Acquisition

RNS Number:0777H
Petmin Limited
06 November 2007

6 November 2007

                                     Petmin



                          ("PETMIN" OR THE "COMPANY")



        ACQUISITION OF VEREMO HOLDINGS IN CONJUNCTION WITH KERMAS GROUP





Petmin (JSE: PET, AIM: PTMN) announces that, further to its most recent
cautionary announcement of 19 September 2007, it has agreed to a joint
acquisition, together with Framework Investments Limited (''Framework"), a 100%
owned subsidiary of Kermas Limited (collectively, the "Kermas Group"), of Veremo
Holdings Limited ("Veremo") and the prospecting rights to a substantial
polymetallic ore body, suitable for the production of high quality pig iron, in
the eastern Bushveld three hours from Johannesburg.





The highlights of the transaction include:



*    In a two-phase transaction, Petmin will acquire a 25% stake in Veremo,
     with the Kermas Group owning the remaining 75%

*    Veremo will purchase the remaining 30% of Veremo Minerals (Pty)
     Limited, owners of the prospecting rights at the project

*    Petmin will fund its share of the acquisition by the issue of
     15,073,602 new Petmin shares

*    Kermas Group will subscribe for 2,000,000 new Petmin shares at R3.00
     per share

*    The financing, development and commissioning of a mine on the deposit and 
     the construction of a pig iron processing plant in the eastern Bushveld at
     Stoffberg, 3 hours from Johannesburg, will be funded by the Kermas Group 
     up to an annual production level of 700,000 tons of pig iron

*    The ore body contains, on average, approximately 60.83 % Iron Oxide (wt%) 
     and 14.39% Titanium Dioxide (wt%) and is suitable for the production of
     high quality pig iron

*    Preliminary estimates of the tonnage contained within the project area
     indicate 150 million tons of magnetite ore in situ and 800 million tons of
     additional material that still requires testing

*    The Kermas Group has warranted that Petmin will receive a cash dividend 
     of R65,000,000 for each of the first three years of production from
     Veremo (expected to commence during 2012) or 25% of its profit after tax 
     which ever is the greater

*    Preliminary calculations indicate that the project is financially robust, 
     on the basis of pig iron sales alone. The titanium slag may contribute
     additional revenue but has not been taken into account in any of the
     abovementioned estimates

*    Petmin, currently the largest producer of anthracite and silica in
     South-Africa, will be granted an irrevocable first right of refusal to 
     supply all anthracite - currently estimated to be in excess of 200,000 tons
     per annum - and all silica that may be required by the Veremo Project for 
     a period of 5 years from first production on terms at least as favorable as
     those which Veremo is able to obtain from other suppliers



Bradley Doig, COO of Petmin, said:

"This transaction represents a further step in our development as a multi
commodity minerals business, focusing on investments which are either at or near
the cash producing stage.  We are particularly pleased to partner the Kermas
Group, who have international experience and a proven ability to manage large
projects.  The Veremo Project provides an excellent opportunity to develop an
important South African asset with significant guaranteed returns to Petmin."



The text that follows comprises the full details of the transaction, as
announced in accordance with JSE regulations.

                                PETMIN LIMITED
                        ("PETMIN" OR "THE COMPANY")



 ACQUISITION OF VEREMO HOLDINGS LIMITED ("VEREMO") AND WITHDRAWAL OF CAUTIONARY
                                  ANNOUNCEMENT





1           INTRODUCTION



Further to the most recent cautionary announcement of 19 September 2007, the
Company is pleased to announce that Petmin and Framework Investments Limited 
(''Framework"), a 100% owned subsidiary of Kermas Limited (collectively, the 
"Kermas Group"), have executed a definitive agreement ("the Agreement") in
respect of a series of transactions ("the Transactions") giving effect to the
following:



*  The joint acquisition of 100% of Veremo Holdings Limited by:

      * Petmin, who will own 25%; and
      * the Kermas Group, who will own 75%;



*  The acquisition by Veremo of the remaining 30% of Veremo Minerals (Pty)
Limited ("Veremo Minerals"); and



*  The financing, development and commissioning of a mine on the iron ore
deposit owned by Veremo and the construction of a pig iron processing plant (the
"Veremo Project") .




