Red Rock Resources Share Discussion Threads

[johndee] 08/7/2014 16:56

Looks like the 4m worked sell kept the share price down.

[atino] 08/7/2014 16:42

Lord Timothy Razzall - who sits on the NEMA board...has started up a NEW company (raising 4 million pounds in debentures)

[Quote] Lord Razzall qualified as a solicitor in 1969 becoming a partner of Frere Cholmeley Bischcoff in 1973, and Chief Executive in 1990 before leaving in1995 to set up corporate finance specialist Argonaut Associates where he remains a partner. In 1974, the then Edward (Tim) Razzall was elected to represent the Mortlake Ward on the London Borough of Richmond where he served as a Liberal Democrat Councillor for 24 years and as Deputy Council Leader between 1983 and 1996. He became Treasurer of the Liberal/Liberal Democratic Party in 1987 holding the position until 2000 after which he Chaired the Liberal Democrats General Election Campaigns of 2001 and 2005.

In 1997 he was raised to the peerage as Baron Razzall of Mortlake, and from 1998 to 2010 he held the post of Liberal Democrat Spokesperson for Trade and Industry/Business, Enterprise and Regulatory Reform. Until recently he was Co-Chairman of the Parliamentary Committee for Business Innovation and Skills and is now Government spokesman in the House of Lords for The Treasury. In addition to a long and successful political career, Lord Razzall has over 35 years' corporate finance experience, and has developed a reputation for his expertise in multinational and cross border transactions. Today he holds directorships in a number of SMEs, in a wide range of industries including in particular, financial services, property and mining.

hxxps://www.just-loans.com/assets/downloads/JustLoans_2016_Information_Memo.pdf

[soulsauce] 08/7/2014 16:40

Atino pulling out the links, must be getting desperate with the silence from RRR.

Don't worry Atino I am sure Bell is storing up all sorts of stories for when the next raising is due.

;-)

[johndee] 08/7/2014 16:36

No sign of RRR rising just yet. Waiting for a sale of an asset RNS.

[atino] 08/7/2014 16:33

Video (of the influential 'big man':-) -

[atino] 08/7/2014 16:29

ESTIMATE OF PALLINGHURST'S FAIR VALUE

Pallinghurst are an investment company which has outourced its core function (!), investment management, to Pallinghurst (Cayman). It's a great gig for Pallinghurst (Cayman), as they've been paid some R200m over the last 4 years!

The board of directors of Pallinghurst are so conflicted so the Chairman, Chief Executive and Financial Director have to recuse themselves from any board discussions to do with the investment manager , fee negotiations with it, asset sales, rights issues and dividend payments and anything else which impacts the NAV (these impact their earnings at Pallinghurst Cayman)! . "negotiations with the Investment Manager and the renewal of the IM agreement. However, the IM agreement has been in place since 2007, and is not periodically renegotiated. A renegotiation is not likely, but could happen if for example Brian Gilbertson became seriously ill or died".

The partners of Pallinghurst Cayman are Brian Gilbertson, Arne Frandsen, Andrew Willis, Sean Gilbertson (Brian's son) & Priyan Thapliyal. Brian Gilbertson is also Chairman of Pallinghurst itself, Arne Frandsen is Chief Executive and Andrew Willis is Finance Director.

As a result of all these conflicts and the associated leakage, Pallinghurst trades at a 67% discount to my estimate of its net assets. So, the best thing that the directors of Pallinghurst could do is close up shop, sell all the assets and pay the NAV out to shareholders (of course the Chairman, CE & FD would have to recuse themselves from that decision too, as it impacts on their earnings from Pallinghurst Cayman)! Failing that, I agree wholeheartedly that Pallinghurst should be trading well below its NAV, but think the market has overcooked the discount. Adding into the mix my feeling that the short-term prospects for platinum prices are good, as well as the director purchases; and I couldn't resist buying a bit of PGL.

Conflicts of Interest

Pallinghurst kindly wrote to me to provide feedback on the initial analysis, in particular on what I wrote about conflicts of interest. Feedback from Pallinghurst is that: "The actual calculation of amounts payable to the Investment Manager can be complex and the sign-off that it is right comes from the audit committee, without the Chairman, CE and FD. However, asset sales, rights issues and dividend payments are all considered by all 7 directors of the board; so whilst the Chairman, CE and FD could theoretically be voted down on something by the 4 non-executives, they are not recused from these decisions."

