Wrap Text
Condensed Consolidated Interim Financial Statements for the six months ended 31 December 2012
Petmin Limited
(Incorporated in the Republic of South Africa)
(Registration number 1972/001062/06)
JSE code: PET AIM code: PTMN
ISIN: ZAE000076014
("Petmin" or "the Group")
Condensed Consolidated Interim Financial Statements
for the six months ended 31 December 2012
"Somkhele project on track to deliver increased production and revenues after experiencing a difficult
operating environment in the last quarter of CY 2012"
Salient features
- R161 million net cash flow generated by operations despite difficult conditions including:
unusually high rainfall; and
an unprotected strike by contractor employees
- Third plant at Somkhele commissioned in February 2013
- Extension to mining licence at Somkhele anthracite mine secured
- New banking facilities of R325 million secured
- Shareholding in NAIC increased to 22.5% as significant progress is made at the project
- Updated resource statement for NAIC confirms 594 million tonnes of sand grading at 9.53% heavy minerals
of which 37.46% is Fe2O3 equivalent
- Proceeds on sale of SamQuarz received
Condensed Consolidated Interim Income Statement
for the six months ended 31 December 2012
Reviewed Reviewed
Six months Six months Audited
ended ended Year ended
31 December 31 December 30 June
2012 2011 2012
Note R'000 R'000 R'000
Revenue 357 633 216 328 516 303
Cost of sales (292 949) (165 367) (360 461)
Gross profit 64 684 50 961 155 842
Operating income 1 854 17 968 6 532
Administration expenses (12 349) (12 635) (20 611)
Results from operating activities 54 189 56 294 141 763
Mark to market of listed securities (2 003) (2 396) (20 234)
Net finance (expense)/income (7 109) 173 (6 988)
Finance income 1 918 1 926 2 936
Finance expenses (9 027) (1 753) (9 924)
Separately disclosed items:
Impairment loss on exploration asset (18 841)
Fair-value gain on investment in jointly controlled entity 3 404
Share of losses of equity accounted investees (655) (1 707)
Profit before income tax 44 422 54 071 97 397
Income tax expense (14 291) (18 428) (41 377)
Profit for the period from continuing operations 30 131 35 643 56 020
Profit for the period from discontinuing operations (net of income tax) 11 380 38 517
Profit on sale of subsidiary 18 145
Profit for the period 30 131 47 023 112 682
Earnings per share
Basic earnings per ordinary share (cents) 6 5.22 8.15 19.53
Diluted earnings per ordinary share (cents) 6 5.22 8.01 19.24
Earnings per share from continuing operations
Basic earnings per ordinary share (cents) 6 5.22 6.18 9.71
Diluted earnings per ordinary share (cents) 6 5.22 6.07 9.56
Condensed Consolidated Interim Statement of Comprehensive Income
for the six months ended 31 December 2012
Reviewed Reviewed
Six months Six months Audited
ended ended Year ended
31 December 31 December 30 June
2012 2011 2012
R'000 R'000 R'000
Profit for the period 30 131 47 023 112 682
Other comprehensive income
Foreign currency translation differences 2 111 3 243 3 877
Effective portion of changes in fair value of cash flow hedges (4 370)
Other comprehensive income for the period, net of income tax 2 111 (1 127) 3 877
Total comprehensive income for the period 32 242 45 896 116 559
Condensed Consolidated Interim Statement of Financial Position
at 31 December 2012
Reviewed Reviewed
Six months Six months Audited
ended ended Year ended
31 December 31 December 30 June
2012 2011 2012
R'000 R'000 R'000
ASSETS
Non-current assets 1 765 402 1 362 551 1 541 541
Property, plant and equipment 1 265 868 860 612 1 042 840
Intangible assets 629
Investment in equity accounted investee 468 757 470 145 468 757
Investments 30 777 31 165 29 944
Current assets 239 563 468 466 494 701
Inventories 86 661 29 642 100 312
Trade and other receivables 146 207 101 934 111 741
Receivable on sale of subsidiary 1 158 281 064
Current tax assets 2 772 4 655
Cash and cash equivalents 2 765 26 524 1 584
Assets classified as held for sale 305 711
Total assets 2 004 965 1 831 017 2 036 242
EQUITY AND LIABILITIES
Ordinary share capital and reserves 1 409 952 1 334 995 1 405 188
Share capital 143 589 143 763 143 763
Share premium 332 759 334 105 334 104
Share option reserve 6 303 3 978 3 508
Hedging reserve (4 370)
Foreign currency translation reserve 5 669 2 924 3 558
Retained earnings 921 632 854 595 920 255
Non-current liabilities 391 600 260 422 262 502
Interest-bearing loans and borrowings 183 553 90 048 68 074
Deferred taxation liabilities 184 727 149 525 172 233