2           THE TRANSACTIONS



2.1                    Acquisition of Veremo

Petmin and the Kermas Group have reached agreement with all of the shareholders
of Veremo (other than the Kermas Group) for the acquisition of all of their
shares in and claims against Veremo. The acquisition of Veremo will be affected
by means of a Phase 1 transaction and a Phase 2 transaction as outlined below
and will result in Petmin owning 25% and Kermas owning 75% of Veremo.



2.1.1                            Phase 1 transaction



With effect from 9 November 2007, Petmin will acquire 24 590 966 shares
representing 9.2% of the issued shares of Veremo to be settled by way of the
allotment and issue of ordinary shares in the share capital of Petmin as
detailed in 2.1.4 below and the Kermas Group will acquire, for cash, 75 573 034
shares representing 28.3% of Veremo from a group of public shareholders.



The Phase 1 transaction is conditional upon the Securities Regulation Panel in
South Africa ("SRP") dispensing with the requirements of the SRP Code on
Takeovers and Mergers and the Rules of the SRP in respect of the Phase 1
transaction and the Phase 2 transaction, either unconditionally or on terms
acceptable to the parties, on or before 8 November 2007 or such other date as
may be agreed upon in writing between the parties, which verbal dispensation
from the SRP has been obtained.



2.1.2                            Phase 2 transaction



Following implementation of the Phase 1 transaction, the Kermas Group, through
Framework, will acquire, partly in cash and partly by way of the delivery of
Petmin shares, 157 256 000 Veremo Shares representing 58.8 % of Veremo from the
remaining public shareholders of Veremo (the "Phase 2 Sellers"), subject to the
fulfillment or waiver of, among others, the following suspensive conditions:



*  The Securities Regulation Panel in South Africa ("SRP") dispensing with the 
   requirements of the SRP Code on Takeovers and Mergers and the Rules of the 
   SRP in respect of the Phase 1 transaction and the Phase 2 transaction,
   either unconditionally or on terms acceptable to the parties, on or before 8
   November 2007 or such other date as may be agreed upon in writing between the
   parties which verbal dispensation from the SRP has been obtained;



*  By not later than 17h00 on 30 April 2008, the Phase 2 transaction is
   approved by the Minister of Mineral and Energy in South Africa in terms of
   section 11 of the  Minerals and Petroleum Resources Development Act 
   ("MPRDA"), either unconditionally or on terms and conditions acceptable to 
   the Kermas Group and Petmin; and


*  By not later than 17h00 on 30 April 2008, (to the extent necessary) the 
   Phase 2 transaction is approved by the competition authorities in South
   Africa in terms of the Competition Act, either unconditionally or on terms 
   and conditions acceptable to the Kermas Group, Petmin and the Phase 2 Sellers.



2.1.3                            Shareholding adjustment



Following the completion of the Phase 2 transaction, the Kermas Group will sell
such number of Veremo shares to Petmin as is required to increase Petmin's
interest in Veremo to 25% (see para 2.1.4 below).



2.1.4                            Purchase consideration



The acquisition consideration payable by Petmin for 25% of Veremo pursuant to
the Phase 1 transaction and the further sale referred to in paragraph 2.1.3 will
be settled by the allotment and issue of 15 073 602 new Petmin shares at an
average issue price of R3.30 per share amounting to R49 742 887.



The Kermas Group will subscribe for 2 000 000 new shares in Petmin at a
subscription price of R3.00 per share amounting to R6 000 000 in order to comply
with its obligation to deliver Petmin shares in terms of the Phase 2
transaction.



