Dividends ‘unlikely to be regular’

Money being ploughed back into businesses but shareholders will be paid ‘in chunks’

PALLINGHURST Resources investors should not expect regular dividend payments. Payments will come in the form of quarterly cheques when we sell part of our investment portfolio, it says.

SHAREHOLDERS of Pallinghurst Resources should not expect regular dividends despite the company and its underlying assets generating cash.

Pallinghurst, formed and led by chairman Brian Gilbertson and CEO Arne Frandsen, is invested in platinum, gemstones, manganese operations as well as iron-ore prospects in Australia.

The company has not paid a dividend, as it was growing its investments. “Right now all our money is being ploughed into the businesses and the moment we sell any of our businesses, our intention is clear, we’ll return the money to our shareholders straight away,” Mr Frandsen said yesterday.

“Our dividend payments will not come in the form of quarterly cheques but in chunks when we sell part of our investment portfolio,” he said.

As the portfolio has matured and generated cash, Pallinghurst’s shares have more than doubled since the start of September last year, reaching R4.70 yesterday.

Pallinghurst has a stake in Sedibelo Platinum Mines, which has a strip of properties along the northern border of the Pilanesberg nature reserve. The market is waiting for it to be listed and Pallinghurst has assigned it a value of $3.2bn. Its indirect stake in the platinum producer of 6.73% has a value of $215m.

Asked if these amounts would add up to be the total value Sedibelo could achieve on listing, Mr Frandsen said Pallinghurst was being “very conservative” in its valuation of the business, which produced 150,000oz of platinum last year.

Sedibelo produced 71,800oz of four platinum group metals in the first six months of this year and was on track to post a 10%-20% improvement on last year’s output, Mr Frandsen said.

Pallinghurst was not going to make a play for Anglo American Platinum’s Rustenburg and Union underground mines, which are up for sale, Mr Frandsen said.

Sedibelo has shallow, safe mines and a strong community involvement in the business and that was the model Pallinghurst wanted to replicate with future acquisitions.

Sedibelo has raised $65m from a number of shareholders towards developing a new opencast mine as it grows towards future output of more than 600,000oz.

Pallinghurst has an 18.45% stake in Australia’s Jupiter, which in turn holds a 49.9% stake in Tshipi Borwa, a South African manganese miner. Jupiter owns the Mt Mason and Mt Ida iron-ore prospects in Australia, with rail and port infrastructure developments there allowing Jupiter to consider bringing Mt Mason into production of 2-million tonnes of ore a year from 2017.

Pallinghurst would like a bigger stake in Jupiter.

“If I had to invest I’d rather put it into one of our existing businesses. The return profile is more attractive in what I have right now. If I had the opportunity I would look very seriously at growing the investment in Jupiter,” Mr Frandsen said.

Tshipi will produce between 1.7-million and 2-million tonnes of manganese this year, its second full year of production. It has already secured about 10% of global seaborne manganese sales to China, he said.

Pallinghurst owns 48% of London-listed Gemfields, the world’s largest producer of gemstones. It reported increased annual earnings before interest, tax, depreciation and amortisation of $59m, up from $1.2m a year earlier. Net profit rose to $16.7m from a $23m loss a year earlier.

“These results look better than consensus expectation,” said SP Angel’s John Meyer.