Petmin to continue share buy-backs

[miningmx.com] – JUNIOR anthracite miner, Petmin, could take the total buy-back of its shares up to 5%, worth R46m at the current price, said Bradley Doig, Petmin’s new business director.

“This would be predicated on the authority we have been given,” said Doig. “We continue to be buyers to a certain threshold: we hold 3% of the shares and perhaps we can could increase that to 5%,” he said.

Shares in Petmin raced up 12% on the Johannesburg Stock Exchange, valuing the company at about R917m, after it posted a 25% increase in headline earnings and 42% higher taxed profit of R32m for the six months ended December 31.

The improvement was based on increased production at its flagship mine, the Somkhele anthracite operation in KwaZulu-Natal. Somkhele also produced more thermal coal which it beneficiates from discard material.

The share is currently worth R1.59 South African cents per share, but Doig said an evaluation of Somkhele by SRK put the asset alone at R2,84c/share, equal to R1.6bn. Macquarie Research has a 12-month target price of R3,70/share on the stock.

As of end-December Petmin hold 15,9 million of its own shares in treasury stock, equal to 2.75% of the total issued shares.

“Management believes that Petmin’s current share price significantly undervalues the group’s assets and Petmin will continue with a share buy-back programme when the opportunity arises,” it said in notes to its interim results.

A key event for the company will be the de-merger of its 34% stake in North Atlantic Iron Corporation (NAIC), a development company that plans to build a pig iron plant either in the US or Canada. Pig iron is used in the production of iron ore.

Doig said a pre-feasibility study on the project was due in the second quarter of this calendar year which would form the basis of a pre-listing document ahead of unbundling of NAIC to shareholders, equal to 50c/share in value. The company would be listed on a North American exchange and take a secondary listing in Johannesburg.

“We value Petmin’s share in NAIC at R1.77/sh and believe a re-rating will be warranted post listing,” said Macquarie Research.

Commenting on prospects, Doig said the anthracite market would remain difficult but acknowledged that Somkhele product was niched and was also benefiting from supply disruptions in the Ukraine which competes to land product in Brazil.