REG-Petra Diamonds: H1 FY 2023 Operating Update
16/01/2023 07:15
16 January 2023 LSE: PDL
Petra Diamonds Limited
H1 FY 2023 Operating Update
Petra reports its operating results for the first half of FY 2023
Richard Duffy, Chief Executive Officer of Petra, commented:
“Despite some challenges in the first half of FY 2023, Petra continues to
benefit from the operational improvements we have made across the business
which provide for greater stability and resilience. As a result, we are seeing
improvements to equipment and tunnel availability at Finsch, resulting in an
increase in ROM grades from December 2022. At the Cullinan Mine, we have
continued to mine and recover targeted tonnes as we continue to seek to
mitigate the impact of the recent grade challenges experienced.
Although lower grades at the Cullinan Mine are now expected to continue
through FY 2024, mitigating factors around the re-opening of Tunnels 36 and 41
and the completion of development of two new tunnels, Tunnels 46 and 50, are
expected to start contributing to production in FY 2025 and more than offset
the impact of lower grades this financial year and next. The CC1E project
currently under development is further expected to contribute higher grade
tonnes from the end of FY 2024 and return average grades towards the 40cpht
level. At Finsch, the acquisition of new drill rigs and LHD loaders supports
improved production in the second half of FY 2023.
Strong relationships at both government and local level, as well as a robust
governance framework, provided for a swift response to the regrettable
tailings storage facility (TSF) breach that occurred at Williamson on 7
November 2022. With this continued cooperation and focused team on the ground,
I am confident production will resume safely from the beginning of FY 2024 and
that the actions taken to date by Williamson Diamonds Limited will enable the
environmental and social impacts to be fully remediated.
After having commenced mining in the early 1880s and being a renowned source
of gem-quality white and coloured diamonds, the Board, in ongoing consultation
with its stakeholders, has taken the difficult decision to cease operations
and place Koffiefontein on care and maintenance. Engagement with our key
stakeholders remains constructive as we seek to ensure an inclusive and
responsible process towards mine closure.
Following on from the above, we have reduced our diamond production guidance
for this financial year to circa 2.8 Mcts and 3.0 to 3.3 Mcts for FY 2024,
which includes the impact of lost production at Williamson and Koffiefontein.
Guidance in FY 2025 remains unchanged.
With a stronger product mix offsetting the recent softness in rough diamond
prices, we remain confident that we will continue to generate cash to fund
capex, allow further deleveraging and pay dividends.”
Highlights vs H1 FY 2022
* LTIFR and LTIs marginally increased to 0.19 and 7 respectively
* Ore processed decreased 4% to 5.4Mt, largely due to the suspension of
production at Williamson and lower tonnes mined at Finsch
* Total diamond production decreased 21% to 1.4 million carats due to lower
grades at the Cullinan Mine, lower tonnes mined at Finsch and production
suspensions at Williamson and Koffiefontein
* Support from a weaker Rand and more stable diamond pricing
* Revenue amounted to US$212.1 million (H1 FY 2022: US$264.7 million) * Post
the Tender 3 sales results announcement released on 13 December 2022,
additional off-tender sales of some US$4.3 million (40,246 carats) to local
South African cutting & polishing clients were effected, bringing total rough
diamond sales for the period to US$210.7 million
* Revenue includes US$1.4 million from Petra’s 50% share in the profit from
the sale of polished stones cut from the 342.92 carat rough white diamond sold
into a partnership for US$10 million in August 2021
* Gross debt decreased to US$241.7 million (30 June 2022: US$366.2 million)
reflecting the successful tender offer to repurchase second lien notes
Safety, sales and production Unit H1 FY 2023 H1 FY 2022
Q2 Q1 Total Q2 Q1 Total
Safety
LTIFR - 0.22 0.16 0.19 0.06 0.31 0.18
LTIs Number 4 3 7 1 5 6
Sales
