| Fri 3 Oct 2008, 15:45 | | PET - Petmin - Withdrawal Of Cautionary Announcement, Disposal Of Springlake |
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PET
PET
PET - Petmin - Withdrawal Of Cautionary Announcement, Disposal Of Springlake
Colliery, Somkhele Expansion Plans On Track And Veremo Project And Other Updates
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")
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT, DISPOSAL OF SPRINGLAKE COLLIERY, SOMKHELE
EXPANSION PLANS ON TRACK AND VEREMO PROJECT AND OTHER UPDATES
Petmin COO Bradley Doig: "The Board of Petmin has considered very carefully the
options available to the company and how its assets and unique position in the
market can best be used to deliver value for shareholders. Today`s announcements
are an integral part of the plan for Petmin`s development. Our management
attention is now focused on three core assets - Somkhele, SamQuarz and Veremo -
and we expect to report further progress on our growth plans in the coming
months."
Withdrawal of cautionary announcement
Shareholders are advised that the negotiations referred to in the cautionary
announcement published on 10 September 2008 have been terminated owing to the
unprecedented volatility in the global financial markets.
Therefore, caution is no longer required to be exercised by shareholders when
dealing in their securities.
Disposal of Springlake Colliery ("Springlake")
In a transaction unrelated to the withdrawal of the cautionary announcement,
Petmin has concluded an agreement to dispose of 100% of its interest in the
Springlake Colliery to Shanduka Coal (Pty) Ltd for a cash consideration of R145
million ("the Sale"), which is subject to normal warranties applicable to a
transaction of this nature.
Petmin acquired Springlake Holdings (Pty) Ltd ("SPH") for R90 million in
November 2005. SPH comprised Springlake, the Somkhele Anthracite Development
Project and a 50% interest in the Baobab Exploration Project. Petmin
subsequently disposed of its interest in Baobab for R35 million, and developed
the Somkhele project, which commenced production in June 2007. The Somkhele
project was independently valued by Snowden Mining Industry Consultants (Pty)
Ltd at R1.47 billion in July 2007 (based on a 15 % discount rate).
Shareholders are advised that this Sale will have no significant (less than 3%)
effects on the Net Assets or Profits of Petmin.
Rationale for the Sale
Petmin specifically acquired SPH with the view to developing the Somkhele
Project. At that time, Springlake was an under-performing asset. Petmin has
restructured the mine and implemented a successful turnaround, while
simultaneously developing Somkhele, which has remained the key focus of the
acquired assets. The disposal will free up management time as well as providing
additional cash resources to be deployed, inter alia, in accelerating the
expansion programme at Somkhele and focussing on the management and development
of the Veremo Project as detailed below.
The Sale is subject to the following key conditions:
1.1.1 by 31 December 2008, the transfer of Tendele Coal Mining (Pty) Ltd
("Tendele") (which houses Somkhele as its sole asset), from SPH to
Petmin;
1.1.2 by 31 December 2008, the Sale being unconditionally or conditionally
approved by the Competition Authorities in terms of the South African
Competition Act;
1.1.3 by 31 December 2008, the Sale and all agreements and transactions
contemplated having been unconditionally or conditionally approved by
the South African Minister of Minerals and Energy in terms of section
11 of the Mineral and Petroleum Resources Development Act (MPRDA).
Operational update - Petmin well-positioned for growth
Petmin reported its results for the year ended June 2008 on 17 September 2008.
Key features were:
- Revenue increased by R285 million or 74% to R667 million compared with R382
million in FY2007.
- Profit for the year increased by 411% from R74 million to R380 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 of R7.2 million (2007: R4.5 million) and net finance expense
of R3.8 million (2007: R1.1 million).
- 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.
- As at 30 June 2008, the Company had cash of approximately R88 million and
additional debt facilities of approximately R75 million with its bankers
that have not been utilised.
Management is considering the use of these debt facilities and existing cash
resources (and enhanced by the proceeds of approximately R145 million from the
Sale announced today) for funding, inter alia, future expansion plans at
Somkhele and pursuing value-enhancing acquisitions.
Somkhele`s expansion plans
The construction of a destoning plant has begun at Somkhele and the plant is on
track to be in production in the last quarter of the company`s 2009 financial
year. Management expects the current production of saleable tonnes to increase
by approximately 10% for the year to 30 June 2009 as the impact of the destoning
plant will only be felt in the last quarter of the year ending 30 June 2009.
