Wrap Text
Condensed Consolidated Preliminary Financial Statements for the year ended 30 June 2014
Petmin Limited
(Incorporated in the Republic of South Africa)
(Registration number 1972/001062/06)
JSE code: PET
ISIN: ZAE000076014
("Petmin" or "the Group")
"Committed to growth, dedicated to value"
Condensed Consolidated
Preliminary Financial Statements
for the year ended 30 June 2014
Normalised earnings R102 million
or 17.63 cents per share (2013:
R82 million or 14.26 cents per
share). Up 24% despite 27%
reduction in at-mine-gate
export prices
"Revenue in excess of
R1 billion for first time,
normalised profit after tax
R102 million, anthracite
production exceeds 1 million
tonnes, remarkable Lost
Time Injury Frequency Rate
at Somkhele of zero. Positive
results of Pre-economic
feasibility study for NAIC."
Salient features:
- R668 million net cash flow from operating activities (2013:
R378 million)
- Updated Competent Person's Report for Somkhele
values the anthracite mine at R1.64 billion
- Shareholding in North Atlantic Iron Corporation
(NAIC) increased to 33% and Preliminary
Economic Feasibility (PEA) confirms economic
and technical viability of the project. Intention
to unbundle by way of special dividend with
estimated value of 50 cents per Petmin share
- Mining Right granted for the Veremo
Pig-Iron Project
- Headline earnings per share (HEPS) 14.95 cents
2013: 15.25 cents)
- Dividend of 3 cents pershare declared on 11 September
2014 (30 September 2013: 3 cents)
- Remarkable Lost Time Injury Frequency Rate at Somkhele
of zero (2013: 0.27)
Preparation
These condensed consolidated preliminary financial statements for the year ended
30 June 2014 have been prepared under the supervision of Petmin's financial
director, Mr BP Tanner CA(SA) (refer to Note 2 of these financial statements).
Review of results
These condensed consolidated preliminary financial statements for the year ended
30 June 2014 have been reviewed by the Group's auditors, KPMG Inc. (refer to
Note 5 of these financial statements).
Condensed Consolidated Preliminary Income Statement
for the year ended 30 June 2014
Reviewed *Restated
Year Year
ended ended
30 June 30 June
2014 2013
Note R'000 R'000
Revenue 1 019 789 833 490
Cost of sales (824 760) (665 930)
Gross profit 195 029 167 560
Operating expenses (14 527) (589)
Administration expenses (20 597) (22 354)
Profit from operating activities 159 905 144 617
– Fair value adjustments on listed securities (13 464) 5 683
Net finance expense (32 546) (20 354)
– Finance income 6 537 5 229
– Finance expenses (39 083) (25 583)
Separately disclosed items:
Impairment of investment in equity accounted
investee (199 676) (200 000)
Share of equity accounted investees, net of tax 7 813 (6 327)
Loss before income tax (77 968) (76 381)
Income tax expense (41 457) (35 651)
Loss for the year (119 425) (112 032)
Earnings per share
Basic earnings per ordinary share (cents) 6 (20,70) (19,42)
Diluted earnings per ordinary share (cents) 6 (20,70) (19,42)
Condensed Consolidated Preliminary Statement of
Comprehensive Income
for the year ended 30 June 2014
Reviewed *Restated
Year Year
ended ended
30 June 30 June
2014 2013
R'000 R'000
Loss for the year (119 425) (112 032)
Other comprehensive income (after tax)
Items that may be reclasssified to profit or
loss
Foreign currency translation differences on
equity accounted investees 6 862 7 442
Share of fair value gain in equity accounted
investee 16 251 –
Effective portion of changes in fair value of
cash flow hedges 2 619 (2 619)
Other comprehensive income for the year,
net of income tax 25 732 4 823
Total comprehensive income for the year (93 693) (107 209)
Condensed Consolidated Preliminary Statement of
Financial Position
as at 30 June 2014
Reviewed *Restated
30 June 30 June
2014 2013
Note R'000 R'000
ASSETS
Non-current assets 1 552 484 1 668 918
Property, plant and equipment 1 122 531 1 130 643
Investment in equity accounted investee 7 337 572 438 856
Loan due from joint venture 67 381 60 955
Investments 25 000 38 464
Current assets 482 951 363 199
Inventories 11 264 532 161 036
Trade and other receivables 121 549 197 887
Receivable on sale of subsidiary – 1 158
Current tax assets 2 095 2 772
Cash and cash equivalents 94 775 346
Total assets 2 035 435 2 032 117
EQUITY AND LIABILITIES
Ordinary share capital and reserves 1 169 304 1 273 521
Share capital 143 150 143 575
Share premium 328 927 332 654
Share option reserve 20 297 9 440
Hedging reserve – (2 619)
Foreign currency translation reserve 17 862 11 000
Retained earnings 659 068 779 471
Non-current liabilities 602 692 567 945
Interest-bearing loans and borrowings 289 159 322 342
Deferred taxation liabilities 246 670 206 415
Environmental rehabilitation provision 66 863 39 188
