JOHANNESBURG (miningweekly.com) – JSE-listed diversified miner Petmin on Monday reported profit of R47-million for the six months ended December 31, following a period of significant capital investment in its flagship Somkhele metallurgical anthracite mine, in KwaZulu-Natal, and expansion operations abroad.
Although the company’s revenue was down by 3% for the period, at R311-million, the group’s operations remained strongly cash generative, CEO Jan du Preez said.
“We have completed a period of significant investment for growth. Our expansion at Somkhele and promising developments in our Canadian iron sands-to-pig iron project, put Petmin in a strong position to increase future earnings and significantly enhance shareholder value,” Du Preez said in a statement.
Petmin executive chairperson Ian Cockerill added that the company continued to generate cash from its mining operations in South Africa, and was on track to deliver on its strategy of becoming a global diversified mining company, specialising in commodities that feed into the steel value chain.
Capital expenditure during the period increased to R339-million, up from R138-million in the same period in 2010, of which R159-million was spent on prestripping the openpits at Somkhele, in anticipation of doubling production to feed a second wash plant. The plant was acquired at a cost of R90-million and was commissioned during February.
The Somkhele mine would now produce more than 1.2-million tons of metallurgical anthracite a year. Continuing exploration also extended the potential life-of-mine (LOM) to more than 20 years.
However, production at Somkhele was down to 203 000 t, from 246 000 t produced in the same period in 2010, owing to rain, short-term challenges in opening up new production areas, and logistical constraints in the supply of earthmoving equipment. Costs of production also rose, as the mine moved to exploit deeper reserves.
Sales were expected to increase, in line with the production increase, as demand from domestic customers remained strong and the export market was underpinned by firm contracts totalling 350 000 t. Petmin had signed a renewable five-year agreement which would enable it to export up to 600 000 t of metallurgical anthracite a year from Grindrod Terminals' Kusasa dry bulk facility, in Richards Bay.
Meanwhile, Petmin invested R23-million in its joint venture projects abroad, including the North Atlantic Iron Corporation (NAIC), in Canada, and Iron Bird Resources, in Liberia. Another R23-million was spent on the exploration programme at Red Crescent Resources’ Sivas copper project, in Turkey.
Petmin director of business development Bradley Doig told Mining Weekly Online that the NAIC announced a maiden resource, based on exploration, of 3% of the NAIC’s 450 km² claim in Labrador, Canada, supporting a LOM of between 25 and 30 years, for production of 500 000 t of pig iron a year.
“With the project being located close to a port, a source of cheap, clean hydroelectric power and being only seven days away from its target US markets by ship, the NAIC project is expected to produce pig iron at the bottom end of the cost curve, competing with Brazilian pig iron producers. Further, the scale of the resource should make it possible to support multiple pig iron plants,” Doig said.
Further, Petmin's SamQuarz silica mine in Mpumalanga, performed consistently during the period, with a 5% increase in tons produced, at 680 000 t.
The sale of SamQuarz to Ferroatlantica subsidiary Thaba Chueu for R259-million was blocked by the Competition Commission and is subject to an appeal by Petmin and Thaba Chueu to the Competition Tribunal. A ruling is expected in June.
Petmin was also awaiting approval from the Mineral Resources Department of its application for a mining licence for the Veremo iron-ore project, in Mpumalanga.