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PET - Petmin Limited - Press Release and Results Presentation

Release Date: 12/03/2012 08:31
Code(s): PET
Wrap Text

PET - Petmin Limited - Press Release and Results Presentation Petmin Limited (Incorporated in the Republic of South Africa) (Registration number 1972/001062/06) "Committed to growth, dedicated to value" JSE code: PET AIM code: PTMN ISIN: ZAE000076014 ("Petmin" or "the Group") Press Release and Results Presentation Petmin ready for growth following record investment in expanded operations and projects - R362 million invested to double anthracite production and execute on diversification strategy - Second Somkhele wash plant commissioned Feb 2012 on time and within budget - Operations remain strongly cash-generative - R200 million in six months to Dec 2011 - Increased stake in projects in Canada, Turkey and Liberia - Release of maiden resource statement for jointly-controlled NAIC project: investment to be accelerated in technically and economically robust Canadian iron sands to pig iron project Petmin has reported stable net profit at R47 million for the halfyear to end- December 2011, following a period of significant capital investment in its flagship Somkhele mine and expansion of operations abroad. Petmin generated revenues of R311 million, down 3% from R321 million in 2010. The group`s operations remain strongly cash generative, with net cash flow from operating activities of R200 million in the six months to December 2011 (2010: R191 million). Headline earnings per share remained unchanged at R8.15 (2010: R8.19). Capital expenditure increased to R339 million (2010: R138 million) of which R159 million (2010: R72 million) was spent on prestripping the open pits at Somkhele in anticipation of doubling production to feed a second wash plant. R90 million (R2010: R7 million) was invested in the second wash plant at Somkhele. The new plant was commissioned in February 2012 and will take Somkhele`s capacity to more than 1.2 million saleable tonnes of metallurgical anthracite per year. R15 million (R2010: R4 million) was invested in exploration in order to ensure a life of mine at Somkhele in excess of 20 years at full production. In the six months to December 2011, Petmin invested R23 million (2010: R11 million) in its jointly controlled projects abroad, the North Atlantic Iron Corporation in Canada (NAIC) and Iron Bird Resources Inc (Iron Bird) in Liberia, and an additional R23 million (2010: nil) to fund the exploration programme at Red Crescent Resources Limited`s (RCR) Sivas copper project in Turkey. A NAIC maiden resource statement, based on exploration of just 3% of NAIC`s 450km2 claim, was released on Monday 12 March. This initial resource will support a life of mine between 25 and 30 years for production of 500,000 tonnes of pig iron per year at the bottom end of the cost curve. The scale of the resource indicates that it should be able to support multiple pig iron plants. "We have completed a period of significant investment for growth," Petmin chief executive Jan du Preez said. "Our expansion at Somkhele and promising developments in our Canadian iron sands to pig iron project put Petmin in a strong position to increase future earnings and significantly enhance shareholder value." Petmin executive chairman Ian Cockerill said: "Petmin continues to generate cash from efficient mining operations in South Africa, and is on track to deliver on its strategy to become a globally diversified mining company specializing in specific commodities that feed into the steel value chain, and capitalize on the ongoing urbanization and investments into infrastructure." Operations update Somkhele - Profit margins from Somkhele production were maintained at 26% in the six months to December 2011, helped by a weakening rand. The average price of anthracite sold from Somkhele increased 24% to R952 per tonne, up from R767. US Dollar prices on export sales increased by 18%. - Petmin invested R90 million in the second wash plant at Somkhele, of a total plant cost of R145 million. A further R159 million was spent on prestripping to open up Area 1 anthracite resources to feed the new plant. During the period under review, 63% of production was from Area 1 compared to 27% in the six months to December 2010. - Petmin`s exploration costs at Somkhele were R15 million for the period as it identified seven new strikes in Area 5. A drilling programme is underway to prove what Petmin believes is a further significant resource of quality metallurgical anthracite. The exploration is expected to deliver an updated SAMREC-compliant resource statement by September 2012. - Production was down slightly at Somkhele at 203,000 tonnes (2010: 246,000) due to rain, short-term challenges in opening up new production areas, and logistical constraints in the supply of earth moving equipment. - Costs of production have risen at Somkhele as the mine moves to exploit deeper reserves. - In the six months ended December 2011, 63% of production was sourced from Area 1 (2010: 27%). Average cost of run of mine coal per saleable tonne was R308 in 2011 (2010: R221). Historically, mining was focused in Area 2 which had a strip ratio of less than 2:1. In other words, for every tonne of coal extracted, two cubic metres of overburden were mined by Petmin. In Area 1, where the bulk of the mining is now focused, the strip ratio is just less than 4:1. Petmin therefore mines an additional two cubic metres of overburden for every tonne of coal extracted. The additional cost for drill-and-blast and load-and-haul operations in a 4:1 strip ratio environment is estimated at R54 per run of mine tonne or R128 per saleable tonne produced at a 42% plant yield or R142 per tonne at a 38% yield. - The