Wrap Text
Condensed Consolidated Preliminary Financial
Statements for the year ended 30 June 2016
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 2016
"Healthy balance sheet
with cash on hand
of R174 million
(June 2015: R237 million)
and net gearing at 7.66%
(2015: 12.66%) and
available banking facilities
of R330 million
(2015: R140 million).
"Headline earnings
per share 23.66 cents
(2015: 24.28 cents)
following another
consistent performance
at the Somkhele
Anthracite Mine"
Salient features:
- Mining right awarded over the remaining
mining areas at the Somkhele Anthracite
Mine.
- Tendele Coal Mining Proprietary Limited
20% BEE deal implemented on
12 November 2015.
- NAIC final draft BFS received and currently
being reviewed. Project economics
remain robust.
- Dividend declared on 2 September 2016
for the seventh year in a row.
Preparation
These condensed consolidated preliminary financial statements
for the year ended 30 June 2016 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 2016 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 2016
Reviewed Audited
Year ended Year ended
30 June 30 June
2016 2015
Note R’000 R’000
Revenue 1 282 619 1 274 165
Cost of sales (1045 655) (1020 531)
Gross Profit 236 964 253 634
Operating expenses 14 423 (19 861)
Administration expenses (21 045) (16 605)
Profit from operating activities 230 342 217 168
Net finance expense (29 663) (32 521)
– Finance income 15 276 7 317
– Finance expenses (44 939) (39 838)
Separately disclosed items:
Loss on sale of subsidiary
Impairment of investments in equity-
accounted investees 7 (115 403) (3 317)
Impairment loss on property, plant and
equipment – (3 747)
Share of (loss)/profit of equity-
accounted investees, net of tax 8 (10 480) 2 397
Profit before income tax 74 796 179 980
Income tax expense (63 755) (54 937)
Profit for the year 11 041 125 043
Earnings per share
Basic earnings per ordinary share
(cents) 9 2.07 22.98
Diluted earnings per ordinary share
(cents) 9 2.07 22.98
Condensed Consolidated Preliminary Statement of
Comprehensive Income
for the year ended 30 June 2016
Reviewed Audited
Year ended Year ended
30 June 30 June
2016 2015
R’000 R’000
Profit for the year 11 041 125 043
Other comprehensive income (after tax)
Items that may be reclasssified to profit or loss
Foreign currency translation gains/(losses) on
equity-accounted investees 55 088 (3 437)
Share of fair value gain in equity-accounted
investee 4 004 54 583
Other comprehensive income for the year,
net of income tax 59 092 51 146
Total comprehensive income for the year 70 133 176 189
Condensed Consolidated Interim Statement of Financial Position
at 30 June 2016
Reviewed Audited
30 June 30 June
2016 2015
Note R’000 R’000
ASSETS
Non-current assets 1 531 469 1 569 463
Property, plant and equipment 1 030 543 1 062 878
Investment in equity-accounted
investee 7,10 434 019 420 452
Loan due from joint venture 66 907 61 133
Investments 7 – 25 000
Current assets 597 883 621 395
Inventory 12 266 982 250 118
Trade and other receivables 133 739 110 249
Hedge asset 13 20 131 –
Current tax assets 2 960 3 681
Cash and cash equivalents 174 071 257 347
Total assets 2 129 352 2 190 858
EQUITY AND LIABILITIES
Ordinary share capital and
reserves 1 310 373 1 284 849
Share capital 132 654 136 026
Share premium 278 036 292 438
Share option reserve 20 297 20 297
Foreign currency translation reserve 69 513 14 425
Retained earnings 809 873 821 663
Non-current liabilities 635 374 451 362
Interest-bearing loans and
borrowings 14 270 000 108 405
Deferred taxation liabilities 244 653 258 632
Environmental rehabilitation
provision 120 721 84 325
Current liabilities 183 605 454 647
Trade and other payables 177 368 136 864
Revenue received in advance 15 1 029 147 562
Current portion of interest-bearing
loans and borrowings 14 3 436 143 671
Hedge liability – 4 628
