Transcript Document

Petmin results for the period ending 31 December 2014
“Managing those issues we can control – and not merely accepting those that we can’t”
February 2015 Investor Roadshow
Index
1. Performance for the 6 months ended 31 December 2014
Page No.
a) Financial Highlights
3
b) Somkhele Operational Highlights
4
c)
5
Somkhele Sales Highlights
d) NAIC Highlights
6
e) Some Strategic Considerations
7
f)
Financial Performance Summary
8
g) Like-for-like Normalised Earnings
9
h) Petmin Group Balance Sheet
10 - 11
i)
Somkhele production performance and cost per tonne
12
j)
Forecasted sales to June 2015 and to December 2015
13
k)
Pre-stripping Costs
14
2.
NAIC - low cost producer of Merchant Pig Iron
16 - 17
3.
Veremo update
19
4.
Our Strategy – a reminder
21 - 22
2
February 2015
Financial Highlights
Headline
Earnings
Normalised
Profit After Tax
Normalised earnings per share increased by 8% from 7,79cps (R45m) to 8.40cps
(R47m) despite a 15% reduction in at-mine-gate export prices
Profit After Tax
Profit after tax up 42% to R47m (2013:R33m)
Revenue
Ex-mine gate
costs
3
Headline earnings per share (HEPS) up 25% to 8.40cps (2013: 6.71cps)
Revenue up 95% from R356m to R694m
Somkhele anthracite ex-mine gate cost per tonne decreased from R697/t to R650/t
(7% improvement)
February 2015
Somkhele Operational Highlights
Safety
Performance
Anthracite
Production
Energy
Coal
Yields
Updated
Competent
Persons
Report
4
Remarkable Lost Time Injury Frequency Rate of zero
Production of saleable anthracite increased by 27% from 534 523 to 678 002 tonnes
Production of energy coal up 55% from 110 349 to 171 474 tonnes
Production yields up 3% to 44.52% (2013: 43.30%)
An updated SAMREC and SAMVAL-compliant Competent Persons Report published in
February 2014 by SRK, valued Petmin’s anthracite mine at R1.64 billion (R2.84cps)
February 2015
Somkhele Sales Highlights
5
Anthracite
Anthracite sales volumes increased by 89% to 659 754 tonnes (2013:349 414)
Domestic
Anthracite
Market
Sales to inland metallurgical customers increased by 25% to 300 846 tonnes (2013:
240 861) as customers expansion projects were commissioned and ramped up to full
production
Export
Anthracite
Market
Export sales increased by 231% to 358 908 tonnes (2013: 108 553)
Energy
Coal
Sales of energy coal increased by 943% to 268 788 tonnes (2013: 25 777)
Energy
Coal
Arbitration with Customer - outlook remains favourable
February 2015
NAIC Highlights
Project Status
Unbundling
Status
6
Final site selection trade off study and PFS underway by Hatch Engineering - Two
preferred sites one in Ohio and one located in Quebec
On track, unbundling of NAIC, via a distribution of a dividend in specie on track, to be
concluded when the PFS is finalised
February 2015
Some Strategic Considerations
Investigating ways to establish a sustainable and meaningful long term benefit to our
Long Term BEE
Community and our Employees as equity owners in Tendele (Somkhele Mine) while
at Somkhele
ensuring that any dilution is for value
Capital
Allocation
Incentive
Scheme
7
Share-buybacks remain a key option when allocating capital - particularly in the
current market
Comprehensive Scheme approved during the June 2013 AGM (for the 3 years from 1
July 2014 to 30 June 2017). To ensure improved alignment with Shareholders, we are
reviewing the scheme, including period of scheme, period of pay-out of incentives,
expensive cost of options and management’s desire to increase its equity holding in
Petmin.
