PTMN Petmin

TIDMPTMN

RNS Number : 6020M

Petmin Limited

19 September 2012

PETMIN LIMITED

Incorporated in the Republic of South Africa

Registration Number 1972/001062/06

Share Code JSE: PET & ISIN: ZAE000076014

Share Code AIM: PTMN

("Petmin" or "the Company")

PRESS RELEASE

Results for the financial year ended 30 June 2012

Petmin reports healthy operational performance and prepares for growth following significant investment and expansion.

R523 million invested to double capacity and deliver on strategy despite difficult market conditions.

Financial highlights:

- Net cash flow from operations up 23% to R443.8 million (2011: R360.8 million)

- R523 million capital expenditure and investment (2011: R230 million)

- Annual profit up 12% to R112.7 million (2011: R101.0 million)

- Headline earnings per share up 9% to 19.06 cents (2011: 17.50 cents)

- Like-for-like earnings per share from continuing operations were up 23% to 16.82 cents

(2011: 13.72 cents)

- Dividend up 25% to 5.0 cents per share (2011: 4.0 cents per share)

- Sale of SamQuarz concluded for R281 million cash

Operational highlights:

- Somkhele annual production capacity up from 530,000 tonnes to 1.2 million saleable tonnes

- Investment approved for third processing plant at Somkhele

- Extended life of Somkhele mine now more than 20 years

- New Order Mining Right extended to cover new mining areas at Somkhele

- Accelerated investment in North Atlantic Iron Corporation (NAIC) pig iron project

JOHANNESBURG, South Africa, 19 September 2012: JSE- and AIM-listed Petmin today reported a

healthy financial performance following a year of expansion and significant investment for future

growth, underpinned by an excellent safety performance.

Headline earnings per share were up 9% at 19.06 cents (2011: 17.50). Annual profit was up 12% to

R112.7 million (2011: R101.0 million).

Petmin declared a 25% increase in dividend to 5 cents per share (2011: 4 cents) in line with the

Company's approved dividend policy.

Petmin chief executive Jan du Preez said: "Benchmarked against our peers in the resources sector,

Petmin had a satisfactory year of significant investment for future growth. We are reporting healthy

financial results after our operations performed well and generated cash in a difficult economic

climate."

"We are pleased to declare an increased dividend while keeping funds in reserve for the

development of new mining areas at Somkhele and the development of our Canadian iron sands to

pig iron project."

Petmin also reported a significant investment of R523 million (2011: R230 million) during the year

under review. Capital expenditure at Somkhele was R388 million (2011: R115 million), of which R177

million (2011: R28 million) was spent on pre-stripping the open pits to feed the second wash plant.

The second plant was commissioned for a total capital cost of R162 million, of which R119 million

was spent in the year to 30 June 2012.

Petmin's investment in development projects was R98 million during the year to 30 June 2012, with

a further R36 million (2011: R63 million) at SamQuarz.

Petmin is proud of its continued safety record, with no fatalities or significant injuries reported at

operations in the year to 30 June 2012.

The Company's flagship Somkhele anthracite mine is reaping the benefits of investment in a second

wash plant, with production more than doubling in May and June 2012 compared to the same

period in 2011. Somkhele's total annual production capacity is now in excess of 1.2 million saleable

tonnes of metallurgical anthracite.

"This is a strongly cash-generative operation which has more than doubled its production capacity

and significantly increased its reserves. Somkhele now has the flexibility to increase production in

response to market demand," du Preez said.

Petmin's 'Business of Tomorrow' exploration activity showed satisfactory results in the year to end-

June 2012. Management is encouraged by progress at NAIC and is accelerating its investment in this

project as it advances towards a Pre-Feasibility Statement.

Following satisfactory exploration results, the Company is considering its options for the future of its

interest in the Mt Ginka iron project in Liberia.

Based on results received from initial exploration activity, Petmin has written down its investment in

the Red Crescent Resources-controlled Sivas copper project in Turkey as the results did not meet

Petmin's criteria for further investment.

Petmin's director of business development, Bradley Doig, said: "Early-stage exploration is an

inherently risky business, but out of three projects NAIC has a very positive maiden resource

statement and is moving rapidly towards pre-feasibility, and Mt Ginka has good prospects - that's a

very good success rate for exploration and validates Petmin's rigorous investment criteria and

project selection."

Petmin's earnings per share from continuing operations in 2012 were negatively affected by the

impairment of the investments in Red Crescent Resources Limited (now recorded at R5 million) and

the Sivas project (now fully impaired). Without the R39 million once-off impairment in FY2011/12,

on a like-for-like basis earnings per share from continuing operations are up 31% to 16.48 cents

(2011: 12.60 cents).

Petmin has signed approved term sheets with Standard Bank, its bankers since inception, securing,

in addition to the existing R100 million overdraft facilities, new medium-term debt facilities of

R225 million and a R100 million revolving credit facility.

