| Wed 17 Sep 2008, 11:11 | | PET - Petmin Limited - Condensed Consolidated Reviewed Financial Statements for |
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PET
PET
PET - Petmin Limited - Condensed Consolidated Reviewed Financial Statements for
the year ended 30 June 2008
Petmin Limited
(Incorporated in the Republic of South Africa)
(Registration number 1972/001062/06)
JSE code: PET & AIM code: PTMN
ISIN: ZAE000076014
("Petmin" or "the Company" or "the Group")
Condensed Consolidated Reviewed Financial Statements for the year ended 30 June
2008
Achievements:
- Revenue increased by 74% from R382 million to R667 million.
- Profit for the year increased by 411% from R74 million to R380 million.
- Headline earnings per share increased by 190% from 5.28 cents to 15.31 cents.
- Fully diluted earnings per share increased by 370% from 15.77 cents to 74.15
cents.
- R252 million cash produced from operations (2007: R75 million).
- The acquisition of a 25% share of Veremo Holdings
Limited positions Petmin in a large scale iron project.
- R216 million capital spent to expand operations (2007: R113 million).
Condensed Consolidated Reviewed
Income Statement
for the year ended 30 June 2008
GROUP Reviewed Reviewed
Year ended Year ended
30 June 2008 30 June 2007
R`000 R`000
Revenue 666 879 382 341
Cost of sales (502 753) (326 500)
Gross profit 164 126 55 841
Other income - 54 943
- Profit on sale of subsidiary - 28 891
- Profit on acquisition of subsidiary - 26 052
Administration expenses (46 335) (19 653)
Operating profit before financing costs 117 791 91 131
Net finance (expense)/income (3 773) (1 104)
- Finance income 7 676 3 352
- Finance expenses (11 449) (4 456)
Share of profit of equity accounted investee 303 133 -
Profit before tax 417 150 90 027
Income tax expense (36 736) (15 613)
Profit for the year 380 414 74 414
Attributable to:
- Equity holders of Petmin Limited 380 353 74 414
- Minority interest 61 -
Profit for the year 380 414 74 414
Basic earnings per ordinary share (cents) 75.43 16.14
Diluted earnings per ordinary share (cents) 74.15 15.77
Condensed Consolidated Reviewed
Cash Flow Statement
for the year ended 30 June 2008
GROUP Reviewed Reviewed
Year ended Year ended
30 June 2008 30 June 2007
R`000 R`000
Net cash flow from operating activities 157 153 27 889
Cash flows from investing activities
Acquisition of subsidiary net of cash acquired 502 -
Increase in investment in rehabilitation funds (1 064) (912)
Investment in equity accounted investee (11 064) -
Acquisition of property, plant and equipment (228 767) (127 522)
- to expand operations (216 155) (112 977)
- to maintain operations (12 612) (14 545)
Proceeds from sale of subsidiary - 30 593
Proceeds from sale of property, plant and
equipment - 399
Net cash flow from investing activities (240 393) (97 442)
Cash flows from financing activities
Proceeds from specific and general share
issues
for cash during the year 91 896 34 053
Repayment of contingent consideration (132) -
Repayment of borrowings (11 509) (10 813)
Increase in borrowings 31 345 36 529
Net cash flows from financing activities 111 600 59 769
Net increase/(decrease) in cash and cash
equivalents 28 361 (9 784)
Cash and cash equivalents at beginning of year 60 350 70 134
Cash and cash equivalents at end of year 88 711 60 350
Condensed Consolidated Reviewed
Balance Sheet
at 30 June 2008
GROUP Reviewed Reviewed
Year ended Year ended
30 June 2008 30 June 2007
R`000 R`000
ASSETS
Non-current assets 1 003 860 469 518
Property, plant and equipment 580 200 453 122
Intangible assets 15 034 6 222
Investment in equity accounted investee 375 888 -
Investments 2 2
Restricted investments 11 236 10 172
Long-term receivables 21 500 -
Current assets 338 175 207 901
Inventories 69 261 63 045
Trade and other receivables 179 410 83 713
Taxation prepaid 793 793
Cash and cash equivalents 88 711 60 350
Total assets 1 342 035 677 419
EQUITY AND LIABILITIES
Ordinary share capital and reserves 1 005 424 451 051
Minority interest 2 434 -
Total equity 1007 858 451 051
Non-current liabilities 178 021 118 627
Interest-bearing loans and borrowings 55 067 36 436
Deferred taxation 89 146 61 612
Environmental rehabilitation provision 33 808 20 579
Current liabilities 156 156 107 741
Trade and other payables 132 292 87 115
Current portion of non-current liabilities 15 386 14 181
