REG-Petra Diamonds: Interim results for the 6mths ended 31 Dec 2022
21/02/2023 07:15
21 February 2023 LSE: PDL
Petra Diamonds Limited
Interim results for the six months ended 31 December 2022
H1 in line with expectations; annual production on track to increase by c.1
Mct in FY 2025
Petra Diamonds Limited ("Petra" or the "Company" or the “Group”) announces
its unaudited interim results for the six months ended 31 December 2022 (the
“Period”, “H1 FY 2023”, or “H1”).
Richard Duffy, Chief Executive Officer at Petra Diamonds commented:
“Petra’s new culture and ongoing focus on continuous improvement through
our operating model has enabled the Company to respond swiftly and efficiently
to the operational challenges experienced in H1 FY 2023.
We are optimistic that the fundamentals of the diamond market will continue to
support prices, with demand for luxury goods remaining robust in the USA,
notwithstanding recent economic volatility. We also expect that the ending of
lock-down restrictions in China will benefit diamond pricing in the near to
medium term.
We remain on track to meet recent production guidance, while our cost guidance
remains largely unchanged despite inflationary pressures as a result of our
ongoing focus on costs, supported by a weaker Rand. Both the Finsch & Cullinan
Mines have a significant resource base giving them potential for long lives,
and our projects at both mines continue to progress in line with expectations.
As a result, our guidance shows annual production increasing by c.1 million
carats from 2.8 million carats in FY 2023 to 3.6 - 3.9 million carats in FY
2025. Production will be further boosted from the recently approved C-Cut
extension at the Cullinan Mine, set to deliver a total of 2.3 million
additional carats from FY 2025 through to FY 2033.
At Williamson, we have made considerable progress in addressing the social and
environmental impact of the tailings storage facility wall breach. The
necessary permits are being put in place, with production anticipated to
resume during Q1 FY 2024. Ahead of this resumption, maintenance is being
accelerated and waste stripping is being carried out to construct the interim
tailings storage facility and to enable an efficient ramp-up in production.
Koffiefontein has been loss making for a number of years and incurred an
operating loss of US$8.7 million in H1. We are taking important steps towards
responsible closure in discussion with all relevant stakeholders.
Revenue for the half year decreased from US$264.7 million in H1 FY 2022 to
US$212.1 million, with the strength of our product mix and an increase in
like-for-like diamond prices of 12.6% helping to offset lower production and
no contribution from Exceptional Stones 1 (H1 FY 2022: US$77.9 million).
Post period-end, two blue diamonds recovered from the Cullinan Mine, including
an Exceptional Stone, were sold into partnership. The 17.4 and 10.4 carat gem
quality blue diamonds were sold for US$7 million and US$2 million
respectively. We will share equally in any upside on the sale of the stones
once cut and polished, extending our partnership approach on selected
diamonds.”
Summary of financial results
US$m unless stated otherwise H1 FY 2023 H1 FY 2022 FY 2022
Revenue 212.1 264.7 585.2
Revenue from rough diamond sales 210.7 264.7 584.1
Average realised price per carat 160 166 165
Adjusted mining and processing costs 130.4 109.8 307.1
Adjusted EBITDA (1) 77.4 150.9 264.9
Adjusted EBITDA margin (1) 36% 57% 45%
Adjusted profit before tax (1) 18.9 91.1 141.9
Adjusted net profit after tax (1) 4.5 66.4 102.0
Net (loss) / profit after tax (17.6) 49.1 88.1
Adjusted basic (loss) / earnings per share (1)(USc) (0.91) 29.01 42.93
Basic (loss) / earnings per share (USc) (12.23) 22.29 35.53
Capital expenditure 51.9 16.7 52.2
Operational free cash flow (1) 11.7 122.4 230.0
Consolidated net debt (1) 90.2 152.3 40.6
Unrestricted cash 130.4 256.7 271.9
Consolidated net debt : Adjusted EBITDA (1) 0.47x 1.0x 0.15x
Note 1: For all non-GAAP measures refer to the Summary of Results table within
the Financial Results section below.
* Revenue amounted to US$212.1 million (H1 FY 2022: US$264.7 million),
including US$1.4 million from Petra’s realised profit share from partnership
stones
* The average realised price per carat in H1 FY 2023 was US$160/ct down 3% to
US$166 in H1 FY 2022 and US$165/ct for FY 2022
* Adjusted mining and processing costs remained within expectations despite
inflationary pressures. The increase was largely attributable to diamond
inventory movement while cash on mine cost remained largely flat
* Adjusted EBITDA 49% lower YoY, due to the lack of contribution from
Exceptional Stones (US$64 million at Cullinan Mine and US$13.9 million at
Williamson Mine in the prior period), together with lower sales volumes
* Basic loss per share from continuing operations of USc12.23 per share and
USc0.91 on an adjusted basis after accounting for non-controlling interests
* Capex increased to US$51.9 million (H1 FY 2022: US$ 16.7 million) largely
due to the planned capital expenditure relating to expansion projects at the
Cullinan and Finsch Mines, coupled with accelerated equipment replacement at
Finsch
* Operational free cash flow down to US$11.7 million on the back of reduced
sales and the planned increase in capital expenditure relating to expansion
projects
* Further strengthening of the Balance Sheet: * Unrestricted cash decreased by
US$141.5 million to US$130.4 million following the successful repurchase of
Loan Notes totaling US$146.1 million
* Consolidated net debt increased to US$90.2 million from US$40.6 million as
at 30 June 2022, with Consolidated net debt : Adjusted EBITDA at 0.47x
compared with 0.15x at 30 June 2022
Safety and operational performance
Unit H1 FY 2023 H1 FY 2022 Variance FY 2022
Lost time injury frequency rate (LTIFR) 0.19 0.18 6% 0.23
Lost time injuries (LTIs) 7 7 0% 15
Gross ore processed Mt 5.4 5.6 -4% 11.7
Gross diamonds recovered Carats 1,399,749 1,777,424 -21% 3,353,670
Gross diamonds sold Carats 1,312,900 1,595,581 -18% 3,536,316
Updates on Williamson
Tailings storage facility (TSF) wall breach
* Financial: As a result of the TSF wall breach, a US$5.9 million remediation
charge is reflected in the profit and loss statement (after Adjusted NPAT).
