Emerald deal takes shape

13/05/2008 Robert Tyerman

Pallinghurst Resources is putting £16.3 million into gemstone miner Gemfields Resources to cement a £62 million reverse takeover agreed in December.

The aim of the deal is to beef up operations at Kagem, Zambia’s largest emerald mine with recent annual production of 6.5 million high quality carats, where Pallinghurst’s Rox subsidiary awarded the management contract and agreed to sell its 75 per cent stake to Gemfields Resources late last year. Brian Gilbertson, the formidable erstwhile boss of mining giant BHP Billiton who heads Aussie-based Pallinghurst, argues the takeover is a step towards consolidating the fragmented coloured gem stone industry along the lines of the diamond business.

Under the deal, which needs shareholders’ approval next month, Pallinghurst is using Rox to receive new shares representing 55 per cent of AIM-quoted Gemfields. Rox is also subscribing £16.3 million for 54.3 per cent of a placing from Gemfields Resources at 45p, whose proceeds will go to improve efficiency and production at Kagem, increase its resources and establish cutting and polishing facilities at Jaipur in India .

Rox is receiving shares to the value of £62 million in exchange for other interests. These include the options to acquire a licence to use the Fabergé brand name for all coloured gemstones apart from diamonds and to buy Oriental Mining, a company with licences and licence applications to mine emeralds, rubies, sapphires and other gems in Madagascar.

Gilbertson’s son Sean and Gemfields Resources’ chairman Graham Mascall are to join the board of the enlarged company, which will be renamed Gemfields. Originally the brainchild of vice chairman and emerald dynast Rajiv Gupta, Gemfields reckons the deal will help it to establish a commanding position in Zambia’s Fwaya-Fwaya gemstone belt.

Floated three years ago at 45p, Gemfields Resources shares reached 52.5p late the next year before falling to 24.5p last August. Having been suspended while the terms were being thrashed out, they have risen 9p to 44p, valuing the company at £46 million.

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