TIDMPDL
RNS Number : 1350K
Petra Diamonds Limited
19 September 2016
This announcement contains inside information
19 September 2016 LSE: PDL
Petra Diamonds Limited
("Petra" or "the Company" or "the Group")
Preliminary Results Announcement for the Year ended 30 June 2016
(unaudited)
Petra Diamonds Limited announces its preliminary results
(unaudited) for the year ended 30 June 2016 ("the Year" or "FY
2016").
Financial Highlights
-- Revenue up 1% to US$430.9 million (FY 2015: US$425.0 million).
-- Adjusted EBITDA(3) up 18% to US$164.3 million (FY 2015: US$139.3 million).
-- Adjusted net profit after tax(4) up 1% to US$63.6 million (FY 2015: US$62.8 million).
-- Net profit after tax up 12% to US$66.8 million (FY 2015: US$59.6 million).
-- Adjusted EPS(4) : 9.76 US$ cents per share (FY 2015: 10.09 US$ cents per share).
-- Basic EPS: 10.38 US$ cents per share (FY 2015: 9.46 US$ cents per share).
-- Adjusted operating cashflow(8) up 36% to US$192.0 million (FY 2015: US$141.3 million).
-- Net debt(7) : US$384.8 million (30 June 2015: US$171.7 million).
Operational Highlights
-- Production up 16% to 3.7 Mcts (FY 2015: 3.2 Mcts), ahead of Company guidance.
-- Capex of US$324.1 million (FY 2015: US$274.1 million),
reflecting the peak activity around the Group's expansion
programmes.
-- Safety: Group LTIFR stable at 0.29 (FY 2015: 0.29).
-- Gross Diamond Resources (inclusive of Reserves) increased 1%
to 312.2 Mcts (30 June 2015: 308.7 Mcts).
Corporate
-- Acquisition of the Kimberley Mines assets in South Africa
from De Beers in January 2016 in a joint operation with Ekapa
Mining Pty Limited ("Ekapa Mining") and subsequent merger of
Petra's Kimberley operations with the operations of Ekapa Mining to
create Kimberley Ekapa Mining Joint Venture ("KEM JV") in July
2016. From FY 2017, Petra will account for its share of investment
in the KEM JV reflecting its 75.9% interest in the results of the
joint operation.
-- Simplification of Group and black economic empowerment
("BEE") partner holding structure in the South African operations,
effective from 1 July 2016, with the Itumeleng Petra Diamonds
Employee Trust now holding a consistent 12% interest in each of the
South African operations.
-- Agreement reached with Petra's lender group during June 2016
to revise the covenant ratios related to its senior debt facilities
for the next three bi-annual measurements, starting 30 June
2016.
-- Director change - David Abery stepped down as Finance
Director on 30 June 2016; Jacques Breytenbach appointed as Chief
Financial Officer and Koos Visser appointed as Chief Operating
Officer, both effective 1 July 2016.
Outlook
-- Production expected to rise to 4.4 - 4.6 Mcts in FY 2017
(excluding ca. 0.2 Mcts attributable to Petra's joint venture
partner at KEM JV), before reaching Petra's stated long-term target
of ca. 5 Mcts in FY 2018, a year earlier than expected, and rising
further to ca. 5.3 Mcts by FY 2019 - both targets representing
production attributable to Petra. Barring the exclusion of
production attributable to Petra's joint venture partner at KEM JV,
the Company maintains its production guidance as published on 25
July 2016.
-- All expansion programmes materially on track and on budget,
with both the new sub level cave ("SLC") at Finsch and the new
block cave at Cullinan expected to deliver undiluted ore in excess
of ca. 1 Mt each during FY 2017. The new Cullinan plant remains on
track to be fully operational by Q4 FY 2017.
-- Despite a cautious outlook on the diamond market, Petra has
made a solid start to FY 2017, with the first tender held in early
September yielding ca. US$94 million (ca. 745 kcts sold); two more
tenders will be held during H1 FY 2017. Prices on a like-for-like
basis were generally on par with H2 FY 2016. In terms of
production, the operations are performing according to
expectations, with an improved product mix and increase in ROM
grades witnessed across all operations (in line with guidance).
-- Petra's revised maintenance covenants were comfortably met
for the measurement period to 30 June 2016. However, distribution
covenants were not met for the measurement period to 30 June 2016
and Petra will therefore not declare a dividend for FY 2016. Should
the current positive production and trading conditions continue,
Petra will revisit this with its lender group post H1 FY 2017, with
the intention to resume dividends as soon as possible.
Johan Dippenaar, CEO, said:
"The Company delivered a strong set of results notwithstanding
the number of challenges faced during FY 2016, which included
managing production from heavily diluted areas at our underground
mines, as well as market related pressure on prices particularly in
H1.
"I am particularly pleased with the continued steady progress
that has been made with our expansion programmes, which have
remained on target over the last seven years. FY 2017 is forecast
to be the first year that the Company reaps the benefit of this
work as we are in line to become free cashflow positive in H2, with
our cashflow profile rising strongly thereafter.
"We now enter the final phase of our capital expansion
programmes in a strong position, with a robust balance sheet,
efficient cost base and the drive to succeed."
Results Presentation, Webcast and Conference Call
Presentation:
A presentation for analysts will be held at 9:30am BST on 19
September 2016 at the offices of Buchanan, 107 Cheapside, London
EC2V 6DN.
Webcast:
A live webcast of the presentation will be available on Petra's
website at www.petradiamonds.com and on:
http://www.investis-live.com/petra-diamonds/57c057a3f66fa9090012353f/r8d52s.
A recording will be available from 1:00pm BST on 19 September 2016
on the same link.
Conference Call
A conference call with management to cater for North American
and other international investors will be held at 4:00pm BST on 19
September 2016. Participants are advised to view the results
presentation webcast in advance of the call, as the main management
commentary on the results will not be repeated.
-- From the United States (toll free): 1866 928 7517
-- From the rest of the world: 44 203 428 1542
-- From the UK (toll free): 0808 237 0040
-- From South Africa (toll free): 0800 222 290
-- Participant passcode: 91009633#
SUMMARY OF RESULTS (unaudited)
Year ended Year ended
30 June 2016 30 June 2015
("FY 2016") ("FY 2015")
US$ million US$ million
--------------------------------------------------- -------------- --------------
Revenue 430.9 425.0
Adjusted mining and processing costs(1) (257.7) (272.7)
Other direct income 2.8 2.2
--------------------------------------------------- -------------- --------------
Profit from mining activities(2) 176.0 154.5
--------------------------------------------------- -------------- --------------
Exploration expense (2.7) (5.6)
Corporate overhead (9.0) (9.6)
--------------------------------------------------- -------------- --------------
Adjusted EBITDA(3) 164.3 139.3
--------------------------------------------------- -------------- --------------
Depreciation (51.8) (38.3)
Share-based expense (4.1) (6.6)
Net finance expense (36.2) (6.2)
Tax expense (8.6) (25.4)
--------------------------------------------------- -------------- --------------
Adjusted net profit after tax(4) 63.6 62.8
Net unrealised foreign exchange gains/(losses) 3.2 (3.2)
Net profit after tax - Group 66.8 59.6
--------------------------------------------------- -------------- --------------
Earnings per share attributable to equity holders
of the Company
Basic profit per share (US$ cents) 10.38 9.46
Adjusted basic profit per share (US$ cents) 9.76 10.09
Unit As at 30 As at 30
June 2016 June 2015
------------------------------------------- -------- ----------- -----------
Cash at bank (including restricted
amounts) US$M 48.7 166.6
Diamond debtors US$M 63.4 57.6
Diamond inventories US$M 43.6 33.5
Diamond inventories(5) Carats 549,620 339,489
US$300 million loan notes (issued
May 2015) (including accrued interest)
(6) US$M 302.0 303.3
Bank loans and borrowings US$M 131.5 35.0
Net debt(7) US$M 384.8 171.7
ZAR bank facilities undrawn and available ZARM 1,525 2,800
USD bank facilities undrawn and available US$M 6.1 25.0
Total bank facilities undrawn and
available US$M 110.0 255.1
Adjusted operating cashflow(8) US$M 192.0 141.3
Notes:
The Group uses several non-GAAP measures above and throughout
this report, including adjusted mining and processing costs, profit
from mining activities, adjusted EBITDA, adjusted net profit after
tax, adjusted earnings per share, adjusted operating cashflow and
net debt. Management considers the adjusted figures to be more
appropriate when comparing results year on year. As these are
non-GAAP measures, they should not be considered as replacements
for IFRS measures. The Company's definition of these non-GAAP
measures may not be comparable to other similarly titled measures
reported by other companies.
1. Adjusted mining and processing costs are mining and
processing costs stated before depreciation and share-based
expense.
2. Profit from mining activities is revenue less adjusted mining
and processing costs plus other direct income.
3. Adjusted EBITDA is stated before depreciation, share-based
expense, net finance expense, tax expense and net unrealised
foreign exchange gains and losses.
4. Adjusted net profit after tax and adjusted basic earnings per
share are net profit after tax and earnings per share stated before
net unrealised foreign exchange gains and losses.
5. Diamond inventory increase mainly due to the Kimberley Mines
joint operation and toll treatment arrangement. Refer to the
'Kimberley Operations' section.
6. The US$ loan note of US$302.0 million (FY 2015: US$303.3
million) represents the gross proceeds of US$300 million and
accrued interest of US$2.0 million (excluding transaction
costs).
7. Net debt is the US$ loan notes and bank loans and borrowings net of cash at bank.
8. Adjusted operating cashflow is operating cashflow adjusted
for the cash effect of the movement in diamond debtors between each
financial year end, adjusted for unrealised foreign exchange
translation movements in diamond debtors.
For further information, please contact:
Petra Diamonds, London Telephone: +44 20 7494 8203
Cathy Malins cathy.malins@petradiamonds.com
Salisha Ilyas salisha.ilyas@petradiamonds.com
Buchanan Telephone: +44 20 7466 5000
(PR Adviser)
Bobby Morse bobbym@buchanan.uk.com
Anna Michniewicz annam@buchanan.uk.com
RBC Capital Markets Telephone: +44 20 7653 4000
(Joint Broker)
Matthew Coakes matthew.coakes@rbccm.com
Jonathan Hardy jonathan.hardy@rbccm.com
Barclays Telephone: +44 20 7623 2323
(Joint Broker)
Bertie Whitehead bertie.whitehead@barclays.com
Philip Drake philip.e.drake@barclays.com
BMO Capital Markets Telephone: +44 20 7236 1010
(Joint Broker)
Jeffrey Couch jeffrey.couch@bmo.com
Neil Haycock neil.haycock@bmo.com
Follow our corporate news feed on Twitter
Follow our dedicated investor relations news feed on Twitter
Follow us on LinkedIn
About Petra Diamonds Limited
Petra Diamonds is a leading independent diamond mining group and
an increasingly important supplier of rough diamonds to the
international market. The Company has interests in five producing
operations: three underground mines in South Africa (Finsch,
Cullinan and Koffiefontein), the Kimberley Operations (including
the Kimberley Underground mine and extensive tailings retreatment
operations) and one open pit mine in Tanzania (Williamson). It also
maintains an exploration programme in Botswana.
Petra has a core objective to steadily increase annual
production to ca. 5.3 million carats by FY 2019. The Group has a
significant resource base in excess of 300 million carats.
Petra conducts all operations according to the highest ethical
standards and will only operate in countries which are members of
the Kimberley Process. Petra is quoted with a premium listing on
the Main Market of the London Stock Exchange under the ticker 'PDL'
and is a constituent of the FTSE4Good Index. For more information,
visit the Company's website at www.petradiamonds.com.
CEO'S REVIEW
FY 2016 saw further growth in throughput to 19.0 Mt and
production to 3.7 Mcts, representing record production levels for
the Group.
The Company's financial results were impacted by the weaker
diamond market for the Year, with pricing achieved by Petra being
down ca. 6% on a like for like basis for the Year, coupled with
realised foreign exchange losses on forward exchange contracts
entered into to cover a portion of US Dollar proceeds from the
Company's South African tenders. However the impact of these items
was mitigated by our focus on efficiencies and cost control, as
well as the significant weakening of the South African Rand (lower
US Dollar reported costs when translating the South African
operations' ZAR denominated costs at weaker ZAR:USD exchange
rates). The Company therefore recorded an Adjusted EBITDA margin of
38% (FY 2015: 33%), despite the challenging market conditions.
We are now on track to deliver further growth to 4.4 - 4.6 Mcts
(excluding ca. 0.2 Mcts attributable to our joint venture partner
at KEM JV) in FY 2017 and are then expected to reach our target of
ca. 5 Mcts in FY 2018, a year earlier than expected, with
production forecast to rise to ca. 5.3 Mcts in FY 2019.
Petra will provide analyst guidance post FY 2019 in due course,
but, as we have previously noted, our focus will be on maximising
overall value, as opposed to maximising volumes. We will achieve
this by optimising production and plant processes, suited to the
unique characteristics of each mine's orebody, as well as by
monitoring market demand and prices. Given our well-diversified
asset base, along with the quality and size of our orebodies, we
will have a lot of flexibility in how we can maximise the value of
our production in the future.
Petra remained in a transitionary period in FY 2016, as we
contended with the dilution in the old mining areas of our
underground mines, while the expansion programmes worked hard to
open up the new, undiluted areas. However by keeping the
development work on track, Petra has navigated the most difficult
stretch of this journey, and our progress is evident in the
improving ROM grade and product mix achieved at both Finsch and
Cullinan for the Year. The new SLC at Finsch and the new block cave
at Cullinan are both expected to deliver undiluted ore in excess of
1 Mt in FY 2017 and we have therefore provided guidance for higher
grades and a better average quality of diamonds at both operations
for the year, though with the caution that we could see some
volatility.
An important development during the Year was the acquisition of
the Kimberley Mines assets from De Beers in January 2016 in a
partnership with Ekapa Mining. Following this, Petra and Ekapa
Mining entered into a toll treatment agreement for the rest of FY
2016, prior to the merger of Petra and Ekapa Mining's mining assets
in Kimberley in July 2016. Combining these assets will lead to a
number of operational synergies, especially with the use of the
high volume Central Treatment Plant that was acquired with the
Kimberley Mines transaction. This is expected to allow for a much
longer mine life of ca. 20 years for both the Kimberley Underground
operation and the various tailings programmes, thereby contributing
to the sustainability of diamond mining operations in Kimberley, to
the benefit of all stakeholders. During and after our initial two
year period whilst development work is undertaken, the business
unit will remain entirely self-funded from its own cashflow and is
expected to remain cashflow positive.
Overall, the bigger picture for Petra remains the same in that
FY 2016 represented the Company's peak Capex year with total
capital spend of US$297.6 million (excluding capitalised borrowing
costs). While we have one more year of significant Capex ahead in
FY 2017, the guided level of ca. US$218 million is already
substantially lower than FY 2016, and will then decrease even
further to ca. US$130 million in FY 2018 and ca. US$85 million in
FY 2019 (FY 2017 money terms). Petra remains fully financed to the
completion of this Capex profile. The Group is expected to become
free cashflow positive from the second half of FY 2017, and
strongly cashflow generative from FY 2018 onwards.
In terms of health and safety, our LTIFR remained stable at 0.29
for the Year, which is a solid achievement in the context of the
high level of construction activities currently underway and for
underground operations. However, we regrettably reported a fatality
in July 2015 at the Tailings Treatment Plant at the Cullinan mine.
Post Year end, Petra also experienced a fatality at the Williamson
mine in August 2016, related to work on an overhead power line. The
safety of all Petra employees is unquestionably the most important
priority for the business and we will therefore keep striving to
achieve a zero-harm workplace.
It was encouraging that labour relations in South Africa
remained stable for the Year, which we believe is in part due to
the high level of focus we place on this area. An important
component of our labour relations strategy was realised with the
restructure and simplification of the Group and affiliated BEE
holdings of our South African operations, effective from 1 July
2016. This has allowed for the Itumeleng Petra Diamonds Employee
Trust ("IPDET") to hold a consistent 12% stake in each of our South
African mines, thereby allowing all beneficiaries (comprising South
African employees) to directly benefit from the positive outlook
for our operations by way of annual distributions to beneficiaries
of the trust based on the South African operations' profitability.
For further detail on the impact of the Group's effective interest
in its underlying operations refer to note 16 in the financial
statements.
Finally, there was a change to our Board at the end of the Year,
when David Abery stepped down as Finance Director on 30 June 2016.
David had been with Petra for 13 years and I would like to thank
him for his outstanding contribution to the Company over this
period. Effective 1 July 2016, we made two senior management
changes, with the promotion of Jacques Breytenbach to Chief
Financial Officer and Koos Visser to Chief Operating Officer. These
new roles will be integral to the daily management of the Company
and its operations, as well as to the delivery of our medium- to
long-term strategy.