Environmental rehabilitation provision 23 320 20 849 22 195
Current liabilities 203 413 235 600 368 552
Trade and other payables 135 054 97 697 157 968
Current portion of interest-bearing loans and borrowings 35 799 23 466 59 590
Current tax liabilities 34 816
Shareholders for dividend 1 366 1 419 1 287
Bank overdraft 31 194 114 891
Liabilities classified as held for sale 113 018
Total equity and liabilities 2 004 965 1 831 017 2 036 242
Condensed Consolidated Interim Statement of Cash Flows
for the six months ended 31 December 2012
Reviewed Reveiwed
Six months Six months Audited
ended ended Year ended
31 December 31 December 30 June
2012 2011 2012
Note R'000 R'000 R'000
Profit from operations before finance (expense)/income 54 189 72 089 193 865
Adjustments for:
depreciation and amortisation 154 185 110 605 261 041
fair value of derivatives included in payables/receivables (4 370)
impairment charges 2 715
notional interest 1 125 1 421 3 014
(profit)/loss on disposal of property, plant and equipment (17)
management share options granted 2 795 1 269 962
Operating cash flows before changes in working capital 212 294 183 729 458 865
(Increase)/Decrease in trade and other receivables (35 783) 18 872 12 453
Decrease in current receivable on sale of subsidiary 279 906
Decrease/(Increase) in inventories 13 651 (12 167) (88 760)
(Decrease)/Increase in trade and other payables (22 463) 8 877 66 781
Cash generated by operations 447 605 199 311 449 339
Income tax refunded/(paid) (37 588) 782 1 425
Finance income 1 918 2 054 4 010
Finance expenses (9 027) (1 870) (10 958)
Net cash flow from operating activities 402 908 200 277 443 816
Cash flows from investing activities
Investment in jointly controlled entities (28 692) (22 964) (45 716)
Investment in listed shares (2 836) (16 616)
Acquisition of property, plant and equipment (347 906) (339 417) (688 548)
to expand operations (90 163) (173 587) (270 707)
to expand operations capitalised pre-strip 8 (256 416) (159 313) (405 558)
to maintain operations (1 327) 6 517) (12 283)
Proceeds on sale of subsidiary, net of cash disposed (23 889)
Proceeds from sale of property, plant and equipment 24
Net cash flows used in investing activities (379 434) (362 381) (774 745)
Cash flows from financing activities
Proceeds from specific and general share issues for cash during the period 3 335 3 331
Treasury shares acquired (1 518) (9 590) (9 590)
Payment on options forfeited (160)
Repayment of borrowings (58 312) (11 987) (29 189)
Increase in borrowings 150 000 2 139 6 984
Dividends paid (28 766) (22 654) (22 785)
Net cash flows from financing activities 61 404 (38 757) (51 409)
Net increase/(decrease) in cash and cash equivalents 84 878 (200 861) (382 338)
Cash and cash equivalents at beginning of period (113 307) 269 031 269 031
Cash and cash equivalents at end of period (28 429) 68 170 (113 307)
Transferred to assets held for sale (41 646)
Cash and cash equivalents at end of the period continuing operations (28 429) 26 524 (113 307)
Condensed Consolidated Interim Statement of Changes in Equity
for the six months ended 31 December 2012
Foreign
Share currency
Share Share option translation Retained
capital premium reserve reserve earnings Total
GROUP R'000 R'000 R'000 R'000 R'000 R'000
Balance at 30 June 2011 143 398 337 807 5 627 (319) 830 649 1 317 162
Total comprehensive income for the period 3 877 112 682 116 559
Profit for the period 112 682 112 682
Foreign currency translation differences 3 877 3 877
Transactions with owners, recorded directly in equity 365 (3 703) (2 119) (23 076) (28 533)
Shares issued during the period
Share options exercised 1 281 4 971 (2 921) 3 331
Share options forfeited during the period (160) (160)
Treasury shares acquired during the period (916) (8 674) (9 590)
Share options granted 962 962
Dividend paid (23 076) (23 076)
Balance at 30 June 2012 143 763 334 104 3 508 3 558 920 255 1 405 188
Total comprehensive income for the period 2 111 30 131 32 242
Profit for the period 30 131 30 131
Foreign currency translation differences 2 111 2 111
Transactions with owners, recorded directly in equity (174) (1 345) 2 795 (28 754) (27 478)
Treasury shares acquired during the period (174) (1 345) (1 519)
Share options granted 2 795 2 795
Dividend paid (28 754) (28 754)
Balance at 31 December 2012 143 589 332 759 6 303 5 669 921 632 1 409 952
Segment reporting
Segment information is presented in the condensed consolidated interim financial statements in respect of the Group's segments.
