South African coal producer Petmin is to branch out into high quality pig iron. It has secured a 25% stake in a potential mine and processing operation near Johannesburg that will start production in 2010.

The company has been in advanced talks for seven months to buy into the project's owner, Veremo. It has bought a 25% stake for around 15 million shares.

The remaining 75% has been acquired by Kermas Group, one of the world's biggest ferrochrome producers. It will fund development and commissioning of the mine and processing plant for up to 700,000 tons of pig iron per year.

The deposit holds an estimated 150 million tons of magnetite ore. There is also 800 million tons of material still to be tested.

Petmin will get a annual dividend worth around £4.8 million or 25% post-tax profit from Kermas, for the first three years' production, whichever is the greater amount.

Shares first revealed in July that Petmin was in talks to buy an iron ore project. Its stock price has doubled since then to 27.5p as production advances on its anthracite coal and silica projects.