Wrap Text
Press Release on Condensed Consolidated Interim Financial Statements for the Six Months ended 31 December 2013
PETMIN LIMITED
Incorporated in the Republic of South Africa
Registration Number 1972/001062/06
Share Code JSE: PET
ISIN: ZAE000076014
("Petmin" or the “Company")
4 March 2014
PRESS RELEASE ON CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2013
Petmin profit and production up despite operational challenges and weak
export market
Petmin stake increased to 30% in North Atlantic Iron Corporation (NAIC)
Financial highlights (six months to end-December 2013)
* Normalised earnings up 40% from R32m to R45m
* Profit after tax up 9% to R33m (2012: R30m)
* Headline earnings per share up 29% from 5.22 cents to 6.71 cents
* R40m investment in international diversification
* R18m investment in domestic growth
Operational highlights (six months to end-December 2013)
* 86% increase in metallurgical anthracite production to 534,523 tonnes (2012:
287,765 tonnes)
* Anthracite sales down 6% at 349,414 tonnes (2012: 370,562 tonnes)
* Ex-mine gate cost per tonne decreased from R770/t to R697/t (a 9% improvement)
* Production of 110,349 tonnes of Somkhele energy product from third wash
plant (2012: zero) and sales of 25,777 tonnes (2012: zero)
* Mining right granted for Veremo pig iron project
* NAIC Preliminary Economic Assessment (PEA) due end-March 2014
Petmin has reported headline earnings per share up 29% for the six months
ended 31 December 2013, despite operational and labour challenges and price
pressures in a difficult market. Normalised earnings were up 40%.
Net cash flow from operating activities was up 129% at R279m (2012: R122m).
Production of saleable anthracite at Somkhele mine in KwaZulu-Natal was up
86% from the comparable six months in 2012 despite a prolonged strike, the
impact of which was minimised by Petmin’s stockpile strategy. Production
volumes at Somkhele are expected to improve by at least 20% in the six
months to 30 June 2014.
Following extensive exploration, an independent SRK SAMREC and SAMVAL-
compliant reserves and resources statement valued Somkhele at R1.64 billion
at 1 December 2013 (as reported on SENS on 3 March 2014).
During the six months under review, Petmin increased its stake in the North
Atlantic Iron Corporation (NAIC) to 30%. NAIC is a North American iron sands
to pig iron industrial venture with a Preliminary Economic Assessment (PEA)
due to be published by end-March 2014.
As reported in Petmin’s interim results, during the six months ended 31
December 2013 Petmin invested a further R40 million in NAIC, taking the
carrying value of Petmin’s investment in NAIC to date to R189m at 31
December 2013.
“We remain strongly cash generative despite difficult conditions,” said chief
executive Jan du Preez. “Petmin’s Somkhele anthracite asset has increased
production at a materially reduced cost, despite 37 days of industrial action
that cost Petmin approximately R10m after tax.”
“The expansion of our stake in NAIC to 30% indicates our confidence in this
North American industrial venture, which is concluding its Preliminary
Economic Assessment and moving rapidly up the value curve.”
As reported in Petmin’s interim results to end-December 2013, Petmin was on
31 January 2014 granted a mining right for the Veremo pig iron project in
Mpumalanga, in which it has a 25% stake.
During the six months to end-December 2013, Petmin invested R58 million
(2012: R237 million) to deliver on its growth and diversification strategy. R18
million (2012: R193 million) was invested in Somkhele and R40 million in NAIC
(2012: R44 million at NAIC and Red Crescent Resources).
Somkhele
* During the six months to end-Dec 2013, Somkhele’s production of saleable
anthracite increased 86% to 534,523 tonnes of (2012: 287,765 tonnes).
* Somkhele produced 110,349 tonnes of energy product from its third wash
plant (2012: zero) and sold 25,777 tonnes (2012: zero).
* Mining activity at Somkhele was disrupted in September/October 2013 by 37
days of industrial action, but the mine’s wash plants continued to run using
stockpiled material, and sales to export and domestic customers were largely
maintained. During the comparative six months to end-Dec 2012, 15 days of
unprotected strikes and 15 days of excess rainfall had a serious impact on
both mining and production.
* As announced in SENS on 3 March, Petmin received an updated SAMREC and
SAMVAL-compliant Competent Persons Report which valued Petmin’s
Somkhele anthracite mine at R1.64 billion at 1 December 2013.
Sales
* Anthracite sales volumes were down 6% at 349,414 tonnes (2012: 370,562
tonnes) with lower pricing and reduced volumes on export markets as world
demand for metallurgical coal declined.
