[miningmx.com] — PETMIN has sold its SamQuarz silica mine for R259m in cash and will use the proceeds to fund developments at its Somkhele anthracite mine in KwaZulu Natal as well as new overseas projects if required.
Executive chairman Ian Cockerill said Petmin’s strategy was to position itself in the production of commodities essential to the “steel value chain’ which was being driven by the urbanization of major Asian countries.
Over the past year Petmin had taken a 50% stake in the Mount Ginka iron ore project in Liberia; bought 10% in a copper project in Turkey with the right to increase this to 37.5% and bought 5% in a magnetite sands project in Canada which can be potentially increased to 40%.
Petmin has joint management control in all these projects.
Cockerill commented, “we said last year we were going to create a platform for Petmin and that is what we have done.
Asked if Petmin risked spreading itself too thin through these geographically diverse investments Cockerill replied he was focused on ensuring this did not happen.
“We have very good local partners in all three of those projects. In Turkey the level of skills available on the ground is fantastic but what our partners there don’t have is money. We have the money.
“In all cases these projects are also not infrastructurally challenged which is essential for their successful development.
“They are close to existing infrastructure which helps in the construction phases and they are also close to transportation infrastructure meaning we can get the commodities easily to market.’
Cockerill said he believed the long-term future of the steel value chain was secure because of the rate of urbanization taking place in Far Eastern economies such as China. This outweighed the impact of current depressed conditions in the major western economies.
He commented, “in China another 250m people are going to be urbanized by 2020. Worldwide there are currently26 cities with a population of greater 10m people but there will be another 13 such cities by 2025.
“This is a major, mega trend. The demand for steel and steel related commodities is huge and will be difficult for the mining industry to meet.. There could be a slow down for a couple of years showing growth at rates lower than experienced prior to 2008 but the trend will still be positive.
“You are looking at a real engine of growth situated “east of Suez’ but, clearly, if China fell off a cliff then the world is going to be in problems.’
Cockerill added he believed the Chinese were keen to diversify their sources of commodity supply to reduce their dependence on the ” big four’ diversified resource groups.
He said the overall result was a business environment providing space for Petmin “to play in’ and earn the kind of returns its shareholders expected.
He added key requirements were that Petmin kept its debt levels low and ensured its projects were at the bottom end of the cost curve.
Cockerill would not specify where Petmin would invest the funds from the sale of Samquarz but indicated the company may pay a special dividend to shareholders as it did after the sale of the Springlake colliery.
“It’s early days and it could be up to a year before we get that money because we need to get Section 11 approval for the deal and who knows how long that could take.’
For the year to end-June Petmin reported an 8% drop in headline earnings to 17.5c a share (previous financial year – 19.1c a share) but maintained its annual dividend unchanged at 4c a share.
The company had cash on hand of R269m at end-June compared with R283m a year previously.
