Wrap Text
Condensed Consolidated Preliminary Financial Statements for the year ended 30 June 2015
PETMIN LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 1972/001062/06)
JSE code: PET ISIN: ZAE000076014
("Petmin" or "the Group")
Condensed Consolidated Preliminary Financial Statements
for the year ended 30 June 2015
Headline earnings per share (HEPS) 24.28 cents, up 62% (2014: 14.95 cents) as disciplined management and cost controls
pay off.
Salient features:
- Normalised earnings increase by 30% to R132.1 million (2014: R101.7 million)
- R901 million net cash flow from operating activities up 35% (2014: R668 million)
- Shareholding in North Atlantic Iron Corporation (NAIC) increased to 35% (2014: 33%). Site selected for first plant
and detailed engineering designs underway.
- Agreement reached with local community and Nedbank for a R350 million finance package for broad-based BEE
transaction granting the local community and employees a 20% stake in the Somkhele anthracite mine. The
transaction remains subject to shareholder approval.
Preparation
These condensed consolidated preliminary financial statements for the year ended 30 June 2015 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 2015 have been reviewed by the
Group's auditors, KPMG Inc., (refer to Note 6 of these financial statements).
Condensed Consolidated Preliminary Income Statement
for the year ended 30 June 2015
Reviewed Audited
Year ended Year ended
30 June 30 June
2015 2014
Note R'000 R'000
Revenue 1 274 165 1 019 789
Cost of sales (1 020 531) (824 760)
Gross profit 253 634 195 029
Operating expenses (19 861) (14 527)
Administration expenses (16 605) (20 597)
Profit from operating activities 217 168 159 905
– Fair value adjustments on listed securities – (13 464)
Net finance expense (32 521) (32 546)
– Finance income 7 317 6 537
– Finance expenses (39 838) (39 083)
Separately disclosed items:
Impairment of investments in equity accounted investees, net of tax (3 317) (199 676)
Impairment loss on property, plant and equipment (3 747) –
Share of profit of equity accounted investees, net of tax 2 397 7 813
Profit/(Loss) before income tax 179 980 (77 968)
Income tax expense (54 937) (41 457)
Profit/(Loss) for the year 125 043 (119 425)
Earnings per share
Basic earnings/(loss) per ordinary share (cents) 7 22.98 (20.70)
Diluted earnings/(loss) per ordinary share (cents) 7 22.98 (20.70)
Condensed Consolidated Preliminary Statement of Comprehensive Income
for the year ended 30 June 2015
Reviewed Audited
Year ended Year ended
30 June 30 June
2015 2014
R'000 R'000
Profit/(Loss) for the year 125 043 (119 425)
Other comprehensive income (after tax)
Items that may be reclasssified to profit or loss
Foreign currency translation (losses)/gains on equity accounted investees (3 437) 6 862
Share of fair value gain in equity accounted investee 54 583 16 251
Cash flow hedges reclassified to profit or loss – 2 619
Other comprehensive income for the year, net of income tax 51 146 25 732
Total comprehensive income/(loss) for the year 176 189 (93 693)
Condensed Consolidated Preliminary Statement of Financial Position
as at 30 June 2015
Reviewed Audited
30 June 30 June
2015 2014
Note R'000 R'000
ASSETS
Non-current assets 1 569 463 1 552 484
Property, plant and equipment 1 062 878 1 122 531
Investment in equity accounted investee 9 420 452 337 572
Loan due from joint venture 61 133 67 381
Investments 25 000 25 000
Current assets 621 395 482 951
Inventories 12 250 118 264 532
Trade and other receivables 110 249 121 549
Current tax assets 3 681 2 095
Cash and cash equivalents 257 347 94 775
Total assets 2 190 858 2 035 435
EQUITY AND LIABILITIES
Ordinary share capital and reserves 1 284 849 1 169 304
Share capital 136 026 143 150
Share premium 292 438 328 927
Share option reserve 20 297 20 297
Foreign currency translation reserve 14 425 17 862
Retained earnings 821 663 659 068