Taxation payable 8 478 6 445
Total equity and liabilities 1 342 035 677 419
Net asset value ("NAV") per share (cents) 187.74 93.99
Fully diluted NAV per share (cents) 170.46 85.25
Condensed Consolidated Reviewed Statement of Changes in Equity
for the year ended 30 June 2008
GROUP Share Share
capital premium
R`000 R`000
Balance at 1 July 2006 109 972 134 821
Shares issued during the year
- General issue for cash - AIM listing 10 000 21 174
- Contingent share issue on acquisition of
Springlake reversed - -
- Share options granted - -
Dividends forfeited - -
Profit for the year - -
Balance at 30 June 2007 119 972 155 995
Shares issued during the year
- To acquire Petmin Logistics (Pty) Ltd 438 7 437
- To acquire 25% of Veremo Holdings Ltd 5 538 68 978
- General issue for cash 7 000 72 968
- Share options exercised 938 1 566
- Share options forfeited - -
Costs capitalised to share premium - (982)
Treasury shares acquired during the year (182) (1 418)
Contingent consideration settled in cash in
the year - -
Share options granted - -
Minority interest recognised on acquisition
of Petmin Logistics (Pty) Ltd - -
Profit for the year - -
Balance at 30 June 2008 133 703 304 545
Share option Contingent
reserve consideration
R`000 R`000
Balance at 1 July 2006 5 141 27 552
Shares issued during the year
- General issue for cash - AIM listing - -
- Contingent share issue on acquisition of
Springlake reversed - (26 052)
- Share options granted 10 595 -
Dividends forfeited - -
Profit for the year - -
Balance at 30 June 2007 15 736 1 500
Shares issued during the year
- To acquire Petmin Logistics (Pty) Ltd - -
- To acquire 25% of Veremo Holdings Ltd - -
- General issue for cash - -
- Share options exercised (820) -
- Share options forfeited (55) -
Costs capitalised to share premium - -
Treasury shares acquired during the year - -
Contingent consideration settled in cash in
the year - (20)
Share options granted 12 633 -
Minority interest recognised on acquisition
of Petmin Logistics (Pty) Ltd - -
Profit for the year - -
Balance at 30 June 2008 27 494 1 480
Retained
earnings Total
R`000 R`000
Balance at 1 July 2006 82 980 360 466
Shares issued during the year
- General issue for cash - AIM listing - 31 174
- Contingent share issue on acquisition of
Springlake reversed - (26 052)
- Share options granted - 10 595
Dividends forfeited 454 454
Profit for the year 74 414 74 414
Balance at 30 June 2007 157 848 451 051
Shares issued during the year
- To acquire Petmin Logistics (Pty) Ltd - 7 875
- To acquire 25% of Veremo Holdings Ltd - 74 516
- General issue for cash - 79 968
- Share options exercised - 1 684
- Share options forfeited - (55)
Costs capitalised to share premium - (982)
Treasury shares acquired during the year - (1 600)
Contingent consideration settled in cash in the year - (20)
Share options granted - 12 633
Minority interest recognised on acquisition of
Petmin Logistics (Pty) Ltd - -
Profit for the year 380 353 380 353
Balance at 30 June 2008 538 201 1 005 424
Minority Total
interest equity
R`000 R`000
Balance at 1 July 2006 - 360 466
Shares issued during the year
- General issue for cash - AIM listing - 31 174
- Contingent share issue on acquisition of
Springlake reversed - (26 052)
- Share options granted - 10 595
Dividends forfeited - 454
Profit for the year - 74 414
Balance at 30 June 2007 - 451 051
Shares issued during the year
- To acquire Petmin Logistics (Pty) Ltd - 7 875
- To acquire 25% of Veremo Holdings Ltd - 74 516
- General issue for cash - 79 968
- Share options exercised - 1 684
- Share options forfeited - (55)
Costs capitalised to share premium - (982)
Treasury shares acquired during the year - (1 600)
Contingent consideration settled in cash in the year - (20)
Share options granted - 12 633
Minority interest recognised on acquisition of
Petmin Logistics (Pty) Ltd 2 373 2 373
Profit for the year 61 380 414
Balance at 30 June 2008 2 434 1 007 858
Condensed Consolidated Reviewed Financial Statements
for the year ended 30 June 2008
Segment reporting
Segment information is presented in the condensed consolidated reviewed
financial statements in respect of the Group`s business segments, which are the
primary basis of segment reporting. The business segment reporting format
reflects the Group`s management reporting structure.
