| Wed 2 Mar 2011, 7:30 | | PET - Petmin Limited - Condensed Consolidated Interim Financial Statements for |
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PET
PET
PET - Petmin Limited - Condensed Consolidated Interim Financial Statements for
the six months ended 31 December 2010
Petmin Limited
(Incorporated in the Republic of South Africa)
(Registration number 1972/001062/06)
"Committed to growth, Dedicated to value"
JSE code: PET AIM code: PTMN
ISIN: ZAE000076014
("Petmin" or "the Group")
Condensed Consolidated Interim Financial Statements for the six months ended
31 December 2010
Achievements: Organic expansion to double production on track
* Earnings maintained despite stronger rand and higher strip ratios at
Somkhele.
* Cash generated by operations increased by 63% to R194 million.
* Cash on hand of R270 million, undrawn facilities of R65 million and interest
bearing debt to equity ratio of 6.63% (30 June 2010: 7.55%).
* Exploration drilling at Somkhele yielding encouraging results.
* Petmin`s focused commodity and geographic diversification strategy on track.
* R80 million debt facility to partly finance Second Plant at Somkhele secured
at favourable interest rate.
Condensed Consolidated Interim Income Statement
for the six months ended 31 December 2010
Reviewed Reviewed Audited
six months six months Year
ended ended ended
31 December 31 December 30 June
2010 2009 2010
R`000 R`000 R`000
Note
Revenue 320 897 214 555 489 354
Cost of sales (226 606) (127 070) (310 449)
Gross Profit 94 291 87 485 178 905
Operating expenses (9 687) (12 398) (14 248)
Administration expenses (13 499) (11 062) (15 208)
Results from operating
activities 71 105 64 025 149 449
Net finance income 1 955 1 895 4 168
- Finance income 3 887 4 582 9 116
- Finance expenses (1 933) (2 687) (4 948)
Profit before income tax 73 060 65 920 153 617
Income tax expense (25 785) (19 545) (45 900)
Profit for the period 47 275 46 375 107 717
Basic earnings per ordinary
share (cents) 6 8.19 8.28 19.09
Diluted earnings per
ordinary share (cents) 6 8.14 8.17 18.97
Condensed Consolidated Interim Statement of
Comprehensive Income
for the six months ended 31 December 2010
Reviewed Reviewed Audited
six months six months Year
ended ended ended
31 December 31 December 30 June
2010 2009 2010
R`000 R`000 R`000
Profit for the period 47 275 46 375 107 717
Other comprehensive income
Foreign currency translation
differences (143) - -
Effective portion of changes in fair
value
of cash flow hedges, net of income tax - 636 636
Other comprehensive income for
the period, net of income tax (143) 636 636
Total comprehensive income for the
period 47 132 47 011 108 353
Condensed Consolidated Statement of Financial Position
as at 31 December 2010
Reviewed Audited Reviewed
as at as at as at
31 December 30 June 31 December
2010 2010 2009
R`000 R`000 R`000
ASSETS
Non-current assets 1 204 372 1 131 293 1 140 819
Property, plant and equipment 705 563 631 225 639 492
Intangible assets 3 148 4 407 5 666
Investment in equity accounted
investee 470 661 470 661 470 661
Investments 25 000 25 000 25 000
Current assets 410 417 465 044 347 002
Inventories 32 351 48 935 43 998
Trade and other receivables 100 940 127 118 151 964
Current tax assets 7 446 5 977 6 220
Cash and cash equivalents 269 680 283 014 144 820
Total assets 1 614 789 1 596 337 1 487 821
EQUITY AND LIABILITIES
Ordinary share capital and
reserves 1 243 224 1 241 421 1 170 295
Share capital 141 790 142 681 138 479
Share premium 321 523 331 337 315 854
Share option reserve 3 112 3 121 13 022
Foreign currency translation reserve (143) - -
Retained earnings 776 942 764 282 702 940
Non-current liabilities 218 932 202 092 193 975
Interest bearing loans and borrowings 34 069 42 128 57 362
Deferred taxation liabilities 159 857 136 744 114 658
Environmental rehabilitation
provision 25 006 23 220 21 955
Current liabilities 152 633 152 824 123 551
Trade and other payables 103 212 101 245 76 731
Current portion of non-current
liabilities 48 379 51 579 46 820
Shareholders for dividend 1 042 - -
Total equity and liabilities 1 614 789 1 596 337 1 487 821
Condensed Consolidated Interim Statement of
Cash Flows
