PETMIN LIMITED - Condensed Consolidated Interim Financial Statements for the six months ended 31 December 2016

Release Date: 23/02/2017 08:00
Code(s): PET
 
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'). 
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.

Email this JSE Sens Item to a Friend.

Share This Story