Wrap Text
Condensed Consolidated Interim Financial
Statements for the six months ended 31 December 2016
Petmin Limited
(Incorporated in the Republic of South Africa)
(Registration number 1972/001062/06)
JSE code: PET ISIN: ZAE000076014
("Petmin" or "the Group")
"Healthy financial position with cash on hand of R135 million and net gearing at
10.78% (30 June 2016: 7.66%).
Condensed
Consolidated
Interim Financial
Statements
for the six months ended
31 December 2016
"Healthy financial
position with cash on
hand of R135 million and
R330 million unutilised
banking facilities
available"
Salient features:
- Offer received to acquire all or a portion of
the issued ordinary shares of Petmin Limited
and proposed delisting
- Mining right over the remaining mining areas
at the Somkhele Anthracite Mine executed.
- Basic earnings per share 8.30 cents
(2015:Loss of 7.15 cents).
- NAIC feasibility study under review in light
of expected positive changes in economic
conditions in North America
- Average Rand prices achieved for exports
decreased by 27% from 2015
Preparation
These condensed consolidated interim financial statements for
the six months ended 31 December 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 interim financial statements for
the six months ended 31 December 2016 have been reviewed
by the Group's auditors, KPMG Inc. (refer to Note 6 of these
financial statements).
Condensed Consolidated Interim Income Statement
for the six months ended 31 December 2016
Reviewed Reviewed Audited
Six months ended Six months ended Year ended
31 December 31 December 30 June
2016 2015 2016
Note R'000 R'000 R'000
Revenue 679 752 721 280 1 282 619
Cost of sales (626 498) (584 435) (1 045 655)
Gross profit 53 254 136 845 236 964
Operating income 21 570 1 956 14 423
Administration expenses (11 604) (11 612) (21 045)
Profit from operating
activities 63 220 127 189 230 342
Net finance expense (8 804) (12 054) (29 663)
- Finance income 7 542 5 504 15 276
- Finance expenses (16 346) (17 558) (44 939)
Separately disclosed
items:
Impairment of
investments in equity
accounted investees 7 - (115 403) (115 403)
Share of profit/(loss)
of equity accounted
investees, net of tax 8 3 355 (4 171) (10 480)
Profit/(loss) before
income tax 57 771 (4 439) 74 796
Income tax expense 9 (13 713) (34 002) (63 755)
Profit/(loss) for the
period 44 058 (38 441) 11 041
Earnings per share
Basic earnings/(loss) per
ordinary share (cents) 10 8.30 (7.15) 2.07
Diluted earnings/(loss)
per ordinary share
(cents) 10 8.30 (7.15) 2.07
Condensed Consolidated Interim Statement of Financial Position
at 31 December 2016
Reviewed Reviewed Audited
31 December 31 December 30 June
2016 2015 2016
Note R'000 R'000 R'000
ASSETS
Non-current assets 1 472 425 1 510 258 1 531 469
Property, plant and
equipment 1 002 627 1 042 858 1 030 543
Investment in equity
accounted investees 7,11 398 541 402 416 434 019
Loan due from joint venture 71 257 64 984 66 907
Current assets 578 441 670 487 608 440
Inventory 13 255 023 202 536 266 982
Trade and other receivables 173 897 165 115 133 739
Hedge asset 14 6 257 - 20 131
Current tax assets 7 819 5 903 2 960
Cash and cash equivalents 135 445 296 933 184 628
Total assets 2 050 866 2 180 745 2 139 909
EQUITY AND LIABILITIES
Ordinary share capital and
reserves 1 289 067 1 256 743 1 310 373
Share capital 132 654 133 202 132 654
Share premium 278 036 279 898 278 036
Share option reserve 20 297 20 297 20 297
Foreign currency translation
reserve 30 680 61 705 69 513
Retained earnings 827 400 761 641 809 873
Non-current liabilities 616 213 812 166 635 374
Interest-bearing loans and
borrowings 15 270 000 469 960 270 000
Deferred taxation liabilities 223 742 256 381 244 653
Environmental rehabilitation
provision 122 471 85 825 120 721
Current liabilities 145 586 111 836 194 162
Trade and other payables 139 078 93 172 177 368
Revenue received in advance 16 959 8 329 1 029
Current portion of interest-
bearing loans and borrowings 15 3 506 8 498 3 436
Shareholders for dividend 2 043 1 837 1 772
Bank overdraft - - 10 557
Total equity and liabilities 2 050 866 2 180 745 2 139 909
Condensed Consolidated Interim Statement of Comprehensive
Income