Current liabilities 263 438 190 651
Trade and other payables 115 182 134 753
Current portion of interest-bearing loans and
borrowings 75 042 21 340
Hedge liability – 3 637
Shareholders for dividend 1 339 1 355
Bank overdraft 71 876 29 566
Total equity and liabilities 2 035 435 2 032 117
Condensed Consolidated Preliminary Statement of Cash Flows
for the year ended 30 June 2014
Reviewed *Restated
Year Year
ended ended
30 June 30 June
2014 2013
Note R'000 R'000
Profit from operating activities before finance (expense)/income 159 905 144 617
Adjustments for:
– depreciation 567 215 464 711
– notional interest 2 250 2 250
– Loss/(profit) on disposal of property, plant and equipment 8 332 (330)
– long-term rehabilitation expenditure incurred (429) –
– impairment of debtor 1 158 –
– reversal of accrual (8 132) –
– write down to net realisable value of inventory 1 591 –
– share options granted 10 857 5 932
Operating cash flows before changes in working capital 742 747 617 180
Decrease/(increase) in trade and other receivables 76 338 (98 995)
Increase in inventories (105 087) (60 724)
Decrease in trade and other payables (11 440) (21 558)
Cash generated by operations 702 558 435 903
Income tax paid (1 542) (37 588)
Interest received 6 537 5 229
Interest paid (39 083) (25 583)
Net cash flow from operating activities 668 470 377 961
Cash flows from investing activities
Investment in equity accounted investees 7 (67 459) (65 396)
Increase in loans to equity accounted investees (6 434) (60 955)
Investment in listed shares – (2 838)
Acquisition of property, plant and equipment (542 580) (635 632)
– to expand operations (25 326) (93 202)
– to expand operations – capitalised pre-strip 8 (497 773) (529 701)
– to maintain operations (19 481) (12 729)
Proceeds on sale of subsidiary, net of cash disposed – 279 906
Proceeds from sale of property, plant and equipment 1 000 6 975
Net cash flows used in investing activities (615 473) (477 940)
Cash flows from financing activities
Treasury shares acquired (4 152) (1 638)
Repayment of borrowings (19 562) (68 982)
Increase in borrowings 40 081 285 000
Dividends paid (17 245) (28 777)
Net cash flows from financing activities (878) 185 603
Net increase in cash and cash equivalents 52 119 85 624
Cash and cash equivalents at beginning of year (29 220) (114 844)
Cash and cash equivalents at end of year 22 899 (29 220)
* The comparative period financial statements have been restated following the change in accounting policy related to
mandatory changes in IFRS. Refer to Note 3 of these financial statements.
Condensed Consolidated Preliminary Statement of Changes in Equity
for the year ended 30 June 2014
Foreign
Share Cash flow currency
Share Share option hedging translation Retain
capital premium reserve reserve reserve earnings Total
GROUP R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 30 June 2012 – restated* 143 763 334 104 3 508 – 3 558 920 255 1 405 188
Total comprehensive income for the year – – – (2 619) 7 442 (112 032) (107 209)
Loss for the year – – – – – (112 032) (112 032)
Effective portion of changes in fair value of cash flow hedges – – – (2 619) – – (2 619)
Foreign currency translation differences – – – – 7 442 – 7 442
Transactions with owners, recorded directly in equity (188) (1 450) 5 932 – – (28 752) (24 458)
Treasury shares acquired during the year (188) (1 450) – – – – (1 638)
Share options granted – – 5 932 – – – 5 932
Dividend paid – – – – – (28 752) (28 752)
Balance at 30 June 2013 – restated* 143 575 332 654 9 440 (2 619) 11 000 779 471 1 273 521
Total comprehensive income for the year – – – 2 619 6 862 (103 174) (93 693)
Loss for the year – – – – – (119 425) (119 425)
Share of fair value gain in equity accounted investee – – – – – 16 251 16 251
Effective portion of changes in fair value of cash flow hedges – – – 2 619 – – 2 619
Foreign currency translation differences – – – – 6 862 – 6 862
Transactions with owners, recorded directly in equity (425) (3 727) 10 857 – – (17 229) (10 524)
Treasury shares acquired during the year (425) (3 727) – – – – (4 152)
Share options granted – – 10 857 – – – 10 857
Dividend paid – – – – – (17 229) (17 229)
Balance at 30 June 2014 143 150 328 927 20 297 – 17 862 659 068 1 169 304
Condensed Consolidated Preliminary Financial Statements
for the year ended 30 June 2014
Segment reporting
Segment is presented in the condensed consolidated unaudited preliminary 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 decisionmakers. Segment revenue
represents revenue to external customers. There was no inter-segment 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:
– Anthracite mining and marketing ("Anthracite")
– Expansion projects, which includes Petmin's exploration and development projects.