February 2015
Financial Performance Summary
Actual YTD
Actual
Audited
31-Dec-13
30-Jun-14
%
31-Dec-14
Turnover (R’000)
R 693 939
95%
R 355 888
R 1 019 789
PAT (R’000)
R 47 153
44%
R 32 766
(R 119 425)
Headline Earnings (R’000)
R 47 162
22%
R 38 794
R 86 250
Weighted average shares in issue (000)
561 031
(3%)
576 908
576 908
Total share in issued at year end (000)
561 031
(3%)
576 908
576 908
EPS (c)
8.40
48%
5.68
(20.70)
HEPS (c)
8.40
25%
6.71
14.95
8
February 2015
Like for Like Normalised Earnings to December 2014
Actual
H1 2015
ended
31 Dec 2014
Actual
H1 2014
ended
31 Dec 2013
Actual
Year ended
30 June 2014
47 153
32 766
(119 425)
- Loss on sale of PPE
9
5 999
5 999
- Mark to market of listed investments
-
9 713
13 464
- Impairments
-
1 158
200 834
- NRV impairment of inventory
-
1 146
6 703
- Reversal of accrual
-
(5 855)
(5 855)
- One-off deal expenses
-
-
-
47 162
44 927
101 720
Adjusted profit per share (cents)
8.40
7.79
17.63
% increase
8%
(R 000)
Profit/(loss) for the year
Adjust for after-tax effect of:
Normalised profit after tax
Production and sales
Anthracite tonnes produced
678 002
534 523
1 125 089
Anthracite tonnes sold
659 754
349 414
1 026 250
R 650
R697
R 708
Anthracite cost per tonne
9
February 2015
Petmin Group Balance Sheet
Actual
31 Dec 2014
Actual
31 Dec 2013
Actual
30 June 2014
1 539 500
1 086 638
1 702 000
1 118 587
1 552 484
1 122 531
369 981
490 359
327 018
1
Investment/Loan -Joint Venture
Investments
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
57 881
25 000
449 815
216 761
172 648
10 350
50 056
1 989 315
64 303
28 751
429 266
296 518
109 843
2 772
20 133
2 131 266
77 935
25 000
482 951
264 532
121 549
2 095
94 775
2 035 435
2
Ordinary share capital and reserves
1 199 163
1 306 043
1 169 305
5
Non-current liabilities
481 381
624 476
602 692
Interest bearing loans and borrowings
144 045
358 500
289 159
Deferred taxation liabilities
268 909
226 092
246 670
Environmental rehabilitation provision
68 427
39 884
66 863
Current liabilities
Trade and other payables
308 771
78 368
200 747
136 531
263 438
116 520
Current portion of non-current liabilities
190 571
21 340
75 042
39 832
1 989 315
27.05%
42 876
2 131 266
30.82%
71 876
2 035 435
29.19%
(R’000)
ASSETS
Non-current assets
Property, plant and equipment
Investment in equity accounted investee
Bank overdraft
Total equity and liabilities
Net Gearing (interest bearing debt/equity)
10
Note
3
4
6
6
February 2015
Petmin Notes to the Group Balance Sheet
1. Final $6 million investment in NAIC (of total $25 million to obtain a 40% shareholding in NAIC) to be
made in 2015 financial year. ($1m in 6 months paid in the six months to 31 Dec 2014 and $5m to be paid
in H2 FY2015).
2. Somkhele Plant JV repaid R11 million of Tendele’s loan account during the period to 31 December 2014
3. Inventories are now reducing from the June 2014 levels as sales volumes have ramped up.
4. Current tax assets increase by R8 million as Tendele paid provisional tax in December 2014 as Tendele
has utilised its unredeemed capital tax shield.
5. 11,565,606 treasury shares were acquired in the six months to 31 December 2014 at an average cost of
R1.58 per share for a total consideration of R18 million. Petmin now holds 15,877,062 or 2,75% of its own
shares.