DIVID
Petra's lender group's distribution covenants were not met for
the measurement period to 30 June 2016 and Petra will therefore not
declare a dividend for FY 2016.
Petra is highly committed to returns to shareholders and the
resumption of dividend payments remains a priority for the Board.
Should the current positive production and trading conditions
continue, Petra will revisit this with its lender group post H1 FY
2017, with the intention to resume dividends as soon as
possible.
THE DIAMOND MARKET
The rough diamond market experienced challenging conditions in
H1 FY 2016, as it continued to be impacted by excess polished
inventory in the pipeline, liquidity issues in the midstream, the
strong US Dollar and a slowdown in retail demand from China.
However, a number of steps were taken to address the market
challenges, including reduced supply from the major diamond
producers (via production cuts and decreased sales volumes),
reduced rough diamond pricing, and increased consumer marketing
(both branded and generic diamond marketing). This led to the
market stabilising in early calendar 2016, with good sales demand
from the midstream of the diamond pipeline (the cutting and
polishing / manufacturing segment) leading to improved sales
volumes of rough diamonds.
Given that the first half of the calendar year is the seasonally
stronger time for the rough diamond market, Petra remains cautious
with regards to the market outlook for the remainder of the
calendar year. Market conditions are likely to depend on continued
supply control from the major producers to the midstream and stable
retail demand, particularly in the US, the largest global
market.
Global diamond supply remained constrained in 2015, with output
only rising 1.6% from 125 Mcts to 127 Mcts, which remains
significantly below the high of 177 Mcts in 2005 (Kimberley Process
Statistics). While there are some new mines due to come into
production over the next two years, none are sufficiently sizeable
to address the declining production profile of some of the world's
largest diamond mines, nor have there been any major diamond
discoveries since the 1990s. It is therefore likely that the world
has already seen peak diamond production.
On the demand side, while macroeconomic conditions remain
volatile and damaging to consumer confidence in the short-term,
Petra still anticipates a positive long-term outlook for the
industry due to the ever-growing numbers of middle classes in
emerging markets, as well as continued growth in the major US
market. Petra is taking an active role in the sustainability of
consumer demand via its position as a founder member of the Diamond
Producers Association, which will shortly commence its first
marketing campaign to consumers in the US, thereby assuming
responsibility for the generic marketing of our unique product.
Diamond Prices:
Rough diamond prices fell ca. 9% in H1 FY 2016, before
recovering ca. 3% in H2 due to the stabilisation of the diamond
market, leading to rough prices being overall down ca. 6% for the
Year (compared to prices realised in FY 2015).
The Company held its first tender of FY 2017 in early September
yielding ca. US$94 million (ca. 745 kcts sold) (including KEM JV
diamonds sold at a 75.9% attributable basis); two more tenders will
be held during H1 FY 2017. The market is noted as being on a stable
footing, with prices on a like-for-like basis generally on par with
H2 FY 2016.
Given Petra's cautious outlook for the diamond market, the
Company is using flat pricing on a like for like basis in its
models for FY 2017. However, the continued shift from the old,
diluted mining areas to the new, undiluted mining areas, as well as
the higher contribution of ROM carats versus tailings at the
Company's underground mines in South Africa, is expected to see an
improved product mix at Finsch, Cullinan and Koffiefontein, leading
to a higher average value per carat. Hence, Petra's price guidance
below reflects the impact of an improved product mix, at current
market pricing.
Mine Guidance Actual Actual
US$/ct(1) US$/ct(2) US$/ct(2)
FY 2017 FY 2016 FY 2015
---------------------- ---------- ---------- ----------
Finsch 100 - 105 89 90
---------------------- ---------- ---------- ----------
Cullinan 105 - 115 126(3) 174(3)
---------------------- ---------- ---------- ----------
Koffiefontein 520 - 550 462 386
---------------------- ---------- ---------- ----------
Kimberley Operations 125 - 130 132(4) 302(4)
---------------------- ---------- ---------- ----------
Williamson 220 - 230 384(5) 298
---------------------- ---------- ---------- ----------
Notes:
1. Guidance is based on expected weighted average prices for
full year FY 2017, incorporating all sales (ROM and tailings), but
not including Exceptional Diamonds (stones above US$5 million in
value).
2. All sales (ROM and Tailings) including Exceptional Diamonds
were used to calculate the above average values.
3. Excluding Exceptional Diamonds, the average value per carat
for FY 2016 was US$109 and for FY 2015 was US$119.
4. The average value per carat for FY 2015 reflects ROM sales
from Kimberley Underground only, whereas the average value per
carat for FY 2016 reflects the dilutionary impact of combining
tailings and ROM sales from H2 FY 2016 onwards.
5. Excluding Exceptional Diamonds, the average value per carat
for FY 2016 was US$238 per carat and US$298 per carat for FY
2015.
FINANCIAL REVIEW
Revenue
Group revenue for FY 2016 increased 1% to US$430.9 million (FY
2015: US$425.0 million) due to an increase in volumes sold, most
notably tailings carats sold from the Kimberley Mines joint
operation and tolling agreement, partially offset by softer diamond
prices in FY 2016.
Exceptional Diamonds contributed US$36.3 million for the Year
(FY 2015: US$38.7 million), further to the sale of two pink
diamonds from Williamson for US$25.1 million, with the remaining
US$11.2 million being US$6.0 million from the sale of an
exceptional 121 carat white stone from Cullinan and US$5.2 million
from Petra's 15% share in the sales proceeds (after expenses) of
the 24.18 carat Cullinan Dream in June 2016.
Petra sold both of the pink diamonds mentioned above into
polishing partnerships:
-- the 23 carat pink was sold for US$10.1 million and Petra has
retained a 20% interest in the sales proceeds (net of expenses) of
the polished; and
-- the 32 carat pink was sold for US$15.0 million and Petra will
receive 10% of the value uplift of the polished.
The polished stones from both pink diamonds are expected to be
sold in FY 2017 and only then will the proceeds from Petra's share
in the retained interest held be recognised as revenue.
Mining and processing costs
The mining and processing costs for the Year are comprised of
on-mine cash costs as well as other operational expenses. A
breakdown of the total mining and processing costs for the Year is
set out below.
Group
Diamond technical, Total
inventory support Adjusted mining and
On-mine and and mining and Share processing
cash Diamond stockpile marketing processing based costs
costs(1) royalties movement costs(2) costs Depreciation(3) expense(3) (IFRS)
US$m US$m US$m US$m US$m US$m US$m US$m
--------- ----------- ----------- ----------- ----------- ----------- ---------------- ----------- -----------
FY 2016 246.4 5.4 (14.1) 20.0 257.7 51.0 1.6 310.3
--------- ----------- ----------- ----------- ----------- ----------- ---------------- ----------- -----------
FY 2015 253.4 4.7 (6.0) 20.6 272.7 37.5 3.7 313.9
--------- ----------- ----------- ----------- ----------- ----------- ---------------- ----------- -----------
Notes:
1. Includes all direct cash operating expenditure at operational
level, i.e. labour, consumables, utilities and on-mine
overheads.
2. Certain technical, support and marketing activities are conducted on a centralised basis.
3. Excludes exploration and corporate / administration.
Operating costs in FY 2016 remained in line with expectations,
despite ongoing inflationary pressures. Group on-mine US$ cash
costs decreased by 3% due to:
-- an increase in tonnes treated versus FY 2015 (including the
impact of additional tonnes treated and fixed costs incurred at the
Kimberley Operations) (7% increase);
-- inflationary increases, including the impact of electricity and labour costs (7% increase);
-- offset by the positive effect of translating the South
African operations' ZAR denominated costs at the weaker ZAR:USD
exchange rate (17% decrease).
Unit costs on a mine by mine basis are covered in the
operational review below.
Certain cost categories in South Africa, in particular
electricity and labour, increased in excess of South African
inflation (South African CPI stood at ca. 6% at 30 June 2016), but
as the bulk of Petra's operating costs are incurred in ZAR, the
weakening of the average ZAR exchange rate against the US Dollar
(FY 2016 ZAR14.51:US$1 versus FY 2015 ZAR11.45:US$1) negated the
increased costs in USD reported terms as mentioned above.
Profit from mining activities
The Company's profit from mining activities (before depreciation
and share based payments) increased 14% to US$176.0 million (FY
2015: US$154.5 million), mainly due to the benefit of the weakening
ZAR:USD exchange rate and the effect on USD reported costs.
Adjusted operating cashflow
Adjusted operating cashflow (IFRS operating cashflow adjusted
for the cash effect of the movement in diamond debtors between each
financial year end, excluding unrealised foreign exchange
translation movements) was up 36% to US$192.0 million (FY 2015:
US$141.3 million), due to the increase in profits from mining
activities and improved working capital position at Year end.
Operating cashflow was US$177.3 million (FY 2015: US$132.4
million) but management considers the adjusted figure to provide a
more useful view of the underlying growth in operating cashflow, as
the IFRS figure does not reflect the level of diamond debtors at
Year end of US$63.4 million (30 June 2015: US$57.6 million) - refer
to the 'Cash and Diamond Debtors' section.
Exploration
Exploration expenditure (before depreciation) decreased to
US$2.7 million (FY 2015: US$5.6 million) due to reduced exploration
activities - refer to the 'Exploration' section.
Corporate overhead - General and Administration
Corporate overhead (before depreciation and share based
payments) decreased 6% to US$9.0 million for the Year (FY 2015:
US$9.6 million). Given that the Group's corporate overhead is
predominantly denominated in ZAR, with some expenditure in GBP, the
impact of the weaker Rand and Pound for the Year benefitted
overhead costs. Excluding this impact, overhead costs still
remained tightly controlled.
Adjusted EBITDA
Adjusted EBITDA rose 18% to US$164.3 million (FY 2015: US$139.3
million), reflecting an Adjusted EBITDA margin of 38% (FY 2015:
33%), which is a solid achievement given that Petra is still in the
process of transitioning from older mining areas to the mining of
undiluted ore.
Depreciation
Depreciation for the Year increased to US$51.8 million (FY 2015:
US$38.3 million), mainly due to initial portions of new production
areas being commissioned (increase of US$5.3 million), the
accelerated depreciation associated with the old treatment plants
at Cullinan and Kimberley Underground (US$14.0 million) and the
addition of the Kimberley Mines joint operation (US$0.5 million),
partially offset by the weakening in the ZAR:USD foreign exchange
rate (US$6.7 million).
Net financial expense
Net financial expense of US$33.0 million (FY 2015: US$9.4
million) comprises:
-- unrealised foreign exchange gain of US$3.2 million (FY 2015:
US$3.2 million loss) representing the net effect of foreign
currency retranslation of cross border loans considered to be
repayable in the foreseeable future, at the Year end closing rate;
and -- net realised finance expense of US$36.2 million (FY 2015:
US$6.2 million) comprising:
o interest received of US$3.8 million (FY 2015: US$8.5 million);
offset by
o realised foreign exchange losses on the settlement forward
exchange contracts of US$20.7 million (FY 2015: US$1.3 million
gain);
o interest payable on the BEE partner loans and the post
retirement pension and medical aid scheme charges of US$12.5
million (FY 2015: US$10.8 million);
o interest payable on the Group's bank debt and working capital
facilities of US$2.6 million (FY 2015: US$2.0 million) (stated
after the capitalisation of interest of US$26.5 million (FY 2015:
US$14.7 million)) associated with the funding of expansion projects
/ assets under development; and
o a charge for the unwinding of the present value adjustment for
Group rehabilitation costs of US$4.2 million (FY 2015: US$3.2
million).
Tax charge
The tax charge of US$8.6 million (FY 2015: US$25.4 million),
comprised deferred tax of US$10.5 million (FY 2015: US$26.3
million), and an income tax credit of US$1.9 million (FY 2015:
US$0.9 million), arising due to the utilisation of certain capital
allowances, predominantly at Finsch and Cullinan, during the Year
and the release of prior period income tax provisions. The
effective tax rate of 11% is lower than FY 2015 mainly due to
taxable profits in Tanzania offset by tax losses not previously
recognised as deferred tax assets.
Adjusted net profit after tax
An adjusted net profit after tax of US$63.6 million was recorded
for the Year (FY 2015: US$62.8 million), adjusted for net
unrealised foreign exchange gains and losses. These adjusted profit
figures are considered to be more appropriate in comparing results
year on year.
Group profit
The Group's net profit after tax increased 12% to US$66.8
million (FY 2015: US$59.6 million).
Earnings per share
A basic earnings per share from operations of 10.38 US$ cents
was recorded (FY 2015: 9.46 US$ cents). Adjusted basic earnings per
share from operations (stated before net unrealised foreign
exchange gains and losses) of 9.76 US$ cents was recorded (FY 2015:
10.09 US$ cents).
Cash and Diamond Debtors
As at 30 June 2016, Petra had cash at bank of US$48.7 million
(30 June 2015: US$166.6 million). Of these cash balances, US$36.7
million was held as unrestricted cash (30 June 2015: US$153.5
million), US$11.1 million was held by Petra's reinsurers as
security deposits on the Group's cell captive insurance structure
(with regards to the Group's environmental guarantees) (30 June
2015: US$11.6 million) and US$0.9 million was held by Petra's
bankers as security for other environmental rehabilitation bonds
lodged with the Department of Mineral Resources in South Africa (30
June 2015: US$1.5 million).
Diamond debtors (relating to the June 2016 tenders and settled
shortly after Year end) at 30 June 2016 were US$63.4 million (30
June 2015: US$57.6 million).
Loans and Borrowings
The Group had gross loans and borrowings at Year end of US$433.5
million (30 June 2015: US$338.3 million), comprised of the Loan
Notes plus accrued interest of US$302.0 million (30 June 2015:
US$303.3 million) and bank loans and borrowings of US$131.5 million
(30 June 2015: US$35.0 million).
At 30 June 2016, the Group had debt facilities undrawn and
available to the Group of US$110.0 million (30 June 2015: US$255.1
million).
BEE loans receivable and payable
BEE loans receivable of US$28.8 million (FY 2015: US$29.6
million) relate to the acquisition and financing at Koffiefontein
and Kimberley Underground mines by Petra on behalf of its BEE
partners, post the refinancing of the BEE Partner's loans at
Cullinan and Finsch.
The BEE loans payable of US$86.2 million, including the portion
held in liabilities directly associated with non-current assets
held for sale (FY 2015: US$94.0 million), relate to the initial
acquisition loan funding advanced by the Group's BEE partners to
the operations to acquire their investments in Cullinan, Finsch,
Koffiefontein and Kimberley Underground mines. The repayment of
these loans by the mines to the BEE partners will be from future
free cashflows generated by the mining operations.
Other Liabilities
Other than trade and other payables of US$134.6 million,
including the portion held in liabilities directly associated with
non-current assets held for sale, (comprising US$74.5 million trade
creditors, US$20.4 million employee related accruals and US$39.7
million other payables) (FY 2015: US$79.3 million), the remaining
liabilities on the balance sheet mainly comprise provisions for
rehabilitation liabilities, post retirement employee related
provisions and deferred tax.
Capex
Total Group Capex for the Year was US$324.1 million (FY 2015:
US$274.1 million), in line with the roll-out of the Group's
expansion programmes. The total Capex figure comprised of
operational Capex of US$322.3 million (FY 2015: US$266.9 million),
corporate / exploration Capex of US$1.8 million (FY 2015: US$7.2
million) and includes capitalised borrowing costs.
FY 2016 Operational Capex of US$322.3 million (FY 2015: US$266.9
million) comprised of US$275.2 million on expansion Capex (FY 2015:
US$212.0 million), US$20.6 million on sustaining Capex (FY 2015:
US$40.2 million) and US$26.5 million on capitalised borrowing costs
with regards to the expansion Capex (FY 2015: US$14.7 million).
Capex Reconciliation Unit FY 2016 FY 2015
---------------------------------- ------ -------- --------
Finsch US$M 73.8 88.0
---------------------------------- ------ -------- --------
Cullinan US$M 179.4 121.5
---------------------------------- ------ -------- --------
Koffiefontein US$M 27.5 26.8
---------------------------------- ------ -------- --------
Kimberley Operations US$M 16.8 13.9
---------------------------------- ------ -------- --------
Williamson US$M 24.4 16.2
---------------------------------- ------ -------- --------
Helam US$M 0.1 0.3
---------------------------------- ------ -------- --------
Subtotal - Capex incurred by
operations US$M 322.0 266.7
---------------------------------- ------ -------- --------
Petra internal projects division
- Capex under construction
/ invoiced to operations(1) US$M 0.3 0.2
---------------------------------- ------ -------- --------
Corporate / exploration US$M 1.8 7.2
---------------------------------- ------ -------- --------
Total Group Capex(2) US$M 324.1 274.1
---------------------------------- ------ -------- --------
Notes:
1. Petra operates an internal projects / construction division
and although this division's spend is reported in the Group's total
Capex, it is policy not to account for it on a specific mine's
Capex until the work completed is invoiced to the relevant
operation.
