Wrap Text
Press Release
PETMIN LIMITED
Incorporated in the Republic of South Africa
Registration Number 1972/001062/06
Share Code JSE: PET & ISIN: ZAE000076014
Share Code AIM: PTMN
("Petmin" or "the Company")
PRESS RELEASE
Results for the financial year ended 30 June 2012
Petmin reports healthy operational performance and prepares for growth following significant investment and expansion.
R523 million invested to double capacity and deliver on strategy despite difficult market conditions.
Financial highlights:
- Net cash flow from operations up 23% to R443.8 million (2011: R360.8 million)
- R523 million capital expenditure and investment (2011: R230 million)
- Annual profit up 12% to R112.7 million (2011: R101.0 million)
- Headline earnings per share up 9% to 19.06 cents (2011: 17.50 cents)
- Like-for-like earnings per share from continuing operations were up 23% to 16.82 cents
(2011: 13.72 cents)
- Dividend up 25% to 5.0 cents per share (2011: 4.0 cents per share)
- Sale of SamQuarz concluded for R281 million cash
Operational highlights:
- Somkhele annual production capacity up from 530,000 tonnes to 1.2 million saleable tonnes
- Investment approved for third processing plant at Somkhele
- Extended life of Somkhele mine now more than 20 years
- New Order Mining Right extended to cover new mining areas at Somkhele
- Accelerated investment in North Atlantic Iron Corporation (NAIC) pig iron project
JOHANNESBURG, South Africa, 19 September 2012: JSE- and AIM-listed Petmin today reported a
healthy financial performance following a year of expansion and significant investment for future
growth, underpinned by an excellent safety performance.
Headline earnings per share were up 9% at 19.06 cents (2011: 17.50). Annual profit was up 12% to
R112.7 million (2011: R101.0 million).
Petmin declared a 25% increase in dividend to 5 cents per share (2011: 4 cents) in line with the
Company's approved dividend policy.
Petmin chief executive Jan du Preez said: "Benchmarked against our peers in the resources sector,
Petmin had a satisfactory year of significant investment for future growth. We are reporting healthy
financial results after our operations performed well and generated cash in a difficult economic
climate."
"We are pleased to declare an increased dividend while keeping funds in reserve for the
development of new mining areas at Somkhele and the development of our Canadian iron sands to
pig iron project."
Petmin also reported a significant investment of R523 million (2011: R230 million) during the year
under review. Capital expenditure at Somkhele was R388 million (2011: R115 million), of which R177
million (2011: R28 million) was spent on pre-stripping the open pits to feed the second wash plant.
The second plant was commissioned for a total capital cost of R162 million, of which R119 million
was spent in the year to 30 June 2012.
Petmin's investment in development projects was R98 million during the year to 30 June 2012, with
a further R36 million (2011: R63 million) at SamQuarz.
Petmin is proud of its continued safety record, with no fatalities or significant injuries reported at
operations in the year to 30 June 2012.
The Company's flagship Somkhele anthracite mine is reaping the benefits of investment in a second
wash plant, with production more than doubling in May and June 2012 compared to the same
period in 2011. Somkhele's total annual production capacity is now in excess of 1.2 million saleable
tonnes of metallurgical anthracite.
"This is a strongly cash-generative operation which has more than doubled its production capacity
and significantly increased its reserves. Somkhele now has the flexibility to increase production in
response to market demand," du Preez said.
Petmin's 'Business of Tomorrow' exploration activity showed satisfactory results in the year to end-
June 2012. Management is encouraged by progress at NAIC and is accelerating its investment in this
project as it advances towards a Pre-Feasibility Statement.
Following satisfactory exploration results, the Company is considering its options for the future of its
interest in the Mt Ginka iron project in Liberia.
Based on results received from initial exploration activity, Petmin has written down its investment in
the Red Crescent Resources-controlled Sivas copper project in Turkey as the results did not meet
Petmin's criteria for further investment.
Petmin's director of business development, Bradley Doig, said: "Early-stage exploration is an
inherently risky business, but out of three projects NAIC has a very positive maiden resource
statement and is moving rapidly towards pre-feasibility, and Mt Ginka has good prospects that's a
very good success rate for exploration and validates Petmin's rigorous investment criteria and
project selection."
Petmin's earnings per share from continuing operations in 2012 were negatively affected by the
impairment of the investments in Red Crescent Resources Limited (now recorded at R5 million) and
the Sivas project (now fully impaired). Without the R39 million once-off impairment in FY2011/12,
on a like-for-like basis earnings per share from continuing operations are up 31% to 16.48 cents
(2011: 12.60 cents).
Petmin has signed approved term sheets with Standard Bank, its bankers since inception, securing,
in addition to the existing R100 million overdraft facilities, new medium-term debt facilities of
R225 million and a R100 million revolving credit facility.