* Sales of energy coal were suspended for three months (July to September
2013) during a dispute with Somkhele’s main energy coal customer. The
dispute with the customer is scheduled for arbitration in August 2014. Sales
have resumed with new customers.
* Production volumes at Somkhele are expected to improve by at least 20% in
the six months to June 2014.
* Sales volumes in the domestic market have improved since December 2013
and are expected to improve by at least 20% in the six months to June 2014.
* Export sales volumes are expected to more than double in the six months to
June 2014, though prices remain under pressure, in line with global trends.
* Energy coal sales in the six months to June 2014 are expected to increase to
approximately 200,000 tonnes as agreements are signed with new energy coal
customers.
* Capital expenditure at Somkhele to June 2014 is expected to be
approximately R26 million with no additional capital pre-stripping forecast to June 2014.
NAIC industrial project (Canada and US)
* Work on a Preliminary Economic Assessment (PEA) for NAIC has been
completed and the summary report will be published at the end of March 2014.
The work indicates a viable fundable project for which Petmin has modelled a
number of investment scenarios.
* A number of independent global experts were used to assist the NAIC team
in the development of the PEA, including SRK, Worley Parsons, Tenova Core,
HATCH, STANTEC and CRU. As reported on SENS on 3 March 2014, the PEA
indicates that NAIC’s cost of production will be 25% below the current lowest
cost producer, yielding a project real internal rate of return (IRR) for its first
plant, which meets Petmin’s internal hurdle rate of 20%.
* The favourable production cost is due to a production process that utilizes
access to low cost raw materials and electricity in the United States or Canada,
proximity to markets in the United States and Europe, and extensive
infrastructure at potential sites under consideration for its plant.
* Three successful smelt campaigns have been conducted at NAIC’s
production facility in Forks, Pennsylvania, under the auspices of HATCH –
resulting in successful production of Merchant Pig Iron (MPI) using
concentrate produced in Goose Bay and a number of different grades of coal.
* The first plant will produce 810,000mt of MPI per year using concentrate
from Goose Bay, or 874,000mt per year using higher grade concentrate
* A comprehensive site selection process is underway for the location of
NAIC’s first MPI plant, the favoured location being the Great Lakes region of
North America.
* Petmin expects to invest up to a further $8m in NAIC, taking its interest to
40%. This funding will be from Petmin’s own resources. No further capital will
be required from Petmin - NAIC will be expected to raise the capital required
for further development.
* Petmin is contemplating exchanging its 40% in NAIC for 40% of the shares in
a Canadian company, which will own 100% of NAIC, and will be listed on the
TSX and JSE. In this event, Petmin intends to unbundle these shares to its
shareholders.
* Petmin management will remain actively involved in the development of NAIC
and will secure long term value for Petmin’s shareholders in NAIC.
Veremo iron ore project (South Africa)
* On 31 January 2014 a mining right was granted by the Department of Mineral
Resources (DMR) for the Veremo pig iron project in Mpumalanga.
* Discussions are continuing with the controlling shareholders of Veremo over
the settlement of the minimum cash payments of R65 million per year that
were due in February 2013, February 2014 and February 2015 respectively.
Live call and Q&A with Petmin management
* Analysts, investors and media are invited to join a call with Petmin
management at 12h00 on Tuesday 4 March 2014. Dial in details below. A
transcript and recording will be available on the Petmin website
www.petmin.co.za after the call.
Presentation available
A detailed presentation will be made available on www.petmin.co.za from
Tuesday 4 March 2014.
Live call access numbers
Country Access Number
Other Countries (Intl Toll) +27 11 535 3600
Other Countries – Alternate +27 10 201 6800
South Africa (Toll-Free) 0 800 200 648
South Africa – Johannesburg 011 535 3600
South Africa - Johannesburg Alternate 010 201 6800
UK (Toll-Free) 0808 162 4061
USA and Canada (Toll Free) 1 855 481 5362
Playback access numbers
Country Access Number
Other Countries (Intl Toll) +27 11 305 2030
South Africa (Telkom) 011 305 2030
UK (Toll-Free) 0 808 234 6771
USA and Canada (Toll Free) 1 855 481 5363
Enquiries:
Petmin
Bradley Doig
+27 11 706 1644
Media
Jonathon Rees
+27 76 185 1827
Sponsor and Corporate Advisor (JSE)
River Group
Andrew Lianos
+27 834 408 365
JOHANNESBURG
4 March 2013
Date: 04/03/2014 07:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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