Inter-segment pricing is determined on an arm`s length basis.
Segment results include items directly attributable to a segment as well as
those that can be allocated on a reasonable basis.
Business segments
The group comprises the following main business segments:
- Silica mining and marketing ("Silica")
- Anthracite mining and marketing ("Anthracite")
- Iron ore mining and beneficiation ("Iron Ore")
Business segments
Silica
Reviewed Reviewed
Year Year
ended ended
30 June 30 June
2008 2007
R`000 R`000
Segment revenue 153 034 127 712
Segment profit/(loss) before tax
- segment result 46 742 35 379
- profit on sale of subsidiary - -
- profit on acquisition of subsidiary - -
- share of profit of equity accounted investee - -
Segment profit/(loss) before tax 46 742 35 379
Segment capital expenditure 27 362 15 424
Segment depreciation 7 688 7 235
Share option costs
included in segment
profit/(loss) before tax 190 190
Segment assets 228 076 187 080
Segment liabilities 100 288 93 829
Anthracite
Reviewed Reviewed
Year Year
ended ended
30 June 30 June
2008 2007
R`000 R`000
Segment revenue 513 845 254 629
Segment profit/(loss) before tax
- segment result 90 973 6 667
- profit on sale of subsidiary - 28 891
- profit on acquisition of subsidiary - -
- share of profit of equity accounted investee - -
Segment profit/(loss) before tax 90 973 35 558
Segment capital expenditure 198 110 113 861
Segment depreciation 93 680 16 631
Share option costs
included in segment
profit/(loss) before tax - -
Segment assets 663 356 472 737
Segment liabilities 449 750 336 831
Iron Ore
Reviewed Reviewed
Year Year
ended ended
30 June 30 June
2008 2007
R`000 R`000
Segment revenue - -
Segment profit/(loss) before tax
- segment result - -
- profit on sale of subsidiary - -
- profit on acquisition of subsidiary - -
- share of profit of equity accounted investee 303 133 -
Segment profit/(loss) before tax 303 133 -
Segment capital expenditure - -
Segment depreciation - -
Share option costs
included in segment
profit/(loss) before tax - -
Segment assets 375 888 -
Segment liabilities - -
Other (corporate office)
Reviewed Reviewed
Year Year
ended ended
30 June 30 June
2008 2007
R`000 R`000
Segment revenue - -
Segment profit/(loss) before tax
- segment result (23 698) (6 962)
- profit on sale of subsidiary - -
- profit on acquisition of subsidiary - 26 052
- share of profit of equity accounted investee - -
Segment profit/(loss) before tax (23 698) 19 090
Segment capital expenditure 3 295 192
Segment depreciation 108 39
Share option costs
included in segment
profit/(loss) before tax 12 443 7 526
Segment assets 401 566 311 268
Segment liabilities 21 947 6 690
Eliminations
Reviewed Reviewed
Year Year
ended ended
30 June 30 June
2008 2007
R`000 R`000
Segment revenue - -
Segment profit/(loss) before tax
- segment result - -
- profit on sale of subsidiary - -
- profit on acquisition of subsidiary - -
- share of profit of equity accounted investee - -
Segment profit/(loss) before tax - -
Segment capital expenditure - -
Segment depreciation - -
Share option costs
included in segment
profit/(loss) before tax - -
Segment assets (326 851) (293 666)
Segment liabilities (237 808) (210 982)
Consolidated
Reviewed Reviewed
Year Year
ended ended
30 June 30 June
2008 2007
R`000 R`000
Segment revenue 666 879 382 341
Segment profit/(loss) before tax
- segment result 114 017 35 084
- profit on sale of subsidiary - 28 891
- profit on acquisition of subsidiary - 26 052
- share of profit of equity accounted investee 303 133 -
Segment profit/(loss) before tax 417 150 90 027
Segment capital expenditure 228 767 129 477
Segment depreciation 101 476 23 905
Share option costs
included in segment
profit/(loss) before tax 12 633 7 716
Segment assets 1 342 035 677 419
Segment liabilities 334 177 226 368
The losses in the corporate office include a once-off impairment charge of
R4.7 million and share option costs of R12.4 million (2007: R7.5 million).