Non-current liabilities 451 362 602 692
Interest bearing loans and borrowings 108 405 289 159
Deferred taxation liabilities 258 632 246 670
Environmental rehabilitation provision 84 325 66 863
Current liabilities 454 647 263 439
Trade and other payables 136 864 115 182
Revenue in advance 13 147 562 –
Current portion of interest bearing loans and borrowings 143 671 75 042
Hedge liability 4 628 –
Shareholders for dividend 1 513 1 339
Bank overdraft 20 409 71 876
Total equity and liabilities 2 190 858 2 035 435
Condensed Consolidated Preliminary Statement of Cash Flows
for the year ended 30 June 2015
Reviewed Audited
Year ended Year ended
30 June 30 June
2015 2014
R'000 R'000
Profit from operating activities before finance (expense)/income 217 168 159 905
Adjustments for:
– depreciation 559 692 567 215
– notional interest 3 064 2 250
– Loss on disposal of property, plant and equipment 12 8 332
– long-term rehabilitation expenditure incurred – (429)
– Impairment of receivable on sale of subsidiary – 1 158
– reversal of accrual – (8 132)
– write down to net realisable value of inventory 27 590 1 591
– share options granted – 10 857
Operating cash flows before changes in working capital 807 526 742 747
Decrease in trade and other receivables 11 300 76 338
Increase in inventories (13 175) (105 087)
Increase/(Decrease) in trade and other payables 21 466 (11 440)
Increase in revenue received in advance 147 562 –
Increase in hedging liability 4 628 –
Cash generated by operations 979 307 702 558
Income tax paid (46 133) (1 542)
Interest received 7 317 6 537
Interest paid (39 838) (39 083)
Net cash flow from operating activities 900 653 668 470
Cash flows from investing activities
Acquistion of subsidiary (net of cash acquired) 8 (11 974) –
Investment in equity accounted investees 9 (32 115) (67 459)
Decrease/(Increase) in loans to equity accounted investees 5 709 (6 434)
Acquisition of property, plant and equipment (475 639) (542 580)
– to expand operations (11 276) (25 326)
– to expand operations – capitalised pre-strip 10 (447 745) (497 773)
– to maintain operations (16 618) (19 481)
Proceeds from sale of property, plant and equipment – 1 000
Net cash flows used in investing activities (514 019) (615 473)
Cash flows from financing activities
Treasury shares acquired 7 (43 613) (4 152)
Repayment of borrowings (112 125) (19 562)
Increase in borrowings – 40 081
Dividends paid (16 857) (17 245)
Net cash flows from financing activities (172 595) (878)
Net increase in cash and cash equivalents 214 039 52 119
Cash and cash equivalents at beginning of year 22 899 (29 220)
Cash and cash equivalents at end of year 236 938 22 899
Condensed Consolidated Preliminary Statement of Changes in Equity
for the year ended 30 June 2015
Cash Foreign
Share flow currency
Share Share option hedging translation Retained
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 2013 143 575 332 654 9 440 (2 619) 11 000 779 471 1 273 521
Total comprehensive income for the year, net of income tax – – – 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
Dividends paid – – – – – (17 229) (17 229)
Balance at 30 June 2014 143 150 328 927 20 297 – 17 862 659 068 1 169 304
Total comprehensive income for the year, net of income tax – – – – (3 437) 179 626 176 189
Profit for the year – – – – – 125 043 125 043
Share of fair value gain in equity accounted investee – – – – – 54 583 54 583
Foreign currency translation differences – – – – (3 437) – (3 437)
Transactions with owners, recorded directly in equity (7 124) (36 489) – – (17 031) (60 644)
Treasury shares acquired during the year (7 124) (36 489) – – – – (43 613)
Dividends paid – – – – – (17 031) (17 031)
Balance at 30 June 2015 136 026 292 438 20 297 – 14 425 821 663 1 284 849
Segment reporting
Segment information is presented in the 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 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 2015 2014 2015 2014 2015 2014 2015 2014
