Petmin is celebrating ten dynamic years of entrepreneurial growth into a sustainably-profitable JSE-listed company.
An entrepreneurial mining success story

Petmin at 10 years

Petmin is celebrating ten dynamic years of entrepreneurial growth into a sustainably-profitable JSE-listed company.

An entrepreneurial mining success story

Petmin has been a South African mining success story since current chief executive Jan du Preez (son of Fourie du Preez, CEO of the old Petmin from 1990 to 2002) led a consortium of entrepreneurs to acquire the old Petmin cash shell in 2004 for R25 million. The old Petmin had bought underperforming mining assets, then turned them around and sold them. A two cents investment in the old Petmin received R11 in dividends between 1990 and 2002.

The consortium buying the new Petmin included Dawie Warmenhoven, current deputy chair Lebo Mogotsi and Petmin’s long-standing BBBEE partner Dark Capital (the investment arm of the Martin family), and the PSG Group. Jannie Mouton, then chief executive and chairman of PSG, provided financial support to the new Petmin.

It was at this time that Jan met Bradley Doig, then chief investment officer of the New Africa Mining Fund (NAMF). This relationship led to Petmin’s acquisition and funding of SamQuarz and Springlake Holdings, and Bradley joined Petmin as chief operating officer. Springlake finance director Bruce Tanner joined Petmin at the same time.

Deeply-committed people have always been key to Petmin’s success story, with the core team of Jan, Brad, Bruce, Dawie and Lebo at the heart of the business since 2004. After the 2008 financial crisis, Dawie decided to pursue interests outside mining but remained a Petmin shareholder.

Petmin at 10 yearsFOCUS DELIVERS RESULTS

Petmin has for ten years focused on the steel value chain and associated commodities. Today, despite economic turbulence and volatile markets, it has a cash-generating anthracite mine independently valued at R1.56 billion, a highly prospective industrial project in North America, and a dividend policy delivering reliable returns to investors.

In September 2004, the new Petmin made its first acquisition, taking control of SamQuarz, then a loss-making silica mine. Johan Gloy was the chief executive at SamQuarz and he helped the Petmin team to turn it into a profitable mine. SamQuarz delivered a 45% year-on-year return on investment after tax until its disposal in June 2012, and Johan subsequently went on to serve as chief executive of Tendele Coal Mining at the Somkhele mine.

The acquisition of Springlake Holdings from the New Africa Mining Fund for R116 million in 2005 enabled Petmin to turn around and dispose of several assets at a profit, while recognising the potential of a project which was to become its flagship Somkhele asset. Petmin subsequently sold off Springlake and Baobab Holdings.

Dr Ricky Pinheiro who was part of the management team that joined Petmin after the acquistion of Springlake is a leading authority on coal classification, characterisation and utilisation. Ricky's extensive knowledge of South African coal resources and their potential uses, was influential in the movement to use anthracite as a replacement for more expensive reductants in metallurgical applications.

Mark Snelling, the managing director of Tendele at the time, played a major role in the initial development of Somkhele and during its commissioning phase in 2007 and its first two years of operation. Petmin’s investment in Somkhele has been R1,2bn to date. It now produces more than 1.2 million saleable tonnes of anthracite annually, employs more than 900 people and has invested approximately R50 million in community development.

Somkhele doubled its production and sales during the period 2010-2012 with the commissioning of a second plant, and in 2013 added a high-ash low-volatile energy coal to its output with a 3rd dedicated wash plant.

As part of its commitment to sharing the economic benefits of its operation with the community, in 2015 Petmin signed an agreement with the Somkhele community and employees to acquire a 20% stake in the mining operation.

Petmin is committed to the development of communities around our mines. Investment in the communnity by Tendele of R50 million over ten years has produced tangible benefit (see p72).

STRATEGIC INVESTMENTS

Petmin has a history of strategic local and international investment guided by a robust investment strategy.

The company has never been afraid to strategically withdraw from exploratory projects which don’t fulfil its strict investment criteria. For example, in 2011 Petmin made small investments into a potential copper project in Turkey and an iron ore exploration project in Liberia. These projects were either put on hold or written down when the ore grades and overall investment potential turned out to be unsatisfactory, particularly considering prevailing market conditions.

Petmin’s investment in the North Atlantic Iron Corporation (NAIC) demonstrates its ability to recognise and consolidate future project value. NAIC’s project in Canada has evolved into an industrial project with a site selected for a first plant to make nodular pig iron for the foundry market, with significant cost advantages over competing products.

Petmin’s phased investment strategy has been proven through its approach to NAIC. The project started with a modest initial investment of US$1.5m for a 5% stake, plus joint management control and rights to acquire up to 40% for a total investment of US$25m, and a further option on 9.9% of NAIC at a market price.

