Offer for Gemfields plc

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

For Immediate Release

19 May 2017

OFFER

FOR

GEMFIELDS PLC

BY

PALLINGHURST RESOURCES LIMITED 

Summary and highlights

· The Board of Pallinghurst Resources Limited is pleased to announce the terms of an offer to be made by Pallinghurst for the whole of the issued and to be issued share capital of Gemfields plc (other than the 258,908,915 Gemfields Shares already held by the Pallinghurst Group, representing 47.09% of Gemfields' issued share capital).

· Under the terms of the Offer, each Gemfields Shareholder will be entitled to receive:

· The exchange ratio of the Offer has been determined using the 30 day volume weighted average price to smooth out the daily movements for both Pallinghurst and Gemfields as well as the spot ZAR/GBP exchange rate as on 17 May 2017 (being the Latest Practicable Date).

· Based on the closing exchange rate of ZAR17.14=£1.00 (source: Reuters) and the closing price of the Pallinghurst Shares of ZAR3.45 on 17 May 2017 (being the Latest Practicable Date) the Offer values each Gemfields Share at 38.5 pence and values the entire issued and to be issued ordinary share capital of Gemfields at approximately £211,450,623.

· If any dividend or other distribution (including any return of capital) is authorised, declared, made or paid by Gemfields in respect of Gemfields Shares on or after the date of this announcement, Pallinghurst reserves the right to reduce the amount of consideration payable in respect of such Gemfields Shares by the amount of all or part of any such dividend or distribution.

· Assuming acceptance of the Offer in full, the Offer will result in Gemfields Shareholders (other than the Pallinghurst Group) owning approximately 42.2% of the Enlarged Group as at 17 May 2017 (being the Latest Practicable Date). This reflects an increase of 555,663,993 shares in Pallinghurst's share capital.

· The Offer will be subject to the Conditions and further terms set out in Appendix 1 to this announcement and to be set out in the Offer Document and (in respect of the Gemfields Shareholders who hold Gemfields Shares in certificated form) the Form of Acceptance. The Conditions include:

- valid acceptances of the Offer being received in respect of Gemfields Shares which, together with any Gemfields Shares held by the Pallinghurst Group, constitute not less than 75% of the Gemfields Shares in issue and of the voting rights attached to those shares; and

- the passing at the Pallinghurst General Meeting by the requisite majority of Pallinghurst Shareholders of such resolution as is necessary to approve, implement and effect the Offer in accordance with the Category 1 requirements under the JSE Listings Requirements.

· From the outset, Pallinghurst has been the largest shareholder of Gemfields, making its investment in Gemfields a core component of Pallinghurst's value proposition to its shareholders. Therefore, unlocking Gemfields' full value potential is of paramount importance to Pallinghurst and its shareholders.

· Gemfields remains an attractive and unique business; however, within the current structure, Gemfields will continue to be constrained by:

- limited access to equity and debt capital markets;

- low liquidity in the trading of Gemfields Shares;

- a high cost base; and hence depressed profitability.

· Pallinghurst believes that the proposed Restructuring and integration of Gemfields will enable Gemfields to perform to its full potential.

· Following the Offer, the Enlarged Group will have a larger market capitalisation, an enhanced free float, improved market coverage and an expected improvement in liquidity - all of these factors will support a re-rating, as well as providing improved access to the equity capital markets. In addition, as Gemfields will become fully part of Pallinghurst's larger and more balanced asset base, it should achieve more attractive access to debt funding.

· Pallinghurst has received the following irrevocable undertakings from Gemfields Shareholders:

- NGPMR (Cayman) L.P. in respect of its interests in 72,497,243 Gemfields Shares, representing approximately 13.19%;

- Investec Pallinghurst (Cayman) L.P. in respect of its interests in 68,273,047 Gemfields Shares, representing approximately 12.42%;

- Pallinghurst (Cayman) Founder L.P. in respect of its interests in 5,391,081 Gemfields Shares, representing approximately 0.98%;

- Dr Christo Wiese in respect of his interests in 2,494,583 Gemfields Shares, representing approximately 0.45%;

- Sean Gilbertson in respect of his interests in 300,000 Gemfields Shares, representing approximately 0.05%; and

- Oasis Asset Management and Oasis Crescent Capital in respect of their collective interests in 6,008,981 Gemfields Shares, representing approximately 1.09%.

In aggregate, Pallinghurst has received irrevocable undertakings in respect of interests of a total of 154,964,935 Gemfields Shares representing, in aggregate, approximately 28.18% of the existing issued share capital of Gemfields as at 17 May 2017 (being the Latest Practicable Date). The irrevocable undertakings commit the Relevant Gemfields Shareholders to accept the Offer and to accept the Pallinghurst Shares in exchange for all their Gemfields Shares. Together, the irrevocable undertakings and Pallinghurst's current holding in Gemfields constitute 75.27% of the total issued share capital of Gemfields. Accordingly, as at the date of this announcement, the Offer has become unconditional as to acceptances.

· Pallinghurst has also received the following irrevocable undertakings from Pallinghurst Shareholders in relation to the Pallinghurst Resolutions:

- Oasis Crescent Capital (Proprietary) Limited in respect of 47,296,088 Pallinghurst Shares, representing approximately 6.22%;

- Oasis Asset Management Limited in respect of 68,470,365 Pallinghurst Shares, representing approximately 9.00%;

- Solway Finance Limited in respect of 67,386,056 Pallinghurst Shares, representing approximately 8.86%;

- Titan Nominees Proprietary Limited in respect of 151,238,953 Pallinghurst Shares, representing approximately 19.89%;

- Affinity Trust Limited ATO The Brian Gilbertson Discretionary Settlement in respect of 24,261,669 Pallinghurst Shares, representing approximately 3.19%;

- Arne H. Frandsen in respect of 4,237,369 Pallinghurst Shares, representing approximately 0.56%;

- Andrew Willis in respect of 2,446,054 Pallinghurst Shares, representing approximately 0.32%;

- Sean Gilbertson in respect of 4,175,536 Pallinghurst Shares, representing approximately 0.55%;

- Priyank Thapliyal in respect of 4,175,536 Pallinghurst Shares, representing approximately 0.55%;

- Hlamogolo Capital (Pty) Ltd in respect of 8,325,334 Pallinghurst Shares, representing approximately 1.09%; and

- Clive Harris in respect of 437,652 Pallinghurst Shares, representing approximately 0.06%.

In aggregate, Pallinghurst has received irrevocable undertakings in respect of interests of a total of 382,450,612 Pallinghurst Shares representing, in aggregate, approximately 50.3% of the existing issued share capital of Pallinghurst as at 17 May 2017 (being the Latest Practicable Date). The irrevocable undertakings commit the Pallinghurst Shareholders to vote in favour of the Pallinghurst Resolutions.

· After the Offer becomes or is declared unconditional in all respects and Pallinghurst has by virtue of its shareholdings and acceptances of the Offer acquired, or agreed to acquire, share capital representing at least 75% of the voting rights of Gemfields, Pallinghurst intends to procure the making of an application by Gemfields for cancellation of the trading in Gemfields Shares on AIM. 

· Pallinghurst reserves the right to elect (with the consent of the Panel) to implement the acquisition of Gemfields by way of a scheme of arrangement under Part 26 of the Companies Act 2006. In such event, the acquisition will be implemented on substantially the same terms, subject to appropriate amendments, as those which would apply to the Offer implemented by way of a contractual takeover offer.

· The Pallinghurst Circular, containing details of the Pallinghurst Resolutions (which include the approval of, inter alia, the implementation of the Offer by Pallinghurst) and notice to convene the Pallinghurst General Meeting, is expected to be posted to Pallinghurst Shareholders as soon as possible following the date of this announcement.

· The Offer Document and (in respect of the Gemfields Shareholders who hold Gemfields Shares in certificated form) the Form of Acceptance will be posted to Gemfields Shareholders (save with the consent of the Panel) within 28 days of the date of this announcement.

· The Prospectus in relation to the Consideration Shares is expected to be published by Pallinghurst (subject to the passing of the relevant Pallinghurst Resolution) on the same date as the Offer Document and will contain information about Pallinghurst, the Pallinghurst Group and the Consideration Shares. 

This summary should be read in conjunction with, and is subject to, the full text of the following announcement and the Appendices. The Offer will be subject to the terms and conditions set out in Appendix 1 and which will be set out in the Offer Document, which Pallinghurst intends to despatch to Gemfields Shareholders as soon as practicable.  Appendix 2 of this announcement contains the sources and bases of certain information used in this summary and in the following announcement. Appendix 3 contains particulars of the irrevocable undertakings referred to in paragraph 3 of this announcement. Appendix 4 of this announcement contains definitions of certain terms used in this summary and the following announcement. Appendix 5 of this announcement contains a copy of the JSE Announcement.

Enquiries:

For further information contact:

Pallinghurst Resources Limited

11 New Street,

St Peter Port,

Guernsey,

GY12PF,

Channel IslandsPhone: +44 148 1726034

Press AgentCapital Voice

Johannes van Niekerk

Phone: +27 (0) 82 921 9110

UK Media Relations

Temple Bar Advisory +44 (0) 207 002 1510

Ed Orlebar +44 (0) 7738 724 630

Tom Allison +44 (0) 7789 998 020

UBS Investment Bank5 Broadgate

London EC2M 2QS

United Kingdom 

London: +44 (0) 20 7567 8000

Ian Hart

Jason Hutchings

Abid Chaudhri

South Africa: +27 11 322 70 00

Brian Smith

Gary Hudson

Important notices

UBS Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the UK together with UBS South Africa (Pty) Ltd which is supervised by the South African Financial Services Board (collectively "UBS"). UBS is acting as financial adviser for Pallinghurst and no one else in connection with the Offer and will not be responsible to anyone other than Pallinghurst for providing the protections afforded to customers of UBS nor for giving advice in relation to the Offer or any other matters referred to in this announcement.

The Guernsey Financial Services Commission ("GFSC") and the States of Guernsey have not reviewed this announcement and take no responsibility for the correctness of any statements made or opinions expressed with regard to Pallinghurst.

Further Information on the Offer

This announcement is not intended to and does not constitute, or form part of, an offer to sell or an invitation to purchase any securities or the solicitation of an offer to buy any securities, pursuant to the Offer or otherwise, nor shall there be any purchase, sale or exchange of securities or such solicitation in any jurisdiction in which such offer, solicitation or sale or exchange would be unlawful prior to the registration or qualification under the laws of such jurisdiction. The Offer Document and Form of Acceptance will be made available to all Gemfields Shareholders at no cost to them. Gemfields Shareholders are advised to read the Offer Document and the accompanying Form of Acceptance when they are sent to them because they will contain important information.

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the Offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th Business Day following the commencement of the Offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th Business Day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the Offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Publication on website and availability of hard copies

This announcement and the documents required to be published pursuant to Rule 26.1 of the Code will be available free of charge, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, on Pallinghurst's website at www.pallinghurst.com/gemfields-offer by no later than 12.00 p.m. on the Business Day following this announcement.

Neither the content of any website referred to in this announcement nor the content of any website accessible from hyperlinks is incorporated into, or forms part of, this announcement.

You may request a hard copy of this announcement by contacting UBS Investment Bank on +44 (0) 20 7567 8000. You may also request that all future documents, announcements and information to be sent to you in relation to the Offer should be in hard copy form.

The Prospectus, once published by Pallinghurst, will be available on Pallinghurst's website at www.pallinghurst.com/gemfields-offer.

Not for release, publication or distribution, in whole or in part, in, into or from any Restricted Jurisdiction.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

For Immediate Release

19 May 2017

OFFER

FOR

GEMFIELDS PLC

BY

PALLINGHURST RESOURCES LIMITED

1. Introduction

The Board of Pallinghurst is pleased to announce the terms of an offer to be made by Pallinghurst for the whole of the issued and to be issued share capital of Gemfields (other than the 258,908,915 Gemfields Shares already held by the Pallinghurst Group, representing 47.09% of Gemfields' issued share capital). 

2. The Offer

Under the terms of the Offer, each Gemfields Shareholder will be entitled to receive:

The exchange ratio of the Offer has been determined using the 30 day volume weighted average price to smooth out daily movements for both Pallinghurst and Gemfields as well as the spot ZAR/GBP exchange rate as on 17 May 2017 (being the Latest Practicable Date).

