JOHANNESBURG (miningweekly.com) – JSE- and Aim-listed anthracite and silica company Petmin is aiming to be South Africa's largest anthracite producer, but is also keen to add other commodities to its mix, CEO Bradley Doig said on Wednesday.

The company has shown strong growth over the past five years, growing from a market capitalisation of R25-million to R1,5-billion.

Doig told Mining Weekly Online that Petmin was positioning itself to take advantage of a growing market for anthracite.

"The anthracite market has improved over the last six months and we expect this to continue for the rest of the financial year. Beyond that, we are cautiously optimistic, also taking into account the volatility of the market. However, our business structure ensures that we do have medium-term off take agreements in place to mitigate possible dips in the market."

He pointed out that anthracite was a direct and cheaper replacement for coking coal and that a number of ferrochrome producers have started to consider anthracite as a reductant, which was increasing the intensity of use in this market.

"Further, the anthracite market is mostly driven by the steel business, and our research indicates a growth of between 5% and 7% within the global steel arena, mainly driven by Asian giant China."

Doig said that Petmin was aiming to be the largest producer of anthracite in the country. "We have the resources to achieve this, and have now also embarked on an exploration programme at Somkhele to further increase this resource. Petmin will also increase it processing capacity in the area."

Petmin is responsible for 45% of South Africa's anthracite output and 35% of the country's silica, according to its website.

In August, Petmin announced capital expenditure of R120-million for the construction of a second coal processing plant at Somkhele in KwaZulu-Natal. The second plant would double the company's current production capacity to about 1,1-million sales tons a year, and would be commissioned by the second quarter of 2012.

Further expenditure of R18-million would be allocated for exploration at Somkhele, following the renewal of new-order prospecting rights by the Department of Mineral Resources.

Doig said that the company now had in excess of 25 000 ha of rights on the prospecting permit, and expected to increase its current reserves and resources, as well as the life-of-mine through additional exploration.

Simultaneously, Doig said that the company was considering a number of acquisition opportunities relating to commodities that fed into infrastructure development and urbanisation, such as copper, chrome, metallurgical coal and ferrous product, over a diverse geographical spread into, and beyond, African borders.

"Petmin is well positioned for acquisitive growth with low gearing and substantial cash resources. The objective of this growth strategy is to significantly increase the size of the company."

For the year ended June 30, 2010, Petmin reported cash-on-hand of R283-million and undrawn bank facilities of R110-million, while its net cash flow from operating activities increased by 43% to R321-million.