for the six months ended 31 December 2016
Reviewed Reviewed Audited
Six months ended Six months ended Year ended
31 December 31 December 30 June
2016 2015 2016
R'000 R'000 R'000
Profit/(loss) for the period 44 058 (38 441) 11 041
Other comprehensive income
(after tax)
Items that may be reclasssified
to profit or loss
Foreign currency translation
(losses)/gains on equity
accounted investees (38 833) 47 280 55 088
Share of fair value gain in equity
accounted investees - 5 252 4 004
Other comprehensive income
for the period, net of income
tax (38 833) 52 532 59 092
Total comprehensive income
for the period 5 225 14 091 70 133
Condensed Consolidated Interim Statement of Cash Flows
for the six months ended 31 December 2016
Reviewed Reviewed Audited
Six months ended Six months ended Year ended
31 December 31 December 30 June
2016 2015 2016
Note R'000 R'000 R'000
Profit from operating activities before finance (expense)/income 63 220 127 189 230 342
Adjustments for:
- depreciation 356 705 289 332 584 211
- effect of exchange rate fluctuation on cash held 748 - (24 780)
- notional interest 1 750 1 500 11 364
- loss on disposal of property, plant and equipment - - 17
- movement in net realisable value impairments of inventory 13 6 269 61 605 55 063
Operating cash flows before changes in working capital 428 692 479 626 856 217
Increase in trade and other receivables (40 158) (54 866) (23 490)
Decrease/(increase) in inventory 5 690 (14 023) (71 927)
(Decrease)/increase in trade and other payables (38 290) (43 693) 40 504
Decrease in revenue received in advance ( 70) (139 233) (146 533)
Decrease in hedge liability - (4 628) (4 628)
Decrease/(increase) in hedge asset 13 874 - (20 131)
Cash generated by operations 369 738 223 183 630 012
Income tax paid (39 484) (38 475) (77 015)
Interest received 3 193 5 504 15 276
Interest paid (16 276) (17 558) (41 503)
Net cash flow from operating activities 317 171 172 654 526 770
Cash flows from investing activities
Investment in equity accounted investees 11 - (24 006) (55 359)
Increase in loans to equity accounted investees - (3 851) (5 774)
Acquisition of property, plant and equipment (328 789) (269 312) (526 862)
- to expand operations (17 583) (22 962) (44 276)
- to expand operations - capitalised pre-strip 12 (301 656) (234 401) (474 601)
- to maintain operations (9 550) (11 949) (7 985)
Net cash flows used in investing activities (328 789) (297 169) (587 995)
Cash flows from financing activities
Treasury shares acquired 10 - (15 364) (17 774)
Repayment of borrowings 15 - (246 744) (452 036)
Increase in borrowings 15 - 473 127 469 960
Dividends paid (26 260) (26 509) (26 572)
Net cash flows from financing activities (26 260) 184 510 (26 422)
Effect of exchange rate fluctuation on cash held (748) - 24 780
Net (decrease)/increase in cash and cash equivalents (38 626) 59 995 (62 867)
Cash and cash equivalents at beginning of the period 174 071 236 938 236 938
Cash and cash equivalents at end of the period 135 445 296 933 174 071
Condensed Consolidated Interim Statement of Changes in Equity
for the six months ended 31 December 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 2015 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 investee - - - - 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 132 654 278 036 20 297 69 513 809 873 1 310 373
Total comprehensive income for the period, net of income tax - - - (38 833) 44 058 5 225
Profit for the period - - - - 44 058 44 058
Foreign currency translation differences on equity accounted investees - - - (38 833) - (38 833)
Transactions with owners, recorded directly in equity - - - - (26 531) (26 531)
Dividends paid - - - - (26 531) (26 531)
Balance at 31 December 2016 132 654 278 036 20 297 30 680 827 400 1 289 067
Notes to the Condensed Consolidated Interim Financial Statements
for the six months ended 31 December 2016
1. Reporting entity
Petmin is a company domiciled in South Africa. The condensed consolidated interim financial statements of the Group for the six months ended 31 December 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 interim financial statements were authorised for issue by the directors on 22 February 2017.