2. Capex for the Year includes US$26.5 million (FY 2015: US$14.7
million) of capitalised borrowing costs, which is also included in
the applicable mine by mine tables below.
Banking Facilities and Covenant Measurements
Effective 20 June 2016, the Company agreed revisions to the bank
debt maintenance covenant measurements related to its senior debt
facilities for the next three measurement periods, being 30 June
2016, 31 December 2016 and 30 June 2017. The covenants are set out
in the table below:
Maintenance Covenants(1) Distribution
Covenants
---------------- ------------------------------------------------------------- -------------
12 months 12 months 12 months 12 months All periods
to 30 Jun to 31 Dec to 30 Jun to 31 Dec
2016 2016 2017 2017 and
thereafter
---------------- --------------- -------------- -------------- ------------ -------------
Net Debt(2) <=3.1x <=2.8x <=2.5x <=2.5x <=2.0x
to EBITDA (Revised (Revised
from <=2.5x) from <=2.5x)
---------------- --------------- -------------- -------------- ------------ -------------
EBITDA to >=3.7x >=3.85x >=4.0x >=4.0x >=6.0x
net finance (Revised (Revised
charges from >=4.0x) from >=4.0x)
---------------- --------------- -------------- -------------- ------------ -------------
Net Debt(2) <=0.6x <=0.6x <=0.6x <=0.5x <=0.3x
to Book Equity (Revised (Revised (Revised
from <=0.75x) from <=0.5x) from <=0.5x)
---------------- --------------- -------------- -------------- ------------ -------------
Notes:
1. Fees to the lender group relating to the abovementioned
changes in covenants and facilities are US$0.9 million.
2. Net Debt is Consolidated Debt per published results, plus
guarantee for BEE Partners loan facilities of ZAR1,303 million as
at 30 June 2016 (30 June 2015: ZAR1,163 million).
Post Year end, the Company agreed a revision to the profile of
its senior lender ZAR facilities, effective 1 July 2016, with
revolving facilities being ZAR1,250 million (30 June 2016: ZAR1,500
million), amortising facilities being ZAR900 million (30 June 2016:
ZAR665 million) and working capital facilities being ZAR700 million
(30 June 2016: ZAR500 million); overall ZAR facilities became,
effective 1 July 2016, ZAR2,850 million (30 June 2016: ZAR2,665
million). The interest and repayment terms remained unchanged.
The Group closely monitors and manages its liquidity risk. Cash
forecasts are regularly produced and sensitivities run for
different scenarios including, but not limited to, changes in
diamond prices, exchange rates and expected production from the
Group's mines, including total carats and mix. The Group's
forecasts show that Petra has sufficient banking facilities to meet
its working capital and capital development requirements and
maintains headroom against its financial covenants.
OPERATIONAL REVIEW
Combined operations:
Unit FY 2016(1) FY 2015 Variance
----------------------------- -------- ----------- ---------- ---------
Sales
----------------------------- -------- ----------- ---------- ---------
Diamonds sold Carats 3,448,084 3,168,650 +9%
----------------------------- -------- ----------- ---------- ---------
Revenue US$M 430.9 425.0 +1%
----------------------------- -------- ----------- ---------- ---------
Production
----------------------------- -------- ----------- ---------- ---------
ROM tonnes Mt 11.3 11.1 +2%
----------------------------- -------- ----------- ---------- ---------
Tailings & other tonnes Mt 7.7 6.0 +28%
----------------------------- -------- ----------- ---------- ---------
Total tonnes treated Mt 19.0 17.1 +11%
----------------------------- -------- ----------- ---------- ---------
ROM diamonds Carats 2,582,135 2,276,168 +13%
----------------------------- -------- ----------- ---------- ---------
Tailings & other(2)
diamonds Carats 1,119,270 910,307 +23%
----------------------------- -------- ----------- ---------- ---------
Total diamonds Carats 3,701,405 3,186,475 +16%
----------------------------- -------- ----------- ---------- ---------
On mine cash costs US$M 246.4 253.4 -3%
----------------------------- -------- ----------- ---------- ---------
Capex
----------------------------- -------- ----------- ---------- ---------
Expansion US$M 275.2 212.0 +30%
----------------------------- -------- ----------- ---------- ---------
Sustaining US$M 20.6 40.2 -51%
----------------------------- -------- ----------- ---------- ---------
Borrowing Costs Capitalised US$M 26.5 14.7 +80%
----------------------------- -------- ----------- ---------- ---------
Total operational capex US$M 322.3 266.9 +21%
----------------------------- -------- ----------- ---------- ---------
Note:
1. FY 2016 production, sales and Capex stated on an attributable
basis, including 75.9% of the Combined Kimberley Operations from 18
January 2016 to 30 June 2016.
2. 'Other' includes mining of the Ebenhaezer satellite
kimberlite pipe at Koffiefontein and alluvial diamond mining at
Williamson.
FY 2016 diamond production increased 16% to 3.7 Mcts, above
market guidance of 3.6 - 3.65 Mcts, due to an increased
contribution from undiluted ROM ore and additional production from
the Combined Kimberley Operations following the acquisition of
Kimberley Mines on 18 January 2016.
Finsch - South Africa
Unit FY 2016 FY 2015 Variance
----------------------------- -------- ---------- ---------- -----------
Sales
----------------------------- -------- ---------- ---------- -----------
Revenue US$M 186.4 185.4 +1%
----------------------------- -------- ---------- ---------- -----------
Diamonds sold Carats 2,085,123 2,067,933 +1%
----------------------------- -------- ---------- ---------- -----------
Average price per carat US$ 89 90 -1%
----------------------------- -------- ---------- ---------- -----------
ROM Production
----------------------------- -------- ---------- ---------- -----------
Tonnes treated Tonnes 3,547,798 3,016,385 +18%
----------------------------- -------- ---------- ---------- -----------
Diamonds produced Carats 1,572,725 1,298,914 +21%
----------------------------- -------- ---------- ---------- -----------
Grade(1) Cpht 44.3 43.1 +3%
----------------------------- -------- ---------- ---------- -----------
Tailings Production
----------------------------- -------- ---------- ---------- -----------
Tonnes treated Tonnes 2,295,918 2,656,471 -14%
----------------------------- -------- ---------- ---------- -----------
Diamonds produced Carats 641,339 766,960 -16%
----------------------------- -------- ---------- ---------- -----------
Grade(1) Cpht 27.9 28.9 -4%
----------------------------- -------- ---------- ---------- -----------
Total Production
----------------------------- -------- ---------- ---------- -----------
Tonnes treated Tonnes 5,843,716 5,672,856 +3%
----------------------------- -------- ---------- ---------- -----------
Diamonds produced Carats 2,214,064 2,065,875 +7%
----------------------------- -------- ---------- ---------- -----------
Costs
----------------------------- -------- ---------- ---------- -----------
On-mine cash cost per
tonne treated ZAR 183 164 +12%
----------------------------- -------- ---------- ---------- -----------
Capex
----------------------------- -------- ---------- ---------- -----------
Expansion Capex US$M 56.5 65.1 -13%
----------------------------- -------- ---------- ---------- -----------
Sustaining Capex US$M 6.7 16.1 -58%
----------------------------- -------- ---------- ---------- -----------
Borrowing Costs Capitalised US$M 10.6 6.8 +56%
----------------------------- -------- ---------- ---------- -----------
Total Capex US$M 73.8 88.0 -16%
----------------------------- -------- ---------- ---------- -----------
Note:
1. The Company is not able to precisely measure the ROM /
tailings grade split because ore from both sources is processed
through the same plant; the Company therefore back-calculates the
grade with reference to resource grades.
Production increased 7% to 2,214,064 carats (FY 2015: 2,065,875
carats), mainly due to an increase in ROM tonnes and ROM grades,
partially offset by a reduction in tailings tonnes and grades.
Despite the increase in production, revenue remained essentially
flat at US$186.4 million (FY 2015: US$185.4 million) due to the
weaker diamond market experienced during the Year.
Costs:
The on-mine cash cost of ZAR183/t (FY 2015: ZAR164/t) was
largely in line with management's expectations, although it
represented a year-on-year increase of ca. 12%, mainly due to the
higher levels of ROM tonnes treated.
Development plan:
Petra's development plan at Finsch is due to increase higher
value ROM production from 1.6 Mcts in FY 2016 to ca. 2 Mctpa by FY
2018, by which point there is no longer planned to be any tailings
production included in the mine's output. Petra's initial mine plan
has a life to 2030, but resources in Block 6 and the adjacent
Precursor kimberlite, which sits next to the main body of the
Finsch kimberlite pipe, are expected to considerably prolong the
actual life of mine ("LOM"). The mine has a significant gross
resource of 49.1 Mcts.
Mining is currently transitioning from the block cave on the 630
metre level ("mL") to an SLC over four levels from 700mL to 780mL.
The new Block 5 Cave will then be installed at 900 mL from FY 2023
/ FY 2024. A schematic of the Finsch mine and orebody is available
on Petra's website at:
www.petradiamonds.com/investors/analysts/analyst-guidance/.
Production from the first level of the SLC commenced in FY 2016
and is due to deliver in excess of 1 Mt in FY 2017, which is
expected to see the ROM grade rise to 53 - 55 cpht for FY 2017.
Total ROM throughput of 3.6 Mt is planned in FY 2017, which is
expected to rise to 3.8 Mtpa for FY 2018 and FY 2019. As the mine's
underground production profile gradually changes from mostly
diluted to mostly undiluted ore, the ROM grade is expected to
increase to steady state 55 - 58 cpht from FY 2018. Finsch's steady
state ROM production will be at 3.5 Mtpa from FY 2020 onwards.
Treatment of the Pre 79 Tailings is planned at 1.3 Mt at a grade
of ca. 17 cpht for FY 2017 and is expected to come to an end during
Q4 2017.
Capex:
Capex of US$73.8 million was ca. US$8 million above guidance
mainly due to the bringing forward of spend, scheduled for FY 2017,
related to underground development.
Cullinan - South Africa
Unit FY 2016 FY 2015 Variance
----------------------------- -------- ---------- ---------- -----------
Sales
----------------------------- -------- ---------- ---------- -----------
Revenue US$M 83.3 122.2 -32%
----------------------------- -------- ---------- ---------- -----------
Diamonds sold Carats 663,175 700,896 -10%
----------------------------- -------- ---------- ---------- -----------
Average price per carat US$ 126(1) 174(2) -28%
----------------------------- -------- ---------- ---------- -----------
ROM Production
----------------------------- -------- ---------- ---------- -----------
Tonnes treated Tonnes 2,302,892 2,513,004 -8%
----------------------------- -------- ---------- ---------- -----------
Diamonds produced Carats 643,724 611,993 +5%
----------------------------- -------- ---------- ---------- -----------
Grade Cpht 28.0 24.4 +15%
----------------------------- -------- ---------- ---------- -----------
Tailings Production
----------------------------- -------- ---------- ---------- -----------
Tonnes treated Tonnes 886,289 2,458,306 -64%
----------------------------- -------- ---------- ---------- -----------
Diamonds produced Carats 37,089 117,503 -68%
----------------------------- -------- ---------- ---------- -----------
Grade Cpht 4.2 4.8 -13%
----------------------------- -------- ---------- ---------- -----------
Total Production
----------------------------- -------- ---------- ---------- -----------
Tonnes treated Tonnes 3,189,181 4,971,310 -36%
----------------------------- -------- ---------- ---------- -----------
Diamonds produced Carats 680,813 729,496 -7%
----------------------------- -------- ---------- ---------- -----------
Costs
----------------------------- -------- ---------- ---------- -----------
On-mine cash cost per
tonne treated ZAR 257 154 +67%
----------------------------- -------- ---------- ---------- -----------
Capex
----------------------------- -------- ---------- ---------- -----------
Expansion Capex US$M 156.2 104.8 +49%
----------------------------- -------- ---------- ---------- -----------
Sustaining Capex US$M 7.3 8.8 -17%
----------------------------- -------- ---------- ---------- -----------
Borrowing Costs Capitalised US$M 15.9 7.9 +101%
----------------------------- -------- ---------- ---------- -----------
Total Capex US$M 179.4 121.5 +48%
----------------------------- -------- ---------- ---------- -----------
Notes:
1. Excluding exceptional diamonds, the average value for FY 2016 was US$109 per carat.
2. Excluding exceptional diamonds, the average value for FY 2015 was US$119 per carat.
Production at Cullinan decreased 7% to 680,813 carats (FY 2015:
729,496 carats) due to the decision taken to reduce ROM throughput
during FY 2016 to focus on grade control.
The mitigating measures to manage the ROM grade at Cullinan as
the mine transitions from the old mining areas to the new block
cave yielded results in FY 2016, with a continued improvement in
the ROM grade to 30.3 cpht achieved for H2 FY 2016 versus 25.7 cpht
for H1 FY 2016.
Cullinan's revenue was down 32% to US$83.3 million for the Year
(FY 2015: US$122.2) due to lower production and sales volumes, as
well as the lower average value per carat. Excluding Exceptional
Diamonds and Petra's share in the Cullinan Dream, the average of
US$109 per carat versus last year's US$119 per carat mainly
reflects the impact of weaker market conditions.
Costs:
On-mine cash costs at Cullinan increased 67% to ZAR257/t (FY
2015: ZAR154/t) mainly due to the planned reduction in ROM tonnes
treated as well as lower volumes of lower cost tailings tonnes
treated during the Year.
Development Plan
Cullinan contains a world-class diamond resource of 194.2 Mcts
(including 17.3 Mcts in tailings), and the Company is capitalising
on this by undertaking an expansion programme at the mine to take
annual production to ca. 2.2 Mcts by FY 2019 (comprising ca. 2.0
Mcts ROM and ca. 0.2 Mcts tailings).
This expansion plan will establish a new block cave, known as
C-Cut Phase 1, on the western side of the orebody in the upper
portion of the major C-Cut resource (estimated to contain some 131
Mcts in total) and will also involve a large tailings operation.
Petra's current mine plan has a life to 2030, but the major
residual resources at the mine indicate that the actual life of
mine ("LOM") could be in excess of 50 years. A schematic of the
Cullinan mine and orebody is available on Petra's website at:
www.petradiamonds.com/investors/analysts/analyst-guidance/.
The C-Cut Phase 1 project is progressing well and in line with
expectations, with initial production having commenced towards the
end of FY 2016. The C-Cut Phase 1 Block Cave production ramp up
will continue during FY 2017 and is expected to contribute ca. 1 Mt
of FY 2017's planned ROM throughput of 2.8 Mt. The remainder of ROM
tonnes will consist of pillar and reclamation mining of 1 Mt
(providing access to largely undiluted areas) and old, diluted
mining areas of 0.8 Mt. This increase in tonnage throughput of
undiluted ore is expected to increase the ROM grade to 33 - 35 cpht
in H1 FY 2017 and 42 - 44 cpht in H2 FY 2017, resulting in a
planned average ROM grade of ca. 39 cpht in FY 2017.
An additional US$16 million in Capex for FY 2017 has been
earmarked for enlarging the C-Cut footprint, extending towards the
Eastern side of the orebody. This will enable the decommissioning
of the older mining areas in the B-Cut during FY 2018 (two years
earlier than previously planned), allowing for production to be
focused on just two areas (as opposed to the current five areas).
Cost savings associated with this simplified mining operation will
enable the Company to counter ongoing inflationary pressures.
ROM grade is expected to increase further to ca. 47 cpht by FY
2018 and to ca. 50 cpht by FY 2019, when Cullinan's C-Cut Phase 1
Block Cave is in full production (yielding undiluted ore) and the
new Cullinan Plant is in operation (providing improved diamond
liberation). The plant configuration has been altered to utilise
slotted screens resulting in an effective bottom cut of 1.1 - 1.2
mm (up from the previous 1.0 mm). This change has resulted in lower
ROM grades being guided for FY 2018 and FY 2019 due to a reduction
in the planned recovery of finer diamonds, while maintaining the
average value per tonne at levels commensurate with previous
guidance.
During FY 2017, ca. 0.4 Mt of higher grade recovery tailings
will be treated at a grade of ca. 25 cpht. From FY 2018 onwards,
tailings treatment is planned at ca. 2.4 Mtpa at a grade of ca. 7 -
8 cpht.
Capex:
Capex of US$179.4 million was ca. US$16 million above guidance
mainly due to the acceleration of spend, scheduled for FY 2017,
related to the new plant.
New Cullinan Plant:
The construction of the new Cullinan Plant is progressing well
and in line with expectations. The commissioning of the new plant
is planned to commence during Q3 FY 2017 and is expected to be
complete and fully operational during Q4 FY 2017.
