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North Atlantic Iron Corporation Project Update
PETMIN LIMITED
Incorporated in the Republic of South Africa
Registration Number 1972/001062/06
Share Code JSE: PET
ISIN: ZAE000076014
("Petmin" or "the Company")
NORTH ATLANTIC IRON CORPORATION PROJECT UPDATE
The North Atlantic Iron Corporation (NAIC) is a private Canadian company
established to develop a low cost merchant pig iron (MPI) business in Canada and/or
the United States. NAIC’s strategy is to develop into a value-added manufacturing
company producing MPI.
Petmin currently owns 30% of NAIC and has the right to invest a further $8m into
NAIC for a further 10%, and an option to acquire a further 9.9% at a market related
price. Petmin’s direct cost of its investment in NAIC to date is ZAR 144 million.
Petmin has joint management control of NAIC with its Canadian partner, Grand River
Iron Sands Inc.
NAIC‘s Preliminary Economic Assessment (PEA) will be published by the end of
March 2014, and will indicate that Petmin’s investment in NAIC has the potential to
materially enhance shareholder value.
NAIC has performed three successful smelt campaigns at its production facility in
Forks, Pennsylvania, under the auspices of its independent experts, HATCH, and has
successfully produced MPI using concentrate produced from Goose Bay iron sands
and a number of different grades of coal.
Through the numerous PEA work streams NAIC has been able to refine its strategy
and has developed a scalable business model which affords much greater flexibility in
capital investment and operating costs.
NAIC’s first plant will produce 810,000mt of MPI per year using concentrate from
Goose Bay, or 874,000mt per year using higher grade concentrate from other
sources.
NAIC will be one of the lowest cost producers of MPI in the world on a delivered
basis to the electric arc furnace (EAF) steel industries of the United States and
Europe.
The PEA indicates that NAIC’s MPI production costs will be 25% below the current
lowest cost producer, yielding a project real internal rate of return (IRR) for its first
plant, which meets Petmin’s internal hurdle rate of 20%.
NAIC will be able to achieve this due to a production process that utilises access to
low-cost raw materials and electricity in the United States or Canada, proximity to
markets in the United States and Europe, and the extensive infrastructure in place at
potential sites under consideration for its plant.
NAIC is currently completing a comprehensive site selection process for the location
of its first MPI plant, the favoured location being the Great Lakes region of North
America.
In addition, NAIC has identified a potentially significant garnet and zircon credit in the
Goose Bay iron sands which will be brought into the resource statement during the
year ahead. This has the potential to significantly increase the value of the iron sands
deposit.
Proposed further investment by Petmin in NAIC
On the basis of the work performed to date, Petmin intends to invest a further $8m to
increase its interest in NAIC to 40%.
This funding will be from Petmin’s own resources and no further capital will be
required from Petmin thereafter. NAIC will be expected to raise the capital required
for further development.
To this end, Petmin is contemplating exchanging its 40% in NAIC for 40% of the
shares in a Canadian company which will own 100% of NAIC and will be listed on the
TSX and JSE.
Should this occur, Petmin intends to unbundle these shares to its shareholders.
Further detail will follow in this regard in due course.
Once NAIC has been unbundled, it is the intention that members of the Petmin
management will remain actively involved in the development of NAIC and secure
long term value for Petmin’s shareholders.
Petmin will continue with its strategy of investing in quality cash producing assets that
produce commodities that feed into the steel and value chain, as well as considering
various opportunities in the thermal coal market in South-Africa.
Enquiries:
Petmin
Bradley Doig
+27 11 706 1644
Media
Jonathon Rees (Communications and investor relations)
+27 76 185 1827
Sponsor and Corporate Adviser
River Group
Johannesburg
3 March 2014
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