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PET
PET
PET - Petmin Limited - New Order Mining Right Boosts Production At Somkhele
And Further Cautionary Announcement
PETMIN LIMITED
Incorporated in the Republic of South Africa
Registration Number 1972/001062/06
Share Code: PET & ISIN: ZAE000010237
("Petmin", "the company" or "the group")
New Order Mining Right Boosts Production At Somkhele And Further Cautionary
Announcement
Multi-commodity mining company Petmin Limited (JSE: PET; AIM: PTMN)
announced today that the recent granting of a new order mining right over
Area 1 at its new Somkhele anthracite mine near Richards Bay in South
Africa`s Kwa-Zulu Natal province allows for:
* a substantial increase in production;
* an acceleration in the production build-up;
* confirmation of combined reserves and resources of 75 million t;
* an update in the life of mine from 11 to 15 years; and
* According to Snowdens, a 310% increase in the mine`s estimated value
Somkhele came into production earlier this year. The plant, which has a
nominal throughput capacity of 120 000 t a month, is now fully operational.
The mine`s first export cargo of 32 000 t of product was dispatched through
Richards Bay Dry Bulk Terminal in June.
Production, from the mine`s Area 2, was originally targeted at 500 000 ROM
t in 2007/2008. Now, capital expenditure of R28 million is planned to bring
Area 1 into production, boosting the 2007/2008 production target by 67% to
835 000 ROM t - approximately what was expected to be achieved only in
2008/2009. Production in 2008/2009 is now expected to be 970 000 ROM t,
increasing to 1 600 000 t in 2010/2011 and reaching a maximum of 1 900 000
t from 2011 onwards.
Snowden Mining Industry Consultants (Pty) Limited has confirmed, according
to the SAMREC code, total combines reserves and resources of 75 million t
(25.475 million t of mineable in-situ reserves and 51.196 million t of
resources) and has updated Somkhele`s LOM from 11 to 15 years.
The new order mining right over Area 1 augments existing rights over Areas
2 and 3. Mining rights - over Areas 1, 2 and 3 - cover 1 400 ha and
prospecting rights - over Areas 4 and 5 - cover a further 23 027 ha. The
LOM increase excludes the prospects for Areas 4 and 5. Further capital
expenditure is planned in 2008 and 2009 to finalise an exploration
programme for Areas 4 and 5, which may yield a new mine of similar
proportions to Areas 1 and 2.
Based on Snowdens assessment, the estimated value of the Somkhele project
has increased from R358 million to R1.470 billion at a 15% discount rate,
which is a 310% increase in value.
NPV comparison
Discount rate CPR valuation Updated valuation
(ZAR m) * (ZAR m)**
10% 453 2 000
12% 397 1 780
15% *** 358 1 470
* CPR valuation as at November 2006 as published in the AIM admission
document.
** Updated valuation dated 25 July 2007
***Snowden believes that including the revised valuation depends on the
company`s interpretation of market dynamics and proposed that cash flow be
discounted at 15% to take into account this risk.
Petmin COO Bradley Doig says there has been significant demand for the
Somkhele product range since the start of production, with negotiations
under way with a number of customers for medium- to long-term offtake
agreements.
"The production of high quality anthracite at Somkhele will assist Petmin
both in consolidating its existing position in the anthracite market and in
targeting niche South African metallurgical markets."
The Petmin Group has secured a five-year agreement to export a minimum of
150 000 t to March 2008 and thereafter a minimum of 300 000 t via a
specialised facility at the Richards Bay Dry Bulk terminal.
Turnaround at Springlake
Meanwhile, Petmin has successfully implemented a turnaround strategy at its
Springlake operation near Dundee in Kwa-Zulu Natal, and earmarked further
capital of R14 million in 2007/8 to secure the sustainability of the
turnaround.
New order mining rights granted over the adjacent Besterdale area are
adding approximately 500 000 t to Springlake`s ROM opencast operation. In
line with its strategy to enhance earnings, Springlake has signed a `take
or pay` offtake agreement for 350 000 t of its duff material until March
2009.
Springlake management has been bolstered with the appointment of Hardus
Combrinck as Mine Manager and Ngwedi Mabilo as Engineering Manager.
Combrinck has 26 years` experience in the gold, platinum and coal sectors
and Mabilo 13 years` experience in the coal sector.
Further Cautionary Announcement
Further to the cautionary announcement dated 26 July shareholders are
advised that negotiations are still in progress which, if successfully
concluded may have a material effect on the price of Petmin`s securities.
Accordingly, shareholders are advised to continue exercising caution when
dealing in the company`s securities until a full announcement is made.
3 August 2007
Johannesburg
Sponsor
River Group
Date: 03/08/2007 09:00:01 Produced by the JSE SENS Department.
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