Anthracite – Saleable tonnes produced (tonnes) 1 335 233 1 125 089 – – – – 1 335 233 1 125 089
Anthracite – Tonnes sold (tonnes) 1 222 150 1 026 250 – – – – 1 222 150 1 026 250
Energy – saleable tonnes produced (tonnes) 368 413 244 298 – – – – 368 413 244 298
Energy – tonnes sold (tonnes) 352 255 174 556 – – – – 352 255 174 556
Segment revenue R'000 1 274 165 1 019 789 – – – – 1 274 165 1 019 789
Segment finance (expense)/income R'000
Finance income R'000 6 615 5 768 – – 702 769 7 317 6 537
Mark to market of listed securities R'000 – – – (13 464) – – – (13 464)
Finance expense R'000 (35 517) (35 576) – – (4 321) (3 507) (39 838) (39 083)
Segment profit/(loss) before tax R'000 184 201 149 782 (2 448) (198 725) (1 773) (29 025) 179 980 (77 968)
Segment tax expense R'000 (50 220) (39 237) – – (4 717) (2 220) (54 937) (41 457)
Segment profit/(loss) after tax R'000 133 981 110 545 (2 448) (198 725) (6 490) (31 244) 125 043 (119 425)
Segment capital expenditure – combined R'000 473 835 562 791 – – 1 804 5 644 475 639 568 434
Segment capital expenditure R'000 26 090 65 018 – – 1 804 5 644 27 894 70 662
Segment capital expenditure – pre-strip* R'000 447 745 497 773 – – – – 447 745 497 773
Segment depreciation – combined R'000 559 324 566 824 – – 368 391 559 692 567 215
Segment depreciation R'000 54 433 45 837 – – 368 391 54 801 46 228
Segment depreciation – pre-strip* R'000 504 891 520 987 – – – – 504 891 520 987
Share option costs included in segment
profit/(loss) before tax R'000 – – – – – 10 857 – 10 857
Segment assets R'000 1 727 114 1 667 713 430 161 352 018 33 583 15 704 2 190 858 2 035 435
Percentage of segment assets to total assets (percent) 79 82 20 17 1 1 100 100
Segment liabilities R'000 949 784 1 037 165 – – (43 776) (171 034) 906 008 866 131
Percentage of segment liabilities to total liabilities (percent) 105 120 – – (5) (20) 100 100
(*) See note 10.
Notes to the Condensed Consolidated Preliminary Financial Statements
for the year ended 30 June 2015
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 2015 comprise the Company and its subsidiaries and the Group’s interests in associates and
joint arrangements (together referred to as the "Group").
The condensed consolidated preliminary financial statements were authorised for issue by the directors on 8 September
2015.
2 Basis of preparation
The condensed consolidated preliminary 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 preliminary financial
statements are in terms of IFRS and are consistent with those applied in the previous consolidated annual financial
statements.
3. Accounting policies
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 2014.
4. Functional and presentation currency
The condensed consolidated preliminary 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.
5. 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 on-going 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 2014.
6. Review of results
These condensed consolidated preliminary financial statements for the year ended 30 June 2015 have been reviewed by the
Group’s auditors, KPMG Inc., who expressed an unmodified review conclusion. 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 review report from the Company’s registered office at 37 Peter Place, Bryanston, 2021, Johannesburg or
at www.petmin.co.za, together with the preliminary financial statements identified in the auditor’s report.
7. 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 Audited
Year ended Year ended
30 June 30 June
2015 2014
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 125 043 544 100 22.98 (119 425) 576 908 (20.70)
Share options and contingent consideration* – – – – –
Diluted EPS 125 043 544 100 22.98 (119 425) 576 908 (20.70)
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 period.