Koffiefontein - South Africa
Unit FY 2016 FY 2015 Variance
------------------------- -------- ---------- ---------- -----------
Sales
------------------------- -------- ---------- ---------- -----------
Revenue US$M 25.7 17.8 +44%
------------------------- -------- ---------- ---------- -----------
Diamonds sold Carats 55,500 46,033 +21%
------------------------- -------- ---------- ---------- -----------
Average price per carat US$ 462 386 +20%
------------------------- -------- ---------- ---------- -----------
ROM Production
------------------------- -------- ---------- ---------- -----------
Tonnes treated Tonnes 681,344 341,783 +99%
------------------------- -------- ---------- ---------- -----------
Diamonds produced Carats 50,825 27,756 +83%
------------------------- -------- ---------- ---------- -----------
Grade Cpht 7.5 8.1 -7%
------------------------- -------- ---------- ---------- -----------
Tailings / Ebenhaezer
Production
------------------------- -------- ---------- ---------- -----------
Tonnes treated Tonnes 446,854 524,244 -15%
------------------------- -------- ---------- ---------- -----------
Diamonds produced Carats 11,365 17,628 -36%
------------------------- -------- ---------- ---------- -----------
Grade Cpht 2.5 3.4 -27%
------------------------- -------- ---------- ---------- -----------
Total Production
------------------------- -------- ---------- ---------- -----------
Tonnes treated Tonnes 1,128,198 866,027 +30%
------------------------- -------- ---------- ---------- -----------
Diamonds produced Carats 62,190 45,384 +37%
------------------------- -------- ---------- ---------- -----------
Costs
------------------------- -------- ---------- ---------- -----------
On-mine cash cost per
tonne treated ZAR 317 303 +5%
------------------------- -------- ---------- ---------- -----------
Capex
------------------------- -------- ---------- ---------- -----------
Expansion Capex US$M 24.6 23.1 +7%
------------------------- -------- ---------- ---------- -----------
Sustaining Capex US$M 2.9 3.7 -22%
------------------------- -------- ---------- ---------- -----------
Total Capex US$M 27.5 26.8 +3%
------------------------- -------- ---------- ---------- -----------
Diamond production increased 37% to 62,190 carats (FY 2015:
45,384 carats), due to an increase in ROM tonnes treated as the SLC
project commenced ramping up to its planned throughput of 1.1
Mtpa.
As the SLC was in the process of ramping up during Q4 FY 2016,
the majority of production was sourced from the diluted 52 mL,
resulting in grade underperformance. Grades are expected to
increase to ca. 8 cpht in FY 2017 and then on to steady state 8 - 9
cpht from FY 2018 onwards.
Revenue increased 44% to US$25.7 million (FY 2015: US$17.8
million) for the Year due to the higher proportion of ROM versus
tailings carats sold, which command a higher average value per
carat.
Costs:
The marked increase in higher value, higher-cost, underground
production resulted in a 5% increase in the unit cash cost per
total tonne treated to ZAR317 (FY 2015: ZAR303/t). Unforeseen
break-downs and associated maintenance costs contributed to the
increase in unit cost.
Development Plan
Petra's expansion plan at Koffiefontein will increase production
from 55,500 ctpa in FY 2016 to ca. 95,000 ctpa by FY 2017
(underground only). Petra's current mine plan has a life to 2025,
but the residual resources at the mine indicate that the actual LOM
could be in excess of 20 years.
As at Finsch, the SLC mining method will be used at
Koffiefontein, before putting in place a new block cave. The SLC
will be mined over three levels from 560 mL to 600 mL. Production
has now commenced on the 560 mL of the SLC. A schematic of the
Koffiefontein mine and orebody is available on Petra's website at:
www.petradiamonds.com/investors/analysts/analyst-guidance/.
The SLC will continue ramping up during FY 2017, with ROM
throughput planned at 1.1 Mtpa at an average grade of ca. 8 cpht
for FY 2017.
Capex:
Capex of ca. US$27.5 million was ca. US$6 million above
guidance, mainly spent on the SLC capital programme.
Kimberley Operations - South Africa
Unit FY 2016 FY 2015 Variance
----------------------------- -------- ---------- ---------- -----------
Sales
----------------------------- -------- ---------- ---------- -----------
Revenue US$M 57.7 41.8 n/a
----------------------------- -------- ---------- ---------- -----------
Diamonds sold Carats 438,680 138,052 n/a
----------------------------- -------- ---------- ---------- -----------
Average price per carat US$ 132 302 n/a
----------------------------- -------- ---------- ---------- -----------
KUM Production(1)
----------------------------- -------- ---------- ---------- -----------
Tonnes treated Tonnes 721,513 1,196,269 n/a
----------------------------- -------- ---------- ---------- -----------
Diamonds produced Carats 88,572 137,226 n/a
----------------------------- -------- ---------- ---------- -----------
Grade Cpht 12.3 11.5 n/a
----------------------------- -------- ---------- ---------- -----------
Combined Kimberley
Operations Production
- attributable to Petra(2)
----------------------------- -------- ---------- ---------- -----------
Tonnes treated Tonnes 3,583,758 n/a n/a
----------------------------- -------- ---------- ---------- -----------
Diamonds produced Carats 442,897 n/a n/a
----------------------------- -------- ---------- ---------- -----------
Grade Cpht 12.4 n/a n/a
----------------------------- -------- ---------- ---------- -----------
Total Production
----------------------------- -------- ---------- ---------- -----------
Tonnes treated Tonnes 4,305,271 1,196,269 n/a
----------------------------- -------- ---------- ---------- -----------
Diamonds produced Carats 531,469 137,226 n/a
----------------------------- -------- ---------- ---------- -----------
Costs
----------------------------- -------- ---------- ---------- -----------
On-mine cash cost per
tonne treated ZAR 140 264 n/a
----------------------------- -------- ---------- ---------- -----------
Capex
----------------------------- -------- ---------- ---------- -----------
Expansion Capex US$M 14.7 10.5 n/a
----------------------------- -------- ---------- ---------- -----------
Sustaining Capex US$M 2.1 3.4 n/a
----------------------------- -------- ---------- ---------- -----------
Total Capex US$M 16.8 13.9 n/a
----------------------------- -------- ---------- ---------- -----------
Notes:
1. KUM production represents the Kimberley Underground ROM and
Tailings production for the period up to 17 January 2016 (pre the
establishment of the Combined Kimberley Operations).
2. Combined Kimberley Operations production represents Petra's
75.9% attributable share (including both ROM production from
Kimberley Underground and Tailings production), further to the
acquisition of the Kimberley Mines assets in partnership with Ekapa
Mining on 18 January 2016 and the associated tolling agreement.
In January 2016, Petra and its consortium partner Ekapa Mining
completed the acquisition of the Kimberley Mines assets from De
Beers in a jointly controlled operation. For the period 18 January
2016 to 30 June 2016 the parties further agreed to jointly operate
their respective operations in Kimberley, being the Kimberley
Underground mine, numerous tailings retreatment programmes around
Kimberley and the Central Treatment Plant ("CTP") - referred to in
this announcement as the "Combined Kimberley Operations". This
joint operation utilised a toll treatment arrangement, with a
resultant attributable interest to Petra of 75.9% in the production
from the Combined Kimberley Operations.
Petra's results for FY 2016 reflect Petra's 100% interest in
Kimberley Underground until 17 January 2016 and Petra's
attributable interest of 75.9% in the Combined Kimberley Operations
from 18 January 2016 to 30 June 2016. The Combined Kimberley
Operations resulted in Petra's attributable production increasing
to 531,469 carats and revenue rising to US$57.7 million for the
Year.
Post Year end, Petra and Ekapa Mining concluded a formal
combination of their respective operations in Kimberley (effective
1 July 2016) into what is now known as the Kimberley Ekapa Mining
Joint Venture ("KEM JV"). Petra has a 75.9% interest in the KEM JV
but, due to the joint control provisions in the relevant
agreements, its interest in Kimberley Underground will change from
a subsidiary to a joint venture. Accordingly, the Consolidated
Statement of Financial Position at 30 June 2016 recognises 24.1% of
Kimberley Underground's assets and liabilities (being the share
attributable to Ekapa) as being held for sale in anticipation of
the establishment of the joint venture, and from 1 July 2016 Petra
will account for its 75.9% interest in the assets, liabilities,
revenues and costs of KEM JV.
Costs:
The on-mine cash cost decreased to ZAR140/t (FY 2015: ZAR264/t),
due to the higher volume and proportion of lower cost tailings
tonnes treated during the Year, following the acquisition of
Kimberley Mines.
Development plan (stated in 100% terms; Petra to record at
75.9%):
The combined operations will yield synergies leading to cost
savings in overheads, processing and hauling costs, and will allow
for a mine plan to 2035 (previously Petra's Kimberley Underground
operation only had a mine plan to 2026).
FY 2017 ROM production is planned at ca. 1.2 Mt ROM at a grade
of ca. 16 cpht. The aforementioned synergies will allow for
increased longer-term production levels at Kimberley Underground,
with ROM tonnages planned to reach steady state of ca. 1.6 Mtpa
from FY 2019 onwards. Petra has therefore assigned additional Capex
of US$25 million in FY 2017 to underground development and shaft
upgrades in order to achieve these higher production levels. This
Capex will be self-funded by KEM JV's free cashflow.
FY 2017 tailings treatment is planned at ca. 8.6 Mt at an
average grade of 9 - 10 cpht, with 5.5 Mt to be processed through
the CTP and 3.1 Mt through existing tailings treatment facilities
contributed to KEM JV.
Petra and its joint venture partner will spend ca. US$5 million
on enhancements to the CTP plant in FY 2017 in order to increase
throughput from ca. 6 Mtpa to 8.5 - 9.0 Mtpa, as well as
introducing a crushing circuit in order to treat ROM material. The
existing plants at Kimberley Underground, Joint Shaft Plant and
Wesselton Plant, which are together capable of processing ca. 1.1
Mt, are currently being decommissioned, with the plan for all
Kimberley Underground ore to be processed through the CTP from Q2
FY 2017 onwards.
The KEM JV business plan envisages a combined steady state
throughput of ca. 8.5 - 9 Mtpa (ca. 1.6 Mtpa ROM and 7.2 Mtpa
tailings) from FY 2019 onwards.
Capex:
Capex of ca. US$16.8 million was ca. US$7 million above
guidance, mainly due to the initial capital spent on projects
relating to the Combined Kimberley Operations.
Williamson - Tanzania
Unit FY 2016 FY 2015 Variance
------------------------- -------- ---------- ---------- -----------
Sales
------------------------- -------- ---------- ---------- -----------
Revenue US$M 78.9 62.1 +27%
------------------------- -------- ---------- ---------- -----------
Diamonds sold Carats 205,548 208,351 -1%
------------------------- -------- ---------- ---------- -----------
Average price per carat US$ 384 298 +29%
------------------------- -------- ---------- ---------- -----------
ROM Production
------------------------- -------- ---------- ---------- -----------
Tonnes treated Tonnes 4,003,180 4,056,638 -1%
------------------------- -------- ---------- ---------- -----------
Diamonds produced Carats 199,796 194,048 +3%
------------------------- -------- ---------- ---------- -----------
Grade Cpht 5.0 4.8 +4%
------------------------- -------- ---------- ---------- -----------
Alluvial Production
------------------------- -------- ---------- ---------- -----------
Tonnes treated Tonnes 417,452 369,406 +13%
------------------------- -------- ---------- ---------- -----------
Diamonds produced Carats 13,073 8,216 +59%
------------------------- -------- ---------- ---------- -----------
Grade Cpht 3.1 2.2 +41%
------------------------- -------- ---------- ---------- -----------
Total Production
------------------------- -------- ---------- ---------- -----------
Tonnes treated Tonnes 4,420,632 4,426,044 0%
------------------------- -------- ---------- ---------- -----------
Diamonds produced Carats 212,869 202,265 +5%
------------------------- -------- ---------- ---------- -----------
Costs
------------------------- -------- ---------- ---------- -----------
On-mine cash cost per
tonne treated US$ 11 12 -8%
------------------------- -------- ---------- ---------- -----------
Capex
------------------------- -------- ---------- ---------- -----------
Expansion Capex US$M 23.0 8.3 +177%
------------------------- -------- ---------- ---------- -----------
Sustaining Capex US$M 1.4 7.9 -82%
------------------------- -------- ---------- ---------- -----------
Total Capex US$M 24.4 16.2 +51%
------------------------- -------- ---------- ---------- -----------
Williamson performed well for the Year, with production
increasing 5% in FY 2016 to 212,869 carats (FY 2015: 202,265
carats), mainly due to an increase in both the ROM and alluvial
grades achieved.
Revenue increased 27% to US$78.9 million (FY 2015: US$62.1
million) due to the higher average price per carat of US$384 in FY
2016 (FY 2015: US$298). This higher average was mainly assisted by
the recovery and sale of two exceptional pink diamonds in FY 2016,
which together generated revenue of US$25.1 million.
Costs:
The on-mine cash cost of US$11/t (FY 2015: US$12/t) was in line
with expectations.
Development Plan:
Petra's expansion plan at Williamson will see tonnage throughput
ramp up to ca. 5 Mtpa from FY 2018, which, at a grade of ca. 7
cpht, is expected to deliver ca. 350,000 ctpa. Petra's current mine
plan for Williamson has a life extending to 2033, but given that
the Mwadui kimberlite hosts a major resource of 40.4 Mcts, there is
potential to extend the LOM considerably. A schematic of the
Williamson mine and Mwadui orebody is available on Petra's website
at: www.petradiamonds.com/investors/analysts/analyst-guidance/.
ROM throughput is planned at 4.6 Mt at a grade of ca. 6 cpht
during FY 2017, in line with previous guidance, as the enhancements
being made to the plant (introduction of an additional crusher
circuit and two autogenous mills) are expected to come into effect
during FY 2017.
Throughput is expected to increase to ca. 5 Mtpa by FY 2018 at a
grade of ca. 7 cpht, resulting in a 7 - 10% increase in revenue per
tonne compared to the FY 2017 guided level of 6 cpht.
Capex:
Capex of US$24.4 million for the Year (FY 2015: US$16.2 million)
exceeded guidance of ca. US$20 million, mainly due to additional
waste stripping costs incurred.
EXPLORATION
FY 2016 saw a shift to a more focused, strategic exploration
approach. This was reflected in the Company's exploration spend
(excluding depreciation) decreasing from US$5.6 million in FY 2015
to US$2.7 million in FY 2016 and a budgeted spend of ca. US$1
million for FY 2017.
Botswana
In Botswana, Petra's focus remains the evaluation of the KX36
deposit. Further to the work carried out in H1 FY 2016, the KX36
Resource is now classified at an Indicated level of confidence to a
depth of 320 metres and an Inferred level of confidence to a depth
of 516 metres below surface. The grade and density estimates were
used to calculate the FY 2016 resource figures.
The Indicated Resource Estimate is 6.3 Mcts contained in 17.9 Mt
at an average of 35 cpht, while the Inferred Resource Estimate is
2.4 Mct contained in 6.7 Mt at an average grade of 36 cpht. This
gives a total of 8.7 Mct contained in 24.6 Mt, at an average grade
of 35 cpht.
The size frequency distribution models are significantly finer
compared to results for FY 2015 due to an increase in recoveries of
diamonds smaller than 7 DTC sieve size further to an improved
crushing circuit in the sample plant.
Having gathered all the relative information on KX 36, desktop
compilation and interpretation of the data is being undertaken so
as to produce a pre-feasibility report for this kimberlite.
Petra also holds four contiguous prospecting licences that
constitute the Orapa South West Project Area, where it is following
up a number of prospective anomalies.
South Africa
In South Africa, Petra's focus is the investigation of the
Reivilo kimberlite, which is situated approximately 110 kilometres
north-east of the Finsch mine.
Ground follow-up of the low level aeromagnetic survey revealed
three separate bodies, the largest of which has a geophysically
estimated size of 3.1 hectares, and two smaller bodies with
geophysically estimated sizes of 1.7 and 0.9 hectares, with a
resultant aggregate size of 5.7 hectares. Geological mapping
revealed three sub-cropping bodies with partial calcrete cover,
from which soil samples were taken of the two larger bodies. All
three kimberlites occur within a cluster defined by a 250 metre
radius, with subsequent laboratory samples suggesting these are
probably Group 2 kimberlites.
Electron micro-probe results of the indicator mineral grains
from the abovementioned samples revealed an abundance of diamond
stability field G10 garnets, as well as an abundance of diamond
stability field high sodium eclogitic paragenesis garnets. In
addition to the above, the peridotitic paragenesis garnets indicate
temperatures of formation well within that required for the
formation of diamond. Thus these initial kimberlitic indicator
minerals results are highly encouraging.