Shareholders for dividend 1 772 1 513
Bank overdraft – 20 409
Total equity and liabilities 2 129 352 2 190 858
Condensed Consolidated Preliminary Statement of Cash Flows
for the year ended 30 June 2016
Reviewed Audited
Year ended Year ended
30 June 30 June
2016 2015
Note R’000 R’000
Profit from operating activities before finance (expense)/income 230 342 217 168
Adjustments for:
– depreciation 584 211 559 692
– notional interest 11 364 3 064
– effect of exchange rate fluctuation on cash held (24 780) –
– loss on disposal of property, plant and equipment 17 12
– write-down to net realisable value of inventory 12 55 063 27 590
Operating cash flows before changes in working capital 856 217 807 526
(Increase)/decrease in trade and other receivables (23 490) 11 300
Increase in inventories (71 927) (13 175)
Increase in trade and other payables 40 504 21 466
(Decrease)/increase in revenue received in advance (146 533) 147 562
(Decrease)/increase in hedge liability (4 628) 4 628
Increase in hedge asset (20 131) –
Cash generated by operations 630 012 979 307
Income tax paid (77 015) (46 133)
Interest received 15 276 7 317
Interest paid (41 503) (39 838)
Net cash flow from operating activities 526 770 900 653
Cash flows from investing activities
Acquistion of subsidiary (net of cash acquired) – (11 974)
Investment in equity-accounted investees 10 (55 359) (32 115)
(Increase)/decrease in loans to equity-accounted investees (5 774) 5 709
Acquisition of property, plant and equipment (526 862) (475 639)
– to expand operations (44 276) (11 276)
– to expand operations – capitalised pre-strip 11 (474 601) (447 745)
– to maintain operations (7 985) (16 618)
Net cash flows used in investing activities (587 995) (514 019)
Cash flows from financing activities
Treasury shares acquired 9 (17 774) (43 613)
Repayment of borrowings 14 (452 036) (112 125)
Increase in borrowings 14 469 960 –
Dividends paid (26 572) (16 857)
Net cash flows from financing activities (26 422) (172 595)
Effect of exchange rate fluctuation on cash held 24 780 –
Net increase/(decrease) in cash and cash equivalents (62 867) 214 039
Cash and cash equivalents at beginning of the year 236 938 22 899
Cash and cash equivalents at end of the year 174 071 236 938
Condensed Consolidated Preliminary Statement of Changes in Equity
for the year ended 30 June 2016
Foreign
Share currency
Share Share option translation Retained
capital premium reserve reserve earnings Total
GROUP R’000 R’000 R’000 R’000 R’000 R’000
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 investees – – – – 54 583 54 583
Foreign currency translation differences on equity-accounted investees – – – (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 (Audited) 136 026 292 438 20 297 14 425 821 663 1 284 849
Total comprehensive income for the year, net of income tax – – – 55 088 15 045 70 133
Profit for the year – – – – 11 041 11 041
Share of fair value gain in equity-accounted investees – – – – 4 004 4 004
Foreign currency translation differences on equity-accounted investees – – – 55 088 – 55 088
Transactions with owners, recorded directly in equity (3 372) (14 402) – – (26 835) (44 609)
Treasury shares acquired during the year (3 372) (14 402) – – – (17 774)
Dividends paid – – – – (26 835) (26 835)
Balance at 30 June 2016 (Reviewed) 132 654 278 036 20 297 69 513 809 873 1 310 373
Condensed Consolidated Interim Financial Statements
for the year ended 30 June 2016
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 executive management team.
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") – this includes Tendele Coal Mining Proprietary Limited, BVI 1770 Proprietary Limited, the Employee and Community Trusts at Tendele and Somkhele Plant Hire Proprietary Limited
– Expansion projects, which includes Petmin’s exploration and development projects.
