| Mon 12 Mar 2012, 8:31 | | 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 2011
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 2011
R362 million invested to double anthracite production and execute
diversification strategy
- Cash produced from operations increased from R191 million to R200 million.
- Earnings stable with costs well controlled despite increased strip ratios at
Somkhele.
- Second plant at Somkhele anthracite mine commissioned in February 2012 on
time and within budget with capacity to more than double saleable tonnes
produced.
- Business of Tomorrow process has resulted in increased stakes in foreign
projects.
- Investment in North Atlantic Iron Corporation to be accelerated as the
project is technically and economically robust.
- Sale of SamQuarz for R258 million prohibited by Competition Commission.
Petmin and the purchaser have appealed the decision.
Condensed Consolidated Interim Income Statement
for the six months ended 31 December 2011
Reviewed Reviewed
Six months Six months Audited
ended ended Year ended
31 Dec 31 Dec 30 Jun
2011 2010 2011
Note R`000 R`000 R`000
Revenue 216 328 237 274 471 385
Cost of sales (165 367) (166 780) (354 683)
Gross profit 50 961 70 494 116 702
Operational income/(expenses) 17 968 (2 801) 7 433
Administration expenses (12 635) (12 139) (13 694)
Results from operating activities 56 294 55 554 110 441
Mark-to-market of listed securities (2 396) - 346
Net finance (expense)/income 173 774 3 698
- Finance income 1 926 2 534 4 889
- Finance expenses (1 753) (1 760) (1 191)
Share of losses of equity
accounted investees - - (524)
Profit before income tax 54 071 56 328 113 961
Income tax expenses (18 428) (21 100) (37 060)
Profit for the period from
continuing operations 35 643 35 228 76 901
Profit for the period from
discontinued operation
(net of income tax) 11 380 12 047 24 081
Profit for the period 47 023 47 275 100 982
Earnings per share
Basic earnings per ordinary
share (cents) 7 8.15 8.19 17.50
Diluted earnings per
ordinary share (cents) 7 8.01 8.14 17.40
Earnings per share from
continuing operations
Basic earnings per ordinary
share (cents) 7 6.18 6.11 13.33
Diluted earnings per
ordinary share (cents) 7 6.07 6.07 13.25
Condensed Consolidated Interim Statement of Comprehensive Income
for the six months ended 31 December 2011
Reviewed Reviewed
Six months Six months Audited
ended ended Year ended
31 Dec 31 Dec 30 Jun
2011 2010 2011
R`000 R`000 R`000
Profit for the period 47 023 47 275 100 982
Other comprehensive income
Foreign currency translation
differences 3 243 (143) (319)
Effective portion of changes in
fair value of cash flow hedges (4 370) - -
Other comprehensive income for
the period, net of income tax (1 127) (143) (319)
Total comprehensive income for
the period 45 896 47 132 100 663
Condensed Consolidated Interim Statement of Financial Position
at 31 December 2011
Reviewed Reviewed Audited
as at as at as at
31 Dec 31 Dec 30 Jun
2011 2010 2011
R`000 R`000 R`000
ASSETS
Non-current assets 1 362 551 1 029 413 1 126 251
Property, plant and equipment 860 612 530 604 620 662
Intangible assets 629 3 148 1 889
Investment in equity accounted investee 470 145 470 661 470 138
Investments 31 165 25 000 33 562
Current assets 468 466 585 376 664 515
Inventories 29 642 10 635 22 134
Trade and other receivables 101 934 76 618 117 496
Current tax assets 4 655 4 624 4 656
Cash and cash equivalents 26 524 185 880 227 792
Assets classified as held for sale 305 711 307 619 292 437
Total assets 1 831 017 1 614 789 1 790 766
EQUITY AND LIABILITIES
Ordinary share capital and reserves 1 334 995 1 243 224 1 317 162
Share capital 143 763 141 790 143 398
Share premium 334 105 321 523 337 807
Share option reserve 3 978 3 112 5 627
Hedging reserve (4 370) - -
Foreign currency translation reserve 2 924 (143) (319)
Retained earnings 854 595 776 942 830 649
Non-current liabilities 260 422 170 004 249 604
Interest-bearing loans and borrowings 90 048 34 069 96 674
Deferred taxation liabilities 149 525 117 335 133 206
Environmental rehabilitation provision 20 849 18 600 19 724
Current liabilities 235 600 201 561 224 000
Trade and other payables 97 697 83 972 88 131
Current portion of non-current liabilities 23 466 14 379 23 466
Shareholders for dividend 1 419 1 042 996
Liabilities classified as held for sale 113 018 102 168 111 407
Total equity and liabilities 1 831 017 1 614 789 1 790 766
Condensed Consolidated Interim Statement of Cash Flows
for the six months ended 31 December 2011
Reviewed Reviewed
Six months Six months Audited
ended ended Year ended
31 Dec 31 Dec 30 Jun
2011 2010 2011
R`000 R`000 R`000
Cash generated by operations 72 089 71 105 142 018
Adjustments for:
- depreciation and amortisation 110 605 74 946 185 792
- fair value of derivatives included
in payables/receivables (4 370) - -
- impairment charges 2 715 852 3 769
- notional interest 1 421 2 022 3 187
- loss on disposal of property, plant
and equipment - - 10
- share-based payments included in
expenses - - 22 336
- decommissioning asset - new mining
areas - - 1 008