A drilling programme is now planned for FY 2017 in order to
obtain primary kimberlite material for micro diamond testing, so as
to establish diamond total content for use in grade estimation on
total content curves, as well as petrographic studies. The drilling
programme will be designed to more accurately determine the size of
the bodies as well as the depth of weathering.
SAFETY
The health and safety of all Petra people is the Company's most
important operational metric and Petra has a wide range of
initiatives, training and awareness programmes in place to foster a
zero harm workplace.
The Group's LTIFR for the Year stayed flat at 0.29 (FY 2015:
0.29), which is a good achievement in comparison to international
industry standards and to other mining companies in South Africa,
particularly for underground operations, especially given the level
of activity currently underway around the expansion programmes.
While Petra's mining methods and operations are inherently safe,
there is an ever present risk of accidents. For this reason, Petra
aims to have a deeply-ingrained safety culture, backed up by
effective systems and processes, with managers through all levels
of the business leading by example.
However, it is with deep regret that Petra experienced a
fatality in July 2015 at the Tailings Treatment Plant at Cullinan,
which was equipment related and happened whilst maintenance work
was being conducted. Post Year end, Petra also experienced a
fatality at the Williamson mine in August 2016, related to work on
an overhead power line.
The above mentioned accidents are not acceptable and Petra is
working hard to carry over the findings from the investigations
into both incidents, with new control procedures being put in place
and findings being shared with the entire Petra Group.
Petra's annual Sustainability Report provides further
information on its sustainable development policies and practices,
covering areas such as Health and Safety, Environment, Community
and Employment. It is available on the Petra website at
www.petradiamonds.com/sustainability.
GROSS RESERVES & RESOURCES
Petra manages one of the world's largest diamond resources. This
major resource suggests that the potential mine lives of Petra's
assets could be considerably longer than the current mine plans in
place at each operation, or could support significantly higher
production rates. A summary of the Group's gross Reserves and
Resources is below and the Group's full 2016 Resource Statement can
be accessed at
www.petradiamonds.com/our-operations/reserves-resources/.
Gross Resources
As at 30 June 2016, the Group's gross Diamond Resources
(inclusive of Reserves) increased 1% to 312.2 Mcts (30 June 2015:
308.6 Mcts).
The main reason for the increase in gross Diamond Resources
relates to a 42% increase (ca. 2.6 Mcts) in the Resource at Petra's
Combined Kimberley Operations, further to the acquisition of an
interest in the Kimberley Mines assets in January 2016, a 6%
overall increase (ca. 2.3 Mcts) in the Resource at Williamson
further to work carried out during FY 2016 to update the Resource
model, and the inclusion of a portion of the overburden dumps at
Finsch based on sampling done during FY 2016 (ca. 1.2 Mcts).
Gross Reserves
The Group's gross Diamond Reserves decreased by 4% to 47.9 Mcts
(30 June 2015: 49.8 Mcts) due to depletion by mining activity, and
re-assessment of remaining Reserves based on mine plan revisions
and plant simulations. This includes the update of Reserves at
Cullinan (-6% or ca. 1.4 Mcts) which includes depletions and the
expected impact of the new plant performance based on metallurgical
simulations and bottom cut-off changes, and Finsch (-3% or ca. 0.7
Mcts) due to mining depletions and updates to the Block 5 mining
plan.
The following table summarises the gross Reserves and Resources
status of the combined Petra Group operations as at 30 June
2016.
Gross
----------- -------------------------------------------
Tonnes Grade Contained Diamonds
Category (millions) (cpht) (Mcts)
----------- ------------ -------- -------------------
Reserves
----------- ------------ -------- -------------------
Proved
----------- ------------ -------- -------------------
Probable 103.2 46.4 47.9
----------- ------------ -------- -------------------
Sub-total 103.2 46.4 47.9
----------- ------------ -------- -------------------
Resources
----------- ------------ -------- -------------------
Measured 0.2 263.9 0.6
----------- ------------ -------- -------------------
Indicated 441.4 49.8 219.7
----------- ------------ -------- -------------------
Inferred 1,434.2 6.4 91.9
----------- ------------ -------- -------------------
Sub-total 1,875.8 16.6 312.2
----------- ------------ -------- -------------------
Notes:
1. Reserves and Resources have been reported in accordance with
the South African code for the reporting of mineral reserves and
mineral resources (SAMREC 2016).
2. The Petra 2016 annual Resource Statement as shown above is
based on information compiled internally within the Group under the
guidance and supervision of Jim Davidson, Pr. Sci. Nat. (reg.
No.400031/06). Jim Davidson has 44 years' relevant experience in
the diamond industry and is a full-time employee of Petra.
3. All Reserves and Resources have been independently reviewed
and verified by John Kilham, Pr. Sci. Nat. (reg. No. 400018/07), a
competent person with 36 years' relevant experience in the diamond
mining industry, who was appointed as an independent consultant by
the Company for this purpose.
GOVERNANCE
Board changes
On 30 June 2016, David Abery stepped down as Finance Director
after 13 years with the Company in order to pursue other business
opportunities. In order to assure a smooth handover, Mr Abery is
currently available to the Company on a consultancy basis up to 31
January 2017.
Following Mr Abery stepping down, the Petra Board consists of
seven members:
-- Two Executive Directors (Johan Dippenaar - CEO and Jim Davidson - Technical Director);
-- One Non-Executive Director (Adonis Pouroulis - Non-Executive Chairman); and
-- Four Independent Non-Executive Directors (Tony Lowrie -
Senior Independent Director, Patrick Bartlett, Gordon Hamilton and
Octavia Matloa).
OUTLOOK
Our Capex profile is now on a declining trend given the advanced
stage of the expansion programmes, with the new shaft and plant at
Cullinan to be completed in H2 FY 2017. This declining trend in
capital, coupled with increased production as the Cullinan C-Cut
Phase 1 and Finsch Block 5 SLC projects come on-line, will have a
positive impact on our cash generation. Consequently the Company
expects to become free cashflow positive during FY 2017, with
cashflows expected to rise strongly from FY 2018 onwards.
The economics of our business are therefore forecast to be
transformed over the next two years, as the ever increasing
contribution from undiluted ore at our operations will lead to an
increase in average value per carat, diamond grade and associated
operating margins.
Given the positive outlook for Petra as set out in this results
announcement, the Company is committed to resuming dividend
payments in the near future.
Petra's continuing success is a direct result of a strong
operational team and our positive reciprocal relationships with
each of our stakeholders. I would therefore like to extend my
thanks to each and every Petra employee for their dedication and
also to our valued partners, including our host Governments, joint
operation partners, BEE partners including the Itumeleng Petra
Diamonds Employee Trust, representative Trade Unions and community
stakeholders, whose support enables us to continue on our mission
to build a leading independent diamond mining group.
Johan Dippenaar
Chief Executive
19 September 2016
Notes
1. The following exchange rates have been used for this
announcement: average for the Year US$1: ZAR14.5062; closing rate
as at 30 June 2016 US$1:ZAR14.6800.
2. The following definitions have been used in this announcement:
a. BEE: black economic empowerment
b. ct: carat
c. cpht: carats per hundred tonnes
d. kcts: thousand carats
e. Mctpa: million carats per annum; and Mcts: million carats
f. mL: metre level
g. Mt: million tonnes
h. Mtpa: million tonnes per annum
i. LOM: life of mine
j. LTIFR: lost time injury frequency rate
k. ROM: run-of-mine, i.e. relating to production from the primary orebody
l. SLC: sub-level cave, a variation of block caving
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 30 JUNE 2016
US$ million Notes 2016 2015
--------------------------------------------- ------ -------- --------
Revenue 430.9 425.0
Mining and processing costs (310.3) (313.9)
Other direct income 2.8 2.2
Exploration expenditure (2.9) (5.8)
Corporate expenditure 5 (12.1) (13.1)
Total costs (322.5) (330.6)
Financial income 6 7.0 6.6
Financial expense 6 (40.0) (16.0)
--------------------------------------------- ------ -------- --------
Profit before tax 75.4 85.0
Income tax charge (8.6) (25.4)
--------------------------------------------- ------ -------- --------
Profit for the Year 66.8 59.6
Attributable to:
Equity holders of the parent company 54.2 48.6
Non-controlling interest 12.6 11.0
--------------------------------------------- ------ -------- --------
66.8 59.6
--------------------------------------------- ------ -------- --------
Profit per share attributable to the equity
holders of the parent during the Year:
From continuing operations:
Basic profit per share - US$ cents 13 10.38 9.46
Diluted profit per share - US$ cents 13 10.14 9.19
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2016
US$ million 2016 2015
---------------------------------------------------------- -------- --------
Profit for the Year 66.8 59.6
Exchange differences on translation of the share-based
payment reserve (2.9) (1.5)
Exchange differences on translation of foreign
operations(1) (121.4) (71.9)
Exchange differences on non-controlling interest(1) (9.6) (7.4)
Exchange differences on hedging and other reserves(1) - (0.4)
Unrealised loss on foreign exchange hedges transferred
directly to equity(1) - (2.7)
Total comprehensive expense for the Year (67.1) (24.3)
----------------------------------------------------------- -------- --------
Total comprehensive income and expense attributable
to:
Equity holders of the parent company (70.1) (27.9)
Non-controlling interest 3.0 3.6
------------------------------------------------------ ------- -------
(67.1) (24.3)
----------------------------------------------------- ------- -------
(1) These items will be reclassified to the consolidated income
statement if specific future conditions are met.
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2016
US$ million Note 2016 2015
-------------------------------------------------- ----- -------- --------
ASSETS
Non-current assets
Property, plant and equipment 7 1 079.3 968.8
Deferred tax asset 7.1 6.3
BEE loans receivable 12 28.8 29.6
Other receivables 11 2.7 -
-------------------------------------------------- ----- -------- --------
Total non-current assets 1 117.9 1 004.7
-------------------------------------------------- ----- -------- --------
Current assets
Trade and other receivables 115.9 87.9
Inventories 57.9 48.7
Cash and cash equivalents (including restricted
amounts) 48.7 166.6
-------------------------------------------------- ----- -------- --------
Total current assets 222.5 303.2
-------------------------------------------------- ----- -------- --------
Non-current assets classified as held for
sale 16 18.8 -
-------------------------------------------------- ----- -------- --------
Total assets 1 359.2 1 307.9
-------------------------------------------------- ----- -------- --------
EQUITY AND LIABILITIES
Equity
Share capital 8 88.6 87.6
Share premium account 8 665.2 664.0
Foreign currency translation reserve (372.1) (250.7)
Share-based payment reserve 14.4 21.7
Hedging and other reserves (0.8) (0.8)
Retained earnings 109.1 61.3
-------------------------------------------------- ----- -------- --------
Attributable to equity holders of the parent
company 504.4 583.1
Non-controlling interest 42.4 39.4
-------------------------------------------------- ----- -------- --------
Total equity 546.8 622.5
-------------------------------------------------- ----- -------- --------
Liabilities
Non-current liabilities
Loans and borrowings 9 317.2 298.2
BEE loans payable 12 84.6 94.0
Provisions 59.7 72.0
Deferred tax liabilities 106.0 113.0
-------------------------------------------------- ----- -------- --------
Total non-current liabilities 567.5 577.2
-------------------------------------------------- ----- -------- --------
Current liabilities
Loans and borrowings 9 107.3 28.9
Trade and other payables 125.4 79.3
-------------------------------------------------- ----- -------- --------
Total current liabilities 232.7 108.2
-------------------------------------------------- ----- -------- --------
Liabilities directly associated with non-current
assets classified as held for sale 16 12.2 -
-------------------------------------------------- ----- -------- --------
Total liabilities 812.4 685.4
-------------------------------------------------- ----- -------- --------
Total equity and liabilities 1 359.2 1 307.9
-------------------------------------------------- ----- -------- --------
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE YEARED 30 JUNE 2016
US$ million Note 2016 2015
----------------------------------------------- ----- -------- --------
Profit before taxation for the Year 75.4 85.0
Depreciation of property plant and equipment 7 51.8 38.3
Movement in provisions (0.7) 1.5
Financial income 6 (7.0) (6.6)
Financial expense 6 40.0 16.0
(Profit) / loss on disposal of property,
plant and equipment (0.1) 0.4
Share based payment provision 4.1 6.6
Operating profit before working capital
changes 163.5 141.2
Increase in trade and other receivables (46.8) (12.6)
Increase in trade and other payables 64.9 11.6
Increase in inventories (4.3) (7.8)
----------------------------------------------- ----- -------- --------
Cash generated from operations 177.3 132.4
Realised (losses) / gains on foreign exchange
contracts (20.7) 1.3
Finance expense (2.6) (2.0)
Income tax (paid) / refund (0.3) 1.0
Net cash generated from operating activities 153.7 132.7
----------------------------------------------- ----- -------- --------
Cashflows from investing activities
Acquisition of assets at Kimberley Mines
net of cash (3.0) -
Acquisition of property, plant and equipment
(including capitalised cash interest paid
of US$24.3 million (30 June 2015 US$10.6
million)) (327.9) (267.1)
Loans advanced to BEE partners (6.8) (6.1)
Repayment from BEE partners 3.4 98.3
Finance income 0.4 1.5
Transfer from restricted cash deposits (0.5) (1.0)
----------------------------------------------- ----- -------- --------
Net cash utilised in investing activities (334.4) (174.4)
----------------------------------------------- ----- -------- --------
Cashflows from financing activities
Proceeds from the issuance of share capital 1.4 7.1
Increase in borrowings (net of Bond issue
costs of US$nil; 30 June 2015: US$11.5
million) 137.0 349.2
Dividends paid (15.4) -
Repayment of borrowings (40.4) (177.3)
Net cash generated from financing activities 82.6 179.0
----------------------------------------------- ----- -------- --------
Net (decrease) / increase in cash and cash
equivalents (98.1) 137.3
Cash and cash equivalents at beginning
of the Year 153.5 20.2
Effect of exchange rate fluctuations on
cash held (18.7) (4.0)
----------------------------------------------- ----- -------- --------
Cash and cash equivalents at end of the
Year(1) 36.7 153.5
----------------------------------------------- ----- -------- --------
(1) Cash and cash equivalents in the Consolidated Statement of
Financial Position includes restricted cash of US$12.0 million (30
June 2015: US$13.1 million) and unrestricted cash of US$36.7
million (30 June 2015: US$153.5 million).
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2016
(Unaudited) Share Share Foreign Share-based Hedging Retained Attributable Non-controlling Total
capital premium currency payment and earnings to the interest equity
account translation reserve other parent
US$ million reserve reserves
------------------------------- -------- -------- ------------ ------------ --------- --------- ------------- ---------------- --------
At 1 July 2015 87.6 664.0 (250.7) 21.7 (0.8) 61.3 583.1 39.4 622.5
Profit for the Year - - - - - 54.2 54.2 12.6 66.8
Other comprehensive expense - - (121.4) (2.9) - - (124.3) (9.6) (133.9)
Dividends paid - - - - - (15.4) (15.4) - (15.4)
Transfer between reserves for
exercise of options - - - (9.0) - 9.0 - - -
Equity settled share based
payments - - - 5.3 - - 5.3 - 5.3
Allotments during the Year:
* Share options exercised 0.2 1.2 - - - - 1.4 - 1.4
* LTSP share grants 0.8 - - (0.7) - - 0.1 - 0.1
At 30 June 2016 88.6 665.2 (372.1) 14.4 (0.8) 109.1 504.4 42.4 546.8
------------------------------- -------- -------- ------------ ------------ --------- --------- ------------- ---------------- --------
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2016
(Audited) Share Share Foreign Share-based Hedging Retained Attributable Non-controlling Total
capital premium currency payment and earnings to the interest equity
account translation reserve other parent
US$ million reserve reserves
------------------------------- -------- -------- ------------ ------------ --------- --------- ------------- ---------------- -------
At 1 July 2014 86.7 657.8 (178.8) 18.3 2.3 9.8 596.1 35.8 631.9
Profit for the year - - - - - 48.6 48.6 11.0 59.6
Other comprehensive expense - - (71.9) (1.5) (3.1) - (76.5) (7.4) (83.9)
Transfer between reserves for
exercise of options - - - (2.9) - 2.9 - - -
Equity settled share-based
payments - - - 7.8 - - 7.8 - 7.8
Allotments during the Year:
* Share options exercised 0.6 3.2 - - - - 3.8 - 3.8
* Warrants exercised 0.3 3.0 - - - - 3.3 - 3.3
------------------------------- -------- -------- ------------ ------------ --------- --------- ------------- ---------------- -------
At 30 June 2015 87.6 664.0 (250.7) 21.7 (0.8) 61.3 583.1 39.4 622.5
------------------------------- -------- -------- ------------ ------------ --------- --------- ------------- ---------------- -------
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
NOTES TO THE CONSOLIDATED PRELIMINARY FINANCIAL STATEMENTS
FOR THE YEARED 30 JUNE 2016
(UNAUDITED)
1. GENERAL INFORMATION
Petra Diamonds Limited (the "Company"), a limited liability
company listed on the Main Market of the London Stock Exchange, is
registered in Bermuda with its Group management office domiciled in
Jersey. The Condensed Consolidated Preliminary Financial Statements
of the Company for the year ended 30 June 2016 comprise the Company
and its subsidiaries, joint operations and associates (together
referred to as the "Group").
