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PET - Petmin - Condensed Consolidated Interim Financial Statements for the six

Release Date: 05/03/2007 11:59
Code(s): PET
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PET - Petmin - Condensed Consolidated Interim Financial Statements for the six months ended 31 December 2006 Petmin Limited (Formerly Petra Mining Limited) (Incorporated in the Republic of South Africa) (Registration number 1972/001062/06) Share code: PET & ISIN: ZAE000076014 ("Petmin" or "the Company" or "the Group") Highlights Headline EPS increases by 27% Somkhele development nearing completion and first sales expected 2nd quarter 2007 as planned Agreement concluded to dispose of Baobab investment for GBP 2.5 million (+/- R35 million) Successful secondary listing on AIM raises R49 million CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2006 Condensed Consolidated Interim Income Statements for the six months ended 31 December 2006 GROUP Reviewed Reviewed Audited Six months Six months Year ended ended ended 31 December 31 December 30 June
2006 2005 2006 Note R`000 R`000 R`000 Revenue 159 500 57 661 176 676 Cost of sales (135 737) (46 430) (145 663) Gross profit 23 763 11 231 31 013 Other income - Profit on acquisition of - subsidiary 26 052 33 822 33 822 Other expenses - including administration expenses (6 020) (4 195) (7 859) Operating profit before financing costs 43 795 40 858 56 976 Net finance (expense)/income (488) 57 (800) - Financial income 874 387 1 923 - Financial expenses (1 362) (330) (2 723) Profit before tax 43 307 40 915 56 176 Income tax expense (4 809) (1 916) (7 576) Profit for the period 38 498 38 999 48 600 Basic earnings per ordinary share (cents) 4 8.73 17.64 16.38 Diluted earnings per ordinary share (cents) 4 8.34 16.60 14.85 Condensed Consolidated Interim Cash Flow Statements for the six months ended 31 December 2006 GROUP Reviewed Reviewed Audited Six months Six months Year ended ended ended 31 December 31 December 30 June 2006 2005 2006
R`000 R`000 R`000 Net cash flow from operating activities (20 459) 14 014 58 218 Cash flows from investing activities Acquisition of subsidiary net of cash acquired - (4 850) (4 850) Increase in investment in rehabilitation funds (351) - (1 430) Acquisition of property, plant and equipment (67 881) (8 318) (70 308) Proceeds from sale of property, plant and equipment 273 - 240 Net cash flow from investing activities (67 959) (13 168) (76 348) Cash flows from financing activities Proceeds from specific and general share issues for cash during period 34 091 - 95 842 Investment in preference shares in subsidiary - - (13 000) Repayment of borrowings (4 771) (1 355) (5 414) Increase in borrowings 36 529 41 333 1 753 Net cash flows from financing activities 65 849 39 978 79 181 Net (decrease)/increase in cash and Cash equivalents (22 569) 40 824 61 051 Cash and cash equivalents at beginning of period 70 134 9 083 9 083 Cash and cash equivalents at end of period 47 565 49 907 70 134 Condensed Consolidated Interim Balance Sheets at 31 December 2006 GROUP Reviewed Reviewed Audited Six months Six months Year ended ended ended 31 December 31 December 30 June
2006 2005 2006 Notes R`000 R`000 R`000 ASSETS Non-current assets 423 018 310 072 365 772 Property, plant and equipment 406 718 295 065 349 775 Intangible asset 6 556 6 913 6 735 Investments 2 2 2 Financial assets 9 742 8 092 9 260 Current assets 167 418 115 270 155 929 Assets classified as held for sale 3 1 485 - - Inventories 49 482 28 760 41 228 Trade and other receivables 68 886 36 603 44 181 Taxation pre-paid - - 386 Cash and cash equivalents 47 565 49 907 70 134 Total assets 590 436 425 342 521 701 EQUITY AND LIABILITIES Ordinary share capital and reserves 408 985 265 073 360 466 Share capital 119 972 87 139 109 972 Share premium 158 912 74 812 134 821 Share option reserve 7 123 2 191 5 141 Contingent consideration 3 1 500 27 552 27 552 Retained earnings 121 478 73 379 82 980 Non-current liabilities 111 966 112 332 82 780 Shareholder`s loan - 40 000 - Interest bearing loans and borrowings 41 272 17 740 14 052 Deferred taxation 56 321 41 293 54 495 Environmental rehabilitation provision 14 373 13 299 14 233 Current liabilities 69 485 47 937 78 455 Trade and other payables 52 513 31 900 67 522 Interest bearing loans and borrowings 15 387 10 800 10 849 Taxation payable 1 585 5 237 84 Total equity and liabilities 590 436 425 342 521 701 Net asset value ("NAV") per share (cents) 5 85.22 76.05 81.94 Fully diluted NAV per share (cents) 5 79.94 64.58 70.16 Condensed Consolidated Interim Statements of Changes in Equity for the six months ended 31 December 2006 GROUP Share Share capital premium
