JOHANNESBURG (miningweekly.com) – JSE-listed diversified miner Petmin on Thursday reported that the company had achieved a “robust” operational performance in the financial year ended June 30, with revenue of above R1-billion and anthracite production and sales from its Somkehele mine crossing the one-million-tonne mark for the first time.

Revenue rose 22.35% year-on-year to R1.02-billion, compared with R833.49-million the year before.

However, the company reported a loss a share of 20.7c, compared with a loss a share of 19.42c in the previous financial year, owing to the R181-million impairment of its investment in the Veremo pig iron project and the R19-million impairment of Iron Bird Resources.

Petmin had also recorded a R200-million impairment on its investment in the Veremo project in the 2013 financial year.

Headline earnings, meanwhile, remained flat at 15c a share, while normalised earnings increased 24% year-on-year, despite “significantly weaker” market conditions for metallurgical coal.

Petmin pointed out that mine-gate export material sold for R225/t less than in the previous financial year.

“If prices had remained stable, Petmin would have earned an additional R77-million after tax,” the miner added.

Further, Petmin said its operations had remained “strongly” cash generative, generating R668-million in the financial year, compared with R378-million the year before.

The company’s Somkhele metallurgical anthracite mine achieved a 37% increase in anthracite output to 1.13-million tonnes in the year under review, compared with 822 431 t the year before, while yield improved 6% to 41.85%.

Anthracite sales rose 28% to 1.03-million tonnes, compared with 802 325 t in the previous financial year.

The production of energy coal at the mine increased 18% to 244 298 t, compared with 207 238 t in the 2013 financial year.

However, energy coal sales fell 2% to 174 556 t, compared with 178 559 t the year before, owing to the suspension of sales between July and September 2013 amid a dispute with an energy coal customer.

Sales had resumed with new customers, while the dispute with the customer over the interpretation of contracted qualities of energy coal had been rescheduled for December.

“Petmin and its legal advisers believe the claims by the customer are unlikely to be successful, hence no liability has been recognised at June 30, 2014,” the company noted.

Looking ahead, the miner expected the current levels of anthracite production and sales at Somkhele to be maintained in the 2015 financial year, with local demand and prices expected to remain stable.

It pointed out that metallurgical anthracite export prices would likely be between $65/t and $85/t.

Energy coal sales, meanwhile, were expected to rise to about 400 000 t/y, with prices expected to remain stable.

Petmin planned to invest about R91-million in capital expenditure (capex) at Somkhele in the 2015 financial year.

It had invested R39-million of capex at the mine in the year under review, compared with R95-million in the prior year. The 2014 capex had included R3-million on a third wash plant and R21-million on exploration and resource definition.

Meanwhile, Petmin had also, in the 2014 financial year, invested R68-million in North Atlantic Iron Corporation (NAIC). The miner now held a 33% interest in NAIC, with plans to spend a further $6-million to further raise its stake in the company to 40% in the 2015 financial year.

During the year under review, a preliminary economic assessment had been finalised for the NAIC pig iron industrial project in Canada and the US, concluding that the project was viable, yielding an unlevered aftertax internal rate of return of up to 19.3%.

“Management is finalising the site selection and process optimisation studies. Talks have also commenced with funding and development agencies to determine the availability of funding guarantees and incentives for the capital build programme,” Petmin highlighted.

Subject to board, shareholder and regulatory approval, the miner would exchange its equity in NAIC for about R300-million of equity in Muskrat Minerals Incorporated (MMI), whereafter MMI would list on a major North American stock exchange with a secondary listing on the JSE.

Petmin planned to distribute the MMI shares to its shareholders by way of a special dividend. The listing and unbundling was expected to occur before June 30, 2015.

“We are very pleased with a robust performance delivered by our Somkhele anthracite mine, despite downward pricing pressure, and with the solid progress at the NAIC pig iron industrial project in Canada and the US,” commented Petmin CE Jan du Preez.

“Our focus for the year ahead is on maintaining our safety record and production levels, to continue striving for productivity and efficiency improvements  at Somkhele, and concluding the distribution of the dividend in specie in NAIC,” he added.

IMPAIRMENTS
Meanwhile, regarding the Veremo pig iron project, in Mpumalanga, Petmin said discussions with the controlling shareholders of Veremo over the settlement of minimum cash payments of R65-million a year for three years, the first of which was due on February 28, 2013, and the last of which was due on February 28, 2015, had not resulted in a negotiated settlement acceptable to Petmin.

The miner would, therefore, continue to pursue the settlement of its claim.

“This has increased the level of uncertainty as to the timing of the development of the project and the resultant cash flows and Petmin has, therefore, decided to impair its investments in Veremo Holdings and Veremo Empowerment Holdings by a further R181-million to a combined carrying value of R115-million,” the company noted.

Petmin pointed out, however, that the Department of Mineral Resources had awarded a mining right for the pig iron project, while the 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.

Meanwhile, the miner explained that the difficult market conditions experienced by West African iron-ore projects had led to the R19-million impairment of Iron Bird Resources.

However, Iron Bird Resources’ mining licences had been extended, with Petmin retaining its 50% interest in Iron Bird and the Mt Ginka iron-ore project in northern Liberia.

Petmin and its joint venture partners continued to seek a merger partner or buyer for the investment in Iron Bird.