for the six months ended 31 December 2010
Reviewed Reviewed Audited
six months six months Year
ended ended ended
31 December 31 December 30 June
2010 2009 2010
R`000 R`000 R`000
Cash generated by operations 71 105 64 025 149 449
Adjustments for non-cash flow items:
- depreciation and amortisation 74 946 46 427 118 226
- fair value of derivatives included
in payables/receivables - 636 636
- impairment charges 852 - 4 983
- notional interest 2 022 1 341 2 733
Operating cash flows before changes
in working capital 148 925 112 429 276 027
Decrease in trade and other
receivables 26 178 62 275 87 121
Decrease/(Increase) in inventories 16 583 (13 625) (18 562)
Increase/(Decrease) in trade and
other payables 1 937 (42 370) (17 886)
Cash generated by/(utilised in)
operations 193 623 118 709 326 700
Income tax paid (4 440) (6 082) (10 010)
Finance income 3 887 4 582 9 116
Finance expenses (1 933) (2 688) (4 948)
Net cash flows from operating
activities 191 137 114 521 320 858
Cash flows from investing activities
Rehabilitation expenditure incurred (236) (2 013) (2 140)
Investment in joint venture (10 786) - -
Acquisition of property, plant
and equipment (137 903) (55 560) (122 825)
- to expand operations (59 588) (23 649) (54 855)
- to expand operations - capitalised
pre-strip (71 809) (27 418) (56 725)
- to maintain operations (6 506) (4 493) (11 245)
Proceeds from sale of property,
plant and equipment - 11 10
Net cash flows from investing
activities (148 925) (57 562) (124 955)
Cash flows from financing activities
Proceeds from specific and general
share
issues for cash during the period 10 16 792 26 640
Treasury shares acquired (10 724) (12 609) (14 085)
Share based payment included in
expenses - - 1 454
Payment on options forfeited - - (101)
Repayment of borrowings (11 259) (45 418) (53 093)
Increase in borrowings - 38 000 35 200
Dividend paid (33 573) - -
Net cash flows from financing
activities (55 546) (3 235) (3 985)
Net (decrease)/increase in cash and
cash
equivalents (13 334) 53 724 191 918
Cash and cash equivalents at
beginning of period 283 014 91 096 91 096
Cash and cash equivalents at end of
period 269 680 144 820 283 014
Condensed Consolidated Interim Statement of Changes in Equity
for the six months ended 31 December 2010
Foreign
Share currency
Share Share option translation
capital premium reserve reserve
R`000 R`000 R`000 R`000
Balance at 1 July 2009 134 686 304 745 23 741 -
Shares issued during the year
- Share options exercised 9 617 37 661 (20 578) -
Share issue costs
capitalised to share premium - (60) - -
Treasury shares acquired
during the year (1 804) (12 281) - -
Share options forfeited
during the year - - (42) -
Share based payment 182 1 272 - -
Effective portion of changes
in fair value of cash flow
hedges - - - -
Profit for the year - - - -
Balance at 30 June 2010 142 681 331 337 3 121 -
Shares issued during the
period
- Share options exercised 4 15 (9) -
Treasury shares acquired
during the period (895) (9 829) - -
Foreign currency translation
differences - - - (143)
Profit for the period - - - -
Dividend paid - - - -
Balance at 31 December 2010 141 790 321 523 3 112 (143)
Hedging Retained
reserve earnings Total
R`000 R`000 R`000
Balance at 1 July 2009 (636) 656 565 1 119 101
Shares issued during the year
- Share options exercised - - 26 700
Share issue costs capitalised to share
premium - - (60)
Treasury shares acquired during the year - - (14 085)
Share options forfeited during the year - - (42)
Share based payment - - 1 454
Effective portion of changes in fair value
of cash flow hedges 636 - 636
Profit for the year - 107 717 107 717
Balance at 30 June 2010 - 764 282 1 241 421
Shares issued during the period
- Share options exercised - - 10
Treasury shares acquired during the period - - (10 724)
Foreign currency translation differences - - (143)
Profit for the period - 47 275 47 275
Dividend paid - (34 615) (34 615)
Balance at 31 December 2010 - 776 942 1 243 224
Segment reporting
Segment information is presented in the condensed consolidated interim
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.
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.