R`000 R`000 Balance at 1 July 2005 48 750 19 767 Shares issued during period - To acquire Springlake 32472 45 462 - To acquire Samquarz preference shares 4 875 8 125 - Specific issue for cash - Springlake acquisition costs 1 042 1 458 - Specific issue for cash - Somkhele project 20 833 54 186 - General issue for cash 2 000 7 600 - Contingent consideration to acquire Springlake - - - Fair value of options vested - - Costs capitalised to share premium - (1 777) Profit for period - - Balance at 30 June 2006 109 972 134 821 Shares issued during period - General issue for cash 10 000 39 097 - Fair value of options vested - - Contingent consideration to acquire Springlake - change in estimate - - Costs incurred on AIM listing capitalised to share premium - (15 006) Profit for period - - Balance at 31 December 2006 119 972 158 912 Share option Contingent
reserve consideration R`000 R`000 Balance at 1 July 2005 1 476 - Shares issued during period - To acquire Springlake - - - To acquire Samquarz preference shares - - - Specific issue for cash - Springlake acquisition costs - - - Specific issue for cash - Somkhele project - - - General issue for cash - - - Contingent consideration to acquire Springlake - 27 552 - Fair value of options vested 3 665 - Costs capitalised to share premium - - Profit for period - - Balance at 30 June 2006 5 141 27 552 Shares issued during period - General issue for cash - - - Fair value of options vested 1 982 - Contingent consideration to acquire Springlake - change in estimate - (26 052) Costs incurred on AIM listing capitalised to share premium - - Profit for period - - Balance at 31 December 2006 7 123 1 500 Retained earnings Total
R`000 R`000 Balance at 1 July 2005 34 380 104 373 Shares issued during period - To acquire Springlake - 77 934 - To acquire Samquarz preference shares - 13 000 - Specific issue for cash - Springlake acquisition costs - 2 500 - Specific issue for cash - Somkhele project - 75 019 - General issue for cash - 9 600 - Contingent consideration to acquire Springlake - 27 552 - Fair value of options vested - 3 665 Costs capitalised to share premium - (1 777) Profit for period 48 600 48 600 Balance at 30 June 2006 82 980 360 466 Shares issued during period - General issue for cash - 49 097 - Fair value of options vested - 1 982 Contingent consideration to acquire Springlake - change in estimate - (26 052) Costs incurred on AIM listing capitalised to share premium - (15 006) Profit for period 38 498 38 498 Balance at 31 December 2006 121 478 408 985 Segment Reporting Segment information is presented in the condensed consolidated interim financial statements in respect of the Group`s business segments, which are the primary basis of segment reporting. The business reporting format reflects the Group`s management and internal reporting structure. Inter-segment pricing is determined on an arm`s length basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Business Segments The Group comprises the following main business segments: - Silica mining and marketing. - Anthracite mining and marketing. Segments Silica
Reviewed Reviewed Audited Six months Six months Year ended ended ended 31 December 31 December 30 June
2006 2005 2006 R`000 R`000 R`000 Segment revenue 61 291 41 711 90 603 Segment profit/(loss) - Segment result 14 879 4 877 19 233 - Amortisation of fair values on acquisition (347) (286) (694) - Assets held for sale - Baobab project - - - - Profit on acquisition of subsidiary - - - Segment profit/(loss) 14 532 4 591 18 539 Segment assets 157 977 134 640 153 102 Segment liabilities 115 315 117 074 121 589 Anthracite Reviewed Reviewed Audited
Six months Six months Year ended ended ended 31 December 31 December 30 June 2006 2005 2006
R`000 R`000 R`000 Segment revenue 98 209 15 950 86 073 Segment profit/(loss) - Segment result 2 226 1 644 1 780 - Amortisation of fair values on acquisition (1 730) (289) (2 018) - Assets held for sale - Baobab project - - - - Profit on acquisition of subsidiary - - - Segment profit/(loss) 496 1 355 (238) Segment assets 429 062 249 870 328 232 Segment liabilities 296 811 145 957 225 911 Other (Corporate office) Reviewed Reviewed Audited Six months Six months Year
ended ended ended 31 December 31 December 30 June 2006 2005 2006 R`000 R`000 R`000
Segment revenue - - - Segment profit/(loss) - Segment result (2 582) (769) (3 523) - Amortisation of fair values on acquisition - - - - Assets held for sale - Baobab project - - - - Profit on acquisition of subsidiary 26 052 33 822 33 822 Segment profit/(loss) 23 470 33 053 30 299 Segment assets 311 855 255 418 303 714 Segment liabilities 9 174 43 089 8 345 Eliminations Reviewed Reviewed Audited Six months Six months Year ended ended ended
31 December 31 December 30 June 2006 2005 2006 R`000 R`000 R`000 Segment revenue - - - Segment profit/(loss) - Segment result - - - - Amortisation of fair values on acquisition - - - - Assets held for sale - Baobab project - - - - Profit on acquisition of subsidiary - - - Segment profit - - - Segment assets (308 458) (214 589) (263 347) Segment liabilities (239 849) (145 853) (194 610) Consolidated entity
