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UPDATE - Gemfields PLC secures US$15mln working capital facility from Pallinghurst

Published: 11:30 17 Apr 2014 EDT

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--adds share price, broker comment--

Gemfields (LON:GEM) has agreed US$15mln working capital facility with key shareholder Pallinghurst, the resources company run by former BHP chief Brian Gilbertson.

The 12-month loan, which can be drawn down in two tranches, carries an annual coupon of 4.5 percentage points above the three-month US dollar LIBOR rate. There are no penalties for early repayment, but there is a 2% arrangement fee.

The funds will help “smooth” cash flow given the “intermittent nature” of revenues from its gemstone auctions and the ongoing development of Gemfields’ ruby, rough gemstone trading and Fabergé businesses, the firm said.

At the end of last year, Gemfields had US$14.8mln in cash. Revenues this financial year (which runs to the end of June) currently stand at US$96.4mln, surpassing its best annual performance by more than US$3mln.

This figure will rise as the group still has two further auctions to stage, including the inaugural sale of rough rubies from the Montepuez deposit in Mozambique planned for June.

Chief executive Ian Harebottle said: "We are pleased to have agreed this financing facility with our key shareholder, Pallinghurst.

“We have been interested in securing a working capital facility for some time now and, having considered a number of offers from various banks, we have now secured what we believe to be the most appropriate funding option for the company.

“The facility also demonstrates Pallinghurst's continued support for Gemfields and its vision for the coloured gemstone sector."

“We look forward to the inaugural auction - in June of this year - of rough rubies from the Montepuez ruby deposit, the development of which has been funded entirely by Gemfields from internal resources.

“In addition, we will be hosting an auction of traded rough emeralds, sourced by Gemfields from the open market in Jaipur, India in April.

“It remains a very exciting stage in Gemfields' development.”

Numis said it looks like a good move for Gemfields to smooth cash flow given the intermittent nature of revenue-providing gem auctions and the ongoing development required at Montepuez and Faberge.

FinnCap added that at the end of 2013, the company had cash of US$14.8mln  and subsequently gained US$36.5mln in February 2014 from an auction of emeralds. It kept its 46p price target. Shares today were 39.7p.

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