Reconciliation between earnings and headline earnings per share Basic EPS 125 043 544 100 22.98 (119 425) 576 908 (20.70)
Adjustments:
– Loss on sale of property, plant and equipment 9 – 0.00 5 999 – 1.04
– Impairment of property, plant and equipment 3 747 – 0.69 – – –
– Impairment of equity accounted investees 3 317 – 0.61 199 676 – 34.61
Headline EPS 132 116 544 100 24.28 86 250 576 908 14.95
Share options and contingent consideration* – – – – – –
Diluted headline EPS 132 116 544 100 24.28 86 250 576 908 14.95
(*) 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.
During the year ended 30 June 2015, the Group acquired 28 496 778 of its own shares at an average acquisition price of
R1.53 per share. At 30 June 2015, the Group held 32 808 234 of its own shares in treasury stock, representing 5.69% of
the total issued shares.
8. Acquisition of subsidiary
As previously disclosed in the Interim results for the six months ended 31 December 2014, on 1 December 2014, Petmin
acquired 100% of the shares and loans of West Road Property 1 Proprietary Limited (WRP) for a total purchase
consideration of R12.5 million. WRP owns the premises occupied by the Petmin corporate team. The acquisition has been
treated as an asset acquisition.
The acquisition had the following effect on the Group’s assets and liabilities at acquisition on 1 December 2015.
Recognised values
Deferred tax (1 512)
Fixed assets 13 750
Bank and cash 526
Creditors (264)
12 500
Paid in cash (12 500)
Cash acquired 526
Net cash outflow (11 974)
9. Investments
9.1 Investment in NAIC
During the year ended 30 June 2015 Petmin invested an additional R29 million (2014: R68 million) in North Atlantic Iron
Corporation (NAIC). Petmin’s shareholding in NAIC is now 35% (30 June 2013: 33%).
9.2 Investment in CPF – Companhia Portuguesa Do Ferro, S.A. (CPF)
During the year ended 30 June 2015, Petmin invested R3 million in the Moncorvo iron-ore to pig-iron project held by CPF.
Petmin’s deal with CPF was structured as stepped investments to assist funding of the project feasibility studies in
three phases, ultimately taking Petmin’s shareholding to 40%. The first tranche investment resulted in Petmin acquiring
a 10% shareholding in CPF and was used to fund metallurgical test work. After receipt of initial metallurgical test
results that did not meet Petmin’s investment criteria, Petmin has decided to fully impair its investment in CPF. Petmin
remains a shareholder in the project and will reassess its strategy for the project going forward.
10. Pre-stripping cost
Year ended Year ended
30 June 2015 30 June 2014
R’million R million
Opening balance in statement of financial position 305 328
Cash spend for the year 448 498
Mining – expensed on a units-of-production basis (depreciation) (505) (521)
Closing balance in statement of financial position 248 305
Petmin incurred cash stripping costs amounting to R448 million during the year ended 30 June 2015 (2014: R498 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 R505 million during the
year ended 30 June 2015 (2014: R521 million). This resulted in a net decrease in the expenditure capitalised to
pre-stripping activities of R57 million during the current year (2014: R23 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).
11. 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.
12. Inventory
R20.8 million (2014: R40.6 million) of inventory is plant feed that will only be processed in greater than 12 months.
Inventory is recorded net of net realisable value provisions amounting to R27.6 million (2014: R3.4 million) after
taking into account the depressed state of the market.
13. Revenue in advance
During the year ended 30 June 2015, Petmin received prepayments for certain export sales, the prepayment recorded at 30
June 2015 is dollar denominated and interest is accrued on the outstanding balance at a rate of 3.5% per annum.
14. Contingent liability
As announced on 21 May 2015, Petmin’s subsidiary Tendele Coal Mining (Pty) Limited, has withdrawn from the arbitration
with its customer, as described in Note 13 of Petmin's December 2014 Interim Financial Statements published on SENS on
Tuesday 24 February 2015 and will now seek declaratory relief from the High Court that the contract concerned is void.
This course of action has been taken due to information recently coming to Tendele's and Petmin's attention during the
course of the arbitration proceedings which is being considered and dealt with by Petmin.