Reviewed Reviewed Audited Six months Six months Year ended ended ended 31 December 31 December 30 June
2006 2005 2006 R`000 R`000 R`000 Segment revenue 159 500 57 661 176 676 Segment profit/(loss) - Segment result 14 523 5 752 17 490 - Amortisation of fair values on acquisition (2 077) (575) (2 712) - Assets held for sale - Baobab project - - - - Profit on acquisition of subsidiary 26 052 33 822 33 822 Segment profit 38 498 38 999 48 600 Segment assets 590 436 425 339 521 701 Segment liabilities 181 451 160 267 161 235 SIGNIFICANT ACCOUNTING POLICIES for the six months ended 31 December 2006 Petmin is domiciled in South Africa. The condensed consolidated interim financial statements of the Company for the six months ended 31 December 2006 comprise the Company and its subsidiaries (together referred to as the "Group"). The condensed consolidated financial statements were authorised for issue by the directors on 1 March 2007. 1. Statement of compliance The condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") for interim financial statements and the South African Companies Act. The condensed consolidated interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated annual financial statements for the year ended 30 June 2006. 1.1 Basis of preparation The financial statements are prepared on the historical cost basis, except for financial instruments which are stated at fair value, where applicable, in terms of IAS 32 - Financial Instruments: Disclosure and Presentation and IAS 39 - Financial Instruments: Recognition and Measurement. The preparation of interim financial statements in conformity with IAS 34 - Interim Financial Reporting, requires management to make judgements, estimates of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The accounting policies have been applied consistently by Group entities and have been applied consistently to all periods presented in these condensed consolidated interim financial statements. 2. Review of results The interim results of the Group as set out above have been reviewed by the Group`s auditors, KPMG Inc., as required by the JSE Limited ("JSE"). The review report is available for inspection at the Group`s registered office. 3. MANAGEMENT COMMENTARY Operations Revenue for the six months ended 31 December 2006 increased by R102 million compared to the same period in 2005 as the revenues reflect a full six months of Springlake`s operations whereas the comparatives only included one month after its acquisition on 30 November 2005. Gross profit increased by R12.5 million or 112% from the same period in 2005. The improved performance was largely due to an exceptional profit reported by SamQuarz (Pty) Limited ("SamQuarz") as production and sales volumes improved and certain chert stocks, which were previously ascribed a zero value, were sold. Cash of R30 million was generated by operations before outflows from changes in working capital of R48 million. Investment in trade receivables increased by R25 million largely due to export shipments made by Springlake Colliery in the latter part of the reporting period. Trade payables reduced by R15 million as the trade payables balance at 30 June 2006 included R17 million capital work in progress related to the Somkhele project which was paid in the period under review. Capital expenditure of R68 million was incurred in the period under review, R53 million of which related to the development of the Somkhele project. SamQuarz silica mine Production at SamQuarz has increased approximately 46% in the six months ended 31 December 2006 when compared to 31 December 2005. The increased production is in line with improved demand from customers for SamQuarz product. Profitability was further enhanced by disciplined cost control by mine management. The results for the six months to 31 December 2006 include the recognition of additional profits after tax on the sale of certain chert stocks that were previously ascribed a zero value, to an amount of R2.9 million. Springlake Colliery Springlake`s performance was disappointing in the six months to 31 December 2006. Although the monthly average run-of-mine ("ROM") production has increased by 40% when compared to the average monthly production for the seven months to 30 June 2006, this has come mainly from an improved performance from the opencast sections. Management`s focus for the next six months will be on reducing the unit cost of production by increasing production volumes and improving efficiencies in the underground sections. Somkhele anthracite project The Somkhele anthracite project is nearing completion with first sales predicted in the second quarter of calendar 2007 as budgeted. The Group has drawn down R36 million on the R40 million banking facilities negotiated with The Standard Bank of South Africa Limited ("Standard Bank"). Mining rights In October 2006, Springlake Colliery was granted a new order mining right on portions of the farm Besterdale. The granting of this mining