Anthracite Expansion projects Eliminations Consolidated
Year Year Year Year Year Year Year Year
Units ended ended ended ended ended ended ended ended
of 30 June 30 June 30 June 30 June 30 June 30 June 30 June 30 June
measure 2014 2013 2014 2013 2014 2013 2014 2013
Anthracite – Saleable tonnes produced (tonnes) 1 125 089 822 431 – – – – 1 125 089 822 431
Anthracite – Tonnes sold (tonnes) 1 026 250 802 325 – – – – 1 026 250 802 325
Energy – saleable tonnes produced (tonnes) 244 298 207 238 – – – – 244 298 207 238
Energy – tonnes sold (tonnes) 174 556 178 559 – – – – 174 556 178 559
Segment revenue R'000 1 019 789 833 490 – – – – 1 019 789 833 490
Segment revenue per tonne sold (Anthracite – gross) (R/tonne) 917,57 996,99 – – – – – –
Segment revenue per tonne sold (Energy – at mine gate) (R/tonne) 239,93 188,06 – – – – – –
Segment finance (expense)/income R'000
Finance income R'000 5 768 2 373 – – 769 2 856 6 537 5 229
Mark to market of listed securities R'000 – – (13 464) 5 683 – – (13 464) 5 683
Finance expense R'000 (35 576) (21 139) – – (3 507) (4 444) (39 083) (25 583)
Segment result R'000 149 782 129 086 (214 976) (197 947) (12 774) (7 520) (77 968) (76 381)
Segment tax expense R'000 (39 237) (35 651) – – (2 219) – (41 457) (35 651)
Segment profit/(loss) after tax R'000 110 545 93 435 (214 976) (197 947) (14 993) (7 520) (119 425) (112 032)
Segment capital expenditure – combined R'000 562 791 653 473 – – 5 644 (17 841) 568 434 635 632
Segment capital expenditure R'000 65 018 123 772 – – 5 644 (17 841) 70 662 105 931
Segment capital expenditure – pre-strip* R'000 497 773 529 701 – – – – 497 773 529 701
Segment depreciation – combined R'000 566 824 464 294 – – 391 417 567 215 464 711
Segment depreciation R'000 45 837 34 854 – – 391 417 46 228 35 271
Segment depreciation – pre-strip* R'000 520 987 429 440 – – – – 520 987 429 440
Share option costs included in segment profit/(loss)
before tax R'000 – – – – 10 857 5 932 10 857 5 932
Segment assets R'000 1 667 713 1 545 632 352 018 475 561 15 704 10 924 2 035 435 2 032 117
Percentage of segment assets to total assets (percent) 82 76 17 23 1 1 100 100
Segment liabilities R'000 1 037 165 1 017 263 – – (171 034) (258 667) 866 131 758 596
Percentage of segment liabilities to total liabilities (percent) 120 134 – – (20) (34) 100 100
*See note 9.
Notes to the Condensed Consolidated Preliminary Financial Statements
for the year ended 30 June 2014
1. Reporting entity
Petmin is a company domiciled in South Africa. The condensed consolidated preliminary financial
statements of the Group for the year ended 30 June 2014 comprise the Company and its subsidiaries
and the Group's interests in associates and joint ventures (together referred to as the "Group").
The condensed consolidated preliminary financial statements were authorised for issue by the directors
on 9 September 2014.
2. Basis of preparation
The condensed consolidated preliminary financial statements have been prepared under the supervision of
Petmin's financial director, Mr BP Tanner CA(SA).The condensed consolidated financial statements are
prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary
reports and the requirements of the Companies Act of South Africa. The Listings Requirements require
preliminary reports to be prepared in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued
by Financial Reporting Standards Council and to also, as a minimum, contain the information required by
IAS 34 – Interim Financial Reporting.The accounting policies applied in the preparation of the condensed
consolidated financial statements are in terms of IFRS and are consistent with those applied in the previous
consolidated annual financial statements. The condensed consolidated preliminary 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 2013, 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. Change in accounting policies
Petmin has adopted the new Consolidation Suite of standards:
- IFRS 10: Consolidated Financial Statements,
- IFRS 11: Joint Arrangements,
- IFRS 12: Disclosure of Interests in Other Entities,
- IFRS 13: Fair value measurement,
- IAS 27: Separate Financial Statements, and
- IAS 28: Investment in Associates and Joint Ventures effective from 1 July 2013.