Anthracite Expansion projects Corporate and 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 2016 2015 2016 2015 2016 2015 2016 2015
Anthracite – saleable tonnes produced (#) (tonnes) 1 236 433 1 335 233 – – – – 1 236 433 1 335 233
Anthracite – tonnes sold (#) (tonnes) 1 122 162 1 222 150 – – – – 1 122 162 1 222 150
Energy – saleable tonnes produced (#) (tonnes) 349 405 368 413 – – – – 349 405 368 413
Energy – tonnes sold (#) (tonnes) 441 579 352 255 – – – – 441 579 352 255
Segment revenue R’000 1 282 619 1 274 165 – – – – 1 282 619 1 274 165
Segment finance (expense)/income R’000
Finance income R’000 3 768 6 615 – – 11 508 702 15 276 7 317
Finance expense R’000 (48 522) (35 517) – – 3 583 (4 321) (44 939) (39 838)
– segment result R’000 191 974 184 201 (12 077) 869 10 302 (1 773) 190 199 179 980
– impairment of equity-accounted investees – – (115 403) (3 317) – – (115 403) –
Segment profit/(loss) before tax R’000 191 974 184 201 (127 480) (2 448) 10 302 (1 773) 74 796 179 980
Segment tax expense R’000 (58 994) (50 220) – – (4 760) (4 716) (63 755) (54 937)
Segment profit/(loss) after tax R’000 132 980 133 981 (127 480) (2 448) 5 542 (6 489) 11 041 125 043
Segment capital expenditure – combined R’000 526 741 473 836 – – 121 1 804 526 862 475 639
Segment capital expenditure R’000 52 140 26 091 – – 121 1 804 52 261 27 894
Segment capital expenditure – pre-strip* R’000 474 601 447 745 – – – – 474 601 447 745
Segment depreciation – combined R’000 583 969 559 324 – – 243 368 584 211 559 692
Segment depreciation R’000 52 306 54 433 – – 243 368 52 549 54 801
Segment depreciation – pre-strip* R’000 531 663 504 891 – – – – 531 663 504 891
Share option costs included in segment profit/(loss) before tax R’000 – – – – – – – –
Segment assets R’000 1 611 519 1 727 114 416 719 430 161 101 114 33 583 2 129 352 2 190 858
Percentage of segment assets to total assets (percent) 76% 79% 20% 20% 5% 2% 100% 100%
Segment liabilities R’000 1 008 649 949 784 – – (189 670) (43 776) 818 979 906 008
Percentage of segment liabilities to total liabilities (percent) 123% 105% 0% 0% (23%) (5%) 100% 100%
(#) Figures not reviewed by independent auditors
(*) See note 11
Notes to the Condensed Consolidated Preliminary Financial Statements
for the year ended 30 June 2016
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 2016 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 2 September 2016.
2. Basis of preparation
These 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 the 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 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. Accounting policies
The accounting policies have been applied consistently by the Group to all periods presented in these condensed consolidated preliminary financial statements.
4. Functional and presentation currency
The condensed consolidated preiminary 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 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 2015.
6. Review of results
These condensed consolidated preliminary financial statements for the year ended 30 June 2016 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.
7. Impairment of investments in equity-accounted investees
As previously disclosed in the condensed consolidated interim financial statements for the six months ended 31 December 2015, Petmin has decided to impair its investments in the
Veremo project in full, totalling R115 million (R25 million Preference Share Investment in Veremo Holdings Limited, R89 million investment in the ordinary share capital of Veremo
Holdings Limited and R1 million investment in Veremo Empowerment Holdings Proprietary Limited). The decision to impair the investment was taken due to the continued lack of
acceptable progress in discussions with the majority shareholders of Veremo on how best to take the Veremo project forward, the continued downward pressure on the prices of iron
ore, and due to the fact that 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. The Veremo project is an iron ore
to pig iron project in South Africa in which Petmin has a 25% shareholding and forms part of the expansion projects segment of Petmin. The measurement of the Veremo project
represents a level 3 fair value hierarchy and the valuation method applied was the fair value less costs of disposal.