Approximately US$1.5 million of this amount was incurred up to 31 December
2022, with the balance accrued for at period-end and is expected to be
incurred during H2 FY 2023.
* Environment, Local Community, Technical and Production: We continue to make
good progress with regards to the environmental, social and economic impact
evaluation and remediation process, with humanitarian relief remaining in
place for those affected. The geotechnical evaluation to establish the root
cause of the subsidence that caused the breach is underway, with operations
anticipated to restart using an interim TSF in Q1 FY 2024. More detailed
information regarding these processes and assessments is available on our
website:
https://www.petradiamonds.com/our-operations/our-mines/williamson/tailings-storage-facility-breach/
Blocked diamond parcel
* Under the Framework Agreement entered into by the Government of Tanzania
(“GoT”), the Company and Williamson Diamonds Limited (“WDL”) in
December 2021, the GoT agreed to allocate the proceeds of the confiscated
diamond parcel of 71,654.45 carats (“Blocked Parcel”) to WDL. It has come
to our attention that a portion of the Blocked Parcel has recently been sold.
We are engaging with GoT to confirm the application of the proceeds. More
information on the history of the Blocked Parcel can be found on our website:
Petra Diamonds | Blocked Diamond Parcel - Petra Diamonds
(https://www.petradiamonds.com/our-operations/our-mines/williamson/blocked-diamond-parcel/)
Independent Grievance Mechanism and community projects at Williamson
* The Independent Grievance Mechanism (IGM), a non-judicial process to address
the historical allegations of human rights abuses at Williamson became
operational in November 2022 and is now in its pilot phase. The pilot phase
will involve the award of remedy to those determined to have suffered severe
human rights impacts whilst allowing for the IGM’s systems and procedures to
be further developed to take into account the learnings of the pilot phase.
More detailed information on the IGM and the Restorative Justice Projects
being put in place to provide sustainable benefits to the communities located
around the mine can be found on our website:
https://www.petradiamonds.com/our-operations/our-mines/williamson/allegations-of-humanrights-abuses-at-the-williamson-mine/
Outlook
Actions taken to strengthen our business and improve cash flow generation,
together with our capital discipline, means that Petra is well placed to take
advantage of the supportive diamond market fundamentals. Our projects remain
on track to deliver a c.1Mct annual increase in FY 2025, with work commencing
on the C-cut extension to unlock a further 2.3Mct from FY 2025 through to FY
2033, as we continue to develop the long term potential of our resource base.
We remain confident that we will continue to generate sufficient cash to fund
capex and allow further deleveraging. The Company will consider the payment of
a FY 2023 dividend when finalising its year end results.
Key operational guidance metrics
Unit H1 FY23A H2 FY23E FY23E FY24E FY25E
Total carats recovered Mcts 1.4 1.35 - 1.45 2.75 - 2.85 3.0 – 3.3 3.6 – 3.9
Cash on-mine costs and G&A (1) US$m 130.4 150 - 170 280 - 300 280 - 300 280 – 300
Expansion capex (1) US$m 38.2 59 – 62 92 – 104 117 – 129 110 - 125
Sustaining capex (1) US$m 13.7 26 – 28 35 - 39 31 – 36 25 - 28
Note 1: Opex and Capex guidance is stated in FY 2023 real terms and based on
an exchange rate of ZAR17 / USD1.
More detailed guidance is available on Petra’s website at:
https://www.petradiamonds.com/investors/analysts/analyst-guidance/
PRESENTATION DETAILS
Richard Duffy, CEO, Jacques Breytenbach, CFO, will present the results to
investors and analysts.
Online and in person at 9.30am GMT
In-person: Storey Club, 100 Liverpool St, Broadgate, London EC2M 2AU
Webcast: To join
https://stream.brrmedia.co.uk/broadcast/63ece9ed46729d09e3663d62
Dial in details:
* Johannesburg, toll/tollfree: +27 (0) 0800 980 512
* UK: +44 (0)33 0551 0200
* USA local: +1 786 697 3501
Password: Quote “Petra Diamonds Interim Results” when prompted by the
operator
Recording of presentation
A recording of the webcast will be available later today on Petra’s website
at https://www.petradiamonds.com/investors/presentations
Investor Meet Company presentation at 2pm GMT
Petra will 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
Petra Diamonds,
London
+44 207 494 8203
Patrick
Pittaway
investorrelations@petradiamonds.com
Julia Stone
About Petra Diamonds Limited
Petra Diamonds is a leading independent diamond mining group and a supplier of
gem quality rough diamonds to the international market. The Group’s
portfolio incorporates interests in three underground mines in South Africa
(Finsch, 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 Group 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 Group’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.