Based on the closing exchange rate of ZAR17.14=£1.00 (source: Reuters) and the closing price of the Pallinghurst Shares of ZAR3.45 on 17 May 2017 (being the Latest Practicable Date) the Offer values each Gemfields Share at 38.5 pence and values the entire issued and to be issued ordinary share capital of Gemfields at approximately £211,450,623.

The table below sets out what the enlarged share capital of Pallinghurst will be and the percentage of shares in the enlarged share capital of Pallinghurst that Gemfields Shareholders will have, depending on the level of acceptances received (and, where appropriate, such number of Gemfields Shares that Pallinghurst and any of its wholly owned subsidiaries has acquired or agreed to acquire whether pursuant to the Offer or otherwise):

____________

* including such number of Gemfields Shares that Pallinghurst and any of its wholly owned subsidiaries has acquired or agreed to acquire whether pursuant to the Offer or otherwise.

** level of acceptances refers to percentage of total Gemfields share capital to be owned by Pallinghurst post-completion of the Offer.

(1) this would arise if acceptances of 90% or more of Gemfields Shares to which the Offer relates were obtained.

If any dividend or other distribution (including any return of capital) is authorised, declared, made or paid by Gemfields in respect of Gemfields Shares on or after the date of this announcement, Pallinghurst reserves the right to reduce the amount of consideration payable in respect of such Gemfields Shares by the amount of all or part of any such dividend or distribution.

The Offer will be subject to the Conditions and further terms set out in Appendix 1 to this announcement and to be set out in the Offer Document and (in respect of the Gemfields Shareholders who hold Gemfields Shares in certificated form) the Form of Acceptance. The Conditions include valid acceptances of the Offer being received in respect of Gemfields Shares which, together with any Gemfields Shares held by Pallinghurst, constitute not less than 75% of the Gemfields Shares in issue and of the voting rights attached to those shares.

Assuming acceptance of the Offer in full, the Offer will result in Gemfields Shareholders (other than the Pallinghurst Group) owning approximately 42.2% of the Enlarged Group as at 17 May 2017 (being the Latest Practicable Date). This reflects an increase of 555,663,993 shares in Pallinghurst's share capital.

Further information on the terms and conditions to which the Offer will be subject are set out in Appendix 1 and will be set out in the Offer Document, which Pallinghurst intends to despatch to Gemfields Shareholders as soon as practicable.

The Prospectus in relation to the Consideration Shares will be published and will contain information about Pallinghurst, the Pallinghurst Group and the Consideration Shares.

3. Irrevocable Undertakings

Pallinghurst has received the following irrevocable undertakings:

- NGPMR (Cayman) L.P. in respect of its interests in 72,497,243 Gemfields Shares, representing approximately 13.19%;

- Investec Pallinghurst (Cayman) L.P. in respect of its interests in 68,273,047 Gemfields Shares, representing approximately 12.42%;

- Pallinghurst (Cayman) Founder L.P. in respect of its interests in 5,391,081 Gemfields Shares, representing approximately 0.98%;

- Dr Christo Wiese in respect of his interests in 2,494,583 Gemfields Shares, representing approximately 0.45%;

- Sean Gilbertson in respect of his interests in 300,000 Gemfields Shares, representing approximately 0.05%;

- Oasis Asset Management and Oasis Crescent Capital in respect of their collective interests in 6,008,981 Gemfields Shares, representing approximately 1.09%.

In aggregate, Pallinghurst has received irrevocable undertakings in respect of interests of a total of 154,964,935 Gemfields Shares representing, in aggregate, approximately 28.18% of the existing issued share capital of Gemfields as at 17 May 2017 (being the Latest Practicable Date). Together, the irrevocable undertakings and Pallinghurst's current holding in Gemfields constitute 75.27% of the total issued share capital of Gemfields. Accordingly, as at the date of this announcement, the Offer has become unconditional as to acceptances.

The irrevocable undertakings commit the Relevant Gemfields Shareholders to accept the Offer and to accept the Pallinghurst Shares in exchange for all their Gemfields Shares. The terms and further details of these irrevocable undertakings are set out in Appendix 2 to this announcement.

4. Background to and Reasons for the Offer

Gemfields in its current form was created in 2008 when Pallinghurst and the Pallinghurst Co-Investors contributed the Kagem emerald mine to Gemfields, its core operating asset, for shares. This transaction made Pallinghurst and the Pallinghurst Co-Investors the majority shareholders of Gemfields. Subsequently, in 2013, Pallinghurst and the Pallinghurst Co-Investors contributed Fabergé to Gemfields, increasing Pallinghurst Group's direct ownership in Gemfields to the current level of 47.09%.

As such, from the outset, Pallinghurst has been the largest shareholder of Gemfields, making its investment in Gemfields a core component of Pallinghurst's value proposition to its shareholders. Therefore, unlocking Gemfields' full value potential is of paramount importance to Pallinghurst and its shareholders.

Pallinghurst believes that, since its investment in Gemfields, the performance of the Gemfields share price has been disappointing and despite the major positive developments, Gemfields Shareholders, including Pallinghurst, have not benefited appropriately. The share price of Gemfields has not increased since the completion of the Kagem acquisition, and over the last year has suffered a material decline.

The poor share price performance of Gemfields has in turn adversely affected the share price performance of Pallinghurst. The key motivation for the Offer is to address this material issue.

Gemfields remains an attractive and unique business; however, within the current structure, Gemfields will continue to be constrained by:

- limited access to equity and debt capital markets;

- low liquidity in the trading of Gemfields Shares;

- a high cost base; and hence depressed profitability.

Pallinghurst believes that the proposed Restructuring and integration of Gemfields will enable Gemfields to perform to its full potential, materially improve trading liquidity and promote a re-rating of the Enlarged Group.

To date, Pallinghurst has been unable to freely support the funding of Gemfields' growth strategy. According to the Relationship Agreement, Pallinghurst and the Pallinghurst Co-Investors cannot influence the operations of Gemfields that would customarily come with Pallinghurst's and the Pallinghurst Co-Investors' level of ownership. Due to Gemfields' depressed profitability and restricted access to third party capital over the past few years, Pallinghurst has had to provide Gemfields with debt facilities.

Following the Offer, the Enlarged Group will have a larger market capitalisation, an enhanced free float, improved market coverage and an expected improvement in liquidity - all of these factors will support a re-rating, as well as providing improved access to equity capital markets. In addition, as Gemfields will fully become part of Pallinghurst's larger and more balanced asset base, it should achieve more attractive access to debt funding.

Having raised in excess of US$2 billion of equity capital for Pallinghurst and its underlying Investments, Pallinghurst's management team has a proven track record of fund raising. Pallinghurst will use this experience, as well as utilising its existing network of global, long-term Pallinghurst Co-Investors, to access capital for the Enlarged Group's operations.

This improved access to additional long-term capital will enable Gemfields to fund its existing projects, as well as accelerate its portfolio of growth projects. In doing so, Pallinghurst will unlock the inherent value of Gemfields' major assets. As per the values contained in the independent competent persons reports for Kagem (dated September 2015) and Montepuez (dated July 2015), the value potential is significant. However, this value unlock cannot be achieved by Gemfields in the current structure. Hence the completion of the Offer is essential for the shareholders of both Pallinghurst and Gemfields and will position Gemfields to realistically achieve its publicly stated objective of becoming the "De Beers of the Coloured Gemstone Industry".

In order to achieve this, following a combination of Pallinghurst and Gemfields, Pallinghurst intends to:

- focus on Gemfields' core emerald and ruby operations in Zambia and Mozambique respectively and develop these to optimal scale;

- accelerate the development of Gemfields' existing portfolio of projects to mitigate the dependency on its attractive, but cyclical assets;

- explore all strategic alternatives for Fabergé, where significant growth capital is still required to reach its full potential; and

- improve profitability by pursuing cost reductions across the Enlarged Group.

Pallinghurst's management has a strong track record of effecting cost reductions in its Investments and intends to work with Gemfields management in reducing the overall cost profile of the Enlarged Group following the acquisition. Pallinghurst shall seek to identify opportunities for cost reduction, streamlining the management, administration and removing any overlapping functions with those which are currently outsourced by Pallinghurst, but which will be brought in-house after the implementation of the Restructuring.

Following the successful completion of the Offer, Gemfields will be controlled and managed by Pallinghurst and, assuming that Pallinghurst becomes in due course an operating mining company, will be consolidated as a subsidiary. As such, Pallinghurst's Executive Directors will have responsibility to manage all of Pallinghurst's Investments, including Gemfields. Pallinghurst's current intention is to review the Enlarged Group's business model (with access to Gemfields' information and following discussions with Gemfields' management) and will make any necessary structural changes that are required at that point.

In conclusion, Pallinghurst believes that following the successful completion of the Offer, as well as the implementation of the Restructuring, Pallinghurst will have the ability to both increase revenue as well as reduce costs and hence significantly improve the profitability of the Enlarged Group. This will, in turn, unlock Gemfields' potential value fully for the benefit of all shareholders.

The Offer

Pallinghurst is offering its Ordinary Shares as consideration for the Offer, allowing existing Gemfields Shareholders the ability to continue to benefit from being exposed to Gemfields and other quality assets through Pallinghurst. Pallinghurst Shareholders will increase their relative exposure to Gemfields, as Pallinghurst materially increases its component of its overall portfolio.

Pallinghurst is not offering a premium to Gemfields Shareholders as:

- Pallinghurst and Pallinghurst Co-Investors already have an interest in approximately 73% of Gemfields;

- the combination of Pallinghurst and Gemfields, together with the broader Restructuring proposed by Pallinghurst, will facilitate a value unlock which will fairly benefit both sets of shareholders; and

- the terms of the Offer have been accepted by a majority of Gemfields Shareholders, including the two largest minority Gemfields Shareholders, which have provided Pallinghurst with irrevocable undertakings to accept the Offer on the proposed terms.

Accordingly, Pallinghurst believes that the Offer is attractive as it can unlock value for shareholders.

5. Information on Pallinghurst Group

Pallinghurst was incorporated on 4 September 2007 as Pallinghurst Resources (Guernsey) Limited in accordance with the Companies Law, and was listed on the BSX on 26 September 2007. On 20 August 2008, Pallinghurst listed on the JSE, with the JSE becoming Pallinghurst's primary listing and the BSX listing being retained as a secondary listing. Pallinghurst has 760,452,631 ordinary shares of US$0.00001 each in issue as at 17 May 2017 (being the Latest Practicable Date). The ISIN number of the Pallinghurst Shares is GG00B27Y8Z93.

Pallinghurst is registered with the GFSC as an authorised closed-ended investment company, with an initial lifespan of 10 years. As an authorised closed-ended investment company under The Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended), Pallinghurst is subject to continuing regulation and supervision by the GFSC. In conjunction with the Transaction, it is proposed that, subject to Pallinghurst Shareholder approval, Pallinghurst will extend its life by 50 years.

Following completion of the Offer, while no decision has been made, if appropriate, Pallinghurst will consider becoming an operating mining company. If that decision is made, Pallinghurst will apply for its listing to be moved to the "Diversified Mining" sector of the JSE main board. Until this is approved, Pallinghurst will continue to account in terms of investment entity accounting provisions.

Investment Objectives

Pallinghurst's main objective is to carry on the business of an investment holding company in Investments falling within the investment scope of Pallinghurst. To achieve the Investment Objectives, Pallinghurst has currently appointed Pallinghurst (Cayman) GP L.P. as its investment manager (the "Investment Manager") to act in the capacity of investment manager to Pallinghurst, on the terms set out in the Investment Management Agreement. The Investment Manager is a specialist natural resources entity that seeks to develop strategic partnerships for Pallinghurst with companies and/or other entities in order to create and unlock value for Pallinghurst Shareholders. Pallinghurst is chaired by Brian Gilbertson, widely regarded as one of the leading figures in the natural resources industry, with a notable history and proven track-record of value creation.

Pallinghurst maintains a global focus across the commodities spectrum, with a primary focus on underperforming assets and businesses that lack direction, are poorly managed, or are stranded or distressed. The Investment Manager, on behalf of Pallinghurst, seeks to develop strategic platforms in pursuit of consolidation, vertical integration and turnaround opportunities and expansion projects. Pallinghurst targets Investments in businesses that hold mines, smelters, refineries and processing plants. The preference is for brownfield opportunities, although Investments in businesses with attractive development opportunities are also considered.