2. Basis of preparation
These condensed consolidated interim financial statements are prepared in accordance with IAS 34 - Interim Financial Reporting as well as the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council, the South African Companies Act and the JSE
Listings Requirements. The condensed consolidated interim financial statements do not include all of the information required for full financial statements purposes and should be read
in conjunction with the consolidated financial statements for the year ended 30 June 2016, 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 interim financial statements.
4. Functional and presentation currency
The condensed consolidated interim financial statements are presented in South African Rands ("Rands"), which is the Company's functional currency. All financial information
presented in Rands has been rounded to the nearest thousand.
5. Estimates and judgements
The preparation of the condensed consolidated interim 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 financial statements as at and for the year ended 30 June 2016.
6. Review of results
These condensed consolidated interim financial statements for the six months ended 31 December 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 condensed consolidated interim
financial statements identified in the auditor's review 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
In the prior year, Petmin impaired 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). Petmin is continuing with
arbitration procedures and its 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. The reasons for the impairment and the
assumptions used have not changed from those disclosed in the financial statements for the year ended 30 June 2016.
8. Share of profit/(loss) of equity accounted investees, net of tax
Reviewed Reviewed Audited
Six months ended Six months ended Year ended
31 December 31 December 30 June
2016 2015 2016
R'000 R'000 R'000
Share of profit/(loss) of equity accounted investees, net of tax 3 355 (4 171) (10 480)
- North Atlantic Iron Corporation Inc. (10 086) (7 829) (12 077)
- Somkhele Plant Proprietary Limited 13 441 3 658 1 597
In the six months ended 31 December 2016, North Atlantic Iron Corporation Inc. (NAIC) incurred ongoing costs to
maintain a facility at Forks Pennsylvania that was previously used to conduct smelt tests in the conduct of its feasibility
study. NAIC management is investigating ways to eliminate the ongoing costs.
9. Income tax expense
Effective income tax rate (taxation expense divided by profit before tax) 24% (766%) 85%
The movements of the effective income tax rate in the reporting periods are primarily as a result of the inclusion of the after tax share of the profit/(loss) of equity accounted investees
and due to the impairment of investments in equity accounted investees in the comparative periods.
10. Earnings/(loss) and diluted earnings/(loss) per share
Earnings/(loss) per share ("EPS") are based on the Group's profit/(loss) for the period, divided by the weighted average number of shares in issue during the period.
Reviewed Reviewed Audited
six months ended 31 December 2016 six months ended 31 December 2015 Year ended 30 June 2016
Weighted Weighted Weighted
average average average
Profit for number of Profit for number of Profit for number of
the period shares in Per share the period shares in Per share the year shares in Per share
R'000 thousands in cents R'000 thousands in cents R'000 thousands in cents
Basic earnings/(loss) per share 44 058 530 615 8.30 (38 441) 537 518 (7.15) 11 041 534 431 2.07
Diluted EPS* 44 058 530 615 8.30 (38 441) 537 518 (7.15) 11 041 534 431 2.07
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 44 058 530 615 8.30 (38 441) 537 518 (7.15) 11 041 534 431 2.07
Adjustments:
- Loss on disposal of property, plant and equipment - - - - - - 12 - 0.00
- Impairment of equity accounted investees - - - 115 403 - 21.47 115 403 - 21.59
Headline EPS 44 058 530 615 8.30 76 962 537 518 14.32 126 456 534 431 23.66
Diluted headline EPS* 44 058 530 615 8.30 76 962 537 518 14.32 126 456 534 431 23.66
(*)At each reporting date there were no share options outstanding.
