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Press Release on Petmin’s 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
Share Code JSE: PET
ISIN: ZAE000076014
("Petmin" or the "Company")
11 September 2014
PRESS RELEASE ON PETMIN'S CONDENSED CONSOLIDATED PRELIMINARY FINANCIAL STATEMENTS FOR THE
YEAR ENDED 30 JUNE 2014
Robust operating performance from Petmin results in normalised profit after tax up 24% to R102m
(2013: R82m) as anthracite product sales exceed a million tonnes
Financial highlights
* Normalised profit after tax up 24% from 14.26 cents per share to 17.63 cents per share despite
27% reduction in at-mine-gate export prices
* Petmin annual revenue exceeds R1 billion for the first time
* Net cash flow from operating activities up 77% to R668m (2013: R378m)
* Somkhele independently valued at R1.64 billion (R 2.84 per share)
* NAIC to be unbundled via a dividend in specie of approximately 50 cents per share
* Headline earnings per share (HEPS) 14.95 cents (2013: 15.25 cents)
* A dividend declared of three cents per share
Operating highlights
* Lost Time Injury Frequency Rate (LTIFR) of zero at Somkhele anthracite mine
* Anthracite production exceeds one million tonnes at Somkhele for the first time
* Year-on-year production of saleable anthracite increased 37% and sales volumes increased
28%
* NAIC pre-economic feasibility study confirms economic and technical viability
* Shareholding in North Atlantic Iron Corporation (NAIC) increased to 33%
* Mining right granted for Veremo pig iron project
JSE-listed diversified miner Petmin has reported a robust operational performance for the year ended 30
June 2014, with revenue in excess of R1 billion and anthracite production and sales from Somkhele over
a million tonnes for the first time.
Headline earnings were maintained at 15 cents per share and normalised earnings were up 24% from
2013 despite significantly weaker market conditions for metallurgical coal, with at-mine-gate export
anthracite prices declining by 27% year on year. Ex-mine-gate revenue for export material was R 225 per
tonne lower than in 2013. If prices had remained stable, Petmin would have earned an additional R77m
after tax. This would have resulted in an additional 13 cents per share like-for-like earnings of 30 cents
per share, up approximately 100% from the 14 cents per share in the 12 months to June 2013.
Somkhele reported a significant improvement in production and sales between the first six months (to
end-Dec 2013) and second six months (to end-June 2014). Production of anthracite climbed 10% from
534,523 to 590,566 tonnes; and sales of anthracite climbed 94% from 349,414 tonnes to 676,836
tonnes. Domestic sales of anthracite were up 30% from 240,861 tonnes to 312,333 tonnes; and export
sales up 236% from 108,553 tonnes to 364,503 tonnes. Sales of energy coal from Somkhele climbed
477% from 25,777 tonnes to 148,779 tonnes.
Petmin's operations remain strongly cash generative, generating R668m in the year under review (2013:
R378m).
"We are very pleased with a robust performance delivered by our Somkhele anthracite mine, despite
downward pricing pressure, and with the solid progress at the NAIC pig iron industrial project in Canada
and the US," said Petmin chief executive Jan du Preez. "Our focus for the year ahead is on maintaining
our safety record and production levels, to continue striving for productivity and efficiency
improvements at Somkhele, and concluding the distribution of the dividend in specie in NAIC."
Petmin has declared a dividend of 3 cents per share in line with its approved dividend policy.
The loss per share for the year ended 30 June 2014 increased by 7% to 20.70 cents (2013: 19.42 cents).
The loss was a result of the impairment of the investment in the Veremo pig iron project of R181m
(2013: R200m) and the impairment of Iron Bird of R19m (2013: nil).
Petmin's capital expenditure for the year ended 30 June 2014 was significantly reduced following
conclusion of major capital projects. Capital expenditure, excluding pre-strip costs, for the reporting
period was R45m (2013: R106m) including R39m for Somkhele (2013: R95m). Somkhele capital
expenditure included R3m on the third wash plant and R21m on exploration and resource definition.
Petmin invested a further R68m in NAIC (2013: R65m) and its loan to its joint venture company,
Somkhele Plant (Pty) Ltd, increased by R6m (2013: R61m).
During the year ended 30 June 2014, Petmin amended its short-term banking facilities with Standard
Bank and secured overdraft facilities of R170m (previously R100m). At 30 June 2014 the Group had net
cash on hand of R23m (2013: R29m overdraft) and unutilised short term facilities of R 170 million.
Somkhele
Production of saleable anthracite increased by 37% to 1,125,089 tonnes (2013: 822,431 tonnes) in the
year ended 30 June 2014 with yield up 6% from 39.57% to 41.85%. Sales of anthracite increased 28% to
1,026,250 tonnes (2013: 802,325).
Increased sales volumes were offset by a 27% reduction in at-mine-gate export prices, reflecting tough
international market conditions for metallurgical coal.