Investment Platforms

Pallinghurst's three main investment platforms comprise: (1) Coloured Gemstones (2) Platinum Group Metals ("PGMs") and (3) Steel Making Materials (together, the "Investment Platforms"). All three Investment Platforms consist of assets that are now at or near steady state production, substantially de-risking the Pallinghurst Group.

(1) Coloured Gemstones - Pallinghurst's Coloured Gemstones platform comprises a 47.09% interest in Gemfields. Gemfields operates the Kagem emerald mine and Kariba amethyst mine in Zambia, the Montepuez ruby mine producing ruby deposit in Mozambique, as well as interests in Sri Lanka, Madagascar and Ethiopia respectively. In addition, Fabergé is Gemfields' wholly owned subsidiary.

(2) PGMs - Pallinghurst's PGMs platform comprises a 6.54% interest in Sedibelo, a large scale open pit mining operation in South Africa. In addition, Sedibelo owns a 50% interest in Kelltech Limited.

(3) Steel Making Materials - Pallinghurst's Steel Making Materials platform comprises an 18.43% interest in Jupiter, which holds an interest in the Tshipi mine, low cost, open-pit manganese mine and estimated to be one of the five largest manganese exporters globally and the largest single manganese mine in South Africa. In addition, Jupiter owns development iron ore projects in Australia.

Pallinghurst's Co-Investors

Pallinghurst is affiliated with certain other investors, known collectively as the "Pallinghurst Co-Investors". The Investment Manager acts on behalf of both Pallinghurst and the Pallinghurst Co-Investors. The Pallinghurst Co-Investors generally co-operate to seek to achieve the broader strategic objectives recommended by the Investment Manager, although each Pallinghurst Co-Investor retains legal title and influence over their individual shareholdings, and is ultimately able to determine its own course of action. 

Proposed Restructuring

In conjunction with the Offer, Pallinghurst has announced a separate restructuring of its business (the "Restructuring"). Pallinghurst was founded in September 2007 as a limited life mining investment fund to source and develop new value accretive mining projects. This phase of Pallinghurst's development has now been achieved with three key assets successfully developed. These include:

· Gemfields - a leading supplier of responsibly sourced coloured gemstones;

· Tshipi - one of the lowest cost manganese producers in the world; and

· Sedibelo - a large scale open pit PGM mining operation in South Africa.

The development of these assets has created significant uplift in the net asset value of Pallinghurst. This value, however, has not been reflected in Pallinghurst's listed share price given the complexities in the structure (including an external management company and multiple entry points into the Pallinghurst Group's assets), complex accounting policies which makes comparison to peers difficult and which is compounded by the lack of consolidated earnings and cash flows.

To unlock value, Pallinghurst now proposes to address these issues and implement the Restructuring of the Pallinghurst Group which will include:

· making the Offer which, if approved and implemented, will result in Pallinghurst acquiring the entire issued and to be issued share capital of Gemfields not already owned by the Pallinghurst Group and following completion of the Offer, move to de-list Gemfields from the AIM market of the London Stock Exchange;

· the potential conversion to an operating mining company; and

· collapsing Pallinghurst's investment structure and simplifying its management arrangements.

The result will be a renewed Pallinghurst with a simplified operating model and an in-house management team. The value of the underlying assets will be more clearly demonstrable with clearer earnings and operating metrics that can be benchmarked against industry peers. The revised structure model will allow Pallinghurst to rationalise costs across the group by simplifying the Pallinghurst Group's structures.

Following completion of the Offer, Pallinghurst expects to have an enlarged market capitalisation, improved trading liquidity and equity broker coverage. The Board believes that the combination of these factors should be value accretive for all shareholders, both in Pallinghurst and Gemfields.

Following completion of the Offer, Pallinghurst will consider the optimal listing locations for the Enlarged Group. Whilst no decision has been taken, Pallinghurst will engage with the Pallinghurst Shareholders and could consider moving the BSX listing to a premium listing on the main board of the London Stock Exchange. There are no certainties around this consideration and there is no guarantee that if an application is ultimately made to the UK Listing Authority, it will be successful.

Further information regarding the Restructuring is contained in the JSE Announcement, a copy of which is contained in Appendix 5.

Management Structure Change

In conjunction with the Transaction, subject to Pallinghurst Shareholder approval (as part of the Pallinghurst Resolutions) Pallinghurst proposes to:

(a) terminate the existing Investment Management Agreement for no consideration. All related fees and carried interest arrangements will cease;

(b) employ certain key Executive Directors of Pallinghurst, namely, Brian Gilbertson as Executive Chairman, Arne H. Frandsen as Chief Executive and Andrew Willis as Finance Director on new employment contracts;

(c) employ certain senior executives of Pallinghurst namely Sean Gilbertson as Chief Investment Officer and Priyank Thapliyal as Chief Operating Officer; and

(d) establish the Pallinghurst Share Plan to attract, retain and incentivise, amongst others, key Executive Directors and senior executives of Pallinghurst, 

(the "Management Structure Change").

The total number of Pallinghurst Shares which will form the subject matter of the Pallinghurst Share Plan will be 157.93 million of the Pallinghurst Shares. Each Executive Director will be granted an option to subscribe for such number of Pallinghurst Shares as is equivalent to 2% of the Pallinghurst Shares immediately after implementation of the Offer.

The Executive Directors share options will vest and become exercisable in five equal tranches of 20% on the following dates:

(a) the date on which their employment commences; and

(b) every year thereafter for the next four years.

Further information regarding the Management Structure Change is contained in the JSE Announcement, a copy of which is contained in Appendix 5.

6. Information on Gemfields

Gemfields is a public limited company, incorporated in England and Wales, with its registered office situated in the United Kingdom. Gemfields Shares are listed on AIM.

Gemfields is a world leading supplier of responsibly sourced coloured gemstones. It delivers a steady supply of high quality, graded rough gemstones through internationally held auctions with an ability to be a price maker not a price taker. Gemfields operates a "mine and market" strategy, targeting the two most profitable channels of the coloured gemstone supply chain.

The auctions are held in secure locations with the material separated into homogeneous lots and have either been produced by Gemfields (and are certified accordingly) or obtained by Gemfields from third parties. The world's leading rough gemstone buyers submit sealed bids for individual lots. A sale occurs if the highest bid received exceeds a pre-determined, but undisclosed, reserve price. The auctions have brought a level of professionalism and transparency previously not seen in the industry.

As there was no industry standard for evaluating rough coloured gemstones, Gemfields established its own grading system to assess each gem according to its individual characteristics (size, colour, shape and clarity). This approach has been instrumental in providing buyers with confidence in the consistent quality of the material on offer. Gemfields used this grading system to develop three auction classes, one offering higher quality gemstones, one for the larger volume of lower quality gemstones and the last offering mixed quality gemstones.

Gemfields owns Zambian emerald and amethyst assets, ruby assets in Mozambique and other gemstone interests in Madagascar and Ethiopia. 

Gemfields' key assets include ownership of:

- 75% of the Kagem emerald mine;

- 75% of the Montepuez ruby mine;

- 50% of the Kariba amethyst mine; and

- 100% of Fabergé Limited, one of the world's most well recognised luxury brand names.

For the financial year ended 30 June 2016, Gemfields had total revenues of US$193.1 million (2015: US$171.4 million) and a profit of US$23.5 million (2015: profit after income tax of US$12.3 million). For the six month period ended 31 December 2016, Gemfields had total revenues of US$51 million (2015: US$94 million) and a loss of US$13.6 million (2015: profit of US$8.2 million).

7. Consideration Shares

Following the Offer becoming or being declared unconditional in all respects, the Consideration Shares will be issued to accepting Relevant Gemfields Shareholders in accordance with the terms of the Offer.

The Consideration Shares will be admitted to trading on the "Investment Equity" sector of the main board of the JSE. No application will be sought for admission of the Consideration Shares to the Official List of the London Stock Exchange or to trading on the London Stock Exchange.

Further details in relation to Pallinghurst and the Consideration Shares will be contained in the Prospectus which is expected to be published by Pallinghurst on the date on which the Offer Document is posted.

8. Pallinghurst Shareholder approval

The Offer constitutes a Category 1 transaction in terms of the JSE Listings Requirements, which requires the approval of the Pallinghurst Shareholders in a general meeting. The percentage of voting rights that will be required for the necessary approval to be obtained is more than 50% of the votes exercised at the Pallinghurst General Meeting (the "Category 1 Resolution"). The Offer is conditional on the Category 1 Resolution.

In conjunction with the Transaction, it is proposed that, subject to Pallinghurst Shareholder approval, Pallinghurst will adopt the Management Structure Change, extend its life by 50 years and amend its Articles of Incorporation in relation thereto. The percentage of voting rights that will be required for the necessary approval to be obtained is not less than 75% of the votes exercised at the Pallinghurst General Meeting. The Offer is not conditional on this approval.

In conjunction with the Transaction, subject to Pallinghurst Shareholder approval, it is also proposed that Pallinghurst be granted a general authority to repurchase 152,090,526 Pallinghurst Shares, which represents 20% of the issued share capital of Pallinghurst. The Directors consider that such a general authority would allow Pallinghurst to retain the flexibility, if appropriate, to buy-back any Pallinghurst Shares in the open market to mitigate any potential flow back of the Consideration Shares. The percentage of voting rights that will be required for the necessary approval to be obtained is not less than 75% of the votes exercised at the Pallinghurst General Meeting. The Offer is not conditional on this approval.

Pallinghurst Shareholders set out below, collectively representing 50.3% of the Pallinghurst Shares in issue, have given irrevocable undertakings to Pallinghurst to procure that their shares are voted in favour of the necessary resolutions on which they are entitled to vote proposed at the Pallinghurst General Meeting:

- Oasis Crescent Capital (Proprietary) Limited in respect of 47,296,088 Pallinghurst Shares, representing approximately 6.22%;

- Oasis Asset Management Limited in respect of 68,470,365 Pallinghurst Shares, representing approximately 9.00%;

- Solway Finance Limited in respect of 67,386,056 Pallinghurst Shares, representing approximately 8.86%;

- Titan Nominees Proprietary Limited in respect of 151,238,953 Pallinghurst Shares, representing approximately 19.89%;

- Affinity Trust Limited ATO The Brian Gilbertson Discretionary Settlement in respect of 24,261,669 Pallinghurst Shares, representing approximately 3.19%;

- Arne H. Frandsen in respect of 4,237,369 Pallinghurst Shares, representing approximately 0.56%;

- Andrew Willis in respect of 2,446,054 Pallinghurst Shares, representing approximately 0.32%;

- Sean Gilbertson in respect of 4,175,536 Pallinghurst Shares, representing approximately 0.55%;

- Priyank Thapliyal in respect of 4,175,536 Pallinghurst Shares, representing approximately 0.55%;

- Hlamogolo Capital (Pty) Ltd in respect of 8,325,334 Pallinghurst Shares, representing approximately 1.09%; and

- Clive Harris in respect of 437,652 Pallinghurst Shares, representing approximately 0.06%.

In aggregate, Pallinghurst has received irrevocable undertakings in respect of interests of a total of 382,450,612 Pallinghurst Shares representing, in aggregate, approximately 50.3% of the existing issued share capital of Pallinghurst as at 17 May 2017 (being the Latest Practicable Date). The irrevocable undertakings commit the Pallinghurst Shareholders to vote in favour of the Pallinghurst Resolutions. The terms and further details of these irrevocable undertakings are set out in Appendix 2 to this announcement.

Pallinghurst will prepare and send to the Pallinghurst Shareholders the Pallinghurst Circular summarising the background to, and reasons for, the Offer and providing information about the Consideration Shares. The Offer is conditional on, amongst other things, the Category 1 Resolution being passed by Pallinghurst Shareholders at the Pallinghurst General Meeting.

9. Management and Employees

Pallinghurst attaches great importance to the skills, expertise and experience of the existing management and employees of Gemfields and believes that they will have greater opportunities arising out of the proposed acquisition of Gemfields by Pallinghurst.

Pallinghurst intends to make the Enlarged Group more efficient by realising costs savings through eliminating overlapping functions. At this stage, Pallinghurst has not undertaken a detailed analysis of specific headcount reductions, which it will do following completion of the Transaction in light of the ongoing requirements of Gemfields as part of the Pallinghurst Group. Pallinghurst does not expect the Offer to have any direct impact on Gemfields employees in the operating businesses. However, in order to achieve the benefits of the Offer, there will be cost savings in the corporate and support functions where there is duplication across Gemfields and Pallinghurst or the ability to streamline specific functions.

