unlisted equity investments
Jupiter (2) 35,705 43,756 - – – 79,461
Sedibelo Platinum Mines 114,408 – - – – 114,408
150,113 43,756 - – – 193,869
Total non-current 308,716 49,768 - – – 358,484
Loans and receivables
Gemfields–US$10 mil. loan(3) 9,804 - - 596 (10,400) -
Gemfields–US$5 mil. loan(4) - – – 23 4,925 4,948
9,804 – – 619 (5,475) 4,948
Total current 9,804 – – 619 (5,475) 4,948
Total Investment Portfolio 318,520 49,768 - 619 (5,475) 363,432
(1) The unrealised fair value gain on Gemfields of US$6.012 million includes an unrealised foreign exchange loss of US$26.336 million.
(2) The unrealised fair value gain on Jupiter of US$43.756 million does not include any direct foreign exchange gain/loss as the
valuation is denominated in US$.
(3) The Group made a loan to Gemfields of US$9.776 million (US$10 million less an arrangement fee of US$0.224 million). The loan, including
interest and arrangement fee was repaid by Gemfields on 9 December 2016.
(4) The Group made a loan to Gemfields of US$4.925 million (US$5 million less an arrangement fee of US$0.075 million). The loan, including
interest and arrangement fee was repaid by Gemfields on 30 June 2017.
Sedibelo Platinum Mines Limited – equity
Nature of investment
The Group holds an equity interest in SPM, a producer of PGMs with interests in the Bushveld Complex in South Africa.
Fair value methodology
The Directors have estimated that the value of SPM is US$1.5 billion; the Group’s indirect 6.54% interest has therefore been valued at
US$98 million.
The Directors have considered a range of sources in determining the valuation of SPM. The primary source used by the Directors in their
valuation is a competent person’s report prepared by an independent third party as at 31 December 2016 (“the CPR”). The CPR is the latest
available report used by the Directors in their valuation of SPM at 30 June 2017.
The CPR includes discounted cash flow (“DCF”) analysis to value SPM’s key assets and includes a range of valuations. The preferred valuation
of SPM at 31 December 2016 given by the CPR is US$2.94 billion; the Group’s indirect 6.54% interest on this basis would be valued at US$192
million.
The DCF analysis is based on a number of predictions and uncertainties including forecast PGM prices, production levels, costs, discount
rates, exchange rates and the consolidated mine plan. Changing any of these assumptions may materially affect the implied valuation. The
Directors note that the valuation of SPM is sensitive to various key inputs, in particular the platinum price, the palladium price, the
discount rate and production levels.
The CPR used information from a range of sources to forecast PGM prices. The platinum price was forecast to be within a range of US$1,038
to US$1,302 over SPM’s life-of-mine. Using the same range of sources at 30 June 2017, the forecasts for platinum have fallen to within a
range of US$979 to US$1,300 over SPM’s life-of-mine. The palladium price was forecast to be within a range of US$704 to US$820 over SPM’s
life-of-mine. Using the same range of sources at 30 June 2017, the forecasts for palladium have risen to within a range of US$785 to US$863
over SPM’s life-of-mine. Platinum, the key PGM produced by SPM, has traded below its forecast price for the first six months of 2017 and
long-term forecasts for platinum have reduced, which implies a reduction in the CPR valuation. Accordingly, the Directors have applied a 5%
reduction in the forecast PGM prices used in the CPR; utilising sensitivity analysis from the CPR, this results in an 11% reduction in the
valuation of SPM.
The Directors note that due to the higher political risk associated with South Africa, including the downgrade of South Africa’s credit
rating and the release of Mining Charter III during the period, implies that a higher Weighted Average Cost of Capital (“WACC”) should be
used in the DCF model, which further implies a reduction in the CPR valuation. The post-tax USD real WACC used in the CPR for the DCF
valuations of SPM’s key assets is 8.10%. Given the political uncertainty, the Directors believe that a higher USD WACC could be justified
and have applied a WACC of 9%; utilising sensitivity analysis from the CPR, this results in a further 9% reduction in the valuation of SPM.
The market price of listed PGM companies often differs to the underlying Net Asset Value (“NAV”) – the size of the discount or premium is
dependent on many factors and can fluctuate significantly, particularly in periods of significant equity market volatility, which has been
seen over the past couple of years. Comparable members of SPM’s peer group of listed PGM companies were trading at an average discount to
NAV of approximately 28% on 30 June 2017 and the Directors believe that an equivalent discount should be applied as part of the overall
discount applied to the CPR.
The Directors further note that the long-term US$/ZAR exchange rate used in the DCF model of US$1/ZAR16.65 differs from the Directors' long
term view of US$1/ZAR13.10 and production at SPM is in line with budget for 2017.
All these factors imply a significant discount could be applied to the CPR preferred valuation of US$2.94 billion. Accordingly, whilst the
Directors note that any adjustment made to the CPR is subjective, they have valued SPM at US$1.5 billion, approximately a 49% discount to
the CPR preferred valuation.
The Group’s valuation of SPM has been determined taking into account a consensus of recent analyst reports for forecast PGM prices for 2017
and beyond. For the purposes of the disclosures required by IFRS13 Fair Value Measurement (“IFRS13”) and using sensitivity analysis included
within the CPR, if the forecasted PGM prices were 10% lower than the current consensus for forecast PGM prices, presuming all other
indicators and evidence was unchanged, the valuation of SPM included in the balance sheet would decrease from US$98 million to US$74 million.
The related fair value decrease of US$24 million would be recognised in profit and loss. The Directors consider this to be a realistic
potential movement in PGM prices. Alternatively, if the post-tax real USD WACC used in the CPR was 10% compared to the Directors’ estimated
post-tax real USD WACC of 9% (i.e. 11% higher), presuming all other indicators and evidence were unchanged, the valuation of SPM
included in the balance sheet would decrease from US$98 million to US$88 million. The related fair value decrease of US$10 million would be
recognised in profit and loss. The Directors consider this to be a realistic potential movement in the WACC in the current environment.
Production is also an important factor in determining the valuations. An adjustment to production levels would also have consequent effects
on variable costs, thereby reducing the impact on fair value versus the pricing analysis. The CPR does not provide such sensitivity analysis
for changes in production.
Other considerations
No secondary valuation methodologies have been considered for the Company’s investment in SPM as the CPR has a recent effective date, being
31 December 2016.
The Group’s cash cost of investment for SPM is approximately US$123 million and the Group’s initial investment was made in August 2008.