8. Share of (loss)/profit of equity-accounted investees
Reviewed Audited
Year ended Year ended
30 June 30 June
2016 2015
R’000 R’000
Share of (loss)/profit of equity-accounted investees, net of tax (10 480) 2 397
– North Atlantic Iron Corporation Inc. (12 077) (2 959)
– Somkhele Plant Proprietary Limited 1 597 4 845
– Veremo Holdings Proprietary Limited – 511
During the year ended 30 June 2016, NAIC incurred a once-off expense on the write-down of a Deferred Taxes Asset (DTA) related to expenditure on certain exploration licenses
and as there is no current plan to mine the mineral sands, the DTA was impaired in the amount of $897 567 (approximately R9.4 million) (Petmin’s share, at that time, being 38% or
R3.572 million).
During the year ended 30 June 2016, Petmin impaired the carrying value of its investment in Veremo Holdings Proprietary Limited to nil. Veremo Holdings Proprietary Limited incurred
additional losses during the year ended 30 June 2016, but, as Petmin does not provide guarantees to Veremo’s creditors, these losses have not been recorded as a liability in Petmin’s
consolidated accounts.
9. Earnings and diluted earnings per share
Earnings per share ("EPS") are based on the Group’s profit for the year, divided by the weighted average number of shares in issue during the year.
Reviewed Audited
Year ended 30 June 2016 Year ended 30 June 2015
Weighted Weighted
average average
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 (loss)/earnings per share 11 041 534 431 2,07 125 043 544 100 22,98
Diluted EPS* 11 041 534 431 2,07 125 043 544 100 22,98
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 11 041 534 431 2,07 125 043 544 100 22,98
Adjustments:
– Loss on disposal of property, plant and equipment 12 – 0,00 9 – 0,00
– Impairment of property, plant and equipment – – – 3 747 – 0,69
– Impairment of equity-accounted investees 115 403 – 21,59 3 317 – 0,61
Headline EPS 126 456 534 431 23,66 132 116 544 100 24,28
Diluted headline EPS* 126 456 534 431 23,66 132 116 544 100 24,28
(*) At 30 June 2016 and 30 June 2015 there were no share options outstanding.
During the year ended 30 June 2016, the Group acquired 13 484 787 of its own shares at an average acquisition price of R1.32 per share. At 30 June 2016, the Group held
46 292 981 of its own shares in treasury stock, representing 8.02% of the total issued shares.
10. Investments – investment in NAIC
During the year ended 30 June 2016 Petmin invested an additional R55 million (2015: R29 million) in North Atlantic Iron Corporation (NAIC). Petmin now holds 40% of the equity in
NAIC (30 June 2015: 35%), having completed its stepped-investment programme totalling US$25 million.
11. Pre-stripping cost
Reviewed Audited
Year ended Year ended
30 June 2016 30 June 2015
R’000 R’000
Opening balance in balance sheet 247 360 304 506
Cash spend for the year 474 600 447 745
Mining – expensed on a units-of-production basis (depreciation) (531 663) (504 891)
Closing balance on the balance sheet 190 297 247 360
Petmin incurred cash stripping costs amounting to R475 million during the year ended 30 June 2016 (2015: R448 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 amortised 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 R532 million during the year ended 30 June 2016 (2015: R505 million). This resulted in a decrease in the expenditure capitalised to pre-stripping activities of
R57 million during the year ended 30 June 2016 (2015: decrease of R57 million).
The amortisation is, in reality, the mining cost (stripping cost) that is expensed during the period when anthracite is produced (removed from the pit).
12. Inventory
Reviewed Audited
Year ended Year ended
30 June 2016 30 June 2015
R’000 R’000
Inventory at cost 349 635 277 708
Less: net realisable value write-downs 82 653 27 590
266 982 250 118
Inventory is recorded net of net realisable value (NRV) write-downs amounting to R83 million (2015: R28 million).
As disclosed in the results for the six months ended 31 December 2015, as a consequence of the drought and resultant shortages of available process water, the throughput of the
third wash plant was reduced during the year ended 30 June 2016. The plant feed that was included in inventory at that time was fully written-down [R28 million charge in the year
ended 30 June 2016 (2015: nil)].
Additionally, during the year ended 30 June 2016, NRV write-downs totalling R27 million (2015: R28 million) were recorded on certain product lines due to the prevailing lower
market prices for these products.