Today Petmin has a 35% stake in NAIC, a proven industrial opportunity in a reindustrialising North America which benefits from low-cost inputs, particularly energy, and will be at the very bottom of the cost curve in its sector. Petmin plans to increase its stake in NAIC to 40%.

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Petmin at 10 years

Petmin's non executive directors 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Piet Nel (Chairman until 1 July 2010) Retired 28 Feb 2011 x x x x
Enrico Greyling
Jabu Mabena Resigned Aug 2007 x x x x x x x x
Johan Strijdom Retired 25 Nov 2011 x x x
Alwyn Martin Appointed 30 Nov 2005 Retired 3 March 2014 x
John Taylor x Deceased 15
October 2013
x x
Ian Cockerill x x Appointed 1 Oct 2007 Executive
Chairman 1 July 2010
Executive Executive Non-exec 3 Dec 2013
Trevor D Petersen x x x x x x Appointed 12 Sept 2011
Koosum Kalyan x x x x x x Appointed 1 March 2011
Millard Arnold x x x x x x Appointed 1 March 2011

Petmin has been fortunate to have had the advice and guidance from a diverse, experienced and knowledgable group of non-executive directors since the inception of the new Petmin. Piet Nel was Chairman of Petmin for more than 20 years and ably led the board until he handed over the reigns to Ian Cockerill in July 2010. It is a tribute to the quality of the Company and its executive management that it could attract non-executives of their stature in their respective fields.

PETMIN’S EMPOWERMENT HISTORY

CUMULATIVE INVESTMENT HISTORY AND SHAREHOLDING IN NORTH ATLANTIC IRON CORPORATION
June 2011 – $1,5m initial investment for 5% stake
June 2012 – $6.5m – 17%
June 2013 – $13m - 25%
June 2014 – $19m – 33%
June 2015 – $21.0m – 35% (to increase to 40%)

PETMIN’S EMPOWERMENT HISTORY

PETMIN PRODUCTION AND SALES HISTORY

PETMIN PRODUCTION AND SALES HISTORY

    Tonnes (Produced)   Tonnes (Sold)  
Year SamQuarz Somkhele – Anthracite Springlake

Anthracite
Somkhele – Energy SamQuarz Springlake

Anthracite
Somkhele – Anthracite Somkhele
– Energy
2005 806 498 n/a n/a n/a 730 235 n/a n/a n/a
2006 1 144 644 n/a 279 045 n/a 1 079 000 312 104 n/a n/a
2007 1 240 000 37 135 683 323 n/a 1 394 810 701 781 32 999 n/a
2008 1 390 000 506 121 713 481 n/a 1 430 000 693 917 505 675 n/a
2009 1 333 613 454 188 562 752 n/a 1 511 850 479 126 481 638 n/a
2010 1 255 559 467 843 n/a n/a 1 171 355 n/a 411 630 n/a
2011 1 325 868 524 006 n/a n/a 1 248 989 n/a 579 087 n/a
2012 1 245 406 637 220 n/a n/a 1 135 807 n/a 546 051 n/a
2013 n/a 822 431 n/a 207 238 n/a n/a 802 325 178 559
2014 n/a 1 125 089 n/a 244 298 n/a n/a 1 026 250 174 556
2015 n/a 1 335 233 n/a 368 413 n/a n/a 1 222 150 352 255

PETMIN PRODUCTION AND SALES HISTORY

  Revenue (R millions) Net Profit (R millions)
Year
SamQuarz Somkhele Petmin SamQuarz Somkhele Petmin
2005 59 n/a 59* 6 n/a 28
2006 90 n/a 177** 19 n/a 49
2007 128 38 382** 25 25 74
2008 153 220 667** 33 52 3801
2009 180 344 789** 34 66 1182
2010 1547 335 489 28 88 108
2011 170 471 641 24 83 101
2012 175 516 691 35 98 113
2013 n/a 833 833 n/a 93 -1123
2014 n/a 1 020 1 020 n/a 111 -1194
2015 n/a 1 274 1 274 n/a 134 125

** Includes Springlake
* 9 months
1. Includes fair value gain on Veremo of R303 million
2. Includes fair value gain on Veremo of R78 million
3. Includes impairment of Veremo of R200 million
4. Includes impairment of Veremo of R181 million

A STABLE EXECUTIVE TEAM

Petmin’s executive management team has been stable for more than a decade:

Chief executive Jan du Preez – with new Petmin since 2004 and management team member of old Petmin since 1992
Deputy chairman Lebo Mogotsi – with Petmin since 2004, initially as non-executive director, executive director since 2005
Business development director Bradley Doig – with Petmin since 2005, initially as chief operating officer
Finance director Bruce Tanner – with Petmin since 2005

Petmin’s stable earnings a key differentiator

Petmin’s stable earnings a key differentiator