[miningmx.com] – PETMIN, a diversified mid-tier mining company, is to unbundle shares worth 50c per unit in terms of earlier laid plans to extract itself from a 40% stake in pig iron prospect North Atlantic Iron Corporation (NAIC).
The R1.4bn coal, base metals and pig iron company is to exchange R300m worth of stock in NAIC for 40% of Muskrat Minerals Inc. and will then pass on those shares to its shareholders in the form of a special dividend.
Shareholders will not be locked up minority investors in Muskrat Minerals, however, as the North American firm plans to list in Canada and then take a secondary listing on the Johannesburg Stock Exchange.
Shares in Petmin, which first outlined its intention to unbundle its stake in NAIC on March 3, gained about 4.5% by midday in Johannesburg.
The company currently has a 32.5% stake in NAIC but in terms of earlier option agreements it will spend $6m ($2m less than anticipated in March) lifting its position in NAIC to 40%. It also has an option to take its position in NAIC up by another 9.9%.
Muskrat Minerals is listed on the Canadian National Stock Exchange and holds 40% of Grand River Iron Sands Inc. (GRI). GRI will own 60% of NAIC once Petmin makes its final investment, anticipated to be before the end of 2014.
“Petmin is focused on delivering value to shareholders, and NAIC is demonstrating its ability to successfully diversify geographically and into new commodities,’ said Jan du Preez, CEO of Petmin in a statement.
Petmin said in September 2012 that NAIC was its preferred development play and that it could be developed into a 500,000 tonnes/year pig iron producer in a market of 70 million tonnes a year (mtpa) to 80mtpa.
However, Ian Cockerill, a non-executive director of Petmin, told Miningmx in March that while the asset was interesting, the decision to unbundle the investment was based on the view its profile didn’t suit Petmin shareholders.
Asked if NAIC was likely to be cash-hungry, Cockerill said at the time: “It’s more a question of Petmin being a mature, cash-flow generating business. That appeals to a certain type of investor,” he said.
“And in all honesty, Petmin’s share price doesn’t get any value for NAIC,” he added.
Based on a recent smelt campaign, NAIC is hoping to produce between 810,000 to 870,000 tonnes of merchant pig iron at some 25% the current lowest cost producer. It expects to meet Petmin’s 20% internal rate of return based on a preliminary economic assessment which is due to be published at the end of March.
