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With the acquisition of Gemfields complete, Pallinghurst aims to lower debt and increase revenue and its mining projects’ outputs.
As part of its efforts to boost revenue, Pallinghurst has refocused mining at the Kagem mine in Zambia, pictured here, to focus on production of premium emeralds.
London--Pallinghurst officially completed its takeover of Gemfields and with that has released an update on initial challenges, progress made and its goals for the future.
Pallinghurst, a natural resources investment company, successfully took over Gemfields in July, two months after it first made an unsolicited takeover offer.
It began making changes almost immediately, including naming a new CEO (Sean Gilberston) and closing the gemstone miner’s marketing, sales and public relations office for cut and polished gemstones in New York and moving those functions to London.
After the integration of the two companies, Pallinghurst said two clear issues have presented themselves.
The first is Gemfields’s debt, which has grown from about $17 million in mid-2014 to $84 million upon completion of the deal.
The second was the $54 million decline in revenue from the Kagem emerald mine in Zambia recorded in the financial year ended in June, mostly due to a sharp decline in the production of premium emeralds.
To resolve these issues, the company has taken action to reduce costs and streamline management. The staff at the London office has been reduced by about 15 percent, it said, joining “staff rationalization” implemented in New York and India.
The Pallinghurst executive team also has been restructured.
Executive Director Priyank Thapliyal has stepped down to become the full-time CEO of Jupiter Mines, in which the company owns an 18 percent stake, while Brian Gilbertson, board chairman and father of Gemfields CEO Sean, will become non-executive chairman at the end of December.
These changes and voluntary salary reductions will reduce the total compensation of the executive team by more than 50 percent, Pallinghurst said. Moving forward, CEO Arne Frandsen, Finance Director Andrew Willis and Sean Gilbertson will form its management team.
Meanwhile, the company has also made operational changes at Gemfields and, more specifically, at Kagem.
“Reporting lines” were reorganized so employees report to a “country executive” overseeing operations in a particular country, rather than reporting by discipline across all countries.
At Kagem, production was purposefully slowed, blast patterns were modified to lower intensity and crews were bolstered to focus on contact and reaction zones. The focus now is being put on extraction of premium emeralds.
Pallinghurst said that while it’s too early to make firm forecasts, it’s happy with initial results. Production in the past three months has generated about 40,000 carats of premium emeralds, compared with 7,940
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carats in the first quarter 2017 and 11,310 carats in the second quarter (the two prior to the acquisition).
It also re-opened the mothballed Mbuva-Chibolele mining pit, located across a river from the Kagem mine, to increase available production areas and boost overall production. The first production is expected in the first quarter of 2018.
Bulk sampling, meanwhile, has started at one of the two Megaruma ruby licenses located adjacent to Montepuez in Mozambique. In Ethiopia, exploration continues with emerald mineralization having been encountered and bulk sampling continuing.
Moving forward, Pallinghurst has identified a number of goals for the coming year, which, in addition to revitalizing emerald production in Zambia and expanding ruby production in Mozambique, includes completing an internal review of Faberge.
It also re-opened the mothballed Mbuva-Chibolele mining pit, located across a river from the Kagem mine, to increase available production areas and boost overall production. The first production is expected in the first quarter of 2018.
Bulk sampling, meanwhile, has started at one of the two Megaruma ruby licenses located adjacent to Montepuez in Mozambique. In Ethiopia, exploration continues with emerald mineralization having been encountered and bulk sampling continuing.
Moving forward, Pallinghurst has identified a number of goals for the coming year, which, in addition to revitalizing emerald production in Zambia and expanding ruby production in Mozambique, includes completing an internal review of Faberge.
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