[miningmx.com] -- PETMIN has agreed to sell its Springlake colliery to Shanduka Coal for R145m cash, boosting its cash resources to above R200m with which to develop its Somkhele anthracite project and preparing the Veremo iron ore project for a listing in London.
Petmin has systematically sold the assets within Springlake Holdings (SPH), which it bought for R90m in 2005. It has sold the Baobab coal exploration project and now Springlake, leaving it the plum asset of Somkhele, which started production in June 2007. Somkhele has 25 million tonnes of reserves.
“The disposal will free up management time as well as providing additional cash resources to be deployed, inter alia, in accelerating the expansion programme at Somkhele and focusing on the management and development of the Veremo Project,” Petmin said. It could also conduct a share buyback.
Not only that but Petmin will use its debt facilities and improved cash position to expand production at Somkhele and to make acquisitions.
“Despite market conditions, demand for metallurgical coals in the medium term remains firm and Somkhele has experienced an overall increase in the price of its product,” Petmin said.
“As a result, Petmin is investigating additional capital projects at Somkhele which will more than double its coal processing capacity and consideration will be given to the construction of a second coal processing plant should the exploration programme deliver promising results and should market conditions justify the investment.”
Petmin has already drawn down R31m on its plant finance facility to expand Somkhele.
“Management expects the current production of saleable tonnes to increase by approximately 10% for the year to 30 June 2009 as the impact of the destoning plant will only be felt in the last quarter of the year ending 30 June 2009,” Petmin said.
“Thereafter it is expected that the sales tonnes will increase by some 25% as a result of the decision to commission the destoning plant.”
The Springlake disposal will have a minimal impact on the value of the company, which posted a 411% increase in annual profits of R380m in the year to end-June 2008.
Petmin has a wholly owned transport business, which will allow it to send coal to the coast for export.
“Petmin Logistics has contracted with the South African Port Authorities to provide export facilities for a minimum of 600,000 tonnes per annum for four years at the Richards Bay Dry Bulk Terminal,” it said.
“Petmin is currently evaluating additional export capacity, which will enable the Company to export in excess of 1 million tonnes per annum.”
The Veremo project should have completed a feasibility study to allow it to list on the London Stock Exchange no later than the end of June 2010, the company said.
© 2009 Petmin Limited