My opinion is that the Chairman, CE & FD are conflicted and should be recusing themselves from decision-making around things like asset sales.

If assets are sold and the proceeds returned to shareholders in the form of dividends, this will mean that Pallinghurst (Cayman) no longer earns its 1.5% fee on those assets. Since asset sales impact on their earnings from Pallinghurst (Cayman), they should recuse themselves from that discussion.

Christo Wiese is betting on Pallinghurst

Christo Wiese has been buying up shares of Pallinghurst & is the single largest shareholder with around 20% of the shares. He's a non-exec, but one whose investment acumen I respect – so, I have taken a closer look. Pallinghurst is best valued by calculating the sum of its parts, and then subtracting the leakage from costs & taxes at a holding company level.

Net assets on 31 Dec 2013

Let's start by examining Pallinghurst's net assets on 31 Dec 2013, before we make adjustments to get to their values today (25 May 2014):

Jupiter Mines : $30m
Gemfields : $144m
Sedibelo Platinum : $215m
Other : $26m
Net assets on 31 Dec 2013 was $416m or R4.3bn.

Jupiter Mines Limited

Jupiter's main asset is a 49.9% ownership of Tshipi Manganese in South Africa. This used to be easy to value as it was listed on the ASX. Sadly, it was delisted on the 10th Jan 2014, so we need to use proxies to value it, and unfortunately there aren't any pure listed SA Manganese mines. Assore is probably as close as we can get, and its share price increased from 34,061 at the start of the year to 36,667. However, the ZAR price of Manganese is slightly down from the start of the year. So, let's assume that Jupiter's value is the same as it was in ZAR on 31 Dec 2013 (ie R315m).

Gemfields

Gemfields is involved in the mining & production of coloured gemstones. It bought Faberge on the 28th Jan 2013, which is famous for the Faberge egg. As Gemfields is listed on AIM, it's simple to value. Gemfields' share price on 31 Dec 2013 was GBP33.75, and on 23 April 2014 was GBP41.5.

So, the 31 Dec 2013 value of $144m was equivalent to GBP88m on that date, and had increased to GBP108m by the 23rd May 2014; which is equivalent to R1,866m.

Sedibelo Platinum Mines

This is a producer of PGMs with interests in the Bushveld Complex in South Africa. Sedibelo is not affected by the strike, and stands to gain from any increase in the Platinum price (my view is that an increase is likely). Sedibelo isn't listed (yet, Pallinghurst plans to list it), so we need to use proxies to value it. The best proxies are the other platinum mines not impacted by the strike:

Aquarius Platinum (share price increased by 13% from R387.04 on 31 Dec 2013 to R438.68 on 23 May 2013)
Atlatsa Resources (share price decreased by 22%)
Royal Bafokeng Platinum (share price increased by 27%)
The average of the above 3 is an increase of 6% in ZAR.

So, on 31 Dec 2013 Sedibelo was valued at $215m, or R2241m, and increased by 6% gives us R2377m on 23 May 2014. We are relying on Pallinghurst's valuation of Sedibelo being correct – there are 2 things which make me believe it is: (1) Christo Wiese buying shares, and (2) they want to list it, so wont want to lose credibility by not being able to attain the book value, and (3) because of their conflict of interest, the board will want to make doubly sure that they're not paying the investment manager a fee on an incorrectly high valuation (wishful thinking?). I also like the prospects for platinum over the next year, so will accept that value (and hope it will increase if the platinum price increases).

Other assets

Most of the other assets are cash balances held in bank and on demand deposits, almost all of which is in USD. For simplicity, I will assume that it's still sitting in USD cash (although it's possible that some has been drawn through a facility with Gemstones).

So, $26m equals R273m today (25 May 2014) at an exchange rate of R10.41 to the USD (I have not bothered to add any interest, as short term USD interest rates are miserable).

Total Net Assets

So, my estimate of the total net assets of Pallinghurst is R4831m on the 23rd May 2014.

Leakage

This isn't something they shout about in their annual reports, but Pallinghurst has massive amounts of leakage! In their Statement of Comprehensive Income, Pallinghurst list the following:

Investment Manager's Benefit
Operating Expenses
Tax
Investment Manager's Benefit

Pallinghurst (Cayman) was appointed on the 4th September 2007 to provide investment advisory & management services. "The Investment Manager is 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. Prior to the end of the Investment Period, the IMB was calculated as 1.5% per annum of the amount subscribed for in the Company. Since the end of the Investment Period, the basis for calculation is 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 1.5% is a definite cost and so must be valued at guaranteed rates of interest. Using a discount rate of 8.25%, we get an estimated total leakage from investment management benefits of 18.2%.