The segment reporting format reflects the Group's management and internal reporting structure as reviewed by the chief operating
decision-makers.
Segment revenue represents revenue from external customers. There was no intersegment revenue.
Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
Reportable segments
The Group comprises the following main reportable segments:
Silica mining and marketing ("Silica") Discontinued operation, sold on 29 June 2012;
Anthracite mining and marketing ("Anthracite"); and
Business of Tomorrow, which includes Petmin's exploration and development projects.
Segment Report
for the six months ended 31 December 2012
Silica (Discontinued) Anthracite Business of Tomorrow Other (Corporate office) Eliminations Consolidated
Six months Six months Year Six months Six months Year Six months Six months Year Six months Six months Year Six months Six months Year Six months Six months Year
Units ended ended ended ended ended ended ended ended ended ended ended ended ended ended ended ended ended ended
of 31 December 31 December 30 June 31 December 31 December 30 June 31 December 31 December 30 June 31 December 31 December 30 June 31 December 31 December 30 June 31 December 31 December 30 June
measure 2012 2011 2012 2012 2011 2012 2012 2011 2012 2012 2011 2012 2012 2011 2012 2012 2011 2012
Saleable tonnes produced (tonnes) 680 312 1 245 406 293 765 203 425 637 220 293 765 883 737 1 882 626
Tonnes sold (tonnes) 628 870 1 135 807 370 562 227 041 546 051 370 562 855 911 1 681 858
Segment revenue R'000 94 436 174 846 357 633 216 328 516 303 357 633 310 764 691 149
Segment revenue per tonne sold (R/tonne) R150.17 R153.94 R965.11 R952.81 R945.52
Segment finance (expense)/income
Finance income R'000 128 1 074 6 256 1 912 1 670 2 936 1 918 2 054 4 010
Mark to market of listed securities R'000 (2 003) (20 234) (2 003) (20 234)
Finance expense R'000 (118) (1 034) (6 356) (1 482) (7 201) (2 671) (2 667) (2 723) (9 027) (4 267) (10 958)
Segment profit per tonne sold (R/tonne) R25.13 R25.37 R137.73 R247.69 R249.90
segment result R'000 15 803 48 667 51 038 56 235 136 458 (2 683) (136) (40 782) (3 933) (2 027) 61 624 44 422 69 875 205 967
Impairment loss on goodwill acquired R'000
Segment tax (expense) R'000 (4 425) (13 627) (14 291) (16 120) (38 760) (2 308) (40 898) (14 291) (22 853) (93 285)
Segment profit/(loss) after tax R'000 11 378 35 040 36 747 40 115 97 698 (2 683) (136) (40 782) (3 933) (4 335) 20 726 30 131 47 022 112 682
Segment capital expenditure combined R'000 20 516 35 858 345 329 286 115 616 644 8 437 32 744 3 308 12 273 42 32 738 (18 133) 347 906 339 417 688 548
Segment capital expenditure R'000 20 516 35 858 88 913 126 802 211 615 8 437 32 744 3 308 12 273 42 32 738 (18 133) 91 490 180 104 283 519
Segment capital expenditure pre-strip* R'000 256 416 159 313 405 029 256 416 159 313 405 029
Segment depreciation combined R'000 10 647 153 978 98 476 258 706 207 222 445 154 185 109 345 259 151
Segment depreciation R'000 10 647 12 314 8 819 30 361 207 222 445 12 521 19 688 30 806
Segment depreciation pre-strip* R'000 141 664 89 657 228 345 141 664 89 657 228 345
Share option costs included in segment
profit/(loss) before tax R'000 2 795 1 429 962 2 795 1 429 962
Segment assets R'000 305 711 1 343 204 876 746 1 106 627 612 358 586 225 575 819 566 535 373 920 750 819 (517 132) (311 585) (397 023) 2 004 965 1 831 017 2 036 242
Segment liabilities R'000 113 018 838 950 470 440 639 210 2 065 1 495 2 106 43 869 20 712 201 580 (289 871) (109 643) (211 842) 595 013 496 022 631 054
*See note 8.