Year-on-year production of energy coal at Somkhele was up 18% to 244,298 tonnes (2013: 207,238
tonnes) and sales of energy coal down 2% to 174,556 tonnes (2013: 178,559 tonnes) following
suspension of sales between July 2013 and September 2013 during a dispute with the energy coal
customer. Sales have resumed with new customers.
Current levels of anthracite production and sales are expected to be maintained in the year ahead with
local demand and prices expected to remain stable. Prices for metallurgical anthracite exports are
expected to be in the range of $65 to $85 per tonne in the year ahead as international prices remain
under pressure.
Energy coal sales are expected to increase to approximately 400,000 tonnes per annum with prices
stable and forecast to improve marginally towards the end of the reporting period.
Capital expenditure at Somkhele to June 2015 is expected to be approximately R91m with no additional
capital pre-stripping forecast to June 2015.
As previously disclosed, the dispute with one of Somkhele's customers over the interpretation of the
contracted qualities of energy coal has been rescheduled for arbitration hearings in December 2014.
Petmin and its legal advisors believe the claims by the customer are unlikely to be successful, hence no
liability has been recognised at 30 June 2014.
As announced on 3 March 2014, Petmin received an updated and independent SAMREC- and SAMVAL-
compliant Competent Person's Report indicating a base case valuation of the Somkhele anthracite mine
of R1.64 billion.
North Atlantic Iron Corporation (NAIC)
During the year ended 30 June 2014, Petmin invested an additional R68m (2013: R65m) in the North
Atlantic Iron Corporation (NAIC). Petmin's shareholding in NAIC is now 33% (2013: 25%). During the year
to end-June 2015, Petmin intends to invest a further US$6m to take its shareholding in NAIC to 40%.
A Preliminary Economic Assessment (PEA) was finalised for the NAIC pig iron industrial project in Canada
and the USA, concluding that the project was viable, yielding an unlevered after tax IRR of up to 19.3%.
Management is finalising the site selection and process optimisation studies. Talks have also
commenced with funding and development agencies to determine the availability of funding guarantees
and incentives for the capital build programme.
Subject to board, shareholder and regulatory approval, Petmin intends to exchange its equity in NAIC at
a circa R300m for equity in Muskrat Minerals Incorporated (MMI), where after MMI will list on a major
North American stock exchange with a secondary listing on the JSE. Petmin will distribute the MMI
shares to its shareholders by way of a special dividend (estimated value approximately 50 cents per
Petmin share). The listing and unbundling is anticipated to take place before 30 June 2015.
Bradley Doig, Petmin Business Development Director, said: "We are pleased with the progress made
during the year by NAIC and remain convinced that NAIC can yield significant value for Petmin
shareholders."
Veremo pig iron project
The Department of Mineral Resources has awarded a Mining Right for the Veremo pig iron project in
Mpumalanga and it awaits notarial registration.
The Veremo project management team has conducted preliminary smelt tests and engaged the services
of Mintek to complete an assessment of the economic viability of extracting a marketable product from
the waste titanium slag.
The discussions with the controlling shareholders of Veremo over the settlement of the minimum cash
payments of R65m 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 R181m (2013: R200m) to a
combined carrying value of R115m (2013: R296 million).
Iron Bird Resources Plc. (Iron Bird)
Mining licenses at Iron Bird Resources have been extended and Petmin retains its 50% interest in Iron
Bird and the Mt Ginka iron ore project in northern Liberia. Petmin and its joint venture partners
continue to seek a merger partner or purchaser for the investment in Iron Bird.
Considering the difficult market conditions experienced by West-African iron ore projects, Petmin has
recorded an impairment expense of R19m (2013: nil). The carrying value of the project is now zero.
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. Petmin has therefore recorded its entire investment in RCR at a
carrying value of zero.
Live call and Q&A with Petmin management
Analysts, investors and media are invited to join a call with Petmin management at 11h00 on Thursday
11 September 2014. Dial in details below.
A transcript and recording will be available on the Petmin website www.petmin.co.za after the call.
A detailed presentation will be made available on www.petmin.co.za from Monday 15 September 2014
Live Call Access Numbers For Participants
Country Access Number
Australia - Toll-Free 1 800 350 100
Other Countries - International +27 11 535 3600
Other Countries - International +27 10 201 6800
South Africa - Cape Town 021 819 0900
South Africa - Durban 031 812 7600
South Africa - Johannesburg Neotel 011 535 3600
South Africa - Johannesburg Telkom 010 201 6800
UK - Toll-Free 0808 162 4061
USA and Canada - Toll Free 1 855 481 5362
Playback Access Numbers
Country Access Number
Other Countries - International +27 11 305 2030
South Africa 011 305 2030
UK - Toll Free 0808 234 6771
USA and Canada - Toll Free 1 855 481 5363
Enquiries:
Petmin
Bradley Doig
+27 11 706 1644
Media
Jonathon Rees
Jonathon@proofafrica.co.za
+27 76 185 1827
Sponsor and Corporate Advisor (JSE)
River Group
Andrew Lianos
+27 834 408 365
JOHANNESBURG
11 September 2014
Date: 11/09/2014 08:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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