- management share options granted 1 269 - 2 532
Operating cash flows before changes
in working capital 183 729 148 925 360 652
Decrease/(Increase) in trade and
other receivables 18 872 26 178 (14 775)
(Increase)/Decrease in inventories (12 167) 16 583 834
Increase in trade and other payables 8 877 1 937 13 159
Cash generated by operations 199 311 193 623 359 870
Income tax refunded/(paid) 782 (4 440) (4 590)
Finance income 2 054 3 887 7 073
Finance expenses (1 870) (1 933) (1 548)
Net cash flow from operating activities 200 277 191 137 360 805
Cash flows from investing activities
Long-term rehabilitation expenditure
incurred - (236) (236)
Investment in jointly controlled
entities (22 964) (10 786) (13 552)
Investment in listed shares - - (8 216)
Acquisition of property, plant and
equipment (339 417) (137 903) (361 376)
- to expand operations (173 587) (59 588) (148 056)
- to expand operations - capitalised
pre-strip (159 313) (71 809) (181 565)
- to maintain operations (6 517) (6 506) (31 755)
Proceeds from sale of property, plant
and equipment - - 5
Net cash flows from investing
activities (362 381) (148 925) (383 375)
Cash flows from financing activities
Proceeds from specific and general
share issues for cash during the period 3 335 10 29
Treasury shares acquired (9 590) (10 724) (15 204)
Payment on options forfeited - - ( 55)
Repayment of borrowings (11 987) (11 259) (22 718)
Increase in borrowings 2 139 - 80 152
Dividends paid (22 654) (33 573) (33 617)
Net cash flows from financing
activities (38 757) (55 546) 8 587
Net decrease in cash and cash
equivalents (200 861) (13 334) (13 983)
Cash and cash equivalents at
beginning of period 269 031 283 014 283 014
Cash and cash equivalents at end of
period 68 170 269 680 269 031
Transferred to assets held for sale (41 646) (83 800) (41 239)
Cash and cash equivalents at end of
period - continuing operations 26 524 185 880 227 792
Condensed Consolidated Interim Statement of Changes in Equity
for the six months ended 31 December 2011
Foreign
Share currency
Share Share option translation
capital premium reserve reserve
R`000 R`000 R`000 R`000
Balance at 30 June 2010 142 681 331 337 3 121 -
Total comprehensive income
for the period - - - (319)
Foreign currency translation
differences - - - (319)
Profit for the period - - - -
Transactions with owners,
recorded directly in equity 717 6 470 2 506 -
Shares issued during the
period - share options
exercised 11 43 (26) -
Share-based payments 1 986 20 350 - -
Treasury shares acquired
during the period (1 280) (13 923) - -
Share options granted - - 2 546 -
Share options forfeited
during the period - - (14) -
Dividend paid - - - -
Balance at 30 June 2011 143 398 337 807 5 627 (319)
Total comprehensive income
for the period - - - 3 243
Effective portion of changes
in fair value of cash flow
hedges - - - -
Foreign currency translation
differences - - - 3 243
Profit for the period - - - -
Transactions with owners,
recorded directly in equity 365 (3 702) (1 649) -
Shares issued during the
period - share options
exercised 1 281 4 972 (2 918) -
Share options forfeited
during the period - - (160) -
Treasury shares acquired
during the period (916) (8 674) - -
Share options granted - - 1 429 -
Dividend paid - - - -
Balance at 31 December 2011 143 763 334 105 3 978 2 924
Hedging Retained
reserve earnings Total
R`000 R`000 R`000
Balance at 30 June 2010 - 764 282 1 241 421
Total comprehensive income for the period - 100 982 100 663
Foreign currency translation differences - - (319)
Profit for the period - 100 982 100 982
Transactions with owners, recorded directly
in equity - (34 614) (24 921)
Shares issued during the period - share
options exercised - - 29
Share-based payments - - 22 336
Treasury shares acquired during the period - - (15 204)
Share options granted - - 2 546
Share options forfeited during the period - - (14)
Dividend paid - (34 614) (34 614)
Balance at 30 June 2011 - 830 649 1 317 162
Total comprehensive income for the period (4 370) 47 023 45 896
Effective portion of changes in fair value
of cash flow hedges (4 370) - (4 370)
Foreign currency translation differences - - 3 243
Profit for the period - 47 023 47 023
Transactions with owners, recorded directly
in equity - (23 077) (28 063)
Shares issued during the period - share
options exercised - - 3 335
Share options forfeited during the year - - (160)
Treasury shares acquired during the year - - (9 590)
Share options granted - - 1 429
Dividend paid - (23 077) (23 077)
Balance at 31 December 2011 (4 370) 854 595 1 334 995
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.
Segment revenue represents revenue to external customers. There was no inter-
segment revenue during the period ended 31 December 2011 or in the prior
periods. 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") - Discontinued operation;
- Anthracite mining and marketing ("Anthracite"); and
- Business of Tomorrow, which includes Petmin`s exploration and development
projects. This segment has been designated as a reportable segment in order to
achieve fairer presentation due to its significance.