Tendele and its legal advisors believe that the claims that were subject to the arbitration are unlikely to be
successful hence no liability has been recognised at 30 June 2015.
15. Broad-based BEE transaction for Tendele Coal Mining (Pty) Ltd (Tendele)
On 10 June 2015, Petmin announced a R350 million Broad-Based Black Economic Empowerment deal with the community around
its mine (the beneficiaries being the children of the community) and with its employees for a 20% stake in Somkhele
anthracite mine
The transaction is subject to the approval of Petmin shareholders at a general meeting. The transaction circular is
expected to be distributed to shareholders during September 2015, with the General Meeting expected to be held before
the end of October 2015.
16. 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 (None of these related parties include management or directors of
Petmin.).
17. Subsequent events
17.1 Declaration of dividend
On 8 September 2015, the Company announced that it had declared a dividend of 5 cents per share which is in line with
the approved dividend policy. The record date for payment of the cash dividend is 16 October 2015. Please refer to the
separate notice of the declaration of dividend dated 8 September 2015.
17.2 Customer entered into business rescue
On 26 August 2015, Tendele was informed that one of its local customers, International Ferro Metals (SA) (Pty) Limited
(IFMSA) has entered into Business Rescue. All amounts due by IFMSA to Tendele that were included in accounts receivable
at 30 June 2015 have been paid. Accounts receivable for deliveries made after 30 June 2015 to IFMSA amount to
approximately R10 million and are subject to the Business Rescue Process.
17.3 Change in role of director
On 8 September 2015, the Company announced that Mrs Lebo Mogotsi, the current executive Deputy Chairperson of Petmin,
will assume the role of non-executive Deputy Chairperson with effect from the Company’s annual general meeting (AGM) to
be convened later this year.
Mrs Mogotsi will remain on the Board and will be available on a consulting basis to Petmin, and will continue to be an
integral part of the strategy, development and growth of the Company.
17.4 Wage agreement
As announced on 6 August 2015, Tendele concluded a two-year wage agreement with NUM and AMCU, effective from 1 July
2015, comprising a Total Cost to Company (TCTC) increase of 8.6% for 2015/2016 and 6.5% for 2016/2017. In addition, a
three-year wage agreement was signed with Solidarity comprising a TCTC increase of 6% for 2015/2016, 6.5% for 2016/2017
and 7% for 2017/2018. A TCTC increase of less than 6% for 2015/2016 was agreed with mine management.
17.5 Other subsequent events
There have been no other events that have occurred subsequent to 30 June 2015 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 2015
This management commentary has been prepared by management and has not been reviewed by the Group’s auditors.
(i) General overview of performance
During the year under review, Tendele continued with its excellent safety record. Tendele’s management and all its
employees are commended for their efforts regarding safety, efficiencies, productivity and cost control.
Following another strong operational performance at Somkhele, Petmin’s headline earnings increased by 62% to 24.28 cents
per share (2014: 14.95 cents). Normalised earnings (see table below) have shown steady growth over the past two years
and were up 30% to R132.1 million (2014: R101.7 million; 2013: R82.3 million).
Basic earnings per share was 22.98 cents per share, compared to the loss of 20.70 per share for 2014. The loss for the
year ended 30 June 2014 was as a result of the impairment of the investment in Veremo of R181 million and the impairment
of Iron Bird of R19 million.
Year ended Year ended Year ended
Normalised earnings 30 June 2015 30 June 2014 30 June 2013
Profit/(loss) for the year 125 043 (119 425) (112 032)
Adjust for after-tax effect of:
– Loss on sale of property plant and equipment 9 5 999 –
– Mark to market of listed investments – 13 464 (5 683)
– Impairments 7 064 200 834 200 000
– NRV impairment of inventory – 6 703 –
– Reversal of accrual – (5 855) –
Normalised profit after tax for the year 132 116 101 720 82 285
Normalised profit per share 24.28 17.63 14.26
% annual increase in profit per share 38 24
Group capital expenditure, excluding pre-stripping, reduced by R17 million to R28 million (2014: R45 million) as capital
expenditure at Somkhele was R26 million, down R13 million from the R39 million spent in 2014.
