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SOMKHELE ANTHRACITE MINE: OPERATIONAL UPDATE

Thursday, 21 April 2016

Tendele Coal Mining (Pty) Limited (“Tendele”), the operator of Petmin’s Somkhele anthracite mine in KwaZulu-Natal, reported the following production and sales volumes for the quarter ended 31 March 2016.

  Description Quarter ended
March 2016
Quarter ended
March 2015
  % Change Year ended
June 2015
 
  Anthracite tonnes produced 261 739 337 268 (22%) 1335 233  
  Anthracite tonnes sold 175 843 286 259 (39%) 1 222 150  
  Anthracite yield 43.0% 44.3% (3%) 44.13%  
  Energy coal tonnes produced 92 461 99 327 (7%) 368 413  
  Energy coal tonnes sold 99 847 5 998 1 565% 352 255  
  Energy coal yield 33.4% 27.9% 20% 26.80%  

The production and sales volumes for the 9 months ended 31 March 2016 were:

  Description 9 Months ended
March 2016
9 Months ended
March 2015
% Change  
  Anthracite tonnes produced 898 509 1 015 270 (12%)  
  Anthracite tonnes sold 797 056 946 013 (16%)  
  Anthracite yield 43.8% 44.5% (2%)  
  Energy coal tonnes produced 250 111 270 801 (8%)  
  Energy coal tonnes sold 337 262 274 786 23%  
  Energy coal yield 28.9% 26.4% 23%
 

The average cost of production for the year ending 30 June 2016 is expected to increase by 9% from 2015.

Production of metallurgical anthracite for the quarter decreased by 22% to 261 739 tonnes (2015: 337 268 tonnes). As disclosed in Petmin’s Interim Results for the six months ended 31 December 2015, production was affected by geological conditions in one of the three open pits currently being mined. These conditions were localised in the one area of the Luhlanga pit.

Tendele has mined through the dyke that affected this pit and, we are pleased to report that production volumes in the month of April have reverted to budgeted levels.

Management interventions included bringing an additional mining team on site and the institution of a mining production bonus based on productivity.

The introduction of the production bonus based on productivity after many years of discussion is indicative of the sense of working together as a team and improved relations between mine management and its employees and union representatives as Tendele continues to operate in very difficult market conditions.

Sales volumes decreased by 39% to 175 843 tonnes (2015: 286 259 tonnes). The reduction in sales volumes in this quarter is mainly due to the timing of export shipments that moved into the months of April and May. Demand for Somkhele anthracite products remains firm and we expect our annualised sales volumes to be maintained at around 1.2 million tonnes per annum.

Sales commitments have been received for 1 170 000 tonnes of an estimated 1.2 million tonnes of anthracite production for the year ending 30 June 2016. The remaining tonnes are under offer and confirmation of these sales is expected.

Average inland sales prices for the three months ended 31 March 2016 reduced by 7% from those achieved in 2015. Average export prices for the three months ended 31 March 2016 were some 45% higher than in 2015 largely due to the weaker exchange rate (42% weaker).

Export anthracite prices in dollar terms remain under pressure.

Energy coal production reduced by 7% to 92 461 tonnes for the quarter (2015: 99 327 tonnes). 99 847 tonnes of energy coal was sold in the three-month period ended 31 March 2016 (2015: 5 998 tonnes). The low level of energy coal sales in 2015 was a result of timing differences as Somkhele built up stock for large export shipments. Demand for energy coal from new markets has increased substantially, and we expect to sell 481,000 tonnes in the year ending 30 June 2016 (2015: 352 255 tonnes).

DROUGHT AND WATER SHORTAGE

We are pleased to report that the recent rains in KwaZulu-Natal have replenished our water supply and we now have sufficient process water to run all three coal processing plants at full production for the foreseeable future.

NORTH ATLANTIC IRON CORPORATION (NAIC) PROJECT UPDATE

During the quarter ended 31 March 2016, Petmin made its final $2m stepped investment into the NAIC project and has now invested a total US$25 million for a 40% shareholding in NAIC.

The NAIC project economics remain robust and the bankable feasibility study is on track for completion in June 2016.

SHARE BUYBACKS

As announced in the Interim Results for the six months ended 31 December 2015, Petmin’s share buy-back programme has continued and at 31 March 2016 Petmin held 42,292,981 shares in treasury. At current price levels, we believe our share is undervalued and we will continue with share buy-backs as and when opportunities arise.

CASH AND FACILITIES

As previously announced in the Interim Results for the six months ended 31 December 2015, during the quarter ended 31 March 2016, Tendele repaid R60 million of the Nedbank Revolving Credit Facility (RCF). At 31 March 2016, the Group had R194 million cash on hand and its net gearing (Interest bearing debt less cash, divided by equity) was 14.2% (31 December 2015: 15.1%).

The R230 million RCF facility remains available for Tendele to redraw.

In addition to the RCF, the Petmin Group has unutilised overdraft facilities of R100 million.

LITIGATION

As disclosed in the Interim Results for the six months ended 31 December 2015, litigation on the legal dispute with a customer of Tendele continues.

Petmin also continues to pursue its R195 million claim against Framework Investments and Kermas Limited related to the Veremo iron ore project.

This update and SENS announcement has not been reviewed or audited by the Company`s auditors.

Enquiries:
Petmin: Bradley Doig

+27 11 706 1644
+27 11 706 1644

Media: Jonathon Rees (Communications and investor relations)
Jonathon Rees (Communications and investor relations)
+27 76 185 1827
+27 76 185 1827

Sponsor and Corporate Adviser
River Group
Johannesburg
21 April 2016

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