Reportable segments
The group comprises the following main reportable segments:
- Silica mining and marketing ("Silica")
- Anthracite mining and marketing ("Anthracite")
- Iron ore mining and beneficiation ("Iron Ore")
Segment Report
for the six months ended 31 December 2010
Silica
Reviewed Reviewed Audited
Units in Six months Six months Year
thousands ended ended ended
unless 31 December 31 December 30 June
otherwise 2010 2009 2010
specified R`000 R`000 R`000
Saleable tonnes
produced (tonnes) 647 088 607 140 1 255 559
Tonnes sold (tonnes) 622 927 547 359 1 171 355
Segment revenue 83 623 73 202 154 474
Segment revenue per
tonne
sold** (R/tonne) R 134.24 R 133.74 R 131.88
Segment finance
(expense)
/income
Finance income 1 353 1 387 3 031
Finance expense (172) (96) (368)
Segment profit per
tonne sold** (R/tonne) R 26.86 R 40.70 R 33.05
Segment profit/(loss)
before
tax 16 730 22 277 38 715
Segment tax (expense) (4 685) (6 346) (11 135)
Segment profit after
tax 12 045 15 931 27 580
Segment capital
expenditure
- combined 31 106 5 379 21 614
Segment capital
expenditure 31 106 5 379 21 614
Segment capital
expenditure -
pre-strip* - - -
Segment depreciation -
combined 7 358 6 038 12 433
Segment depreciation 7 358 6 038 12 433
Segment depreciation -
pre-strip* - - -
Segment assets 303 418 274 060 296 714
Segment liabilities 102 110 94 778 107 453
Anthracite
Reviewed Reviewed Audited
Units in Six months Six months Year
thousands ended ended ended
unless 31 December 31 December 30 June
otherwise 2010 2009 2010
specified R`000 R`000 R`000
Saleable tonnes produced (tonnes) 245 791 202 800 467 843
Tonnes sold (tonnes) 309 347 171 867 411 630
Segment revenue 237 274 141 353 334 880
Segment revenue per
tonne
sold** (R/tonne) R 767.02 R 822.46 R 813.55
Segment finance
(expense)
/income
Finance income 417 1 158 1 677
Finance expense (1 596) (2 286) (4 063)
Segment profit per
tonne sold** (R/tonne) R 198.84 R 273.03 R 292.50
Segment profit/(loss)
before
tax 61 512 46 924 120 402
Segment tax (expense) (17 638) (13 199) (34 433)
Segment profit after tax 43 874 33 725 85 969
Segment capital
expenditure
- combined 94 163 46 895 81 384
Segment capital
expenditure 22 354 19 479 24 659
Segment capital
expenditure -
pre-strip* 71 809 27 416 56 725
Segment depreciation -
combined 66 133 40 266 102 984
Segment depreciation 10 598 7 916 15 288
Segment depreciation -
pre-strip* 55 535 32 350 87 696
Segment assets 717 998 701 728 690 707
Segment liabilities 386 645 467 808 407 959
Iron Ore
Reviewed Reviewed Audited
Units in Six months Six months Year
thousands ended ended ended
unless 31 December 31 December 30 June
otherwise 2010 2009 2010
specified R`000 R`000 R`000
Saleable tonnes produced (tonnes) - - -
Tonnes sold (tonnes) - - -
Segment revenue - - -
Segment revenue per tonne
sold** (R/tonne) - - -
Segment finance (expense)
/income
Finance income - - -
Finance expense - - -
Segment profit per tonne
sold** (R/tonne)
Segment profit/(loss)
before
tax 729 - -
Segment tax (expense) - - -
Segment profit after tax 729 - -
Segment capital
expenditure
- combined 5 - -
Segment capital
expenditure 5 - -
Segment capital
expenditure -
pre-strip* - - -
Segment depreciation -
combined - - -
Segment depreciation - - -
Segment depreciation -
pre-strip* - - -
Segment assets 497 412 495 661 495 661
Segment liabilities 190 - -
Other (corporate office)
Reviewed Reviewed Audited
Units in Six months Six months Year
thousands ended ended ended
unless 31 December 31 December 30 June
otherwise 2010 2009 2010
specified R`000 R`000 R`000
Saleable tonnes produced (tonnes) - - -
Tonnes sold (tonnes) - - -
Segment revenue - - -
Segment revenue per tonne
sold** (R/tonne) - - -
Segment finance (expense)
/income
Finance income 2 117 2 037 4 408
Finance expense (164) (305) (517)
Segment profit per tonne
sold** (R/tonne)
Segment profit/(loss)
before tax (5 911) (3 281) (5 500)
Segment tax (expense) (3 462) - (332)
Segment profit after tax (9 373) (3 281) (5 832)
Segment capital
expenditure
- combined 12 629 3 284 19 827
Segment capital
expenditure 12 629 3 284 19 827
Segment capital
expenditure -
pre-strip* - - -
Segment depreciation -
combined 293 123 293
Segment depreciation 293 123 293
Segment depreciation -
pre-strip* - - -
Segment assets 455 074 353 080 486 516
Segment liabilities 59 485 25 356 40 473
Eliminations
Reviewed Reviewed Audited
Units in Six months Six months Year
thousands ended ended ended
unless 31 December 31 December 30 June
otherwise 2010 2009 2010
specified R`000 R`000 R`000
Saleable tonnes
produced (tonnes) - - -
Tonnes sold (tonnes) - - -
Segment revenue - - -