2. ACCOUNTING POLICIES
The preliminary results, which are unaudited, do not include all
the notes of the type normally included in an annual financial
report. Accordingly, this unaudited preliminary report is to be
read in conjunction with the Annual Report for the year ended 30
June 2015, and any public announcements made by the Group during
the reporting period. The annual financial report for the year
ended 30 June 2015 was prepared in accordance with International
Financial Reporting Standards as adopted by the European Union
("IFRSs") and the accounting policies applied in this preliminary
report are consistent with the policies applied in the annual
financial report for the year ended 30 June 2015.
In addition to the above accounting policies, the Group has
adopted the following accounting policies in the Year:
Revenue
Where the Group enters into tolling agreements under which the
combined production of the parties is sold by the Group, the Group
only recognises revenue from the portion of sales for which it acts
as principal. No revenue is recognised for the remaining portion,
for which the Group acts as an agent and receives no further
income.
Non- current assets held for sale
Non-current assets or disposal groups are classified as held for
sale when they are available for immediate sale, management have
committed to a plan to sell, it is unlikely that significant
changes to the plan will be made or that the plan will be withdrawn
and that the sale will be completed within 12 months from the date
of classification. The non-current assets classified as held for
sale are measured at the lower of carrying amount and fair value
less costs to sell.
Basis of preparation
After a review of the Group's operations, the Directors have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, the Directors continue to adopt the going concern
basis in preparing the unaudited condensed interim financial
statements. Further details of the Group's funding position are
included on page 11 and 12 of the financial review and in notes 9
and 17.
The unaudited consolidated preliminary financial statements for
the year ended 30 June 2016 do not constitute statutory accounts
and have been drawn up using accounting policies and presentation
expected to be adopted in the Group's full financial statements for
the year ended 30 June 2016, which are not expected to be
significantly different to those set out in Note 1 to the Group's
audited financial statements for the year ended 30 June 2015.
The financial information for the year ended 30 June 2015 has
been extracted from the statutory accounts for that period. The
auditors' report for the year ended 30 June 2015 was unqualified
and did not include references to any matters to which the auditors
drew attention by way of emphasis without qualifying their
report.
New standards and interpretations applied
The IASB has issued no new standards, amendments to published
standards and interpretations to existing standards with effective
dates on or prior to 1 July 2015 which have a material effect on
the Group.
New standards and interpretations not yet effective
Certain new standards, amendments and interpretations to
existing standards have been published that are mandatory for the
Group's accounting periods beginning after 1 July 2016 or later
periods, which the Group has decided not to adopt early or which
are yet to be European Union endorsed.
The only standards which are anticipated to be significant or
relevant to the Group are IFRS 9 - Financial Instruments, IFRS 15
Revenue from Contracts with Customers, IFRS 16 Leases and
Amendments to IFRS 11 Accounting for Acquisitions of Interests in
Joint Operations. The standards are effective ranging from 1
January 2016 to 1 January 2019. The Group is in the process of
assessing the impact of these standards on the Financial
Statements. Further information will be included in the Group's
2016 annual report.
Significant assumptions and judgements:
The preparation of the consolidated preliminary financial
statements requires management to make estimates and judgements and
form assumptions that affect the reported amounts of the assets and
liabilities, reported revenue and costs during the periods
presented therein. Estimates and judgements are continually
evaluated and based on management's historical experience and other
factors, including future expectations and events that are believed
to be reasonable. The estimates and assumptions that have a
significant risk of causing a material adjustment to the financial
results of the Group in future reporting periods are discussed
below.
Key estimates and judgements:
Life of mine and ore reserves and resources
There are numerous risks inherent in estimating ore reserves and
resources and the associated current life of mine plan. The life of
mine plan is the current approved management plan for ore
extraction that considers specific resources and associated capital
expenditure. The life of mine plan frequently includes less tonnes
than the total reserves and resources that are set out in the
Group's Reserves and Resources Statement and which management may
consider to be economically viable and capable of future
extraction.
Management must make a number of assumptions when making
estimates of reserves and resources, including assumptions as to
exchange rates, rough diamond and other commodity prices,
extraction costs, recovery and production rates. Any such estimates
and assumptions may change as new information becomes available.
Changes in exchange rates, commodity prices, extraction costs,
recovery and production rates may change the economic viability of
ore reserves and resources and may ultimately result in the
restatement of the ore reserves and resources and potential
impairment to the carrying value of the mining assets and life of
mine plans.
The current life of mine plans are used to determine the ore
tonnes and capital expenditure in the impairment tests. Ore
reserves and resources, both those included in the life of mine and
certain additional tonnes which form part of reserves and resources
considered to be sufficiently certain and economically viable, also
impact the depreciation of mining assets depreciated on a unit of
production basis. Ore reserves and resources further impact the
estimated date of decommissioning and rehabilitation.
Impairment reviews
While conducting an impairment review of its assets using value
in use impairment models, the Group exercised judgement in making
assumptions about future rough diamond prices, volumes of
production, ore reserves and resources included in the current life
of mine plans, future development and production costs and
macroeconomic factors such as inflation and discount rates. Changes
in estimates used can result in significant changes to the
'Consolidated Income Statement' and 'Statement of Financial
Position'. The Group prepares value in use impairment models and
assesses mining assets for impairment.
Capitalisation of borrowing costs
The Group capitalises effective interest costs (inclusive of
fees) to property, plant and equipment when the loans are
considered to have been drawn down for the purpose of funding the
Group's capital development programmes. Judgement is required in
determining the extent to which borrowing costs relate to
qualifying capital projects. Bank borrowings were utilised to fund
the underground expansion projects. The US$300 million bond raised
in FY 2015 is being used to fund the construction of the new
processing plant at Cullinan and will fund the completion of the
underground expansion projects.
Provision for rehabilitation
Significant estimates and assumptions are made in determining
the amount attributable to rehabilitation provisions. These deal
with uncertainties such as the legal and regulatory framework,
timing and future costs. In determining the amount attributable to
rehabilitation provisions, management used a discount rate range of
8.1%-9.6% (30 June 2015: 7.9%-8.3%), estimated rehabilitation
timing of 3 to 49 years (30 June 2015: 11 to 50 years) and an
inflation rate range of 6.1%-7.6% (30 June 2015: 5.8%-6.3%). The
Group estimates the cost of rehabilitation with reference to
approved environmental plans filed with the local authorities.
Reductions in estimates are only recognised when such reductions
are approved by local legislation and are consistent with the
Group's planned rehabilitation strategy. Increases in estimates are
immediately recognised. The carrying value of rehabilitation
provisions at the reporting date is US$48.9 million (30 June 2015:
US$58.9 million).
Depreciation
Judgement is applied in making assumptions about the
depreciation charge for mining assets. The Group depreciates its
assets using units of production or straight-line basis depending
on its assessment of the most appropriate method for each
individual asset. Judgement is applied when using the units of
production method in estimating the ore tonnes held in reserves and
resources which have sufficient geological and geophysical
certainty of being economically viable and which are extractable
using existing assets. The relevant reserves and resources include
those included in current approved life of mine plans and, in
respect of certain surface and underground shared infrastructure,
certain additional resources which also meet these levels of
certainty and viability. The Group depreciates its assets according
to relevant sections of the orebody over which these will be
utilised and a key judgement exists in determining the future
production unit assigned to on-mine shared infrastructure which is
utilised over more than one section of the orebody or is used to
access ore tonnes outside of the current approved life of mine
plan. Judgement is also applied when assessing the estimated useful
life of individual assets and residual values. The assumptions are
reviewed at least annually by management and the judgment is based
on consideration of the Life of Mine plans and structure of the
orebody and the nature of the assets. The assessment is determined
by the Group's capital project teams and geologists.
Pension and post-retirement medical fund schemes
The Company operates a defined benefit pension scheme and a
post-employment health care liability scheme. The pension charge or
income for the defined benefit scheme and benefit liability for the
post-employment health care liability scheme is regularly assessed
in accordance with the advice of a qualified actuary using the
projected unit credit method. The most recent actuarial valuation
was at 30 June 2016. The most important assumptions made in
connection with the pension scheme valuation and charge or income
are the return on the funds, the average yield of South African
Government long dated bonds, salary increases, withdrawal rates,
life expectancies and the current South African consumer price
index. The most important assumptions made in connection with the
post-employment health care liability scheme valuation and charge
or income are the health care cost of inflation, the average yield
of South African Government long dated bonds and salary increases,
withdrawal rates and life expectancies.
Net investments in foreign operations
Management assess the extent to which intra-group loans to
foreign operations that give rise to unrealised foreign exchange
gains and losses are considered to be permanent as equity or
repayable in the foreseeable future. The judgement is based upon
factors including the life of mine plans, cashflow forecasts and
strategic plans. The foreign exchange on permanent equity loans are
recorded in foreign currency translation reserve until such time as
the operation is sold, whilst the foreign exchange on loans
repayable in the foreseeable future are recorded in the
Consolidated Income Statement.
Kimberley Mines acquisition
Judgement was applied in determining the fair value adjustments
in respect of the Kimberley Mines acquisition. The fair value
adjustments to property, plant and equipment and medical aid
provisions were to ensure these amounts were reflected at fair
value. As detailed in note 15, the Group holds a 49.9% interest in
Ekapa Minerals (Pty) Limited, which was used to acquire Kimberley
Mines. The Group consolidates its share of the assets, liabilities,
income and expenses of Kimberley Mines as a jointly controlled
operation, based on contractual agreements between the joint
venture partners that provided for unanimous decision making on the
relevant activities of the business. The accounting treatment
involved consideration of the structure of the arrangement, the
legal form and the contractual agreements between the parties.
Non-current assets held for sale - Kimberley Underground
The carrying value of assets at Kimberley Underground,
considered on the basis of classification as non-current assets
held for sale, are carried at the lower of carrying value and fair
value less cost to sell, as detailed in note 16. The assessment of
fair value less cost to sell has been considered by the Board and
represents a key judgement, based on internal valuation models,
discounts for market pricing and progress of the current sale
process. The book value of the assets is less than fair value less
costs to sell.
3. DIVIDS
On 30 November 2015, the shareholders approved at the Annual
General Meeting the payment of a maiden dividend of 3.0 US$ cents
per share for the year ending 30 June 2015 (US$15.4 million). The
dividend was paid during December 2015. The Group's debt facility
distribution covenants were not met for the measurement period to
30 June 2016 and Petra will therefore not declare a dividend for FY
2016.
4. SEGMENTAL INFORMATION
Segment information is presented in respect of the Group's
operating and geographical segments:
Mining - the extraction and sale of rough diamonds from mining
operations in South Africa and Tanzania.
Exploration - exploration activities in Botswana and South
Africa.
Corporate - administrative activities in Jersey.
Segments are based on the Group's management and internal
reporting structure. Management reviews the Group's performance by
reviewing the results of the mining activities in South Africa and
Tanzania, reviewing the results of exploration activities in
Botswana and South Africa, and reviewing the corporate
administration expenses in Jersey. Each segment derives, or aims to
derive, its revenue from diamond mining and diamond sales, except
for the corporate and administration cost centre.
Segment results, assets and liabilities include items directly
attributable to a segment, as well as those that can be allocated
on a reasonable basis. Segment results are calculated after
charging direct mining costs, depreciation and other income and
expenses. Unallocated items comprise mainly interest-earning assets
and revenue, interest-bearing borrowings and expenses and corporate
assets and expenses. Segment capital expenditure is the total cost
incurred during the year to acquire segment assets that are
expected to be used for more than one period. Eliminations comprise
transactions between Group companies that are cancelled on
consolidation. The results are not materially affected by seasonal
variations. Revenues are generated from tenders held in South
Africa and Antwerp for external customers from various countries,
the ultimate customers of which are not known to the Group.
The Group's non-current assets are located in South Africa
US$991.8 million (30 June 2015: US$898.2 million), Tanzania
US$125.0 million (30 June 2015: US$105.2 million), Botswana US$0.9
million (30 June 2015: US$1.2 million) and Jersey US$0.2 million
(30 June 2015: US$0.1 million).
The Group's property, plant and equipment included in
non-current assets are located in South Africa US$953.2 million (30
June 2015: US$862.4 million), Tanzania US$125.0 million (30 June
2015: US$105.2 million), Botswana US$0.9 million (30 June 2015:
US$1.2 million) and Jersey US$0.2 million (30 June 2015: US$0.1
million).
4. SEGMENTAL INFORMATION (continued)
Operating South Africa - Mining activities Care and Tanzania Botswana Jersey South Africa
segments maintenance -Mining
activities
Corporate
US$ million Kimberley and
Cullinan Finsch Koffiefontein Operations(3) Helam Williamson Exploration treasury Beneficiation(5) Inter-segment Consolidated
----------------- --------- ------- -------------- -------------- ------------ ----------- ------------ ---------- ----------------- -------------- -------------
2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016
----------------- --------- ------- -------------- -------------- ------------ ----------- ------------ ---------- ----------------- -------------- -------------
Revenue 83.3 186.4 25.7 57.7 0.1 78.9 - - 0.2 (1.4) 430.9
Segment
result(1) 3.7 98.0 (1.0) 7.1 (2.5) 18.6 (2.9) (12.1) (1.6) (1.7) 105.6
Other direct
income - 0.2 0.2 1.5 0.3 0.5 - - - 0.1 2.8
--------- ------- -------------- -------------- ------------ ----------- ------------ ---------- ----------------- -------------- -------------
Operating profit
/ (loss)(2) 3.7 98.2 (0.8) 8.6 (2.2) 19.1 (2.9) (12.1) (1.6) (1.6) 108.4
Financial income 7.0
Financial
expense (40.0)
Income tax
expense (8.6)
Non-controlling
interest (12.6)
----------------- --------- ------- -------------- -------------- ------------ ----------- ------------ ---------- ----------------- -------------- -------------
Loss
attributable
to equity
holders
of the parent
company 54.2
----------------- --------- ------- -------------- -------------- ------------ ----------- ------------ ---------- ----------------- -------------- -------------
Segment assets 654.7 352.8 195.9 185.2 5.8 158.9 1.1 2 314.8 6.1 (2 516.1) 1 359.2
Segment
liabilities 425.1 179.4 199.1 194.1 42.7 264.1 43.6 1 368.9 7.6 ( 1912.2) 812.4
Capital
expenditure 179.4 73.8 27.5 16.8 0.4(4) 24.4 - 1.8 - - 324.1
----------------- --------- ------- -------------- -------------- ------------ ----------- ------------ ---------- ----------------- -------------- -------------
(1) Total depreciation of US$51.8 million included in the
segmental result, comprises depreciation incurred at Finsch US$11.8
million, Cullinan US$18.4 million, Koffiefontein US$4.5 million,
Kimberley Underground US$9.8 million, Williamson US$5.9 million,
Helam US$0.6 million, Exploration US$0.2 million and Corporate
administration US$0.6 million.
(2) Operating profit is equivalent to revenue of US$430.9
million less total costs of US$322.5 million as disclosed in the
Consolidated Income Statement.
(3) The Kimberley Operations segment includes the trading
results of 100% of Kimberley Underground from 1 July 2015 to 17
January 2016 and the Group's 75.9% attributable share of the
Combined Kimberley Operations from 18 January 2016 following the
acquisition of a jointly controlled interest in the Kimberley Mines
and tolling agreement. Assets of US$18.8 million and liabilities of
US$12.2 million in respect of Kimberley Underground have been
classified as non-current assets-held-for-sale (refer to note
16).
(4) Capital expenditure at Helam includes work-in-progress of
US$0.3 million in respect of the manufacture of plant and equipment
for other mines within the Group.
(5) The beneficiation segment represents Tarorite, a cutting and
polishing business in South Africa, which can on occasion cut and
polish select rough diamonds.
