Petmin Limited, the JSE and AIM-listed mining company, announced today that definitive agreements have been reached with Framework Investments Limited, a 100% subsidiary of Kermas Limited (Kermas Group), for the joint acquisition of Veremo Holdings Limited (Petmin 25%; Kermas Group 75%). This announcement follows the cautionary announcement of 7 July 2007. (The Kermas Group is the controlling shareholder of Samancor Chrome – see below).
Petmin and the Kermas Group will develop and commission the Veremo project, which is a substantial iron ore deposit on the Eastern Bushveld at Stoffberg in Mpumalanga Province. In terms of the agreement, the Kermas Group will fund and manage the construction and commissioning of an integrated plant to produce 700 000 tonnes a year of pig iron and titanium-bearing slag. The mine will produce in the region of 2 to 2.5 million tonnes of run-of-mine ore a year. The orebody is estimated to have a life of mine in excess of 50 years. It is anticipated that the Veremo project will start production within four years from 30 April 2008.
For the first three years from this production date, Petmin will receive a warranted cash dividend of R65 000 000 or 25% of its profit after tax, whichever is the greater. Petmin will finance its R49 742 887 acquisition of the 25% stake in Veremo through the issuing of 15 073 602 new shares at an average issue price of R3.30 per share.
Commenting on the announcement Petmin COO Bradley Doig said: “This transaction represents a further step in the development of Petmin into a multi-commodity minerals business with a particular emphasis on industrial minerals, bulk commodities and base metals that are either cash-producing and or near-cash producing. Petmin is particularly pleased to enter into a partnership with the Kermas Group, a substantial international player with a proven ability to manage large projects. The Kermas Group will be developing an important South African asset with significant guaranteed returns to Petmin.”
One of Petmin’s six stated strategic objectives is to bring life to the Mining Charter. The transaction boosts black economic empowerment (BEE) in two ways:
Veremo holds the prospecting rights to a substantial polymetallic orebody containing, on average, approximately 60.83% Fe2O3 (wt%) and 14.39% TiO2 (wt%) suitable for the production of high quality pig iron. The orebody is situated on the Eastern Bushveld at Stoffberg in Mpumalanga Province, three hours from Johannesburg.
The orebody forms part of layer 21 of the well-known magnetite layers within the Bushveld Complex, and is particularly well developed in the area, outcropping on surface, with thickness of up to 60 metres having been encountered in a comprehensive drilling programme.
To date 90 holes have been drilled, equating to 6 000 metres. The average depth per drill hole is 32 metres. In addition, 306 trenches and 15 pits have been excavated to expose eluvial ore and determine outcrop positions.
The resource modeling and a SAMREC-compliant Competent Person’s Report is under way and should be completed before June 2008.
Preliminary estimates of the tonnage contained within the project area indicate 150 million tonnes of magnetite ore in situ and 800 million tonnes of additional material that still requires testing. Mineral consultants are currently developing an initial 25-year mine plan.
Preliminary calculations indicate that the project is financially robust, on the basis of pig iron sales only. The titanium slag may contribute additional revenue but has not been taken into account in any of the abovementioned estimates.
Framework is a wholly owned subsidiary of the Kermas Group. The group is an investment holding company with a variety of investments in the resources sector in South Africa, including a substantial indirect shareholding in Samancor Chrome Limited, the second largest producer of ferrochrome in the world.
For further details on the conditions and the transaction, please refer to the SENS announcement (PDF - 44KB)
© 2009 Petmin Limited