JSE- and AIM-listed mining and processing company Petmin Limited today (2 March 2009) announced that its operations generated R165 million in cash for the six months ended 31 December 2008, an increase of 195% compared with R56 million during the corresponding period in 2007.
Headline earnings per share (HEPS) rose by 81% to 11.82 cents (2007: 6.52 cents) and fully diluted HEPS by 80% to 11.48 cents (2007: 6.38 cents).
Revenue went up by R171 million or 54% to R490 million (2007: R319 million) and gross profit by R47 million or 69% to R115 million (2007: R68 million).
The company incurred capital expenditure of R170 million in the six months to 31 December 2008 (2007: R55 million), primarily to expand operations with R79 million spent at Somkhele anthracite mine on pre-stripping the open pits and R18 million constructing a de-stoning plant and workshops.
Commenting on the results, Petmin’s Chief Operating Officer Bradley Doig said: "We have continued with our strategy of turning developing assets into cash-generative assets and have a solid balance sheet, with a gearing of only 7%."
Production at Petmin’s Anthracite Division (Somkhele and Springlake colliery) increased by 4%, from 615 360 to 637 325 tonnes while sales rose by 85 795 tonnes or 14% to 682 879 tonnes. During this period all export sales were contracted at $62.50 per tonne, significantly lower than the market and $55.50 lower than the current contracted price. The division recorded a 70% improvement in profit before tax of R52 million (a 70% increase) from improved export volumes and the ramp-up in Somkhele’s sales to the inland metallurgical market.
During the period under review, the accelerated exploration programme at Somkhele outlined additional resources in close proximity to the plant. Indications are that the current drilling programme will yield additional resources in this new area. Exploration will continue on the remaining 23 000 hectares over which the company has new order prospecting rights.
Petmin Logistics, which is wholly owned by Petmin, secured a contract with the South African Port Authorities to provide a dedicated export facility at the Dry Bulk Terminal at Richards Bay for a minimum of 600 000 tonnes per year for four years. The company is currently in discussions to increase these facilities to 1.4 million tonnes a year for an extended period.
The sale of Springlake to Shanduka Coal for approximately R150 million is progressing well. The only remaining condition to be met before the sale can be concluded is Section 11 approval in terms of the Mineral and Petroleum Resources Development Act.
SamQuarz increased its production of silica and chert by 32% to 815 235 tonnes (2007: 615 887 tonnes) and its sales by 43% to 902 513 tonnes (2007: 630 089 tonnes). Revenue rose by 47% to R101 million (2007: R69 million) due to the higher prices negotiated for key sales contracts and improved sales volumes for chert in the construction industry.
As detailed in the company’s Annual Report for the year ended 30 June 2008, a SAMREC-compliant reserve and resource statement confirmed proven and probable reserves of 60.64 million tonnes of quartzite and 11.48 million tonnes of chert, giving SamQuarz a life of mine of more than 40 years.
During the six months to 31 December 2008, Petmin management reviewed the valuation of the project after an independent review of the resource statement and a better understanding of the metallurgical processes required to treat the ore provided greater project certainty. The result of the review is that the fair value of Petmin’s investment in the project has increased by R48 million from the R376 million reported in the 30 June 2008 Annual Report.
In their commentary on the results, the Petmin management pointed out that the results to 31 December 2008 did not reflect the impact of the current economic crisis and worldwide recession as the reduction in off-takes to the metallurgical sector only started towards the end of the period under review.
The team noted the impact of the economic downturn on the metallurgical sector and forecast that sales to this sector would be affected at both their Silica and Anthracite divisions.
Nevertheless, Petmin management expected SamQuarz to maintain current production and to have only slightly lower sales volumes in the six months to 30 June 2009 because the demand for crusher run material (used in the building and maintenance of roads) remained robust and the glass sector continued to produce at steady levels. Although sales to the metallurgical markets were not expected to recover until the latter half of calendar 2009, this was the least profitable sector of SamQuarz’s business and cut-backs in this sector were not expected to have a material effect on results.
With the local ferrochrome industry reducing its production capacity by approximately 90%, there had been a severe reduction in demand for the Anthracite Division’s products since the end of 2008. However, this would be offset by the three-year export contract which Petmin had secured. In terms of this contract, Petmin had locked in sales of 1 050 000 tonnes over a period of three calendar years, from 2009 to 2011, at an average price of $119 per tonne. This significantly enhanced the company’s visibility of earnings. The company would sell 145 000 tonnes at $118 per tonne in the six months to 30 June 2009. Sales for this period were hedged at an average rand/dollar exchange rate of R9.55/$1.00.
"Low debt/gearing levels, profitable and cash-generative assets, and the proceeds to be received from the disposal of Springlake, together with undrawn facilities of R160 million will all place Petmin in a strong position to evaluate both under-capitalised assets and opportunistic, value-enhancing propositions to increase shareholder wealth and weather the current global market downturn," Doig said.
Condensed Consolidated Reviewed Financial Statements for the six months ended 31 December 2008 (PDF - 97KB)
This media release may contain certain forward-looking statements concerning Petmin’s operations, economic performance and financial condition, and plans and expectations. These statements, including without limitation, those concerning the market outlook for the company’s products, expectations of prices, production, the commencement and completion of certain exploration and production projects, may contain forward-looking views. Such views involve both known and unknown risks, assumptions, uncertainties and other important factors that could materially influence the actual performance of the company. No assurance can be given that these will prove to be correct and no representation or warranty express or implied is given as to the accuracy or completeness of such views or as to any of the other information in this media release. Petmin’s future results may differ materially from past or current results, and actual results may differ materially from those projected in the forward-looking statements.
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© 2009 Petmin Limited