FINANCIAL RESULTS
SUMMARY RESULTS (unaudited)
6 months to 31 December 2022 (“H1 FY 2023”) 6 months to 31 December 2021 (“H1 FY 2022”) Year ended 30 June 2022 (“FY 2022”)
US$ million US$ million US$ million
Revenue 212.1 264.7 585.2
Adjusted mining and processing costs (1) (130.4) (109.8) (307.1)
Other direct income 0.6 0.3 (0.8)
Adjusted profit from mining activity (2) 82.3 155.2 277.3
Other corporate income 0.5 0.6 0.6
Adjusted corporate overhead (3) (5.4) (4.9) (13.0)
Adjusted EBITDA (4) 77.4 150.9 264.9
Depreciation and Amortisation (37.2) (43.5) (85.3)
Share-based expense (0.9) (0.1) (1.1)
Net finance expense (8) (20.4) (16.2) (36.6)
Adjusted profit before tax 18.9 91.1 141.9
Tax expense (excluding taxation credit on unrealised foreign exchange gain / (loss)) (5) (14.4) (24.7) (39.9)
Adjusted net profit after tax (6) 4.5 66.4 102.0
Impairment (charge) / reversal – operations and other receivables (7) (3.8) 0.1 19.6
Transaction costs and acceleration of unamortised costs on partial redemption of Notes (8) (9.0) — —
Williamson tailings facility - remediation costs (5.9) — —
Williamson tailings facility - accelerated depreciation (5.2) — —
Recovery of fees relating to investigation and settlement of human rights abuse claims — 0.2 0.8
Net unrealised foreign exchange gain / (loss) 1.6 (28.7) (36.5)
Taxation credit on unrealised foreign exchange gain / (loss) (4) 0.2 11.1 2.2
Net (loss) / profit after tax (17.6) 49.1 88.1
Earnings per share attributable to equity holders of the Company – US cents
Basic (loss) / profit per share (12.23) 22.29 35.53
Adjusted (loss) / profit per share (9) (0.91) 29.01 42.93
Unit As at 31 December 2022 (US$ million) As at 31 December 2021 (US$ million) As at 30 June 2022 (US$ million)
Cash at bank – (including restricted amounts) US$m 146.6 272.3 288.2
Diamond debtors US$m 4.9 0.4 37.4
Diamond inventories (14) US$m /Cts 59.9 540,153 79.6 819,252 52.7 453,380
Loan notes (issued March 2021) (10) US$m 241.7 346.4 366.2
Bank loans and borrowings (11) US$m — 78.6 —
Consolidated net debt (12) US$m 90.2 152.3 40.6
Bank facilities undrawn and available (11) US$m 58.8 0.6 61.5
Consolidated net debt : Adjusted EBITDA (rolling twelve months) 0.47x 1.0x 0.15x
The following exchange rates have been used for this announcement: average for
H1 FY 2023 US$1:ZAR17.32 (H1 FY 2022: US$1: ZAR15.03, FY 2022: US$1:ZAR15.22);
closing rate as at 31 December 2022 US$1:ZAR17.00 (31 December 2021
US$1:ZAR15.99, 30 June 2022: US$1:ZAR16.27).
Notes:
The Group uses several non-GAAP measures above and throughout this report to
focus on actual trading activity by removing certain non-cash or non-recurring
items. These measures include adjusted mining and processing costs, profit
from mining activities, adjusted EBITDA, adjusted net profit after tax,
adjusted earnings per share, adjusted US$ loan note, and consolidated net debt
for covenant measurement purposes. As these are non-GAAP measures, they
should not be considered as replacements for IFRS measures. The Group’s
definition of these non-GAAP measures may not be comparable to other similarly
titled measures reported by other companies. The Board believes that such
alternative measures are useful as they exclude one-off items such as the
impairment charges and non-cash items to provide a clearer understanding of
the underlying trading performance of the Group.
1. Adjusted mining and processing costs are mining and processing costs stated
before depreciation.
2. Adjusted profit from mining activities is revenue less adjusted mining and
processing costs plus other direct income.
3. Adjusted corporate overhead is corporate overhead expenditure less
corporate depreciation, tender offer transaction costs and share-based
expense.
4. Adjusted EBITDA is stated before depreciation, amortisation of right-of-use
asset, share-based expense, net finance expense, tax expense, impairment
reversal/(charges), expected credit loss release/ (charge), recovery of fees
relating to investigation and settlement of human rights abuse claims,
Williamson tailings facility remediation costs and accelerated depreciation
and unrealised foreign exchange gains and (losses).
5. Tax expense is the tax expense for the Period excluding taxation credit on
unrealised foreign exchange gain/(loss) generated during the Period; such
exclusion more accurately reflects resultant adjusted net profit.
6. Adjusted net profit after tax is net profit after tax stated before
impairment (charge)/reversal, Williamson tailings facility remediation costs
and accelerated depreciation, recovery of fees relating to investigation and
settlement of human rights abuse claims net unrealised foreign exchange gains
and losses, and excluding taxation credit on net unrealised foreign exchange
gains and losses and excluding taxation credit on impairment charge.