Segment Report
for the six months ended 31 December 2011
Silica (Discontinued)
Six Six
months months Year
Units ended ended ended
of 31 Dec 31 Dec 30 Jun
measure 2011 2010 2011
Saleable tonnes produced (tonnes) 680 312 647 088 1 325 868
Tonnes sold (tonnes) 628 870 622 927 1 248 989
Segment revenue R`000 94 436 83 623 170 082
Segment revenue per tonne sold (R/tonne) R150.17 R134.24 R136.18
Segment finance
(expense)/income
Finance income R`000 128 1 353 1 838
Finance expense R`000 (118) (172) (357)
Segment profit per tonne sold (R/tonne) R25.13 R26.86 R26.47
Segment profit/(loss) before
tax R`000 15 803 16 730 33 058
Segment tax (expense) R`000 (4 425) (4 685) (8 977)
Segment profit/(loss) after tax R`000 11 378 12 045 24 081
Segment capital expenditure -
combined R`000 20 516 33 131 65 494
Segment capital expenditure R`000 20 516 33 131 65 494
Segment capital expenditure -
pre-strip R`000 - - -
Segment depreciation - combined R`000 10 647 7 358 16 560
Segment depreciation R`000 10 647 7 358 16 560
Segment depreciation - pre-strip R`000 - - -
Share option costs included in
segment profit/(loss) before tax R`000 - - -
Segment assets R`000 305 711 307 619 292 437
Segment liabilities R`000 113 018 102 168 111 407
Anthracite
Six Six
months months Year
ended ended ended
31 Dec 31 Dec 30 Jun
2011 2010 2011
Saleable tonnes produced 203 425 245 791 524 006
Tonnes sold 227 041 309 347 579 087
Segment revenue 216 328 237 274 471 385
Segment revenue per tonne sold R952.81 R767.02 R814.01
Segment finance (expense)/income
Finance income 256 417 569
Finance expense (1 482) (1 596) (852)
Segment profit per tonne sold R247.69 R198.84 R202.05
Segment profit/(loss) before tax 56 235 61 512 117 006
Segment tax (expense) (16 120) (17 638) (33 599)
Segment profit/(loss) after tax 40 115 43 874 83 407
Segment capital expenditure - combined 286 115 99 092 276 179
Segment capital expenditure 126 802 27 283 94 828
Segment capital expenditure - pre-strip 159 313 71 809 181 351
Segment depreciation - combined 98 476 66 133 172 460
Segment depreciation 8 819 10 598 18 980
Segment depreciation - pre-strip 89 657 55 535 153 480
Share option costs included in segment
profit/(loss) before tax - - -
Segment assets 876 746 717 998 805 728
Segment liabilities 470 440 386 645 435 167
Business of Tomorrow
Six Six
months months Year
ended ended ended
31 Dec 31 Dec 30 Jun
2011 2010 2011
Saleable tonnes produced - - -
Tonnes sold - - -
Segment revenue - - -
Segment revenue per tonne sold
Segment finance (expense)/income
Finance income - - -
Finance expense - - -
Segment profit per tonne sold
Segment profit/(loss) before tax (136) 729 (566)
Segment tax (expense) - - -
Segment profit/(loss) after tax (136) 729 (566)
Segment capital expenditure - combined 32 744 5 605 19 312
Segment capital expenditure 32 744 5 605 19 312
Segment capital expenditure - pre-strip - - -
Segment depreciation - combined - - -
Segment depreciation - - -
Segment depreciation - pre-strip - - -
Share option costs included in segment
profit/(loss) before tax - - -
Segment assets 586 225 497 412 527 676
Segment liabilities 1 495 190 428
Other (Corporate office)
Six Six
months months Year
ended ended ended
31 Dec 31 Dec 30 Jun
2011 2010 2011
Saleable tonnes produced - - -
Tonnes sold - - -
Segment revenue - - -
Segment revenue per tonne sold
Segment finance (expense)/income
Finance income 1 670 2 117 4 666
Finance expense (2 667) (164) (339)
Segment profit per tonne sold
Segment profit/(loss) before tax (2 027) (5 911) (2 479)
Segment tax (expense) (2 308) (3 462) (3 461)
Segment profit/(loss) after tax (4 335) (9 373) (5 940)
Segment capital expenditure - combined 42 75 491
Segment capital expenditure 42 75 491
Segment capital expenditure - pre-strip - - -
Segment depreciation - combined 222 293 408
Segment depreciation 222 293 408
Segment depreciation - pre-strip - - -
Share option costs included in segment
profit/(loss) before tax 1 429 - 2 546
Segment assets 373 920 450 873 427 743
Segment liabilities 20 712 59 485 28 525
Eliminations
Six Six
months months Year
ended ended ended
31 Dec 31 Dec 30 Jun
2011 2010 2011
Saleable tonnes produced - - -
Tonnes sold - - -
Segment revenue - - -
Segment revenue per tonne sold
Segment finance (expense)/income
Finance income - - -
Finance expense - - -
Segment profit per tonne sold
Segment profit/(loss) before tax - - -
Segment tax (expense) - - -
Segment profit/(loss) after tax - - -
Segment capital expenditure - combined - - -
Segment capital expenditure - - -
Segment capital expenditure - pre-strip - - -
Segment depreciation - combined - - -
Segment depreciation - - -
Segment depreciation - pre-strip - - -
Share option costs included in segment
profit/(loss) before tax - - -
Segment assets (311 585) (359 113) (262 818)
Segment liabilities (109 643) (176 923) (101 495)
Consolidated
Six Six
months months Year
ended ended ended
31 Dec 31 Dec 30 Jun
2011 2010 2011
Saleable tonnes produced 883 737 892 879 1 849 874
Tonnes sold 855 911 932 274 1 828 076
Segment revenue 310 764 320 897 641 467
Segment revenue per tonne sold
Segment finance (expense)/income
Finance income 2 054 3 887 7 073
Finance expense (4 267) (1 932) (1 548)
Segment profit per tonne sold
Segment profit/(loss) before tax 69 875 73 060 147 019