In terms of IFRS 11, the proportionate consolidation of joint ventures is no longer permitted. Joint arrangements
are now classified as either joint ventures or joint operations. Joint ventures are required to be equity
accounted. Equity accounting of Petmin's joint ventures has resulted in a restatement of the income statement,
statement of comprehensive income, statement of financial position and statement of cash flows for the year ended
30 June 2013.
Equity accounting of Petmin's joint ventures had no impact on the statement of changes in equity.
Petmin also adopted IFRIC 20: Stripping costs in the production phase of a surface mine with effect from
1 July 2013. The adoption of this interpretation had no impact on these financial statements.
Other than as noted above, the accounting policies have been applied consistently by the Group to all periods
presented in these condensed consolidated preliminary financial statements and are consistent to those applied
by the Group in its consolidated financial statements for the year ended 30 June 2013.
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.
Change in accounting policy: Income Statement
Audited
Year ended Impact of Restated
30 June 2013 change in Year
as previously accounting ended
reported policy 30 June 2013
R'000 R'000 R'000
Revenue 833 490 – 833 490
Cost of sales (664 100) (1 830) (665 930)
Gross profit 169 390 (1 830) 167 560
Operating expenses (589) – (589)
Administration expenses (24 384) 2 030 (22 354)
Results from operating activities 144 417 200 144 617
– Mark to market of listed securities 5 683 – 5 683
Net finance expense (24 172) 3 818 (20 354)
– Finance income 4 306 923 5 229
– Finance expenses (28 478) 2 895 (25 583)
Separately disclosed items:
Impairment of investment in equity accounted investee (200 000) – (200 000)
Share of equity accounted investees, net of tax (1 625) (4 702) (6 327)
Loss before income tax (75 697) (684) (76 381)
Income tax expense (36 335) 684 (35 651)
Loss for the year (112 032) – (112 032)
Earnings per share
Basic earnings per ordinary share (cents) (19,42) – (19,42)
Diluted earnings per ordinary share (cents) (19,42) – (19,42)
Change in accounting policy: Statement of Comprehensive Income
Audited
Year ended Impact of Restated
30 June 2013 change in Year
as previously accounting ended
reported policy 30 June 2013
R'000 R'000 R'000
Loss for the year (112 032) – (112 032)
Other comprehensive income (after tax)
Items that may be reclasssified to profit and loss
Foreign currency translation differences 7 442 – 7 442
Effective portion of changes in fair value of cash flow hedges (2 619) – (2 619)
Other comprehensive income for the year, net of income tax 4 823 – 4 823
Total comprehensive income for the year (107 209) – (107 209)
Change in accounting policy: Statement of Cash Flows
Audited
Year ended Impact of Restated
30 June 2013 change in Year
as previously accounting ended
reported policy 30 June 2013
R'000 R'000 R'000
Profit from operations before finance (expense)/income 144 417 200 144 617
Adjustments for:
– depreciation and amortisation 474 562 (9 851) 464 711
– notional interest 2 250 – 2 250
– profit on disposal of property, plant and equipment (340) 10 (330)
– share options granted 5 932 – 5 932
Operating cash flows before changes in working capital 626 821 (9 641) 617 180
Increase in trade and other receivables (68 270) (30 725) (98 995)
Increase in inventories (62 061) 1 337 (60 724)
Decrease in trade and other payables (42 894) 21 336 (21 558)
Cash generated by operations 453 596 (17 693) 435 903
Income tax paid (37 588) – (37 588)
Finance income 4 306 923 5 229
Finance expenses (28 478) 2 895 (25 583)
Net cash flow from operating activities 391 836 (13 875) 377 961
Cash flows from investing activities
Investment in equity accounted investees (91 765) 26 369 (65 396)
Investment in equity accounted investee – loan to JV – (60 955) (60 955)
Investment in listed shares (2 838) – (2 838)
Acquisition of property, plant and equipment (672 594) 36 962 (635 632)
– to expand operations (130 164) 36 962 (93 202)
– to expand operations – capitalised pre-strip (529 701) – (529 701)
– to maintain operations (12 729) – (12 729)
Proceeds on sale of subsidiary, net of cash disposed 279 906 – 279 906
Proceeds from sale of property, plant and equipment 7 068 (93) 6 975
Net cash flows used in investing activities (480 223) 2 283 (477 940)
Cash flows from financing activities
Treasury shares acquired (1 638) – (1 638)
Repayment of borrowings (78 997) 10 015 (68 982)
Increase in borrowings 286 122 (1 122) 285 000
Dividends paid (28 777) – (28 777)
Net cash flows from financing activities 176 710 8 893 185 603