13. Hedge asset
At 30 June 2016 Tendele had hedges totalling $33.8 million (2015: $16.5 million) with delivery dates from July to December 2016. The average protection level of these hedges is
a R/$ of 15.5 (2015: R/$ protection level of 11.30). $21 million of the hedges are collar and cap option contracts with $12.8 million plain forward exchange contracts. The hedging
contracts were valued on a mark-to-market basis using valuations obtained from its bankers at 30 June 2016. This valuation methodology represents a level 2 fair value hierarchy.
14. Interest-bearing loans and borrowings
Reviewed Audited
Year ended Year ended
30 June 2016 30 June 2015
R’000 R’000
Total interest-bearing loans and borrowings 273 436 252 075
Less: current portion (3 436) (143 671)
Long-term portion 270 000 108 404
A. Nedbank A Preference Share liability 273 436 –
Less: current portion (3 436) –
Long-term portion 270 000 –
B. Secured loan – Nedbank Limited – Revolving Credit Facility – –
Less: current portion – –
Long-term portion – –
C. Industrial Development Corporation of South Africa Limited (secured) – 16 004
Less: current portion – (16 004)
Long-term portion – –
D. Secured loan – Standard Bank of South Africa Limited – Term loan – 41 128
Less: current portion – (41 128)
Long-term portion – –
E. Secured loan – Standard Bank of South Africa Limited – Revolving Credit Facility – 194 943
Less: current portion – (86 538)
Long-term portion – 108 405
As announced on 12 November 2015, the Tendele BEE Transaction was implemented. On closing, the Standard Bank Limited revolving credit facility (E in the table above) and term
loans (D in the table above) (totalling R198 million) were settled in full and an amount of R198 million was initially drawn down on the R230 million Nedbank Limited revolving credit
facility (Nedbank RCF) in Tendele (A in the table above). In the six months ended 30 June 2016, the RCF was repaid in full but remains available to Tendele. Interest is payable at JIBAR
plus 2.85% on the Nedbank RCF and the amounts drawn on the facility are repayable on or before 12 November 2020.
The BEE special purpose vehicle (BEE SPV) is consolidated by the Petmin Group. As a consequence of this consolidation of the BEE SPV, the Petmin Group accounts reflect the
R270 million "A" preference shares issued by the BEE SPV to Depfin Investments Proprietary Limited (Depfin), a Nedbank Limited group company, as a financial liability. Dividends are
payable on the "A" preference shares at 90% of prime NACM and dividends are payable to Depfin every six months. The "A" preference shares are redeemable in four six-monthly
tranches of R55 million each with the first tranche due in November 2018 and one final tranche of R50 million payable in November 2020. The "A" preference shares are a financial
instrument and are recorded at fair value and represent a level 2 fair value hierarchy.
Subsequent to the BEE transaction, Petmin has arranged overdraft banking facilities with Nedbank Limited of R50 million and Tendele retains its overdraft facilities of R50 million with
Standard Bank Limited.
During the year ended 30 June 2016, the loan from the Industrial Development Corporation (C in the table above) was repaid in full.
At 30 June 2016, the Group had R330 million in available facilities (2015: R140 million) with the R230 million Nedbank RCF, R50 million Nedbank overdraft and R50 million Standard
Bank overdraft being available.
15. Revenue received in advance
During the year ended 30 June 2015, Petmin received pre-payments for certain export sales, the pre-payment is dollar denominated and interest is charged on the outstanding balance
at a rate of 3.5% per annum. During the year ended 30 June 2016, the Group delivered export sales amounting to R146 million (2015: nil) against these pre-payments.
16. Legal dispute with customer
As described in more detail in Note 15 of Petmin’s December 2015 Interim Financial Statements published on SENS on Monday 7 March 2016, Petmin’s subsidiary, Tendele Coal
Mining Proprietary Limited, withdrew from the arbitration with its customer and has sought declaratory relief from the High Court that the contract concerned is void or voidable.
As stated at the time, "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’s legal advisors have filed a High Court action to declare the contract void or voidable. It is anticipated that a court date will be set for early 2017 to commence arguments
on this action.
Additionally, it is expected that the first court hearings for the High Court application to have the arbitration award made an order of court are anticipated for early 2017.