Diamonds sold Carats 792,889 520,011 1,312,900 1,017,665 578,186 1,595,851
Revenue (1) US$m 107.8 102.9 210.7 149.9 114.9 264.7
Contribution from Exceptional Stones US$m 0.0 0.0 0.0 27.7 50.2 77.9
Production
ROM tonnes Tonnes 2,198,975 3,042,017 5,240,992 2,935,488 2,466,044 5,401,532
Tailings and other tonnes Tonnes 92,375 105,715 198,090 122,699 115,593 238,292
Total tonnes treated Tonnes 2,291,350 3,147,732 5,439,082 3,058,187 2,581,637 5,639,824
ROM diamonds Carats 604,917 733,014 1,337,931 839,643 810,346 1,649,989
Tailings and other diamonds Carats 31,612 30,206 61,818 61,370 66,065 127,435
Total diamonds Carats 636,529 763,220 1,399,749 901,013 876,411 1,777,424
(1) Revenue reflects proceeds from the sale of rough diamonds and excludes
revenue from profit share arrangements (as noted in the text above)
(2) Petra classifies “Exceptional Stones” as rough diamonds which sell for
US$5 million or more each
* Production guidance for FY 2023 & FY 2024 revised downwards from 3.3 to 3.6
Mcts for each of these years to circa 2.8 Mcts for FY 2023, increasing to 3.0
to 3.3 Mcts for FY 2024. The adjustment incorporates the impact of production
curtailment at Williamson on FY 2023 of c. 200 kcts, cessation of production
at Koffiefontein during H1 FY 2023 of c. 40 kcts p.a. for both FY 2023 and FY
2024, lower H1 FY 2023 production at Finsch compared to earlier guidance of c.
85 kcts and a restated grade forecast for the Cullinan Mine for FY 2023 and FY
2024 given accelerated waste ingress of c. 200 kcts per year for each of the
two years
Production and guidance
* LTI and LTIFR increased marginally in H1 FY 2023 due to an increase in the
number of LTIs, with the LTIFR impacted by a smaller number of hours worked at
Koffiefontein. Petra continues to strive for a zero harm environment and has
increased its focus on identifying and mitigating safety risks through
behaviour-based intervention programmes.
* Cullinan Mine ROM grade reduced to 31.2cpht and is expected to be between
30cpht and 32cpht for the full year. As announced previously, this is
attributable to the C-Cut cave maturity as the cave progresses from SW to
NE. From March 2022, the C-Cut experienced early ingress of waste from the
overlying depleted mining blocks. The change in ore makeup (lower grade and
higher density) as a result of the cave progression also resulted in
processing challenges due to the high process yields, causing a reduction in
plant capacity to process tailings treatment.
Ingress of overlying waste into the extraction draw points is a natural
process in block cave mining. However, the onset and rate of the observed
waste ingress occurred earlier and much more rapidly than predicted by the
depletion model provided by an independent external expert. The C-Cut
depletion model has been recalibrated by the independent external expert and
model parameters adjusted to obtain alignment between the modelled and
observed waste ingress. Once the ingress of waste commences, dilution of the
ore is unavoidable and will increase as the cave maturity progresses. The
impact of the change in the ore makeup on treatment capacity has, however,
been largely negated with changes made in the dense media separation plant.
Several mitigating action plans to reduce the loss in carats are being
considered and evaluated. Tailings treatment has been optimised but, in
isolation, is not sufficient to address the extent of the carat loss
associated with waste ingress in the C-Cut. Other mitigation action plans
include the re-opening of Tunnels 36 and 41, which have already commenced, and
the establishment of two new tunnels, Tunnels 46 and 50 (C-Cut extension),
which are being evaluated. The re-opening of Tunnels 36 and 41 and the
establishment of Tunnels 46 and 50 are expected to provide additional volume
from FY 2025 onwards. Early development spend has been approved for Tunnels 46
and 50 and the additional production from these two tunnels is expected to
more than offset the impact of lower grades in FY 2023 and FY 2024. Production
from the CC1E capital expansion project will contribute meaningfully from FY
2025 onwards and is expected to see grades move back towards 40cpht.