I've used that in my estimate, but there is the possibility that one day the investment management job is in-sourced, which would be a massive boost to the share price.

Operating Expenses

Operating expenses consist mainly of admin costs, directors' fees, audit fees, valuer's fees, legal/professional fees and listing costs.

Operating expenses were $909k in 2010, R773k in 2011 , $807k in 2012 and $895k in 2013.

Let's assume operating expenses increase by 1% p.a. in real terms in ZAR from R9.3m, so the present value is R139m.

Tax

Tax leakage at a holding company level is miniscule. It was $4461 in 2013. To avoid complex calculations which boil down to polishing peanuts, let's merely assume conservatively that this amounts to R10m present value.

Fair Value Estimate of Pallinghurst

We can now calculate the fair value of Pallinghurst net of leakage as R3802m. Since there are 760,452,631 shares in issue, this boils down to a fair value per share on 23 May 2014 of R5.00 (nice round number!)

Pallinghurst closed at R3.81 on the 23rd May, which represents a 31% discount to its net NAV.

I think that is a sufficient margin of safety, so I have bought some Pallinghurst. But I could be wrong, and so could Christo Wiese.

hxxp://investsouthafrica.co.za/shares/jse/equity-investment-instruments/pallinghurst/

[atino] 08/7/2014 16:25

[Quote] "Anglo Pacific Group PLC generates returns for shareholders by receiving royalties from coal and other mines, primarily in Australia, Canada and Europe - a substantial part of which it pays as shareholder dividends. The income is usually received by way of a "net smelter royalty" (NER) which varies between 1% and 2.5% on the delivered production.....

....As of mid-May 2012, the company announced that its royalty income for the first quarter of the year was only £1.5 million (around a sixth of what it had been during the same period the previous year). It had also completed the Mount Ida iron ore royalty acquisition from operator of the project, Australia's Jupiter Mines Ltd [Marketwire 15 May 2012].

Peter Boycott, Chairman of Anglo Pacific, optimistically commented at the time:

"The company continues to receive an increasing number of new enquiries for mining finance, which are being assessed as potential royalty opportunities".

However, he conceded that: "During the [first quarter] period, royalty flows from Kestrel [coal] in Australia were lower compared to the same period last year...Anglo Pacific's strategy remains focused on paying a progressive dividend and acquiring new royalty cash flows from commodities linked to Asian growth."

hxxp://moneytometal.org/index.php/Anglo_Pacific_Group_PLC

[atino] 08/7/2014 16:23

{quote 27/6/14] "Pallinghurst kept waiting for platinum gap"

[miningmx.com] – MANAGEMENT at Johannesburg-listed Pallinghust Resources must be left scratching its collective head at the recent activity – or lack of it – in the platinum market where some five months of strikes among the major producers has left barely a mark on the price of the metal.

It's estimated some 1 million ounces of platinum production has been delayed by the now ended strike that affected the Rustenburg mines of Anglo American Platinum (Amplats), Impala Platinum (Implats) and Lonmin.

Add to that the 1 million ounces of metal that has been absorbed by the creation of the platinum exchange traded fund NewGold Platinum, and there's real apprehension regarding the size of inventories of the metal.
"Following almost four months of disruption and around 1 million oz of lost production, prices remain below $1,500/oz suggesting a looser market that many expected," said Goldman Sachs in a report dated May 29.

It believed that with the resumption of mining by the platinum producers – which could take some three months to occur – the platinum price would trend down to $1,350/oz, below consensus for the year.

"We believe this is the result of companies having built up large inventories, higher than expected above ground stocks amongst end-users, weaker than expected demand and continuing supply from primary and secondary sources," it said.
The bind for Pallinghust Resources is that it raised the prospect of listing its platinum business Sedibelo Platinum Mines this year, although it has recently pared expectations to 'when the market is right'.
The question is whether the market will ever be right in the short term for a listing of a new platinum firm, or whether Sedibelo's debut may be on hold for longer than Pallinghurst would prefer.

