Wrap Text
Press Release on Petmin's Condensed Consolidated Interim Financial Report for the six months ended 31 December 2015
PETMIN LIMITED
Incorporated in the Republic of South Africa
Registration Number 1972/001062/06
Share Code JSE: PET
ISIN: ZAE000076014
("Petmin" or "the Company")
FINAL 7 March 2016
PRESS RELEASE ON PETMIN'S CONDENSED CONSOLIDATED INTERIM FINANCIAL REPORT FOR THE SIX
MONTHS ENDED 31 DECEMBER 2015
Petmin headline earnings per share up 70% as Somkhele delivers in difficult conditions
Further investment in North Atlantic Iron Corporation (NAIC) as project economics remain robust
Financial highlights
* Headline earnings per share up 70% to 14.32 cents (2014: 8.40 cents)
* R297m cash on hand at end-December 2015
* Revenue up 4% to R721m (2014: R694m)
* Gross profit up 40% to R137m (2014: R97m)
* Further investment in NAIC taking shareholding to 38% at end-Dec 2015
* Share buyback continued - 44m Petmin shares (7.64% of shares in issue) held at year end
* R115m full impairment of Veremo investment
Operating highlights
* Solid operating performance at Somkhele
* Tendele BBBEE transaction gives 20% Somkhele stake to children of local community and
employees
*Final design and costing underway for NAIC plant - Bankable Feasibility Study (BFS) due mid-2016
*NAIC environmental permitting underway
*High Court action to have contract in Tendele customer arbitration dispute declared void or
voidable
Petmin has posted headline earnings per share up 70% for the six months to end December 2015 as its
Somkhele anthracite mine delivered a solid operating performance in difficult conditions.
Petmin revenue was up 4% to R721m (2014: R694m) and gross profit up 40% to R137m (2014: R97m).
Profit from operating activities was up 46% to R127m (2014: R87m).
Headline earnings per share were reported at 14.32 cents (2014: 8.40 cents). At 31 December 2015, Petmin
had R297m cash on hand (2014: R10m).
Petmin's R115m full impairment of its investment in the Veremo iron ore to pig iron project in
Mpumalanga led to a basic loss per share of 7.15 cents (2014: profit of 8.40 cents).
The decision to impair the Veremo investment was due to the continued lack of acceptable progress in
discussions with the majority shareholders of Veremo on how best to take the project forward, the
continued downward pressure on iron ore prices, and the fact the mining right awarded in January 2014
has still not been executed.
The impairment in no way detracts from Petmin's continuing arbitration procedures and court application
for the payment of the guaranteed distributions of R195 million due to it by Framework Investments
and/or Kermas Limited.
Capital expenditure, excluding pre-stripping, increased to R35 million (2014: R18 million) including R20m to
develop new mining areas at Somkhele to secure future production and the continued employment of
some 900 people.
Petmin invested a further $2 million to take its shareholding in the North Atlantic Iron Corporation
industrial project to 38%, with a subsequent investment in 2016 taking the holding to 40%.
Petmin paid a dividend of 5 cents per share (2014: 3 cents) during the period under review.
The company bought 11,3 million of its own shares for R15m. Management believes the current share price
undervalues Petmin's assets and will continue with the share buy-back programme. At 31 December 2015,
Petmin held just over 44 million of its own shares, 7.64% of the total shares in issue.
Somkhele anthracite mine in KwaZulu-Natal
Somkhele reported a 6% reduction in tonnes produced of saleable anthracite to 637m tonnes (2014: 678m
tonnes), with a 6% drop to 621m tonnes sold (2014: 660m). The reduced production was due to geological
conditions in the mining areas which affected the quality and sizing of run-of-mine material.
Production and sales during the period remain above the benchmark 1,2m tonnes metallurgical anthracite
capacity of Somkhele.
Somkhele also produces an energy coal from discard. Tonnes produced in the six months to end-December
2015 were down 8% to 157m (2014: 171m) and sales down 12% to 237m (2014: 269m).