An R82 million surety signed by Petmin on behalf of its primary black empowerment partner, Dark

Capital (Pty) Ltd, has been withdrawn following Dark Capital's payment in full of its R65 million debt

to the Standard Bank of South Africa.

Somkhele anthracite mine - year to 30 June 2012

- Somkhele reported a profit after tax up 17% to R97.7 million (2011: R83.4 million)

- Somkhele has maintained its impressive safety record, with no material health and safety

issues reported during FY2011/12. The current Loss Time Injury Frequency Rate (LTIFR) for

the operation is a commendable 0.22.

- Monthly production more than doubled in May and June 2012 at Somkhele following the

successful commissioning of a second wash plant, with annual production capacity now in

excess of 1.2 million saleable tonnes.

- Somkhele produced 637,220 tonnes of saleable anthracite in the year to 30 June 2012

(2011: 524,006 tonnes) and sold 546,051 tonnes (2011: 579,087 tonnes) in the year to 30 June

2012.

- Net profit margins were stable at 26% (2011: 25%)

- In February 2012, Petmin announced it had signed a renewable five-year agreement which

will enable it to export up to 600,000 tonnes of metallurgical anthracite a year from

Grindrod Terminals' Kusasa dry bulk facility in Richards Bay.

- The exploration and resource definition activities during the year indicate that Somkhele has

an open-cast life of mine in excess of 20 years with both plants running at full capacity and

producing approximately 1.2 million tonnes of anthracite per annum.

- Permanent and temporary employment at Somkhele increased to more than 950 people

during the year to end-June 2012, with 80% local employment.

Somkhele - the year ahead

- In July 2012 Somkhele was granted a twenty-year New Order Mining Right for an expansion

to new mining areas.

- The pit design and mining plan at Somkhele has been optimised to reduce future capital

expenditure.

- Construction of a third processing plant at an approved cost of R62 million has been

approved. The new plant is expected to be commissioned in Q1 2013. It will give the

Somkhele operation greater flexibility to produce additional saleable anthracite or

480,000 tonnes of product annually for the energy market.

- An updated SAMREC-compliant resource statement is due early in 2013.

- Although world markets remain uncertain, production and sales levels are expected to

significantly increase from those achieved in FY2012, with an expected reduction in spot

US$ export prices expected to be offset by a weaker Rand Dollar exchange rate.

- Export sale negotiations have all indicated extremely difficult trading conditions with export

duff prices between US$90 and US$100 FOB for the next six months, possibly moving to

US$110 FOB in the second half of FY2012/13.

- Somkhele anticipates selling approximately 900,000 tonnes of anthracite during the next

12 months, some 300,000 tonnes less than capacity as a result of a depressed market.

The Company anticipates selling some 420,000 tonnes into the export market (and has

committed orders for 360,000 tonnes) and 480,000 tonnes into the local market (and has

committed orders for 370,000 tonnes).

- Capital expenditure at Somkhele in FY 2013 is expected to be approximately R95 million

including the construction of the third plant and exploration programmes. Actual

development cost of the pits (or capital pre-stripping) is expected to be approximately R110

million.

- Somkhele is committed to ensuring the community around the mine, which has created

more than 950 permanent and temporary jobs in an impoverished area with few economic

opportunities, nearly 80% of them from the local community.

- A baseline needs analysis has been conducted to determine projects for the new Social and

Labour Plan, and Somkhele plans to spend a further R25 million on community development

during the next five years.

SamQuarz

- The sale of SamQuarz for final gross proceeds of R281 million, was concluded on 30 June 2012.

- Petmin generated an average net return on SamQuarz of 39% year-on-year after tax for the

seven and three quarter years since it acquired the operation for R85 million.

North Atlantic Iron Corporation (NAIC) - year to 30 June 2012

- Petmin has joint management control of NAIC, with an earn-in option to acquire up to 40%

for a total of US$25 million, plus a further option to acquire an additional 9.9% at a market-

related price.

- During the year under review, Petmin invested an additional $5 million (2011: $1.5 million)

in the jointly managed NAIC, acquiring an additional 12% interest to take Petmin's

shareholding in NAIC to 17%.

- At 30 June 2012, Petmin's investment was US$6.5 million for 17% of NAIC. (Subsequent to

30 June 2012, Petmin invested a further US$4.5 million for an additional 5.5% shareholding,

taking its holding in NAIC to 22.5%.)

- In March 2012, NAIC's maiden resource statement - covering just 3% of the claim - indicated

that its iron sands resource provides an abundant low-cost feedstock for production of a

concentrate which can be converted into high-purity pig iron. The NAIC resource is 594

million tonnes of sand grading at 9.35% heavy minerals of which 38.02% is Fe2O3 equivalent.

- Pig iron is used as a feedstock in the steel making process. Approximately one billion tonnes

of world production of pig iron is produced and used in integrated steel mills.

- NAIC will produce merchant pig iron for trade on world markets. Merchant pig iron

constitutes about 70 to 80 million metric tonnes annually.

