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Petmin shareholder and trading update for the year ended 30 June 2013 and cautionary announcement
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")
9 September 2013
PETMIN SHAREHOLDER AND TRADING UPDATE FOR THE YEAR ENDED 30 JUNE 2013 AND
CAUTIONARY ANNOUNCEMENT
92% increase in expected second half headline earnings per share (HEPS) from an improved
performance at Petmin’s Somkhele anthracite mine.
In terms of the Listings Requirements of JSE Limited ("Listings Requirements"), listed companies are
required to publish a trading statement as soon as they are satisfied that a reasonable degree of
certainty exists that the financial results for the period to be reported upon next will differ by at
least 20% from those of the prior comparative period.
Petmin’s like for like profit for the year to 30 June 2013 from continuing operations, before
impairments (see below for 2013 Veremo impairment), is expected to be up 18% to R88m (2012
R75m).
Due to Petmin’s decision to impair its investment in Veremo Holdings (Pty) Limited (“Veremo”) with
R200m (refer to detail below), earnings per share from continuing operations are expected to be a
loss of approximately 19.42 cents (2012: 9.71 cents profit).
HEPS of 10.03 cents is expected for the six months to 30 June 2013, an increase of 92% from the
5.22 cents in the six months to 31 December 2012.
Year
Unaudited Year ended ended
30 June 30 June
2013 2012 Variance
Headline earnings per share (cents) 15.25 19.06 -20%
Like for like earnings per share (cents)* 15.25 12.98 18%
Earnings per share (cents)** (19.42) 19.53 -199%
* = Excludes SamQuarz (sold in 2012) and
impairments
** = 2013 includes Veremo impairment (see below), 2012 includes SamQuarz
Review of Somkhele anthracite operation
The Somkhele anthracite mine in KwaZulu?Natal is delivering solid results with anthracite production
in the second half year up 80% on the first half. Somkhele now has an installed capacity to produce
1,2m tonnes of saleable metallurgical anthracite and 480,000 tonnes of energy product from the
newly?commissioned third plant.
The third plant at Somkhele was successfully commissioned and became fully operational in
February/March 2013.
The table below reflects the expected normalised profits from on?going operations for the year
ended 30 June 2013.
Normalised profit from ongoing Unaudited Unaudited % change Reviewed Audited
operations Year ended H2 2013 H1 2013 Year ended
30 June 2013 30 June 2012
tonnes tonnes tonnes tonnes
Anthracite tonnes produced 822,431 528,666 80% 293,765 637,220
Anthracite tonnes sold 802,325 431,763 17% 370,562 546,051
Energy tonnes produced 207,238 207,238 ? ?
Energy tonnes sold 178,559 178,559 ? ?
R'000 R'000 % change R'000 R'000
Turnover 833 490 475 857 33% 357 633 516 303
Results from ongoing operations 140 599 86 411 59% 54 188 141 763
Net finance expense (20 354) (13 245) 86% (7 109) (6 988)
Pre?tax results from ongoing operations 120 245 73 166 55% 47 079 134 775
Pre?tax Gross Profit Margin (includes 14% 15% 17% 13% 26%
corporate costs)
Assumed tax at 28% (33 669) (20 486) 55% (13 182) (37 737)
Assumed profit after tax from ongoing 86 576 52 679 55% 33 897 97 038
operations
Shares in issue 576,908,188 576,908,188 0% 576,908,188 576,908,188
Normalised profit after tax from ongoing 15.01 9.13 55% 5.88 16.82
operations per share
The table indicates that normalised profit after tax increased by 55 % from R 33.9 million for the six
months to December 2012 to R 52.7 million for the six months to June 2013.
Somkhele production increased for the year to 822,431 tonnes of anthracite (2012: 637,220) and
207,238 tonnes of energy product (2012: nil). Second half anthracite production was 528,666
tonnes, up 80% on the first half production of 293,765 tonnes.
Somkhele’s net profit margins were reduced to 16% (2012: 26%) for the year ended 30 June 2013 as
sales price increases in a subdued market could not compensate for cost increases.