7. Impairment charge of US$3.8 million (30 June 2022: US$19.6 million reversal
and 31 December 2021: US$0.1 million reversal) was due to the Group’s
impairment review of its operations and other receivables. Refer to note 15
for further details.
8. Transaction costs and acceleration of unamortised costs on partial
redemption of Notes comprise transaction costs of US$0.8 million included
within Corporate expenditure (refer to note 5) and US$8.2 million in respect
of the redemption premium and acceleration of unamortised costs included
within Finance expense (refer to note 6).
9. Adjusted EPS is stated before impairment charge, gain on extinguishment of
Notes net of unamortised costs, acceleration of unamortised costs on Notes,
Williamson tailings facility remediation costs and accelerated depreciation,
recovery of fees relating to investigation and settlement of human rights
abuse claims, and net unrealised foreign exchange gains and losses, and
excluding taxation credit on net unrealised foreign exchange gains and losses.
10. 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 (30 June 2022: US$366.2 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$43.0 million of accrued interest and net
of unamortised transaction costs capitalised of US$11.5 million. Refer to Note
8 for further detail.
11. Bank loans and borrowings represent the Group’s ZAR1 billion (US$58.8
million) revolving credit facility which remains undrawn and available.
During the FY2022, the South African banking facilities held with the
Group’s previous consortium of South African lenders were settled and
cancelled, comprising of the revolving credit facility of ZAR404.6 million
(US$24.9 million) (capital plus interest) and the term loan of ZAR893.2
million (US$54.9 million) (capital plus interest).
1. Consolidated Net Debt is bank loans and borrowings plus loan notes, less
cash and less diamond debtors.
2. Operational free cashflow is defined as cash generated from operations less
cash outflows on the acquisition of property, plant and equipment.
3. Diamond inventory includes the 71,654.45 carat parcel of diamonds blocked
for export during August 2017, with a carrying value of US$12.5 million. In
terms of the framework agreement reached with the Government of Tanzania, as
announced on 13 December 2021, the proceeds from the sale of this parcel will
be allocated to Williamson. During February 2023, it has come to our attention
that a portion of the Blocked Parcel has been sold. We are engaging with GoT
to confirm the application of the proceeds.
Revenue
H1 FY 2023 amounted to US$212.1 million (H1 FY 2022: US$264.7 million),
comprising revenue from rough diamond sales of US$210.7 million (H1 FY 2022:
US$264.7 million) and additional revenue from profit share agreements of
US$1.4 million (H1 FY 2022: US$nil).
H1 FY 2023 revenue from rough diamond sales decreased 20% to US$210.7 million
(H1 FY 2022: US$264.7 million) as result of no sales of Exceptional Stones
during the Period (H1 FY 2022 US$77.9 million), lower volumes sold largely
owing to reduced tonnages at Finsch and lower grades at the Cullinan Mine,
which was partially offset by improved product mix, largely at the Cullinan
Mine, and a 12.6% increase in like-for-like diamond prices.
Mining and processing costs
The mining and processing costs for H1 FY 2023 comprised on-mine cash costs as
well as other operational expenses. A breakdown of the total mining and
processing costs for the Period is set out below.
On-mine cash costs (1) US$m Diamond royalties US$m Diamond inventory and stockpile movement US$m Group technical, support and marketing costs (2) US$m Adjusted mining and processing costs US$m Williamson tailings facility – remediation costs (3) US$m Depreciation and amortisation (4) US$m Total mining and processing costs (IFRS) US$m
H1 FY 2023 128.4 3.7 (8.8) 7.1 130.4 5.9 42.1 178.4
H1 FY 2022 129.8 3.4 (29.5) 6.1 109.8 — 43.1 152.9
FY 2022 272.3 14.6 0.5 19.7 307.1 — 84.4 391.5
Notes:
1. Includes all direct cash operating expenditure at operational level, i.e.
labour, contractors, consumables, utilities and on-mine overheads.
2. Certain technical, support and marketing activities are conducted on a
centralised basis.
3. Remediation costs comprise costs involved in establishing the root cause of
the failure, humanitarian relief to the affected community, livelihood- and
environmental restoration and costs to repair.
4. Includes US$5.2 million of accelerated depreciation at Williamson relating
to assets damaged in the TSF failure and amortisation of right-of-use assets
under IFRS 16 of US$1.7 million (H1 FY2022: US$0.6 million and FY 2022: US$2.3
million) and excludes corporate / administration.
On-mine cash costs reduced by US$1.4 million (1.1%) compared to H1 FY 2022 and
in line with expectations, due to:
* The effect of translating ZAR denominated costs at the South African
operations at a weaker ZAR/USD average exchange rate (12.4% decrease)
* Lower production volumes at South African operations (5.0% decrease)
* Other cost savings, including reduction in on-mine costs due to
centralisation (3.4% decrease)
Offset by:
* Increase in Williamson cash costs compared to a lower prior year base,
following restart post-care and maintenance in H1 FY22 (12.0% increase)
* Inflationary increases (6.9% increase)
* Above-inflation increases associated with electricity costs (0.8% increase)
Royalties increased to US$3.7 million (H1 FY 2022: US$3.4 million) driven by
increased revenues from Williamson compared to the prior period.
Adjusted profit from mining activities
Adjusted profit from mining activities decreased 47% to US$82.3 million (H1 FY
2022: US$155.2 million), mainly due to no sales of Exceptional Stones during
the Period, the impact of lower volumes at the Cullinan and Finsch Mines, and
increased costs at Williamson being in production for a period of almost five
months (prior to the tailings storage facility failure when operations at the
mine ceased) compared to three months in the comparative period.
