| Mon 2 Mar 2009, 8:00 | | 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 six months ended 31 December 2008 and resignation of director
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 six months ended
31 December 2008 and resignation of director.
"Developing projects into high-yielding, cash generative assets"
- Headline earnings per share ("HEPS") increase by 81% from 6.52 cents to
11.82 cents
- Strong operational assets produce cash from operating activities of R165
million (2007: R56 million) an increase of 195%
- SAMREC compliant report for SamQuarz indicates a life-of-mine in excess of 40
years
- SAMREC compliant report on additional resources at Somkhele expected shortly
- Disposal of Springlake for approximately R150 million on track
7% gearing, profitable and cash generative assets, proceeds to be received
on the disposal of Springlake and undrawn banking facilities of R160 million,
place Petmin in a strong position to review under-capitalised assets or
opportunistic value enhancing propositions to increase shareholder wealth
and the weather the current financial crisis facing the world.
Reviewed Condensed Consolidated Income Statement
for the six months ended 31 December 2008
GROUP Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2008 2007 2008
Note R`000 R`000 R`000
Revenue 490 359 318 637 672 997
Cost of sales (375 569) (250 654) (502 753)
Gross Profit 114 790 67 983 170 244
Administration expenses (21 440) (18 597) (52 453)
Impairment loss on
assets classified
as held for sale (13 392) - -
Impairment loss on
goodwill acquired (1 327) - -
Results from operating
activities 78 631 49 386 117 791
Net finance expense (3 773) (1 573) (3 773)
- Finance income 5 460 1 560 7 676
- Finance expenses (9 233) (3 133) (11 449)
Share of profit of
equity accounted
investee (ii) 32 635 61 706 303 133
Profit before income tax 107 493 109 519 417 150
Income tax expense (26 346) (16 358) (36 736)
Profit for the period 81 147 93 161 380 414
Attributable to:
- Equity holders of
Petmin Limited 81 525 93 100 380 353
- Minority interest (378) 61 61
Profit for the period 81 147 93 161 380 414
Basic earnings per
ordinary share
(cents) 6 15.15 19.30 75.43
Diluted earnings per
ordinary share
(cents) 6 14.72 18.89 74.15
Reviewed Condensed Consolidated Cash Flow Statement
for the six months ended 31 December 2008
GROUP Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Net cash flow from operating
activities 165 059 56 316 157 153
Cash flows from investing activities
Acquisition of subsidiary net of
cash acquired - - 502
Increase in investment in
rehabilitation funds (622) (188) (1 064)
Investment in equity accounted
investee (15 352) (20 346) (11 064)
Acquisition of property, plant
and equipment (170 113) (55 138) (228 767)
- to expand operations (160 273) (55 138) (216 155)
- to maintain operations (9 840) - (12 612)
Net cash flow from investing
activities (186 087) (75 672) (240 393)
Cash flows from financing activities
Proceeds from specific and general share
issues for cash during the period 4 907 32 578 91 896
Treasury shares acquired (5 748) - -
Repayment of contingent
consideration (3 991) - (132)
Repayment of borrowings (6 342) (6 259) (11 509)
Increase in borrowings 18 781 - 31 345
Net cash flows from financing
activities 7 607 26 319 111 600
Net (decrease)/increase in cash
and cash equivalents (13 421) 6 963 28 361
Cash and cash equivalents at
beginning
of period 88 711 60 350 60 350
Cash and cash equivalents at end
of period 75 290 67 313 88 711
Reviewed Condensed Consolidated Balance Sheet
as at 31 December 2008
GROUP Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2008 2007 2008
Note R`000 R`000 R`000
ASSETS
Non-current assets 1 038 661 639 741 1 003 860
Property, plant and
equipment 585 102 491 620 580 200
Intangible assets 8 184 5 963 15 034
Investment in equity
accounted investee 423 875 131 796 375 888
Investments - 2 2
Restricted investments - 10 360 11 236
Long term receivables 21 500 - 21 500
Current assets 409 774 227 981 338 175
Inventories 32 829 65 584 69 261
Trade and other
receivables 105 831 95 084 179 410
Current tax assets 3 128 - 793
Cash and cash equivalents 75 290 67 313 88 711