Gemfields plc – equity
Nature of investment
The Group holds an equity interest in Gemfields, the producer of coloured gemstones. Gemfields owns emerald assets in Zambia and Ethiopia,
ruby assets in Mozambique and amethyst assets in Zambia. Gemfields was listed on AIM at 30 June 2017.
The Group owns a see-through interest of 77.57% in Gemfields at 30 June 2017, valued at US$179 million, see Note (5) Gemfields Takeover.
Fair value methodology
Market Approach- Listed share price
The Group’s interest in Gemfields is valued at the 30 June 2017 mid-price of GBP0.3213 per share, translated at the closing rate of
US$1/GBP0.7690.
Other considerations
No secondary valuation methodologies have been considered for the Company’s investment in Gemfields as it is a listed equity in an active
market.
The Group’s cost of investment is approximately US$198 million and the Group’s initial investment was made in October 2007.
Jupiter Mines Limited – equity
Nature of investment
The Group holds an equity interest in Jupiter. Jupiter is based in Perth, Western Australia and its main asset is a 49.9% interest in the
Tshipi manganese joint venture in South Africa.
Fair value methodology
Combination of Income, Market and Cost Approach applying Directors’ estimate
Each of Jupiter’s material assets has been valued separately to determine an appropriate valuation for 100% of Jupiter. The Directors have
estimated that the fair value of Jupiter at 30 June 2017 is US$410 million; the implied valuation of the Group’s 18.43% interest is US$76
million.
Jupiter’s 49.9% interest in Tshipi has been valued based on a competent person’s report prepared by an independent third party as at 31
December 2016. The competent person’s report includes a DCF analysis for Tshipi Borwa and includes a range of valuations. The preferred
valuation of 100% of Tshipi Borwa at 31 December 2016 given by the competent person’s report is US$1,436 million; the Group’s indirect
interest (through Jupiter’s 49.9% interest in Tshipi) on this basis would be valued at US$132 million. The Directors have estimated that
the fair value of Jupiter’s 49.9% interest in Tshipi at 30 June 2017 is US$357 million with the implied valuation of the Group’s see
through interest being US$66 million. The DCF analysis is based on a large number of predictions and uncertainties including revenues,
production levels, costs and exchange rates. Changing any of the assumptions may materially affect the implied valuation, in particular the
long-term forecast manganese price. The Directors have considered each of the variables and have applied different assumptions for the
long-term manganese price and long-term US$/ZAR exchange rate than those used in the DCF, which has reduced the implied valuation.
The Directors have applied a long-term 37% FOB manganese price of US$3.55 per dry metric tonne unit (“dmtu”) in the DCF model, which is the
average price over the five years to 30 June 2017. This price compares to the average five-year price (at 31 December 2016) of US$3.65 per
dmtu used to value Tshipi at 31 December 2016. The Directors believe that long-term past performance is a sensible indicator to what might
happen to the manganese price going forwards, particularly given the volatility of the manganese market over the past 18 months. The
Directors further note that the long-term US$/ZAR exchange rate used in the DCF model of US$1/ZAR14.82 differs from the Directors' long-term
view of US$1/ZAR13.10, which is the same long-term rate used in the Directors valuation of Tshipi at 31 December 2016.
For the purposes of the disclosures required by IFRS13, if the forecast manganese price of US$3.55 per dmtu used in the valuation declined
by 10% and presuming all other indicators and evidence were unchanged, the valuation of Jupiter included in the balance sheet would
decrease from US$76 million to US$57 million. The fair value decrease of US$19 million would be recognised in profit and loss. The Directors
consider this to be a realistic potential movement in the manganese price. If the forecast exchange rate of US$1/ZAR13.10 used in the
valuation declined by 10% (i.e. the Rand strengthening against the US$) and presuming all other indicators and evidence were unchanged, the
valuation of Jupiter included in the balance sheet would decrease from US$76 million to US$56 million. The fair value decrease of US$20
million would be recognised in profit and loss. The Directors consider this to be a realistic potential movement in the foreign exchange
rate in the current environment. Production is also an important factor in determining the valuations. An adjustment to production levels
would also have consequent effects on variable costs, thereby reducing the impact on fair value versus the pricing analysis. The competent
person’s report does not provide such sensitivity analysis for changes in production.
Jupiter’s other assets have been valued using a range of different valuation methodologies. Jupiter has made certain shareholder loans to
Tshipi which have been valued at amortised cost, which the Directors consider approximates to fair value. Jupiter’s interests in Mount
Mason and Mount Ida have been written down to zero due to the uncertainty over the future prospects for each asset, however the Directors
note that the iron ore price has shown some signs of recovery which could lead to a revaluation of the assets in future reporting periods.
Jupiter’s cash has been included at cost which approximates to fair value. Jupiter has no material liabilities.
Other considerations
The Directors have compared the price set for the Jupiter buy-back of US$0.40 per share against the sum-of-the-parts valuation of US$0.19
per share. The Directors note that at the time Jupiter first announced the US$55 million distribution to shareholders, 21 November 2016,
the manganese price was trading at US$7.29 per dmtu and that the buy-back price per share was underpinned by long-term manganese price
assumptions of between US$4-5 per dmtu, which are higher than the US$3.55 per dmtu price used by the Directors in the valuation of Jupiter.
As the share buy-back comprised an off-market transaction that was offered to all of Jupiter’s shareholders, with a high acceptance rate of
98%, it is not considered by the Directors to be a third party or external market transaction. Accordingly, the Directors believe that the
US$0.40 per share is not a better estimate of the fair value of Jupiter as at 30 June 2017 than the primary fair value methodology used in
these Financial Statements. Further details of the Jupiter buy-back are disclosed in Note 4 Realised gain on Jupiter Buy-Back.
The Group owned an effective 18.43% interest in Jupiter at 30 June 2017. The Group’s cash cost of investment is approximately US$19 million
and the Group’s initial investment into Jupiter was made in May 2008.
Gemfields plc – US$5 million loan
Nature of investment
On 13 December 2016, the Group agreed to provide a loan of US$5 million to Gemfields, in line with the Group’s strategy of providing
financial support to its investments. The loan was repaid with accrued interest on 30 June 2017.
Valuation methodology
Amortised cost - effective interest method
The value of the loan to Gemfields was calculated using the effective interest method, with the arrangement fee accruing evenly over the
projected life of the loan. The loan was repayable with accrued interest on 30 June 2017. The outstanding balance on the date of repayment,
30 June 2017, including interest and arrangement fee, was US$5.17 million. The effective interest rate of the loan throughout the duration
of the loan was approximately 9.04%.