As a consequence of the continued lower grades being experienced, production
guidance for the full year and for FY 2024, which was expected to be towards
the lower end of guidance, is now expected to fall below previously guided
ranges with an annual negative impact of around 200 to 250 kcts for both FY
2023 and FY 2024, with FY 2025 guidance remaining unchanged at 1.7 to 1.9 Mct.
* Finsch mined and treated 1.1Mt in H1 FY 2023. Finsch experienced further
production challenges in Q2 FY 2023, resulting in tonnes hoisted and treated
being significantly below target in the first half. These challenges included
low machine availability owing to an aging underground fleet, challenges with
the centralised blasting system and emulsion quality and an extended
rock-winder breakdown. In December 2022, production improved on the back of
new underground equipment being delivered and commissioned following the
previously announced increased lead-times, coupled with positive changes to
the blasting process. These blasting process changes, together with the
introduction of new long hole drill rigs and Load Haul Dump (LHDs) loaders as
well as the appointment of individuals to a number of key positions, supports
the expected improvement in production in the second half.
The lower production in the first half is expected to result in full year
production falling short of earlier guidance by some 75kcts. Guidance for FY
2024 onwards remains unchanged.
* Production at Williamson was trending positively against guidance until the
TSF breach in November 2022. Following the incident, all production activities
were suspended, with no further production expected for FY 2023. On-mine
activities are focused on remedial steps and critical maintenance to allow for
a smooth start-up once the TSF has been recommissioned. A separate
announcement will be released shortly by the Company to provide an update on
activities at Williamson since the incident.
On 28 November 2022, the Independent Grievance Mechanism (IGM) at Williamson
became operational with the commencement of the IGM’s pilot phase. A
detailed update, dated 30 November 2022, of the IGM work undertaken since July
2022, the Restorative Justice Projects that are being put in place to provide
sustainable benefits to the communities located close to the mine and illegal
incursions onto the Williamson mine lease area during Q1 FY 2023 is set out
here: Williamson-IGM-and-RJPs-November-Update-for-website-29-November-22.pdf
(petradiamonds.com)
(https://www.petradiamonds.com/wp-content/uploads/Williamson-IGM-and-RJPs-November-Update-for-website-29-November-22.pdf)
* As previously announced, Petra has been exploring options for a responsible
exit at Koffiefontein as the mine approaches the end of its mine plan and with
the sales process announced in April 2022 having not resulted in a potential
buyer for the mine. The asset has been loss-making for several years and low
morale remains a risk to the mine’s safety performance. A Section 189(3)
notice was issued to all KDM employees during November 2022 informing them of
the economic realities of the mine and inviting them to join a collaborative
process to determine the optimal way forward towards achieving the mine being
placed on care and maintenance. Operations were halted to ensure all assessed
risks were adequately mitigated for. Our consultations with the mine’s key
stakeholders remain constructive and we are optimistic that an inclusive and
responsible process towards mine closure will be achieved. As a result,
further production from Koffiefontein has been removed from our updated
guidance.
* Guidance – the following items are amended, with items not shown being
unchanged with reference to earlier guidance. Updated cost and capital
guidance, including actual results to December 2022, will be provided with the
Company’s interim results on 21 February 2023.