right paves the way for Springlake to increase the capacity of its opencast operations from approximately 40 000 run-of-mine tonnes ("ROM(t)") per month to approximately 70 000 ROM(t) per month. Increase in authorised share capital In the period under review, the Company increased its authorised share capital from 500 000 000 ordinary shares of 25 cents each to 1 000 000 000 ordinary shares of 25 cents each. General issue of shares for cash - Listing on AIM Petmin concluded its successful secondary listing on the London Stock Exchange`s Alternative Investment Market ("AIM") on 20 December, 2006. Petmin issued 40 million new shares at 9 British pence per share in a general issue of shares for cash on the listing, raising approximately R49 million gross proceeds. Capital raising expenses of R15 million were posted to share premium. The listing presents Petmin with a platform for future growth by: -improving the acceptability of the Company`s shares as a global currency for the purpose of acquiring or developing new assets; -gaining access to the international pool of capital in the London market with a view to widening the Company`s institutional and retail investors shareholder base; -increasing the Company`s international profile and research coverage; -improving share liquidity in the longer term. Disposal of investment in Baobab Mining and Exploration (Pty) Limited ("Baobab") The Company has reached an agreement with GVM Metals Limited to dispose of its investment in Baobab for an amount of GBP 2.5 million (+/- R35 million). The sale is subject to ministerial approval, by no later than 30 April 2007, in terms of the Mineral and Petroleum Resource Development Act, 2002. In accordance with IFRS, assets of R1.5 million have been disclosed as assets held for sale and are carried at cost which is lower than their net realisable value. Revenue on the sale will be recorded when the last remaining suspensive condition is satisfied. An amount of R1.5 million will only become payable to a third-party mineral consultant should the remaining suspensive clause be satisfied and the sale of Baobab be concluded. Contingent consideration reserve - Springlake profit warranty As noted in the 30 June 2006 Annual Report, the Directors have given further consideration to the financial performance of the Springlake Colliery. It is the opinion of the Directors that the warranted profit will not be met. Petmin has reached agreement that the profit warranty will not be met with Springlake Vendors representing 91% of the shares to be issued under the profit warranty. The contingent consideration has been re-estimated to R1.5 million, resulting in an amount of R26.052 million being recognised as "profit on acquisition of subsidiary" in the income statement during the period under review. 4. EARNINGS PER ORDINARY SHARE Earnings per share ("EPS") is based on the Group`s profit for the period, divided by the weighted average number of shares in issue during the period. Six months ended 31 December 2006
Net Number Per income of shares share (R`000) (`000) (cents) Basic EPS 38 498 441 205 8.73 Share options and contingent consideration - 20 275 (0.39) Diluted EPS 38 498 461 480 8.34 Headline earnings per share Headline EPS is based on the Group`s headline earnings divided by the weighted average number of shares in issue during the period. Reconciliation between earnings and headline earnings: Basic EPS 38 498 441 205 8.73 Adjustments: - AIM listing expenses 663 - 0.15 - Profit on acquisition of subsidiary (26 052) - (5.90) Headline EPS 13 109 441 205 2.97 Share options and contingent consideration - 20 275 (0.13) Diluted headline EPS 13 109 461 480 2.84 Six months ended 31 December
2005 Net Number Per income of shares share (R`000) (`000) (cents)
Basic EPS 38 999 221 084 17.64 Share options and contingent consideration - 13 915 (1.04) Diluted EPS 38 999 234 999 16.60 Headline earnings per share Headline EPS is based on the Group`s headline earnings divided by the weighted average number of shares in issue during the period. Reconciliation between earnings and headline earnings: Basic EPS 38 999 221 084 17.64 Adjustments: - AIM listing expenses - - - - Profit on acquisition of subsidiary (33 822) - (15.30) Headline EPS 5 177 221 084 2.34 Share options and contingent consideration - 13 915 (0.14) Diluted headline EPS 5 177 234 999 2.20 Headline EPS increased by 0.63 cent or 27% compared to 2005. Diluted headline EPS increased by 0.64 cent or 29% compared to 2005. 5.NET ASSET VALUE ("NAV") PER SHARE Reviewed Reviewed Audited Six months Six months Year
