Vision & strategy

• Restructuring of senior management to ensure effective management of operations and succession planning at both Somkhele and SamQuarz completed.
• At a corporate level, Bruce Tanner was appointed as Financial Director of Petmin with effect from 1 July 2009.
• Performance-based incentive schemes continue to be the basis for remunerating management at all Petmin operations, and have instilled a culture of ownership.
• The Executive Committee contracts have been renegotiated for another three years and the team will continue to be remunerated according to performance. Alignment with shareholders is ensured by the executives holding significant equity. They increased their interest by exercising 11.5 million options during the past year.

Risk management:

• a comprehensive risk register is updated and risks are managed, monitored and reviewed on a regular basis. Reports are presented to the Board every quarter.

Reporting:

• financial reporting and other systems have been set up at Somkhele to ensure quality and timeous information; processes are being refined to improve reporting on environmental issues. High-quality reporting and management systems are in place at SamQuarz.

Safety:

• preliminary results of a NOSA safety audit conducted at SamQuarz showed improvement from 82.99% to 92.28% in 2009, giving the operation a five-star rating;
• SamQuarz's LTIFR was 0.25 and Somkhele's LTIFR was 0.29;
• No fatalities occurred at SamQuarz or Somkhele; and
• internal safety audit processes were conducted at regular intervals.

Communication:

• channels of communication between Petmin's operations and key stakeholders (employees, contractors, communities and regulators) have improved; regular meetings were held with stakeholders to address issues and strengthen relations.

• Performance improvements have been achieved at all Petmin operations as outlined below.

SamQuarz

• Consistently strong operational and financial performance at SamQuarz with sales volumes and profits maintained despite the global financial crisis;
• annual production of 1.33 million tonnes of silica and chert (2008: 1.39 million) and sales of 1.5 million tonnes of silica and chert (2008: 1.4 million tonnes); and
• profit before tax of R48 million compared to R47 million in 2008.

• Continued pursuit of growth opportunities in the construction and foundry industry to supplement sales to the glass manufacturing and metallurgical sectors.
• Completed a SAMREC-compliant exploration programme to delineate the orebody which resulted in proven and probable reserves increasing to approximately 60.64 million tonnes of silica and 11.48 million tonnes of chert, and life of mine in excess of 40 years.
• Capital expenditure focused on ensuring a long-term sustainable mining operation and increasing production capacity in the plant to ensure demand from customers is met.
• Installation of an emergency generator completed in the six months to 31 December 2008.
• Renegotiated a R40-million, four-year-term, asset-based facility with Standard Bank.

Somkhele

• Restructured Tendele Coal Mining (Pty) Ltd to be a direct subsidiary of Petmin Limited post the sale of Springlake Holdings.
• Improved sales prices achieved but demand declined further during the second half of FY09.
• Long-term export agreement shielded Somkhele from the sharp decline in international demand for anthracite during the six months to June 2009.
• Renegotiated long-term export contract - over four years at 200,000 tonnes a year - for the period after 30 June 2009 to accommodate poor international market for anthracite.
• Drilling programme concluded with main focus on delineation of additional reserves and resources. Results were confirmed by Snowden Mining Industry Consultants and resulted in SAMREC-compliant resource of approximately 24 million tonnes being delineated in areas in close proximity to the current plant.
• Completed the construction and erection of a rotary breaker.
• Product stockpiling capacity increased through development of pit-room and construction of workshops and terraces.
• Sufficient pre-stripping of the overburden in the pits completed to ensure that reduced development expenditure does not affect production.
• Key focus on the local market.
• Somkhele well-positioned to take advantage of any increased demand.
• Increased credit facilities with Standard Bank, currently R10 million overdraft and R90-million asset-based facility.

Veremo

• Detailed infill drilling programme under way to determine final ore quality and to differentiate between weathered and massive zones. Updated Competent Person’s Report will be published in the first quarter of 2010.
• Evaluating standard pig-iron production processes for comparative purposes

Springlake

• Sale of Springlake Holdings concluded on 29 June 2009. Global market conditions declined dramatically during delays encountered in meeting all the conditions precedent. Final sale adjusted accordingly with result that the company received proceeds of R85 million - a R79 million consolidated loss on the sale.
• Springlake's increased profits for the financial year mainly due to exceptional sales prices secured on a spot export vessel in the six months to 31 December 2008.

• Petmin acquired the remaining 30% interest in Petmin Logistics from the minority shareholders to bring its holding to 100%. Petmin Logistics has contracted with the South African Port Authorities to provide a dedicated export facility at Richards Bay for a minimum of 600,000 tonnes per year for four years.
• Petmin increased its effective interest in Veremo Minerals (Pty) Ltd, a subsidiary of Veremo Holdings Limited in which the mining of the ore will be conducted, to an effective 34.9% (2008: 25%) economic interest; retains a 25% interest in the remainder of the project.
• Shortly after 30 June 2009, the Group's cash position improved with R85 million received for the sale of Springlake Holdings.
• The Executive Committee (Exco) pursued a number of opportunities in the 12 months to June 2009, but comprehensive due diligence procedures showed that these prospects did not meet the Company's investment criteria.
• Petmin's strong balance sheet and cash reserves as well as current market conditions position the Company well to evaluate other growth opportunities and potential acquisitions.

• Our analysis indicates that our institutional shareholder base is stable. Given the tough economic conditions affecting resources companies, this shows institutional confidence in the future of Petmin.
• Institutional and brokers' interest in Petmin has increased as has the number of requests from analysts to cover the Company.
• Investor roadshows well attended and well received; regular visits paid to major shareholders to update them on Petmin's activities; and presentations made at coal conferences to promote Somkhele anthracite.
• The Petmin website continues to be an effective medium for disseminating information to shareholders and other key stakeholders and is a great tool for creating awareness about the Group and its activities. Website information is updated on a regular basis.

• Petmin was rated fourth-best empowered JSE listed company in the resources sector in the Financial Mail/Empowerdex Top Empowerment Companies Survey 2009.
• BEE equity continually monitored and managed to ensure it is maintained above the 26% Charter requirement. Petmin BEE shareholding is currently 33%, even in the current tough economic climate when a number of BEE transactions collapsed.
• SamQuarz mining right conversion application was approved in April 2009, and is valid for 30 years.
• Veremo's five renewals of new order prospecting right applications were approved in May 2009.
• Only old order mining right conversion still outstanding is for Areas 2 and 3 at Somkhele; Exco proactively following this up with Department of Mineral Resources to ensure prompt processing of the application.
• Measured against the requirements of the Mining Charter, the Group's performance has improved significantly in the following areas: women in mining, Adult Basic Education and Training, and procurement. Acquiring and developing the right skills sets from the ranks of historically disadvantaged South Africans (HDSAs) for senior management positions at Somkhele remains a challenge, but is being managed.
• BEE certification of SamQuarz and Somkhele operations to comply with supply contracts under way.
• Currently reviewing training programmes at SamQuarz and Somkhele to ensure alignment with Mining Qualifications Authority accreditation requirements where possible.
• Board kept up to date with developments regarding proposed legislative changes and potential impact on the Group.
• Continue to engage with communities through mine community forums.