Pallinghurst confirms that the existing contractual and statutory employment rights, including pension rights, of all employees of Gemfields will be fully observed following completion of the Transaction.

10. Gemfields Share Option Scheme

The Offer will extend to any Gemfields Shares which are issued or unconditionally allotted and fully paid (or credited as fully paid) while the Offer remains open for acceptance, including Gemfields Shares issued pursuant to exercised options or vested awards granted under the Gemfields Share Option Scheme or otherwise.

11. Disclosure of Interests in Gemfields Shares

Save as disclosed below, neither Pallinghurst nor any of the directors of Pallinghurst nor, so far as Pallinghurst or the directors of Pallinghurst are aware, any person acting in concert with Pallinghurst for the purposes of the Offer, has an interest in or right to subscribe for, or has any arrangement in relation to, Gemfields Shares or securities convertible or exchangeable into Gemfields Shares, or had any short position in relation to the relevant securities of Gemfields, whether conditional or absolute and whether in the money or otherwise, including any short position under a derivative, any agreement to sell or any delivery obligation or right to require another person to purchase or take delivery of the relevant securities. For these purposes, "arrangement" includes any indemnity or option arrangement, any agreement or understanding, formal or informal, of whatever nature, relating to Gemfields Shares which may be an inducement to deal or refrain from dealing in such shares.

(a) As at 17 May 2017 (being the Latest Practicable Date), the Pallinghurst Group held the following interests in relevant Gemfields Shares:

Notes:

(1) The Pallinghurst Resources Fund L.P. holds indirect interests in Gemfields of 9.17% through its holdings in Fabergé Conduit Limited.

(b) As at 17 May 2017 (being the Latest Practicable Date), the Pallinghurst Directors held the following interests in relevant Gemfields Shares:

Notes:

(1) Dr Christo Wiese holds an indirect interest in Gemfields via Telemon Inc.

(2) Andrew Willis holds an interest in Gemfields through a contract for difference and not directly in Gemfields Shares.

(3) Brian Gilbertson, Arne H. Frandsen and Andrew Willis each hold interests in Pallinghurst (Cayman) Founder L.P which in turn holds 5,391,081 Gemfields Shares via Fabergé Conduit Limited. Brian Gilbertson holds an interest in Autumn Holdings Asset Inc which in turn holds 988,079 Gemfields Shares and he also holds a 25% interest in Pallinghurst Resources Management L.P.

(c) As at 17 May 2017 (being the Latest Practicable Date), the following persons acting, or deemed to be acting, in concert with Pallinghurst held the following interests in relevant Gemfields Shares:

____________

Notes:

(1) NGPMR (Cayman) L.P. and Investec Pallinghurst (Cayman) L.P. hold indirect interests in Gemfields of 5.11% and 2.69% respectively through their holdings in Fabergé Conduit Limited.

(2) Sean Gilbertson holds interests in Pallinghurst (Cayman) Founder L.P which in turn holds 5,391,081 Gemfields Shares via Fabergé Conduit Limited.

12. Pensions

Gemfields participates in a defined contribution pension scheme for the benefit of its employees, and Pallinghurst recognises that many current and former employees, and their families, depend on the Gemfields pension scheme for all, or part, of their retirement income and so have an interest in the Offer. Pallinghurst intends that following the implementation of the Offer, Gemfields will continue to comply with all its pensions obligations. Further details regarding Pallinghurst's intentions with regard to pension arrangements will be set out in the Offer Document.

13. Delisting, Compulsory Acquisition and Re-Registration

If Pallinghurst receives acceptances under the Offer in respect of, and/or otherwise acquires, 90% or more of the Gemfields Shares by nominal value and voting rights attaching to such shares to which the Offer relates and assuming that all of the other Conditions of the Offer have been satisfied or waived (if capable of being waived), Pallinghurst intends to exercise its rights pursuant to the provisions of Chapter 3 of Part 28 of the Companies Act 2006 to acquire compulsorily the remaining Gemfields Shares in respect of which the Offer has not been accepted on the same terms as the Offer.

After the Offer becomes or is declared unconditional in all respects and Pallinghurst has by virtue of its shareholdings and acceptances of the Offer acquired, or agreed to acquire, share capital representing at least 75% of the voting rights of Gemfields, Pallinghurst intends to procure the making of an application by Gemfields for cancellation of the trading in Gemfields Shares on AIM. A notice period of not less than 20 Business Days prior to the cancellation will commence either on Pallinghurst attaining 75% or more of the voting rights as described above or on the first date of issue of squeeze‑out notices under Chapter 3 of Part 28 of the Companies Act 2006. 

It is also proposed that, following the Offer becoming unconditional in all respects and after the Gemfields Shares are delisted, Gemfields will be re‑registered as a private company under the relevant provisions of Companies Act 2006.

Such cancellation of the AIM listing and re-registration would significantly reduce the liquidity and marketability of any Gemfields Share not assented to the Offer and the value of Gemfields Shares may be affected as a consequence. Any remaining Gemfields Shareholders would become minority shareholders in a privately controlled limited company and may be unable to sell their Gemfields Shares.

Pallinghurst reserves the right to increase its shareholding after the Offer has closed by buying further Gemfields Shares in the market (to the extent permitted under applicable laws and regulations), which may subsequently allow it to reach the threshold for delisting without the need to launch a further offer to all Gemfields Shareholders.

14. Overseas Shareholders

The availability of the Offer and the distribution of this announcement to persons who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions. Such persons should inform themselves about and observe any applicable requirements. Further details in relation to Overseas Shareholders will be contained in the Offer Document.

15. General

The Pallinghurst Circular, containing details of the Pallinghurst Resolutions (which include the approval of, inter alia, the Offer) and notice to convene the Pallinghurst General Meeting, is expected to be posted to Pallinghurst Shareholders as soon as possible following the date of this announcement. Pallinghurst today has announced and made publicly available the JSE Announcement, a copy of which is contained in Appendix 5, and the Investor Presentation.

The Offer will be subject to the terms and conditions set out in Appendix 1 and which will be set out in the Offer Document, which Pallinghurst intends to despatch to Gemfields Shareholders as soon as practicable and in any event (save with the consent of the Panel) within 28 days of this announcement. The Offer Document will include a Form of Acceptance. Pallinghurst expects to publish the Prospectus in respect of the Consideration Shares on the same date.

Unless an exemption under relevant securities laws is available, the Consideration Shares are not being, and may not be, offered, sold, resold, delivered or distributed, directly or indirectly, in, into or from the United States or any other Restricted Jurisdiction or to, or for the account or benefit of, any US Person or resident of any other Restricted Jurisdiction. The Offer does not constitute an offer of Consideration Shares in the United States. Neither the US Securities and Exchange Commission nor any US state securities commission has approved or disapproved of the Consideration Shares, or determined if this announcement is accurate or complete. Any representation to the contrary is a criminal offence. The Consideration Shares are not being offered to the public by means of this announcement. This announcement does not constitute a prospectus or prospectus equivalent document.

Appendix 2 of this announcement contains the sources and bases of certain information used in this summary and in the following announcement. Appendix 3 contains particulars of the irrevocable undertakings referred to in paragraph 3 of this announcement. Appendix 4 of this announcement contains definitions of certain terms used in the summary and the announcement. Appendix 5 of this announcement contains a copy of the JSE Announcement.

UBS has given and not withdrawn its consent to the publication of this announcement with the inclusion herein of the references to its name in the form and context in which they appear.

16. Documents Available on Website

Copies of the following documents will be made available on Pallinghurst's website at www.pallinghurst.com/gemfields-offer until the end of the Offer Period:

- the irrevocable undertakings referred to in paragraph 3 above;

- a copy of this announcement;

- a copy of the JSE Announcement;

- the irrevocable undertakings referred to in paragraph 8 above; and

- a copy of the Investor Presentation.

Enquiries 

For further information contact:

Pallinghurst Resources Limited11 New Street

St Peter Port

Guernsey

GY12PF

Channel Islands

Phone: +44 148 1726034

Press AgentCapital Voice

Johannes van Niekerk

Phone: +27 (0) 82 921 9110

UK Media Relations

Temple Bar Advisory +44 (0) 207 002 1510

Ed Orlebar +44 (0) 7738 724 630

Tom Allison +44 (0) 7789 998 020

UBS Investment Bank5 Broadgate

London EC2M 2QS

United Kingdom 

London: +44 (0) 20 7567 8000

Ian Hart

Jason Hutchings

Abid Chaudhri

South Africa: +27 11 322 70 00

Brian Smith

Gary Hudson

This announcement is not intended to and does not constitute an offer to sell or an invitation to purchase any securities or the solicitation of an offer to buy any securities, pursuant to the Offer or otherwise, nor shall there be any purchase, sale or exchange of securities or such solicitation in any jurisdiction in which such offer, solicitation or sale or exchange would be unlawful prior to the registration or qualification under the laws of such jurisdiction. The Offer Document and Form of Acceptance will be made available to all Gemfields Shareholders at no cost to them. Gemfields Shareholders are advised to read the Offer Document and the accompanying Form of Acceptance when they are sent to them because they will contain important information.

UBS Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority in the UK together with UBS South Africa (Pty) Ltd which is supervised by the South African Financial Services Board (collectively "UBS").UBS is acting as financial adviser for Pallinghurst and no one else in connection with the Offer and will not be responsible to anyone other than Pallinghurst for providing the protections afforded to customers of UBS Investment Bank nor for giving advice in relation to the Offer or any other matters referred to in this announcement.

The GFSC and the States of Guernsey have not reviewed this announcement and take no responsibility for the correctness of any statements made or opinions expressed with regard to Pallinghurst.

Overseas Jurisdictions

The availability of the Offer to persons who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions. Such persons should inform themselves about and observe any applicable requirements. Further details in relation to Overseas Shareholders will be contained in the Offer Document.

Any failure to comply with the applicable restrictions may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies involved in the proposed Offer disclaim any responsibility or liability for the violation of such restrictions by any person.

This announcement has been prepared for the purposes of complying with English law, the Code and the AIM Rules and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.

Unless otherwise determined by Pallinghurst or required by the Code, and permitted by applicable law and regulation, the Offer will not be made, directly or indirectly, in, into or from, and will not be capable of acceptance in or from any Restricted Jurisdiction. Accordingly, copies of this announcement are not being, and must not be, mailed or otherwise forwarded, distributed or sent in, into or from any Restricted Jurisdiction. Persons receiving this announcement (including custodians, nominees and trustees) should observe these restrictions and should not send or distribute this announcement in, into or from any such jurisdictions.

Forward Looking Statements

This announcement includes certain "forward looking statements". These statements are based on the current expectations of the management of Pallinghurst and are naturally subject to uncertainty and changes in circumstances. The forward-looking statements contained herein include statements about the expected effects on Pallinghurst of the Offer, the expected timing and scope of the Offer, and all other statements in this announcement other than historical facts. Forward-looking statements include, without limitation, statements typically containing words such as "intends", "expects", "anticipates", "targets", "estimates", "plans", "strategy", "will", "should", "may" and words of similar import. These forward looking statements are not guarantees of future performance. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to, the satisfaction of the conditions to the Offer, and Pallinghurst's ability successfully to integrate the operations and employees of Gemfields, as well as additional factors, such as changes in economic conditions, changes in the level of capital investment, success of business and operating initiatives and restructuring objectives, costs associated with research and development, changes in the prospects for products in the research and development pipeline of Pallinghurst or Gemfields, customers' strategies and stability, changes in the regulatory environment, fluctuations or interest and exchange rates, the outcome of litigation, government actions and natural phenomena such as floods, earthquakes and hurricanes. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. Pallinghurst does not undertake any obligation to update publicly or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

Consideration Shares

The Consideration Shares are not being offered to the public by means of this announcement. This announcement is an advertisement and does not constitute a prospectus or prospectus equivalent document. The Prospectus in relation to the Consideration Shares is expected to be published by Pallinghurst (on the date on which the Offer Document is posted) and will contain information about Pallinghurst and the Consideration Shares.

Disclosure requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the Offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th Business Day following the commencement of the Offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th Business Day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the Offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Publication on website and availability of hard copies

This announcement and the documents required to be published pursuant to Rule 26.1 of the Code will be available free of charge, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, on Pallinghurst's website at www.pallinghurst.com/gemfields-offer by no later than 12.00 p.m. on the Business Day following this announcement.