2.2    ACQUISITION OF VEREMO MINERALS AND BLACK ECONOMIC EMPOWERMENT ("BEE") 
       INITIATIVE



One of Petmin's six stated strategic objectives is to bring life to the Mining
Charter in pursuit of not only the letter, but also the spirit of the Charter.
Petmin's existing BEE equity is approximately 30% and Petmin announced on 19
September that its BEE equity may increase to approximately 48% if Petmin's
anchor BEE shareholder, Dark Capital (Pty) Limited is successful in acquiring an
additional 121 million shares in Petmin.



30% of Veremo Minerals is held by a consortium of BEE Shareholders ("BEE
Shareholder"). In terms of the existing shareholders agreement between Veremo
and the BEE Shareholders, the BEE Shareholders are precluded from disposing of
their shareholding in Veremo Minerals for a period of 5 years from the date of
signature of the agreement.



The BEE Shareholders have granted Petmin or its nominee an option to acquire
their collective 30% shareholding in Veremo Minerals for a purchase
consideration amounting to R22 500 000, which would be settled by means of a
cash payment of R9 425 000 and the issue of 4 508 621 new Petmin shares at an
issue price of R2.90.

Pursuant to the Agreement, Veremo will exercise the option to acquire to
remaining 30% of Veremo Minerals.



Petmin and the Kermas Group have agreed that in order to ensure that Petmin's
BEE shareholding is maintained at above 50%, the Kermas Group will, if
necessary, facilitate the acquisition by a BEE partner of Kermas's choice of
Petmin shares at an issue price of R 2.90.





3           DESCRIPTION OF THE VEREMO IRON ORE PROJECT



Veremo holds the prospecting rights to a substantial polymetallic ore body
containing on average approximately 60.83 % Fe2O3 (wt%) and 14.39% TiO2 (wt%)
suitable for the production of high quality pig iron, in the eastern Bushveld in
Mpumalanga at Stoffberg, 3 hours from Johannesburg.

The ore body forms part of layer 21 of the well known magnetite layers within
the Bushveld Complex, and is particularly well developed in the area,
outcropping on surface, with thickness of up to 60 meters having been
encountered in a comprehensive drilling program.



To date 90 holes have been drilled, equating to 6000 meters. The average depth
per drill hole over all the holes drilled is 32 meters. In addition, 306
trenches and 15 pits have been excavated to expose eluvial ore and determine
outcrop positions.



The resource modeling and a SAMREC compliant Competent Person's Report ("CPR")
is under way and should be completed before June 2008.



Preliminary estimates of the tonnage contained within the project area indicate
150 million tons of magnetite ore in situ and 800 million tons of additional
material that still requires testing. The reef thickness from south to north
averages 44.39m. Mineral Consultants are currently developing an initial 25 year
mine plan.



Pursuant to the Agreement, The Kermas Group will fund and manage the
construction and commissioning of an integrated plant to initially produce 700
000 tonnes per annum of ductile iron and titanium-bearing slag from a mine
producing in the region of 2 to 2.5 million tonnes of run of mine ore, the
intention being to increase production over time. At the anticipated expanded
production rate, the ore-body should sustain a life of mine in excess of 50
years.



Preliminary calculations indicate that the project is financially robust, on the
basis of pig iron sales only. The titanium slag may contribute additional
revenue but has not been taken into account in any of the abovementioned
estimates.





4           Development of the Veremo Iron Ore Project



Petmin and the Kermas Group will enter into a shareholders agreement in respect
of their shareholding in Veremo in accordance with the essential terms and
conditions contained in the Agreement.