Segment revenue per
tonne
sold** (R/tonne) - - -
Segment finance
(expense)
/income
Finance income - - -
Finance expense - - -
Segment profit per
tonne sold** (R/tonne)
Segment profit/(loss)
before
tax - - -
Segment tax (expense) - - -
Segment profit after
tax - - -
Segment capital
expenditure
- combined - - -
Segment capital
expenditure - - -
Segment capital
expenditure -
pre-strip* - - -
Segment depreciation -
combined - - -
Segment depreciation - - -
Segment depreciation -
pre-strip* - - -
Segment assets (359 113) (336 708) (367 108)
Segment liabilities (176 865) (270 416) (194 816)
Consolidated
Reviewed Reviewed Audited
Units in Six months Six months Year
thousands ended ended ended
unless 31 December 31 December 30 June
otherwise 2010 2009 2010
specified R`000 R`000 R`000
Saleable tonnes
produced (tonnes) 892 879 809 940 1 723 402
Tonnes sold (tonnes) 932 274 719 226 1 582 985
Segment revenue 320 897 214 555 489 354
Segment revenue per
tonne
sold** (R/tonne) - - -
Segment finance
(expense)
/income
Finance income 3 887 4 582 9 116
Finance expense (1 932) (2 687) (4 948)
Segment profit per
tonne sold** (R/tonne)
Segment profit/(loss)
before
tax 73 060 65 920 153 617
Segment tax (expense) (25 785) (19 545) (45 900)
Segment profit after
tax 47 275 46 375 107 717
Segment capital
expenditure
-combined 137 903 55 558 122 825
Segment capital
expenditure 66 094 28 142 66 100
Segment capital
expenditure -
pre-strip* 71 809 27 416 56 725
Segment depreciation -
combined 73 784 46 427 115 710
Segment depreciation 18 249 14 077 28 014
Segment depreciation -
pre-strip* 55 535 32 350 87 696
Segment assets 1 614 789 1 487 821 1 602 490
Segment liabilities 371 565 317 526 361 069
*The open pit mining profile at Somkhele requires that 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.
**Profit per tonne in the Anthracite segment was negatively affected by the
strong Rand and by increased mining strip ratios (please refer to the general
overview of performance).
Notes to the Condensed Consolidated Interim Financial Statements
for the six months ended 31 December 2010
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
2010 comprise the Company and its subsidiaries (together referred to as the
"Group") and the Group`s interests in associates and joint ventures.
The condensed consolidated interim financial statements were authorised for
issue by the directors on 28 February 2011.
2. Statement of compliance
The condensed consolidated interim financial statements have been prepared in
accordance with the recognition, measurement, presentation and disclosure
requirements of IAS 34 - Interim Financial Reporting, the AC 500 Standards as
published by the Accounting Practices Board and the South African Companies
Act. The condensed consolidated interim 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 2010, which are available upon request
from the company`s registered office at Parc Nouveau, Third Floor, Block C,
225 Veale Street, Brooklyn, Pretoria or at www.petmin.co.za.
3. Significant accounting policies
The accounting policies have been applied consistently by the Group to all
periods presented in these condensed consolidated interim financial statements
and are consistent to those applied by the Group in its consolidated financial
statements as at and for the year ended 30 June 2010, with the exception of
the adoption of the following amendments, standards or interpretations
effective for the first time for the financial year beginning on 1 July 2010.
Accounting for investments in joint ventures
The proportionate share of the financial results of joint ventures is
consolidated into the Group`s results from acquisition date until disposal
date.
The Group combines its share of the joint venture`s individual income and
expenses, assets and liabilities and cash flows on a line- by-line basis with
similar items in the Group`s financial statements. The Group recognises the
portion of gains and losses on the sale of assets by the Group to the joint
venture that is attributable to the other venturers. The Group does not
recognise its share of profits or losses from the joint venture that result
from the purchase of assets by the Group from the joint venture until it
resells the assets to an independent party, except where unrealised losses
provide evidence of an impairment of the asset transferred. When the end date
of the reporting period of the parent is different to that of the joint
venture, the joint venture prepares, for consolidation purposes, additional
financial statements as of the same date as the financial statements of the
parent.
