| Mon 12 Mar 2012, 8:31 | | PET - Petmin Limited - Press Release and Results Presentation |
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PET
PET
PET - Petmin Limited - Press Release and Results Presentation
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")
Press Release and Results Presentation
Petmin ready for growth following record investment in expanded operations and
projects
- R362 million invested to double anthracite production and execute on
diversification strategy
- Second Somkhele wash plant commissioned Feb 2012 on time and within budget
- Operations remain strongly cash-generative - R200 million in six months to
Dec 2011
- Increased stake in projects in Canada, Turkey and Liberia
- Release of maiden resource statement for jointly-controlled NAIC project:
investment to be accelerated in technically and economically robust Canadian
iron sands to pig iron project
Petmin has reported stable net profit at R47 million for the halfyear to end-
December 2011, following a period of significant capital investment in its
flagship Somkhele mine and expansion of operations abroad.
Petmin generated revenues of R311 million, down 3% from R321 million in 2010.
The group`s operations remain strongly cash generative, with net cash flow
from operating activities of R200 million in the six months to December 2011
(2010: R191 million). Headline earnings per share remained unchanged at R8.15
(2010: R8.19).
Capital expenditure increased to R339 million (2010: R138 million) of which
R159 million (2010: R72 million) was spent on prestripping the open pits at
Somkhele in anticipation of doubling production to feed a second wash plant.
R90 million (R2010: R7 million) was invested in the second wash plant at
Somkhele.
The new plant was commissioned in February 2012 and will take Somkhele`s
capacity to more than 1.2 million saleable tonnes of metallurgical anthracite
per year. R15 million (R2010: R4 million) was invested in exploration in order
to ensure a life of mine at Somkhele in excess of 20 years at full production.
In the six months to December 2011, Petmin invested R23 million (2010: R11
million) in its jointly controlled projects abroad, the North Atlantic Iron
Corporation in Canada (NAIC) and Iron Bird Resources Inc (Iron Bird) in
Liberia, and an additional R23 million (2010: nil) to fund the exploration
programme at Red Crescent Resources Limited`s (RCR) Sivas copper project in
Turkey.
A NAIC maiden resource statement, based on exploration of just 3% of NAIC`s
450km2 claim, was released on Monday 12 March. This initial resource will
support a life of mine between 25 and 30 years for production of 500,000
tonnes of pig iron per year at the bottom end of the cost curve. The scale of
the resource indicates that it should be able to support multiple pig iron
plants.
"We have completed a period of significant investment for growth," Petmin
chief executive Jan du Preez said. "Our expansion at Somkhele and promising
developments in our Canadian iron sands to pig iron project put Petmin in a
strong position to increase future earnings and significantly enhance
shareholder value."
Petmin executive chairman Ian Cockerill said: "Petmin continues to generate
cash from efficient mining operations in South Africa, and is on track to
deliver on its strategy to become a globally diversified mining company
specializing in specific commodities that feed into the steel value chain, and
capitalize on the ongoing urbanization and investments into infrastructure."
Operations update
Somkhele
- Profit margins from Somkhele production were maintained at 26% in the six
months to December 2011, helped by a weakening rand. The average price of
anthracite sold from Somkhele increased 24% to R952 per tonne, up from R767.
US Dollar prices on export sales increased by 18%.
- Petmin invested R90 million in the second wash plant at Somkhele, of a total
plant cost of R145 million. A further R159 million was spent on prestripping
to open up Area 1 anthracite resources to feed the new plant. During the
period under review, 63% of production was from Area 1 compared to 27% in the
six months to December 2010.
- Petmin`s exploration costs at Somkhele were R15 million for the period as it
identified seven new strikes in Area 5. A drilling programme is underway to
prove what Petmin believes is a further significant resource of quality
metallurgical anthracite. The exploration is expected to deliver an updated
SAMREC-compliant resource statement by September 2012.
- Production was down slightly at Somkhele at 203,000 tonnes (2010: 246,000)
due to rain, short-term challenges in opening up new production areas, and
logistical constraints in the supply of earth moving equipment.
- Costs of production have risen at Somkhele as the mine moves to exploit
deeper reserves.
- In the six months ended December 2011, 63% of production was sourced from
Area 1 (2010: 27%). Average cost of run of mine coal per saleable tonne was
R308 in 2011 (2010: R221). Historically, mining was focused in Area 2 which
had a strip ratio of less than 2:1. In other words, for every tonne of coal
extracted, two cubic metres of overburden were mined by Petmin. In Area 1,
where the bulk of the mining is now focused, the strip ratio is just less than
4:1. Petmin therefore mines an additional two cubic metres of overburden for
every tonne of coal extracted. The additional cost for drill-and-blast and
load-and-haul operations in a 4:1 strip ratio environment is estimated at R54
per run of mine tonne or R128 per saleable tonne produced at a 42% plant yield
or R142 per tonne at a 38% yield.
- The Petmin board has approved the construction of a third wash plant to
reprocess discard and increase yield. The third plant is expected to improve
overall plant yield from 42% to in excess of 50%.