Segment tax (expense) (22 853) (25 785) (46 037)
Segment profit/(loss) after tax 47 022 47 275 100 982
Segment capital expenditure - combined 339 417 137 903 361 476
Segment capital expenditure 180 104 66 094 180 125
Segment capital expenditure - pre-strip 159 313 71 809 181 351
Segment depreciation - combined 109 345 73 784 189 427
Segment depreciation 19 688 18 249 35 947
Segment depreciation - pre-strip 89 657 55 535 153 480
Share option costs included in segment
profit/(loss) before tax 1 429 - 2 546
Segment assets 1 831 017 1 614 789 1 790 766
Segment liabilities 496 022 371 565 473 604
*The open pit mining profile at Somkhele requires that overburden be removed
from the pit before coal can be extracted. This overburden removal is
capitalised to the development cost of the open pit (so called "pre-strip")
and is then expensed on a units-of-production basis as the coal is extracted
from the open pits. The pre-strip expenditure in the six months ended 31
December 2011 reflects the increased investment to ensure supply of run-of-
mine coal to feed both the existing and the second plant at Somkhele.
Notes to the Condensed Consolidated Interim Financial Statements
for the six months ended 31 December 2011
1. Reporting entity
Petmin is a company domiciled in South Africa. The condensed interim
consolidated financial statements of the Group for the six months ended 31
December 2011 comprise the Company and its subsidiaries (together referred to
as the "Group") and the Group`s interests in associates and jointly controlled
entities.
The condensed consolidated interim financial statements were authorised for
issue by the directors on 12 March 2012.
2. Statement of compliance
These condensed consolidated interim financial statements have been prepared
under the supervision of Petmin`s financial director, Mr BP Tanner CA(SA) and
in accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS), 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 2011, which are available upon request from the company`s
registered office at 37 Peter Place, Bryanston, 2021, Johannesburg 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 2011.
Functional and presentation currency:
The condensed consolidated interim financial statements are presented in South
African Rands ("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 on-going 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.
In the six months ended 31 December 2011, as a result of management
innovation, Tendele Coal Mining (Pty) Limited commenced the re-processing of
discard material at its Somkhele anthracite mine. As a result of the change in
processing, management has reviewed the method of allocation of mining costs
to the products produced by both the first wash of the run of mine coal and
the second wash of the discard. This change of method of allocation of mining
costs meets the definition of a change in accounting estimate and has
therefore been applied prospectively in the six months ended 31 December 2011.
The adjustment resulted in an increase in work-in-progress inventory of R19.6
million and a reduction in cost of sales of R19.6 million.
This adjustment has not been applied retrospectively for the discard
stockpile.
Other than noted above, 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 2011.
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. Discontinued operation
As disclosed in the annual financial statements for the year ended 30 June
2011, Petmin agreed to the sale of SamQuarz (Pty) Ltd to Thaba Chueu Mining
(Pty) Limited ("Thaba"). The sale was subject to approval by the Competition
Commission ("the Commission") and by the Department of Mineral Resources. As
disclosed on 16 January 2012, Petmin was informed that the Commission had
ruled against the transaction. Petmin announced on 30 January 2012 that,
together with the purchaser have appealed the decision and expect a ruling on
the appeal in June 2012. Consequently, SamQuarz, the silica segment, continues
to be classified as held for sale or a discontinued operation.
Reviewed Reviewed
Six months Six months Audited
ended ended Year ended
31 Dec 31 Dec 30 Jun
2011 2010 2011
R`000 R`000 R`000
Results of discontinued operation
Revenue 94 436 83 623 170 082
Cost of sales (60 896) (59 826) (111 289)
Gross profit 33 540 23 797 58 793
Operating expenses (11 663) (6 886) (24 515)
Administration expenses (6 082) (1 360) (2 701)
Results from operating activities 15 795 15 550 31 577
Net finance income/(expense) 10 1 181 1 481
- Finance income 128 1 353 1 838
- Finance expenses (118) (172) (357)
Profit before income tax 15 805 16 731 33 058
Income tax expense (4 425) (4 684) (8 977)
Profit for the period 11 380 12 047 24 081
Earnings per share
Basic earnings per share (cents) 1.97 2.08 4.17
Diluted earnings per share (cents) 1.94 2.07 4.15
Cash flows from/(used in)
discontinued operation
Net cash from operating activities 23 483 13 830 46 742
Net cash used in investing activities (19 854) (29 813) (62 286)
Net cash used in financing activities (3 222) (3 200) (6 200)
Net cash from/(used in) discontinued
operation 407 (19 183) (21 744)
7. Earnings per share
Earnings per share ("EPS") are based on the Group`s profit for the period,
divided by the weighted average number of shares in issue during the period.