Notes to the Condensed Consolidated Interim Financial Statements
for the six months ended 31 December 2012
1. Reporting entity
Petmin is a Company domiciled in South Africa. The condensed consolidated interim financial statements of the Group for the six months ended 31 December 2012 comprise the Company and its subsidiaries
and the Group's interests in associates and jointly controlled entities (together referred to as the "Group").
The condensed consolidated interim financial statements were authorised for issue by the directors on 28 February 2013.
2. Statement of compliance
The condensed consolidated interim financial statements have been prepared under the supervision of Petmin's Financial Director, Mr BP Tanner CA(SA), and in accordance with the recognition, measurement,
presentation and disclosure requirements of IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements
as issued by the Financial Reporting Standards Council and the South African Companies Act, 2008. The condensed consolidated interim financial statements do not include all of the information required
for full annual financial statement purposes and should be read in conjunction with the consolidated annual financial statements for the year ended 30 June 2012, which are available upon request from the
Company's registered office at 37 Peter Place, Bryanston, 2021, Johannesburg or at www.petmin.co.za.
3. Significant accounting policies
The accounting policies have been applied consistently by the Group to all periods presented in these condensed consolidated interim financial statements and are consistent to those applied by the Group
in its consolidated financial statements as at and for the year ended 30 June 2012.
Functional and presentation currency
The condensed consolidated interim financial statements are presented in South African Rands ("Rands"), which is the Company's functional currency. All financial information presented in Rands has been
rounded to the nearest thousand.
4. Estimates and judgements
The preparation of the condensed consolidated interim financial statements, in conformity with IAS 34 Interim Financial Reporting, requires management to make judgements, estimates and assumptions that
affect the application of policies and reported amounts 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 for 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 significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated annual financial
statements as at and for the year ended 30 June 2012.
5. Review of results
The results of the Group as set out in these condensed consolidated interim financial statements have been reviewed by the Group's independent auditors, KPMG Inc. The unqualified review report is available
for inspection at the Group's registered office.
6. Earnings and diluted earnings per share
Earnings per share ("EPS") are based on the Group's profit for the period, divided by the weighted average number of shares in issue during the period.
Reviewed Reviewed Audited
Six months ended Six months ended Year ended
31 December 2012 31 December 2011 30 June 2012
Profit for Number of Per Profit for Number of Per Profit for Number of Per
the period shares in share the period shares in share the year shares in share
R'000 thousands in cents R'000 thousands in cents R'000 thousands in cents
Basic EPS 30 131 576 908 5.22 47 023 576 908 8.15 112 682 576 908 19.53
Share options(*) 10 147 (0.14) 8 771 (0.29)
Diluted EPS 30 131 576 908 5.22 47 023 587 055 8.01 112 682 585 679 19.24
Headline EPS
Headline EPS is based on the Groups headline earnings divided by the weighted average number of shares in issue during the period.