Net increase in cash and cash equivalents 88 323 (2 699) 85 624
Cash and cash equivalents at beginning of year (113 307) (1 537) (114 844)
Cash and cash equivalents at end of year (24 984) (4 236) (29 220)
Change in accounting policy: Statement of Financial Position
Audited Impact Audited Impact
30 June 2013 of change 30 June 2012 of change
as previously in accounting Restated as previously in accounting Restated
reported policy 30 June 2013 reported policy 30 June 2012
R'000 R'000 R'000 R'000 R'000 R'000
ASSETS
Non-current assets 1 765 955 (97 037) 1 668 918 1 541 541 3 361 1 544 902
Property, plant and equipment 1 425 327 (294 684) 1 130 643 1 042 840 (91 217) 951 623
Investment in equity accounted investee 271 686 167 170 438 856 468 757 94 578 563 335
Loan due from joint venture 30 478 30 477 60 955 – – –
Investments 38 464 – 38 464 29 944 – 29 944
Current assets 374 425 (11 226) 363 199 494 701 (5 467) 489 234
Inventories 163 779 (2 743) 161 036 100 312 – 100 312
Trade and other receivables 201 768 (3 881) 197 887 111 741 (3 930) 107 811
Receivable on sale of subsidiary 1 158 – 1 158 281 064 – 281 064
Current tax assets 2 772 – 2 772 – – –
Cash and cash equivalents 4 948 (4 602) 346 1 584 (1 537) 47
Total assets 2 140 380 (108 263) 2 032 117 2 036 242 (2 106) 2 034 136
EQUITY AND LIABILITIES
Ordinary share capital and reserves 1 273 521 – 1 273 521 1 405 188 – 1 405 188
Share capital 143 575 – 143 575 143 763 – 143 763
Share premium 332 654 – 332 654 334 104 – 334 104
Share option reserve 9 440 – 9 440 3 508 – 3 508
Hedging reserve (2 619) – (2 619) – – –
Foreign currency translation reserve 11 000 – 11 000 3 558 – 3 558
Retained earnings 779 471 – 779 471 920 255 – 920 255
Non-current liabilities 649 478 (81 533) 567 945 262 502 ( 451) 262 051
Interest-free loan 1 122 (1 122) – – – –
Interest-bearing loans and borrowings 372 032 (49 690) 322 342 68 074 – 68 074
Loan due to venturer in joint venture 30 478 (30 478) – – – –
Deferred taxation liabilities 206 658 ( 243) 206 415 172 233 ( 451) 171 782
Environmental rehabilitation provision 39 188 – 39 188 22 195 – 22 195
Current liabilities 217 381 (26 730) 190 651 368 552 (1 655) 366 897
Trade and other payables 131 023 3 730 134 753 157 968 (1 655) 156 313
Current portion of interest-bearing loans and borrowings 51 434 (30 094) 21 340 59 590 – 59 590
Hedge liability 3 637 – 3 637 – – –
Current tax liabilities – – – 34 816 – 34 816
Shareholders for dividend 1 355 – 1 355 1 287 – 1 287
Bank overdraft 29 932 ( 366) 29 566 114 891 – 114 891
Total equity and liabilities 2 140 380 (108 263) 2 032 117 2 036 242 (2 106) 2 034 136
4. Estimates and judgements
The preparation of the condensed consolidated preliminary 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 2013.
5. Review of results
These condensed consolidated preliminary financial statements for the year ended 30 June 2014 have been reviewed
by the Group's auditors, KPMG Inc., who expressed an unmodified review conclusion. A copy of the auditor's review
report is available for inspection at the Company's registered office together with the preliminary financial
statements identified in the auditor's report.
The auditor's review report does not necessarily report on all of the information contained in these financial results.
Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's review
engagement they should obtain a copy of the auditor's report together with the accompanying financial information from
the issuer'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 Restated
Year ended 30 June 2014 Year ended 30 June 2013
Profit for Number of Profit for Number of
the year shares in Per share the year shares in Per share
R'000 thousands in cents R'000 thousands in cents
Basic earnings per share (119 425) 576 908 (20,70) (112 032) 576 908 (19,42)
Share options and contingent consideration* – – – – –
Diluted EPS (119 425) 576 908 (20,70) (112 032) 576 908 (19,42)
Headline earnings per share
Headline earnings per share is based on the Group's headline earnings
divided by the weighted average number of shares in issue during the year.
Reconciliation between earnings and headline earnings per share
Basic EPS (119 425) 576 908 (20,70) (112 032) 576 908 (19,42)
Adjustments:
– Loss on sale of property, plant and equipment 5 999 1,04
– Impairment of equity accounted investees 199 676 34,61 200 000 – 34,67
Headline EPS 86 250 576 908 14,95 87 968 576 908 15,25
Share options and contingent consideration* – – – – – –
Diluted headline EPS 86 250 576 908 14,95 87 968 576 908 15,25
*At the reporting dates, the ruling share price of Petmin's shares was below the strike price of the options.