Reviewed
six months ended
31 Dec
2011
Profit for Number of
the period shares in Per share
R`000 thousands in cents
Basic earnings per share 47 023 576 908 8.15
Share options - 10 147 (0.14)
Diluted EPS 47 023 587 055 8.01
Reconciliation between earnings
and headline earnings per share
Basic EPS 47 023 576 908 8.15
Headline EPS 47 023 576 908 8.15
Share options - 10 147 (0.14)
Diluted headline
EPS 47 023 587 055 8.01
Reviewed
six months ended
31 Dec
2010
Profit for Number of
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
Reconciliation between earnings
and headline earnings per share
Basic EPS 47 275 576 908 8.19
Headline EPS 47 275 576 908 8.19
Share options - 3 559 (0.05)
Diluted headline
EPS 47 275 580 467 8.14
Reviewed
Year ended
30 Jun
2011
Profit for Number of
the year shares in Per share
R`000 thousands in cents
Basic earnings
per share 100 982 576 908 17.50
Share options - 3 514 (0.10)
Diluted EPS 100 982 580 422 17.40
Reconciliation between earnings
and headline earnings per share
Basic EPS 100 982 576 908 17.50
Headline EPS 100 982 576 908 17.50
Share options - 3 514 (0.10)
Diluted headline
EPS 100 982 580 422 17.40
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.
8. Investments in jointly controlled entities
Petmin previously announced its strategy to become a globally diversified
mining company with a focus on those specific commodities that feed into the
steel value chain. Petmin`s investment philosophy is to reduce risk of entry
into new geographic areas and commodities by contracting on an earn-in,
stepped acquisition basis with joint management control from inception and not
as an investor in a portfolio of minority stakes without control. As
previously announced and in line with this investment philosophy, in the six
months ended 31 December 2011 Petmin has made the following investments:
Investment in North Atlantic Iron Corporation
In the six months ended 31 December 2011, Petmin invested an additional US$2
million in the jointly managed North Atlantic Iron Corporation ("NAIC")
acquiring an additional 5.17% interest to take Petmin`s shareholding in NAIC
to 10.17%. Petmin`s investment in NAIC has been proportionately consolidated
in accordance with the accounting policy for investments in jointly controlled
entities.
Investment in Iron Bird Resources Inc
In the six months ended 31 December 2011, Petmin invested an additional US$1.5
million in the jointly managed Iron Bird Resources Inc, increasing its
shareholding in Iron Bird to 50%.
Red Crescent Resources Limited ("RCR")
In the six months ended 31 December 2011, Petmin invested C$3 055 000 to
increase its equity holding in RCR to approximately 10.1%. The funds are to be
applied to the exploration programme at RCR`s Sivas copper project and
therefore the additional investment has been accounted for as an investment in
mineral assets. Petmin has the right to earn up to a 37.5% interest in the
Sivas project.
9. Related parties
9.1 Exercise of options
As announced on 30 June 2011, the Company was informed that executive
directors exercised 5 070 250 options with an exercise price of 65 cents per
share. Additionally, 100 000 options with a strike price of 65 cents per share
were bought by the Company for 275 cents per share.
On 30 June 2011, the Company was informed that employees exercised 55 000
options with an exercise price of 65 cents per share. Additionally, 180 000
options with a strike price of 65 cents per share were bought by the Company
for 275 cents per share.
The options were the final remaining options awarded in terms of a share
incentive scheme approved by shareholders on 19 July 2005 and there are now no
further outstanding options with a strike price of 65 cents.
9.2 Fees charged to equity accounted investee
In the six months ended 31 December 2011, Petmin charged Veremo Holdings
Limited management fees amounting to R2 495 156 (2010: Nil). Petmin holds 25%
of the issued share capital of Veremo Holdings Limited.
9.3 Other transactions with related parties
No other related party transactions were entered into.
10. Change in directors
As announced on 13 September 2011, Petmin appointed Mr Trevor Petersen with
effect from 12 September 2011 as an independent non-executive director and as
a member of Petmin`s audit and risk committee. Mr Petersen is a Chartered
Accountant and is a former Managing Partner of the Cape Town office of audit
firm PricewaterhouseCoopers ("PwC"). He also held the position of Chairman of
PwC Western Cape and is the past Chairman of the South African Institute of
Chartered Accountants. Mr Petersen has also been a member of the University of
Cape Town Council since 2002.
11. Subsequent events
11.1 Appointment of Macquarie Capital (Europe) Limited as Nominated Adviser
and Broker
On 1 February 2012, Petmin announced that it had appointed Macquarie Capital
(Europe) Limited as its Nominated Adviser and Broker. The appointment was with
effect from 1 February 2012 and is in respect of the Alternative Investment
Market of the London Stock Exchange plc. Petmin believes that this appointment
will assist Petmin in its long term stated objective to migrate its listing to
the main board of the London Stock Exchange and to initially form part of the
FTSE 250 index, and ultimately the FTSE 100 index.