4. SEGMENTAL INFORMATION (continued)
Operating South Africa - Mining activities Care and Tanzania Botswana Jersey South Africa
segments maintenance -Mining
activities
Corporate
US$ million Kimberley and
Cullinan Finsch Koffiefontein Underground Helam Williamson Exploration treasury Beneficiation(4) Inter-segment Consolidated
------------------ --------- ------- -------------- ------------ ------------ ----------- ------------ ---------- ----------------- -------------- -------------
2015 2015 2015 2015 2015 2015 2015 2015 2015 2015 2015
------------------ --------- ------- -------------- ------------ ------------ ----------- ------------ ---------- ----------------- -------------- -------------
Revenue 122.2 185.4 17.8 41.8 1.2 62.1 - - 0.5 (6.0) 425.0
Segment result(1) 41.9 82.2 (8.4) 2.6 (3.8) (1.4) (5.8) (13.1) - (2.0) 92.2
Other direct
income 0.1 0.6 0.3 (0.1) 0.1 1.2 - - - - 2.2
--------- ------- -------------- ------------ ------------ ----------- ------------ ---------- ----------------- -------------- -------------
Operating
profit/(loss)(2) 42.0 82.8 (8.1) 2.5 (3.7) (0.2) (5.8) (13.1) - (2.0) 94.4
Financial income 6.6
Financial
expense (16.0)
Income tax
expense (25.4)
Non-controlling
interest (11.0)
------------------ --------- ------- -------------- ------------ ------------ ----------- ------------ ---------- ----------------- -------------- -------------
Profit
attributable
to equity
holders
of the parent
company 48.6
------------------ --------- ------- -------------- ------------ ------------ ----------- ------------ ---------- ----------------- -------------- -------------
Segment assets 661.6 331.7 173.5 96.6 7.9 141.9 2.7 2 810.3 7.4 (2 925.7) 1 307.9
Segment
liabilities 411.9 287.8 173.7 112.2 50.0 259.2 41.9 1 561.8 7.4 (2 220.5) 685.4
Capital
expenditure 121.5 88.0 26.8 13.9 0.5(3) 16.2 0.9 6.2 0.1 - 274.1
------------------ --------- ------- -------------- ------------ ------------ ----------- ------------ ---------- ----------------- -------------- -------------
(1) The segment result includes total depreciation of US$38.3
million, comprising depreciation incurred at Cullinan US$10.6
million, Finsch US$13.5 million, Koffiefontein US$2.5 million,
Kimberley Underground US$4.8 million, Helam US$0.7 million,
Williamson US$5.5 million, Exploration US$0.1 million and Corporate
administration US$0.6 million.
(2) Operating profit is equivalent to revenue of US$425.0
million less total operating costs of US$330.6 million as disclosed
in the Consolidated Income Statement.
(3) Capital expenditure at Helam includes work in progress of
US$0.2 million in respect of the manufacture of plant and equipment
for other mines within the Group.
(4) The beneficiation segment represents Tarorite, a cutting and
polishing business in South Africa, which can on occasion cut and
polish select rough diamonds.
5. CORPORATE EXPITURE
US$ million 2016 2015
----------------------------------------------------- ----- -----
Auditors' remuneration
- Audit services(1) 0.6 0.7
- Audit related services(2) 0.1 0.1
Depreciation of property, plant and equipment 0.6 0.7
London Stock Exchange and other regulatory expenses 1.4 1.6
Other charges 3.1 2.4
----- -----
Share-based expense - Directors 2.3 2.5
Share-based expense - Senior Management 0.3 0.4
Other staff costs 3.7 4.7
------------------------------------------------------ ----- -----
Total staff costs 6.3 7.6
12.1 13.1
----------------------------------------------------- ----- -----
(1) Audit fees for the year ended 30 June 2016 stated above
refer to fees for the FY 2015 audit.
(2) Audit-related services of US$0.1 million for FY 2016 (FY
2015: US$0.1 million) are in respect of the interim review. A
further US$0.4 million fees in FY 2015 are in respect of the issue
of the US$300 million loan notes, which were capitalised under
non-current loans and borrowings.
6. FINANCIAL INCOME / EXPENSE
US$ million 2016 2015
---------------------------------------------------------- ------- -------
Net unrealised foreign exchange gains / (losses) 3.2 (3.2)
Interest received on BEE loans and other receivables 3.4 7.0
Interest received on bank deposits 0.4 1.5
Realised foreign exchange gains - 1.3
-------
Financial income 7.0 6.6
-------
Gross interest on bank loans and overdrafts (29.1) (16.7)
Interest on bank loans and overdrafts capitalised 26.5 14.7
------- -------
Net interest expense on bank loans and overdrafts (2.6) (2.0)
Other debt finance costs, including BEE loan
interest and facility fees (12.5) (10.8)
Unwinding of present value adjustment for rehabilitation
costs (4.2) (3.2)
Realised foreign exchange losses on the settlement
of foreign loans and forward exchange contracts (20.7) -
Financial expense (40.0) (16.0)
Net financial expense (33.0) (9.4)
----------------------------------------------------------- ------- -------
The Group enters into hedge contracts where the risk being
hedged is the volatility in the South African Rand and US Dollar
exchange rates affecting the proceeds in South African Rand of the
Group's US Dollar denominated diamond tenders. The fair value of
the Group's hedges as at 30 June are based on Level 2
mark-to-market valuation performed by the counterparty financial
institutions. The contracts mature within the next 12 months. An
unrealised loss of US$8.8 million (30 June 2015: US$3.7 million) in
respect of foreign exchange contracts held at year end that did not
qualify for continued hedge accounting and a realised loss of
US$20.7 million (30 June 2015: US$1.3 million gain) in respect of
foreign exchange contracts closed during the year is included in
the net finance and expense amount. These amounts have arisen due
to the South African Rand depreciating against the US Dollar from
US$:R12.16 (30 June 2015) to US$:R14.68 (30 June 2016).
7. PROPERTY, PLANT AND EQUIPMENT
The net movement in property, plant and equipment for the Period
is an increase of US$110.5 million, excluding the portion held in
non-current assets held for sale of US$14.1 million (30 June 2015:
US$129.7 million). This is primarily as a result of an increase in
property, plant and equipment from capital expenditure of US$324.1
million (30 June 2015: US$274.1 million) and the acquisition of the
Group's 49.9% interest in Kimberley Mines assets of US$8.7 million
(30 June 2015: US$nil), which is off-set by the movement in the
USD:ZAR foreign exchange rate resulting in a foreign exchange
decrease on Rand based assets of US$147.4 million (30 June 2015:
US$105.0 million decrease), depreciation of US$51.8 million (30
June 2015: US$38.3 million), decrease in rehabilitation assets of
US$8.8 million (30 June 2015: US$0.3 million increase), and assets
of US$0.2 million (30 June 2015: US$1.4 million) disposed of during
the Year.
8. SHARES ISSUED
Allotments during the Year were in respect of:
(i) the award to the Executive Directors of 683,013 ordinary
shares granted under the 2012 Performance Share Plan, in respect of
performance measured over the period 1 July 2012 to 30 June
2015;
(ii) the award to the Executive Directors of 510,000 ordinary
shares granted under the 2011 Long-Term Share Plan, in respect of
performance measured over the period 1 July 2012 to 30 June
2015;
(iii) the award to Senior Management of 3,463,750 ordinary
shares granted under the 2011 Long-Term Share Plan, in respect of
performance measured over the period 1 July 2012 to 30 June 2015;
and
(iv) the exercise of 1,377,405 share options under the 2005
Executive Share Option Scheme by Directors and Senior
Management.
Further details with regards to the Group's share plans will be
provided in the Company's 2016 Annual Report.
9. LOANS AND BORROWINGS
US$ million 2016 2015
---------------------------------------------- ------ ------
Non-current liabilities
Loans and borrowings - Senior secured lender
debt facilities 51.2 33.5
Loans and borrowings - Senior secured second
lien notes 266.0 264.7
----------------------------------------------- ------ ------
317.2 298.2
Current liabilities
Loans and borrowings - Senior secured lender
debt facilities 80.3 1.5
Loans and borrowings - Senior secured second
lien notes 27.0 27.4
----------------------------------------------- ------ ------
107.3 28.9
Total loans and borrowings - bank facilities 424.5 327.1
----------------------------------------------- ------ ------
a) Senior Secured Lender Debt Facilities
During the Year the Group amended its lending group (Absa
Corporate and Investment Banking ("Absa"), FirstRand Bank Limited
(acting through its Rand Merchant Bank division) ("RMB"), IFC,
Nedbank Limited and Bank of China Limited) to facilitate the exit
of Sanlam Life Insurance from its Amortising term facility. An exit
of Bank of China Limited from the Revolving credit facility and a
restructuring of the Senior Secured Lender debt facilities post
year end is further outlined in Note 17.
The Group's debt and hedging facilities are detailed in the
table below:
Amended Senior Secured Lender 30 June 2016 30 June 2015
Debt Facilities
Facility Facility
amount amount
------------------------------------ --------------- ---------------
ZAR Debt Facilities:
Amortising term facility (ATF) ZAR665 million ZAR800 million
Revolving credit facility (RCF) ZAR1,500 ZAR1,500
million million
Working capital facility (WCF) ZAR500 million ZAR500 million
Foreign exchange hedging facilities ZAR400 million ZAR400 million
US$ Debt Facilities:
Amortising term facility (ATF) US$35 million US$35 million
Revolving credit facility (RCF) US$25 million US$25 million
------------------------------------ --------------- ---------------
The repayment terms and interest rates remained unchanged. The
terms and conditions will be detailed in the Company's 2016 Annual
Report.
The facilities are secured on the Group's interests in Finsch,
Cullinan, Koffiefontein, Kimberley Underground and Williamson.
Effective 20 June 2016, the Group agreed revisions to the
covenant measurements related to its Senior Secured Lender Debt
Facilities for the next three measurement periods, being 30 June
2016, 31 December 2016 and 30 June 2017. The revised covenants are
set out in the table below:
Maintenance Covenant 12 months 12 months 12 months 12 months
to 30 June to 31 December to 30 June to 31 December
2016 2016 2017 2017 and
thereafter
------------------------------ --------------- ---------------- -------------- ----------------
Net Debt to EBITDA <=3.1x <=2.8x <=2.5x <=2.5x
(Revised (Revised
from <=2.5x) from <=2.5x)
EBITDA to net finance charges >=3.7x >=3.85x >=4.0x >=4.0x
(Revised (Revised
from >=4.0x) from >=4.0x)
Net Debt to Book Equity <=0.6x <=0.6x <=0.6x <=0.5x
(Revised (Revised (Revised
from <=0.75x) from <=0.5x) from <=0.5x)
------------------------------ --------------- ---------------- -------------- ----------------
Refer to the Financial Review section within the CEO's Review
for discussion with regards to covenants and these debt
facilities.
b) US$300 million Senior Secured Second Lien Notes
In May 2015, a wholly owned subsidiary of the Company, Petra
Diamonds US$ Treasury Plc, issued debt securities consisting of
US$300 million five-year senior secured second lien loan notes
("the Notes"), with a maturity date of 31 May 2020. The Notes carry
a coupon of 8.25% per annum, which is payable semi-annually in
arrears on 31 May and 30 November of each year, beginning on 30
November 2015. The Notes are guaranteed by the Company and by the
Group's material subsidiaries and are secured on a second-priority
basis on the assets of the Group's material subsidiaries. The Notes
are listed on the Irish Stock Exchange and traded on the Global
Exchange Market. On or after 31 May 2017, the Company has the right
to redeem all or part of the Notes, details of which are included
in the 2016 Annual Report.
Proceeds from the Notes were used to repay (without cancelling)
amounts outstanding under certain of the Company's existing bank
loan facilities and to pay fees and expenses associated with the
issue of the Notes. The balance of the funds from the Notes,
together with future drawdowns from the Company's bank loan
facilities, are being used to fund the construction of the modern
processing plant at Cullinan and to further the Group's expansion
projects.
Further details about the Notes (including security and
covenants) will be included in the 2016 Annual Report.
10. COMMITMENTS
As at 30 June 2016, the Company has committed to future capital
expenditure totalling US$63.3 million (30 June 2015: US$59.7
million), mainly comprising Cullinan US$36.1 million (30 June 2015:
US$29.3 million), Finsch US$14.1 million (30 June 2015: US$8.3
million), Koffiefontein US$4.4 million (30 June 2015: US$14.1
million), Kimberley Underground US$4.1 million (30 June 2015:
US$1.0 million) and Williamson US$4.3 million (30 June 2015: US$7.0
million).
11. RELATED PARTY TRANSACTIONS
The Group's related party BEE partners as at 30 June 2016,
Senakha Diamonds Investments (Pty) Ltd ("Senakha"), Thembinkosi
Mining Investments (Pty) Ltd ("Thembinkosi"), Re-Teng Diamonds
(Pty) Ltd ("Re-Teng Diamonds") and Sedibeng Mining (Pty) Ltd
("Sedibeng Mining"), and joint operation partner Ekapa Mining (Pty)
Ltd ("Ekapa Mining") and their gross interests in the mining
operations of the Group are disclosed in the table below.
Mine Partner and respective interest
as at 30 June 2016 (%)
---------------------- --------------------------------
Finsch Senakha (21%)
Cullinan Thembinkosi (14%)
Koffiefontein Re-Teng Diamonds (30%)
Kimberley Underground Sedibeng Mining (26%)
Helam Sedibeng Mining (26%)
Kimberley Mines Ekapa Mining (50.1%)
---------------------- --------------------------------
The non-current loans receivable, non-current loans payable,
finance income and finance expense due from and due to the BEE
partners and other related parties are disclosed in the table
below:
US$ million 2016 2015
------------------------ ----- -----
Non-current receivable
Re-Teng Diamonds 0.6 0.8
Sedibeng Mining 14.1 18.9
Senakha(2) 2.1 2.2
Thembinkosi(1&2) 2.4 2.3
Ekapa Mining(3) 2.7 -
------------------------ ----- -----
21.9 24.2
------------------------ ----- -----
Non-current payable
Re-Teng Diamonds - -
Sedibeng Mining 1.1 2.5
Senakha(2) 35.2 38.3
Thembinkosi(1&2) 21.8 24.4
58.1 65.2
------------------------ ----- -----
Finance income
Re-Teng Diamonds - -
Sedibeng Mining 1.3 1.6
Senakha(2) 0.1 1.7
Thembinkosi(1&2) 0.1 1.2
Ekapa Mining 0.1 -
------------------------ ----- -----
1.6 4.5
------------------------ ----- -----
Finance expense
Re-Teng Diamonds - -
Sedibeng Mining 0.7 0.8
Senakha(2) 3.9 4.2
Thembinkosi(1&2) 2.0 2.2
Ekapa Mining 0.1 -
------------------------ ----- -----
6.7 7.2
------------------------ ----- -----
(1) Umnotho weSizwe Group (Pty) Ltd ("Umnotho"), holds a 36%
interest in Thembinkosi. Mr Abery is a director of Umnotho. Mr
Pouroulis, Mr Dippenaar and Mr Abery are directly or indirectly
beneficiaries of a trust that is a shareholder in Umnotho.
(2) Included in non-current receivables and payables are amounts
advanced during the Year of US$1.7 million (30 June 2015: US$6.1
million) and an accrual of US$1.1 million (30 June 2015: US$2.4
million).
(3) Additionally, included in current trade and other
receivables and current trade and other payables are amounts of
US$11.6 million (30 June 2015: US$nil) receivable from and US$1.9
million (30 June 2015: US$nil) payable to Ekapa Mining (Pty) Ltd
relating to the tolling agreement entered into with the Group.
The Group entered into a tolling agreement during the year with
Ekapa Minerals (Pty) Limited ("Ekapa Minerals") (50.1% owned by
Ekapa Mining (Pty) Limited) and Superstone Mining (Pty) Limited
("Superstone") (100% owned by Ekapa Mining (Pty) Limited) to
combine diamond production and sales. Under the agreement, the
Group acquired tailings material from the parties and the combined
run of mine and tailings material of the parties was processed by
the parties in return for tolling fees. While the Group sold the
resulting combined diamond production on behalf of the parties, the
Group only received the economic benefit from 75.9% of the combined
rough diamond sales under the agreement. Accordingly, the Group
recognises 75.9% of the sales for which it acted as principal. No
revenue is recognised for the remaining portion, for which the
Group acted as an agent and receives no further income. The Group
generated revenue of US$42.2 million as part of the tolling
agreement and incurred total costs of US$23.4 million for the
period 18 January 2016 to 30 June 2016.
Mr Abery stepped down as Petra's Finance Director, effective 30
June 2016, in order to pursue other opportunities. Mr Abery entered
into a fixed term employment contract for advisory services with
the Company effective from 1 July 2016 for a fixed period of seven
months until 31 January 2017 as part of the succession process.
Further details with regards to Mr Abery's resignation and
subsequent fixed term employment contract will be provided in the
Company's 2016 Annual Report.