Pallinghust Resources, which is run by Brian Gilbertson, a former CEO of Billiton and BHP Billiton, and Arné Frandsen, formerly a banker with JP Morgan, has declared itself in harvest mode after establishing a number of business about seven years ago in sectors it considered unloved or with assets that merely needed better attention.
An uncooperative platinum market may disturb Pallinghurst's harvest plans, however, although Goldman Sachs added in its report that the future success of platinum ventures will depend on their mechanisations and consequent low cost of production.
The intention is for Sedibelo to become a 1.2 million ounce/year platinum group metals producer. It is making money, Frandsen has said in the past. He couldn't be reached for comment for the purposes of this article despite repeated attempts.
So why didn't the platinum price respond to the cut in production? Goldman Sachs believes the level of inventories held by Amplats, Implats and Lomin is some 16%, 12% and 25% more than average inventories respectively than in the previous four to five years by the companies.

Secondly, above-ground stocks of the metal and supply from the so-called secondary market – recycling of platinum – has also contributed to keeping the platinum price in check.

According to Standard Bank Group Securities, platinum recycling is a massively growing industry and is expected to increase to 1.3 million ounces in 2020 from 991,000 oz last year. The increase in the recycling of palladium, a sister metal to platinum, is larger still at some 1.9 million oz last year rising to 5 million oz in six years.

"This makes global palladium recycling the single largest supplier of metal to the market by the 2020 calendar year," it said. "The secondary supply of platinum group metals (PGM) in relation to total global PGM production, including recycling, is set to increase from 20% in 2013 to 31% by 2020, it said. There is also the issue of slower-than-anticipated demand growth for platinum in cars exhausts. Emission control legislation requiring higher use of PGMs in autocatalysts is on the agenda in Europe, but Goldman Sachs believes demand for new cars is not at former levels while the costliness of the more stringent autocatalysts would be passed on to end-users by the auto manufacturers.

This would see the man-in-the-steet opting for cheaper gasoline run automobiles rather than diesel units where platinum is more intensively used in autocatalysis, it said.

[kezman01] 30/6/2014 13:28

Greetings from beautiful Puerto de Pollensa.
Bit cloudy today but still about 27 ........similar to Red Rock.
In the twenties again.....who would have thought lol

[fangorn2] 26/6/2014 13:24

Good ruk :)

[21trader] 26/6/2014 13:23

Quite a lot of buying in this today so took small amount for a punt.

L2 shows one mm offering 0.32p then one offering 0.36p then another jump to 0.4p
so it could have a run.

[on target] 26/6/2014 13:06

That would be welcome news BAM BAM. Might not get much for their share in the current market though.

[daniel levi bmd] 26/6/2014 13:05

FYI




Dan
x

[bam bam rubble] 26/6/2014 13:03

Reminder of the Kansai agreement;
Kansai will issue RRR a further 45% of its Mid-Migori Ltd. subsidiary provided a
bankable feasibility study is completed within six years, being August 13th 2015.
RRR can terminate this purchase agreement at any time by giving 6 month's notice.

From recent Edison report which tend to be checked by companies prior to release;
- cost assumption for Red Rock to complete a BFS at Nyanza: further US$6 million
- time est. to complete BFS and bring to point of development: a further 5 years

Suggests it does not intend (and cannot afford) to do a BFS within the next year
and will be waiving its earn-in rights. Kansai project now a disposal in waiting.

[mozii] 26/6/2014 10:16

On the move...

[knoblet] 25/6/2014 17:37

The only thing this company is financing is Bell's back pocket!

[mozii] 25/6/2014 15:46

Well, AIM is mainly bump dump and have seen it every day, recently in RRR when it went from .22 to .42 for couple of days, I'm not suggesting this as strategy, but if you come across it then why not.It might start here sooner than u think when the muppets start to sing, then u decide which way u want to play it

[steve1905] 25/6/2014 12:56

moz, you're new here, yeah?

[on target] 25/6/2014 12:54

Mozil,

Good luck trying to trade 'bumps' here, there are very few suckers left who haven't been suckered enough on this one.

[mozii] 25/6/2014 11:31

Gents, its all part of the bump, let it go, benefit from it if you can, but no point of playing it down

[on target] 25/6/2014 11:28

Almost puked reading that sentence!

[knoblet] 25/6/2014 11:25

"It is now a combination of a junior gold explorer and a mining finance house, focused on discovering and developing iron ore, gold, steel feed and uranium globally."

Since when?