11.2 Update on proposed sale of SamQuarz
On 30 January 2012, Petmin announced that Petmin and the proposed buyer of its
SamQuarz silica mine, Thaba Chueu Mining (Pty) Limited ("Thaba"), have
appealed against a decision by the Competition Commission to prohibit the
sale.
A formal notice was filed with the Competition Tribunal by Petmin and Thaba on
Friday, 27 January 2012, asking the Tribunal to reconsider the Commission`s
decision.
This follows Petmin`s statement of 16 January 2012, in which it advised that
the Commission had said it would not authorise the sale of SamQuarz due to its
strategic importance as a supplier to the producers of ferrosilicon and
silicon metal in South Africa. Petmin had announced on 13 September 2011 that
it had sold SamQuarz to Thaba for R259 million (plus all profits made after 1
July 2011 until closing of the transaction) subject to approval from the
Commission and the Department of Mineral Resources.
It is anticipated that the appeal process will take approximately six months.
During this time, Petmin will continue to operate SamQuarz as a profitable and
productive mining business.
On 23 February 2012, Petmin announced that it had received notification from
the Department of Mineral Resources of its consent to the sale.
11.3 Renewable 600 000 tonne anthracite export capacity agreement with
Grindrod
As announced on 22 February 2012, 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 Terminal`s Kusasa dry bulk facility in
Richards Bay, located in the KwaZulu-Natal province of South Africa.
The agreement, effective from 1 February 2012, gives Petmin the capacity to
transport by road and then ship its expanded anthracite production from the
Somkhele mine 85km north of Richards Bay.
11.4 North Atlantic Iron Corporation maiden inferred resource statement
Petmin today announced its maiden CIM (Canada`s equivalent of SAMREC) inferred
resource of 594 million tonnes at its joint venture Iron Sands/Pig-iron
project in Canda, NAIC. Please refer to the detailed announcement published on
12 March 2012.
11.5 Subsequent events
There have been no other events that have occurred subsequent to 31 December
2011 which require adjustment of, or disclosure in the financial statements or
notes thereto in accordance with IAS 10 - Events After the Reporting Date.
General overview of performance
Revenues of R311 million, down 3% from R321 million in 2010, generated a
profit after tax of R47 million (2010: R47 million). Sales volumes reduced at
Somkhele by 82 000 tonnes due to reduced production (42 000 tonnes) and due to
the sale of stockpiles in 2010. Demand for Somkhele`s product exceeded
production.
The group`s operations remain strongly cash generative, with net cash flow
from operating activities of R200 million in the six months to 31 December
2011 (2010: R191 million).
Average selling prices at Somkhele increased to R952.81/tonne or 24% from the
R767.02/tonne achieved in 2010. United States Dollar ("Dollar") prices on
export sales increased by 18% and the Rand/Dollar exchange rate assisted with
weakening of the Rand to an average of 7.61 (2010: 6.79) for the six months
ended 31 December 2011.
Production tonnes for the Group were flat at 883 737 tonnes (2010: 892 879)
and sales tonnes decreased by 8% to 855 911 (2010: 932 274). Production
volumes were disappointing at Somkhele, being affected by poor geological
conditions in the shallow, weathered sections of the new pits opened in Area
1. The weathered material also affected yields in the wash plant resulting in
a 38% yield in the six months to 31 December 2011 (2010: 42%). Production was
further hampered by delays caused by rain and by late delivery of additional
opencast mining equipment. Management anticipates yields and geological
conditions to improve as the deeper sections of the pits are mined going
forward.
In the period under review, discard was re-processed at Somkhele in the
existing plants and produced encouraging yields. In the six months ended 31
December 2011, the Petmin board approved the construction of an additional
processing plant to re-treat discard subject to securing off-take agreements.
Once in operation, this is expected to increase the overall plant yield from
the current 42% to in excess of 50%.
Operating income was R18.0 million compared to an expense of R2.8 million in
2010 as foreign exchange gains of R9.5 million (2010: losses of R6.8 million)
were recorded with the weakening of the Rand against the US Dollar in the six
months ended 31 December 2011 and Petmin earned fee income from Veremo of R2.5
million (2010: R nil).
In the six months to 31 December 2011, Petmin made significant investments to
secure its future expansion strategy. Capital expenditure increased to R339
million (2010: R138 million) of which R159 million (2010: R72 million) was
spent on pre-stripping the open pits at Somkhele in anticipation of doubling
production in order to feed Somkhele`s second plant which has commenced its
commissioning process in February 2012. Capital expenditure of R90 million
(2010: R7 million) was incurred on the second plant at Somkhele, with R15
million spent on exploration at Somkele (2010: R4 million), and an additional
R23 million (2010: R nil) to fund the exploration programme at RCR`s Sivas
copper project.
Petmin invested R23 million (2010: R11 million) in its jointly controlled
entities (North Atlantic Iron Corporation and Iron Bird Resources).