Gemfields plc – US$10 million loan
Nature of investment
On 18 December 2015, the Group agreed to provide a loan of up to US$10 million to Gemfields, in line with the Group’s strategy of providing
support to its investments. The loan was repaid, with accrued interest, on 9 December 2016.
Valuation methodology
Amortised cost- effective interest method
The value of the loan to Gemfields was calculated using the effective interest method, with the arrangement fee accruing evenly over the
projected life of the loan. The loan was repayable in instalments; US$1 million was repaid on 31 March 2016, US$2.5 million on 30 June 2016,
US$2.5 million on 30 September 2016 and US$4 million with accrued interest on 9 December 2016. The outstanding balance on the date of
repayment, 9 December 2016, including interest and arrangement fee, was US$4.4 million. The effective interest rate of the loan throughout
the duration of the loan was approximately 6.53%.
FAIR VALUE HIERARCHY
The Group owns certain financial instruments that are measured at fair value subsequent to initial recognition. The equity investments held
within the Investment Portfolio fall into this category. The Group also owns certain other equity investments which do not form part of the
Investment Portfolio, held within Other investments on the balance sheet.
IFRS13 requires disclosure of fair value measurements under the following hierarchy:
Level Fair value input description
Level 1 Listed prices (unadjusted) in active markets for identical assets or liabilities
Level 2 Inputs other than listed prices included within level one that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices)
Level 3 Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)
The Group’s valuation of Jupiter is based on a number of different valuation methodologies, with each of Jupiter’s material assets valued
separately. However, the investment in Jupiter as a whole has been categorised as Level 3 as the most significant inputs to the Jupiter
valuation as a whole are Level 3 inputs.
A breakdown of the Group’s financial assets at Fair Value through Profit or Loss (“FVTPL”), categorised as Level 1, Level 2 and Level 3
assets is included below:
Level 1
Level 2
Level 3 Total
US$’000s
US$’000s
US$’000s
US$’000s
30 June 2017
(reviewed)
(reviewed)
(reviewed)
(reviewed)
Financial assets at FVTPL
Equity investments
179,390
- 173,675 353,065
Investments in associates
-
-
1,267
1,267
Other investments
14
-
-
14
179,404
-
174,942
354,346
Level 1
Level 2
Level 3 Total
US$’000s
US$’000s
US$’000s
US$’000s
30 June 2016 (reviewed)
(reviewed)
(reviewed)
(reviewed)
Financial assets at FVTPL
Equity investments 124,426 – 154,100 278,526
Investments in associates
-
-
1,255
1,255
Other investments
21
-
-
21
124,447 – 155,355 279,802
Level 1
Level 2
Level 3 Total
US$’000s
US$’000s
US$’000s
US$’000s
31 December 2016 (audited)
(audited)
(audited) (audited)
Financial assets at FVTPL
Equity investments 164,615 – 193,869 358,484
Investments in associates
-
-
1,265
1,265
Other investments
12
-
-
12
164,627 – 195,134 359,761
Level 3 fair value reconciliation
A reconciliation of the Group’s investments during the period/year is provided below:
30 June 2017 30 June 2016 31 December 2016
US$’000 US$’000 US$’000
(reviewed) (reviewed) (audited)
Opening 195,134 151,307 151,307
Fair value gain of associates 2 61 71
Jupiter part disposal (1) (4,768) - -
Unrealised fair value gains 918 3,987 43,756
Unrealised fair value losses (16,344) – -
Closing 174,942 155,355 195,134
(1) The Company sold back 6% of its shares to Jupiter at a price of US$0.40 per share. The transaction completed on 13 March 2017 with the
Company receiving US$10.1 million, see Note (4) Realised gain on Jupiter Buy-Back. The fair value of the shares sold back to Jupiter at the
time the transaction completed was US$0.19 per share.
3. SEGMENTAL REPORTING
The Chief Operating Decision Maker (“CODM”) is Mr Brian Gilbertson, the Chairman, who measures the performance of each operating segment by
assessing the fair value of the Group’s Investment Portfolio on a regular basis. The Group’s segmental reporting is based around three
Investment Platforms; PGMs, Steel Making Materials, and Coloured Gemstones, each of which is categorised as an operating segment. Each of
SPM, Jupiter and Gemfields is a separate legal entity and each has a discrete board of directors with a clear set of responsibilities. Each
investment is assessed on this basis and as such, each of the Group’s operating segments may include multiple mines and other assets.
The segmental information provided to the CODM for the period ended 30 June 2017 is as follows:
Steel Making Coloured
PGMs (1) Materials(2) Gemstones(3) Unallocated Total
30 June 2017 US$’000 US$’000 US$’000 US$’000 US$’000
(reviewed) (reviewed) (reviewed) (reviewed) (reviewed)
Income statement
Unrealised fair value gains
– 918 – – 918
Unrealised fair value losses
(16,344) – (63,952) – (80,296)
Realised gains - 5,337 - - 5,337
Loan interest income
– – 222 – 222
Net segmental (expense)/income
(16,344) 6,255 (63,730) – (73,819)
Other income
-
-
Net losses on investments and
income from operations
(73,819)
Expenses, net finance income, fair value
gain of associates and taxation
(7,366) (7,366)
Net segmental (loss)/profit
(16,344) 6,255 (63,730) (7,366) (81,185)
Balance sheet
Net Asset Value
98,064 75,611 179,390 9,999 363,064
(1) The unrealised fair value loss on SPM of US$16.344 million does not include any foreign exchange as the valuation is denominated in US$.
(2) The unrealised fair value gain on Jupiter of US$0.918 million does not include any foreign exchange as the valuation is denominated in
US$. The realised gain on Jupiter of US$5.337 million does not include any foreign exchange as the valuation is denominated in US$.
(3) The unrealised fair value loss on Gemfields of US$63.952 million includes an unrealised foreign exchange loss of US$10.297 million.
The segmental information provided to the CODM for the period ended 30 June 2016 was as follows:
The segmental information provided to the CODM for the period ended 30 June 2016 was as follows:
Steel Making Coloured
PGMs Materials(1) Gemstones(2) Unallocated Total
30 June 2016 US$’000 US$’000 US$’000 US$’000 US$’000
(reviewed) (reviewed) (reviewed) (reviewed) (reviewed)
Income statement
Unrealised fair value gains
– 3,987 – – 3,987
Unrealised fair value losses
– – (34,177) – (34,177)
Loan interest income
– – 358 – 358
Net segmental income/(expense)
– 3,987 (33,819) – (29,832)
Other income
-
-
Net losses on investments and
income from operations
(29,832)
Expenses, net finance income, fair value
gain of associates and taxation
(3,113) (3,113)
Net segmental profit/(loss)
– 3,987 (33,819) (3,113) (32,945)
Balance sheet
Net Asset Value
114,408 39,692 131,088 4,192 289,380
(1) The unrealised fair value gain on the Steel Making Materials segment of US$3.987 million does not include any foreign exchange as the
valuation is denominated in US$.