12. BEE LOANS RECEIVABLE AND PAYABLE
US$ million 2016 2015
-------------------------- ----- -----
Non-current assets
Loans receivable 28.8 29.6
Non-current liabilities
Loans and other payables 84.6 94.0
The non-current BEE loans and receivables and BEE payables,
excluding the portion held in liabilities directly associated with
non-current assets held for sale of US$1.6 million, represent those
amounts receivable from and payable to the Group's BEE partners
(Thembinkosi, Senakha, Re Teng Diamonds, Sedibeng Mining and the
Itumeleng Petra Diamonds Employee Trust ("IPDET")) in respect of
financing their interests in the Finsch, Cullinan, Koffiefontein
and Kimberley Underground mines.
In November 2014 the Company and its BEE partners in the Finsch
and Cullinan mines (the "BEE Partners") entered into agreements
with Absa and RMB (together the "BEE Lenders"). Under the
agreements, the BEE Lenders directly financed the BEE Partners in
respect of the non-current loans and other receivables due to Petra
of ZAR1,078 million (US$98.3 million) relating to the original
acquisition of the BEE Partners' interests in Finsch and Cullinan.
In December 2014 the BEE partners drew down the full funds of
ZAR1,078 million (US$98.3 million) from the BEE Lenders and
transferred this amount to Petra in settlement of their loans.
Petra provides surety to the BEE Lenders for the loan should the
BEE Partners' default on repayment.
13. EARNINGS PER SHARE
30 June 2016 30 June
US$ 2015
US$
Numerator
Profit for the Year 54,173,140 48,624,018
------------------------------------------------- ------------- ------------
Denominator
Shares Shares
Weighted average number of ordinary shares used
in basic EPS
As at 1 July 518,138,799 512,110,048
Effect of shares issued during the Year 3,592,017 1,882,544
------------- ------------
As at 30 June 521,730,816 513,992,592
------------- ------------
Shares Shares
Dilutive effect of potential ordinary shares 12,547,315 14,879,891
------------------------------------------------- ------------- ------------
Weighted average number of ordinary shares in
issue used in diluted EPS 534,278,131 528,872,483
------------------------------------------------- ------------- ------------
US$ cents US$ cents
------------- ------------
Basic profit per share 10.38 9.46
Diluted profit per share 10.14 9.19
------------------------------------------------- ------------- ------------
In the current year, the number of potentially dilutive ordinary
shares, in respect of employee share options, Executive Director
and Senior Management share award schemes is 12,547,315 (30 June
2015: 14,879,891). These potentially dilutive ordinary shares may
have a dilutive effect on future earnings per share. As at the date
of this announcement, there have been no significant post balance
sheet changes to the number of options and awards under share
schemes to impact the dilutive number of ordinary shares.
14. ADJUSTED EARNINGS PER SHARE
In order to show earnings per share from operating activities on
a consistent basis, an adjusted earnings per share is presented
which excludes certain items as set out below. It is emphasised
that the adjusted earnings per share is a non-GAAP measure. The
Petra Board considers the adjusted earnings per share to better
reflect the underlying performance of the Group. The Company's
definition of adjusted earnings per share may not be comparable to
other similarly titled measures reported by other companies.
30 June 2016 30 June
US$ 2015
US$
Numerator
Profit for the Year 54,173,140 48,624,018
Adjustments:
Net unrealised foreign exchange (gain) / loss
(note 6) (3,257,585) 3,245,904
Adjusted profit for the Year 50,915,555 51,869,922
------------- ------------
Denominator
Shares Shares
Weighted average number of ordinary shares used
in basic EPS
As at 1 July 518,138,799 512,110,048
Effect of shares issued during the Year 3,592,017 1,882,544
------------- ------------
As at 30 June 521,730,816 513,992,592
------------- ------------
Shares Shares
Dilutive effect of potential ordinary shares 12,547,315 14,879,891
------------------------------------------------- ------------- ------------
Weighted average number of ordinary shares in
issue used in diluted EPS 534,278,131 528,872,483
------------------------------------------------- ------------- ------------
US$ cents US$ cents
------------- ------------
Adjusted basic profit per share 9.76 10.09
Adjusted diluted profit per share 9.53 9.81
------------------------------------------------- ------------- ------------
15. ACQUISITION
(i) Acquisition of 49.9% interest in Kimberley Mines
On 18 January 2016, Ekapa Minerals (Pty) Ltd, owned by Petra
(49.9%) and Ekapa Mining (Pty) Ltd (50.1%) ("Ekapa Mining"), an
established Kimberley-based diamond tailings producer, acquired
from De Beers Consolidated Mines Proprietary Limited the Kimberley
Mines assets and liabilities in South Africa as a going concern.
The total consideration was ca. US$6.0 million (ZAR102 million)
paid in cash, Petra's share being ca. US$3.0 million (ZAR50.9
million). The transaction comprises a number of tailings deposits
in the Kimberley area, as well as the Central Treatment Plant, and
provides the opportunity to ensure a sustainable future for the
diamond mining industry in Kimberley. Petra jointly controls the
business based on contractual agreements between the parties. The
Group consolidates its share of the assets, liabilities, income and
expenses based on an analysis of factors including the structure of
the arrangement, the legal form and the contractual agreements
between the shareholders.
It is not practical to obtain the turnover and operating results
for the Kimberley Mines for the period from 1 July 2015 to the date
of acquisition, as the Kimberley Mines turnover and operating
results were treated as a branch within a larger corporate division
by the vendor and were not available to the Group.
Effect of the acquisition
The acquisition had the following effect on the Group's assets
and liabilities:
Kimberley Mines net assets at acquisition
date
Book values Fair value Fair values
US$ million adjustments
------------------------------------------- ------------------ ------------------- ------------------
Mining property, plant and equipment 16.4 (1.2) 15.2
Land 2.2 - 2.2
Inventory consumables and stores 0.8 - 0.8
Trade and other receivables - - -
Environmental liabilities (9.6) - (9.6)
Medical aid and provisions (3.0) 1.2 (1.8)
Employee-related payables (0.5) - (0.5)
Trade and other payables (0.3) - (0.3)
------------------------------------------- ------------------ ------------------- ------------------
Net assets acquired 6.0 - 6.0
------------------------------------------- ------------------ ------------------- ------------------
Fair value of net assets acquired (49.9%) 3.0
------------------------------------------- ------------------ ------------------- ------------------
Satisfied as follows:
------------------------------------------- ------------------ ------------------- ------------------
Cash consideration paid by the Group 3.0
------------------------------------------- ------------------ ------------------- ------------------
16. NON-CURRENT ASSETS HELD FOR SALE
Partial disposal of Kimberley Underground (24.1%)
As at 30 June 2016, the Company was in negotiations with Ekapa
Mining to combine their respective businesses in the Kimberley area
(refer note 17 (iii) below), with Petra retaining a 75.9% interest
in the newly formed joint venture. As a result of this transaction,
24.1% of the Kimberley Underground mining operation (being Ekapa
Mining's effective interest in the newly formed joint venture) has
been classified as held for sale in the Statement of Financial
Position at 30 June 2016, in accordance with IFRS 5. The Kimberley
Underground mining operation forms a part of the Kimberley
Operations operating segment for the purposes of the Group's
segmental reporting, as disclosed in note 4. The 24.1% interest in
net assets of the Kimberly Underground mining operation included in
the Statement of Financial Position are set out below.
US$ million 30 June 2016
------------------------------------------------- ------------
Net assets :
Property, plant and equipment 14.1
Trade and other receivables 3.0
Inventories 1.7
Non-current assets classified as held for sale 18.8
Non-current trade and other payables (1.6)
Rehabilitation provision (1.4)
Trade and other payables (9.2)
------------
Liabilities directly associated with non-current
assets classified as held for sale (12.2)
Net assets 6.6
------------
17. SUBSEQUENT EVENTS
(i) Senior Secured Lender Debt Facilities
Effective 1 July 2016, Absa, RMB, IFC, and Nedbank agreed to
restructure the Group's Debt Facilities as detailed in the table
below:
Amended Senior Secured Lender Debt 01 July 2016(1) 30 June 2016
Facilities
Facility amount Facility amount
-------------------------------------- ----------------- -----------------
ZAR Debt Facilities:
ZAR Lenders Amortising term facility ZAR900 million ZAR665 million
(ATF)
ZAR Lenders Revolving credit facility ZAR1,250 million ZAR1,500 million
(RCF)
ZAR Lenders Working capital facility ZAR700 million ZAR500 million
(WCF)
Foreign exchange hedging facilities ZAR300 million ZAR400 million
US$ Debt Facilities:
IFC - Amortising term facility
(ATF) US$35 million US$35 million
IFC - Revolving credit facility
(RCF) US$25 million US$25 million
-------------------------------------- ----------------- -----------------
(1) Effective 1 July 2016, Bank of China Limited exited the
Petra Group Lenders.
The repayment terms and interest rates remained unchanged.
The facilities are secured on the Group's interests in Finsch,
Cullinan, Koffiefontein and Williamson.
(ii) Group restructuring
Effective 1 July 2016, the Company completed the restructuring
of the Group and its BEE partner structures, allowing for a
simplified Group structure. The Itumeleng Petra Diamonds Employee
Trust now owns a 12% interest in each of the Group's South African
operations, with Petra's commercial BEE partners holding the
remaining 14% interest through their respective shareholdings in
Kago Diamonds (Pty) Ltd, in which Petra has a 31.46% interest. The
effect of the restructuring for shareholders is disclosed in the
table below:
Resultant Group's effective Resultant Group's effective
Mine interest % - Pre restructuring interest % - Post restructuring
---------------------- ------------------------------- --------------------------------
Finsch 82.38 78.4
Cullinan 77.03 78.4
Koffiefontein 81.39 78.4
Kimberley Underground
/ KEM JV 86.80 58.1(1)
Helam 86.80 74.0
---------------------- ------------------------------- --------------------------------
(1) The 58.1% effective interest in KEM JV post restructuring
reflects both the Group's interest in KEM JV following the
transaction in (iii) and the impact of the BEE restructuring.
(iii) Kimberley Ekapa Mining Joint Venture
On 8 July 2016, Petra and Ekapa Mining entered into a joint
venture agreement (effective 1 July 2016) to combine the operations
owned and operated by the joint venture partners in the Kimberley
area into an unincorporated joint venture named the Kimberley Ekapa
Mining Joint Venture ("KEM JV").
The operations owned and operated by the joint venture partners
comprise:
- Kimberley Underground mines (via Petra's subsidiary Crown Resources (Pty) Ltd);
- tailings operations (via Ekapa Mining's subsidiaries Super
Stone Mining (Pty) Ltd ("Super Stone Mining"), and Kimberley Miners
Forum (Pty) Ltd); and
- Kimberley Mines tailings operations (via Ekapa Minerals (Pty)
Ltd, owned 50.1% Ekapa Mining and 49.9% Petra).
Petra and its BEE partners will have an effective 75.9% interest
in KEM JV with Ekapa Mining owning the remaining 24.1%.
Principal Risk Factors and Uncertainties
The Group is exposed to a number of risks and uncertainties
which could have a material impact on its long-term development and
performance and management of these risks is an integral part of
the management of the Group. The Board has identified the following
as being the principal strategic and operational risks (in no order
of priority). A more detailed analysis of the Group's risk factors
as well as its risk management processes will be provided in the
2016 Annual Report.
Risk Description
Safety Ensuring the safety of all Petra people is the
Group's number one priority. Poor safety performance
can also lead to temporary mine closures, thereby
impacting production results. Petra is highly
focused on managing its safety performance and
follows a risk-based approach which entails
continual hazard identification, risk assessment
and instilling safety awareness into the workplace
culture. HSSE targets are explicitly included
as part of Petra's annual bonus framework.
Mining and production The mining of diamonds from kimberlite deposits
involves an intrinsic degree of risk from various
factors, including geological, geotechnical
and seismic factors, industrial and mechanical
accidents, unscheduled plant shutdowns, technical
failures, ground or water conditions and inclement
or hazardous weather conditions.
ROM grade and product At the Group's underground mines, Petra is currently
mix variability operating predominantly in 'mature' caves, meaning
that the block of ore being mined has nearly
been exhausted and that the area is nearing
the end of its life. Once the majority of the
kimberlite ore has been removed, waste rock
is able to ingress into the production areas,
thereby reducing the volume (grade) and negatively
impacting the quality of diamonds recovered.
This risk is being mitigated as Petra's expansion
programmes continue to open up new mining areas,
which are undiluted by waste rock, however Petra
expects ROM grade and product volatility up
to H2 FY 2017 while the Company remains in the
transitionary period from the old to the new
mining areas, particularly at Cullinan.
Rough diamond prices The Company's financial performance is closely
linked to rough diamond prices which are influenced
by numerous factors beyond the Company's control,
including international economic conditions,
world production levels and consumer trends.
Whilst the medium to long term fundamentals
of the diamond market remain positive, some
volatility in rough diamond pricing is expected,
particularly in the short term. The Group's
management closely monitors developments in
the international diamond market (across the
pipeline from the rough market to the retail
consumer market) to be in a position to react
in a timely manner to changes in rough diamond
prices and demand.
Expansion and project Petra has set out a clear and transparent growth
delivery profile to increase annual production to ca.
5.3 million carats by FY 2019. Actual production
may vary from estimates of future production
for a variety of reasons and it should be noted
that assumptions may be subject to change as
the Company continually evaluates its projects
to optimise efficiency and production profitability.
Retention of key The successful achievement of the Group's strategies,
personnel business plans and objectives depends upon its
ability to attract and retain certain key personnel.
Petra believes that employees who are empowered
and accountable for their actions work to the
best of their ability and are able to fulfil
their true potential.
Financing Petra has a significant Capex programme over
the years to FY 2019. The Company plans to continue
to finance this Capex from operating cashflows
and debt finance. Lack of adequate available
cashflows as a result of reduction in operating
cashflows and/or breaches in banking covenants
could delay development work.
Country and political Petra's operations are predominantly based in
risk South Africa, with lesser exposure to Tanzania
and Botswana. Emerging market economies could
be subject to greater risks, including legal,
regulatory, economic, and political risks, and
are potentially subject to rapid change.
Labour relations The Group's production, and to a lesser extent
its project development activities, is dependent
on a stable and productive labour workforce.
Petra remains highly focused on managing labour
relations and on maintaining open and effective
communication channels with the appropriate
employee and union representatives at its operations.
Currency With Petra's operations mainly in South Africa,
but diamond sales based in US Dollars, the volatility
and movement in the Rand is a significant factor
to the Group. Also, the Group undertakes transactions
in a number of different currencies. Fluctuations
in these currencies may have a significant impact
on the Group's performance. In order to mitigate
currency risk, the Group continually monitors
the movement of the Rand against the US Dollar
and takes expert advice from its bankers in
this regard. It is the Group's policy to hedge
a portion of future diamond sales when weakness
in the Rand deems it appropriate. Such contracts
are generally short-term in nature.
Synthetic diamonds Man-made or "synthetic" diamonds have been
available for many years, but to date have predominantly
been used to manufacture smaller diamonds for
industrial purposes as the cost of production
has generally rendered larger gem quality synthetic
stones uneconomic. Technological advancements
mean that gem quality synthetics are now more
widely available but they are estimated to represent
less than 1% of world diamond supply(1).
Access to Energy South Africa and Tanzania both face power supply
constraints, but the issue has been more acute
in South Africa. However, there was a marked
improvement in power supply in the South African
environment in FY 2016, with only limited requests
for load curtailment from Eskom. Petra aims
to reduce energy consumption and increase energy
efficiency wherever possible.
Access to Water South Africa experienced severe drought conditions
in FY 2016. Prolonged drought conditions may
have an adverse impact on Petra's operations.
Cost Control and As is usual for the mining industry, Petra's
Capital Discipline operations have a relatively high fixed-cost
base, estimated to be ca. 70%. Petra's main
cost inputs are labour and energy, both of which
have been rising higher than the official inflation
rates in South Africa and Tanzania. Ineffective
cost control leads to reduced margins and profitability.
Licence to Operate In order to maintain its exploration or mining
licences, Petra must comply with stringent legislation
to justify its licence to operate. Failure to
comply with relevant legislation in South Africa,
Tanzania or Botswana could lead to delays or
suspension of its mining and exploration activities.
(1) Source: Morgan Stanley Research estimates - Global Diamonds;
Insight: Game of Stones - Lab vs Pipe - 18 July 2016
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
(a) the preliminary financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union, and give a true and fair view of the
assets, liabilities, financial position and profit of the Group for
the Year; and
(b) the preliminary management report for the Year includes a
fair review of the information required by the FCA's Disclosure and
Transparency Rules (DTR 4.1.8 R and 4.1.9 R).
By order of the Board
Johan Dippenaar
Chief Executive
19 September 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFDFAAFMSEDU
(END) Dow Jones Newswires
September 19, 2016 02:00 ET (06:00 GMT)
Petra Diamonds (LSE:PDL)
Historical Stock Chart
From Apr 2024 to May 2024
Petra Diamonds (LSE:PDL)
Historical Stock Chart
From May 2023 to May 2024