Assets classified as
held for sale (i) 192 696 - -
Total assets 1 448 435 867 722 1 342 035
EQUITY AND LIABILITIES
Ordinary share capital
and reserves 1 085 049 632 795 1 005 424
Share capital 135 236 126 991 133 704
Share premium 307 223 231 297 304 545
Share option reserve 23 741 21 998 27 494
Contingent consideration
reserve - 1 500 1 480
Hedging reserve (877) - -
Retained earnings 619 726 251 009 538 201
Minority interest - - 2 434
Total equity 1 085 049 632 795 1 007 858
Non-current liabilities 164 336 131 557 178 021
Interest bearing loans
and borrowings 66 394 31 566 55 067
Deferred taxation 78 999 76 661 89 146
Environmental
rehabilitation provision 18 943 23 330 33 808
Current liabilities 199 050 103 370 156 156
Trade and other payables 104 375 90 517 132 292
Current portion of
non-current liabilities 10 942 12 792 15 386
Current tax liabilities 474 61 8 478
Liabilities classified
as held for sale (i) 83 259 - -
Total equity and
liabilities 1 448 435 867 722 1 342 035
Net asset value ("NAV")
per share
(cents) 7 199.26 124.57 187.74
Fully diluted NAV per
share (cents) 7 184.36 113.63 170.46
Reviewed Condensed Consolidated Statement of Changes in Equity
for the six months ended 31 December 2008
GROUP Attributable to equity holders of the Company
Share Share Share
capital premium reserve
R`000 R`000 R`000
Balance at 1 July 2007 119 972 155 995 15 736
Shares issued during the year
- To acquire Petmin Logistics (Pty) Ltd 438 7 437 -
- To acquire 25% of Veremo Holdings (Pty)Ltd 5 538 68 978 -
- General issue for cash 7 000 72 968 -
- Share options exercised 938 1 566 (820)
- Share options forfeited - - (55)
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 - - 12 633
Minority interest recognised on acquisition
of Petmin Logistics (Pty) Ltd - - -
Profit for the year - - -
Balance at 30 June 2008 133 704 304 545 27 494
Shares issued during the period
- To acquire 30% of Petmin Logistics (Pty)Ltd 187 3 189 -
- Share options exercised 1 945 7 161 (4 199)
- Issued to Springlake vendors 117 163 -
Treasury shares acquired during the period (1 217) (8 535) -
Treasury shares transferred to Springlake
vendors 500 700 -
Share options granted - - 446
Effective portion of changes in fair value
of cash flow hedges - - -
Profit for the period - - -
Balance at 31 December 2008 135 236 307 223 23 741
Attributable to equity holders of the Company
Contingent
consideration Hedging Retained
reserve reserve earnings Total
R`000 R`000 R`000 R`000
Balance at 1 July 2007 1 500 - 157 848 451 051
Shares issued during
the year
- To acquire Petmin
Logistics (Pty) Ltd - - - 7 875
- To acquire 25% of
Veremo Holdings (Pty) 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) - - (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 1 480 - 538 201 1 005 424
Shares issued during
the period
- To acquire 30% of
Petmin Logistics (Pty) Ltd - - - 3 376
- Share options exercised - - - 4 907
- Issued to Springlake vendors (280) - - -
Treasury shares
acquired during the period - - - (9 752)
Treasury shares
transferred to
Springlake vendors (1 200) - - -
Share options granted - - - 446
Effective portion of
changes in fair value
of cash flow hedges - (877) - (877)
Profit for the period - 81 525 81 525
Balance at 31 December 2008 - (877) 619 726 1 085 049
Attributable to equity holders of the Company
Minority Total
interest equity
R`000 R`000
Balance at 1 July 2007 - 451 051
Shares issued during the year
- To acquire Petmin Logistics (Pty) Ltd - 7 875
- To acquire 25% of Veremo Holdings (Pty) 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
Shares issued during the period
- To acquire 30% of Petmin Logistics (Pty) Ltd (2 056) 1 320
- Share options exercised - 4 907
- Issued to Springlake vendors - -
Treasury shares acquired during the period - (9 752)
Treasury shares transferred to Springlake vendors - -
Share options granted - 446
Effective portion of changes in fair value of cash
flow hedges - (877)
Profit for the period (378) 81 147
Balance at 31 December 2008 - 1 085 049
Segment reporting
Segment information is presented in the reviewed 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 and internal reporting
structures.