(2) The unrealised fair value loss on the Coloured Gemstones segment of US$34.177 million includes an unrealised foreign exchange loss of
US$15.104 million.
The segmental information provided to the CODM for the period ended 31 December 2016 was as follows:
Steel Making Coloured
PGMs Materials(1) Gemstones(2) Unallocated Total
US$’000 US$’000 US$’000 US$’000 US$’000
(audited) (audited) (audited) (audited) (audited)
31 December 2016
Income statement
Unrealised fair value gains – 43,756 6,012 – 49,768
Unrealised fair value losses - - - - -
Loan interest income – – 619 – 619
Net segmental expense - 43,756 6,631 – 50,387
Other income – –
Net gain on investments and income from
operations 50,387
Expenses, net finance income, fair value
gain/(loss) of associates and taxation (5,817) (5,817)
Net segmental profit/(loss) - 43,756 6,631 (5,817) 44,570
Balance sheet
Net Asset Value 114,408 79,461 169,563 3,463 366,895
(1) The unrealised fair value gain on the Steel Making Materials segment of US$43.756 million does not include any direct foreign
exchange gain/loss as the valuation is denominated in US$.
(2) The unrealised fair value gain on the Coloured Gemstones segment of US$6.012 million includes an unrealised foreign exchange loss of
US$26.336 million.
4. REALISED GAIN ON JUPITER BUY-BACK - MARCH 2017
On 23 January 2017, Jupiter announced the details of an off-market equal access share buy-back to return up to US$55 million to its
shareholders. All Jupiter shareholders were made an equal offer to buy-back 6% of their shares in Jupiter, at a set price of US$0.40 per
share.
The Company, as an 18.45% shareholder in Jupiter (prior to the Jupiter buy-back) had the right to have 6% of its 421,042,093 Jupiter shares
bought-back. The Company accepted the buy-back by Jupiter, resulting in the sale of 25,262,526 shares in Jupiter for US$0.40 per share. The
buy-back price per share was underpinned by Jupiter’s long-term manganese price assumptions of between US$4-5 per dmtu, which are higher
than the price used by the Directors in the valuation of Jupiter. The transaction completed on 13 March 2017 with the Company receiving
US$10.105 million. At 13 March 2017, the Directors’ most recent estimate of the fair value of the Jupiter shares was US$0.19 per share,
being the valuation as at 31 December 2016.
The realised gain on the Jupiter buy-back was as follows:
Realised gain on Jupiter shares bought back Number of shares Price per share in US$ US$
Fair value of Jupiter shares at date of receipt (13 March 2017) 25,262,526 0.19 (4,767,640)
Buy-back price of the 6% of Jupiter shares bought back
by Jupiter (13 March 2017) 25,262,526 0.40 10,105,010
Realised gain on Jupiter shares 5,337,370
Subsequent to the Jupiter share buy-back and as at 30 June 2017 the Company owns 395,779,567 Jupiter shares or 18.43% of the issued share
capital of Jupiter.
5. GEMFIELDS TAKEOVER
On 19 May 2017, the Company’s Board announced the terms of an offer to acquire the entire issued and to be issued share capital of Gemfields,
other than the Gemfields shares already held by the Company (the “Offer”). Under the terms of the Offer, each Gemfields shareholder was
entitled to receive 1.91 PRL shares for each Gemfields share.
On 26 June 2017, the Company’s shareholders voted in favour of the resolution approving the Offer and the Offer became wholly unconditional.
During the period 26 – 30 June 2017, the Company acquired 170,444,135 additional Gemfields shares (in return for 1.91 PRL shares for each
Gemfields share) for total consideration US$78,727,379 (between ZAR2.89 – ZAR3.12 per PRL share). The acquisition cost of these additional
Gemfields shares is based on the PRL share price (on the day of each tranche of acceptances) converted at the 1.91 Offer ratio and the daily
US$/ZAR exchange rate. The Company had the legal right to the 170,444,135 Gemfields shares at the reporting date although these shares had
not been transferred to PRL until after the end of the period.
The Offer closed on 1 August 2017 when the Company had received valid acceptances from Gemfields shareholders (including the Company’s own
interest) representing 96.98% of the Gemfields shares in issue). As the level of acceptances from the Gemfields shares has surpassed 90% of
the Gemfields shares to which the Offer related, the Company commenced the compulsory acquisition process of the remaining Gemfields shares
under Sections 979-982 of the Companies Act 2006.
Impact of the Gemfields Acquisition on equity
The below table illustrates the impact of the Gemfields Acquisition during the period on share capital and share premium:
Share Capital Share Premium
US$’000s US$’000s
Balance at 1 January 2017 8 375,227
Gemfields Offer- Gemfields shares acquired 3 78,724
Gemfields Offer- transaction costs - (1,373)
Gemfields Offer- own shares acquired 1 23,318
At 30 June 2017 12 475,896
Further details on the impact on equity are detailed in Note 9 Share Capital.
Gemfields Acquisition costs
The costs associated with the Gemfields Acquisition during the period can be broken down as follows:
Costs US$’000s
Financial Advisor and transaction sponsor 3,000
Independent Reporting Accountants 300
Legal Advisor to PRL as to South African Law 242
Legal Advisor to PRL as to English Law 1,615
Legal Advisor to PRL as to Guernsey Law 242
Legal Advisor to PRL as to Zambian Law 14
Legal Advisor to PRL as to Mozambique Law 3
Administration 71
Documentation and Listing fees 42
UK Regulatory 115
Printing and postage 116
5,760
The Directors have allocated US$4.4 million (approximately 75%) of the Gemfields Acquisition costs to profit and loss and US$1.4 million to
equity (approximately 25%) due to these costs being associated with the issuance of new shares.
6. INVESTMENT MANAGER'S BENEFITS
Pallinghurst (Cayman) GP L.P. (the “Investment Manager”) was appointed on 4 September 2007. The Investment Manager acted through its general
partner, Pallinghurst GP Ltd. The Investment Manager provides advisory and management services to the Group and to certain other
Pallinghurst Co-Investors.