Thereafter it is expected that the sales tonnes will increase by some 25% as a
result of the decision to commission the destoning plant.
Somkhele has mineral rights over some 28 000 hectares, of which only 1 430
hectares is being mined. The Company`s aggressive exploration programme to
delineate additional resources is on track. Management anticipates that an
updated SAMREC-compliant reserve and resource statement will be procured before
the end of December 2008 and which management expects significantly increase the
current proven and probable reserves of 25.4 million tonnes.
Despite market conditions, demand for metallurgical coals in the medium term
remains firm and Somkhele has experienced an overall increase in the price of
its product. As a result, Petmin is investigating additional capital projects at
Somkhele which will more than double its coal processing capacity and
consideration will be given to the construction of a second coal processing
plant should the exploration programme deliver promising results and should
market conditions justify the investment.
In order to facilitate the continued growth in Somkhele`s export business,
Petmin acquired, a further 30% interest in Petmin Logistics (Pty) Ltd ("Petmin
Logistics") (formerly ZMS Logistics (Pty) Ltd) and now controls 100% of Petmin
Logistics. Petmin Logistics has contracted with the South African Port
Authorities to provide export facilities for a minimum of 600,000 tonnes per
annum for four years at the Richards Bay Dry Bulk Terminal ("DBT"). Petmin is
currently evaluating additional export capacity, which will enable the Company
to export in excess of 1 million tonnes per annum.
Update on SamQuarz
The programme to delineate the ore body at SamQuarz (Pty) Limited, the pre-
eminent silica producer in South-Africa, has now been concluded and the updated
SAMREC compliant report of the reserves and resources will be published 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.
Update on Veremo Iron Ore Project
Following the conclusion of the joint acquisition of Veremo Holdings (Pty) Ltd
("Veremo") by Petmin and Framework Investments Limited ("Framework") whereby
Petmin acquired 25% and Framework 75%, the parties have agreed on the
appointment of Bradley Doig and Lebo Mogotsi as directors of Veremo and as
Petmin`s representatives on the Veremo executive management team.
The Veremo executive management team will focus on delivering a feasibility
study sufficient for the purposes of listing the Veremo Project on the LSE
and/or other stock exchange by no later than 30 June 2010.
Dark Capital (Proprietary) Limited ("Dark")
Dark is a member of the Black Economic Empowerment (BEE) anchor consortium in
Petmin, controlling approximately 157 million shares in Petmin. As outlined in a
circular to shareholders dated 7 November 2005, Dark obtained 7 million options
in Petmin at 65 cents. Dark has notified Petmin that it intends to exercise
these options once the Cautionary Announcement referred to above is withdrawn.
Renewal of management contracts
Petmin directors and management collectively control 220 million shares in
Petmin and 47 million options. In total, this amounts to 45% percent of the
fully diluted shares in Petmin.
The contractual arrangement between Petmin and its management team was a three-
year agreement that expired on 30 June 2008. Management has subsequently reached
agreement with the Remuneration Committee to renew its arrangement for a further
three years on similar terms and conditions, which ensures alignment with
shareholders. The broad principles are as follows:
1. Guaranteed Remuneration between zero and R 1 million each for the
Management Team
2. 5% of Pre-Tax profits payable as an incentive on the condition that the
Headline Earnings per share (after taking into account the management fee
and the 5% fee) increases by at least 20% on a year on year basis
3. 1.5% management fee on all assets under management as at 30 June 2008 and
1% on any increase in the assets under management after 30 June 2008
4. The new remuneration scheme also provides for a share option incentive
scheme for which shareholder approval will be requested once the details
have been finalized.
Prospects
Petmin has secured the services of its executive management team, has a strong
balance sheet, with gearing of 7% as at 30 June 2008 and cash reserves in excess
of R200 million (post the Springlake disposal). The Somkhele and SamQuarz assets
are strongly cash generative. The Company is therefore, well positioned to
evaluate growth opportunities and potential acquisition targets, including a
share buy-back, in order to enhance shareholder value.
Johannesburg
03 October 2008
Sponsor
River Group
Date: 03/10/2008 15:45:01 Produced by the JSE SENS Department.
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