Any difference between the cost of acquisition and the Group`s share of the
net identifiable assets, liabilities and contingent liabilities, fairly
valued, is recognised and treated according to the Group`s accounting policy
for goodwill.
IFRS 2 Share based payment - Group cash-settled share-based payment
transactions
The standard has been amended to clarify the accounting for group cash-settled
share-based payment transactions. This amendment also supersedes IFRIC 8 and
IFRIC 11. The adoption of this amendment did not have any impact on the
financial position or performance of the Group or any additional disclosure
requirements.
IFRIC 19 (AC 452) - Extinguishing Financial Liabilities with Equity
Instruments
The interpretation provides guidance on accounting for debt for equity swops.
The adoption had no effect on the financial statements of the Group.
A number of new standards, amendments to standards and interpretations are not
yet effective for the year ended 30 June 2010 and have not been applied in
preparing these financial statements. The Group has not yet determined the
potential effect of the following standards and interpretations.
Standard/interpretation Effective date
Revised IAS 24 (AC 126) Related Party Disclosures Annual periods commencing
on or after
1 January 2011
IFRIC 14 (AC 447) Prepayments of a Minimum Annual periods commencing
amendment Funding Requirement on or after 1 January 2011
IFRS 9 (AC 146) Financial Instruments Annual periods commencing
on or after 1 January 2013
Functional and presentation currency:
The condensed consolidated interim 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 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 2010.
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 share
Earnings per 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
Six months ended
31 December 2010
Profit for Number of Earnings
the period shares in per share
R`000 thousands in cents
Basic earnings
per share 47 275 576 908 8.19
Share options - 3 559 (0.05)
Diluted EPS 47 275 580 467 8.14
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 year.
Reconciliation between earnings and headline earnings per share
Basic EPS 47 275 576 908 8.19
Adjustments:
Headline EPS 47 275 576 908 8.19
Share options - 3 559 (0.05)
Diluted headline
EPS 47 275 580 467 8.14
Reviewed
Six months ended
31 December 2009
Profit for Number of Earnings
the period shares in per share
R`000 thousands in cents
Basic earnings
per share 46 375 560 285 8.28
Share options - 7 424 (0.11)
Diluted EPS 46 375 567 709 8.17
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 year.
Reconciliation between earnings and headline earnings per share
Basic EPS 46 375 560 285 8.28
Adjustments:
Headline EPS 46 375 560 285 8.28
Share options - 7 424 (0.11)
Diluted headline
EPS 46 375 567 709 8.17
Audited
Year ended
30 June 2010
Profit for Number of Earnings
the year shares in per share
R`000 thousands in cents
Basic earnings
per share 107 717 564 135 19.09
Share options - 3 559 (0.12)
Diluted EPS 107 717 567 694 18.97
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 year.
Reconciliation between earnings and headline earnings per share
Basic EPS 107 717 564 135 19.09
Adjustments:
Headline EPS 107 717 564 135 19.09
Share options - 3 559 (0.12)
Diluted headline
EPS 107 717 567 694 18.97
7. Investment in Joint Venture
During the period under review, Petmin acquired a 5% interest in an
exploration company in Canada ("Exploration Co.") for an amount of US$1.5
million.
Exploration Co. is jointly controlled by Petmin and its Canadian partners from
inception.
In terms of the transaction Petmin has the option to acquire a maximum of 40%
of Exploration Co. for a total investment of USD25 million, exercisable at its
sole discretion. The investment is made on the condition of a properly
certified SAMREC Code and CIM Standards compliant resource statement that
defines a Measured Resource of magnetite for 20 years, based on the production
of 500,000 tons of pig iron per annum.
Petmin will, once it is a 40% shareholder, have a further option to acquire an
additional 9,9% (taking Petmin to 49.9%) at Petmin`s discretion, at a value to
be determined in terms of a NI 43-101 compliant report.
8. Related parties
Dark Capital (Pty) Limited ("Dark Capital") Petmin`s anchor black economic
empowerment shareholder is a material shareholder in Petmin and is therefore a
related party as defined by Section 10 of the JSE Listings Requirements.
8.1 Loan to and transactions with Dark Capital
Other than as previously disclosed in the annual financial statements for the
year ended 30 June 2010, there have been no further related party transactions
with Dark Capital.