The Investment Manager was entitled to an Investment Manager’s Benefit (“IMB”) each accounting period. The basis for calculation of the IMB
changed subsequent to 14 September 2012, the end of the Investment Period(1). Prior to the end of the Investment Period, the IMB was
calculated as 1.5% per annum of the amount subscribed for by shareholders in the Company. From the end of the Investment Period until 14
September 2017, the basis for calculation was 1.5% per annum of the lower of either the aggregate acquisition cost, or the fair value, of
the Group’s unrealised investments (based on the Group’s most recent published financial statements).
The total charge in profit or loss for the IMB during the six months ending 30 June 2017 was US$2,442,000 (six months to 30 June 2016:
US$2,715,000; year ending 31 December 2016: US$4,988,000). The IMB paid in advance, as per the terms of the Investment Management Agreement,
for the third quarter of 2017 is US$1,130,000. The IMB prepaid for the third quarter of 2016 was US$1,199,000 and the IMB prepaid for the
first quarter 2017 was US$1,074,161. The IMB prepaid for the third quarter of 2017 is for the period 1 July 2017 – 14 September 2017.
At the Company’s General Meeting on 26 June 2017, shareholders voted in favour of extending the life of the Company by a further 50 years,
and the termination of the Investment Management Agreement effective 14 September 2017 for no consideration. From 15 September 2017, the
Company is responsible for its own investment management activity. The Company has entered into employment contracts with the
Executive Directors to undertake this function, namely, Mr Brian Gilbertson as Executive Chairman, Mr Frandsen as Chief Executive, Mr Willis
as Finance Director, Mr Sean Gilbertson as Chief Investment Officer and Mr Thapliyal as Chief Operating Officer. Mr Sean Gilbertson and Mr
Thapliyal were appointed Directors of the Company, effective 17 July 2017.
Performance Incentive
Subject to certain conditions, the Investment Manager was entitled to a Performance Incentive related to the performance of the Group’s
investments. The excess of the total funds returned, and/or available for return, to shareholders, over the total amount subscribed in each
separate capital raising to date, is split between the shareholders (80%) and the Investment Manager(2) (20%). This was subject to a
Hurdle(3) of 8% per annum; until the Hurdle was reached, the Investment Manager is not entitled to any Performance Incentive. The Investment
Manager would only receive the Performance Incentive if aggregate returns to shareholders over the life of the Company are in excess of 8%
per year.
The Directors assess whether a provision for the Performance Incentive should be made at the end of each reporting period. The Directors
also assess whether the provision should be accounted for as a current or non-current liability, based on their best assessment of the
likely timing of any outflow.
The provision for the Performance Incentive was calculated as follows:
(a) The Group’s Aggregate Proceeds(4) are allocated entirely to shareholders until such time as shareholders have received an aggregate
amount of the Company’s Funds(5) plus the Hurdle.
(b) Thereafter, the Investment Manager is allocated all further Aggregate Proceeds until it has been allocated an amount equal to 25% of the
Hurdle.
(c) Aggregate Proceeds are then allocated 80% to Investors and 20% to the Investment Manager.
(1) The Investment Period commenced on 14 September 2007 and ended on 14 September 2012.
(2) Any Performance Incentive payment may be made to the Investment Manager or an affiliate, at the election of the Investment Manager.
(3) The Hurdle is calculated as 8% of the Company’s Funds, compounded annually and calculated daily.
(4) Aggregate Proceeds are equal to the Group’s NAV after adding back any provision for the Performance Incentive. For this calculation, it
is assumed that all investments will be disposed of at their current fair value, with no associated transaction costs, and that all proceeds
will be distributed immediately. The Group’s NAV, after adding back any provision for the Performance Incentive, is therefore the best
estimate of the total amount available for distribution.
(5) The Company’s Funds is equal to the amounts subscribed for by shareholders in the Company, prior to certain related costs and foreign
exchange.
The Directors have not provided for a Performance Incentive in the current or prior periods.
At the Company’s General Meeting on 26 June 2017, shareholders voted in favour of termination of the Investment Management Agreement.
Accordingly, effective 14 September 2017, the Performance Incentive was also terminated for no consideration.
7. CASH FLOWS FROM OPERATIONS
1 January 2017 1 January 2016 1 January 2016
to 30 June 2017 to 30 June 2016 to 31 December 2016
US$’000s (reviewed) US$’000s (reviewed) US$’000s (audited)
Notes
Net (loss)/profit after tax (81,185) (32,945) 44,570
Adjustments for:
Unrealised fair value gains (2)
(918) (3,987) (49,768)
Unrealised fair value losses
(2) 80,296 34,177 -
Realised gain on Jupiter
share buy-back (4) (5,337) - -
Loan interest income and structuring fee(2)
(222) (358) (619)
Unrealised fair value (gain)/loss
on other investments (2) 27 36
Fair value gain of associates (2) (61) (71)
Tax expense
3 2
3
Finance income (19) - (1)
Finance costs 5 2 3
Foreign exchange gain on cash
(2) (11) (9)
Operating cash flows before
movements in working capital
(7,383) (3,154) (5,856)
(Increase)/decrease in trade
and other receivables
(78) 286
487
Increase/(decrease) in trade
and other payables
4,035 (559) (502)
Cash used in operations (3,426) (3,427) (5,871)
Finance income 19 - 1
Finance costs (5) (1) (3)
Tax paid
- (3) (3)
Net cash used in operating activities (3,412) (3,431) (5,876)
8. RELATED PARTY TRANSACTIONS
The Group’s subsidiaries, joint ventures and associates are related parties. Investments within the Group’s Investment Portfolio are also
usually related parties. The Investment Portfolio consists of investments held at fair value and loans to portfolio companies. Certain
individuals act as both Directors of the Company and as directors of the Group’s investments. Mr Brian Gilbertson is the chairman of SPM,
Jupiter and Gemfields, and Mr Frandsen is executive deputy chairman of SPM and deputy chairman of Gemfields. Mr Brian Gilbertson and Mr
Frandsen were appointed to the Gemfields board effective 28 July 2017.
The Investment Manager acted through its general partner, Pallinghurst GP Ltd. The directors of Pallinghurst GP Ltd are Mr Brian Gilbertson,
Mr Frandsen, Mr Willis, Mr Harris and Mr Tolcher. The Investment Manager is a related party due to the common directorships between the
Group and Pallinghurst GP Ltd. Certain expenses are incurred by Pallinghurst GP Ltd on behalf of the Group and are then reimbursed to
Pallinghurst GP Ltd at cost. The Company’s reimbursement of the expenses settled by Pallinghurst GP Ltd during the six months ending 30 June
2017 was US$16,493 (six months to 30 June 2016: US$8,994; year ending 31 December 2016: US$40,598). The Group’s outstanding balance with
Pallinghurst GP Ltd at 30 June 2017 was US$17,033 (30 June 2016: US$1,762; 31 December 2016: US$Nil).