Adjusted corporate overhead – general and administration
Corporate overhead (before depreciation and share based payments) increased to
US$5.4 million for the Period (H1 FY 2022: US$4.9 million) mainly attributable
to the increase in corporate governance structures and costs associated with
the Williamson IGM process during the Period.
Adjusted EBITDA
Adjusted EBITDA, being profit from mining activities less adjusted corporate
overhead, decreased 49% to US$77.4 million (H1 FY 2022 US$150.9 million),
representing an adjusted EBITDA margin of 36% (H1 FY 2022: 57%) driven by the
lower production, increased mining costs and zero contribution from
Exceptional Stones.
Depreciation and amortisation
Depreciation and amortisation for the Period of US$42.4 million (H1 FY 2022:
US$43.1 million), decreased due to lower production and a weaking ZAR/USD,
offset by the inclusion of accelerated depreciation of US$5.2 million
attributable to the assets written down at Williamson as a result of the
tailings storage facility failure.
Impairment reversal / charge
As a result of the impairment reviews carried out at the Group’s operating
assets and other receivables during the Period, an overall net impairment
charge of US$3.8 million (H1 FY 2022: US$0.1 million impairment reversal) was
recognised, comprising:
US$ million H1 FY 2023 H1 FY 2022
Asset class
Impairment charge - property, plant & equipment (Refer note 15) (0.3) (0.3)
Impairment (charge)/reversal - other current receivables (refer note 15) (3.5) 0.4
Total (3.8) 0.1
Impairment reviews carried out at the Cullinan, Finsch and Williamson Mines
did not result in an impairment charge or reversal for operational assets
during the Period (H1 FY 2022: US$nil). Asset level impairment at
Koffiefontein amounted to US$0.3 million (H1 FY 2022: US$0.3 million),
compared to the Group’s carrying value of property, plant and equipment of
US$615.3 million (H1 FY 2022: US$624.0 million) pre-impairment.
During the Period, an impairment charge of US$3.5 million (H1 FY 2022: US$0.4
million) relating to VAT receivable at Williamson was recognised in the
Consolidated Income Statement.
Net financial expense
Net financial expense of US$27.0 million (H1 FY 2022: US$44.9 million)
comprises:
US$ million H1 FY 2023 H1 FY 2022
Net realised foreign exchange gain on settlement of forward exchange contracts and foreign loans — 8.8
Interest received on bank deposits 1.7 0.5
Net interest receivable on the BEE partner loans and amortisation of lease liabilities in accordance with IFRS 16 0.8 1.3
Offset by:
Net realised foreign exchange loss on settlement of forward exchange contracts and foreign loans (7.7) —
Interest on the Group’s debt and working capital facilities (13.6) (23.8)
Unwinding of the present value adjustment for Group rehabilitation costs (1.6) (3.0)
Acceleration of unamortised bank facility and Notes transaction costs (8.2) —
Net unrealised foreign exchange gains / (losses) 1.6 (28.7)
Net financial expense (27.0) (44.9)
Tax credit / charge
The tax charge of US$14.2 million (H1 FY 2022: US$13.6 million) comprised a
deferred tax charge of US$14.0 million (H1 FY 2022: US$24.3 million) and a net
current tax charge of US$0.2 million (H1 FY 2022: US$nil). The tax charge of
US$14.2 million (H1 FY 2022: US$13.6 million) comprised a deferred tax charge
of US$14.2 million (H1 FY 2022: US$24.3 million) in respect of the utilisation
of capital allowances at the Cullinan Mine, Finsch and Williamson Mines and
US$0.2 million deferred tax credit (H1 FY2022: US$11.1 million) relating to
unrealised foreign exchange losses during the Period, which reduced existing
deferred tax liabilities, with an income tax charge of US$0.2 million at
Williamson for the Period (H1 FY 2021: US$0.4 million at Finsch).
The current period effective tax rate is higher than the South African tax
rate of 27% (the Group’s primary tax paying jurisdiction) primarily due to
foreign exchange losses and permanent differences as a result of the
Koffiefontein impairment and loss making companies (within the Group) where
deferred tax assets on operating losses are not recognised, which when
consolidated reduces the Group’s overall profit before tax resulting in an
increased effective tax rate.
Williamson Tailings Storage Facility (TSF)
On 7 November 2022, the TSF wall at the Williamson mine was breached,
resulting in flooding away from the pit which has extended into certain areas
outside of the mine lease area. As a result, remediation costs relating to the
incident have been incurred during the Period and additional costs will be
incurred going forward. The remediation costs comprise establishing the root
cause of the failure, humanitarian relief to the affected community,
livelihood and environmental restoration and costs to repair.
In H1 FY 2023, US$1.5 million of costs have been incurred and a further US$4.4
million of costs, comprising management’s best estimate based on the current
information available, has been provided for ongoing remediation costs.
In addition, US$5.2 million of accelerated depreciation was recognised in the
Period to fully write down assets damaged in the TSF breach.
Earnings per share
Basic loss per share from continuing operations of USc12.23 was recorded (H1
FY 2022: USc22.29 profit).