During the six months ended 31 December 2016, the Group did not acquire any of its own shares (Year ended 30 June 2016: 13 484 787 shares were acquired at an average acquisition
price of R1.32 per share). At 31 December 2016, the Group held 46 292 981 of its own shares in treasury (30 June 2016: 46 292 981 shares), representing 8.02% of the total issued
shares.
11. Investments - investment in NAIC
During the six months ended 31 December 2016, Petmin did not make further investments into the NAIC project (Year ended 30 June 2016: R55 million). Petmin holds 40% of the
equity in NAIC (30 June 2016: 40%). The strengthening of the Rand compared to the Canadian Dollar resulted in a R39 million foreign currency translation loss recorded in equity in
the six months ended 31 December 2016 (Six months ended 31 December 2015: R47 million gain; Year ended 30 June 2016: R55 million gain). NAIC is a development project with
ongoing workstreams to complete a bankable feasability study. During the six months ended 31 December 2016, there has been no indication of potential impairment of the recorded
project value.
12. Pre-stripping cost
Reviewed Reviewed Audited
Six months ended Six months ended Year ended
31 December 31 December 30 June
2016 2015 2016
R'000 R'000 R'000
Opening balance in statement of financial position 190 297 247 360 247 360
Cash spend for the period 301 656 234 401 474 601
Mining - expensed on a units-of-production basis (amortisation) (325 349) (262 385) (531 664)
Closing balance in the statement of financial position 166 604 219 376 190 297
Petmin incurred cash stripping costs amounting to R302 million during the six months ended 31 December 2016 (Six months ended 31 December 2015: R234 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 R325 million during the six months ended 31 December 2016 (Six months ended 31 December 2015: R262 million).
13. Inventory
Reviewed Reviewed Audited
Six months ended Six months ended Year ended
31 December 31 December 30 June
2016 2015 2016
R'000 R'000 R'000
Inventory at cost 343 945 291 731 349 635
Less: Net realisable value provision (88 922) (89 195) (82 653)
255 023 202 536 266 982
Inventory is recorded net of net realisable value (NRV) write-downs amounting to R89 million (30 June 2016: R83 million). Inventory levels are expected to reduce in the six months
ending 30 June 2017 as all anthracite and energy coal inventory have sales commitments.
14. Hedge asset
At 31 December 2016 Tendele had hedges totalling $5.97 million (30 June 2016: $33.82 million) with delivery dates in January 2017. The average protection level of these hedges is a
R/$ of 14.80 (30 June 2016: R/$ protection level of 15.46). The hedging contracts were valued on a mark-to-market basis using valuations obtained from its bankers at 31 December
2016.This valuation methodology represents a level 2 fair value hierarchy.The Group's bankers provided valuation schedules of the derivative asset/liability with reference to observable
data such as ruling foreign exchange rates and market volatility.
15. Interest-bearing loans and borrowings
Reviewed Reviewed Audited
Six months ended Six months ended Year ended
31 December 31 December 30 June
2016 2015 2016
R'000 R'000 R'000
Total Interest-bearing loans and borrowings 273 506 478 459 273 436
Less: Current portion 3 506 8 498 3 436
Long-term portion 270 000 469 960 270 000
A. Nedbank A Preference Share liability 273 506 273 167 273 436
Less: Current portion 3 506 3 167 3 436
Long-term portion 270 000 270 000 270 000
B. Secured loan - Nedbank Limited - Revolving Credit Facility - 199 960 -
Less: Current portion - - -
Long-term portion - 199 960 -
C. Industrial Development Corporation of South Africa Limited (secured) - 5 331 -
Less: Current portion - 5 331 -
Long-term portion - - -
As announced on 12 November 2015, the Tendele BEE Transaction was implemented. On closing, the Standard Bank Limited revolving credit facility and term loans (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
(B in the table above). In the year 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) used in the BEE Transaction 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.
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 31 December 2016, the Group had R330 million in available facilities (30 June 2016: R330 million) with the R230 million Nedbank RCF, R50 million Nedbank overdraft and
R50 million Standard Bank overdraft being available.