An R82 million surety signed by Petmin on behalf of its primary black empowerment partner, Dark
Capital (Pty) Ltd, has been withdrawn following Dark Capital's payment in full of its R65 million debt
to the Standard Bank of South Africa.
Somkhele anthracite mine year to 30 June 2012
- Somkhele reported a profit after tax up 17% to R97.7 million (2011: R83.4 million)
- Somkhele has maintained its impressive safety record, with no material health and safety
issues reported during FY2011/12. The current Loss Time Injury Frequency Rate (LTIFR) for
the operation is a commendable 0.22.
- Monthly production more than doubled in May and June 2012 at Somkhele following the
successful commissioning of a second wash plant, with annual production capacity now in
excess of 1.2 million saleable tonnes.
- Somkhele produced 637,220 tonnes of saleable anthracite in the year to 30 June 2012
(2011: 524,006 tonnes) and sold 546,051 tonnes (2011: 579,087 tonnes) in the year to 30 June
2012.
- Net profit margins were stable at 26% (2011: 25%)
- In February 2012, Petmin announced it had 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.
- The exploration and resource definition activities during the year indicate that Somkhele has
an open-cast life of mine in excess of 20 years with both plants running at full capacity and
producing approximately 1.2 million tonnes of anthracite per annum.
- Permanent and temporary employment at Somkhele increased to more than 950 people
during the year to end-June 2012, with 80% local employment.
Somkhele the year ahead
- In July 2012 Somkhele was granted a twenty-year New Order Mining Right for an expansion
to new mining areas.
- The pit design and mining plan at Somkhele has been optimised to reduce future capital
expenditure.
- Construction of a third processing plant at an approved cost of R62 million has been
approved. The new plant is expected to be commissioned in Q1 2013. It will give the
Somkhele operation greater flexibility to produce additional saleable anthracite or
480,000 tonnes of product annually for the energy market.
- An updated SAMREC-compliant resource statement is due early in 2013.
- Although world markets remain uncertain, production and sales levels are expected to
significantly increase from those achieved in FY2012, with an expected reduction in spot
US$ export prices expected to be offset by a weaker Rand Dollar exchange rate.
- Export sale negotiations have all indicated extremely difficult trading conditions with export
duff prices between US$90 and US$100 FOB for the next six months, possibly moving to
US$110 FOB in the second half of FY2012/13.
- Somkhele anticipates selling approximately 900,000 tonnes of anthracite during the next
12 months, some 300,000 tonnes less than capacity as a result of a depressed market.
The Company anticipates selling some 420,000 tonnes into the export market (and has
committed orders for 360,000 tonnes) and 480,000 tonnes into the local market (and has
committed orders for 370,000 tonnes).
- Capital expenditure at Somkhele in FY 2013 is expected to be approximately R95 million
including the construction of the third plant and exploration programmes. Actual
development cost of the pits (or capital pre-stripping) is expected to be approximately R110
million.
- Somkhele is committed to ensuring the community around the mine, which has created
more than 950 permanent and temporary jobs in an impoverished area with few economic
opportunities, nearly 80% of them from the local community.
- A baseline needs analysis has been conducted to determine projects for the new Social and
Labour Plan, and Somkhele plans to spend a further R25 million on community development
during the next five years.
SamQuarz
- The sale of SamQuarz for final gross proceeds of R281 million, was concluded on 30 June 2012.
- Petmin generated an average net return on SamQuarz of 39% year-on-year after tax for the
seven and three quarter years since it acquired the operation for R85 million.
North Atlantic Iron Corporation (NAIC) year to 30 June 2012
- Petmin has joint management control of NAIC, with an earn-in option to acquire up to 40%
for a total of US$25 million, plus a further option to acquire an additional 9.9% at a market-
related price.
- During the year under review, Petmin invested an additional $5 million (2011: $1.5 million)
in the jointly managed NAIC, acquiring an additional 12% interest to take Petmin's
shareholding in NAIC to 17%.
- At 30 June 2012, Petmin's investment was US$6.5 million for 17% of NAIC. (Subsequent to
30 June 2012, Petmin invested a further US$4.5 million for an additional 5.5% shareholding,
taking its holding in NAIC to 22.5%.)
- In March 2012, NAIC's maiden resource statement covering just 3% of the claim - indicated
that its iron sands resource provides an abundant low-cost feedstock for production of a
concentrate which can be converted into high-purity pig iron. The NAIC resource is 594
million tonnes of sand grading at 9.35% heavy minerals of which 38.02% is Fe2O3 equivalent.
- Pig iron is used as a feedstock in the steel making process. Approximately one billion tonnes
of world production of pig iron is produced and used in integrated steel mills.
- NAIC will produce merchant pig iron for trade on world markets. Merchant pig iron
constitutes about 70 to 80 million metric tonnes annually.