Adjusted loss per share from continuing operations (adjusted for impairment
charges, transaction costs and accelerated unamortised costs, taxation credit
on net unrealised foreign exchange losses and net unrealised foreign exchange
gains and losses) of USc0.91 was recorded (H1 FY 2022: USc29.01 profit
(adjusted for impairment charges, taxation charge on net unrealised foreign
exchange gains and net unrealised foreign exchange gains and losses)).
Operational free cash flow
During the Period, operational free cash flow of US$11.7 million (H1 FY 2022:
US$122.4 million) reflects the impact from an increase in capital expenditure
of US$32.4 million and a decrease in revenue from Exceptional Stones of
US$89.1 million. This cash flow performance was further impacted by:
* US$6.4 million outflow (H1 FY 2022: US$4.8 million inflow) of net realised
foreign exchange gains/(losses) and cash finance expenses net of finance
income;
* US$2.7 million dividend paid to BEE partners (H1 FY 2022: US$3.5 million).
Cash and Diamond Debtors
As at 31 December 2022, Petra had cash at bank of US$146.6 million (H1 FY
2022: US$272.3 million). Of these cash balances, US$130.4 million was held as
unrestricted cash (H1 FY 2022: US$256.7 million), US$15.4 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)
(H1 FY 2022: US$14.8 million) and US$0.8 million was held by Petra’s bankers
as security for other environmental rehabilitation bonds lodged with the
Department of Mineral Resources and Energy in South Africa (H1 FY 2022: US$0.8
million).
The decrease in cash balances is attributable to the repayment to Noteholders,
through a debt tender offer during the Period, of US$144.6 million comprising
the principal amount of US$126.4 million and PIK interest of US$18.2 million.
The principal amount of Notes outstanding after the repayments to Noteholders
is US$210,190,662. Cash costs of US$1.4 million attributable to the debt
tender offer have been expensed in the Consolidated Income Statement under
finance expense (refer to Note 6).
Diamond debtors as at 31 December 2022 were US$4.9 million (H1 FY 2022: US$0.4
million).
Loans and Borrowings
The Group had loans and borrowings (measured under IFRS) at Period end of
US$241.7 million (H1 FY 2022: US$425.3 million) comprised of US$210.2 million
of Second Lien Notes (including US$43.0 million of accrued interest and
unamortised transaction costs of US$11.5 million) and bank loans and
borrowings of US$nil (H1 FY 2022: US$78.6 million). Bank debt facilities
undrawn and available to the Group as at 31 December 2022 were US$58.8 million
(H1 FY 2022: US$0.6 million). Refer to note 8 for further details relating to
the movement in loans and borrowings during the Period.
Consolidated net debt as at 31 December 2022 was US$90.2 million (H1 FY2022:
US$152.3 million).
Covenant Measurements attached to banking facilities
The Company’s EBITDA-related covenants associated with its banking
facilities are as outlined below:
* To maintain a Consolidated Net Debt : Adjusted EBITDA ratio tested
semi-annually on a rolling 12-month basis
* To maintain an Interest Cover Ratio (ICR) tested semi-annually on a rolling
12-month basis
* To maintain minimum 12 month forward looking liquidity requirement that
consolidated cash and cash equivalents (excluding diamond debtors) shall not
fall below US$20.0 million
The Company’s covenant levels, which have not been breached during the
Period under review, for the respective measurement periods are outlined
below:
FY22 H2 FY23 H1 FY23 H2 FY24 H1 FY24 H2 FY25 H1 FY25 H2 FY26 H1
Consolidated Net Debt : EBITDA Leverage ratio ( maximum ) 4.00 4.00 3.50 3.50 3.25 3.25 3.00 3.00
Interest Cover Ratio (ICR) ( minimum ) 1.85 1.85 2.50 2.50 2.75 2.75 3.00 3.00
For further detail on the SA Lender facilities refer to Note 8 below.
Going concern considerations
The Board has reviewed the Group’s forecasts with various sensitivities
applied, for the 18 months to June 2024, including both forecast liquidity and
covenant measurements. As per the First Lien agreements, the liquidity and
covenant measurements exclude contributions from Williamson’s trading
results and only recognise cash distributions payable to Petra upon forecasted
receipt, or Petra’s funding obligations towards Williamson upon payment.
The Board has given careful consideration to potential risks identified in
meeting the forecasts under the review period. The following sensitivities
have been performed in assessing the Group’s ability to operate as a going
concern (in addition to the Base Case) as at the date of this report:
* A 10% decrease in forecast rough diamond prices from January 2023 to June
2024
* A 10% strengthening in the forecast South African Rand (ZAR) exchange rate
against the US Dollar from January 2023 to June 2024
* A 5% increase in operating costs from January 2023 to June 2024
* A US$15 million reduction in revenue contribution from the effects of
product mix and/or Exceptional Stones
* Combined sensitivity: prices down 10% and ZAR stronger by 10%, reduced
contribution from Exceptional Stones and operating costs up 5%
Under all the cases, the forecasts indicate that the Group’s liquidity
outlook over the 18-month period to December 2024 remains strong, even when
applying the above sensitivities to the base case forecast.
The forward-looking covenant measurements associated with the new First Lien
(1L) facility do not indicate any breaches during the 18-month review period
for the base case as well as all the above sensitivities when considered on a
stand-alone basis. The combined sensitivity shows a covenant breach for the
required ICR in the June 2024 measurement period. While the ICR is projected
to be breached in this combined sensitivity, neither the Consolidated Net Debt
: EBITDA covenant nor the liquidity covenant is projected to be breached,
while the revolving credit facility (RCF) remains undrawn. It is therefore
assumed that the RCF remains available on the expectation that the 1L lender
will agree to an ICR covenant waiver given that the Group does not expect to
utilise the RCF for servicing of its Second Lien (2L) interest obligations.