Tendele and its legal advisors believe that the prospect of success in the High Court to declare the contract void or voidable is good. No liability will be recorded in relation to the
award made by the arbitrator.
17. 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.
18. Subsequent events
18.1 Renewal of cautionary announcement
On 8 August 2016, Petmin announced on SENS that it had extended the cautionary announcement dated 24 June 2016.
18.2 Draft bankable feasibility study (BFS) for NAIC
Subsequent to 30 June 2016, the final draft BFS prepared by Tenova for the NAIC pig iron project has been received and is being reviewed by management. The project economics
remain robust.
18.3 Declaration of dividend
On 2 September 2016, 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 21 October 2016. Please refer to the separate notice of the declaration of dividend dated 2 September 2016.
18.4 Other subsequent events
There have been no other events that have occurred subsequent to 30 June 2016 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 2016
This management commentary has been prepared by management and has not been reviewed by the Group’s auditors.
(i) General overview of performance
Following another solid operational performance at Somkhele, Petmin’s normalised earnings increased by 7% to 26.15 cents per share (2015: 24.43 cents).
Year ended Year ended
30 June 30 June
2016 2015
Normalised Earnings R’000 R’000
Profit for the year 11 041 125 043
Adjust for after-tax effect of:
– loss on disposal of property plant and equipment 12 9
– provision for bad debt 7 613 789
– NAIC one-off flow-through expenses 2 105 –
– NAIC Deferred Tax Asset write-down 3 572 –
– impairments 115 403 7 064
Normalised profit after tax for the period 139 746 132 905
Adjusted profit per share 26.15 24.43
Weighted average shares in issue 534 million 544 million
% annual increase in profit per share 7%
Petmin’s interest-bearing debt-to-equity ratio (net of cash on hand) decreased to 7.66% at 30 June 2016 (2015: 12.66%). The debt includes the R270 million preference share liability
of the BEE SPV after the implementation of the BEE transaction at Tendele on 12 November 2015.
A provision was raised against a local debtor’s balance as it entered business rescue proceedings, the after-tax impact of this was R7.6 million in 2016 (2015: R0.8m million).
Group capital expenditure, excluding pre-stripping, increased by R24 million to R52 million (2015: R28 million) as Somkhele spent R31 million on the commencement of development
of the new KwaQubuka open pit mining area.
Additionally, Petmin invested a further $4 million in NAIC to take its shareholding in NAIC to 40%.
As a result of the impairment of the investment in Veremo of R115 million, the basic earnings per share was 2.07 cents, compared to the basic earnings per share of 22.98 cents
for 2015.
Dividends and share buy-backs
During the year ended 30 June 2016, Petmin paid a dividend of 5 cents per share (2015: 3 cents). Petmin also acquired 13 484 787 (2015: 28 496 778) of its own shares at an average
acquisition price of R1.32 (2015: R1.53) per share for a total investment of R18 million (2015: R44 million).
Anthracite Division
Somkhele Anthracite Mine
Year Year
ended ended
30 June Percentage 30 June
Somkhele production performance 2016 Change 2015
Run of Mine (ROM) tonnes washed 2 809 488 (7%) 3 025 567
Yield 44,01% 0% 44,13%
Anthracite saleable tonnes produced 1 236 433 (7%) 1 335 233
Anthracite tonnes sold 1 122 162 (8%) 1 222 150
Discard tonnes washed 1 183 353 (14%) 1 374 716
Yield 29,53% 10% 26,80%
Energy coal saleable tonnes produced 349 405 (5%) 368 413
Energy coal sold 441 579 25% 352 255
Production of saleable anthracite reduced by 7% in the year ended 30 June 2016 as a dyke encountered in one of the three mining areas affected the quality and sizing of ROM
material in H1 FY2016. This had a knock-on effect in the third plant where throughput was affected by the finer material emanating from the mining areas. Production in the third
wash plant was restricted during H1 FY2016 in order to conserve process water as the impact of the drought in KwaZulu-Natal had resulted in low water levels in the mine storage
dams. Rains in H2 FY2016, together with mitigating actions taken by management have resulted in an improved water balance and there is sufficient process water at full production
levels for the foreseeable future.