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")
- Iron ore mining and beneficiation ("Iron Ore")
- Anthracite mining and marketing ("Anthracite")
Reviewed Condensed Consolidated Financial Statements
for the six months ended 31 December 2008
Silica
Reviewed Reviewed Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Saleable tonnes
produced 815 235 615 887 1 385 906
Tonnes sold 902 513 630 089 1 434 853
Segment revenue 101 139 68 653 153 034
Segment profit/(loss)
before tax
- segment result 25 759 19 975 46 742
- Impairment loss
on assets classified
as held for sale - - -
- Impairment loss
on goodwill acquired - - -
- share of profit of
equity accounted
investee - - -
Segment profit/(loss)
before tax 25 759 19 975 46 742
Segment capital
expenditure 10 128 11 500 27 362
Segment depreciation
and amortisation 4 105 3 715 7 688
Share option costs
included in segment
profit/(loss) before tax - 95 190
Segment assets 217 368 194 301 228 076
Segment liabilities 71 529 78 498 100 288
Anthracite
Reviewed Reviewed Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Saleable tonnes
produced 637 325 615 360 1 219 601
Tonnes sold 682 879 597 084 1 188 519
Segment revenue 389 220 249 984 519 963
Segment profit/(loss)
before tax
- segment result 66 584 30 565 90 973
- Impairment loss
on assets classified
as held for sale (13 392) - -
- Impairment loss
on goodwill acquired (1 327) - -
- share of profit of
equity accounted
investee - - -
Segment profit/(loss)
before tax 51 865 30 565 90 973
Segment capital
expenditure 160 592 43 499 198 110
Segment depreciation
and amortisation 53 212 12 985 93 680
Share option costs
included in segment
profit/(loss) before tax - - -
Segment assets 805 186 517 394 663 356
Segment liabilities 556 781 359 611 449 750
Iron Ore
Reviewed Reviewed Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Saleable tonnes
produced - - -
Tonnes sold - -
Segment revenue - - -
Segment profit/(loss)
before tax
- segment result - - -
- Impairment loss
on assets classified
as held for sale - - -
- Impairment loss
on goodwill acquired - - -
- share of profit of
equity accounted
investee 32 635 61 706 303 133
Segment profit/(loss)
before tax 32 635 61 706 303 133
Segment capital
expenditure - - -
Segment depreciation
and amortisation - - -
Share option costs
included in segment
profit/(loss) before tax - - -
Segment assets 423 875 131 796 375 888
Segment liabilities - - -
Other (corporate office)
Reviewed Reviewed Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Saleable tonnes
produced - - -
Tonnes sold -
Segment revenue - - -
Segment profit/(loss)
before tax
- segment result 1 178 (2 727) (23 698)
- Impairment loss
on assets classified
as held for sale - - -
- Impairment loss
on goodwill acquired - - -
- share of profit of
equity accounted
investee - - -
Segment profit/(loss)
before tax 1 178 (2 727) (23 698)
Segment capital
expenditure 2 365 139 3 295
Segment depreciation
and amortisation 84 46 108
Share option costs
included in segment
profit/(loss) before tax 446 6 112 12 443
Segment assets 394 631 341 978 401 566
Segment liabilities 29 332 23 479 21 947
Eliminations
Reviewed Reviewed Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Saleable tonnes
produced - - -
Tonnes sold
Segment revenue - - -
Segment profit/(loss)
before tax
- segment result (3 943) - -
- Impairment loss
on assets classified
as held for sale - - -
- Impairment loss
on goodwill acquired - - -
- share of profit of
equity accounted
investee - - -
Segment profit/(loss)
before tax (3 943) - -
Segment capital
expenditure (2 972) - -
Segment depreciation
and amortisation - - -
Share option costs
included in segment
profit/(loss) before tax - - -
Segment assets (392 625) (317 747) (326 851)
Segment liabilities (294 256) (226 661) (237 808)
Consolidated
Reviewed Reviewed Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2008 2007 2008
R`000 R`000 R`000
Saleable tonnes
produced 1 452 560 1 231 247 2 605 507
Tonnes sold 1 585 392 1 227 173 2 623 372
Segment revenue 490 359 318 637 672 997
Segment profit/(loss)
before tax
- segment result 89 578 47 813 114 017
- Impairment loss
on assets classified
as held for sale (13 392) - -
- Impairment loss
on goodwill acquired (1 327) - -
- share of profit of
equity accounted
investee 32 635 61 706 303 133
Segment profit/(loss)
before tax 107 494 109 519 417 150
Segment capital
expenditure 170 113 55 138 228 767
Segment depreciation