Notes to the Condensed Consolidated Reviewed Financial Statements
for the year ended 30 June 2008
1. Reporting entity
Petmin is a company domiciled in South Africa. The condensed consolidated
reviewed financial statements of the Group for the year ended 30 June 2008
comprise the Company and its subsidiaries (together referred to as the
"Group").
The condensed consolidated reviewed financial statements were authorised for
issue by the directors on 16 September 2008.
2. Statement of compliance
The condensed consolidated reviewed financial statements have been prepared in
accordance with the recognition and measurement requirements of International
Financial Reporting Standards (IFRSs) and the presentation and disclosure
requirements of IAS 34 - Interim Financial Reporting and the South African
Companies Act. The condensed consolidated reviewed financial statements do not
include all of the information required for full annual financial statements
and should be read in conjunction with the consolidated annual financial
statements for the year ended 30 June 2007.
3. Significant accounting policies
The condensed consolidated reviewed financial statements are prepared on the
historical cost basis, except for financial instruments which are stated at
fair value, where applicable, in terms of IAS 32 - Financial Instruments:
Disclosure and Presentation and IAS 39 - Financial instruments: Recognition and
Measurement.
The accounting policies have been applied consistently by Group entities and
have been applied consistently to all periods presented in these condensed
consolidated reviewed financial statements.
4. Estimates and judgements
The preparation of reviewed 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 2007, with the exception of the estimation of the fair value
of the acquisition of the 25% investment in Veremo Holdings Limited ("Veremo")
(See management commentary).
5. Review of results
The results of the Group as set out above have been reviewed by the Group`s
auditors, KPMG Inc. The review report is available for inspection at the
Group`s registered offices.
6. Earnings per ordinary share
Earnings per ordinary share ("EPS") are based on the Group`s profit for the
year, divided by the weighted average number of shares in issue during the
year.
Reviewed
Year ended 2008
Profit for Number of
the year shares in Per share
R`000 thousands in cents
Basic earnings
per share 380 353 504 280 75.43
Share options
and contingent
consideration - 8 701 (1.28)
Diluted EPS 380 353 512 980 74.15
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 380 353 504 280 75.43
Adjustments:
- AIM listing expense - - -
- profit on sale of
subsidiary - - -
- profit on acquisition
of subsidiary - - -
- share of profit of
equity accounted
investee (303 133) - -
Headline EPS 77 220 504 280 15.31
Share options and
contingent consideration - 8 701 (0.26)
Diluted headline EPS 77 220 512 980 15.05
Reviewed
Year ended 2007
Profit for Number of
the year shares in Per share
R`000 thousands in cents
Basic earnings
per share 74 414 461 041 16.14
Share options
and contingent
consideration - 10 817 (0.37)
Diluted EPS 74 414 471 858 15.77
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 74 414 461 041 16.14
Adjustments:
- AIM listing expense 693 - 0.15
- profit on sale of
subsidiary (24 725) - (5.36)
- profit on acquisition
of subsidiary (26 052) - (5.65)
- share of profit of
equity accounted
investee - - -
Headline EPS 24 330 461 041 5.28
Share options and
contingent consideration - 10 817 (0.12)
Diluted headline EPS 24 330 471 858 5.16
7. Net asset value ("NAV") per share
Reviewed Reviewed
Year ended Year ended
2008 2007
Ordinary share capital and reserves (R`000) 1 005 424 451 051
Total n umber of shares in issue (`000) 535 541 479 890
NAV per share (cents) 187.74 93.99
Ordinary share capital and reserves (R`000) 1 005 424 451 051
Total number of shares in issue (`000) 535 541 479 890
Share options and contingent consideration (`000) 54 299 49 173
Fully diluted number of shares (`000) 589 840 529 063
Fully diluted NAV per share (cents) 170.46 85.25
NAV per share increased 93.75 cents or 100% compared to 30 June 2007.
Fully diluted NAV per share increased 85.21 cents or 100% compared to 30 June
2007.
8. Related parties
8.1 NAMF and Dark Capital
NAMF Nominees (Proprietary) Limited ("NAMF") who disposed of their shareholding
in Petmin (see 4 December 2007 press release) were, until that date, material
shareholders in Petmin. Dark Capital (Pty) Limited ("Dark Capital"), Petmin`s
anchor Black Economic Empowerment shareholder, increased its shareholding in
Petmin by acquiring 99 million Petmin shares from NAMF. Dark Capital is a
material shareholder in Petmin and is therefore a related party as de fined by
Section 10 of the Listings Requirements.
