Veremo

Petmin has a 25% free-carry stake in Veremo Holdings (Pty) Limited (Veremo), a pig iron joint venture near Stofberg in Mpumalanga Province, South Africa. The balance (75%) of the equity in Veremo is held by Framework Investments Ltd, a wholly-owned subsidiary of Kermas Ltd (Kermas), which is managing the project. Petmin has no funding exposure to operating or development capital at Veremo.

Veremo was notified in January 2014 that the Department of Mineral Resources awarded a mining right for Veremo, and it awaits notarial registration.

The Veremo project management team has conducted preliminary smelt tests and engaged the services of Mintek to complete an assessment of the economic viability of extracting a marketable product from the waste titanium slag. A report on the project by MCC International Incorporation Limited (MCC) previously concluded that it is economically viable.

During the year ended 30 June 2015, additional metallurgical test work was conducted and, going forward, a commercial scale campaign will be undertaken at Mogale Alloys on their 10 MW DC Arc Furnace.

The Veremo ore will be smelted in their single electrode DC arc furnace to produce high purity pig iron and a titanium rich slag. The furnace will be modified and the engineering design for the modifications has been completed by GLPS Project Management Engineering Services.

The controlling shareholders were to fund and develop the project to commence production within 48 months of 30 April 2008. Veremo was to distribute to Petmin the larger of a cash payment of R65 million per year for three years, or 25% of the profit after tax from Veremo.

Petmin’s discussions with the controlling shareholders over the settlement of the cash payments, the first of which was due on 28 February 2013 and the last of which was due on 28 February 2015, have not resulted in a negotiated settlement acceptable to Petmin. Accordingly, on 25 November 2014, Petmin instituted proceedings against Framework Investments Limited (Framework) and Kermas Limited (Kermas) for the payment of the three R65 million distributions payable from the Veremo project to Petmin. Petmin awaits confirmation of the scheduled dates for the arbitration.

During the year ended 30 June 2014, due to the increased level of uncertainty as to the timing of the development of the project, as a result of the dispute, Petmin impaired its investments in Veremo Holdings (Pty) Ltd (Veremo) and Veremo Empowerment Holdings (VEH) to a combined carrying value of R115m.

THE VEREMO DEPOSIT

The Veremo deposit contains high concentrations of Ti-magnetite (43.4% Fe and 14.7% TiO2) and Veremo is evaluating development options for the potential annual production of a million tonnes of high-quality pig iron and titanium-rich slag as a by-product.

The Veremo drilling programme has shown Measured Mineral Resources of 44.3 million tonnes at 43.4% Fe in the outcropping weathered zone of the ore body; and 498.3 million tonnes at 42.5% Fe in the fresh zone to a depth of 120m below surface.

The table below depicts the SAMREC-compliant measured resources of the Veremo project. The figures were extracted from a report, dated 19 January 2010, prepared by MSA Geoservices (Pty) Ltd on behalf of Veremo Minerals (Pty) Ltd.

The competent persons responsible for the report were: Frieder Reichhardt, Principal consultant (Pr.Sci.Nat., GSSA) Mike Hall, Resource consultant, (MAusIMM, GSSA) Craig Blaine, Field Geologist, GSSA.

SAMREC-compliant resources in the weathered portion
Tonnes
‘000
Bulk
Density
AL2O3
%
CAO % FE % FE203
%
MGO
%
P2O5
%
SIO2 % TIO2 % V2O5
%
Measured 44,252 3.51 5.01 0.71 43.39 61.99 1.83 0.07 12.86 14.69 0.15
Petmin’s effective economic interest* 15,444                    
SAMREC-compliant resources in the fresh portion (to a depth of 120 metres below the surface)
Tonnes
‘000
Bulk
Density
AL2O3
%
CAO % FE203
%
MGO
%
P2O5
%
SIO2 % TIO2 % V2O5
%
 
Measured 498,313 4.20 5.54 1.73 60.77 3.43 0.08 15.06 14.23 0.16  
Petmin’s share* 173,911                    

* Petmin holds a 25% stake in Veremo Holdings Proprietary Limited, which in turn holds 70% of Veremo Minerals (Pty) Ltd which holds the mineral rights of the Veremo project. Petmin also holds a 30% stake in Veremo Empowerment Holdings (Pty) Ltd (VEH) which holds the remaining 30% Veremo Minerals (Pty) Ltd. Additionally, Petmin holds a preference share that grants Petmin the right to 40% of any distributions made by VEH.