Reconciliation between earnings and
headline earnings per share
Basic EPS 30 131 576 908 5.22 47 023 576 908 8.15 112 682 576 908 19.53
Adjustments:
Fair-value gain on investment in joint venture (3 404) (0.59)
Impairment of exploration asset 18 841 3.27
Profit on sale of subsidiary (18 145) (3.15)
Headline EPS 30 131 576 908 5.22 47 023 576 908 8.15 109 974 576 908 19.06
Share options(*) 10 147 (0.14) 8 771 (0.28)
Diluted headline EPS 30 131 576 908 5.22 47 023 587 055 8.01 109 974 585 679 18.78
Reconciliation between EPS and EPS from
continuing operations
Basic EPS 30 131 576 908 5.22 47 023 576 908 8.15 112 682 576 908 19.53
Profit for the period from discontinued operations (11 380) (1.97) (38 517) (6.68)
Profit on sale of discontinued operation (18 145) (3.14)
EPS from continuing operations 30 131 576 908 5.22 35 643 576 908 6.18 56 020 576 908 9.71
Share options(*) 10 147 (0.11) 8 771 (0.15)
Diluted headline EPS 30 131 576 908 5.22 35 643 587 055 6.07 56 020 585 679 9.56
*The impact of the share options in the period ended 31 December 2012 is antidilutive and has therefore been ignored.
The EPS from continuing operations in the six months ended 31 December 2012 were negatively affected by the mining sector strike and the excessive rainfall encountered in KwaZulu-Natal in the period
under review. See the management commentary for more information.
7. Investment in Jointly Controlled entities
As previously announced, in the six months ended 31 December 2012 Petmin has made the following investments:
7.1 Investment in North Atlantic Iron Corporation ("NAIC")
On 16 August 2012, Petmin announced that it had invested an additional US$4.5 million [approximately R37 million] (2011: US$2 million [approximately R14 million]) in the jointly managed NAIC,
acquiring an additional 5.5% interest to take Petmin's shareholding in NAIC to 22.5%. Petmin's investment in NAIC has been proportionately consolidated in accordance with the accounting policy for
investments in jointly controlled entities.
7.2 Red Crescent Resources Limited ("RCR")
Petmin invested C$0.3 million [approximately R3 million] (2011: C$3.1 million [approximately R23 million]) to maintain its equity holding in RCR at approximately 10.1% following a private placement
by RCR to recapitalise the business and to settle debt.
8. Capital pre-stripping
It is Petmin's accounting policy to record the pre-strip capital of R256 million (2011: R159 million) as "capital". The true cash capital expenditure amount is the net amount recognised in property, plant
and equipment during the year, ie R114 million (2011: R70 million), being pre-strip capital of R256 million less amortisation of R142 million (2011: capital of R159 million and amortisation of R89 million).
The amortisation represents the mining cost incurred in the year.
The open pit mining profile at Somkhele requires that overburden be removed from the pit before coal can be extracted. This overburden removal is capitalised to the development cost of the open pit
(so called "pre-strip") and is then expensed on a units-of-production basis as the coal is extracted from the open pits.
The pre-strip expenditure in the six months ended 31 December 2012 reflects the increased expenditure to ensure supply of run-of-mine coal to feed both the existing and the second plant, which was
commissioned in early CY 2012, at Somkhele.
9. Cash proceeds received for the sale of SamQuarz
During the six months ended 31 December 2012, Petmin received R280 million of the proceeds on the sale of SamQuarz in cash.
10. Cancellation of R82 million Black Economic Empowerment ("BEE") surety
In January 2010, Petmin shareholders approved an R82 million surety by Petmin on behalf of Dark Capital (Pty) Limited, Petmin's primary BEE partner. The Petmin board is pleased to inform shareholders
that the surety has been withdrawn with effect from 24 August 2012 following Dark Capital's payment in full of its R65 million debt to the Standard Bank of South Africa ("Standard Bank").
11. Banking facilities secured
During the period under review, the Group signed term loan facilities with Standard Bank, our bankers since inception, securing, in addition to the existing R100 million overdraft facilities, new medium-term
debt facilities of R225 million (Facility A) and a R100 million (Facility B) revolving credit facility. At 31 December 2012, Petmin had drawn R150 million against the medium-term and revolving credit facilities.
The loans bear interest at the Johannesburg Interbank Agreed Rate ("JIBAR") plus 3.4% (Facility A) and JIBAR plus 2.85% for Facility B. Facility A is repayable in quarterly capital instalments commencing in
December 2014 and ending in December 2017. Facility B is repayable in one capital instalment on maturity in December 2015. Both facilities are subject to cash sweep calculations that apply surplus funds to
the earlier settlement of this debt. As security, Tendele Coal Mining (Pty) Limited and Petmin Limited have ceded their bank accounts to Standard Bank and have provided General Notarial Bonds over their
movable assets other than Tendele's investment in the mining joint venture referred to in note 13.1 below and other than Petmin's investment in NAIC. In addition, Tendele has provided a Special Notarial
Bond over its moveable property (other than the second plant which is bonded under a pre-existing finance agreement).