In accordance with the Agreement:



*   the Kermas Group will fund and develop the Veremo iron project on normal 
    commercial terms to commence production within 48 months from 30 April
    2008;


*   the Kermas Group has warranted that Veremo will for the first three years 
    from the said production date, distribute to Petmin a cash dividend of R65
    000 000 (sixty five million Rand) or 25% of its profit after tax which ever 
    is the greater;


*   Petmin will have no obligations to fund the Veremo Project  and all funding 
    required to produce at least 700 000 tons of pig iron per annum (including 
    capital cost and working capital) will be provided to and/or procured
    by the Kermas Group on normal commercial terms for Veremo and Petmin will 
    suffer no dilution of its shareholding in Veremo as a consequence of such 
    funding;



*   in the event that production is increased above 700 000 tons of pig iron 
    per annum and should funding be required from Veremo shareholders, then
    Petmin will be obliged to fund its pro rata share of the additional capital
    requirements; and



*   Petmin, currently the largest producer of anthracite and silica in
    South-Africa, will be granted an irrevocable first right of refusal to 
    supply all anthracite - currently estimated to be in excess of 200 000 tons 
    per annum - and all silica that may be required by the Veremo Project for 
    a period of 5 years from first production of on terms at least as favorable 
    as those which Veremo is able to obtain from other suppliers.





5           GROUP STRUCTURE



5.1     Veremo group structure before implementation of the Transactions

5.2     Veremo Group Structure after implementation of the Transactions

Please see the PDF at the link below for the diagrams of these structures:

http://www.rns-pdf.londonstockexchange.com/rns/0777h_-2007-11-5.pdf





6           RATIONALE


In line with Petmin's growth strategy this transaction represents a further step
in the development of Petmin into a multi commodity minerals business with a
particular emphasis on industrial minerals, bulk commodities and base metals
that are either cash producing and or near cash producing. The Kermas Group is a
substantial international partner with a proven ability to manage large projects
and Petmin is particularly pleased to partner the Kermas Group in developing an
important South African asset with significant guaranteed returns to Petmin.


The transaction will further enhance Petmin's BEE status as an HDSA controlled
mining company.



7           THE KERMAS GROUP


Framework is a wholly owned subsidiary of Kermas. Kermas is an investment
holding company with a variety of investments in the resources sector in South
Africa, including a substantial indirect shareholding in Samancor Chrome
Limited, the second largest producer of ferrochrome in the world.




8           FINANCIAL EFFECTS


The table below sets out the pro forma financial effects of the transaction,
based on Petmin's audited results for the year ended 30 June 2007. The financial
effects are presented for illustrative purposes only and because of their nature
may not give a fair reflection of the company's results, financial position and
changes in equity after the transaction.

It has been assumed for purposes of the pro forma financial effects that the
above transaction took place with effect from 1 July 2006 for Income Statement
purposes and 30 June 2007 for Balance Sheet purposes. The directors of Petmin
are responsible for the preparation of the financial effects, which have not
been reviewed by the auditors.
                                                               Before              After          % Change
Profit (Loss) per share (cents)                                 16.14              22.41               39%
Headline profit (loss) per share (cents)                         5.28               5.04              (5%)
Weighted number of shares in issue (in '000)                  461 041            483 115                5%
Net asset value per share (cents)                               93.99             110.72               18%
Net tangible asset value per share (cents)                      92.69             109.48               18%



The "Before" financial information has been extracted, without adjustment from
the published audited consolidated results of Petmin for the twelve months ended
30 June 2007.

The "After" column represents the effects of the transaction.



The "% Change" column compares the "After" column to the "Before" column.

The financial effects set out herein do not take into account the annual
guaranteed dividend of ZAR 65 000 000 payable to Petmin for the three years from
2012 as Petmin considers this to be too far in the future to be accounted for
now.





9           Withdrawal of cautionary and categorisation



Petmin is pleased to announce that the cautionary announcement most recently
confirmed on 19 September 2007 is hereby withdrawn.



Under the new Listings Requirements of the JSE Limited which came into effect on
15 October 2007 this transaction is a Category 2 transaction.







Enquiries:


Petmin
Jan Du Preez (CEO) [phone]
Bradley Doig (COO) [phone]
www.petmin.co.za

Numis Securities Limited [phone]
John Harrison
Nick Stamp

Parkgreen Communications [phone]
Justine Howarth
Erica Nelson




                      This information is provided by RNS
            The company news service from the London Stock Exchange
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