8.2 Petmin executive committee remuneration scheme and share option trust As
disclosed in the annual financial statements for the year ended 30 June 2007,
the Petmin executive committee remuneration scheme and share option scheme
affects the executive directors of the Company and constitutes a related party
transaction. The Petmin executive committee remuneration scheme was a three-
year agreement that terminated on 30 June 2008. Management has reached
agreement with the Remuneration Committee on a new scheme with similar terms
and conditions. The new remuneration scheme provides for a share option
incentive scheme for which shareholder approval will be requested.
8.3 Other transactions with related parties
Other than as disclosed in note 8.1 above, there were no significant
transactions with related parties.
9. Subsequent events
9.1 Renewal of cautionary
Shareholders are advised that the Company has entered into negotiations which,
if successfully concluded, may have a material effect on the price of the
Company`s securities. Accordingly, shareholders are advised to exercise caution
when dealing in their Petmin securities until a further announcement is made.
9.2 Issue of shares
Petmin has issued 750 000 shares at R4.50 for the acquisition of the remaining
30% of Petmin Logistics (Pty) Ltd ("Petmin Logistics") (formerly ZMS Logistics
(Pty) Ltd) resulting in Petmin now holding 100% of Petmin Logistics.
Management commentary
(i) Operations
Revenue for the year ended 30 June 2008 increased by R285 million or 74% to
R667 million compared to the R382 million in 2007. Gross profit was R164
million, an increase of R108 million or 193% compared to the R56 million in
2007. This was as a result of an improved performance from Springlake Colliery
in the second half of the year under review, coupled with the first full year
of results from the Somkhele Colliery. There was also a consistently strong
performance of the silica mine, SamQuarz (Pty) Ltd ("SamQuarz") which
increased its revenue by 20% from R128 million in 2007 to R153 million and its
gross profit by R14 million or 30% to R60 million.
The anthracite segment`s profit before tax for the year ended 30 June 2008 was
reduced by an accrual of R3.4 million from the fair value adjustments on
unrealised US Dollar currency derivatives. Management continually reviews the
group`s hedging strategy and will restructure hedges where appropriate.
Administration expenses included a full year of operation at Somkhele (2007
only included one month) and also included an impairment charge of R4.7 million
(2007: R nil) on certain loans made to a company with a project in Zambia and
share option expenses of R12.7 million (2007: R7.7 million).
Cash of R252 million (2007: R75 million) was generated by operations before
outflows from changes in working capital of R84 million (2007: R42 million),
tax R7.2 million (2007: R4.5 million) and net finance expense of R3.8 million
(2007: R1.1 million).
Capital expenditure of R229 million (2007: R129 million) was incurred in the
year to 30 June 2008. R133 million was spent on exploration drilling and mine
development programmes to expand operations, R80 million was spent on plant and
mining equipment and R12 million on capital projects that are work-in-progress.
The ratio of interest bearing debt to equity at 30 June 2008 was 7.01% (2007:
11.22%). An amount of R31 million was drawn on the plant finance facility at
Somkhele in the year ended 30 June 2008 to fund the expansion of the project.
The Group has negotiated additional debt facilities of approximately R75
million with its bankers that are currently not utilised. Gearing of the Group
remains low and management will consider the use of these debt facilities for
funding future expansion plans.
Anthracite division
Somkhele anthracite mine, Springlake Colliery and Petmin Logistics Management
is pleased to report that the anthracite division increased its production by
69%, producing 1,219,601 tonnes (2007: 720,135) and selling 1,199,592 tonnes
(2007: 733,999) of anthracite in the year to 30 June 2008.
75% (2007: 67%) of the sales tonnages in the year to 30 June were exported.
Demand from inland metallurgical customers for the Somkhele product has
increased substantially. Management plans to expand production at Somkhele to
meet the combined demands of the inland metallurgical market and the export
markets.
Mining at Somkhele is progressing well and anthracite is currently being mined
from two pits in the project`s Area 2. Development of the mining Area 1 is
progressing well and management expects first production from the Area in the
latter half of calendar 2008.
In its first full year of operations the Somkhele Colliery has delivered on its
potential to become a profitable mine and a competitive alternative source of
carbon units to replace coke as a reductant in certain metallurgical processes.