and amortisation 57 401 16 746 101 476
Share option costs
included in segment
profit/(loss) before tax 446 6 207 12 633
Segment assets 1 448 435 867 722 1 342 035
Segment liabilities 363 386 234 927 334 177
The capital expenditure of R161 million and amortisation of R53 million in the
six months to 31 December 2008 for the anthracite division include R80
million and R36 million for "pre-stripping" of the open pits at Somkhele
respectively (Six months ended 31 December 2007: R31 million and R27
million). The open pit mining profile requires that waste overburden be removed
from the pit before coal may be extracted. This overburden removal is
capitalised to the development cost of the open pit (so called "pre-stripping")
and is then expensed on a units-of-production basis as the coal is extracted
from the open pits.
Notes to the Reviewed Condensed Consolidated Interim Financial Statements
for the six months ended 31 December 2008
1. Reporting entity
Petmin is a company domiciled in South Africa. The condensed consolidated
financial statements of the Company for the six months ended 31
December 2008 comprise the Company and its subsidiaries (together referred to
as the "Group") and the Group`s interest in associates.
The reviewed condensed consolidated financial statements were authorised for
issue by the directors on 26 February 2009.
2. Statement of compliance
The reviewed condensed consolidated 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 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 2008.
3. Significant accounting policies
The reviewed condensed consolidated 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 reviewed
condensed consolidated financial statements.
Functional and presentation currency:
The consolidated financial statements are presented in Rands, which is the
Company`s functional currency. All financial information presented in Rands has
been rounded to the nearest thousand.
4. Estimates and judgements
The preparation of 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 2008, with the exception of the re-estimation of the fair
value of the acquisition of the 25% investment in Veremo Holdings Limited (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 unqualified 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
period, divided by the weighted average number of shares in issue during the
year.
Reviewed
six months ended
31 December 2008
Profit for Number of Per
the period shares in share
R`000 thousands in cents
Basic earnings per share 81 525 538 244 15.15
Share options
and contingent
consideration - 15 629 (0.43)
Diluted EPS 81 525 553 873 14.72
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 81 525 538 244 15.15
Adjustments:
- Impairment of
goodwill 1 327 - 0.25
- Fair value
impairment
on assets held
for sale 13 392 - 2.49
- Share of profit
of equity
accounted
investee (32 635) - (6.06)
Headline EPS 63 609 538 244 11.82
Share options
and contingent
consideration - 15 629 (0.33)
Diluted headline
EPS 63 609 553 873 11.48
Reviewed
six months ended
31 December 2007
Profit for Number of Per
the period shares in share
R`000 thousands in cents
Basic earnings per share 93 161 482 659 19.30
Share options
and contingent
consideration - 10 484 (0.41)
Diluted EPS 93 161 493 143 18.89
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 93 161 482 659 19.30
Adjustments:
- Impairment of
goodwill - - -
- Fair value
impairment
on assets held
for sale - - -
- Share of profit
of equity
accounted
investee (61 706) - (12.78)
Headline EPS 31 455 482 659 6.52
Share options
and contingent
consideration - 10 484 (0.14)
Diluted headline
EPS 31 455 493 143 6.38
7. Net Asset Value ("NAV") Per Share
Reviewed Reviewed Audited
six months six months Year
ended ended ended
31 December 31 December 30 June
2008 2007 2008
Ordinary share capital and
reserves (R`000) 1 085 049 632 795 1 005 424
Total number of shares in issue
(`000) 544 538 507 964 535 541
NAV per share (cents) 199.26 124.57 187.74
Ordinary share capital and
reserves (R`000) 1 085 049 632 795 1 005 424
Total number of shares in issue
(`000) 544 538 507 964 535 541
Share options and contingent
consideration (`000) 44 019 48 923 54 299
Fully diluted number of
shares (`000) 588 557 556 887 589 840
Fully diluted NAV per share (cents) 184.36 113.63 170.46
NAV per share increased 11.52 cents or 6% compared to 30 June 2008. Fully
diluted NAV per share increased 13.90 cents or 8% compared to 30 June 2008.