As the exercise of the options would be anti-dilutive, they have been ingored for the dilution calculations.
7. Investments
7.1 Investment in NAIC
During the year ended 30 June 2014 Petmin invested an additional R68 million (2013: R65 million) in North
Atlantic Iron Corporation (NAIC). Petmin's shareholding in NAIC is now 33% (30 June 2013: 25%).
As announced on 11 June 2014, the NAIC PEA confirmed the viability of NAIC's project, yielding an unlevered after
tax IRR of up to 19.3%. Subject to the key conditions precedent being fulfilled, namely, board, shareholder and
regulatory approval, Petmin intends to exchange its equity in NAIC at a circa ZAR300 million for equity in Muskrat
Minerals Incorporated ("MMI"), whereafter MMI is to list on a major North American Stock Exchange with a secondary
listing on the JSE and Petmin is to distribute the MMI shares to shareholders by way of a special dividend (estimated
value approximately 50 cents per Petmin share). The listing and unbundling is anticipated to take place prior
to 30 June 2015.
7.2 Investment in Iron Bird Resources
During the year ended 30 June 2014, no potential purchasers or merger partners were identified for Iron Bird Resources.
Considering the difficult market conditions experienced by West-African iron ore projects, Petmin has recorded an
impairment expense of R19 million (2013: nil). The carrying value of the project is now zero. Petmin retains its 50%
interest in Iron Bird Resources and the company has renewed its mining licenses over the project area for a period of
two years and Petmin will seek ways to extract value during that time.
7.3 Investment in Red Crescent Resources (RCR)
On 15 April 2014, RCR announced that the offer to purchase the Turkish assets of RCR by Ebullio Resources was withdrawn
by the purchaser. On 25 April 2014, RCR further announced that it would delist from the Toronto Stock Exchange at close
of business on 23 May 2014. RCR has filed for insolvency and management consider it unlikely that ordinary shareholders
will receive any further value from the liquidation. As a result of the above, Petmin has recorded its investment in
RCR at a carrying value of zero.
7.4 Investment in the Veremo Group
The discussions with the controlling shareholders of Veremo over the settlement of the minimum cash payments of R65 million
per year for three years, the first of which was due on 28 February 2013 and the last of which is due on 28 February 2015,
have not resulted in a negotiated settlement acceptable to Petmin. Accordingly, Petmin will continue to pursue the settlement
of its claim.
This has increased the level of uncertainty as to the timing of the development of the project and the resultant cash flows
and Petmin has therefore decided to impair its investments in Veremo Holdings (Pty) Ltd (Veremo) and Veremo Empowerment Holdings (VEH)
by a further R181 million (2013: R200 million) to a combined carrying value of R115 million (2013: R296 million).
As previously reported, the notice of granting of a mining right over the Veremo project area was received on 31 January 2014 and the
notarial execution of the right is expected shortly.
8. Share option scheme
The proposed amendments to the share option schemes as approved at the 21 February 2014 AGM, were not implemented. It is management's
opinion that the Black and Scholes accounting cost to the Company is not commensurate to the actual benefit received by the recipients
of the share options. To account for an option expense that bears little resemblance to the real economic value of the options is of
little use to the users of financial statements. Management will revert in due course with an alternative share-based payment
proposal for shareholder approval.
9. Pre-stripping cost
Year Year
ended ended
Somkhele: Pre-strip costs June 2014 June 2013
Opening balance on balance sheet 328 227
Cash costs incurred in the year 498 530
Mining – expensed on a units of production basis (depreciation) (521) (429)
Closing balance on balance sheet 305 328
Petmin incurred cash stripping costs amounting to R498 million during the year ended 30 June 2014 (2013: R530 million). It is Petmin's
accounting policy to record the cash cost incurred on these stripping activities as additions to mine development cost under property,
plant and equipment (a non-current asset).
These capitalised cash costs are expensed (depreciated) as coal is extracted.This is done on a units-of-production basis over the life
of the component of the ore body to which access is improved and amounted to R521 million during the year ended 30 June 2014
(2013: R429 million). This resulted in a net decrease in the expenditure capitalised to pre-stripping activities of R23 million during
the current year (2013: increase of R100 million).
The depreciation is, in reality, the mining cost (stripping cost) that is expensed during the year when anthracite is produced
(removed from the pit).
10. Liquidity and going concern
The Group remains strongly cash generative and the directors believe that there is sufficient liquidity and funding available to finance
the Group's operations for the foreseeable future and that the going concern assumption is appropriate.
During the year ended 30 June 2014, the Group signed an amendment to its short-term banking facilities with Standard Bank, securing
overdraft facilities of R170 million which are currently unutilised (previously R100 million). Additionally, at 30 June 2014, the Group
had R23 million cash on hand (2013: R29 million overdraft).