12. Related parties
The Group entered into various transactions with related parties which occurred under terms that are no more favourable than those arranged with independent third parties.
13. Subsequent events
13.1 Joint venture agreement mining contractor
Subsequent to 31 December 2012, Tendele finalised an agreement with Sandton Plant Hire (Pty) Limited ("SPH"), the mining contractor at Tendele since inception. A new Joint Venture ("JV") has
been established and Tendele will initially have 50% of the JV and SPH will have 50%. A joint management team has been established. The JV provides Tendele with more control to ensure improved
production and efficiency in the mining processes. Tendele has also assumed responsibility for all human resources functions of the JV, ensuring that all labour practices are standardised on the Mine.
Mining costs amounts to some 67% of all cash operating costs at Tendele and, by entering the JV, Tendele will furthermore share in the margins of the JV. The JV utilises plant and machinery to the
value of R276 million and Tendele intends to provide a guarantee limited to R100 million to ABSA, the lenders to the JV. Upon signature of the agreement, Petmin paid R62 million on loan account
for its share of the JV funding requirements.
13.2 Other subsequent events
There have been no other events that have occurred subsequent to 31 December 2012 and before the condensed consolidated interim financial statements are authorised for issue which require
adjustment of, or disclosure in the financial statements or notes thereto in accordance with IAS 10 Events After the Reporting Period.
Management commentary for the six months ended 31 December 2012
(i) General overview of performance
Petmin invested R238 million (2011: R273 million) to deliver on its growth and diversification strategy. R115 million was spent on pre-stripping the open pits, R45 million on the third wash-
plant at Somkhele, R8 million on the second wash plant at Somkhele (primarily for diesel generators for back-up power supply), R10 million on exploration in Areas 4 and 5, R6 million
development of the Luhlanga mining area, R29 million was spent on acquiring an additional 5.5% of NAIC, R3 million on acquiring 6.5 million shares and warrants in RCR, Petmin's share of
the capital expenditure at NAIC amounted to R13 million, with sundry other items amounting to R9 million.
Petmin's earnings per share from continuing operations were down 16% from 2011, reflecting the difficult operating environment experienced by the mining industry in South Africa and
KwaZulu-Natal during that period. Management is confident that these difficulties have been largely overcome and Somkhele is
now operating at its budgeted production levels. For a more
detailed discussion on the production issues at Somkhele, please refer to the commentary on the Anthracite division below.
Despite the difficult operating conditions, the Group's operations remain cash-generative, generating R161 million (2011: R200 million). The R161 million is calculated as follows: R403 million
net cash flow from operations, less the after-tax amount of R242 million received for the sale of SamQuarz.
Profit after tax was down 36% to R30 million (2011: R47 million). The profit from ongoing operations on a like-for-like basis (taking into account that SamQuarz has been sold) decreased by
16% to R30 million (2011: R36 million).
Petmin's interest-bearing debt to equity ratio increased to 17.77% from the 17.25% recorded at 30 June 2012 as Petmin drew R150 million of the new loan facilities amounting to R325 million
negotiated with Standard Bank, settled an asset-backed loan of R22 million, and settled the loan from SamQuarz R23 million.
Anthracite division
Somkhele anthracite mine
Production in the six months ended 31 December 2012 at Somkhele was severely constrained by:
- the unprotected strike by contractor employees (see announcements released on the Securities Exchange News Services and on RNS dated 28 September 2012 and 8 October 2012);
and
- unusually high rainfall encountered in KwaZulu-Natal during November and December 2012 which prevented the delivery of coal from the open pits.
In the six months ended 31 December 2012, Somkhele lost a total of 42 production days to the strike and rainfall.