Despite the challenges noted above, production costs per tonne were well-controlled in the year ended 30 June 2016, increasing by 9% from 2015. Increased state royalty payments
contributed 3% of the 9%.
The average prices achieved for inland sales were 5% down from those achieved in 2015.The average Rand prices achieved on the export market increased by 16% from 2015, largely
as a result of the weaker Rand at an average exchange rate of 13.74 Rand/$ from 11.29 Rand/$ in 2015. The average dollar price of export sales decreased by 14% compared to 2015.
The average at-mine-gate selling price of energy coal increased by 38% in 2016 with continued strong demand for this product.
Tendele was notified by the Department of Mineral Resources (DMR) in a letter dated 31 May 2016 that it had been awarded the mining right for Areas 4 and 5, which covers the
future mining areas for the Somkhele Anthracite Mine. The right is in the process of being executed.
Expansion projects division
Petmin’s focus remains on the development of the NAIC pig-iron project in North America.
North Atlantic Iron Corporation ("NAIC")
During the year ended 30 June 2016, Petmin invested a further $4 million (R55 million) into the NAIC project and has now completed its $25m stepped-acquisition of 40% equity in
NAIC. During the year ended 30 June 2016, the various work streams continued with the goal to finalise the bankable feasibility study for the project.
Iron ore – South Africa (Veremo project)
As reported in the Interim Results for the six months ended 31 December 2015 and in Note 7 to these interim financial statements, management has taken the decision to impair its
investment in the Veremo project as it has not made any significant progress in obtaining the execution of the mining right in the project since its award in January 2014 and due to
uncertainty as to the timing of development of the project. Petmin will continue to pursue its R195 million claim against Framework Investments and Kermas Limited.
(ii) Prospects
Anthracite division
Current anthracite production levels are expected to increase by 4% from those achieved in 2016. Sales volumes are expected to increase by 20% as concerted efforts have resulted
in the placement of the inventory build-up in 2016.
It is expected that the production cost per tonne for the year to June 2017 will increase by approximately 6% from that achieved in 2016.
Local demand is expected to increase by 7% and local prices are expected to increase by 3% from those achieved in 2016.
We expect the average dollar prices for our exports in six months to 31 December 2016 to reduce by 19% from those achieved in 2016, but we do expect an upward trend in
pricing for H2 FY2017. The lower dollar price in H1 FY2017 is offset by hedges for $33.8 million at an average R/$ of 15.5.
Energy coal production in the third wash plant is expected to increase by 20% from 2016, with sales volumes expected to increase by 9% from 2016. At-mine-gate energy coal sales
prices are expected to increase by 20% from 2016.
Capital expenditure to June 2017 is expected to be approximately R50 million with approximately half of this on a planned expansion to the third plant to increase throughput capacity
and also for the development and relocation expenditure to open up new mining areas. There is no additional capital pre-stripping forecast in the year ending June 2017.
Expansion projects division
The bankable feasibility study at NAIC prepared by Tenova /Tecint is in draft form and is expected to be finalised in the next month. Debt and equity funding for the plant construction
will commence once the BFS is concluded.
Petmin has approved an additional $4 million equity investment into NAIC subject to certain conditions, including:
- Grand River Ironsands Inc. (GRI), Petmin’s partner in the NAIC project, contributes its pro-rata portion on the same terms as Petmin.
- The investment can be in the form of a subscription, shareholder loan or convertible, on the same terms for both Petmin and GRI.
- Finalisation of a detailed budget for next 12 months.
- Appointment of full-time executives in NAIC responsible for Project fund raising and Project development and execution.
- Completion and sign-off by GRI and Petmin of a Bankable Feasibility Study ("BFS"), incorporating the Tenova / SNC-Lavalin BFS and all attendant commercial aspects of the
Project.
- Appointment of NAIC Board Directors (3 NAIC appointees and 2 Petmin appointees).
Additional details on Petmin, including a detailed presentation on the results (which will be available from 5 September 2016), 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
2 September 2016
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: 05/09/2016 08:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.