The NAV above includes the value of assets on an historical cost and fair value
at acquisition basis. The directors` valuation of the investments in the
various subsidiaries amounts to 387.90 fully diluted cents per share.
8. Related parties
Dark Capital (Pty) Limited ("Dark Capital"), Petmin`s anchor Black Economic
Empowerment shareholder, increased its shareholding in Petmin by acquiring 7
million Petmin shares on exercising their share options in October 2008. Dark
Capital is a material shareholder in Petmin and is therefore a related party as
defined by Section 10 of the Listings Requirements.
8.1 Petmin executive committee remuneration scheme and share option trust
As disclosed in the annual financial statements for the year ended 30 June
2008, 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. As reported in the Annual
Report for the year ended 30 June 2008, management has reached agreement with
the Remuneration Committee on a new three year scheme with similar terms and
conditions. The new scheme also includes a new option scheme for which
shareholder approval will be sought in due course.
8.2 Other transactions with related parties
Johan Strijdom, Enrico Greyling and Lebo Mogotsi, all directors of the company,
were issued with 250,000 Petmin shares each upon their exercising of options,
granted in 2004, to acquire shares at 45 cents each. At the time of the grant,
Ms. Mogotsi was a non- executive director.
The Springlake Vendors, all of whom are employed by Petmin, were issued with 2
467 000 Petmin shares in final settlement of the warranty shares due in terms
of the Springlake acquisition that was concluded in November 2005.
9. Subsequent events
Mr. DH Warmenhoven announced his resignation as a director of Petmin with effect
from 28 February 2009. Mr. Warmenhoven will remain a significant shareholder of
Petmin and will provide Petmin with consulting services to June 2009. The Board
of Directors express their gratitude to Mr. Warmenhoven for his valuable
contribution during the formative years of Petmin.
There have been no events that have occurred subsequent to the balance sheet
date which require adjustment of, or disclosure in the financial statements or
notes thereto in accordance with IAS 10 Events After the Balance Sheet Date.
Commentary
(i) Operations
Revenue for the six months ended 31 December 2008 increased by R171 million or
54% to R490 million compared to the R319 million for the six months ended 31
December 2007. Gross profit was R115 million, an increase of R47 million or 69%
compared to the R68 million in 2007. The increased revenue and profitability was
as a result of strong performances from all the operations in the six months to
31 December 2008.
The anthracite division`s profit before tax for the year ended 30 June 2008
was reduced by impairment charges of R14.7 million. This includes R13.3 million
which was provided on the classification of the Springlake Group as an asset
held for sale, as the proceeds on the sale of Springlake are not adjusted for
profits generated by Springlake after 30 June 2008.
In accordance with accounting rules, the fair value of the investment in Veremo
Holdings Limited was reviewed and, after capitalisation of expenses of R15
million, R32 million was recognised as a share of profits of equity accounted
investee. Cash of R165 million (2007: R56 million) was generated by the
operations.
Capital expenditure of R170 million was incurred in the six months to 31
December 2008 (2007: R55 million); R106 million was spent on exploration
drilling and mine development programmes to expand operations (R79 million
related to "pre-stripping" the open pits at Somkhele); R18 million on the
construction of the de-stoning plant and workshops at Somkhele Colliery;
R4 million was spent on installation of power generators at SamQuarz and;
R42 million on plant and mining equipment and capital projects that are
work-in-progress.
In the six months ended 31 December 2008, Petmin acquired 4 869 390 of its own
shares at an average price of 200 cents per share. Of these shares, 2 000 000
were transferred to the Springlake vendors to settle the contingent
consideration payable in terms of the warranty clauses in the Springlake
acquisition agreement.