The Group`s interest bearing debt to equity ratio increased to 10.58% (2010:
6.63%) with the R80 million five-year term loan from the Industrial
Development Corporation to partially finance the construction of the second
wash plant at Somkhele being drawn down in June 2011. The loan has a fixed
interest rate of 6.3% per annum until 1 April 2015, whereafter the interest
rate will be 0.7% below prime. At 31 December 2011, Petmin had cash on hand of
R68 million (2010: R270 million) and has overdraft facilities of R110 million.
In light of the delayed sale of SamQuarz, Petmin is reviewing its financing
options and is likely to raise additional medium-term debt funding in the near
term.
Anthracite Division
Somkhele anthracite mine and Petmin Logistics
The Anthracite division produced 203 425 tonnes (2010: 245 791 tonnes) and
sold 227 041 tonnes (2010: 309 347 tonnes) of anthracite in the six months
ended 31 December 2011. Production volumes are expected to increase
significantly with the commencement of the second plant and with improved
geological conditions and the arrival of additional earthmoving equipment for
the open-pit mining operations.
Net profit margins were maintained at 26% (2010: 26%) with assistance from
improved Dollar prices for exports (2011: $119/tonne 2010: $100.72/tonne) and
a weaker Rand/Dollar exchange rate (2011: 7.61 2010: 6.79). The increase in
sales prices was offset by increased mining cost due to a greater proportion
of production emanating from Area 1 (2011: 63% of production from Area 1;
2010: 27% of production from Area 1). As previously announced in September
2011 it was anticipated that mining costs would increase due to the increased
strip ratios in the deeper reserves in Area 1. Management estimated an
increase in mining cost of 56% when moving from a strip ratio of less than 2:1
in Area 2 to a strip ratio of almost 4:1 in Area 1.
In a drive to improve operating efficiencies at the mine, management approved
the construction of a discard reprocessing plant with a budgeted capital cost
of R50 million. Based on the results of a trial washing of 20 000 tonnes of
discard in December 2011, it is anticipated that the re-washing of the discard
will improve plant yield from the historic 42% to in excess of 50%.
The commissioning of the second wash plant at Somkhele has commenced in
February 2012 and is expected to be in full production by the end of the first
quarter of calendar 2012. The project is on time and within budget and has the
capacity to more than double the current saleable production at Somkhele to in
excess of 1.2 million tonnes per annum.
Somkhele has signed an additional export sales contract for 250 000 tonnes for
calendar year 2012 (150 000 tonnes are firm with 100 000 tonnes at the
customers option), enhancing visibility of revenues with the existing take or
pay export contract for 200 000 tonnes per annum until December 2013. 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. Somkhele has signed
off-take agreements with domestic customers for approximately 650 000 tonnes
per annum.
The following market summary indicates forces affecting competition for our
product in the export market. With European stock levels increasing,
international trade volumes are coming under pressure. The European market for
anthracite has seen significant downward pressure and is 5% to 7% down on July
2011 prices. (Max 10% Ash, 3% Volatiles, 1.2% Sulphur).
The Vietnamese government upped the export tax on anthracite to 15% effective
September 2011 in line with its stated policy of discouraging exports to
conserve coal for local consumption. Vietnamese anthracite prices for the last
quarter have seen reductions from the previous period, reflecting the relative
strength of Chinese export prices for blast furnace coke against which they
are sold.
Demand from our primary market, Brazil, is steady with firm orders being
placed until June 2012 and we see demand remaining consistent until December
2012, albeit at lower than anticipated prices.
In the local market, despite the downturn in the ferrochrome industry with a
number of furnaces being switched off, demand from our principle customers
remains firm, given the nature of our supply to the lower cost furnaces using
proprietary technology.
We continue to evaluate new products and markets.
Silica Division
SamQuarz silica mine
SamQuarz produced 680 312 tonnes (2010: 647 088 tonnes) of silica and chert in
the six months ended 31 December 2011. Sales volumes were maintained at 628
870 tonnes (2009: 622 927 tonnes).
The Silica division`s profit before tax declined by 6% to R16 million (2010:
R17 million) as profit margins continue to be squeezed by the effects of long
term sales contract pricing mechanisms that do not match the inflationary
increases of mining costs. Management continues to negotiate improved contract
price adjustments to reverse this trend. Sales in the glass sector remain
steady in line with expectations. The recent decline in demand from the
metallurgical sector is viewed as temporary and is anticipated to return to
normal levels by May 2012.
Capital expenditure for the six months ended 31 December 2011 amounted to R20
million (2010: R31 million), spent primarily on the development of the open
pit.
Business of Tomorrow Division ("BOT")
In the six months to 31 December 2011, Petmin is pleased to report on the
progress made in the BOT projects:
Pig-iron - Canada
In the six months ended 31 December 2011, Petmin invested an additional US$2
million in the jointly managed North Atlantic Iron Corporation ("NAIC")
acquiring an additional 5.17% interest to take Petmin`s shareholding in NAIC
to 10.17%.
The project is progressing very well and in line with our projections. After
having drilled more than 4 500 metres and analysed more than 1 400 samples,
management today released NAIC`s CIM compliant maiden resource statement.
Iron-ore - Liberia
In the six months ended 31 December 2011, Petmin invested an additional US$1.5
million in the jointly managed Iron Bird Resources Inc, increasing its
shareholding in Iron Bird to 50%.