8.2 Executive remuneration and share option scheme
As previously announced, at the AGM held on 13 December 2010, shareholders
approved the terms of the new Executive Share Option Scheme, the Executive
Incentive Scheme and the subscription for 5.4 million shares at R2.84 per
share to Ian Cockerill. For more information on these items, please refer to
Annexure 1 in the Petmin Limited Annual Financial Statements for the year
ended 30 June 2010. As per previous years, P Nel has been paid consulting fees
for advisory services to the Group.
8.3 Other transactions with related parties
No other related party transactions were entered into.
9. Subsequent events
9.1 Investment in Iron Bird Resources Inc.
As previously announced, on 24 January 2011, Petmin entered into an agreement
with Hummingbird Resources Plc (Hummingbird; AIM: HUM) and Hummingbird`s
wholly owned subsidiary, Iron Bird Resources Inc (Iron Bird), relating to
Hummingbird`s Mount Ginka licence for the exploration of iron ore in Liberia.
For more information on this investment. please refer to the press release.
9.2 Mining right conversion over Somkhele Areas 2 and 3 approved
On 1 February 2011, the Department of Mineral Resources confirmed that Tendele
Coal Mining`s application for the conversion of an old order right over its
Areas 2 and 3 at its Somkhele Anthracite Mine has been successful ("Successful
Conversion"). Petmin previously secured a new order mining right over Area 1
which, together with the Successful Conversion now paves the way for an
application for a new order mining right over additional resources adjacent to
Area 2 included in an expanded mining right. These resources will provide
additional high quality anthracite in close proximity to the expanding coal
wash plant complex.
9.3 Change in directors
In line with the recommendations of King III, and to assist Petmin in its
global expansion strategy, Petmin has commenced the process of sourcing
suitably qualified independent non-executive directors.
Petmin is pleased to announce the appointment of two experienced independent
non-executive directors, Ms Koosum Kalyan and Mr Millard Arnold with effect
from 1 March 2011.
Ms Kalyan (54) is chairman of EdgoMerap (Pty) Ltd in London and holds amongst
others, the following directorships: Standard Bank Group and the MTN Group.
From 2000 to 2008, Ms Kalyan was Senior Business Development Manager: African
Exploration Oil and Gas of Shell International Exploration.
Ms Kalyan holds a B.Com (Hons) in Economics and completed the Senior Executive
Management Programme at the London Business School.
Mr Arnold (64), who holds a Jurist Doctorate from the University of Notre Dame
in Indiana, has practiced law and was Professor of Law at Touro Law School in
New York.
Mr Arnold is a senior Fellow of the Gordon Institute of Business Science and a
member of the Council of the University of South Africa and member of the
University of South Africa Foundation.
He was previously Excutive Chairman of Black and Veatch Africa and served the
government of the United States as its first Minister Counsellor of Commercial
Affairs for the South Africa region.
In order to enhance risk management processes and in line with the
recommendations of the King III report, Petmin has established a Technical
Advisory Committee. The committee is tasked with providing Petmin with
independent technical advisory and operational audit services. Mr Nel has
taken up the position as chairman of Petmin`s Technical Advisory Committee and
has announced his resignation as a director of Petmin with effect from 28
February 2011. Petmin is pleased to retain Piet`s invaluable knowledge and
experience via this advisory body. Petmin extends its thanks to Piet, who
guided Petmin through its formative years.
Mr Johan Strijdom has indicated that it is his intention to offer his
resignation as a director of Petmin Limited at the next Annual General Meeting
of the company, Mr Strijdom remains a significant shareholder of Petmin.
9.4 Other
There have been no other events that have occurred subsequent to 31 December
2010 which require adjustment of, or disclosure in the financial statements or
notes thereto in accordance with IAS 10 - Events After the Reporting Date.
(i) General Overview of Performance
Earnings have been maintained, despite a stronger rand and as previously
indicated, higher strip ratios at Somkhele. The Group`s conservative marketing
and sales strategy of locking in long term supply agreements and protecting
the balance sheet, as implemented prior to the "Financial Crisis" of 2008 and
2009, assisted Petmin to survive and thrive during difficult times.
During these difficult times Petmin continued to grow earnings and remained
cash positive with virtually no gearing. However, as result of this policy to
protect earnings and to ensure visibility of cash flows and earnings, Petmin
has been unable to benefit from the substantial increase in local demand for
anthracite (as a coke replacement), export demand in the iron-ore sintering
market and a resultant material increase in price.
Tonnes sold by the Group increased by 30%, resulting in revenue of R321
million for the six months ended 31 December 2010 (2009: R215 million), an
increase of 49% despite the negative impact on revenues from a stronger
Rand/Dollar exchange rate.