In order to de-risk the export channels for the anthracite division, the Group
acquired a 70% interest in Petmin Logistics. Petmin Logistics has contracted
with
Transnet Port Terminals to provide export facilities of a minimum of 600,000
tonnes per annum for four years at the Richards Bay Dry Bulk Terminal.
Springlake`s financial performance improved in the second half of the year
ended 30 June 2008, with 76% of its profits being generated in the last six
months of the financial year. This was despite a write down of R3.4 million for
the fair value of certain foreign currency derivatives.
Silica division
SamQuarz silica mine
SamQuarz produced 1,385,906 tonnes of silica (2007: 1,240,000), an increase of
11.8% and sold 1,434,853 tonnes of silica (2007: 1,394,810) and chert in the
year ended 30 June 2008.
Revenue increased by 20% to R153 million (2007: R128 million) due to improved
prices negotiated on key sales contracts and due to improved sales volumes,
largely in the construction sector.
Capital expenditure has been focused on increasing production capacity both in
the open pit and the plant to ensure that customers` increased demand levels
can be reliably attained.
Impact of power shortages in South Africa
The power cuts that occurred in South Africa during the year under review, did
not have a material effect on Petmin`s production and sales.
Notwithstanding this, in order to mitigate against the risk of power cuts in
its operations, Petmin has ordered standby generators which will be in
operation in the first quarter of 2009.
Mineral rights applications
To the extent required, applications for renewals of prospecting rights and
conversions of old order mining rights have been submitted timeously for
approval by the Department of Minerals and Energy.
(ii) Investment in the Veremo iron ore project
As announced on 6 November 2007, Petmin concluded an agreement with Framework
Investments Limited ("Framework"), a 100% held subsidiary of Kermas Limited
(collectively the "Kermas Group") for the joint acquisition of Veremo.
Following the fulfilment of the conditions precedent to the transaction, with
effect from 23 May 2008, Petmin now holds a 25% interest in Veremo. The Kermas
Group holds the remaining 75%.
Petmin`s cost of acquisition of the 25% interest was R73 million. An amount of
R303 million was recognised as a profit on acquisition on the fair value
adjustment of the project as required in compliance with International
Financial Reporting Standards. The fair value of Petmin`s 25% interest was
calculated using pig iron prices of $400/t (current market prices are
approximately $900/t) in an indicative cash flow model for the project, and
taking into account the fact that Petmin is not required to fund capital
expenditure to produce at least 700,000 tonnes of pig iron per annum. Petmin is
guaranteed an annual cash dividend of R65 million per year for the first three
years from the planned date of commencement of mining and sales. In terms of
IFRS, the valuation of a business combination may be reviewed within 12 months.
Management will review the valuation of the project as more certainty is
provided by the metallurgical testing of a bulk sample of the ore and as the
feasibility study is progressed.
In February 2008, Veremo procured an updated resource statement for the project
(endorsed by Snowden Mining Industry Consultants). The results were as follows:
Classification Weathering Tonnes Fe SiO2 TiO2 V2O5 SG
(Mt) (%) (%) (%) (%)
Indicated Resource Fresh 797.5 42.05 15.13 14.09 0.15 4.22
Indicated Resource Weathered 123.8 43.00 13.67 14.64 0.16 4.16
Measured Resource Weathered 11.6 48.98 5.03 18.38 0.23 3.85
Total Resource 933.0 42.26 14.22 14.22 0.15 4.21
(iii) Prospects
Silica division
Management expects SamQuarz to increase current production and sales volumes as
the demand for the crusher run material (a product that is being used in the
building and maintenance of roads) has increased and as SamQuarz develops niche
markets in the foundry and metallurgical sectors.
The programme to delineate the ore body is nearing completion and management
expects to present an updated SAMREC compliant report of the reserves and
resources in the next quarter. Management expects that the proven reserves
should increase from the current 10 million tonnes of quartzite to
approximately 45 million tonnes by providing certainty on the 35 million tonnes
currently classified as a probable reserve.
Capital expenditure is forecast to reduce in the year to 30 June 2009 as the
bulk of the work on the expansion and exploration programmes has been completed
in the 2008 financial year.