Production costs per tonne were well controlled in the six months ended 31 December 2015, increasing by
just under 7% from 2014 mainly as a result of reduced volume produced and as the costs of explosives and
diesel are linked to the Rand/dollar exchange rate. It is expected production costs will increase by less than
5% in the six months to end-June 2016.
Average prices for domestic sales of anthracite were 2% down on 2014, while average Rand prices on the
export market increased by 29% from 2014, largely as a result of the weaker Rand.
The average dollar price of export sales increased by 5% over 2014.
The average at-mine-gate selling price of energy coal increased by 34% in 2015 with continued strong
demand.
Somkhele outlook
Current anthracite production levels are expected to reduce by approximately 15% in the six months to
June 2016 as difficult geological conditions cause a further reduction in processing throughput in the
plants. Despite this, sales volumes are expected to reduce by only 5%.
Local sales prices are expected to be maintained at current levels. Dollar prices for Somkhele's anthracite
exports are expected to reduce by 21% in line with global commodity trends, but are offset by the
weakening of the Rand against the dollar.
Petmin has protected $8.3 million of these sales to June 2016 through collar and cap option contracts, with
further collar and cap option contracts for $500,000 per month for July to December 2016.
Prices for energy coal are expected to be maintained.
There is currently enough water at Somkhele to run the two main wash plants for 14 months without
additional rainfall.
Capital expenditure to June 2016 is expected to be approximately R64 million with approximately half of
this on planned development and relocation expenditure to open up new mining areas and protect the
employment of some 900 employees.
The Tendele BBBEE transaction was implemented during the period under review, in terms of which the
children of the local community and employees now hold a 20% equity stake in the Somkhele mine.
Legal dispute with customer
During 2015 Tendele withdrew from arbitration proceedings related to an energy coal contract with a
customer and announced that it would ask the High Court to find the contract void or voidable. This
followed an investigation which established incidents of fraud, bribery and corruption in connection with
the conclusion and manipulation of the contract.
Notwithstanding Tendele's withdrawal, on legal advice, from the arbitration, and the High Court action, the
arbitration continued on an uncontested basis and the arbitrator delivered an award against Tendele.
Tendele maintains that this award is invalid and unenforceable and is opposing the application to the court
to enforce the award granted, on the grounds of the fraud, bribery and corruption.
NAIC
NAIC is a development stage industrial project in North America, established to produce high-quality low-
cost merchant pig iron (MPI). The project's economics remain robust despite difficult conditions in the
commodity markets.
During the six months ended 31 December 2015, Petmin invested an additional US$2 million (2014: US$1
million) in NAIC to take its stake to 38% (30 June 2015: 35%), with a subsequent US$2m investment in early
2016. Petmin now holds a 40% shareholding stake in NAIC, which is Petmin's priority project focus.
Tenova and Tecint are concluding the final engineering design and equipment costing for the first NAIC
plant with a bankable feasibility study due in mid-2016. NAIC has contracted SNC Lavalin to manage the
environmental permitting process which is anticipated to take between 12 and 15 months.
The NAIC sales and marketing strategy as well as offtakes will be incorporated in the BFS. Debt and equity
funding for the plant construction will commence once the BFS is concluded. Discussions are already
underway with Export Credit Agencies and with the fiscal funding mechanisms available to NAIC.
Investors, analysts and media are invited to join a 10h00 call with Petmin management on Monday 7
March 2016 to discuss Petmin interim financial results for the six months ended 31 December 2015.
Dial in details for Petmin results call
10h00 Monday 7 March 2015
Country
Access Number
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
Australia - Toll-Free 1 800 350 100
Other Countries - International +27 11 305 2030
Other Countries - International +27 10 201 6800
Playback Access Numbers (code 45555#)
Country
Access Number
Other Countries - International +27 11 305 2030
South Africa 011 305 2030
UK - Toll Free 0 808 234 6771
USA and Canada - Toll Free 1 855 481 5363
Enquiries:
Petmin: Bradley Doig
+27 11 706 1644
Media:
Jonathon Rees (Communications and investor relations)
+27 76 185 1827
jonathon@proofafrica.co.za
Sponsor and Corporate Adviser
River Group
Johannesburg
7 March 2016
Date: 07/03/2016 07:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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