The weighted average Rand/Dollar for the six months ended 31 December 2010 of
R6.79/$1.00 (2009: R7.44/$1.00) had a R11 million negative impact on revenue
at Somkhele and a negative impact on earnings per share of 1.37 cents.
Consolidated Profit before tax was R73 million (2009: R66 million), an
increase of 11%, while profit after tax only increased by 2% as secondary tax
on companies of R3.5 million was paid on the inaugural dividend declared in
the six months ended 31 December 2010 (2009: Nil).
Gross profit margin reduced to 29% (2009: 41%) as a result of the stronger
rand and as mining commenced in the deeper reserves in Area 1 at Somkhele.
Operations remained strongly cash generative with cash of R194 million (2009:
R119 million) being generated by operations after inflows from changes in
working capital of R45 million (2009: R6 million).
Capital expenditure of R138 million (2009: R56 million) was incurred in the
six months to 31 December 2010, of which R72 million spent on pre-stripping of
the open pits at Somkhele in anticipation of doubling production by the first
quarter of 2012 in order to feed the Second Plant. R60 million was spent to
expand operations (2009: R24 million) and R7 million to maintain operations
(2009: R5 million).
The ratio of interest bearing debt to equity at 31 December 2010 was 6.63% (30
June 2010: 7.55%).
Anthracite Division
Somkhele anthracite mine
In the six months to 31 December 2010, production increased by 21% to 245,791
tonnes (2009: 202,800 tonnes) and tonnes sold increased by 80% to 309,347
tonnes (2009: 171,867 tonnes).
Additional tonnes were bought-in from third party producers to supplement
export cargoes as finished product stockpiles were depleted.
Gross profit margins of 30% were achieved in the anthracite division during
the six months ended 31 December 2010 (2009: 42%). The reduction in margins
was as a result of the stronger Rand against the Dollar and due to mining
commencing in the deeper reserves situated in Area 1.
85 exploration and evaluation holes amounting to 8,893 metres were drilled in
the six months to 31 December 2010. The drilling has been focused on
Somkhele`s Areas 4 and 5. Drill results have been positive and management is
confident that the drill programme will yield significant additional resources
to increase the life of mine at Somkhele to approximately 40 years at double
the current production rates.
Capital expenditure (excluding pre-stripping of the open-pits) for the six
months ended 31 December 2010 was R22 million (2009: R20 million). The
expenditure on mining pre-strip of R72 million (2009: R27 million) is
reflective of the additional pre-stripping required as mining commenced in
Area 1.
Silica Division
SamQuarz silica mine
SamQuarz produced 647,088 tonnes (2009: 607,140 tonnes) of silica and chert in
the six months ended 31 December 2010. Sales volumes increased by 14% to
622,927 tonnes (2009: 547,359 tonnes).
Net profit margin reduced 34% to 20% (2009: 30%) due to "margin squeeze" as
the average selling price per tonne increased by only 0.37% to R134.24 per
tonne (2009: R133.74 per tonne). Cost of production, including depreciation
but before interest and tax, increased by 14.8% due to difficult mining
conditions and lack of pit-room. Management is negotiating revised off-take
agreements where appropriate and has initiated a plant and pit improvement
programme. A 40 year life of mine mine plan has been finalized.
The pit improvement programme has resulted in the decision to relocate the
admin buildings and to mine previously sterilised glass-grade silica reserves
close to surface. The office move is expected to be completed before 30 June
2011.
Capital expenditure totalling R31 million (2009: R5 million) was incurred in
the six months ended 31 December 2010 and was focused on mine development and
processing plant upgrades.
(ii) Iron Ore Division
Veremo
Petmin is a 25 percent shareholder in Veremo Holdings (Pty) Limited and 75
percent is ultimately controlled by Kermas Limited ("Kermas"). Veremo is the
owner of the Stoffberg magnetite project containing iron ore and titanium
("the Project").
During the period under review, Veremo submitted an application for a mining
licence and the application has been accepted by the DMR. Significant progress
has been made on the pre-feasibility study commissioned by Kermas and the
report is expected to be completed by mid-2011.
Exploration Co. - Canada
In the period to 31 December 2010, Petmin, together with its joint venture
partners, approved an exploration programme with the aim of defining a 40-year
inferred magnetite resource based on the production of 500,000 tonnes of pig-
iron per annum.
Mount Ginka
In terms of the Mount Ginka Project the first phase of the exploration program
has been approved which is focused on demonstrating whether a commercially
saleable magnetite concentrate can be produced.
(iii) Prospects
Anthracite division
Existing business
Current production and sales levels are expected to be maintained for calendar
2011. Market conditions are expected to remain favourable and all production
for the balance of the year has been committed.