- Petmin has signed a renewable five-year agreement which will enable it to
export up to 600,000 tonnes of metallurgical anthracite a year from Grindrod
Terminals` Kusasa dry bulk facility in Richards Bay.
- Demand from domestic customers exceeded Somkhele`s production capacity in
the six months ended 31 December 2011 and the commissioning of the second
plant will assist in the servicing of the demand from this market.
- Sales are expected to increase in line with the production increase as
demand from domestic customers remains firm and the export market is
underpinned by firm export contracts for calendar 2012 year totalling 350 000
tonnes.
SamQuarz
- Petmin`s SamQuarz silica mine in Mpumalanga remained a consistent performer
in the six months to end-December 2011, with a 5% increase in tonnes produced
to 680,000 (2010: 647,000). The mine sold 629,000 tonnes in the period under
review (2010: 623,000).
- SamQuarz reported R16 million profit before tax, down 6% from R17 million
due to margins being squeezed by the effect of longterm pricing mechanisms not
matched by inflation.
- The sale of SamQuarz to Ferroatlantica subsidiary Thaba Chueu (Thaba) for
R259 million, announced on 13 September 2011, was prohibited by the South
African Competition Commission and is subject to an appeal by Petmin and Thaba
to the Competition Tribunal. A ruling is expected in June 2012. Petmin
continues to operate SamQuarz as a productive, profitable mine
- Capital expenditure at SamQuarz to June 2012 is expected to remain
consistent with R21 million spent in the six months ended 31 December 2011.
Project update
North Atlantic Iron Corporation - iron sands to pig iron in Canada
- In the six months ended 31 December 2011, Petmin invested an additional US$2
million to take its stake from 5% to 10.17% in the jointly managed NAIC.
- NAIC has a 450km2 claim in Labrador with an extensive iron sands resource
close to clean cheap power and an existing port. Petmin and its partners in
NAIC propose to develop an iron sands to pig iron operation for export to US
and other markets.
- After having drilled more than 4,500 metres and analysed more than 1,400
samples, Petmin on 12 March 2012 released its maiden resource statement for
NAIC.
- The resource statement is based on exploration of 3% of the 450km2 NAIC
claim and laboratory analysis of 1,500 metres of drilling samples.
- The CIM (Canada`s equivalent of SAMREC) inferred resource indicates a life
of mine between 25 and 30 years for Phase 1 production of 500,000 tonnes of
pig iron per year at the bottom of the cost curve. The scale of the resource
indicates that it should support multiple pig iron plants.
- The resource is 594 million tonnes of sand at 9.35 wt % of which 38.02% is
Fe2O3 equivalent.
For details please refer to the announcement published on 12 March 2012.
- The resource statement is to be followed by smelt tests and an updated NI
43101 statement.
- Petmin regards NAIC`s iron sands to pig iron proposal as technically and
economically robust and intends to accelerate its development as a key future
asset.
Iron Bird Resources Inc - iron ore in Liberia
- Petmin has invested an additional US $1.5 million to increase its stake to
50% in Iron Bird, its Liberian iron ore joint venture with Hummingbird
Resources PLC.
- An aeromagnetic survey shows a continuous magnetic unit interpreted as an
iron formation that is 20km long, up to 250m wide and 1 000m deep. Early
samples of the ore range from 3354% magnetite iron. Geochemical and
metallurgical testing is to be carried out on 151 trench samples.
Red Crescent Resources Limited copper in Turkey
- In the six months ended 31 December 2011, Petmin invested CA$3.1 million to
increase its equity holding in RCR to approximately 10.1%. Petmin has an
option to acquire up to 37.5% of RCR`s Sivas copper project for CA$17 million.
- Drilling has commenced on the Sivas project and initial results noted 10
metres at 0.5% Cu (and 5 metres at 0.6% Cu). Management will assess the
project once the initial 14 drillhole programme and test work is complete.
Veremo - iron ore in South Africa
- Veremo continues to await the outcome of its application for a mining
license with the South African Department of Mineral Resources.
- In the six months ended 31 December 2011, Kermas Limited, the ultimate
controlling shareholder of Veremo, signed an agreement with an international
plant construction company to complete a feasibility study on the project.
Petmin`s significant investment during the six months to end December 2011
will help to create more job opportunities and further benefit the communities
in which the company operates.
The domestic investment at Somkhele combined with international expansion
keeps Petmin on track to implement its strategy to provide superior returns to
shareholders by becoming a globally diversified mining group specializing in
specific commodities that feed into the steel value chain.
Results Presentation
Shareholders are advised that a Company`s Results presentation is available
from Tuesday, 13 March 2012 on the Company`s website at www.petmin.co.za
Enquiries:
Petmin
Bradley Doig (Director of Business development)
+27 11 706 1644
Media
Jonathon Rees
+27 76 185 1827
Sponsor and Corporate Adviser (JSE)
River Group
Andrew Lianos
+27 834 408 365
Nominated Adviser and Broker (AIM)
Macquarie Capital (Europe) Limited
Steve Baldwin
+44 20 3037 2362
Nicholas Harland
+44 20 3037 2369
Johannesburg
12 March 2012
Date: 12/03/2012 08:31:45 Produced by the JSE SENS Department.
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