Pallinghurst GP Ltd received investment advice from the Investment Advisor, Pallinghurst Advisors LLP (“PALLP”), a limited liability
partnership incorporated in the United Kingdom and regulated by the Financial Conduct Authority. PALLP is a related party to the Group as
Mr Brian Gilbertson is both a Member of PALLP and Chairman of the Company. Mr Sean Gilbertson who was appointed to the board effective 17
July 2017 is also a Member of PALLP. Certain expenses were incurred by PALLP on behalf of the Group and are then reimbursed to PALLP at cost.
The Company’s reimbursement of the expenses settled by PALLP during the six months ending 30 June 2017 was US$68,622 (six months to 30 June
2016: US$17,294; year ending 31 December 2016: US$49,667). The Group’s outstanding balance with PALLP at 30 June 2017 was US$62,903 (30 June
2016: US$16,385; 31 December 2016: US$Nil).
Vistra Guernsey acts as the Group’s administrator, company secretary and registrar. Mr Platt-Ransom ceased to be a Director of Vistra
Guernsey and entities within the Vista Guernsey group during 2016. The Group’s relationship with Vistra Guernsey is at arm’s length. The
Group’s expense for services rendered by Vistra Guernsey during the six months ending 30 June 2017 was US$78,000 (six months to 30 June 2016:
US$78,000; year ending 31 December 2016: US$164,000). The Group’s outstanding balance with Vistra at 30 June 2017 was US$39,000 (30 June
2016: US$Nil; 31 December 2016: US$Nil).
Related party transactions include entering into equity investments, exiting from equity investments and loan transactions. Related party
transactions related to the Group’s investments are detailed in Note 2 Investment Portfolio. Certain amounts are payable by the Group to the
Investment Manager as disclosed in Note 6 Investment Manager’s benefits.
The amounts paid to the Non-Executive Directors for services during the six months to 30 June 2017 are set out below:
Directorship Directorship Lead
of the of other Group Audit Independent
Company companies Committee Director Total
US$000 US$000 US$000 US$000 US$000
1 January 2017 to 30 June 2017 (reviewed) (reviewed) (reviewed) (reviewed) (reviewed)
Stuart Platt-Ransom 18 - 1 1 20
Clive Harris 18 1 1 - 20
Martin Tolcher 18 - 2 - 20
Dr Christo Wiese 18 - - - 18
Lumkile Mondi 18 - - - 18
Total 90 1 4 1 96
At the Company’s General Meeting, held on 26 June 2017, shareholders resolved that the maximum amount payable as Directors’ fees be
increased to US$100,000 per Director per annum, with effect from 14 September 2017, the fee payable for each Non-Executive Director
increased from US$35,000 per annum to US$40,000 per annum.
The amounts paid to the Non-Executive Directors for services during the six months to 30 June 2016 are set out below:
Directorship Directorship Lead
of the of other Group Audit Independent
Company companies Committee Director Total
US$000 US$000 US$000 US$000 US$000
1 January 2016 to 30 June 2016 (reviewed) (reviewed) (reviewed) (reviewed) (reviewed)
Stuart Platt-Ransom 18 - 1 1 20
Clive Harris 18 1 1 - 20
Martin Tolcher 18 - 2 - 20
Dr Christo Wiese 18 - - - 18
Lumkile Mondi 18 - - - 18
Total 90 1 4 1 96
The amounts paid to the Non-Executive Directors for services during 2016 are set out below:
Directorship Directorship Lead
of the of other Group Audit Independent
Company companies Committee Director Total
US$000 US$000 US$000 US$000 US$000
1 January to 31 December 2016 (audited) (audited) (audited) (audited) (audited)
Stuart Platt-Ransom 35 - 3 2 40
Clive Harris 35 2 3 - 40
Martin Tolcher 35 - 5 - 40
Dr Christo Wiese 35 - - - 35
Lumkile Mondi 35 - - - 35
Total 175 2 11 2 190
9. SHARE CAPITAL
Shares issued are recognised at the fair value of consideration received, with the excess over the nominal value of the shares credited to
share premium. Costs directly attributable to a share issue are deducted from share premium rather than included in profit or loss.
The Company has issued Ordinary Shares and Management Shares. Ordinary Shares entitle the holder to a vote in shareholder meetings and to
receive dividends. In the event of the Company’s wind-up, Management Shares carry the right to receive notice of, attend and vote at any
general meeting of the Company, provided that no Ordinary Shares are in issue at such date. Holders of the Management Shares will only
receive their nominal value once the holders of the Ordinary Shares have received the fair value of their shares. Accordingly, the holders
of Management Shares do not have the right to receive nor participate in any distributions of the Company, including dividends. The Company
is permitted to issue an unlimited number of shares.
Issued and allotted share capital:
Number of shares Share Capital Share Premium
US$ US$
Management Shares (unlisted)
Management Shares of US$1 each
Balance at 30 June 2016, 31 December 2016
and 30 June 2017 2 2 -
Reserve for
Number of shares Share Capital Share Premium own shares
US$ 000 US$ 000 US$ 000
Ordinary Shares (listed)
Ordinary Shares of US$0.00001 each
Balance at 30 June 2016 and 31 December 2016 760,452,631 8 375,227 -
Allotted during Gemfields Offer period- June 2017 421,824,444 4 100,669 -
Effect of own shares held - - (23,319)
1,182,277,075(1) 12 475,896 (23,319)
Total Share Capital 30 June 2017 12 475,896 (23,319)
(1) The total of shares allotted includes 96,276,146 PRL shares allotted to an associate included within the Group that are omitted from
the calculation of Per Share Information included within Note 10. Total number of shares in issue as at 30 June 2017 excluding these shares
is 1,086,000,929.
On 19 May 2017, the Company’s Board announced the terms of an offer to acquire the entire issued and to be issued share capital of Gemfields,
other than the Gemfields shares already held by the Company (the “Offer”). Under the terms of the Offer, each Gemfields shareholder was
entitled to receive 1.91 PRL shares for each Gemfields share.
The Offer went wholly unconditional on 26 June 2017 as the number of acceptances of the Offer from Gemfields’ shareholders surpassed 60% as
well as the Company receiving the requisite approval from the Company’s shareholders at the General Meeting on 26 June 2017 to approve the
transaction.