Anthracite division
The anthracite division is expected to take advantage of the improved export
prices for anthracite by placing spot cargoes at strong US Dollar prices. The
weaker Rand against the US Dollar is expected to assist, although the
anthracite division has sold forward 4.5 million US Dollar receipts from July
2008 to March 2009 at an average exchange rate of R 7.36 to the US Dollar.
The anthracite division has also entered into zero cost collar and cap currency
options totalling 5.6 mill ion US Dollars which terminate in October 2008.
These options have a collar of R7.10 per US Dollar and a cap of R8.62 per US
Dollar.
Somkhele has commenced the construction of a destoning plant that is scheduled
to be in production in the last quarter of the 2009 financial year.
It is anticipated that the destoning plant will increase throughput by
approximately 25%. A debt finance facility to fund the plant construction has
been approved by the Group`s bankers. Management has budgeted a total capital
expenditure for the year ending 30 June 2009 of R138 million. The majority of
the capital is planned in order to accelerate the development of new mining
areas to meet the expansion programme, to expedite the exploration programme
and to advance the social expenditure programme in the directly affected
communities around Somkhele.
Petmin has approved an exploration programme to delineate additional resources
and this programme is expected to result in additional resources in close
proximity to the existing coal processing plant. Management expects to make an
announcement on an updated SAMREC-compliant reserve and resource statement in
the fourth quarter of calendar 2008.
The anthracite division expects that sales volumes to inland customers will
total 34% of sales for 2009 from the 25% in the year ended 30 June 2008, with
significantly improved prices. Approximately 85% of all Somkhele`s production
to December 2008 had been contracted during the construction phase at Somkhele
(between January 2006 and June 2007) to mitigate the risk associated with
starting up a new project. Subsequently the export prices have almost doubled
and Somkhele will benefit from these prices for the remaining portion of its
production. Approximately 150,000 tonnes of the current con tract are due to be
delivered in the six months to 31 December 2008. The anthracite division has
entered into a new contract, at significantly improved prices, for the sale of
1 million tonnes over a three year period ending December 2011. This equates to
approximately 35% of the planned production tonnages over the contract period.
Due to the unprecedented demand for metallurgical coals, Somkhele is
investigating capital projects to double its coal processing capacity and
consideration will be given to the construction of a second coal processing
plant at Somkhele should the exploration programme deliver the desired results.
Management is investigating various opportunities to secure the use of
additional export facilities.
Somkhele has mineral rights over a total of 28,742 hectares of land, of which,
1,430 hectares is currently being mined and 21,939 hectares explored. Once the
exploration programme is complete, the mine`s reserve base will increase
significantly.
Veremo
Subsequent to the completion of the acquisition of Veremo in May 2008,
Framework has assumed the responsibility to manage the process of procuring an
updated bankable feasibility study on the Veremo project. Due to the importance
of the project, Petmin has agreed to the appointment of Bradley Doig and Lebo
Mogotsi as directors of Veremo and as members of the Veremo executive
management team.
The investment in the Veremo project is an exciting prospect which gives Petmin
the opportunity to become involved in a large scale mining and beneficiation
operation that may provide significant returns to its shareholders and
furthermore, provides Petmin with a partner that has a significant track
record.
Petmin`s management team is continuing to evaluate value enhancing
propositions to increase shareholder wealth.
By order of the Board
P J Nel JC du Preez
Chairman Chief Executive Officer
Johannesburg
16 September 2008
Directors
P J Nel* (Chairman), L Mogotsi (Deputy Chairman),
J C du Preez (Chief Executive Officer), B B Doig (Chief Operating Officer),
I Cockerill*#, E de V Greyling*, J P Mabena**, A Martin*, J A Strijdom*,
D H Warmenhoven, J Taylor* *Non-executive #British (appointed 1 October
2007)
**Resigned 1 August 2007
Registered Office
Parc Nouveaux, First Floor, Block C
225 Veale Street, Brooklyn, Pretoria, 0002
(PO Box 899, Groenkloof, 0027)
www.petmin.co.za
Corporate Office:
37 Peter Place
Bryanston, 2021
Tel: (011) 706 1644 Fax: (011) 706 1594
www.petmin.co.za
Nominated Adviser and Broker - AIM
Numis Securities Limited
Transfer Secretaries
JSE: Computershare Investor Services (Proprietary) Limited
AIM: Computershare Investor Services PLC
Auditors
KPMG Inc.
Johannesburg
17 September 2008
Sponsor and Company Secretary
River Group
Date: 17/09/2008 11:11:04 Produced by the JSE SENS Department.
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