Additionally, Petmin made the following investments in subsidiaries and equity accounted investees:
- Petmin acquired 100% of the shares and loans in WRP, whose only asset is the office building which houses the
Petmin corporate team, for a total purchase consideration of R12.5 million.
- Petmin invested an additional R29 million (2014: R68 million) in NAIC, taking its shareholding in NAIC to 35%
(2014: 33%).
- Petmin invested R3 million for a 10% shareholding in CPF which was subsequently impaired following test results
which did not meet Petmin’s investment criteria.
Petmin’s interest bearing debt to equity ratio (net of cash on hand) decreased to 12.56% at 30 June 2015 from the 29.19%
recorded at 30 June 2014. During the year ended 30 June 2015, Petmin received prepayments for certain export sales, the
prepayment recorded at 30 June 2015 is dollar denominated and interest is accrued on the outstanding balance at a rate
of 3.5% per annum.
Dividends and share buy-backs
During the year ended 30 June 2015, Petmin paid a dividend of 3 cents per share and also acquired 28 496 778 of its own
shares at an average acquisition price of R1.53 per share for a total investment of R44 million. Management believes
that Petmin’s current share price significantly undervalues the Group’s assets and Petmin will continue with a share
buy-back programme when the opportunity arises.
Anthracite Division
Somkhele anthracite mine
Year Year
ended ended
30 June Percentage 30 June
Somkhele production performance 2015 Change 2014
Run of Mine (ROM) tonnes washed 3 025 567 13% 2 688 563
Yield 44.13% 5% 41.85%
Anthracite saleable tonnes produced 1 335 233 19% 1 125 089
Anthracite tonnes sold 1 222 150 19% 1 026 250
Discard tonnes washed 1 374 716 17% 1 174 419
Yield 26.80% 29% 20.80%
Energy coal saleable tonnes produced 368 413 51% 244 298
Energy coal sold 352 255 102% 174 556
Production of saleable anthracite increased by 19% in the year ended 30 June 2015 with improved volumes and yields.
The average prices achieved for inland sales were unchanged from those achieved in 2014. The average prices achieved on
the export market reduced by 2% in 2015. 71% of Somkhele’s export sales were dollar denominated with the remaining 29%
denominated in Rands. The average dollar price of export sales reduced by 4%, but this was offset by a 9% weakening of
the average exchange rate to 11.29 Rand/$ from 10.36 Rand/$ in 2014.
Production of saleable re-washed discard ("energy coal") increased by 51% in the year ended 30 June 2015 with improved
volumes and yields being achieved as management continues to make design improvements to the discard processing plant.
The average at-mine-gate selling price of energy coal increased by 9% in 2015 with continued strong demand for this
product.
Expansion projects division
Petmin focus remains on the development of the NAIC pig-iron project in North America.
North Atlantic Iron Corporation ("NAIC")
Following an extensive independent trade-off analysis of the various proposed sites during the year, NAIC has selected a
site at the Port of Saguenay in Quebec as the location for the first pig iron plant. Detailed engineering design and
costing is now underway for the Saguenay site. The site selection process encompassed a study of 13 locations over 2
years. It is anticipated that the first plant based in Saguenay, Quebec will have a significant cost advantage over
material currently delivered to the U.S. In particular, it will avoid the significant costs of material movement from
New Orleans to the Midwest.
4 production scenarios were evaluated and reviewed by Tenova and NAIC:
- 2 production levels – 425ktpa and 850ktpa
- 2 smelting furnaces – electric arc furnace ("EAF") and submerged arc furnace ("SAF")
- All cases include pre-reduction in a rotary hearth furnace ("RHF")
NAIC has made the decision to proceed with a production scenario of 425ktpa using an EAF smelter In each case it is
assumed the 425ktpa of production will be for foundry grade Merchant Pig Iron (MPI) which trades at significant premium
to standard MPI. While the economics of each case presented similar IRRs, the qualitative aspects as well as the
mitigation of certain risk parameters, ultimately lead to the decision to proceed on this basis.