11. Inventory
R40,6 million of inventory is plant feed that will only be processed in greater than 12 months.
12. Contingent liability
The dispute with one of Tendele's customers over the interpretation of the contracted qualities of Tendele's energy product (as disclosed
in the reviewed results for the six months ended 31 December 2013 and in note 29 of the audited annual financial statements for the year
ended 30 June 2013) has been rescheduled for arbitration hearings in December 2014. The claimant has revised their position and has now
instituted two claims totalling R60 million (previously R30 million) and a third claim that is contingent should Petmin not be ordered to
perform its contractual obligations under the disputed contract. Tendele and its legal advisors believe that all the claims are unlikely
to be successful hence no liability has been recognised at 30 June 2014.
13. 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.
14. Change in board of directors
As announced on 16 October 2013, it was with deep regret and sadness that the board informed shareholders of the death of John Taylor after
a long illness. John served as a Petmin non-executive director since 2006. He will be greatly missed.
As announced on 3 March 2014, Mr Alwyn Martin retired as a director of Petmin Limited with effect from that date. Mr Martin had been a
non-executive director of Petmin since November 2005 and has played an active role in the Company's development. The board of directors
thanks Mr Martin for his valuable contribution and wishes him well in the future.
As noted in Petmin's June 2013 Integrated Report, with effect from 22 February 2014, Ian Cockerill has assumed the role of non-executive
chairman of Petmin Limited (previously executive chairman).
15. Updated competent person's report (CPR) for the Somkhele Anthracite mine
As announced on 3 March 2014, Petmin received an updated, SAMREC and SAMVAL compliant CPR indicating a base case valuation of the
Somkhele anthracite mine of R1,64 billion.
16. Subsequent events
16.1 Declaration of dividend
On 11 September 2014, the Company announced that it had declared a dividend of 3 cents per share which is in line with the approved
dividend policy. The record date for payment of the cash dividend is 21 November 2014. Please refer to the separate notice of the
declaration of dividend dated 11 September 2014.
16.2 Other subsequent events
There have been no other events that have occurred subsequent to 30 June 2014 and before the condensed preliminary consolidated
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 year ended 30 June 2014
This management commentary has been prepared by management and has not been reviewed by the Group's auditors.
(i) General overview of performance
Following a strong operational performance at Somkhele, Petmin's headline earnings were maintained at 15 cents per share and normalised
earnings (see table below) were up 24% from 2013, this was despite significantly weaker market conditions for metallurgical coal.
Headline earnings included a mark to market expense of R14 million (2013: profit of R6 million) on Petmin's investment in
Red Crescent Resources (RCR).
The loss per share for the year ended 30 June 2014 increased by 7% to 20,70 cents (2013: 19,42 cents). The loss for the year ended
30 June 2014 was as a result of the impairment of the investment in Veremo of R181 million (2013: R200 million) and the impairment
of Iron Bird of R19 million (2013: nil).
Actual Actual Actual Actual
Year ended six months ended six months ended Year ended
Like for Like 30 June 2014 30 June 2014 31 December 2013 30 June 2013
Profit/(loss) for the period (119 425) (152 191) 32 766 (112 032)
Adjust for after-tax effect of:
– Loss on sale of property, plant and equipment 5 999 – 5 999 –
– Mark to market of listed investments 13 464 3 751 9 713 (5 683)
– Impairments 200 834 199 676 1 158 200 000
– NRV impairment of inventory 6 703 5 557 1 146 –
– Reversal of accrual (5 855) – (5 855) -
Normalised profit after tax for the period 101 720 56 793 44 927 82 285
Adjusted profit per share 17,63 9,84 7,79 14,26
% annual increase 24
Capital expenditure at Somkhele reduced significantly as the major capital projects have been completed.The table below summarises
the Group's capital expenditure for the year ended 30 June 2014:
Restated
Year ended Year ended
30 June 2014 30 June 2013
R'000 R'000
Total capital expenditure – excluding pre-strip 45 106
Somkhele 39 95
Group 6 11
Capital expenditure at Somkhele anthracite mine 39 95
Third wash plant 3 62
Exploration, development, resource definition 21 32
Other items 15 1
Capital pre-strip (23) 100
Capital expenditure including pre-strip 22 206
Additionally, Petmin invested a further R68 million in NAIC (2013: R65 million) and its loan to the joint venture company,
Somkhele Plant (Pty) Ltd, increased by R6 million (2013: R61 million).
The Group's operations remain cash generative, generating R668 million (2013: R378 million).
Petmin's interest-bearing debt to equity ratio (net of cash on hand) decreased to 29.19% at 30 June 2014 from the 29.28%
recorded at 30 June 2013. During the year ended 30 June 2014, Petmin drew the final R40 million of the R325 million
Standard Bank loan facilities.
