[miningmx.com] — Petmin was now in a sufficiently strong financial position for management to be able to follow the best strategy regarding development of the Veremo pig iron project.
That’s according to Petmin chairman Ian Cockerill who told Miningmx, “this is now a business on a very sound financial footing and well positioned to move.’
Petmin holds a 25% stake in Veremo with the 75% majority shareholder being Kermas. Veremo owns the Stoffberg magnetite project in Mpumalanga containing iron ore and titanium on which a pig iron plant could be developed.
In recent months Veremo has signed a memorandum of understanding with Chinese group MCC International to appoint MCC as the engineering, procurement and construction (EPC) contractor on a turnkey basis for the project.
Cockerill indicated Veremo had also been in discussions with a Korean consortium interested in taking an equity stake in the project.
Asked whether Petmin would look to sell down its stake if the opportunity arose Cockerill commented, ” we have nearly R300m in the bank and unutilised debt facilities of about R110m available.
“Our business is strongly cash-generative and we have very strong support from our shareholders who have indicated they will back us should we decide we need to raise more money.
“That puts us in a position where we can decide to do what is in the best interests of our shareholders regarding developments at Veremo.’
For the year to end-June Petmin reported attributable profits of R107,7m (previous financial year – R118.4m) although the two numbers are not comparable because of the sale of the Springlake colliery.
Springlake contributed R21.8m in earnings to Petmin’s 2009 results but did not form part of the group’s operations in financial 2010.
Significantly, Petmin has declared a maiden dividend of 6c a share of which 2c is a special dividend related to the sale of Springlake.
That’s despite the fact that the 2009 profit statement reflects a R79.2m loss on the sale of Springlake although Petmin previously said it sold the colliery for R145m after paying R90m to buy it in 2005.
Asked for clarification Cockerill said, “we made a cash profit on the sale but the results show an accounting loss after taking into account other factors.’
Cockerill said Petmin’s policy of paying an annual dividend equivalent to 20% of headline earnings per share was sustainable and something that would differentiate Petmin from other companies in the junior coal sector.
Cockerill commented, “we strongly believe shareholders need to be rewarded on a both a short and long-term basis’.
Petmin is currently investing R120m in the construction of a second recovery plant at its Somkhele anthracite mine to double production to 1.1mt annually.
Cockerill said, “clearly, Somkhele provides the most upside for the group with the doubling of production of a commodity on which there is a R300/t profit margin.
“Despite the increase in production Somkhele still has an economic life of around 35 years because we have only mined 10% of the lease area and there’s around 40mt in resources available.’