6. During the six months ended 31 December 2014, third Party debt reduced by R30 million. The short-term
portion of third-party debt increases at 31 December 2014 as capital repayments on the Standard Bank
R225 million Term Loan commenced in December 2014 and the R100m Standard Bank RCF is due to be
repaid in one lump sum in December 2015
11
February 2015
Somkhele production performance and cost per tonne to
December 2014
Actual YTD
Somkhele Production Performance
Actual
Audited
31-Dec-13
30-Jun-14
%
31-Dec-14
1 523 051
23%
1 234 380
2 688 563
Yield
44.52%
3%
43.30%
41.85%
Anthracite saleable tonnes produced
678 002
27%
534 523
1 125 089
Anthracite tonnes sold
659 754
89%
349 414
1 026 250
Discard tonnes washed
669 292
26%
530 215
1 174 419
Yield
25.62%
23%
20.81%
20.80%
Energy coal saleable tonnes produced
171 474
55%
110 349
244 298
Energy coal sold
268 788
943%
25 777
174 556
Actual
Audited
31-Dec-14
31-Dec-13
30-Jun-14
Average cost at mine gate per tonne (R)
R 650
R697
R 708
Cost of run-of-mine coal
R 379
(16%)
R 449
R 443
Plant Processing and product handling
R 117
(4%)
R 122
R 128
Overhead/infrastructure costs
R 80
19%
R 67
R 73
State royalty
R 16
700%
R2
R2
Interest
R 23
(18%)
R 28
R 27
Depreciation
R 35
13%
R 31
R 35
Run of Mine (ROM) tonnes washed
Actual YTD
Cost Per Tonne
12
%
February 2015
Forecast sales to June 2015 and to December 2015
Forecasted sales for the year to June 2015
Confirmed
(31/12)
Confirmed
(30/06)
Unconfirmed
Total
Export
358 908
260 000
25 000
643 908
Inland
300 846
318 188
-
619 034
Total Anthracite
659 754
578 188
25 000
1 262 942
Energy Coal
268 788
215 000
-
483 788
Market/product
Forecasted sales for 6 months to December 2015
Market/product
Confirmed
Unconfirmed
Total
Export
250 000
80 000
330 000
Inland
330 000
-
330 000
Total Anthracite
580 000
80 000
660 000
Energy Coal
135 000
13
135 000
February 2015
Pre-stripping costs
Somkhele: Pre-strip costs
December 2014
December 2013
Opening balance on balance sheet
305
328
Cash spend in the period
227
226
(265)
(232)
267
322
Mining – expensed on units of production basis (Depreciation)
Closing balance on the balance sheet
 Petmin incurred cash stripping costs amounting to R227 million during the current period (2013:
R226 million). It is Petmin’s accounting policy to record the cash cost incurred on these stripping
activities as additions to mine development cost under property plant and equipment (a non-current
asset).
 These capitalised cash costs are expensed (depreciated) as coal is extracted. This is done on a
units-of-production basis over the life of the component of the ore body to which access is improved
and amounts to R265 million during the current period (2013: R232 million). This resulted in a net
decrease in the capital expenditure capitalised to pre-stripping activities of R38 million during the
current period (2013: decrease of R6 million).
 The depreciation is, in reality, the mining cost (stripping cost) that is expensed during the period
when run-of-mine coal is removed from the pit.
14
February 2015
NAIC – Low Cost Producer of Merchant Pig Iron (MPI)
PIG IRON MANUFACTURER
16
February 2015
NAIC

PFS and final site selection trade-off analysis underway, to be concluded by June 2015
• Proven viability of NAIC’s project based on the PEA, yielding an unlevered after tax IRR of circa 20% (Plant
1 will produce circa 900,000mt of MPI per annum)
• A comprehensive site selection process for the location of its first MPI plant, the favoured locations are
Quebec and Ohio. HATCH Engineering concluding a final trade-off analysis and PFS

The unbundling of NAIC shares to shareholders and the separate listing of NAIC remains on track, to
be implemented once PFS finalised
• Petmin to exchange its equity in NAIC at a circa ZAR 300m for equity in Muskrat Minerals Incorporated
(“MMI”)
• MMI to list on a major US or Canadian Stock Exchange with a secondary listing on the JSE and Petmin to
distribute the MMI shares to shareholders by way of a special dividend (estimated value approximately
ZAR0,50 cents per Petmin share)

Petmin’s investment in NAIC to date is R269m
•
Petmin currently owns 34.1% of NAIC and has the right to invest a further $5m into NAIC for a further 5.9%,
and an option to acquire a further 9.9% at a market related price. Petmin will be issued a further 1% of NAIC
by June 2015 and further 1.5% of NAIC upon completion of the Bankable Feasibility Study (BFS)

Petmin entitled to receive management consulting fees of $600 000 over 2 years from NAIC

Post unbundling Petmin management will remain actively involved in the development of NAIC and
secure long term value for Petmin’s shareholders in NAIC
17
February 2015