The local anthracite market is buoyant, shored up by increased demand from the
ferrochrome producers. In line with our medium term view of the steel sector,
we see this demand trend continuing for the balance of the 2011 financial year
and into 2012.
In addition to steel growth, two other key factors support this demand trend;
namely the increase in the intensity of use of quality, low-sulphur anthracite
as a reductant of choice for the ferrochrome producers and their need to
secure long term reliable supply for this expansion.
On the export market, the trend is similar with prices moving to pre-2009
levels. We are currently contracted at $119 FOB on a take-or-pay agreement for
200,000 tonnes per annum until 2013.
Demand from South America remains solid and we are also seeing demand for
sized export cargoes to Europe and India. We will however only be in a
position to benefit from this demand once our Second Plant is in production.
Expansion
Our focus during the 2011 calendar year will be on mine development to ensure
that there is adequate pit-room to supply the quantity of anthracite that will
be required to feed the new and existing coal wash plants, and the
acceleration of the exploration programme with the intention to double our
reserves in order to secure a "40 year life of mine" at double current
production rates.
The doubling of volume as a result of the commissioning of the Second Plant in
quarter 1, 2012, will significantly reduce the unit cost and will have a
material impact on earnings. Long lead items for the second coal wash plant
have been procured and management are confident that the wash plant will be
commissioned by the end of the first quarter of 2012.
Management have received a term sheet from financiers for an asset based loan
of R80 million to Tendele Coal Mining (Pty) Ltd. The loan will have a fixed
interest rate of 6.3% until 1 April 2015, where-after the interest rate will
be 0.7% below prime. The loan will be used to part finance the construction of
the second wash plant.
The exploration drilling programme and reserve and resource verification
process are progressing well and management expects to report on updated
reserves and resources in the latter part of calendar 2011. Initial drill
results in targets identified in Areas 4 and 5 at Somkhele have been positive
with good coal intersections being reported.
In terms of the expanded production profile, post-commissioning of the second
plant, negotiations are underway to ensure we lock up some 65% to 70% of our
sales on price/volume related medium term contracts (3 years), the balance
will be used to feed the spot market demand from 2012 onwards.
Silica division
In the six months to 30 June 2011, we anticipate a small improvement in profit
margins at SamQuarz as production and sales tonnages increase and the average
selling price increases slightly. Demand from both the glass making and
metallurgical sectors is expected to remain steady for the balance of the
year. Capital expenditure is expected to be maintained at the rate of spend
incurred in the six months ended 31 December 2010, with the main expenditure
being focused on mining development and the movement of the office block.
Iron ore projects division
With the injection of funds from Petmin`s investment in Exploration Co. and
the Mt. Ginka project, the project teams on the ground will continue with
their respective exploration and resource evaluation programmes. It is
anticipated that the initial exploration results of Exploration Co. will be
available and will be published towards the second half of the 2011 calendar
year.
At Veremo, a pre-feasibility study is in the process of being finalised and
the initial indications are positive. The project has applied for a mining
licence and awaits final adjudication from the DMR.
(iv) General
With the operations at full production and an anticipated strong Rand, Petmin
expects a similar operational and financial performance for the six months
ending 30 June 2011. With organic expansion at Somkhele on track to double the
plant capacity and double the Life of Mine, and an exciting pipeline of
prospective iron ore projects in place, Petmin remains well positioned for
growth with low gearing and significant cash resources.
Petmin will continue to actively evaluate new opportunities which meet its
stated highly focused commodity and geographic diversification growth strategy
in order to maximize shareholder wealth in the short to medium term.
More details on Petmin can be found on our website www.petmin.co.za.
By order of the Board
I D Cockerill J C du Preez
Executive Chairman Chief Executive Officer
Pretoria
2 March 2011
Sponsor
River Group
Directors: I Cockerill# (Executive Chairman) L Mogotsi (Deputy Chairman)
J du Preez (Chief Executive Officer) B Doig (Chief Operating Officer)
B Tanner (Financial Director) M Arnold*+ E de V Greyling* K Kalyan*
A Martin* P Nel* J Strijdom* J Taylor*
*Non-executive #British +American Resigned 28 February 2011
Registered office: Parc Nouveau Third 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 Tel: +44 (0) 207 260 1000
Transfer secretaries: JSE: Computershare Investor Services (Proprietary)
Limited AIM: Computershare Investor Services PLC
Auditors: KPMG Inc.
Date: 02/03/2011 07:30:01 Produced by the JSE SENS Department.
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