By 30 June 2017, the Company had unconditional agreements to acquire 170,444,135 additional Gemfields shares (in return for 1.91 PRL shares
for each Gemfields share) for total consideration of US$79 million (between ZAR2.89 – ZAR3.12 per PRL share). The acquisition cost of these
additional Gemfields shares is based on the PRL share price (on the day of each tranche of acceptances) converted at the 1.91 Offer ratio
and the daily US$/ZAR exchange rate. The Company has accounted for an additional 325,548,298 PRL shares (170,444,135 Gemfields shares
multiplied by the 1.91 Offer ratio) being issued during the period 26 – 30 June 2017, due to the Offer being wholly unconditional.
10. PER SHARE INFORMATION
NAV per share and (Loss)/Earnings Per Share (“LPS” or “EPS”) are key performance measures for the Group. NAV per share is based on net assets
divided by the number of ordinary shares in issue at 30 June 2017. (LPS)/EPS is based on (loss)/profit for the year divided by the weighted
average number of ordinary shares in issue during the period. There are no dilutive indicators or dilutive ordinary shares in issue.
Headline (Loss)/Earnings Per Share (“HLPS” or “HEPS”) is similar to (LPS)/EPS, except that attributable profit specifically excludes
certain items, as set out in Circular 2/2015 “Headline earnings” (“Circular 2/2015”) issued by SAICA. None of these exclusions are relevant
to the Group and (LPS)/EPS is equal to (HLPS)/HEPS in the current and prior periods.
The Group’s EPS is as follows:
30 June 2017 30 June 2016 31 December 2016
(reviewed) (reviewed) (audited)
(Loss)/profit for the year - US$000 (81,185) (32,945) 44,570
Weighted average number of shares in issue (1) 768,936,425 760,452,631 760,452,631
(Loss)/earnings Per Share - US$ (0.11) (0.04) 0.06
(1) The weighted average number of shares for the period ending 30 June 2017 is as follows:
Weighted average
Period Number of shares Effect of own Number of Number of number of shares
allotted shares held shares days for the period
Shares in issue 1 January 2017
– 25 June 2017 - - 760,452,631 176 739,445,652
Shares allotted 26 June 2017 393,179,614 (96,276,146) 1,057,356,099 1 5,841,746
Shares allotted 27 June 2017 151,526 - 1,057,507,625 1 5,842,584
Shares allotted 28 June 2017 195,393 - 1,057,703,018 1 5,843,663
Shares allotted 29 June 2017 21,559,169 - 1,079,262,187 1 5,962,775
Shares allotted 30 June 2017 6,738,742 - 1,086,000,929 1 6,000,005
181 768,936,425
There are no reconciling items between EPS and HEPS as they are equal to each other. There are no dilutive shares and HEPS is equal to
dilutive HEPS.
NAV per share
The Group’s NAV per share is as follows:
30 June 2017 30 June 2016 31 December 2016
(reviewed) (reviewed) (audited)
Net assets - US$’000
363,064 289,380 366,895
Number of shares in issue
1,086,000,929 760,452,631
760,452,631
NAV per share- US$
0.33 0.38
0.48
Tangible NAV is similar to NAV but excludes intangible assets such as goodwill or IT software. The Group does not hold any intangible
assets and NAV is equal to Tangible NAV.
11. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern while taking advantage of
strategic opportunities to provide sustainable returns to shareholders. The Group’s capital structure has not changed since the year-end.
12. CONTINGENT LIABILITIES AND CONTINGENT ASSETS
The Group has acted as a limited guarantor for the lease of Fabergé’s New York retail outlet at 694 Madison Avenue since 31 August 2011.
One of the conditions of the Gemfields/Fabergé Merger, which completed on 28 January 2013, was that Gemfields either take over as guarantor
from the Company, or that Gemfields indemnify the Group against any potential liability to the landlord. Gemfields have provided an
indemnity to the Group against any loss from this guarantee. Fabergé’s New York retail outlet at 694 Madison closed during March 2017 and
the Directors’ assessment of the contingent liability at 30 June 2017 is US$Nil. The Directors’ assessment of the contingent liability at
both 31 December 2016 and 30 June 2016 was US$0.219 million.
The Group had no other significant contingent liabilities or contingent assets at 30 June 2017, 30 June 2016 or 31 December 2016.
13. COMMITMENTS
The Group had no material commitments at the date of signature of these Financial Statements.
14. EVENTS OCCURRING AFTER THE END OF THE PERIOD
GEMFIELDS TAKEOVER
Gemfields is a leading supplier of coloured gemstones and owns emerald assets in Zambia and Ethiopia, ruby assets in Mozambique and amethyst
assets in Zambia. In 2008, the Company and the Pallinghurst Co-Investors became the majority shareholders of Gemfields by contributing the
Kagem emerald mine to Gemfields, its core operating asset, for shares. Subsequently, in 2013, the Company and the Pallinghurst Co-Investors
contributed Fabergé Ltd to Gemfields. The Gemfields investment formed a core component of the Company’s value proposition and therefore
unlocking Gemfields’ full value potential is of paramount importance to the Company.
Despite many positive developments, the share price of Gemfields did not reflect its inherent value. Accordingly, on 19 May 2017, the
Company announced the terms of an offer to acquire the entire issued and to be issued share capital of Gemfields, other than the Gemfields
shares already held by the Company (the “Offer”). See Note 5 Gemfields Takeover. The Directors believe that the acquisition will enable
Gemfields to perform to its full potential, materially improve trading liquidity and promote a re-rating of the enlarged Group.
On 1 August 2017, the Company’s total shareholding had reached 96.98% of the entire issued share capital of Gemfields. As the level of
Gemfields share acceptances surpassed 90% of the shares to which the Offer related, the Company commenced the compulsory acquisition
process of the remaining Gemfields shares under Sections 979-982 of the Companies Act 2006.
The Company gained full control of Gemfields on 28 July 2017, being the day Gemfields delisted from AIM. Given that the Company only gained
board control of Gemfields on 28 July 2017, it has not been possible to determine the fair values of the assets and liabilities acquired by
the date of these interim financial statements. The Company is therefore unable to disclose all the information required by paragraph B64
(e)-(q) of IFRS3 Business Combinations. As Gemfields was loss-making for the twelve months to 30 June 2017, the acquisition may have an
initial negative impact on the Group’s HEPS and EPS.