16. Revenue received in advance
During the year ended 30 June 2015, Petmin received prepayments for certain export sales, the prepayment is dollar denominated and interest is charged on the outstanding balance
at a rate of 3.5% per annum. During the six months ended 31 December 2016, no deliveries were made against these prepayments. (During the year ended 30 June 2016, the Group
delivered export sales amounting to R146 million against these prepayments).
17. Legal dispute with customer
As described in more detail in note 28 of Petmin's 30 June 2016 Annual Financial Statements, 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 and Tendele expects to commence arguments on this action before May 2017.
Additionally, it is expected that the first court hearings for the High Court application to have the arbitration award made an order of court will be held before May 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 is recognised in relation to the award
made by the arbitrator.
18. Related parties
No material related party transactions were entered into by the Group which would require disclosure in these condensed consolidated interim financial statements.
19. Offer by Corpvent 100 Limited (Bidco) to acquire Petmin
On 19 December 2016, Petmin announced that it had received an offer by Bidco to acquire all or a portion of the issued ordinary shares in Petmin, excluding treasure shares, and
the proposed delisting of Petmin (Announcement).
On 29 December 2016, Petmin announced that shareholders are advised that further irrevocables have been obtained, whereby the total irrevocable support for the offer now
represents 46.47% of the offer shares.
20. Fair values of financial instruments
The fair values of all financial instruments held by the Group approximates the carrying amounts reflected in the statement of financial position.
21. Subsequent events
There have been no events that have occurred subsequent to 31 December 2016 and before the condensed consolidated interim financial statements are authorised for issue which
require adjustment of, or disclosure in the condensed consolidated interim financial statements or notes thereto in accordance with IAS 10 - Events After the Reporting Period.
22. 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") - 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
Reviewed Reviewed Audited Reviewed Reviewed Audited Reviewed Reviewed Audited Reviewed Reviewed Audited
Six months Six months Year Six months Six months Year Six months Six months Year Six months Six months Year
Units ended ended ended ended ended ended ended ended ended ended ended ended
of 31 Dec 31 Dec 30 June 31 Dec 31 Dec 30 June 31 Dec 31-Dec 30 June 31 Dec 31 Dec 30 June
measure 2016 2015 2016 2016 2015 2016 2016 2015 2016 2016 2015 2016
Anthracite - Saleable tonnes produced (#) (tonnes) 642 640 636 771 1 236 433 - - - - - - 642 640 636 771 1 236 433
Anthracite - Tonnes sold (#) (tonnes) 695 796 621 213 1 122 162 - - - - - - 695 796 621 213 1 122 162
Energy - saleable tonnes produced (#) (tonnes) 178 195 157 149 349 405 - - - - - - 178 195 157 149 349 405
Energy - tonnes sold (#) (tonnes) 182 383 237 414 441 579 - - - - - - 182 383 237 414 441 579
Segment revenue R'000 679 752 721 280 1 282 619 - - - - - - 679 752 721 280 1 282 619
Finance income R'000 337 4 057 3 768 - - - 7 205 1 447 16 914 7 542 5 504 20 682
Finance expense R'000 (25 181) (16 553) (48 522) - - - 8 835 (1 005) (1 823) (16 346) (17 558) (50 345)
- segment profit/(loss) before impairment of
equity accounted investees R'000 51 962 122 808 191 974 (10 086) (7 829) (12 077) 15 895 (4 015) 10 302 57 771 110 964 190 199
- Impairment of equity accounted investees R'000 - - - - (115 403) (115 403) - - - - (115 403) (115 403)
Segment profit/(loss) before tax R'000 51 962 122 808 191 974 (10 086) (123 232) (127 480) 15 895 (4 015) 10 302 57 771 (4 439) 74 796
Segment tax expense R'000 (15 454) (33 883) (58 994) - - - 1 741 (118) (4 760) (13 713) (34 002) (63 755)