Neither the content of any website referred to in this announcement nor the content of any website accessible from hyperlinks is incorporated into, or forms part of, this announcement.

You may request a hard copy of this announcement by contacting UBS Investment Bank on +44 (0) 20 7567 8000. You may also request that all future documents, announcements and information to be sent to you in relation to the Offer should be in hard copy form.

The Prospectus, once published by Pallinghurst, will be available on Pallinghurst's website at www.pallinghurst.com/gemfields-offer.

Rounding

Certain figures included in this announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Not for release, publication or distribution, in whole or in part, in, into or from any Restricted Jurisdiction.

Appendix 1 Conditions and Further Terms of the Offer

Part A: Conditions of the Offer

The Offer complies with the Code, is governed by English law and is subject to the exclusive jurisdiction of the English courts. The Offer is being made on the terms and conditions set out in this Appendix 1, in the Offer Document and in the Form of Acceptance. The Offer is subject to the following Conditions:

Acceptance Condition

1. Valid acceptances being received (and not, where permitted, withdrawn) by not later than 1:00 pm on the first closing date of the Offer (or such later time(s) and/or date(s) as Pallinghurst may, with the consent of the Panel or in accordance with the rules of the Code, decide) in respect of not less than 75% (or such lower percentage as Pallinghurst may decide) in nominal value of the Gemfields Shares in issue which carry voting rights, provided that, unless agreed by the Panel, this Condition will not be satisfied unless Pallinghurst shall have acquired or agreed (unconditionally or subject only to conditions which will be fulfilled upon the Offer becoming or being declared unconditional) to acquire (whether pursuant to the Offer or otherwise) Gemfields Shares carrying, in aggregate, more than 60% of the voting rights then normally exercisable at a general meeting of Gemfields on such basis as may be required by the Panel, including for this purpose, to the extent (if any) required by the Panel, any voting rights attaching to shares which are unconditionally allotted or issued before the Offer becomes or is declared unconditional as to acceptances, whether pursuant to the exercise of conversion or subscription rights or otherwise.

For the purposes of this Condition:

(i) Gemfields Shares that are unconditionally allotted but not issued shall be deemed to carry the voting rights which they will carry upon issue;

(ii) the 75% of voting rights is to be calculated by reference to the percentage held and in issue outside treasury; and

(iii) valid acceptances shall be deemed to have been received in respect of Gemfields Shares which are treated for the purposes of sections 977(1) and 979(8) to (10) of the Companies Act 2006 as having been acquired or contracted to be acquired by Pallinghurst by virtue of acceptances of the Offer.

Pallinghurst Shareholder Approval

2. The passing at the Pallinghurst General Meeting (or at any adjournment thereof) by the requisite majority of the Pallinghurst Shareholders of such resolution as is necessary to approve, implement and effect the Offer in accordance with the Category 1 requirements under the JSE Listings Requirements.

JSE Listing

3. (i) the admission to the JSE of the Consideration Shares becoming effective in accordance with the JSE Listings Requirements; or

(ii) if Pallinghurst so determines (and subject to the consent of the Panel) the JSE having acknowledged to Pallinghurst or its agent (and such acknowledgement not having been withdrawn) that the Consideration Shares will be admitted to trading on the JSE;

Other Statutory or Regulatory Obligations

4. All statutory or regulatory obligations in connection with the Offer or the acquisition by Pallinghurst of any shares in, or control of, Gemfields or any member of the wider Gemfields Group in any applicable jurisdiction having been complied with.

Other Third Party Clearances

5. No central bank, government or governmental, quasi‑governmental, supranational, statutory or regulatory or investigative body, trade agency, court or professional association, institution or professional body or other body or person having statutory or regulatory competence in any jurisdiction (each a "Relevant Authority") having instituted, implemented or threatened, or having decided to take, institute or threaten, any action, proceeding, suit, investigation, inquiry or reference, or having made, proposed or enacted any statute, regulation or order, or taken any other steps, and there not continuing to be outstanding any statute, regulation or order in any jurisdiction, in each case which is likely to be material in the context of the Offer and which would or might reasonably be expected to:

(a) make the Offer or its implementation or the acquisition of any shares or other securities in, or control of, Gemfields by any member of the wider Pallinghurst Group void, illegal or unenforceable under the laws of any jurisdiction or, to an extent which is material, otherwise directly or indirectly restrain, prohibit, restrict or delay the implementation or performance of the Offer or impose additional conditions or obligations with respect to it, or otherwise materially challenge or interfere with the Offer or the acquisition of any shares or other securities in, or control of, Gemfields by any member of the wider Pallinghurst Group;

(b) require, prevent or delay the divestiture or alter the terms envisaged for such divestiture by any member of the wider Gemfields Group or any member of the wider Pallinghurst Group of all or any portion of their respective businesses, assets or property, or impose any limitation on the ability of any of them to conduct their respective businesses or own their assets or property or any part of them, in any case to an extent which is material in the context of the Gemfields Group, or the Pallinghurst Group, as the case may be, taken as a whole;

(c) impose any limitation on, or result in a delay in, the ability of any member of the wider Pallinghurst Group or the wider Gemfields Group to acquire or to hold or exercise effectively, directly or indirectly, all or any rights of ownership of any shares or other securities (whether acquire pursuant to the Offer or otherwise) in, or to exercise management control over, any member of the wider Gemfields Group, in any case to an extent which is material in the context of the Gemfields Group, or the Pallinghurst Group, as the case may be, taken as a whole;

(d) save as pursuant to the Offer or Part 28 of the Companies Act 2006, require any member of the wider Pallinghurst Group or the wider Gemfields Group to acquire or offer to acquire any shares or other securities owned by any third party in the capital of any member of the wider Gemfields Group or the wider Pallinghurst Group or any asset owned by any third party, in any case to an extent which is material in the context of the Gemfields Group, or the Pallinghurst Group, as the case may be, taken as a whole;

(e) result in any member of the wider Gemfields Group or the wider Pallinghurst Group ceasing to be able to carry on business under any name which it presently does so;

(f) impose any limitation on the ability of any member of the wider Gemfields Group or the wider Pallinghurst Group to integrate or co‑ordinate its business, or any part of it, with all or any part of the businesses of any other member of the wider Gemfields Group and/or wider Pallinghurst Group, in any case to an extent which is material in the context of the Gemfields Group, or the Pallinghurst Group, as the case may be, taken as a whole; or

(g) otherwise adversely affect any or all of the businesses, financial position, assets, trading results or prospects of any member of the wider Pallinghurst Group or the wider Gemfields Group, in any case to an extent which is material in the context of the Gemfields Group, or the Pallinghurst Group, as the case may be, taken as a whole;

and all regulatory and statutory obligations having been complied with and all applicable waiting and other time periods during which any such Relevant Authority could decide to take, institute, implement or threaten such action, proceeding, suit, investigation, inquiry or reference under the laws of any jurisdiction having expired, lapsed or been terminated.

6. All necessary material notifications and filings having been made in connection with the Offer and all statutory and regulatory obligations in connection with the Offer in any jurisdiction having been complied with and all material authorisations, orders, recognitions, grants, consents, clearances, confirmations, certificates, licences, permissions and approvals ("Authorisations") deemed reasonably necessary or appropriate by Pallinghurst in any jurisdiction for, or in respect of, the Offer and the acquisition or the proposed acquisition of the Gemfields Shares by Pallinghurst or any member of the Pallinghurst Group having been obtained in terms reasonably satisfactory to Pallinghurst from all appropriate Relevant Authorities or from any persons or bodies with whom any member of the wider Pallinghurst Group or the wider Gemfields Group has entered into contractual arrangements, all or any applicable waiting and other time periods having expired, lapsed or been terminated (as appropriate) and all such Authorisations (together with all material Authorisations deemed reasonably necessary or appropriate to carry on the business of any member of the wider Gemfields Group) remaining in full force and effect at the time at which the Offer becomes otherwise unconditional and there being no notice of any intention to revoke, suspend, restrict, amend or not to renew any such Authorisations.

Confirmation of absence of adverse circumstances

7. Save as disclosed in the Annual Report of Gemfields or in the Interim Results of Gemfields, or as publicly announced through a Regulatory Information Service prior to the date of this announcement, there being no provision of any arrangement, agreement, licence, permit, franchise or other instrument to which any member of the wider Gemfields Group is a party or by or to which any such member or any of their assets is or may be bound, entitled or subject which, in consequence of the Offer or the acquisition or proposed acquisition of any shares or other securities in Gemfields or any member of the Gemfields Group by any member of the wider Pallinghurst Group, or a change in the control or management of Gemfields or any member of the Gemfields Group, could or might reasonably be expected to result in:

(a) any monies borrowed by or other indebtedness or liabilities, actual or contingent, of any member of the wider Gemfields Group being or becoming repayable or being capable of being declared repayable immediately or prior to their stated maturity, or the ability of any such member to borrow or incur indebtedness being withdrawn, prohibited or adversely affected or being capable of being withdrawn, prohibited or adversely affected;

(b) the creation or enforcement of any mortgage, charge or other security interest over the whole or any part of the business, property or assets of any member of the wider Gemfields Group or any such mortgage, charge or security interest (whenever arising or having arisen) becoming enforceable;

(c) any such arrangement, agreement, licence, permit, franchise or other instrument being, or becoming capable of being, terminated or adversely modified or affected or any action being taken of an adverse nature or any obligation or liability arising thereunder;

(d) any assets or interests of any member of the wider Gemfields Group being disposed of or charged or any right arising under which any such asset or interest could be required to be disposed of or charged, other than in the ordinary course of business;

(e) any member of the wider Gemfields Group ceasing to be able to carry on business under any name which it presently does so or any person presently not able to carry on business under any name which any member of the wider Gemfields Group presently does becoming able to do so;

(f) the rights, liabilities, obligations or interests or business of any member of the wider Gemfields Group in or with any firm or body or person, or any arrangements relating to such interests or business, being terminated, modified or adversely affected;

(g) any liability (actual, contingent or otherwise) being created; or

(h) the value or the business, financial or trading position, results or prospects of any member of the wider Gemfields Group being prejudiced or adversely affected,

and no event having occurred which, under any such provision, could result in any of the events or circumstances referred to in sub‑paragraphs (a) to (h) (in any such case to an extent which is material in the context of the Gemfields Group taken as a whole).

No material transactions, claims or changes in the conduct of the business of the Gemfields Group

8. Since 30 June 2016, and save as disclosed in the Annual Report of Gemfields or in the Interim Results of Gemfields, or as publicly announced through a Regulatory Information Service prior to the date of this announcement, no member of the wider Gemfields Group having:

(a) issued or agreed to issue or authorised or proposed the issue of additional shares of any class, or securities convertible into, or rights, warrants or options to subscribe for or acquire, any such shares or convertible securities, save as between Gemfields and any wholly‑owned subsidiaries of Gemfields and except for any options granted, and Gemfields shares unconditionally issued upon or pursuant to the exercise of options granted, prior to the date of announcement of the Offer under the Gemfields Share Option Scheme;

(b) recommended, declared, paid or made or proposed to recommend, declare, pay or make any bonus issue, dividend or other distribution whether in cash or otherwise;

(c) made or authorised or proposed or announced any change in its loan capital, outside the ordinary course of business;

(d) other than pursuant to the Offer and save for transactions between a wholly‑owned subsidiary of Gemfields and Gemfields or another wholly‑owned subsidiary of Gemfields and other than in the ordinary course of business, implemented, effected, authorised or proposed or announced its intention to implement, effect, authorise or propose any merger, demerger, reconstruction, amalgamation, scheme, commitment or acquisition, disposal, transfer, mortgage, charge or creation of any security interest of or over any asset or shares in any undertaking, or any right, title or interest in any asset which is material in the context of the Gemfields Group taken as a whole;

(e) issued, authorised or proposed or announced an intention to authorise or propose, the issue of any debentures, or, save in the ordinary course of business, incurred or increased any indebtedness or contingent liability;

(f) purchased, redeemed or repaid or proposed or announced any proposal to purchase, redeem or repay any of its own shares or other securities or the equivalent, or reduced or proposed the reduction of, or made or proposed the making of any other change to, any part of its share capital;

(g) entered into or varied any contract, including any guarantee, transaction or binding commitment (whether in respect of capital expenditure or otherwise) which is of a long‑term or unusual or onerous nature or magnitude or which would be restrictive of the business of any member of the wider Gemfields Group in any way or which involves or could involve an obligation of such a nature or magnitude and which is other than in the ordinary course of business, or announced any intention to do so;

(h) entered into or varied or made any offer which remains open for acceptance to enter into or vary the terms of any contract, including any service contract, with any of the directors or senior executives of any member of the wider Gemfields Group;

(i) entered into any contract or commitment restricting the ability of any member of the wider Gemfields Group to compete with any other person;

(j) taken or proposed any corporate action or passed any resolution for or had any legal proceedings instituted against it for its winding‑up (voluntarily or otherwise), dissolution or re‑organisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of all or any of its assets and revenues or any analogous proceedings or steps in any jurisdiction or for the appointment of any analogous person in any jurisdiction;

(k) been unable or having admitted in writing that it is unable to pay its debts or having stopped or suspended, or threatened to stop or suspend, payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business;

(l) waived or compromised any material claim against any person otherwise than in the ordinary course of business;

(m) terminated or varied the terms of any agreement or arrangement between any member of the Gemfields Group and any other person in a manner which would or might reasonably be expected to have a material adverse effect on the financial position of the Gemfields Group taken as a whole;

(n) made or agreed or consented to any significant change to the terms of the trust deeds constituting the pension schemes established for its directors and/or employees and/or their dependants or to the benefits which accrue, or to the pensions which are payable under such schemes, or to the basis on which qualification for or accrual or entitlement to such benefits or pensions are calculated or determined or to the basis upon which the liabilities (including pensions) of such pension schemes are funded or made, or agreed or consented to any change to the trustees involving the appointment of a trust corporation;

(o) save as disclosed on publicly available registers, made any alteration to its memorandum or articles of association, or other constitutional documents; or

(p) entered into or made an offer which remains open for acceptance to enter into any agreement, commitment or arrangement or passed any resolution or announced any intention with respect to any of the transactions, matters or events referred to in this paragraph 8.