Original Guidance Restated Guidance
Carats recovered 3.3 – 3.6 Mcts 3.3 – 3.6 Mcts ~2.8 Mcts ~3.0 – 3.3 Mcts
Cullinan Mine Carats recovered ROM grade 1.61 – 1.79 Mcts 1.66 – 1.85 Mcts 36.5 – 38.5 cpht 36.7 – 38.8 cpht 1.4 – 1.5 Mcts 1.45 – 1.55 Mcts ~30.8 cpht ~30.7 cpht
Carats recovered 1.28 – 1.39 Mcts 1.15 – 1.25 Mcts
Carats recovered 319 – 358 kcts 141 kcts
Carats Recovered 47 – 52 kcts 45 – 49 kcts 29 – 32 kcts 6 kcts
More detailed guidance is available on Petra’s website at
https://www.petradiamonds.com/investors/analysts/analyst-guidance/
Balance sheet further strengthened through successful debt tender offer
* Balance Sheet as at 31 December 2022:
* Gross debt decreased to US$241.7 million (30 June 2022: US$366.2 million)
reflecting the successful tender offer in September/October 2022 to repurchase
second lien notes. * Gross cash of US$146.6 million (30 June 2022: US$288.2
million) and unrestricted cash of US$130.4 million (30 June 2022: US$271.9
million) reflecting the repurchase of the Company’s loan notes totalling
US$145.0 million during the period.
* Consolidated net debt of US$90.8 million (30 June 2022: US$40.6 million)
increased due partly to timing of the Company’s tender cycles and resultant
inventory build during the period together with the previously announced
increase in capital expenditure for the expansion projects at the Cullinan
Mine and Finsch.
Outlook
Although the recent grade and dilution issues at the Cullinan Mine are
expected to impact production for the remainder of FY 2023 and FY 2024, the
impact of this on the business is expected to be more than offset from FY
2025. Production from Tunnels 46 and 50 are not included in Cullinan Mine’s
current LOM plan and therefore provide incremental tonnes and carats. At
Finsch, the successful commissioning of a new underground fleet and
appointment of individuals to a number of key positions are expected to lead
to improved production in H2 FY 2023. At Williamson, remedial steps and
critical maintenance are ongoing to allow for a smooth and safe start-up once
the TSF has been recommissioned, which is expected from the beginning of FY
2024. Production at Koffiefontein will remain halted while we continue to
engage with our key stakeholders to determine the optimal way forward in
moving towards placing the mine on care and maintenance as part of finalising
a responsible process towards mine closure.
The backdrop of structural changes to the supply and demand fundamentals in
the diamond market remains unchanged and we anticipate it to remain supportive
going forward. We are cautiously optimistic that the resilience seen in the
luxury goods market, together with the easing of lockdown restrictions in
China, will lead to a stabilisation of prices in the early part of CY 2023.
This announcement includes inside information as defined in Article 7 of the
UK Market Abuse Regulation No. 596/2014 and is being released on behalf of
Petra by the Company Secretary.
INVESTOR WEBCASTS
Webcast presentation for institutional investors and analysts
09:30am GMT tomorrow, 17 January 2023
Petra’s CEO, Richard Duffy, and CFO, Jacques Breytenbach, will host a
webcast for institutional investors and analysts tomorrow to discuss this
trading update at 09:30 GMT.
Please register at:
https://www.investis-live.com/petra-diamonds/63c12fedaba36a0c0021ee6a/hyaie
Dial in details:
United Kingdom 0800 640 6441
South Africa 087 550 8441
United States (Local) 1 646 664 1960
All other locations +44 20 3936 2999
09:30: Access code: 723364
Press *1 to ask a question, *2 to withdraw your question, or *0 for operator
assistance.
Link for recording (available later in the day):
https://www.petradiamonds.com/investors/results-reports/
Investor Meet webcast at 14.30 GMT on 17 January 2023
Petra will also present the results on the Investor Meet Company platform,
predominantly aimed at retail investors. To join:
https://www.investormeetcompany.com/petra-diamonds-limited/register-investor
FURTHER INFORMATION
Please contact
Petra Diamonds,
London
Telephone: +44 207494 8203
Patrick Pittaway
investorrelations@petradiamonds.com
Julia Stone
Notes:
1. The following definitions have been used in this announcement:
1. Exceptional Stones: diamonds with a valuation and selling price of US$5m or
more per stone
2. cpht: carats per hundred tonnes
3. LTIs: lost time injuries
4. LTIFR: lost time injury frequency rate, calculated as the number of LTIs
multiplied by 200,000 and divided by the number of hours worked
5. FY: financial year ending 30 June
6. CY: calendar year ending 31 December
7. H: half of the financial year
8. ROM: run-of-mine (i.e. production from the primary orebody)
9. m: million
10. Mt: million tonnes
11. LHD: Load Haul Dump loaders
ABOUT PETRA DIAMONDS
Petra Diamonds is a leading independent diamond mining group and a supplier of
gem quality rough diamonds to the international market. The Company’s
portfolio incorporates interests in three underground mines in South Africa
(Finsch, the Cullinan Mine and Koffiefontein) and one open pit mine in
Tanzania (Williamson).