Furthermore, this potential ICR breach may be cured by means of cost savings
and revenue enhancing opportunities through, for example, entering into
partnership agreements on the sale of high-value or Exceptional stones.
As a result, the Board concluded that there are no material uncertainties that
would cast doubt on the Company continuing as a going concern. See ‘Basis
of preparation including going concern’ in the Financial Statements for
further information.
Capex and Production
Total Group capex for the Period increased to US$51.9 million (H1 FY 2022:
US$16.7 million), comprising:
* US$38.2 million expansion capex (H1 FY 2022: US$11.7 million)
* US$13.7 million sustaining capex (H1 FY 2022: US$5.0 million)
Capex (US$m) H1 FY 2023 H1 FY 2022
Cullinan 23.3 12.5
Finsch 23.1 2.5
Williamson 3.2 0.8
Koffiefontein 0.3 0.3
Subtotal – capex incurred by operations 49.9 16.1
Corporate 2.0 0.6
Total Group capex 51.9 16.7
Group Production Summary
Below is a summary of the Group production for the Period, further detail can
be obtained from the H1 FY2023 Operating update released on 16 January 2023.
Production H1 FY 2023 H1 FY 2022
ROM tonnes Tonnes 5,240,992 5,401,532
Tailings and other tonnes Tonnes 198,090 238,292
Total tonnes treated Tonnes 5,439,082 5,639,824
ROM diamonds Carats 1,337,931 1,649,989
Tailings and other diamonds Carats 61,818 127,435
Total diamonds Carats 1,399,749 1,777,424
PRINCIPAL BUSINESS RISKS
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.
A summary of the risks identified as the Group’s principal external,
operating and strategic risks (in no order of priority), which may impact the
Group over the next twelve months, is listed below.
Risk Risk appetite Risk rating Nature of risk Change in FY 2023: H1
External Risks
1. Rough diamond price High Medium Long term No Change – The third tender for FY 2023 saw a 2.2% increase in like-for-like prices compared to the second tender, reversing the trend of the previous two tenders. An upward movement of prices in the 2ct to 10ct size ranges, as a likely result of the festive season and easing of lockdown restrictions in China, more than offset softer pricing in the 0.75ct to 2ct ranges. While some volatility is expected in pricing in the short-term given the ongoing macroeconomic situation, we remain encouraged by the supportive diamond market resulting from the projected supply deficit in the medium to longer term.
2. Currency High Medium Long term No change - The ZAR/USD rate weakened during H1 FY 2023, opening at R16.44 and ending the six-month period at R17.00 and this provided some support for Petra. The IMF’s recent positive sentiments on global growth (as China eases its zero-COVID policies and greater resilience is shown to impact higher inflation/interest rates despite the ongoing war in Ukraine) may drive the strength of emerging market currencies, though this remains to be seen for South Africa’s Rand.
3. Country and political High Medium Long term No change – The risk of political instability remains in South Africa. In addition, rolling blackouts as a result of load-shedding (electricity outages), continue due to the inability of South Africa’s electricity provider to service the population and businesses. It has come to our attention that a portion of the c.71kct parcel seized by the Government of Tanzania (“GoT”) in 2017 has recently been sold. The proceeds of this parcel are required to be allocated to WDL under the Framework Agreement with the GoT. We are engaging with the GoT to confirm the application of the Blocked Parcel proceeds.
4. COVID-19 pandemic (operational impact) Medium Low Short to medium term No change – Despite the emergence of a new, more transmissible sub-variant, COVID-19 levels at Petra’s operations have remained low during H1 FY 2023. The impact of COVID 19 infections continues to have no significant effect on our operations or sales processes at this time.
Strategic Risks
5. Group Liquidity Medium Medium Short to long term Higher - Whilst the Group’s balance sheet was strengthened through the repurchase of the Company’s loan notes totalling US$145m, resulting in annual interest savings of c. US$14 million, the Group has experienced operational challenges, including lower grades experienced at the Cullinan Mine which are now expected to continue through FY 2024 and lower tonnes mined at Finsch in H1 FY 2023, which impact Petra’s liquidity position. A number of ongoing mitigating actions are being taken to address these challenges. Halting operations at Koffiefontein and placing the mine on care and maintenance will have a positive impact on liquidity
for the Group.
6. Licence to operate: regulatory and social impact & community relations Medium High Long term Higher – In light of operations at Koffiefontein having ceased and consultations taking place regarding placing the mine on care and maintenance, increasing community tensions have led to disagreements on the viability and delivery of certain projects that are required to be implemented under Social and Labour Plans. Management has conducted extensive engagements between local communities, the DMRE and the local municipality to resolve these issues. At Williamson, the IGM became operational at the end of November 2022 with the commencement of the pilot scheme. Whilst no fatalities or serious injuries were reported after the TSF
breach at Williamson, the livelihoods of a number of community members were affected. An assessment of the impact on the surrounding communities and potential remediation is currently nearing completion. The TSF breach has resulted in WDL providing immediate humanitarian relief to those affected and work is underway to develop an Entitlement Framework that will enable community members who have been impacted by the TSF breach to be appropriately compensated.