The ratio of interest bearing debt to equity at 31 December 2008 was 7.13%
compared to 7.01% at 30 June 2008. An amount of R19 million was drawn on the
de-stoning plant finance facility at Somkhele. The Group has debt facilities of
approximately R160 million with its bankers that are currently not utilised.
Anthracite division
Somkhele anthracite mine, Springlake Colliery and Petmin Logistics
In the six months to 31 December 2008, the anthracite division increased sales
by 85 795 tonnes or 14% compared to the six months ended 31 December 2007 and
increased production by 4%.
Profits from the anthracite divisions increased by 70% compared to the six
months ended 31 December 2007, despite the inclusion of impairment charges
of R14.7 million mentioned above. The increased profits emanated from
improved export sales at Springlake and the ramp up of sales to the inland
metallurgical market at Somkhele in the six months to December 2008. Mining
at Somkhele is progressing well and the accelerated exploration programme
has outlined additional resources in close proximity to the current plant
site. Indications are that the drilling programme will yield additional
resources in this new area. A SAMREC compliant report to announce the additional
mineral resource has been commissioned and is expected shortly.
The Group acquired the remaining 30% interest in Petmin Logistics from the
minority shareholders. The Group now holds 100% of Petmin Logistics. Petmin
Logistics has contracted with the South African Port Authorities to provide a
dedicated export facility at Richards Bay for a minimum of 600 000 tonnes per
year for four years. Negotiations to renew the contract for an additional three
years are underway and various opportunities to increase the Group`s export
capability in Richards Bay are being investigated.
The planned sale of Springlake Colliery is progressing well, and the
Competition Commission has approved the transaction.
The final remaining condition precedent is the Section 11 approval required in
terms of the Mineral and Petroleum Resources Development Act. In terms of the
sale agreement, the consideration due for Springlake was amended by the change
in the net asset value of Springlake up to 30 June 2008. Any profits or losses
generated by the colliery subsequent to 30 June 2008 do not alter the
consideration payable by the purchaser. Springlake generated profits in excess
of R20 million in the six months to 31 December 2008 and consequently the sale
proceeds are now R13 million less than the carrying value of Springlake in the
Group accounts. Management has therefore accounted for an impairment charge of
R13 million on those assets. The Springlake assets have been disclosed as an
"asset held for sale" as at 31 December 2008.
At 31 December 2008, assets held for sale included trade and other receivables
of R40 million, inventory of R39 million, Property plant and equipment of R102
million, restricted investments of R12 million. At 31 December 2008 liabilities
held for sale included trade payables of R33 million, taxation payable of
R5 million, deferred of R22 million, interest bearing loans of R6 million and
environmental rehabilitation provision of R17 million.
Silica division
SamQuarz silica mine
SamQuarz produced 815 235 (2007: 615 887) and sold 902 513 (2007: 630 089)
tonnes of silica and chert in the six months ended 31 December 2008.
Revenue increased by 47% to R101 million (2007: R69 million) due to improved
prices negotiated on key sales contracts and due to improved sales volumes of
chert 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. The installation of an emergency generator was
completed in the six months to 31 December 2008.
The exploration programme culminated in the production of a SAMREC compliant
reserve and resource statement that confirmed proven and probable reserves of
60.64 million tonnes of quartzite and 11.48 million tonnes of chert, resulting
in a life-of-mine in excess of 40 years, as detailed in the company`s Annual
Report for the year ended 30 June 2008 and distributed to shareholders on 22
December 2008.
(ii) Investment in the Veremo pig-iron project
As reported in the 30 June 2008 Annual Report, in terms of IFRS, the valuation
of a business combination may be reviewed within 12 months of the acquisition
date. In the six months ended 31 December 2008, management reviewed the
valuation of the project as more certainty has been provided by an independent
review of the resource statements and by a better understanding of the
metallurgical processes required to treat the ore. The result of the review is
that the fair value of the Group`s investment in the project was increased by
R32 million after expenses of R14 million were capitalised to the cost of the
investment.
The required prospecting permit renewals were submitted in the period under
review and progress was made on the validation of all historical geological and
metallurgical data.
