The market for Petmin’s products

Anthracite

Anthracite is a carbon-rich, high-quality coal whose key application is as a reductant, replacing coke in metallurgical processing industries, with a notable increase in the intensity of anthracite use i.e. as a substitute for coke in ferro-alloy smelting activities. Other uses of anthracite include:

• as a smokeless fuel for domestic heating and similar processes, typically in urban areas where pollution restrictions apply;
• as pulverised fuel for power generation in the older type coal burning utilities, especially in Europe; and
• in the manufacture of carbon-rich products, such as Soderberg electrodes and carbon blocks.

The steel and ferro-alloy industries (FeCr and FeMn) are key consumers of anthracite products, with Xstrata and Samancor as dominant players in the South African ferro-chrome market.

Somkhele’s product is low in phosphorus, sulphur and calcium, which makes it a viable reductant for the ferro-titanium and ferro-chrome industries in South Africa, and suitable for the pelletising and sintering of iron ore.

Anthracite competes with bituminous coals, chars and cokes as a carbon feedstock (reductant) in the metallurgical industry, particularly in the production of ferro-alloys.

Silica

Silica is the name of a group of metals composed of silicon and oxygen, the two most abundant elements in the earth’s crust. Silica is hard, chemically inert and has a high melting point because of the strength of the bonds between the atoms. These are prized qualities in various fields, including the glass, metallurgical and construction industries.

The South African silica industry is made up primarily of two key market segments, namely the glass and metallurgical sectors, and is estimatedby management to have grown to over 3.7 million tonnes. SamQuarz is the largest producer of silica products in South Africa.

Petmin continues to rely on the local market and, in particular, a small number of key customers who accounted for close to 80% of the total tonnes sold during the year to June 2010. These customers include major companies in the glass and metallurgical industries. Approximately 47% of the Company’s production, comprising metallurgical grade silica (29%) and metallurgical chert (18%) is supplied to the metallurgical sector.

Although the metallurgical process industries were affected by poor market conditions for the first three quarters of the year under review, they remained some of the primary consumers of SamQuarz’s products. Glass sand sales continued to constitute approximately 30% of total sales achieved.