Petra's strategy is to focus on value rather than volume production by
optimising recoveries from its high-quality asset base in order to maximise
their efficiency and profitability. The Group has a significant resource base
which supports the potential for long-life operations.
Petra strives to conduct all operations according to the highest ethical
standards and only operates in countries which are members of the Kimberley
Process. The Company aims to generate tangible value for each of its
stakeholders, thereby contributing to the socio-economic development of its
host countries and supporting long-term sustainable operations to the benefit
of its employees, partners and communities.
Petra is quoted with a premium listing on the Main Market of the London Stock
Exchange under the ticker 'PDL'. The Company’s loan notes due in 2026 are
listed on the Irish Stock Exchange and admitted to trading on the Global
Exchange Market. For more information, visit www.petradiamonds.com.
Corporate and financial summary 31 December 2022
Unit As at 31 December 2022 As at 30 September 2022 As at 30 June 2022
Cash at bank – (including restricted amounts)¹ US$m 146.6 154.0 288.2
Diamond debtors US$m 4.3 4.2 37.4
Diamond inventories (2,3) US$m Carats 59.9 540,153 76.3 692,219 52.7 453,380
2026 US$336.7m loan notes (4) US$m 241.7 235.8 366.2
Bank loans and borrowings (5) US$m — — —
Consolidated Net Debt (6) US$m 90.8 77.6 40.6
Bank facilities undrawn and available (5) US$m 58.8 55.1 61.5
Note: The following exchange rates have been used for this announcement:
average for H1 FY 2023 US$1: ZAR17.32 (FY 2022: US$1: ZAR15.22); closing rate
as at 31 December 2022 US$1: ZAR17.00 (30 June 2022: US$1: ZAR16.27).
Notes:
1. The Group’s cash balances comprise unrestricted balances of US$130.4
million, and restricted balances of US$16.2 million.
2. Recorded at the lower of cost and net realisable value.
3. Diamond inventories includes the Williamson 71,654.45 carat parcel of
diamonds blocked for export during August 2017, with a carrying value of
US$12.5 million. Under the framework agreement reached with the Government of
Tanzania, as announced on 13 December 2021, the proceeds from the sale of this
parcel are required to be allocated to Williamson.
4. The 2026 US$336.7 million loan notes, originally issued following the
capital restructuring (the “Restructuring”) completed during March 2021,
have a carrying value of US$241.7 million which represents the outstanding
principal amount of US$210.2 million (after the early participation phase of
the debt tender offers as announced in September and October 2022) plus
US$45.5 million of accrued interest and net of unamortised transaction costs
capitalised of US$14.0 million.
5. Bank loans and borrowings represent the Group’s ZAR1 billion revolving
credit facility which remains undrawn and available.
6. Consolidated Net Debt is bank loans and borrowings plus loan notes, less
cash and diamond debtors.