Iron-ore – South Africa (Veremo project)
Veremo still awaits the execution of the mining right for which notification of its award was received in January 2014.
During the year ended 30 June 2015 additional metallurgical test work was conducted and a commercial scale campaign will
be undertaken at Mogale Alloys on their 10 MW DC Arc Furnace. The Veremo ore will be smelted in their single electrode
DC arc furnace to produce high purity Pig Iron and a titanium rich slag. The furnace will be modified and the
engineering design for the modifications has been completed by GLPS Project Management Engineering Services. The
arbitration proceedings against Framework Investments Limited and Kermas Limited for the payment of the three R65
million distributions payable from the Veremo project to Petmin will continue once dates have been scheduled for the
arbitration hearings.
(ii) Prospects
Anthracite division
Tendele remains focussed on safety, efficiencies, productivity and cost control.
Current anthracite production levels are expected to be maintained in the year ahead, with sales volumes expected to
increase slightly as inventory levels are reduced.
Local customers remain under pressure in the current market with demand looking slightly weaker. However, as a large
proportion of local sales are contracted, prices are expected to remain at current levels.
We expect the dollar prices to remain under pressure for our exports, with Rand receipts aided by the weakening of the
Rand.
Energy coal sales are expected to increase to approximately 450 000 tonnes per annum with average at-mine-gate prices
received in Rands expected to increase by approximately 15% due to improved pricing received from revised product blends
and due to expected weakening of the Rand.
Capital expenditure to June 2016 is expected to be approximately R83 million with approximately half of this on planned
development and relocation expenditure to open up new mining areas. There is no additional capital pre-stripping
forecast in the year ending June 2016.
Tendele is expanding its efforts to build even stronger relationships with all stakeholders, including its employees and
their families and with the community within which its operates (including the Tribal Authority, all traditional
structures, schools, the youth, the business community and other parties in the community). We do not believe that the
provision of basic services (water, electricity, health care and education) is our primary responsibility, however, we
do believe that we are making a material difference in the community and we can work together with the authorities and
the community to ensure a better future.
Expansion projects division
Petmin intends to invest the final US$4 million to take its shareholding in NAIC to 40% as the economics of the first
plant in Saguenay remain favourable, notwithstanding the current market conditions.
Tenova will conclude the detailed site specific engineering design work at Saguenay within 6 months which work will form
the basis of the feasibility required to raise the capital for the construction of NAIC’s first plant at Saguenay.
During this period the environmental permitting process will also commence, which is expected to take 12 months.
The total capex required for plant 1 including an overrun facility is currently estimated by Tenova at US$313m and
discussions continue with the Government of Quebec and various Canadian federal development agencies regarding the
funding options available to NAIC. Once this funding base is established and site specific feasibility is concluded the
capital markets will be approached by NAIC for the balance of the capital required.
In the current market environment and due to the volatility in the equity markets, our project partners, Grand River
Inc. and Petmin believe it will be prudent to continue to develop the project jointly in its current structure rather
than to attempt to list NAIC separately and overlay the project with the additional costs of a separate listing. For
these reasons the proposed unbundling has been delayed indefinitely.
Due to the current state of the commodities market, cash preservation is critical and, despite a solid balance sheet,
Petmin will not investigate any opportunities that are not cash producing and not in the bottom quartile of the cost
curve.
Additional details on Petmin, including a detailed presentation on the results (which will be available from 9 September
2015) can be found on our website www.petmin.co.za
By order of the Board
ID Cockerill JC du Preez
Chairman Chief Executive Officer
Johannesburg
8 September 2015
Sponsor and Corporate Adviser
River Group
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