Tycoon in Tanzanite bid

12/09/2008

Ex-BHP Billiton boss Brian Gilbertson is involved in a £33 million bid by Gemfields Resources for Tanzanite One (TZI).

Emerald play Gemfields is offering 45p a share in cash or its paper for fellow AIM counter TZI, whose shares hit 275p in 2006 on hopes for its Tanzanian deposits of the rare blue stones, before falling all the way to 25.5p last month. Since leaving BHP (the world’s largest miner), Gilbertson has headed acquisitive Australia-based resources investor Pallinghurst, which took a controlling stake in Gemfields last June.

Tanzanite says its board will frame its response to the bid next Friday. Gemfields, founded by leading emerald trader Rajiv Gupta, argues that the deal would unlock ‘significant shareholder value’ in both constituent companies by creating ‘the world’s leading miner of coloured gemstones’.

Gemfields, which maintains that the takeover would enable Tanzanite One to exploit Gemfields’ existing exclusive right to the Fabergé brand, suggests that the enlarged company would have ‘improved prospects’ of joining the AIM exodus and listing on the main board of the London Stock Exchange. Gemfields, which owns 75 per cent of Tanzania’s Kagem emerald mine, says it and Pallinghurst together own 13.7 per cent of TZI and have received ‘irrevocable’ acceptance undertakings for another 19 per cent, so that 32.7 per cent of TZI’s equity is committed to the bid.

At 44.25p, Tanzanite One shares are close to the offer price, while Gemfields’, at 32p, are closer to last month’s 24.5p low than their 52.5p high in late 2006. Despite the huge discount from TZI’s historic peak, the deal could be good for both companies, but TZI shareholders should hold on for the board’s response and any other moves that might spice up the situation.

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