No material adverse change

9. Since 30 June 2016, and save as disclosed in the Annual Report of Gemfields or in the Interim Results of Gemfields, or as publicly announced through a Regulatory Information Service prior to the date of this announcement:

(a) no investigation or enquiry by any Relevant Authority having statutory or regulatory competence (save as a result of the Offer) and no litigation, arbitration proceedings, prosecution or other legal proceedings to which any member of the Gemfields Group is or may become a party, whether as plaintiff or defendant or otherwise, having been threatened in writing, announced or instituted by or remaining outstanding against or in respect of any member of the wider Gemfields Group which, in any such case, is material in the context of the Gemfields Group taken as a whole;

(b) there having been no adverse change in the business, assets, financial position, trading results, profits or prospects of the Gemfields Group taken as a whole;

(c) no contingent or other liability of any member of the wider Gemfields Group having arisen or been created which would or might be likely materially and adversely to affect the Gemfields Group taken as a whole; or

(d) no steps having been taken which would or are reasonably likely to result in the withdrawal, cancellation, termination or modification of any licence held by any member of the wider Gemfields Group which is necessary for the proper carrying on of its business and which, in any case, is material in the context of the wider Gemfields Group taken as a whole.

No discovery of certain matters regarding information, liabilities and environmental issues

10. Save as disclosed in the Annual Report of Gemfields or in the Interim Results of Gemfields, or as publicly announced through a Regulatory Information Service prior to the date of this announcement, Pallinghurst not having discovered that:

(a) any financial, business or other information concerning the wider Gemfields Group publicly announced prior to the date of this announcement or disclosed at any time to any member of the wider Pallinghurst Group by or on behalf of any member of the wider Gemfields Group prior to the date of this announcement is misleading, contains a material misrepresentation of any fact, or omits to state a fact necessary to make that information not misleading, in any such case to a material extent;

(b) any member of the wider Gemfields Group is subject to any liability, contingent or otherwise, arising other than in the ordinary course of business and which is material in the context of the Gemfields Group taken as a whole;

(c) any past or present member of the wider Gemfields Group has not complied in any material respect with all applicable legislation, regulations or any Authorisations relating to the use, treatment, storage, carriage, disposal, discharge, spillage, release, leak or emission of any waste or hazardous substance or any substance likely to impair the environment (including property) or harm human or animal health or otherwise relating to environmental matters or the health and safety of humans, which non-compliance would be likely to give rise to any material liability, including any penalty for non-compliance (whether actual or contingent) on the part of any member of the wider Gemfields Group, in each case to an extent which is material in the context of the wider Gemfields Group taken as a whole;

(d) there has been a material disposal, discharge, spillage, accumulation, release, leak, emission or the migration, production, supply, treatment, storage, transport or use of any waste or hazardous substance or any substance likely to impair the environment (including any property) or harm human or animal health which (whether or not giving rise to non-compliance with any law or regulation), would be likely to give rise to any material liability on the part of any member of the wider Gemfields Group, in each case to an extent which is material in the context of the wider Gemfields Group taken as a whole;

(e) that there is or is reasonably likely to be any material obligation or liability (whether actual or contingent) or requirement to make good, remediate, repair, reinstate or clean up any property, asset or any controlled waters currently or previously owned, occupied, operated or made use of or controlled by any past or present member of the wider Gemfields Group, or in which any such member may have or previously have had or be deemed to have had an interest, under any environmental legislation, common law, regulation, notice, circular, Authorisation or order of any third party in any jurisdiction or to contribute to the cost thereof or associated therewith or indemnify any person in relation thereto, in each case to an extent which is material in the context of the wider Gemfields Group taken as a whole; or

(f) that circumstances exist (whether as a result of making the Offer or otherwise) which would be reasonably likely to lead to any third party instituting (or whereby any member of the wider Gemfields Group would be likely to be required to institute) an environment audit or take any steps which would in any such case be reasonably likely to result in any actual or contingent liability to improve or install new plant or equipment or to make good, repair, reinstate or clean up any property of any description or any asset now or previously owned, occupied or made use of by any past or present member of the wider Gemfields Group (or on its behalf) or by any person for which a member of the wider Gemfields Group is or has been responsible, or in which any such member may have or previously have had or be deemed to have had an interest, which is material in the context of the wider Gemfields Group taken as a whole.

Anti-corruption and sanctions

11. Save as disclosed in the Annual Report of Gemfields or in the Interim Results of Gemfields, or as publicly announced through a Regulatory Information Service prior to the date of this announcement, Pallinghurst not having discovered that:

(a) any past or present member of the wider Gemfields Group or any person that performs or has performed services for or on behalf of any such company is or has at any time engaged in any activity, practice or conduct (or omitted to take any action) in contravention of the UK Bribery Act 2010, the US Foreign Corrupt Practices Act of 1977 or any other applicable anti-corruption legislation or has failed to put in place adequate procedures to prevent such activity, practice or conduct; or

(b) any past or present member of the wider Gemfields Group has engaged in any activity or business with, or made any investments in, or made any payments to any government, entity or individual covered by any of the economic sanctions administered by the United Nations or the European Union (or any of their respective member states) or the United States Office of Foreign Assets Control or any other governments or supranational body or authority in any jurisdiction.

No criminal property

12. Pallinghurst not having discovered that any asset of any member of the wider Gemfields Group constitutes criminal property as defined by section 340(3) of the Proceeds of Crime Act 2002 (but disregarding paragraph (b) of that definition).

Part B: Further terms of the Offer

1. Subject to the requirements of the Panel, Pallinghurst reserves the right to waive, in whole or in part, all or any of Conditions 3 to 12 (inclusive). Conditions 3 to 12 must be satisfied or waived or, where appropriate, have been determined by Pallinghurst to be or to remain satisfied by midnight on the day which is twenty one (21) days after the later of the first closing date of the Offer and the date on which Condition 1 is satisfied (or in each case such later date as the Panel may agree), or the Offer will lapse.

2. Pallinghurst shall be under no obligation to waive or treat as satisfied any of Conditions 3 to 12 (inclusive) by a date earlier than the date specified above for the satisfaction thereof notwithstanding that the other Conditions of the Offer may at such earlier date have been waived or fulfilled and that there are at such earlier date no circumstances indicating that any of such Conditions may not be capable of fulfilment or, to the extent permitted, waived.

3. If the Offer lapses for any reason, the Offer will cease to be capable of further acceptance, and Pallinghurst and accepting Gemfields Shareholders will cease to be bound by acceptances of the Offer delivered on or before the time when the Offer lapses.

4. If Pallinghurst is required by the Panel to make an offer for Gemfields Shares under the provisions of Rule 9 of the Code, Pallinghurst may make such alterations to the terms and conditions of the Offer as are necessary to comply with the provisions of that Rule.

5. The Gemfields Shares which are the subject of the Offer will be acquired under the Offer fully paid and free from all liens, equities, charges, encumbrances, rights of pre-emption and any other third party rights or interests of any nature whatsoever and together with all rights now or hereafter attaching or accruing to them including voting rights and the right to receive and retain in full all dividends and other distributions (if any) declared, made or paid after 19 May 2017. If any dividend or other distribution is authorised, declared, made or paid by Gemfields in respect of Gemfields shares on or after the date of this announcement, Pallinghurst reserves the right to reduce to reduce the offer consideration by the amount of all or part of any such dividend or other distribution.

6. The availability of the Offer to persons not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions. Persons who are not resident in the United Kingdom should inform themselves about and observe any applicable requirements.

7. The Offer is not being made, directly or indirectly, in, into or from, or by use of the mails of, or by any means of instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of, any jurisdiction where to do so would violate the laws of that jurisdiction.

8. The Offer is governed by the law of England and Wales and is subject to the jurisdiction of the English courts and to the Conditions and further terms set out in this Appendix I and to be set out in the Offer Document. The Offer will be subject to the applicable requirements of the Code, the Panel, the London Stock Exchange and the UK Listing Authority.

Appendix 2 Bases and Sources

Unless otherwise stated:

(a) the value of the share capital of Gemfields is based upon 549,816,476 Gemfields Shares in issue on 17 May 2017 (being the Latest Practicable Date), as per Gemfields' website at http://corporate.gemfields.co.uk/investors/shareholder-information;

(b) the value of the share capital of Pallinghurst is based upon 760,452,631 Pallinghurst shares in issue on 17 May 2017 (being the Latest Practicable Date);

(c) financial information relating to Gemfields has been extracted from the audited consolidated annual report and accounts of the Gemfields Group for the year ended 30 June 2016 the ("Annual Report of Gemfields") and the interim results of Gemfields for the six months ended 31 December 2016 (the "Interim Results of Gemfields"), prepared in accordance with IFRS;

(d) financial information relating to Pallinghurst has been extracted from the audited consolidated annual report and accounts of the Pallinghurst Group for the year ended 31 December 2016, prepared in accordance with IFRS;

(e) the exchange ratio of the Offer has been determined using the 30 day volume weighted average price to smooth out the daily movements for both Pallinghurst and Gemfields as well as the spot ZAR/GBP exchange rate as on 17 May 2017 (being the Latest Practicable Date);

(f) ZAR has been converted into Pounds Sterling at the rate of 17.14 to one Pound Sterling, being the exchange rate quoted by Reuters as at 4 p.m. in London on 17 May 2017 (being the Latest Practicable Date); and

(g) all prices quoted for Gemfields Shares are closing middle market quotations derived from the London Stock Exchange Daily Official List (SEDOL), and all prices quoted for Pallinghurst Shares have been derived from Factset.

Appendix 3 Details of Irrevocable Undertakings

The following holders of Gemfields Shares have given irrevocable undertakings to accept the Offer:

The irrevocable undertakings from each of NGPMR (Cayman) L.P., Investec Pallinghurst (Cayman) L.P., Pallinghurst (Cayman) Founder L.P., Dr Christo Wiese and Sean Gilbertson cease to be binding if: (i) the Offer is not made (by the publication of the Offer Document) on substantially the terms and conditions set out or referred to in this announcement by the date which is 28 days from the date of this announcement (or such later date as the Panel may permit); (ii) the Offer lapses or is withdrawn becoming unconditional in all respects; or (iii) a third party announces a firm intention to acquire the share capital of Gemfields and such proposal provides for consideration of more than 10% premium to the price per Gemfields Share being offered by Pallinghurst and Pallinghurst does not increase the consideration to be paid for Gemfields Shares pursuant to the Offer to an amount equivalent per Gemfields Share within seven days of the competing offer.