EXTENSION OF THE COMPANY
The Company is currently structured as an investment entity, listed on the main market of the JSE. Given the diverse nature of its
investments it prepares its financial statements in terms of investment entity accounting which allows it to reflect the underlying
investments at valuation but only reflect the actual cash flow, typically dividends through the income statement. There are no other
similar mining investment entities currently listed on the JSE.
The Company’s initial life-span was due to end on 14 September 2017. At the Company’s General Meeting on 26 June 2017, the shareholders
approved the resolution to amend the Company’s Articles to extend the life of the Company as a closed-end investment company by 50 years.
The Company became an operating mining company upon taking board control of Gemfields and will apply for its listing to be moved to the
“Diversified Mining” sector of the JSE main board.
The Board reminds Shareholders that notwithstanding the proposed continued closed-ended status of the Company, Shareholders are still able
to realise the value of their investments through the trading platforms of either the JSE or the BSX (as appropriate) where the Company’s
equity securities are admitted to trading.
BOARD COMPOSITION
At the Company’s initial public offering in 2007, the Company’s executives committed to managing the Company for at least ten years. As part
of the Gemfields Offer, and the extension of the Company for a further 50 years, the Company’s executives have committed to manage the
Company for another five years, until September 2022.
Mr Brian Gilbertson as Executive Chairman, Mr Frandsen as Chief Executive and Mr Willis as Finance Director have each provided a renewed
five-year commitment to the Company. In addition, Mr Sean Gilbertson has been appointed as the Chief Investment Officer and Mr Thapliyal as
the Chief Operating Officer and have provided the same commitment. Mr Sean Gilbertson and Mr Thapliyal were both Partners of the Investment
Manager prior to being appointed to the Board effective 17 July 2017. The Company’s executive management will lead operations in London,
South Africa, Zambia and Mozambique, with dedicated teams in the field.
After ten years of service, Mr Harris and Mr Platt-Ransom have resigned as independent non-executive Directors and from all Board committees
with effect from 11 July 2017. Furthermore, Mr Erich Clarke and Mr Kwape Mmela were appointed as independent non-executive Directors
effective 31 July 2017.
Mr Mondi has been appointed as a member of each of the Audit Committee, Nomination Committee (Chair) and Remuneration Committee and as the
Company’s Lead Independent Non-Executive Director (“LID”). The LID’s main responsibilities are to chair any meeting in which the Chairman
has a conflict of interest, and to give stakeholders an additional point of contact.
Mr Mmela has been appointed to both the Remuneration Committee (Chair) and Nomination Committee and Mr Clarke has been appointed to the
Audit Committee.
JUPITER BUY-BACK - SEPTEMBER 2017
On 11 September 2017, Jupiter announced the details of an off-market equal access share buy-back to return up to US$25 million to its
shareholders. All Jupiter shareholders were made an equal offer to buy-back 4% of their shares in Jupiter, at a set price of US$0.29 per
share.
The Company, as an 18.43% shareholder in Jupiter has the right to have 4% of its 395,779,567 Jupiter shares bought-back. The Company intends
to accept the buy-back by Jupiter, which will result in the sale of 15,831,182 shares in Jupiter for US$0.29 per share. The Directors’
estimate of the fair value of the Jupiter shares at 30 June 2017 is US$0.19 per share. The transaction is expected to complete in late
October or early November with the Company receiving US$4.6 million.
This transaction will be accounted for in the Company’s financial statements for the year ending 31 December 2017.
APPROVAL OF INTERIM FINANCIAL STATEMENTS
The Interim Financial Statements were approved by the Directors and authorised for issue on 14 September 2017.
REVIEW BY SAFFERY CHAMPNESS
The Interim Report has been reviewed by the Group’s auditor, Saffery Champness, who have provided a report to the Company (the “Independent
Review Report”). The Independent Review Report confirms that nothing has come to the auditor’s attention that might cause them to believe
that the Interim Report was not prepared, in all material respects, in accordance with IAS34, the SAICA Reporting Guides and the FRSC
Pronouncements. The Independent Review Report does not necessarily report on all of the information contained in this Interim Report. Any
reference to future financial information included in the Interim Report has not been reviewed or reported on by the auditors. Shareholders
are advised that in order to obtain a full understanding of the nature of the auditors’ engagement they should obtain a copy of the
Independent Review Report together with the accompanying financial information. The Independent Review Report is available from the
Company’s registered office.
Directors
Brian Gilbertson
Arne H. Frandsen
Andrew Willis
Dr Christo Wiese
Stuart Platt-Ransom (1)
Martin Tolcher
Clive Harris (1)
Lumkile Mondi
Sean Gilbertson (2)
Priyank Thapliyal (2)
Kwape Mmela (3)
Erich Clarke (3)
(1) Resigned 11 July 2017
(2) Appointed 17 July 2017
(3) Appointed 31 July 2017
General Partner of the Investment Manager Administrator and Company Secretary
Pallinghurst GP Ltd Vistra Fund Services (Guernsey) Limited
2nd floor 11 New Street
23-25 Le Pollet St Peter Port
St Peter Port Guernsey
Guernsey, GY1 1WQ GY1 2PF
Channel Islands Channel Islands
Investment Advisor (London) Registered Office
Pallinghurst Advisors LLP 11 New Street
1 New Burlington Place St Peter Port
London Guernsey
W1S 2HR GY1 2PF
United Kingdom Channel Islands
Legal Advisor (Guernsey) Investment Advisor (South Africa)
Mourant Ozannes Pallinghurst Advisors (Pty) Limited
1 Le Marchant Street PO Box 12160
St Peter Port Die Boord
Guernsey Western Cape, 7613
GY1 4HP South Africa
Channel Islands
Legal Advisor (Bermuda) Legal Advisor (South Africa)
Appleby Global ENSafrica
Canon’s Court 150 West Street
22 Victoria Street Sandton, 2196
PO Box HM1179 South Africa
Hamilton HM EX
Bermuda
JSE Sponsor BSX Sponsor
Investec Bank Limited Clarien Investments Limited
100 Grayston Drive 25 Reid Street, 4th Floor
Sandton, 2196 Hamilton HM11
South Africa Bermuda
Registrar and Bermudan Transfer Secretary Auditor
Computershare Investor Services (Guernsey) Ltd Saffery Champness Chartered Accountants
c/o Queensway House PO Box 141
Hilgrove Street St Sampson
St Helier Guernsey
Jersey JE1 1ES GY1 3HS
Channel Islands
South African Transfer Secretary
Computershare Investor Services
(Pty) Limited
Ground Floor
70 Marshall Street
Johannesburg, 2001
South Africa
Date: 26/09/2017 09:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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