- The NAIC claim has been explored to a depth of 15 metres. Aeromagnetic and Lidar surveys,

and deeper drilling subsequent to the maiden resource statement, indicate potential for the

NAIC iron sands resource to be extended to approximately 40 metres.

- The scale of the resource indicates that it should support multiple pig iron plants producing

500,000 tonnes of pig iron annually per plant.

- NAIC has support from the Canadian government, and the Atlantic Canada Opportunities

Agency (ACOA) has invested $500,000 in the project to partly finance the concentrator pilot

plant through a repayable loan from ACOA's Business Development Program.

NAIC - the year ahead

- An updated resources statement is expected to be issued during Q4 2012 followed by a

National Instrument (NI) 43-101 compliant statement in Q1 2013.

- A pilot mineral processing plant has been commissioned alongside the NAIC resource in

Goose Bay, Labrador, and the first concentrate was produced during August 2012, with

results in line with expectations. It is anticipated that NAIC will produce 250 tonnes of

concentrate by end-September 2012 for smelt test purposes.

- It is estimated that the smelt test to produce pig iron will be completed in Q1 2013.

- NAIC has appointed consultants TWP Holdings (Pty) Limited (TWP) to undertake a

Preliminary Economic Assessment (PEA) which will be followed by a Pre-Feasibility Study.

It is estimated that the PEA will be completed by Q1 2013.

- Tenova Core (Tenova) has been appointed to undertake the engineering design for the pig

iron processing plant and will oversee metallurgical test work and a smelt test using the

concentrate produced by the pilot plant.

- NAIC has also appointed engineering consultants HATCH to undertake a peer review of both

TWP and Tenova for the purposes of the NI43-101 statement and PEA sign-off.

Exploration - Mt Ginka iron ore in Liberia

- Petmin has invested a total US$2 million to date for 50% of Iron Bird Resources Inc

(Iron Bird) in a 50/50 joint venture with gold explorer Hummingbird.

- Following satisfactory results of an exploration programme, Petmin and its joint venture

partners are considering their options to merge Iron Bird with a larger iron ore company or

sell the investment in the Mt Ginka iron ore project in northern Liberia.

- During the year under review, Petmin invested an additional $1.5 million (2011: $0.5 million)

in the jointly managed Iron Bird Resources.

Exploration - Red Crescent Resources (RCR)/Sivas copper in Turkey

- During the year under review, Petmin invested CAD $3,055,000 to increase its equity holding

in RCR to approximately 10.1%.

- Exploration for copper and associated minerals at the Sivas project in Turkey delivered

disappointing results. In line with Petmin's investment approach, when these results did not

meet Petmin's investment criteria it wrote off R18.9 million on its Sivas exploration asset.

A further R20.2 million mark-to-market impairment was recorded on Petmin's investment in

Toronto-listed shares of RCR. Petmin retains its investment of 9,280,000 listed shares in RCR,

which at 30 June were valued at R4.9 million.

Veremo - pig iron in South Africa

- Petmin and Kermas Limited (Kermas), the controlling shareholder of the Veremo pig iron

project in Mpumalanga, are awaiting the outcome of an application for a mining right from

the South African Department of Mineral Resources.

- Kermas is evaluating development options for potential annual production of a million

tonnes of pig iron.

- Kermas has signed an agreement with a Chinese construction company, MCC International

Incorporation Ltd, to complete a detailed bankable feasibility study on Veremo before the

end of Q1 2013.

Johannesburg

19 September 2012

Teleconference with management

- Analysts and shareholders are invited to participate in a teleconference with Petmin

management at 10h00 South Africa time on Wednesday 19 September 2012.

Dial in details:

South Africa:

- 0800 200 648 (toll free)

United Kingdom

- 0808 162 4061 (toll free)

Other countries

- +27 11 535 3600

Alternate numbers:

- South Africa - 011 535 3600 or 010 201 6616

- UK - 0800 917 7042

- Other countries - +27 11 535 3600 or +27 10 201 6616

Playback access code: 22095# (available from 11h30 on Wed 19 September 2012)

- South Africa - 011 305 2030

- UK toll free 0808 234 6771

- Other countries +27 11 305 2030

Results presentation

- Analysts and shareholders are advised that Petmin's results presentation will be available

from 20 September 2012 on the Petmin website at www.petmin.co.za

Enquiries:

Petmin projects

Bradley Doig (Director of Business Development)

+27 11 706 1644

Media

Jonathon Rees

+27 76 185 1827

Sponsor and Corporate Advisor (JSE)

River Group

Andrew Lianos

+27 834 408 365

Nominated Adviser and Broker (AIM)

Macquarie Capital (Europe) Limited

Steve Baldwin, Nicholas Harland

+44 20 3037 2000

Johannesburg

19 September 2012

Sponsor

River Group

This information is provided by RNS

The company news service from the London Stock Exchange

END

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