The approximate quantitative effect of the above is summarised below:
Reason Production days lost ROM tonnes shortfall Anthracite saleable tonnes shortfall
Strike 15 days 127 500 53 550
Rainfall 15 days (27 12 planned) 127 500 53 550
Total 30 days 255 000 107 100
Total saleable tonnes produced to 31 December 2012 293 765
Percentage tonnes lost 27%
At the end of December 2012, Somkhele had 192 000 tonnes of exposed coal (coal that is available in the pits to be loaded and hauled to the wash plants) that could not be delivered to
the wash plants during December 2012 due to the heavy rainfall. At the time of this report, these sections have been de-watered to grant access to the coal and the mine is operating at
budgeted levels.
In the six months ended 31 December 2012, Somkhele maintained its expected sales volumes and prices as demand remained steady and deliveries were made from stockpiles on hand.
Production at Somkhele increased by 44% to 293 765 tonnes (2011: 203 425 tonnes) of saleable anthracite in the six months to 31 December 2012 and tonnes sold increased by 63% to
370 562 tonnes (2011: 227 041 tonnes). Although production increased by 44%, infrastructure and staff contingent were geared for a 100% increase in production, consequently profit margins
were negatively affected.
The significant capital investment in Somkhele during the past two years is largely completed and Tendele is now geared to annually produce some 1.2 million tonnes of anthracite and some
480 000 tonnes of energy product from the newly commissioned third plant.
During the period under review a new order mining right was obtained for the Luhlanga area. Once the Luhlanga mining area is in production (expected to commence in April 2013), Somkhele
will operate in four different pit areas that will provide the flexibility to blend production to supply improved qualities and to reduce the risk of production delays should production in one
of the pits be delayed.
Following severe rains in January 2013, production levels have returned to normal. In order to mitigate the impact of rain on production going forward, Somkhele has commenced a campaign
to stockpile ROM coal at the pit-head so that it may still be delivered to the wash plants in the event of sustained heavy rainfall. The aim of the campaign is to ensure some 100 000 ROM
material on stockpile that will allow the plants to operate at full capacity for 10 days in the event that the pits can't be accessed due to rain. At the time of writing this report, some 86 000
ROM tonnes are on the stockpile.
With production levels improving and an anthracite market that is showing reasonable demand at prices better than during the previous six months, Petmin expects production from Somkhele
to increase significantly in the six months ending 30 June 2013.
Construction of a third processing plant progressed well and this plant is being commissioned and has commenced producing coal for the energy market in February 2013. Somkhele secured a
new five-year take-or-pay agreement to supply 25 000 tonnes per month of product into the energy market commencing in Q1 2013 at an initial price of R170 per tonne, escalating annually.
Silica division SamQuarz silica mine
During the six months ended 31 December 2012, Petmin received R280 million of the R281.1 million cash proceeds on the sale of the SamQuarz silica mine.
Business of Tomorrow division
Petmin's strategy is to focus on the steel value chain and commodities required for infrastructure development and urbanisation.
During the six months ended 31 December 2012, Petmin made the following investments:
North Atlantic Iron Corporation ("NAIC")
At the jointly managed NAIC, a pilot mineral processing plant was commissioned alongside the NAIC resource in Goose Bay, Labrador, producing its first concentrate during August 2012.
The initial concentrate test results are in line with our expectations and are encouraging.
NAIC currently has an inferred resource 594 million tonnes at 9.53 wt % of which 37.46% is FE2O3 from which NAIC produces a 54% FE contained concentrate, a quality feed-stock for
high-purity pig iron production. An updated NI43-101 compliant statement published by SRK Consulting in February 2013 confirms an indicated resource of 334 million tonnes with a further
260 million tonnes in the inferred category. The tonnage has not been discounted for containing clay. The resource statement is based on just 3% of NAIC's 450 km2 claim.
Iron Bird Resources Plc. ("Iron Bird")
As previously announced, Petmin and its joint venture partners are considering their options to either merge with a larger iron ore company or to sell the investment in the Mt Ginka iron
ore project in northern Liberia.
Red Crescent Resources Limited ("RCR")
In the six months ended 31 December 2012, Petmin invested C$325 000 (2011: C$3 055 000) to acquire 6.5 million shares in RCR together with 6.5 million share warrants that provide the
holder with the right to acquire RCR shares for 7 Canadian cents per share for three years. The investment maintains Petmin's shareholding in RCR at approximately 10% following a private
placement by RCR to recapitalise the business and to settle debt.