ended ended ended 31 December 31 December 30 June 2006 2005 2006 Ordinary share capital and reserves (R`000) 408 985 265 073 360 466 Total number of shares in issue (`000) 479 889 348 557 439 889 NAV per share (cents) 85.22 76.05 81.94 Reconciliation between NAV and fully diluted NAV: Ordinary share capital and reserves (R`000) 408 985 265 073 360 466 Total number of shares in issue (`000) 479 890 348 557 439 889 Share options and contingent consideration (`000) 31 706 61 920 73 920 Fully diluted number of shares (`000) 511 596 410 477 513 809 Fully diluted NAV per share (cents) 79.94 64.58 70.16 NAV per share increased 3.28 cents per share or 4% when compared to 30 June 2006. Fully diluted NAV per share increased 9.78 cents per share or 14% when compared to 30 June 2006. 6. Related Parties NAMF Nominees (Proprietary) Limited, Dark Capital (Pty) Limited and PSG Limited are material shareholders in Petmin and are therefore related parties as defined by Section 10 of the JSE Listings Requirements. Dark Capital (Pty) Limited is the anchor entity of the broad-based Black Economic Empowerment consortium. River Corporate Finance (Proprietary) Limited, is a related party by virtue of its advisory role to Petmin. 6.1 Profit on acquisition of subsidiary - Springlake The re-estimation of the contingent consideration related to the Springlake acquisition constitutes a related party transaction, as NAMF Nominees is a material shareholder in Petmin. Refer to amounts disclosed in note 3. 6.2 Petmin Executive Committee remuneration scheme and share option trust As disclosed in the annual financial statements for the year ended 30 June 2006, the Petmin Executive Committee remuneration scheme and share option trust affects the executive directors of the Company and constitutes a related party transaction. Amounts due to the executive directors are included in the table of compensation to directors and key management below. Reviewed Reviewed Audited Six months Six months Year ended ended ended 31 December 31 December 30 June
2006 2005 2006 R`000 R`000 R`000 Key management emoluments - Short-term emoluments * 9 855 ** 3 305 *** 10 448 - Retirement fund contributions 79 69 139 - Share-based payments 1 302 492 2 321 11 236 3 866 12 908 Amounts payable to directors and key management included in trade and other payables 6 817 1 554 5 698 *Includes Springlake key management for six months. **Includes Springlake key management for one month. ***Includes Springlake key management for seven months. 7. increase in borrowings During the period under review a loan of R36 million was advanced to fund capital expenditure at the Somkhele anthracite project by Standard Bank. In terms of the asset based finance facility, interest is payable at the prime lending rate less 1% and the loan is repayable over 72 months. 8. Subsequent events There have been no events that have occurred subsequent to the balance sheet date which require adjustment of, or disclosure in the financial statements or notes thereto in accordance with IAS 10 - Events After the Balance Sheet Date. 9. Dividends Due to the development of the Somkhele anthracite project and the associated cash requirements and Petmin`s focus on acquisitive growth, the Board has resolved that no interim dividend will be declared. 10. Prospects SamQuarz The production from the newly developed areas of the SamQuarz open pit, whilst generating the same overall product yield, has resulted in a different sizing distribution of products. This may necessitate additional capital expenditure at SamQuarz in order to meet the increased demand from key customers. Management does not foresee any material effect on the profitability of SamQuarz. Springlake Colliery With increased opencast production planned in the second quarter of 2007 and with the measures introduced to the underground operations, management expects a significantly improved performance in the six months to 30 June 2007. The coal market remains buoyant and Springlake is expected to enjoy these prices for the remainder of the calendar year. Somkhele anthracite project With first sales from this project expected in the second quarter of 2007, management expects a positive, although small, contribution from Somkhele in the six months to 30 June 2007. New business Acquisitive growth remains a focus of Petmin and management is continuously reviewing potential new business opportunities. By order of the Board P J Nel J C du Preez Chairman Chief Executive Officer Pretoria 1 March 2007 Directors P J Nel* (Chairman), L Mogotsi (Deputy Chairperson), J C du Preez (Chief Executive Officer), B B Doig (Chief Operating Officer), E de V Greyling*, J P Mabena*, A Martin*, J A Strijdom*, D H Warmenhoven, J Taylor* *Non-executive Registered Office Parc Nouveaux, First Floor, Block C, 225 Veale Street, Brooklyn, Pretoria, 0002 (PO Box 899, Groenkloof, 0027) Tel: (011) 706 1644 Fax: (011) 706 1594 Secretary and Sponsor River Sponsors (Pty) Limited Nominated Adviser and Broker Numis Securities Limited Transfer Secretaries Computershare Investor Services 2004 (Proprietary) Limited Auditors KPMG Inc. www.petmin.co.za Date: 05/03/2007 11:59:55 Supplied by www.sharenet.co.za Produced by the JSE SENS Department.

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