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 33% to 54% magnetite iron. 151 trench samples have been
submitted for geochemical and metallurgical testing to determine whether a
saleable concentrate can be economically obtained from the ore. The results of
the initial test work are expected in the second quarter of calendar 2012.
Copper - Turkey
In the six months ended 31 December 2011, Petmin invested C$3 055 000 to
increase its equity holding in RCR to approximately 10.1%.
Drilling commenced on the project and the initial drill results noted 10
metres at 0.5% Cu (and 5 metres at 0.6% Cu). Management expects the initial 14
drill-hole programme and test work to be complete by the second quarter of
calendar 2012 and will then assess the project on the merits of the results
achieved.
Iron-ore - South Africa (Veremo project)
Veremo continues to await the outcome of its application for a mining license
with the Department of Mineral Resources.
Subsequent to 31 December 2011, Kermas Limited, the ultimate controlling
shareholder of Veremo signed an agreement with Metallurgical Group Corporation
Limited, an international plant construction entity, to complete a feasibility
study on the project.
Prospects
Anthracite division
In the six months to 30 June 2012, management expects monthly production to
double after the commissioning of the second wash plant during the first
quarter of calendar 2012.
Sales are expected to increase in line with the production increase as demand
from our domestic customers remains firm and with the export market being
underpinned by the export contracts for calendar 2012 totalling 350 000
tonnes.
The exploration and evaluation programme has identified seven targets in the
exploration area and work to quantify the resources in these targets
continues. Management expects to announce updated resource estimates over the
new exploration areas by September 2012 and anticipates that this will
increase the life of mine to approximately 20 years at full production.
Silica division
We anticipate current sales and production volumes to be maintained in the
year ahead. Petmin will continue to manage this asset pending the outcome of
the appeal process with the Competition Tribunal. In terms of the sale
agreement, all undistributed profits from 30 June 2011 are for Petmin`s
benefit and the sale price will be adjusted accordingly.
Capital expenditure to 30 June 2012 is expected to remain consistent with the
R20 million spent in the six months ended 31 December 2011.
Business of Tomorrow division
With the publishing of the updated resource statement at NAIC, Petmin expects
to complete smelt tests and thereafter issue an updated National Instrument 43-
101(*)("NI 43-101") compliant statement for the project. Petmin views this
project as extremely robust, from both an economic and a technical perspective
and it is Petmin`s intention to accelerate the development of NAIC as a key
asset for the future.
*(NI 43-101 is a mineral resource classification scheme used for the public
disclosure of information relating to mineral properties in Canada. The NI 43-
101 is a strict guideline for how public companies can disclose scientific and
technical information about mineral projects on bourses supervised by the
Canadian Securities Administrators. The NI 43-101 is broadly comparable to the
Joint Ore Reserves Committee Code (JORC Code) which regulates the publication
of mineral exploration reports on the Australian Stock Exchange (ASX). It is
also broadly comparable with the South African Code for the Reporting of
Mineral Resources and Mineral Reserves (SAMREC).
Iron Bird Resources, being fully funded, will continue with the current
metallurgical testing and budgeted large diameter drill programme whereafter
Petmin and Hummingbird, its partner, will decide the appropriate course of
action going forward.
The drilling programme at the RCR Sivas copper project in Turkey continued as
planned and Petmin awaits the final drill results from the initial 14-hole
drill campaign, whereafter Petmin will decide on its next course of action.
General
With the expansion at Somkhele nearing completion and with the promising
developments at NAIC, Petmin is well positioned to significantly increase
earnings and enhance shareholder value with the increase in value of its BOT
projects as they near development stage.
Renewal of cautionary announcement
Further to the cautionary announcements dated 9 January 2012 and 20 February
2012, shareholders are advised that the negotiations are still in progress
which, if successfully concluded may have a material effect on the price of
the Company`s securities. Consequently, shareholders are advised to continue
to exercise caution when dealing in the Company`s securities until a further
announcement is made.
More details on Petmin can be found on our website www.petmin.com.
By order of the Board
I D Cockerill J C du Preez
Executive Chairman Chief Executive Officer
Sponsor (JSE) Nominated Adviser and Broker (LSE: AIM) River Group
River Group Macquarie Capital (Europe) Limited
Johannesburg
12 March 2012
Directors: I Cockerill# (Executive Chairman) L Mogotsi (Deputy Chairman)
J du Preez (Chief Executive Officer) B Doig B Tanner (Financial Director)
M Arnold*+ E de V Greyling* K Kalyan* A Martin* T Petersen* J Taylor*
*Non-executive #British +American
Registered office: 37 Peter Place Bryanston 2021
Corporate office: 37 Peter Place Bryanston 2021
Tel: (011) 706 1644 Fax: (011) 706 1594 Website: www.petmin.co.za
Sponsor - JSE: River Group Tel: +27 (0)12 346 8540
Nominated adviser - AIM: Macquarie Capital (Europe) Limited
Company secretary: Mondial Consultants (Pty) Limited
Transfer secretaries: JSE: Computershare Investor Services (Proprietary)
Limited
AIM: Computershare Investor Services PLC
Auditors: KPMG Inc.
A PDF version of these results is available on our website: www.petmin.com
Date: 12/03/2012 08:31:16 Produced by the JSE SENS Department.
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