The irrevocable undertakings from Oasis Asset Management and Oasis Crescent Capital cease to be binding if: (i) the Offer is not made (by the publication of the Offer Document) on substantially the terms and conditions set out or referred to in this announcement by the date which is 28 days from the date of this announcement (or such later date as the Panel may permit); (ii) the Offer lapses or is withdrawn becoming unconditional in all respects; or (iii) a third party announces a firm intention to acquire the share capital of Gemfields and such proposal provides for consideration of more than the price per Gemfields Share being offered by Pallinghurst and Pallinghurst does not increase the consideration to be paid for Gemfields Shares pursuant to the Offer to an amount equivalent per Gemfields Share within seven days of the competing offer.

The following holders of Pallinghurst Shares have given irrevocable undertakings:

These irrevocable undertakings cease to be binding upon the earlier of: (i) the date on which the Conditions lapse as a result of the failure or non-fulfilment of any of the Conditions; or (ii) the date on which the Offer is implemented.

Appendix 4 Definitions

The following definitions apply throughout this announcement unless the context otherwise requires:

Appendix 5 JSE Announcement

PALLINGHURST RESOURCES LIMITED

(Incorporated in Guernsey)

(Guernsey registration Number: 47656)

(South African external company registration number 2009/012636/10)

Share code on the BSX: PALLRES ISIN: GG00B27Y8Z93

Share code on the JSE: PGL

("Pallinghurst")

Pallinghurst announces a restructuring of the group including an offer to acquire the minority interests of Gemfields plc ("Gemfields")

INTRODUCTION AND BACKGROUND

Pallinghurst was founded in September 2007 as a limited life mining investment fund to source and develop new value accretive mining projects. This phase of Pallinghurst's development has now been achieved with three key assets successfully developed. These include:

· Gemfields - a leading supplier of responsibly sourced coloured gemstones;

· Tshipi - one of the lowest cost manganese producers in the world; and

· Sedibelo - a large scale open pit PGM mining operation in South Africa.

The development of these assets has created significant uplift in the net asset value of Pallinghurst. This value, however, has not been reflected in Pallinghurst's listed share price given the complexities in the structure (including an external management company and multiple entry points into the Pallinghurst Group's assets), complex accounting policies which makes comparison to peers difficult and which is compounded by the lack of consolidated earnings and cash flows.

To unlock value, Pallinghurst now proposes to address these issues and implement a restructuring of the group which will include:

· making an offer which, if approved and implemented, will result in Pallinghurst acquiring the entire issued and to be issued share capital of Gemfields not already owned by the Pallinghurst group (the "Offer") and post the completion of the Offer, move to de-list Gemfields from the AIM market of the London Stock Exchange ("LSE");

· the potential conversion to an operating mining company; and

· collapsing Pallinghurst's investment structure and simplifying its management arrangements.

The result will be a renewed Pallinghurst with a simplified operating model and an in-house management team. The value of the underlying assets will be more clearly demonstrable with clearer earnings and operating metrics that can be benchmarked against industry peers. The revised structure model will allow Pallinghurst to rationalise costs across the group by simplifying the group's structures.

Post completion of the Offer, Pallinghurst expects to have an enlarged market capitalisation, improved trading liquidity and equity broker coverage. The board of directors of Pallinghurst (the "Pallinghurst Board") believes that the combination of these factors should be value accretive for all shareholders.

THE OFFER

Description of the Offer

Pallinghurst intends to make an offer which, if approved and implemented, will result in Pallinghurst acquiring the entire issued and to be issued share capital of Gemfields not already owned by the Pallinghurst group. Under the terms of the Offer, Gemfields shareholders will be entitled to receive for each Gemfields share: 1.91 new Pallinghurst ordinary shares in respect of which valid acceptances are received. The exchange ratio of the Offer has been determined using the 30 day volume weighted average price for both Pallinghurst and Gemfields as well as the spot ZAR/GBP exchange rate as on 17 May 2017.

Based on the closing exchange rate of ZAR17.14=£1.00 (source: Reuters) and the closing price of the Pallinghurst ordinary shares of ZAR3.45 on 17 May 2017, being the Latest Practicable Date before the Offer announcement, the Offer values each Gemfields share at 38.5 pence and values the entire issued and to be issued ordinary share capital of Gemfields at approximately £211.5 million.

The table below sets out what the enlarged share capital of Pallinghurst will be and the percentage of shares in the enlarged share capital of Pallinghurst that Gemfields shareholders will have, depending on the level of acceptances received (and, where appropriate, such number of Gemfields shares that Pallinghurst and any of its wholly owned subsidiaries has acquired or agreed to acquire whether pursuant to the Offer or otherwise):

Note:

* including such number of Gemfields shares that Pallinghurst and any of its wholly owned subsidiaries has acquired or agreed to acquire whether pursuant to the Offer or otherwise. Level of acceptance refers to the percentage of total Gemfields share capital to be owned by Pallinghurst post-completion.

(1) this would arise if acceptances of 90% or more of the Gemfields shares to which the Offer relates were obtained.

Pallinghurst's management has a strong track record of effecting cost reductions in its investments and intends to work with Gemfields management in reducing the overall cost profile of the enlarged group following the acquisition. Following the completion of the Offer, Pallinghurst intends to engage with Gemfields management to identify opportunities for cost reduction, including, but not limited to, streamlining the management, administration and removing any overlapping functions. Accordingly, it is Pallinghurst's intention to apply for the de-listing of Gemfields from the AIM market of the LSE (assuming that the Offer becomes unconditional) and, subject to reaching at least 90% of the Gemfields shares to which the Offer relates, compulsorily acquiring all of the remaining Gemfields shares.

The new Pallinghurst ordinary shares will be the subject of an application for admission to trading on the "Investment Equity" sector of the main board of the JSE Limited.

 Rationale for the Offer and prospects

Gemfields in its current form was created in 2008 when Pallinghurst and the Pallinghurst Co-Investors contributed the Kagem emerald mine to Gemfields, its core operating asset, for shares. This transaction made Pallinghurst and the Pallinghurst co-investors the majority shareholders of Gemfields. Subsequently, in 2013, Pallinghurst and the Pallinghurst co-investors contributed Fabergé Limited ("Fabergé") to Gemfields, increasing the Pallinghurst group's direct ownership in Gemfields to the current level of 47.09%.

As such, from the outset, Pallinghurst has been the largest shareholder of Gemfields, making its investment in Gemfields a core component of Pallinghurst's value proposition to its shareholders. Therefore, unlocking Gemfields' full value potential is of paramount importance to Pallinghurst and its shareholders.

Pallinghurst believes that, since its investment, the performance of the Gemfields share price has been disappointing and despite the major positive developments, Gemfields' shareholders, including Pallinghurst, have not benefited appropriately. The share price of Gemfields has not increased over the last decade, and over the last year has suffered a material decline.

The poor share price performance of Gemfields has in turn, adversely affected the share price performance of Pallinghurst. The key motivation for the Offer is to address this material issue.

Gemfields remains an attractive and unique business; however, within the current structure, Gemfields will continue to be constrained by:

· limited access to equity and debt capital markets;

· low liquidity in the trading of Gemfields Shares;

· a high cost base; and hence

· depressed profitability.

Pallinghurst believes that the proposed restructuring and integration of Gemfields will enable Gemfields to perform to its full potential, materially improve trading liquidity and promote a re-rating of the enlarged group.

To date, Pallinghurst has been unable to freely support the funding of Gemfields' growth strategy. According to the relationship agreement, Pallinghurst and the Pallinghurst co-investors cannot influence the operations of Gemfields that would customarily come with Pallinghurst and the Pallinghurst co-investors' level of ownership. Due to Gemfields' depressed profitability and restricted access to third party capital over the past few years, Pallinghurst has had to provide Gemfields with debt facilities.

Following the Offer, the enlarged group will have a larger market capitalisation, an enhanced free float, improved market coverage and an expected improvement in liquidity - all of these factors will support a re-rating, as well as providing improved access to equity capital markets. In addition, as Gemfields will fully become part of Pallinghurst's larger and more balanced asset base, it should achieve more attractive access to debt funding.

Having raised in excess of US$ 2 billion of equity capital for Pallinghurst and its underlying investments, Pallinghurst's management team has a proven track record of fund raising. Pallinghurst will use this experience, as well as utilising its existing network of global, long-term Pallinghurst co-investors, to access capital for the enlarged group's operations.

This improved access to additional long-term capital will enable Gemfields to fund its existing projects, as well as accelerate its portfolio of growth projects. In doing so, Pallinghurst expects to unlock the inherent value of Gemfields' major assets. As per the values contained in the independent competent persons reports for Kagem (dated September 2015) and Montepuez (dated July 2015), the value potential is significant. However, this value unlock cannot be achieved by Gemfields in the current structure. Hence the completion of the Offer is essential for the shareholders of both Pallinghurst and Gemfields and will position Gemfields to realistically achieve its publicly stated objective of becoming the "De Beers of the Coloured Gemstone Industry".

In order to achieve this, following a combination of Pallinghurst and Gemfields, Pallinghurst intends to:

· focus on Gemfields' core emerald and ruby operations in Zambia and Mozambique respectively and develop these to optimal scale;

· accelerate the development of its existing portfolio of projects to mitigate the dependency on its attractive, but cyclical assets;

· explore all strategic alternatives for Fabergé, where significant growth capital is still required to reach its full potential; and

· improve profitability by pursuing cost reductions across the enlarged group.

 Pallinghurst's management has a strong track record of effecting cost reductions in its investments and intends to work with Gemfields management in reducing the overall cost profile of the enlarged group following the acquisition. Pallinghurst shall seek to identify opportunities for cost reduction, streamlining the management, administration and removing any overlapping functions with those which are currently outsourced by Pallinghurst, but which will be brought in-house after the implementation of the restructuring.

Following the successful completion of the Offer, Gemfields will be controlled and managed by Pallinghurst and, assuming that Pallinghurst becomes in due course an operating mining company, will be consolidated as a subsidiary. As such, Pallinghurst's executive directors will have responsibility to manage all of Pallinghurst's investments, including Gemfields. Pallinghurst's current intention is to review the enlarged group's business model (with access to Gemfields' information and following discussions with Gemfields' management) and will make any necessary structural changes that are required at that point.

In conclusion, Pallinghurst believes that following the successful completion of the Offer, as well as the implementation of the restructuring, Pallinghurst will have the ability to both increase revenue as well as reduce costs and hence significantly improve the profitability of the enlarged group. This will, in turn, unlock Gemfields' potential value fully for the benefit of all shareholders.

Pallinghurst is offering its ordinary shares as consideration for the Offer, allowing existing Gemfields shareholders the ability to continue to benefit from being exposed to Gemfields and other quality assets through Pallinghurst. Pallinghurst's shareholders will increase their relative exposure to Gemfields, as Pallinghurst materially increases its component of its overall portfolio.

Pallinghurst is not offering a premium to Gemfields shareholders as:

· Pallinghurst and Pallinghurst Co-Investors already have an interest in approximately 73% of Gemfields;

· the combination of Pallinghurst and Gemfields, together with the broader restructuring proposed by Pallinghurst will facilitate a value unlock which will fairly benefit both sets of shareholders; and

· the terms of the Offer have been accepted by a majority of Gemfields shareholders, including the two largest minority Gemfields shareholders, which have provided Pallinghurst with irrevocable undertakings to accept the Offer on the proposed terms.

Accordingly, Pallinghurst believes that the Offer is attractive as it can unlock value for shareholders.

Information on Gemfields

Gemfields is a producer of coloured gemstones. Gemfields' principal assets include Zambian emerald and amethyst assets, ruby assets in Mozambique, sapphire interests in Sri Lanka and other gemstone interests in Madagascar and Ethiopia. Gemfields is a public limited company, listed on AIM.

Gemfields is a world leading supplier of responsibly sourced coloured gemstones. It delivers a steady supply of high quality, graded rough gemstones through internationally held auctions with an ability to be a price maker not a price taker. Gemfields operates a "mine and market" strategy, meaning it focuses on both ends of the value chain, representing what it believes to be the two most important segments.

The auctions are held in secure locations with the material separated into homogeneous lots and have either been produced by Gemfields (and are certified accordingly) or obtained by Gemfields from third parties. The world's leading rough gemstone buyers submit sealed bids for individual lots. A sale occurs if the highest bid received exceeds a pre-determined, but undisclosed, reserve price. The auctions have brought a level of professionalism and transparency previously not seen in the industry.

