JSE- and AIM-listed minerals, mining and processing company Petmin on Wednesday reported a 190% increase in headline earnings a share to 15,3c a share, while earnings a share went up 370% to 74,15c a share, for the year ended June 2008.
Cash produced from the operations increased by 236% to R252-million, from R75-million in 2007, and the company also announced a fivefold increase in profit after tax to R380-million for the year.
The results for the period under review included the results of Somkhele Colliery for 12 months, as this KwaZulu-Natal operation started production in June 2007.
Petmin said that there was an improved performance from Springlake Colliery in the second half of the year, and a consistently strong performance by the SamQuarz silica mine, which increased its revenue by 20% to R153-million.
Capital expenditure to expand operations was R216-million in the year, compared with R113-million in the previous year. R133-million was spent on exploration drilling and mine development programmes to expand operations, R80-million was spent on plant and mining equipment and R12-million on work-in-progress capital projects.
Petmin’s anthracite division, including Somkhele and Springlake, produced over 1,2-million tons, and sold over 1,19 t of anthracite in the period under review. The 63% increase in tonnages sold reflected the first full year of production from Somkhele. Some 75% of these sales tonnages were exported.
In order to de-risk the export channels for the anthracite division, the group acquired a 70% interest in Petmin Logistics (formerly ZMS Logistics), which has contracted with the Transnet Port Terminals to provide export facilities of a minimum of 600 000 t/y for four years at the Richards Bay Dry Bulk Terminal.
“Somkhele has delivered on its potential to become a profitable mine and a competitive alternative source of carbon units to replace coke as a reductant in certain metallurgical processes. Demand from inland metallurgical customers for its product has increased substantially. Expanded production is planned to meet the combined demands of the inland metallurgical and export markets,” the company said.
Mining at Somkhele was currently from two pits in Area 2, and the development of Area 1 was said to be progressing well, with first production from this area expected in the latter half of 2008.
The company indicated that if the exploration programme at Somkhele yielded positive results, consideration would be given to the construction of a second coal processing plant, which would double Somkhele’s capacity.
The anthracite division hoped to take advantage of the improved export price for anthracite by placing spot cargoes at strong US dollar prices, and sales volumes to inland customers of anthracite, which would comprise 34% of sales for 2009 would be at improved prices.
SamQuarz’s production went up by 11,6% to 1,38-million tons, and 1,43-million tons of silica and chert were sold.
The company attributed the rise in revenues in this division to the improved prices that were negotiated on key sales contracts and increased sales volumes, largely in the construction sector.
Capital expenditure was focused on expanding production capacity both in the open pit and the plant to ensure that increased demand could be met. SamQuarz was expected to increase production and sales volumes in the 2008/9 financial year, as the demand for crusher-run material (used in the building and maintenance of roads) increased, and as niche markets in the foundry and metallurgical sectors were developed.
From May, Petmin also held a 25% interest in Veremo Holdings, which was an iron-ore project, and the cost of the acquisition was R73-million. The Kermas Group hold the remaining 75%.
“The fair value of Petmin’s 25% interest was calculated using pig-iron prices of $400/t (current market prices are about $900/t) in an indicative cash flow model for the project, and taking into account the fact that Petmin is not required to fund capital expenditure to produce at least 700 000 t of pig-iron a year,” the company said.
Petmin was guaranteed an annual cash dividend of R65-million a year for the first three years from the planned date of commencement of mining and sales, and the valuation of a business combination could be reviewed within 12 months.
Petmin management said it would review the valuation of the project as more certainty was provided by the metallurgical testing of a bulk sample of the ore and as the feasibility study progressed.
“The investment in the Veremo project is an exciting prospect, which gives Petmin the opportunity to become involved in a large scale mining and beneficiation operation that may provide significant returns and furthermore provides Petmin with a partner that has a significant track record. Our management team is continuing to evaluate value-enhancing propositions to increase shareholder wealth,” said COO Bradley Doig.
© 2009 Petmin Limited