Mine-by-mine tables:
Cullinan Mine – South Africa
Unit H1 FY 2023 H1 FY 2022
Q2 Q1 Total Q2 Q1 Total
Sales
Revenue US$m 45.8 56.9 102.7 74.9 92.8 167.7
Diamonds sold Carats 400,999 267,728 668,727 500,008 372,296 872,304
Average price per carat US$ 114 212 154 150 249 192
ROM Production
Tonnes treated Tonnes 1,120,282 1,110,912 2,231,194 1,099,643 1,207,343 2,306,986
Diamonds produced Carats 328,137 368,796 696,933 411,235 431,967 843,202
Grade (1) Cpht 29.3 33.2 31.2 37.4 35.8 36.5
Tailings Production
Tonnes treated Tonnes 62,178 77,572 139,750 122,700 115,593 238,293
Diamonds produced Carats 28,211 26,790 55,001 61,370 66,065 127,435
Grade (1) Cpht 45.4 34.5 39.4 50.0 57.2 53.5
Total Production
Tonnes treated Tonnes 1,182,460 1,188,484 2,370,944 1 222,343 1,322,936 2,545,279
Diamonds produced Carats 356,348 395,586 751,934 472,605 498,032 970,637
Note: 1. Petra 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.
Finsch – South Africa
Unit H1 FY 2023 H1 FY 2022
Q2 Q1 Total Q2 Q1 Total
Sales
Revenue US$m 32.0 23.4 55.4 46.4 19.3 65.7
Diamonds sold Carats 283,833 177,285 461,118 474,643 201,652 676,295
Average price per carat US$ 113 132 120 98 96 97
ROM Production
Tonnes treated Tonnes 522,578 572,976 1,095,554 721,741 701,378 1,423,119
Diamonds produced Carats 234,150 260,217 494,367 351,175 350,368 701,543
Grade (1) Cpht 44.8 45.4 45.1 48.7 50.0 49.3
Tailings Production
Tonnes treated Tonnes 30,197 17,305 47,502 - - -
Diamonds produced Carats 3,402 3,160 6,562 - - -
Grade (1) Cpht 11.3 18.3 13.8 - - -
Total Production
Tonnes treated Tonnes 552,775 590,281 1,143,056 721,741 701,378 1,423,119
Diamonds produced Carats 237,552 263,377 500,929 351,175 350,368 701,543
Note: 1. Petra 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.
Williamson – Tanzania
Unit H1 FY 2023 H1 FY 2022
Q2 Q1 Total Q2 Q1 Total
Sales
Revenue US$m 27.9 21.2 49.1 20.2 - 20.2
Diamonds sold Carats 103,829 71,295 175,124 26,611 - 26,611
Average price per carat US$ 269 297 280 760 - 760
ROM Production
Tonnes treated Tonnes 520,017 1,309,359 1,829,376 988,978 365,138 1,354,116
Diamonds produced Carats 39,766 100,750 140,516 68,453 14,420 82,873
Grade (1) Cpht 7.6 7.7 7.7 6.9 3.9 6.1
Total Production
Tonnes treated Tonnes 520,017 1,309,359 1,829,376 988,978 365,138 1,354,116
Diamonds produced Carats 39,766 100,750 140,516 68,453 14,420 82,873
Koffiefontein – South Africa
Unit H1 FY 2023 H1 FY 2023
Q2 Q1 Total Q2 Q1 Total
Sales
Revenue US$m 2.2 1.4 3.6 8.3 2.8 11.1
Diamonds sold Carats 4,228 3,703 7,931 16,400 4,238 20,638
Average price per carat US$ 508 383 450 505 664 538
ROM Production
Tonnes treated Tonnes 36,099 48,770 84,869 125,126 192,184 317,310
Diamonds produced Carats 2,862 3,253 6,115 8,779 13,592 22,371
Grade (1) Cpht 7.9 6.7 7.2 7.0 7.1 7.1
Tailings Production
Tonnes treated Tonnes - 10,837 10,837 - - -
Diamonds produced Carats - 255 255 - - -
Grade (1) Cpht - 2.4 2.4 - - -
Total Production
Tonnes treated Tonnes 36,099 59,607 95,706 125,126 192,184 317,310
Diamonds produced Carats 2,862 3,508 6,370 8,779 13,592 22,371
Note: 1. Petra 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.
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