Segment profit/(loss) after tax R'000 36 508 88 925 132 980 (10 086) (123 232) (127 480) 17 636 (4 133) 5 542 44 058 (38 441) 11 041
Segment capital expenditure - combined R'000 328 725 269 271 551 772 - - - 64 40 (24 910) 328 789 269 311 526 862
Segment capital expenditure R'000 27 069 34 869 77 171 - - - 64 40 120 27 133 34 909 77 291
Segment capital expenditure - pre-strip* R'000 301 656 234 401 474 601 - - - - - - 301 656 234 401 474 601
Segment depreciation - combined R'000 356 623 289 210 583 969 - - - 82 122 242 356 705 289 332 584 211
Segment depreciation R'000 31 274 26 826 52 306 - - - 82 122 242 31 356 26 948 52 548
Segment depreciation - pre-strip* R'000 325 349 262 385 531 663 - - - - - - 325 349 262 385 531 663
Share option costs included in segment
profit/(loss) before tax R'000 - - - - - - - - - - - -
Segment assets R'000 1 565 499 1 577 268 1 611 519 368 603 384 406 416 719 116 764 219 071 101 114 2 050 866 2 180 745 2 139 909
Percentage of segment assets to total assets (percent) 76% 72% 76% 18% 18% 20% 6% 10% 5% 100% 100% 100%
Segment liabilities R'000 992 433 957 316 1 008 649 - - - (230 634) (33 314) (189 670) 761 799 924 002 829 536
Percentage of segment liabilities to total liabilities (percent) 130% 104% 123% 0% 0% 0% (30%) (3%) (23%) 100% 100% 100%
(#)Figures not reviewed by independent auditors.
(*)See note 12.
Management commentary
for the six months ended 31 December 2016
This management commentary has been prepared by management and has not been reviewed by the Group's auditors.
(i) General overview of performance
The lower average selling prices achieved on anthracite exports in the six months ended 31 December 2016, combined with increased operating costs incurred as a result of delayed
access to new mining areas at Somkhele, resulted in a reduction of Petmin's normalised earnings by 43% to 8.49 cents per share (2015: 14.98 cents).
Mining costs were adversely affected by illegal activities of a few individuals that prevented access to the KwaQubuka mining area. A court interdict has been obtained against the
individuals. Delays in accessing the new KwaQubuka mining area meant that an additional cut of deeper coal, which is more expensive to mine, was extracted from the Luhlanga pit.
Despite Somkhele having all the legal rights required to mine in KwaQubuka, in the interests of building bridges with the local community and in order not to inflame the situation, a
decision was taken to temporarily delay mining in KwaQubuka. A roadmap agreement for the future sustainable development of Somkhele was concluded with the various parties and
mining has now commenced in KwaQubuka.
Six months ended Six months ended Year ended
31 December 31 December 30 June
2016 2015 2016
Normalised earnings R'000 R'000 R'000
Profit/(loss) for the period 44 058 (38 441) 11 041
Adjust for after-tax effect of:
- Loss on disposal of property plant and equipment - - 12
- Provision for bad debt 1 006 - 7 613
- NAIC once-off flow-through expenses - - 2 105
- NAIC Deferred Tax Asset write-down - 3 572 3 572
- Impairments - 115 403 115 403
Normalised profit after tax for the year 45 064 80 534 139 746
Adjusted profit per share 8.49 14.98 26.15
Weighted average shares in issue (million) 531 537 534
% annual decrease in profit per share (43%)
Petmin's interest-bearing debt to equity ratio (net of cash on hand) was 10.78% at 31 December 2016 (30 June 2016: 7.66%). 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.
Group capital expenditure, excluding pre-stripping, was R27 million (2015: R35 million) with Somkhele spending R18 million on a plant expansion project to increase recoveries of fine
coal and R9 million spent to maintain operations with the commencement of development of the new KwaQubuka open-pit mining area.
Basic earnings per share for the six months ended 31 December 2016 was 8.30 cents compared to a loss of 7.15 cents for the six months ended 31 December 2015. The loss in the
six months ended 31 December 2015 was as a result of the impairment of the investment in Veremo of R115 million.