- The NAIC claim has been explored to a depth of 15 metres. Aeromagnetic and Lidar surveys,
and deeper drilling subsequent to the maiden resource statement, indicate potential for the
NAIC iron sands resource to be extended to approximately 40 metres.
- The scale of the resource indicates that it should support multiple pig iron plants producing
500,000 tonnes of pig iron annually per plant.
- NAIC has support from the Canadian government, and the Atlantic Canada Opportunities
Agency (ACOA) has invested $500,000 in the project to partly finance the concentrator pilot
plant through a repayable loan from ACOA's Business Development Program.
NAIC the year ahead
- An updated resources statement is expected to be issued during Q4 2012 followed by a
National Instrument (NI) 43-101 compliant statement in Q1 2013.
- A pilot mineral processing plant has been commissioned alongside the NAIC resource in
Goose Bay, Labrador, and the first concentrate was produced during August 2012, with
results in line with expectations. It is anticipated that NAIC will produce 250 tonnes of
concentrate by end-September 2012 for smelt test purposes.
- It is estimated that the smelt test to produce pig iron will be completed in Q1 2013.
- NAIC has appointed consultants TWP Holdings (Pty) Limited (TWP) to undertake a
Preliminary Economic Assessment (PEA) which will be followed by a Pre-Feasibility Study.
It is estimated that the PEA will be completed by Q1 2013.
- Tenova Core (Tenova) has been appointed to undertake the engineering design for the pig
iron processing plant and will oversee metallurgical test work and a smelt test using the
concentrate produced by the pilot plant.
- NAIC has also appointed engineering consultants HATCH to undertake a peer review of both
TWP and Tenova for the purposes of the NI43-101 statement and PEA sign-off.
Exploration - Mt Ginka iron ore in Liberia
- Petmin has invested a total US$2 million to date for 50% of Iron Bird Resources Inc
(Iron Bird) in a 50/50 joint venture with gold explorer Hummingbird.
- Following satisfactory results of an exploration programme, Petmin and its joint venture
partners are considering their options to merge Iron Bird with a larger iron ore company or
sell the investment in the Mt Ginka iron ore project in northern Liberia.
- During the year under review, Petmin invested an additional $1.5 million (2011: $0.5 million)
in the jointly managed Iron Bird Resources.
Exploration Red Crescent Resources (RCR)/Sivas copper in Turkey
- During the year under review, Petmin invested CAD $3,055,000 to increase its equity holding
in RCR to approximately 10.1%.
- Exploration for copper and associated minerals at the Sivas project in Turkey delivered
disappointing results. In line with Petmin's investment approach, when these results did not
meet Petmin's investment criteria it wrote off R18.9 million on its Sivas exploration asset.
A further R20.2 million mark-to-market impairment was recorded on Petmin's investment in
Toronto-listed shares of RCR. Petmin retains its investment of 9,280,000 listed shares in RCR,
which at 30 June were valued at R4.9 million.
Veremo - pig iron in South Africa
- Petmin and Kermas Limited (Kermas), the controlling shareholder of the Veremo pig iron
project in Mpumalanga, are awaiting the outcome of an application for a mining right from
the South African Department of Mineral Resources.
- Kermas is evaluating development options for potential annual production of a million
tonnes of pig iron.
- Kermas has signed an agreement with a Chinese construction company, MCC International
Incorporation Ltd, to complete a detailed bankable feasibility study on Veremo before the
end of Q1 2013.
Johannesburg
19 September 2012
Teleconference with management
- Analysts and shareholders are invited to participate in a teleconference with Petmin
management at 10h00 South Africa time on Wednesday 19 September 2012.
Dial in details:
South Africa:
- 0800 200 648 (toll free)
United Kingdom
- 0808 162 4061 (toll free)
Other countries
- +27 11 535 3600
Alternate numbers:
- South Africa - 011 535 3600 or 010 201 6616
- UK - 0800 917 7042
- Other countries - +27 11 535 3600 or +27 10 201 6616
Playback access code: 22095# (available from 11h30 on Wed 19 September 2012)
- South Africa 011 305 2030
- UK toll free 0808 234 6771
- Other countries +27 11 305 2030
Results presentation
- Analysts and shareholders are advised that Petmin's results presentation will be available
from 20 September 2012 on the Petmin website at www.petmin.co.za
Enquiries:
Petmin projects
Bradley Doig (Director of Business Development)
+27 11 706 1644
Media
Jonathon Rees
+27 76 185 1827
Sponsor and Corporate Advisor (JSE)
River Group
Andrew Lianos
+27 834 408 365
Nominated Adviser and Broker (AIM)
Macquarie Capital (Europe) Limited
Steve Baldwin, Nicholas Harland
+44 20 3037 2000
Johannesburg
19 September 2012
Sponsor
River Group
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