JOHANNESBURG (miningweekly.com) – JSE-listed Petmin has described its growth for the six months ended December 31 as “satisfying”, stating on Tuesday that it had succeeded in driving up headline earnings by 25% over the half-year, despite difficult trading conditions at its Somkhele anthracite mine, in KwaZulu-Natal.
The company, which reported a 45% jump in after-tax profit for the period to R47-million, outlined in a results statement that normalised earnings a share were up 8% from the same period in 2013, while net cash flow from operating activity had improved 12% to R313-million for the six months.
Capital expenditure, meanwhile, declined by 25% to R18-million.
Petmin finished the year with cash of R10-million and undrawn overdraft facilities of R140-million with Standard Bank.
SOMKHELE
Production of saleable anthracite from Petmin’s key operating asset increased by 27% to 678 002 t in the six months under review, with a 3% improvement in yields and 23% increase in run-of-mine tons washed.
Anthracite sales volumes increased by 89% to 659 754 t over the period, while export sales volumes increased 231% and inland sales volumes increased 25%, as Petmin's metallurgical coal customers ramped up new projects to full production.
Average dollar export prices dropped 22%, a reflection of global commodity markets and product mix compared with 2013.
“Demand remained firm owing to interruptions in local and Eastern European supply,” commented CEO Jan du Preez.
Production from Somkhele's third processing plant, which produced energy product from discard, increased by 55% to 171 474 t during the period under review, with yield improving 23%.
Energy coal sales increased 943% to 268 768 t following a temporary suspension of sales in the comparable six months of the prior year.
Meanwhile, the company outlined that a dispute with a customer of wholly-owned subsidiary Tendele Coal Mining over the interpretation of the contracted qualities of energy product had been scheduled for continued arbitration hearings in May.
Looking ahead, Petmin expected production and sales of Somkhele's metallurgical anthracite and energy product to be maintained at current levels for the six months ending June 30.
Confirmed orders had been received for 94% of anticipated anthracite production and anticipated energy coal production was fully committed to confirmed orders.
“Management expects the continued effects of local supply constraints and the crisis in Eastern Europe to continue to support demand for Somkhele's products,” Du Preez outlined.
TOP PRIORITY
Petmin stated on Tuesday that the North Atlantic Iron Corporation (NAIC) remained its “highest priority project”.
The group aimed to position NAIC as the dominant supplier of merchant pig iron to the US electric arc furnace steelmaking industry.
During the six months under review, Petmin invested an additional $1-million in NAIC, takings its shareholding to 34%.
“We expect to invest a further $5-million in the project, taking our shareholding to 40% for a total investment of $25-million,” it outlined.
Petmin also had the option of acquiring a further 9.9% at a “market-related price”.
The NAIC team was, meanwhile, focused on the site selection process for NAIC's first merchant pig iron plant, with sites in Ashtabula, Ohio, and Quebec, Canada, selected from a shortlist of 13.
An independent trade-off analysis between the two sites would be concluded in the second quarter of the 2015 calendar year, coinciding with the completion of the prefeasibility study (PFS) .
Detailed engineering design and project costing would begin once a site was selected.
“It remains our focus to be at the bottom end of the pig iron cost curve, and we are confident that the PFS will substantiate an unlevered internal rate of return of some 20% in our North American project,” noted Petmin business development director Bradley Doig.
Meanwhile, the unbundling of the NAIC shares to shareholders remained on track once the PFS was concluded and it was expected that a dividend in-specie of about 50c a share would be declared, following the primary listing of NAIC in North America and a secondary listing on the JSE.
VEREMO PROJECT
Petmin added on Tuesday that smelt tests were being conducted at its
Veremo pig iron project, in Mpumalanga, while the mine design was being finalised.
Development would start once the mining right awarded in January last year was executed by the Department of Mineral Resources.
Petmin was, meanwhile, awaiting arbitration dates for its dispute with iron developer Veremo, Framework Investments and investment group Kermas.
All development capital for the project was funded by Framework – Veremo’s 75% sharholder – and supported by holding company Kermas.
Petmin instituted proceedings against the parties in November for three separate payments of R65-million it said were due to Petmin arising from the original transaction.
The dispute would not affect the continued development of the project.