North Atlantic Iron Corporation (NAIC)
During the year under review, Petmin invested an additional US$6.5m (2012: US$5m) to acquire an
additional 8% of NAIC and increase its total shareholding to 25%. NAIC is a highly?prospective iron
sands to pig iron project in Canada’s Labrador province, aiming to become one of the lowest cost pig
iron producers in the world. Petmin retains joint management control of NAIC with an earn?in option
to acquire up to 40% of the project for a total US$25m, with a further option to acquire an additional
9, 9% at a market?related price.
The NAIC project made significant progress in the year ended 30 June 2013, with an extensive
Preliminary Economic Assessment (PEA) due to be published in the fourth quarter of 2013. During
the review period, pig iron has successfully been produced in NAIC’s test furnace under the auspices
of HATCH. The PEA will provide detailed information in respect of geology (resource definition),
mining methodology and mine design, processing, smelting, logistics and market analysis.
Veremo impairment
Petmin has reported a R200m impairment of its investment in the Veremo pig iron project in
Mpumalanga, South Africa.
The controlling shareholders of Veremo Holdings (Proprietary) Limited (Veremo) were to fund and
develop the project to commence production within 48 months of 30 April 2008. Veremo was to
distribute to Petmin the larger of a cash payment of R65m per year for three years, or 25% of the
profit after tax from Veremo.
The first of the three cash payments of R65 million fell due on 28 February 2013 and this payment
has not been received. Petmin has entered into discussions with the controlling shareholders
regarding the payment due to Petmin.
Considering the state of the South African and world economies, Petmin has reviewed the project
valuation parameters and recorded an impairment expense of R200m at 30 June 2013.
The carrying value of the investment in Veremo prior to the impairment was R497m. Petmin’s initial
investment in the project amounted to R95m. The difference between the carrying value and the
cost was an International Financial Reporting Standard (IFRS) accounting adjustment on acquisition.
Neither the IFRS accounting adjustment nor the impairment has any cash effects. The revised
carrying value of R297m is still materially in excess of the original cost of the investment.
Significant progress has been made at Veremo and development capital of R112 million has been
invested to date by the controlling shareholders and the previous owners. MCC International
Incorporation Limited (MCC) was commissioned by Veremo 18 months ago to perform a feasibility
study and, during the year under review, finalised their report on the project and concluded that it is
economically viable. The Veremo management team are in the process of evaluating and reviewing
this report. Furthermore, Veremo is awaiting the approval of a new order mining licence application.
Intention to de?list and terminate Petmin’s secondary listing on the Alternative Investment Market
(AIM) of the London Stock Exchange (LSE)
Petmin is reviewing its costs across the group, including the reduction of costs at the corporate
office and, as part of this process, Petmin intends to terminate its secondary listing on the AIM in
London.
More detailed information as well as advice to shareholders regarding the intention to delist from
AIM will be announced in due course.
Over the past twelve months, the average daily volume of Petmin shares traded on AIM was 10,820
compared to 1,264,977 shares on the JSE.
Whilst Petmin remains cognisant of the interest of all shareholders, the rationale for delisting on
AIM is informed by the low volume of trade in the company`s shares on the AIM, with the UK
register comprising less than 3% of the overall total shareholding.
The Company has determined that the secondary listing is administratively intensive and costly, and
is of the view that the volume of trade over the past few years does not sufficiently warrant the
expense of maintaining a secondary listing on the AIM.
Full year results to 30 June 2013
Petmin’s full financial reviewed results for the year to 30 June 2013 (“Reviewed Results”) will be
reported on Monday 30 September 2013 and a detailed presentation will be available on the
Company’s website www.petmin.com from 1 October 2013.
Cautionary announcement
Shareholders are advised that the Company has entered into negotiations (unrelated to Veremo, the
AIM delisting or the Reviewed Results), which if successfully concluded may have a material effect
on the price of the Company’s securities.
Accordingly, shareholders are advised to exercise caution when dealing in the Company`s securities
until a further announcement is made.
Enquiries:
Petmin
Bradley Doig
+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
9 September 2013
Sponsor and Corporate Adviser
River Group
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