CHRIS BUCHANAN: Silica and anthracite miner Petmin, has announced that it will be getting into iron ore through a 25% stake in Veremo iron ore mine. The stock has trebled in the last eight months from below R1.50 to over R4. Chief operating officer Brad Doig told CNBC’s Power Lunch with Moneyweb that the company came out of a private-equity fund, New Africa Mining Fund, and a listed cash shell in Petmin, looking to do some business in the industry. Doig says the common interest started with the silica business.
BRADLEY DOIG: The entrepreneurs behind Petmin – Jan du Preez is now the CEO – they’d found an asset and they looked for some funding from ourselves. So we thought, OK, in order for the fund to get a liquid position in a company, we’d take the asset and we’d put it into Petmin together, and that’s how we started Petmin. And that was their silica business, SamQuarz, which we acquired from a German company, called Quarzwerke. It was actually a Samancor asset right in the early days.
MONEYWEB: So you knew it from those days?
BRADLEY DOIG: Ja, I did.
CHRIS BUCHANAN: Petmin has a market cap of R2bn, and has taken a different attitude to many of the other mining juniors, whereby the emphasis is firmly on production in the silica business and its anthracite asset, Somkhele. With this latest deal, Petmin has nailed its colour firmly to the mast of the iron ore sector.
BRADLEY DOIG: We wanted to differentiate ourselves from, I think, the traditional sort of junior exploration company. We bought assets at good prices – you know, make your money when you buy – and we focused on improving the margins in those businesses. And we went to the market and said, guys, look, we’re going to produce cash as a junior mining company. And that’s what we set out to do. And with the Somkhele project that we’ve just literally put into production four months ago, we see a lot of benefits in that. So that’s really our game plan.
CHRIS BUCHANAN: From the word go, Petmin invested in black economic empowerment through Dark Capital, headed up by Alwyn Martin. Doig says they’re not miners, but they’re good businesspeople, and a BEE partner is essential when getting into mining.
BRADLEY DOIG: To operate in South Africa you must have good black empowerment partners. The beauty of the way we set up businesses – basically, the management and the BEE partners are one. We work together. You know, it’s a really healthy environment. And to get mining rights converted, to get prospecting permits, you need strong black economic empowerment.
MONEYWEB: And in your field, prospecting permits, are there great prospects still available? We’re going to get to iron ore in a moment, which is the sexy part of the business, I guess.
BRADLEY DOIG: Look, Somkhele is a wonderful asset. I mean, we have 25 000 hectares of land under prospecting permit. The current mine is only situated on 2 300–odd hectares of that particular deposit, and we’re undertaking a massive drill programme. So yes, in terms of internally, we’ve got huge growth potential at Somkhele, and we have the prospecting permits to back that up at the moment as well.
CHRIS BUCHANAN: Petmin’s Brad Doig, in conversation with Alec Hogg, on CNBC’s Power Lunch with Moneyweb.
© 2009 Petmin Limited