Veremo Update
Veremo status
Outstanding Claims of R 130 million as at 31 December 2014 (and R 195 million as at 28 February
2015)
•
Discussions to resolve the dispute ongoing. Legal proceedings instituted
Project issues
•
Mining Right obtained on 31 January 2014, to be executed in Limpopo Province
•
Mintek signed off on smelt test (Pig Iron 95% and Titanium Slag, 62%)
•
Project Team in the process of preparing 10MWA DC Arc furnace to do comprehensive smelt test and
process some 40 000 tons of Veremo Ore to produce some 18 000 tons of Pig Iron
•
Once the Mining Right is executed, mine development can commence
•
Water Licence remains outstanding
•
Mine Site power outstanding
19
February 2015
Strategy – A Reminder
Petmin vision:
To develop into a geographically-diversified multi-commodity mining
company delivering sustainable and superior returns to shareholders
Strategy
• Organic and acquisitive growth
• Focusing on a mix of quality cash-producing assets and projects that create “optionality”
• Capitalise on the steel value chain focusing on commodities that support infrastructure development and urbanisation
Leadership
• “Leadership at the Corporate Centre” implements board-approved strategies and sets the tone for the business
• The role of the Corporate Centre is to allocate capital and employ the best possible teams for projects and operations
• The management system is decentralised and each management team is disciplined, innovative and entrepreneurial
Goal
• To deliver sustained and superior risk-adjusted returns (capital growth, cash dividend and dividend in specie) to its
stakeholders
Petmin 2014
•
•
•
•
•
Market Cap ~ R 1.0 Billion
JSE Main Board
100% of Tendele , Anthracite cash producing in SA
Minority % in Veremo, Pig Iron, SA
Up to 40% NAIC, Pig iron projects, North-America
Commodities
2014 – 2019
Potentially through one
transaction or a series of
transactions including
mergers and unbundling
Petmin “sum of the parts” 2019
• Market Cap > R 4 Billion (25% compound growth per
annum )
• Infrastructure Based Commodities – mix of cash
producing operations & projects
• South Africa Assets <50% of NAV
Investment Criteria
Type of deal
Petmin is focused on infrastructure
development and urbanisation commodities:
Petmin will invest in politically-stable
countries with security of tenure:
Commercially sound, deliver sustained and
superior risk-adjusted returns.
•
•
•
•
•
•
•
•
•
• Opportunities must have a long potential life ie. >15 years
• The ore body must be of high quality and yield a return
(IRR) of at least 15% Operations must be at the bottom
50% of the cost curve
• Projects should be able to produce cash within 36 months
• Dividend and gearing policies to be maintained
• Petmin has a phased approach to investment in projects
• We ensure joint management control at project level
• We set upfront, predetermined deliverables that determine
if the projects proceed or not
• Our aim is to partner with reputable BEE entities and local
communities in SA and strong local partners internationally
• Over time increase our stake at a predetermined price
based on clearly determined milestones
Copper
Iron Ore
Pig-iron
Metallurgical coals (coking & anthracite)
Manganese
Thermal Coal (Eskom and exports)
Other steel additives
Stainless Steel additives
Opportunistic cash producing assets
21
February 2015
Petmin strategy
Focus
On steel value chain and commodities for urbanisation and infrastructure development
Performance
Deliver superior returns (capital growth and dividends) through efficient operations and
well-timed divestment
Growth
Optionality
Diversify
Execution
22
Organic and acquisitive
Created by mix of quality cash-producing assets and high-potential projects
Geographically and by specific commodity
Decentralised management empowered by executive team to deliver
February 2015
Disclaimer
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the information contained herein is not intended to be and shall not be deemed to be an invitation or inducement to invest in or otherwise deal in any securities of
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plans and expectations. These statements, including without limitation, those concerning the market outlook for the company’s products, expectations of prices,
production, the commencement and completion of certain exploration and production projects, may contain forward-looking views. Such views involve both known and
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projected in the forward-looking statements.
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23
February 2015
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24
February 2015