As there was no industry standard for evaluating rough coloured gemstones, Gemfields established its own grading system to assess each gem according to its individual characteristics (size, colour, shape and clarity). This approach has been instrumental in providing buyers with confidence in the consistent quality of the material on offer. Gemfields used this grading system to develop three auction classes, one offering higher quality gemstones, one for the larger volume of lower quality gemstones and the last offering mixed quality gemstones.

As at 17 May 2017, there were 549,816,476 ordinary shares of £0.01 each in the capital of Gemfields in issue.

Overview of Gemfields' Key Assets

Gemfields' key assets include ownership of:

· 75% of the Kagem emerald mine;

· 75% of the Montepuez ruby mine;

· 50% of the Kariba amethyst mine; and

· 100% of Fabergé Limited, one of the world's most well recognised luxury brand names.

Gemfields also owns and operates ubiquitous coloured gemstone sorting, grading and supply infrastructure, and has several exploration and expansion projects including in Zambia (emeralds and amethyst), Mozambique (rubies), Ethiopia (emeralds), Sri Lanka (sapphires) and Madagascar (rubies, emeralds and sapphires).

Conditions

The conditions to the Offer include (among others):

· Pallinghurst having received valid acceptances of the Offer in respect of Gemfields shares which, together with any Gemfields shares held by Pallinghurst, constitute not less than 75% of the voting rights in Gemfields; and

· the passing at the Pallinghurst general meeting by the requisite majority of Pallinghurst shareholders of such resolution as is necessary to approve, implement and effect the Offer in accordance with the Category 1 requirements under the JSE Listings Requirements.

The Offer is expected to close in the third quarter of calendar 2017.

Irrevocable Undertakings

Pallinghurst has received the following irrevocable undertakings from Gemfields shareholders:

· NGPMR (Cayman) L.P. in respect of its interests in 72,497,243 Gemfields Shares, representing approximately 13.19%;

· Investec Pallinghurst (Cayman) L.P. in respect of its interests in 68,273,047 Gemfields Shares, representing approximately 12.42%;

· Pallinghurst (Cayman) Founder L.P. in respect of its interests in 5,391,081 Gemfields Shares, representing approximately 0.98%;

· Dr Christo Wiese in respect of his interests in 2,494,583 Gemfields Shares, representing approximately 0.45%;

· Sean Gilbertson in respect of his interests in 300,000 Gemfields Shares, representing approximately 0.05%; and

· Oasis Asset Management and Oasis Crescent Capital in respect of its collective interests in 6,008,981 Gemfields Shares, representing approximately 1.09%.

The irrevocable undertakings commit the relevant shareholders to accept the Offer and to accept new Pallinghurst ordinary shares in exchange for all their Gemfields shares. The irrevocable undertakings cease to be binding if the Offer lapses or is withdrawn without becoming unconditional in all respects or a third party announces a firm intention to acquire the share capital of Gemfields and such proposal provides for consideration of more than 10% premium to the price per Gemfields share being offered by Pallinghurst.

In aggregate, Pallinghurst has received irrevocable undertakings to accept the Offer in respect of a total of 154,964,935 Gemfields shares, representing, in aggregate, approximately 28.18% of the existing issued share capital of Gemfields as at 17 May 2017. Together, the irrevocable undertakings and Pallinghurst's current holding in Gemfields constitute 75.3% of the total issued share capital of Gemfields.

Articles of association of Gemfields

Pallinghurst confirms that the provisions of the articles of association of Gemfields will not frustrate Pallinghurst's compliance with the JSE Listings Requirements and that nothing contained in Gemfields articles of association will relieve Pallinghurst from compliance with the JSE Listings Requirements.

Value of net assets and profits of Gemfields

The value of 100% of the net assets of Gemfields at 31 December 2016, being Gemfields' most recent reporting date (the "Reporting Date"), was US$294.8 million and given Pallinghurst will be acquiring a maximum of 52.9% of the issued share capital of Gemfields the pro forma net assets of the acquired assets will be US$155.9 million. The 100% net loss after taxation of Gemfields for the six months ending on the Reporting Date, was US$(13.6 million) and given Pallinghurst will be acquiring a maximum of 52.9% of the issued share capital of Gemfields the pro forma net loss after taxation will be US$(7.2 million).

PROPOSED CONVERSION OF PALLINGHURST

Pallinghurst is currently structured as an investment entity, listed on the main board of the JSE. Given the diverse nature of its investments it prepares its financial statements in terms of investment entity accounting which allows it to reflect the underlying investments at valuation but only reflect the actual cash flow, typically dividends through the income statement. There are no other similar mining investment entities currently listed on the JSE.

The current articles of incorporation of Pallinghurst ("Articles") provide that its initial life-span will end on 14 September 2017. Pallinghurst is proposing to extend its life as a closed-ended company by 50 years. Following the closing of the Offer and post the approval of the proposed extension and while no decision has been made, if appropriate, Pallinghurst will consider becoming an operating mining company. If that decision is made, Pallinghurst will apply for its listing to be moved to the "Diversified Mining" sector of the JSE main board. Until this is approved, Pallinghurst will continue to account in terms of investment entity accounting provisions.

To give this effect, Pallinghurst is proposing to amend its Articles to extend its life by 50 years (the "Proposed Extension"). In order to implement these changes, it is necessary to make amendments to the Articles by way of a special resolution of Pallinghurst shareholders.

There are various amendments to the definitions and to other sections contained within the Articles that stem from the Proposed Extension. These amendments are detailed more particularly in the marked copy of the Articles attached at Appendix A to the Notice of General Meeting.

The Pallinghurst Board reminds shareholders that notwithstanding the proposed continued closed-ended status of Pallinghurst, shareholders are still able to realise the value of their investments through the trading platforms of either the JSE or the Bermuda Stock Exchange where Pallinghurst's equity securities are admitted to trading.

The directors of Pallinghurst ("Directors") believe that the Proposed Extension is in the best interests of Pallinghurst and its shareholders as a whole, particularly when considered together with the proposed Offer. A disposal of Pallinghurst's minority stakes in its investments platforms on the expiry of the current life of the Pallinghurst would likely be expected at a material discount to the underlying value which would be to the detriment of all Pallinghurst shareholders. The Proposed Extension will eliminate investor uncertainty in the short-term and provide clear guidance to the market on the Pallinghurst's long-term future.

 In accordance with Part 5 of the Authorised Closed-Ended Investment Schemes Rules 2008, the Guernsey Financial Services Commission ("GFSC") has been notified of the Proposed Extension and the corresponding amendments to the Articles, the proposed internalisation of Pallinghurst's investment management function, the proposed Offer and Pallinghurst's updated scheme particulars.

Future stock exchange listings

Pallinghurst is listed on the JSE and BSX. Following the Offer, Pallinghurst will consider the optimal listing locations for the enlarged group. Whilst no decision has been taken, Pallinghurst will engage with its shareholders and could consider moving the BSX listing to a premium listing on the main board of the LSE.

There are no certainties around this consideration and there is no guarantee that if an application is ultimately made to the UK Listing Authority, it will be successful. The Pallinghurst Board is continuing to explore various options to maximise Shareholder return and it will continue to update Shareholders if and when matters progress.

REVISION OF CURRENT MANAGEMENT STRUCTURE

At the time of its initial public offering in 2007, the Pallinghurst management team committed to managing Pallinghurst for at least 10 years. As part of the Offer, and the proposed extension, the Pallinghurst management team will undertake to manage Pallinghurst for another 5 years, until July 2022.

Consistent with the conversion to a mining operating company, listed in the diversified mining sector, Pallinghurst proposes to internalise its management. To achieve this, Pallinghurst proposes to:

· terminate the existing Investment Management Agreement for no consideration. All fees and carried interest arrangements will cease;

· employ certain key Executive Directors, namely, Brian Gilbertson as Executive Chairman, Arne H. Frandsen as Chief Executive and Andrew Willis as Finance Director (the "Executive Directors") on new employment contracts (the "Service Agreements");

· employ certain Senior Executives namely Sean Gilbertson, as Chief Investment Officer, and Priyank Thapliyal, as Chief Operating Officer; and

· establish the Pallinghurst share plan to attract, retain and incentivize, amongst others, key Executive Directors and Senior Executives. In this regard, Brian Gilbertson, Arne H. Frandsen and Andrew Willis will be granted their options in their respective service agreements and subject to the terms of the Pallinghurst share plan.

Accordingly, the board of directors of Pallinghurst have approved the Service Agreements which will result in them making a further five year commitment to Pallinghurst and being committed to a restraint of trade during this period as well as for a 12 month period following a termination of their employment. The employment contracts provide for a base salary in line with market practice and bonus arrangements that is directly linked to share price performance.

Pallinghurst intends issuing share options to the Executive Directors and other senior executives.

The total number of ordinary shares which will form the subject matter of the Pallinghurst share plan will be 157.93 million of the ordinary shares. Each Executive Director will be granted an option to subscribe for such number of ordinary shares as is equivalent to 2% of the Pallinghurst ordinary shares immediately after implementation of the Offer.

The Executive Directors share options will vest and become exercisable in five equal tranches of 20% on the following dates:

· the date on which their employment commences; and

· every year thereafter for the next 4 years.

The subscription price for the Executive Director share options will be an amount equal to the value per Pallinghurst ordinary share issued pursuant to the Offer.

This arrangement aligns the interests of management with shareholders to achieve a value-accretive share price performance.

GENERAL AUTHORITY TO REPURCHASE ORDINARY SHARES

Given the significant number of ordinary shares being issued pursuant to the Offer and the potential flow back of some of these new Pallinghurst ordinary shares, the Pallinghurst Board has deemed it prudent to obtain a general authority to buy back shares on the terms and conditions set out below and in accordance with the JSE Listings Requirements and Guernsey law.

The effect of the requisite Special Resolution, if approved, will be to grant Pallinghurst the general authority to repurchase up to 152,090,526 Pallinghurst ordinary shares, representing 20% of the issued share capital of Pallinghurst.

The Directors consider that a general authority should be put in place to acquire up to 152,090,526 Pallinghurst ordinary shares to retain the flexibility to buy back any ordinary shares in the open market to mitigate any flow back of the new Pallinghurst ordinary shares.

IRREVOCABLE UNDERTAKINGS BY SHAREHOLDERS

The Pallinghurst shareholders set out below, collectively representing 50.3% of the Pallinghurst ordinary shares in issue, have given an irrevocable undertaking to Pallinghurst to procure that its shares are voted in favour of the necessary resolutions on which they are entitled to vote proposed at the general meeting:

· Oasis Crescent Capital (Proprietary) Limited in respect of 47,296,088 Pallinghurst Shares, representing approximately 6.22%;

· Oasis Asset Management Limited in respect of 68,470,365 Pallinghurst Shares, representing approximately 9.00%;

· Solway Finance Limited in respect of 67,386,056 Pallinghurst Shares, representing approximately 8.86%;

· Titan Nominees Proprietary Limited in respect of 151,238,953 Pallinghurst Shares, representing approximately 19.89%;

· Affinity Trust Limited ATO The Brian Gilbertson Discretionary Settlement in respect of 24,261,669 Pallinghurst Shares, representing approximately 3.19%;

· Arne H. Frandsen in respect of 4,237,369 Pallinghurst Shares, representing approximately 0.56%;

· Andrew Willis in respect of 2,446,054 Pallinghurst Shares, representing approximately 0.32%;

· Sean Gilbertson in respect of 4,175,536 Pallinghurst Shares, representing approximately 0.55%;

· Priyank Thapliyal in respect of 4,175,536 Pallinghurst Shares, representing approximately 0.55%;

· Hlamogolo Capital (Pty) Ltd in respect of 8,325,334 Pallinghurst Shares, representing approximately 1.09%; and

· Clive Harris in respect of 437,652 Pallinghurst Shares, representing approximately 0.06%.

CIRCULAR AND GENERAL MEETING

A circular, including revised listing particulars, providing further information and a notice of general meeting will be posted to Pallinghurst shareholders in due course and a general meeting of Pallinghurst shareholders will be held on in due course to approve the resolutions proposed.

Guernsey

19 May 2017

Financial advisor and transaction sponsor: UBS

Legal advisor in South Africa: ENSAfrica

Legal advisor in the United Kingdom: White & Case LLP

Legal advisor in Guernsey: Mourant Ozannes

Independent reporting accountants: Deloitte LLP

Communications advisor: CapitalVoice

Investment advisor (London): Pallinghurst