Dividends and share buy-backs
During the six months ended 31 December 2016, Petmin paid a dividend of five cents per share (2015: five cents). Petmin did not acquire any of its own shares during the six months
ended 31 December 2016. During the year ended 30 June 2016, Petmin acquired 13 484 787 of its own shares at an average acquisition price of R1.32 per share for a total investment
of R18 million.
Anthracite division
Somkhele Anthracite Mine
Six months ended Six months ended Year ended
31 December Percentage 31 December 30 June
Somkhele production performance 2016 change 2015 2016
Run of Mine (ROM) tonnes washed 1 454 722 1 1 440 908 2 809 488
Yield (%) 44.18 0 44.19 44.01
Anthracite saleable tonnes produced 642 640 1 636 771 1 236 433
Anthracite tonnes sold 695 796 12 621 213 1 122 162
Discard tonnes washed 637 837 9 586 693 1 183 353
Yield (%) 27.94 4 26.79 29.53
Energy coal saleable tonnes produced 178 195 13 157 149 349 405
Energy coal tonnes sold 182 383 (23) 237 414 441 579
Production of saleable anthracite increased by 1% in the six months ended 31 December 2016. Production in the third wash plant increased by 13% compared to 2015.
Production costs per tonne in the six months ended 31 December 2016 increased by 12% from those reported for the year ended 30 June 2016 as a result of the delays in accessing
the KwaQubuka mining area.
The average prices achieved for inland sales were down 2% from those achieved in 2015. The average Rand prices achieved on the export market decreased by 27% from 2015 (and
19% from the average achieved for the year ended 30 June 2016), as lower quality export anthracite was sold in the six months ended 31 December 2016 and in line with the reduction
in international coal prices at the time. The average dollar price of export sales decreased by 34% compared to 2015.
The average at-mine-gate selling price of energy coal increased by 4% compared to 2015 with continued strong demand for this product.
On 26 October 2016, the mining right for areas four and five which covers the future mining areas for the Somkhele Anthracite Mine was executed.
North Atlantic Iron Corporation ("NAIC")
During the six months ended 31 December 2016, Petmin reviewed the draft bankable feasibility study for the NAIC project. Areas were identified that require additional clarity and
the report is being updated. Petmin did not make an additional investment into the project during the six months ended 31 December 2016. Discussions are ongoing regarding funding
and site selection.
Iron-ore - South Africa (Veremo project)
As reported in note 4 to the annual financial statements for the year ended 30 June 2016, Petmin continues to pursue its R195 million claim against Framework Investments and
Kermas Limited.
ii) Prospects
Anthracite division
Current anthracite production levels are expected to be reduce by 7% as a result of the delayed access to the KwaQubuka mining area. Sales volumes are expected to reduce by 8% in
the six months ending 30 June 2017. As a result of the delayed access to the KwaQubuka mining area, and additional tonnes mined at deeper levels, it is expected that the production
cost per tonne for the year to 30 June 2017 will increase by approximately 10% from the average production cost per tonne achieved in 2016.
Local demand for the year ending 30 June 2017 is expected to be maintained at the same level as 2016, with annual average prices expected to increase by 2% from those achieved
in 2016.
We expect the average dollar prices for our exports in the six months to 30 June 2017 to increase by 53% from those achieved in the six months ended 31 December 2016.
This higher expected dollar price is offset by a forecast strengthening of the Rand against the Dollar resulting in an expected 37% increase in the at-mine-gate export selling price in
Rand for the six months ended 30 June 2017.
For the year ending 30 June 2017, energy coal production in the third wash plant is expected to increase by 25% compared to 2016, with sales volumes expected to increase by 2%.
At-mine-gate energy coal sales prices are expected to increase by 21% from 2016.
Capital expenditure for the year ending June 2017 is expected to be approximately R50 million with expenditure focused 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.
NAIC
The bankable feasibility study at NAIC prepared by Tenova/SNC Lavalin is being updated and discussions are ongoing regarding site selection, given potential changes in legislation in
the USA and Canada that may affect project economics.
Additional details on Petmin, 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
23 February 2017
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* TD 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
Date: 23/02/2017 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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