Anthracite Division
Somkhele Anthracite mine
Year ended Percentage Year ended
Somkhele production performance 30 June 2014 change 30 June 2013
Run of Mine (ROM) tonnes washed 2 688 563 29 2 078 360
Yield (%) 41,85 6 39,57
Anthracite saleable tonnes produced 1 125 089 37 822 431
Anthracite tonnes sold 1 026 250 28 802 325
Discard tonnes washed 1 174 419 58 744 547
Yield (%) 20,80 (37) 33,28
Energy coal saleable tonnes produced 244 298 18 207 238
Anthracite saleable tonnes produced from discard – (100) 40 518
Energy coal sold 174 556 (2) 178 559
Production of saleable anthracite increased by a pleasing 37% in the year ended 30 June 2014 with improved volumes
and yields achieved.
Somkhele sales performance Year ended Percentage Year ended
Volume 30 June 2014 change 30 June 2013
Inland anthracite – tonnes sold 553 194 25 442 540
Export anthracite – tonnes sold 473 056 31 359 785
Total anthracite tonnes sold 1 026 250 28 802 325
Energy coal tonnes sold 174 556 (2) 178 559
Price
Inland anthracite selling price (at mine gate) – R 1 014 3 983
Export anthracite selling price (at mine gate) – R 598 (27) 823
Export price R (FOB) 805 (21) 1 020
Export price US$ (FOB) 78 (31) 112
Average Rand Dollar exchange rate achieved 10,36 14 9,07
Energy coal selling price (at mine gate) – R 240 28 188
The pleasing increase in sales volumes of 28% was offset by a 27% reduction in at-mine-gate export prices reflecting the tough
international market conditions for metallurgical coal.
As disclosed in Petmin's financial statements for the year ended 30 June 2013, sales of energy coal were suspended in the period
July 2013 to September 2013 during the dispute with the energy coal customer (refer to note 11 of these preliminary financial statements).
Sales have resumed with new customers.
Expansion projects division
Petmin's strategy remains focused on the steel value chain and commodities required for infrastructure development and urbanisation.
During the year ended 30 June 2014, Petmin's expansion projects made the following progress:
North Atlantic Iron Corporation ("NAIC")
At NAIC, the Preliminary Economic Assessment (PEA) was finalised, concluding that the project was viable. Subsequent to the publishing
of the PEA, management is in the process of finalising the site selection and process optimisation studies. Talks have also commenced
with funding and development agencies to ascertain the availability of funding guarantees and incentives for the capital build programme.
Iron Bird Resources Plc. ("Iron Bird")
The mining licenses at Iron Bird Resources have been extended and Petmin retains its 50% interest in Iron Bird. Petmin and its joint
venture partners continue to seek a merger partner or purchaser for the investment in the Mt Ginka iron ore project in northern Liberia.
Iron-ore – South Africa (Veremo project)
The Department of Mineral Resources has notified Veremo that it has been awarded a Mining Right for the Veremo project. The mining right
awaits official notarial registration. The Veremo project management team has conducted preliminary smelt tests and has engaged the
services of Mintek to complete their assessment of the economic viability of extracting a marketable product from the waste titanium slag.
(ii) Prospects
Anthracite division
Current anthracite production and sales levels are expected to be maintained in the year ahead, while cost reduction and mine optimisation
studies remain a key focus for management.
Local demand and prices are expected to remain stable.
Prices for our various export products are expected to be in the range of $65 to $85 per tonne in this period as international prices remain
under pressure.
Energy coal sales are expected to increase to approximately 400 000 tonnes per annum with prices remaining stable and forecast to improve
marginally towards the end of the reporting period.
Capital expenditure to June 2015 is expected to be approximately R91 million with no additional capital pre-stripping forecast to June 2015.
Expansion projects division
Petmin intends to invest a further US$6 million to take its shareholding in NAIC to 40%.
The proposed unbundling of Petmin's interest in NAIC to shareholders is expected to be completed before 30 June 2015.
Petmin continues to investigate opportunities that meet its investment criteria with the aim to create value and to deliver superior returns
to stakeholders.
Additional details on Petmin, including a detailed presentation on the results (which will be available from 11 September 2014) can be found
on our website www.petmin.co.za.
By order of the Board
ID Cockerill JC du Preez
Non-executive Chairman Chief Executive Officer
Johannesburg
11 September 2014
Directors: I Cockerill# (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* T Petersen*
*Non-executive #British †American
Registered office: 37 Peter Place Bryanston 2021
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
Company secretary: Mondial Consultants (Proprietary) Limited
Transfer secretaries: JSE: Computershare Investor Services (Proprietary) Limited
Auditors: KPMG Inc.
A PDF version of these results is available on our website: www.petmin.co.za
www.petmin.co.za
Date: 11/09/2014 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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