(iii)Prospects
The results of the Group to 31 December 2008 do not reflect the impact of the
current economic crisis and worldwide recession as the reduction in off-takes
to the metallurgical sector only commenced towards the end of the period under
review. The economic downturn has had a severe impact on the metallurgical
sector and we forecast that our sales to this sector will be affected at
both the Silica and Anthracite divisions.
Silica division
Management expects SamQuarz to maintain current production and slightly lower
sales volumes in the six months to 30 June 2009 as the demand for the crusher
run material (as a product that is being used in the building and maintenance
of roads) remains robust and the glass sector continues to produce at similar
levels. Sales to the metallurgical markets are not expected to recover until
the latter half of calendar 2009. The metallurgical sector is the least
profitable market that SamQuarz sells to, and as a result, the impact of
reduced sales to this sector on SamQuarz`s profit is not expected to be
material.
Capital expenditure is forecast to reduce in the six months to 30 June 2009 as
the work on the exploration programme has been completed and the bulk of the
expansion of the plant has been completed.
Anthracite division
Subsequent to the reporting date of 31 December 2008, the anthracite division
has experienced a reduction in demand for its products in the inland
metallurgical markets as the local ferrochrome industry has reduced its
production by approximately 90%. At the time of writing this report,
the Company has seen some demand return, albeit slowly.
This reduction in revenues from the inland market will be offset by the
increased revenues emanating from the commencement of sales with an average
selling price well in excess of the $62.50 per tonne received in the six months
to 31 December 2008.
These expected sales are in terms of the three year export contract for 1.05
million tonnes concluded in the period under review.
In terms of this contract, we expect to sell 145 000 tonnes at $118 per tonne
in the six months to 30 June 2009 and approximately 325 000 tonnes and 375 000
tonnes in the years ending 30 June 2010 and 2011 respectively at similar
prices. We have hedged our sales in the six months to 30 June 2009 at an
average Rand/Dollar exchange rate of R9.55/$1.00.
The construction of the de-stoning plant at Somkhele is progressing well and it
is expected to be commissioned and fully operational in the six months ending
30 June 2009. Management plans to maintain the current production levels at
Somkhele, but will reduce the rate of development expenditure as the investment
in the past eighteen months has ensured that there is a sufficient pit-room to
support the current production profile for at least 12 months ahead. The
current exploration drilling programme has been completed and a SAMREC
compliant reserve and resource statement is being compiled. Planned capital
expenditure to 30 June 2009 will be approximately R30 million and Somkhele
expects to have a tax shield from unredeemed capital allowances of
approximately R240 million at 30 June 2009.
The Springlake Colliery disposal awaits ministerial approval and the sale
proceeds of approximately R150 million will boost the group`s cash resources.
We expect the transaction to be concluded by 30 June 2009.
Veremo
In the ensuing period, management will focus on ensuring that:
- the renewal of the prospecting permits are secured;
- the geological validation programme is completed and;
- the magnetic separation flow sheet required for the production of pig iron is
finalised.
Management is in negotiations regarding the conversion of the loan of R21.5
million made to Veremo Holdings Limited into an increased equity stake in
Veremo.
By order of the Board
P J Nel J C du Preez
Chairman Chief Executive Officer
Johannesburg
26 February 2009
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*, A Martin*, J A Strijdom*, D H Warmenhoven**,
J Taylor* *Non-executive #British
**Resignation with effect from 28 February 2009
Registered Office
Parc Nouveaux, First Floor, Block C
225 Veale Street, Brooklyn, Pretoria, 0002
(PO Box 899, Groenkloof, 0027)
Corporate Office
37 Peter Place
Bryanston, 2021
Tel: (011) 706 1644 Fax: (011) 706 1594
Website: www.petmin.co.za
Secretary and Sponsor - JSE
River Group
Nominated Adviser - AIM
Numis Securities Limited
Transfer Secretaries
JSE: Computershare Investor Services (Proprietary) Limited
AIM: Computershare Investor Services PLC
Auditors
KPMG Inc.
Johannesburg
2 March 2009
Sponsor
River Group
A PDF version of these results is available on our website: www.petmin.co.za
Date: 02/03/2009 08:00:01 Produced by the JSE SENS Department.
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