Following the restructuring of its board and senior management, RCR has made good operational progress on its Hakkari Zinc Project and has commenced production and sales of direct
shippable ore.
Iron ore South Africa (Veremo project)
In the six months ended 31 December 2012, additional information in support of the application for a mining right was provided to the Department of Mineral Resources, we await the
outcome of the application. Kermas Limited ("Kermas"), the ultimate controlling shareholder of Veremo, has signed an agreement with a Chinese international plant construction company
MCC International Incorporation Limited to complete a detailed bankable feasibility study on Veremo before the end of Q2 2013.
We continue to work with Kermas in order to ensure the maximum extraction of value from the project.
(ii) Prospects
Anthracite division
With production levels improving since December 2012 and an anthracite market that is showing reasonable demand at prices better than during the first six months, Petmin expects earnings
from Somkhele to increase significantly in the six months ending 30 June 2013.
We anticipate to sell approximately 876 000 (previous estimate 900 000 tonnes) of anthracite during the 12 months ending 30 June 2013, with margins recovering as production increases
to budgeted levels.
The commissioning of the third processing plant at Somkhele with an annual capacity to produce approximately 480 000 tonnes of product for the energy market from processing of discard
commenced in February 2013 and the plant is expected to operate at planned capacity during March 2013. The significant capital investment in Somkhele during the past two years is largely
completed and Somkhele is now geared to produce some 1.2 million tonnes of anthracite from two plants and some 480 000 tonnes of energy product. Once the Luhlanga mining area is in
production (expected to commence in April 2013), Somkhele will operate in four different pit areas that will allow significant flexibility that will enable the Mine to maximise production and
improved ability to blend to ensure improved qualities. Capital expenditure at Somkhele in the six months to 30 June 2013 is expected to be approximately R26 million as the construction of
the third plant and the exploration programmes are finalised. Somkhele expects development cost of the pits (or pre-stripping) to be approximately R24 million in the six months to June 2013.
At the time of this report, production levels have returned to normal and the yield in the anthracite plants has improved to above 40%. A specific project is under way to ensure some
100 000 tonnes of ROM material is placed on stockpile that will allow the plants to operate at full capacity for 10 days in the event that the pits can't be accessed due to rain. At the time of
writing this report, some 86 000 ROM tonnes are on the stockpile.
Business of Tomorrow division
NAIC will run series of smelt tests at its facility in Forks Pennsylvania to prove the scalability of the pig iron production using the concentrate and chosen process which will be signed off by
independent experts during March 2013. The results of which will be published in early April 2013. The NI43 101 compliant Pre-Economic Analysis ("PEA") which has been underway for
the past 12 months is expected to be published before the end of Q4 2013.
Petmin has budgeted to spend an additional US$6 million to advance the project in the six months ending 30 June 2013 and to increase its stake to 30% in the potentially world-class pig-iron
project.
Additional details on Petmin, including a detailed presentation on the results (which will be available from 5 March 2013) can be found on our website
www.petmin.co.za
By order of the Board
I D Cockerill J C du Preez
Executive Chairman Chief Executive Officer
Johannesburg Sponsor
4 March 2013 River Group
Directors: I Cockerill# (Executive Chairman) L Mogotsi (Deputy Chairman) J du Preez (Chief Executive Officer)
B Doig B Tanner (Financial Director) M Arnold* E de V Greyling* K Kalyan* A Martin* T Petersen* J Taylor*
*Non-executive # British American
Registered office: 37 Peter Place, Bryanston, 2021
(PO Box 6070, Rivonia, 2128)
Corporate office: 37 Peter Place, Bryanston, 2021 Tel: (011) 706 1644 Fax:(011) 706 1594 Website: www.petmin.co.za
Sponsor JSE: River Group Tel: +27 (0) 12 346 8540
Nominated adviser AIM: Macquarie Capital (Europe) Limited
Company Secretary: Mondial Consultants (Pty) Limited
Transfer secretaries: JSE: Computershare Investor Services (Proprietary) Limited
AIM: Computershare Investor Services PLC
Auditors: KPMG Inc.
A PDF version of these results is available on our website: www.petmin.co.za
Date: 04/03/2013 08:33:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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