Petmin board has approved the construction of a third wash plant to reprocess discard and increase yield. The third plant is expected to improve overall plant yield from 42% to in excess of 50%. - Petmin has signed a renewable five-year agreement which will enable it to export up to 600,000 tonnes of metallurgical anthracite a year from Grindrod Terminals` Kusasa dry bulk facility in Richards Bay. - Demand from domestic customers exceeded Somkhele`s production capacity in the six months ended 31 December 2011 and the commissioning of the second plant will assist in the servicing of the demand from this market. - Sales are expected to increase in line with the production increase as demand from domestic customers remains firm and the export market is underpinned by firm export contracts for calendar 2012 year totalling 350 000 tonnes. SamQuarz - Petmin`s SamQuarz silica mine in Mpumalanga remained a consistent performer in the six months to end-December 2011, with a 5% increase in tonnes produced to 680,000 (2010: 647,000). The mine sold 629,000 tonnes in the period under review (2010: 623,000). - SamQuarz reported R16 million profit before tax, down 6% from R17 million due to margins being squeezed by the effect of longterm pricing mechanisms not matched by inflation. - The sale of SamQuarz to Ferroatlantica subsidiary Thaba Chueu (Thaba) for R259 million, announced on 13 September 2011, was prohibited by the South African Competition Commission and is subject to an appeal by Petmin and Thaba to the Competition Tribunal. A ruling is expected in June 2012. Petmin continues to operate SamQuarz as a productive, profitable mine - Capital expenditure at SamQuarz to June 2012 is expected to remain consistent with R21 million spent in the six months ended 31 December 2011. Project update North Atlantic Iron Corporation - iron sands to pig iron in Canada - In the six months ended 31 December 2011, Petmin invested an additional US$2 million to take its stake from 5% to 10.17% in the jointly managed NAIC. - NAIC has a 450km2 claim in Labrador with an extensive iron sands resource close to clean cheap power and an existing port. Petmin and its partners in NAIC propose to develop an iron sands to pig iron operation for export to US and other markets. - After having drilled more than 4,500 metres and analysed more than 1,400 samples, Petmin on 12 March 2012 released its maiden resource statement for NAIC. - The resource statement is based on exploration of 3% of the 450km2 NAIC claim and laboratory analysis of 1,500 metres of drilling samples. - The CIM (Canada`s equivalent of SAMREC) inferred resource indicates a life of mine between 25 and 30 years for Phase 1 production of 500,000 tonnes of pig iron per year at the bottom of the cost curve. The scale of the resource indicates that it should support multiple pig iron plants. - The resource is 594 million tonnes of sand at 9.35 wt % of which 38.02% is Fe2O3 equivalent. For details please refer to the announcement published on 12 March 2012. - The resource statement is to be followed by smelt tests and an updated NI 43101 statement. - Petmin regards NAIC`s iron sands to pig iron proposal as technically and economically robust and intends to accelerate its development as a key future asset. Iron Bird Resources Inc - iron ore in Liberia - Petmin has invested an additional US $1.5 million to increase its stake to 50% in Iron Bird, its Liberian iron ore joint venture with Hummingbird Resources PLC. - An aeromagnetic survey shows a continuous magnetic unit interpreted as an iron formation that is 20km long, up to 250m wide and 1 000m deep. Early samples of the ore range from 3354% magnetite iron. Geochemical and metallurgical testing is to be carried out on 151 trench samples. Red Crescent Resources Limited copper in Turkey - In the six months ended 31 December 2011, Petmin invested CA$3.1 million to increase its equity holding in RCR to approximately 10.1%. Petmin has an option to acquire up to 37.5% of RCR`s Sivas copper project for CA$17 million. - Drilling has commenced on the Sivas project and initial results noted 10 metres at 0.5% Cu (and 5 metres at 0.6% Cu). Management will assess the project once the initial 14 drillhole programme and test work is complete. Veremo - iron ore in South Africa - Veremo continues to await the outcome of its application for a mining license with the South African Department of Mineral Resources. - In the six months ended 31 December 2011, Kermas Limited, the ultimate controlling shareholder of Veremo, signed an agreement with an international plant construction company to complete a feasibility study on the project. Petmin`s significant investment during the six months to end December 2011 will help to create more job opportunities and further benefit the communities in which the company operates. The domestic investment at Somkhele combined with international expansion keeps Petmin on track to implement its strategy to provide superior returns to shareholders by becoming a globally diversified mining group specializing in specific commodities that feed into the steel value chain. Results Presentation Shareholders are advised that a Company`s Results presentation is available from Tuesday, 13 March 2012 on the Company`s website at www.petmin.co.za Enquiries: Petmin Bradley Doig (Director of Business development) +27 11 706 1644 Media Jonathon Rees +27 76 185 1827 Sponsor and Corporate Adviser (JSE) River Group Andrew Lianos +27 834 408 365 Nominated Adviser and Broker (AIM) Macquarie Capital (Europe) Limited Steve Baldwin +44 20 3037 2362 Nicholas Harland +44 20 3037 2369 Johannesburg 12 March 2012 Date: 12/03/2012 08:31:45 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. 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