PETMIN appears to be getting a remarkably favourable deal with Kermas Group to acquire a 25% stake in a new iron ore mine and pig iron business Veremo Holdings.
Petmin will pay R49m for its share and will have to wait up to four years for a return, but it should recoup all its initial outlay within year five. In terms of the deal, Petmin will earn at least R65m in cash dividends or 25% of Veremo’s after-tax profits a year for the first three years after production starts.
Petmin does not have to contribute anything towards the capital costs of the mine and plant, up to a capacity of 700000 tons a year, but its stake of 25% will not be diluted. It also has the first right to supply the plant with 200000 tons of anthracite a year on commercial terms, and all the silica the plant will require, for its first five years.
In addition, Kermas Group would help to place Petmin shares to ensure Petmin’s black empowerment status remains above 51%.
Petmin’s black empowerment shareholding obviously gives it a major advantage in securing deals on favourable terms but CEO Bradley Doig said the terms also reflected Petmin’s “perseverance in pursuing this asset” — in other words, Petmin helped to procure the deal for the partners.
© 2009 Petmin Limited