[miningmx.com] — PETMIN, the R1.7bn coal producer and mineral explorer, has added Turkey to its growing list of investment gambits following a memorandum of understanding with Toronto-listed Red Crescent Resources (RCR), whose copper project Petmin may commit up to R122m (C$17m).
In return for a four-phase investment plan, linked to reaching milestones in respect of RCR’s Shivas Copper Project in central Turkey, Petmin will take a 37.5% stake in RCR’s asset over three-and-a-half years, and a 10.1% stake in RCR’s equity up front.
At the fourth phase of investment, when Petmin is to invest its final tranche of cash, it wants to see a minimum 150 milllion tonne copper deposit at Shivas, of which a fifth is a measured resource. A prefeasibility study will then commence.
The announcement follows a relatively rapid-fire diversification strategy, not coincidentally related to the appointment of Ian Cockerill as the company’s executive chairperson.
Said Cockerill: “It [RCR investment] represents further progress on our stated intention of investing in a suite of commodities used specifically in the ‘urbanisation and infrastructure development space’, and in expanding our global footprint.
“Our Business of Tomorrow growth strategy is to significantly increase the size of the company through organic and acquisitive growth, in order to deliver sustainable value to our stakeholders by focusing on a combination of cash-producing assets, near cash projects and targeted exploration programmes.”
Petmin paid 50 Canadian cents per RCR share for the first tranche, which sees the South African firm take a 10% stake. A total of 9.3 million RCR shares were issued. The share issue is at a slight premium to RCR’s share price, said Cockerill. However, the share had been under pressure as the market became aware RCR was seeking capital to help develop the Shivas project. “The market can be brutal,” he said.
The traditionally low-key Petmin has enjoyed a lively period in the last year, in which its share price has responded well to new business investments. The company paid a maiden dividend in September. It also took a 25% stake in Veremo, a magnetite project containing iron ore and titanium, from which pig iron could be produced.
In January, Petmin announced plans to invest in Hummingbird Resources, an AIM-listed company with exploration properties in Liberia.
PETMIN GROWTH
Commenting on further diversification in Petmin’s business, Cockerill said there was perhaps room to add manganese to its commodity mix. “Anything that is in the steel feed business is potentially interesting to us,” he said.
However, Petmin would pursue a strategy of cautious growth. “We will continue to examine potential deals that others may have missed or considered too small. Therefore, things may take more time with us,” he said.
The company’s balance sheet was barely levered – debt:equity stands at a mere 8% – and cash resources would continue to be used. “Petmin’s cash flow will grow tremendously shortly with the completion of the Somkhele expansion (Petmin’s metallurgical coal asset),” said Cockerill.
Shares in Petmin were unchanged on the JSE and were last trading at R2.95/share at around midday on Monday.