Operating Risks
7. Mining; production (including ROM grade and product mix volatility) Medium High Long term Higher – Lower grades at the Cullinan Mine are now expected to continue through FY
2024. This is attributable to the C-Cut cave maturity as the cave progresses from SW
to NE and the earlier than anticipated waste ingress from the overlying depleted
mining blocks. Several mitigating actions are underway to address these grade issues,
including: • Tailings treatment has been optimised but is not in isolation sufficient
to address the grade reduction. • The re-opening of Tunnels 36 (which has already
commenced) and 41 and the establishment of Tunnels 46 and 50 (the development of
which have recently been approved by the Board) will provide additional volume from
FY 2025 and more than offset the impact of lower grades in FY 2023/24. • Production
from the CC1E project will contribute meaningfully from FY 2025 and is expected to
see grades move back towards 40cpht. Finsch’s production target fell short of
guidance largely attributable to low machine availability owing to an ageing
underground fleet, challenges with the centralised blasting system and emulsion
quality and an extended rock-winder breakdown. As noted above, production at
Williamson has been suspended for the remainder of FY 2023 due to the TSF breach and
a restart is reliant on the implementation of an interim TSF, with operations
anticipated to restart in Q1 FY 2024. Operations at Koffiefontein have ceased in
light of consultations to place the mine on care and maintenance. As a result of the
above events, Group production guidance has been lowered to c. 2.8 Mcts for FY 2023
and 3.0 to 3.3 Mcts for FY 2024.
8. Labour relations Medium Medium Short to medium term No Change – Stable labour relations were experienced at all operations throughout H1
FY23. For FY 2023, the Group has introduced a quarterly production bonus scheme for
lower band employees to ensure alignment with other incentive structures across the
Group. A Collective Bargaining Agreement with TAMICO, the majority union at
Williamson, was signed in November 2022. A statutory consultation process is underway
with employees regarding placing Koffiefontein in care and maintenance which would
result in the retrenchment of the mine’s workforce.
9. Safety Medium Medium Short to medium term Higher – LTIFR and LTIs marginally increased to 0.19 and 7 respectively in comparison to H1 FY 2022. FY 2023 YTD safety indicators show a declining trend. Remedial actions and behaviour intervention programmes with various focus areas have been launched to address this trend.
10. Environment Medium Medium Long term Higher – Following the TSF breach at Williamson on 7 November 2022, significant work has been undertaken to contain the breach, determine the extent of the environmental impact and commence environmental remediation. An investigation is being conducted to determine the root cause of the TSF breach. WDL continues to engage with Tanzania’s environmental regulator (National Environment Management Council) regarding the breach. No significant changes in terms of environmental impacts were observed for the SA operations in H1 FY2023.
11. Climate Change High Medium Long term No Change – Management continues to monitor progress against annual climate change targets set for on-mine water and electricity consumption and efficiency. Petra is looking to formulate and implement a renewables strategy that will be key in enabling Petra to reach its 2030 interim target of a 35-40% reduction in Scope 1 & 2 emissions (against Petra’s 2019 baseline).
12. Supply Chain Governance Medium High Short to medium term Higher – Progress was made in the Supply Chain function to address various gaps which included: (1) reviewing the Group’s Supply Chain policy to improve compliance, governance and risk management, (2) improving procurement, tender and supplier registration procedures and (3) filling critical roles in the function. An online due diligence platform, administered by an external third party, went live in December 2022 to improve the vetting and screening of suppliers. An independent external expert was engaged to conduct a gap analysis of existing Supply Chain processes and systems and this has resulted in management formulating
action plans to address areas that require improvement.
13. Capital Projects Medium High Short to medium term Higher – For the CC1E Project at the Cullinan Mine and the Lower Block 5 3 Levels SLC at Finsch, management have initiated various mitigating actions led by intensive safety inventions and expediting Trackless Mining Machinery and drill rig availability to address the risk of both projects falling behind project plans. Alternate labour sourcing strategies are also being considered.
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE 6 MONTH PERIOD ENDED 31 DECEMBER 2022
US$ million Notes (Unaudited) 1 July 2022- 31 December 2022 (Unaudited) 1 July 2021- 31 December 2021 (Audited) Year ended 30 June 2022
Revenue 212.1 264.7 585.2
Mining and processing costs (178.4) (152.9) (391.5)
Other direct income / expense 0.6 0.3 (0.8)
Corporate expenditure including settlement costs 5 (7.4) (5.2) (14.1)
Other corporate income 0.5 0.6 0.6
Impairment (charge) / reversal of non-financial assets 15 (0.3) (0.3) 21.1
Impairment (charge) / reversal of other receivables 15 (3.5) 0.4 (1.5)
Total operating costs (188.5) (157.1) (386.2)
Financial income 6 25.8 11.4 19.0
Financial expense 6 (52.8) (56.3) (92.1)
(Loss) / profit before tax (3.4) 62.7 125.9
Income tax charge (14.2) (13.6) (37.8)
(Loss) / profit for the Period (17.6) 49.1 88.1
Attributable to:
Equity holders of the parent company (23.7) 43.2 69.0
Non-controlling interest 6.1 5.9 19.1
(17.6) 49.1 88.1
Profit per share attributable to the equity holders of the parent during the Period:
Continuing operations:
Basic (loss) / earnings per share – US cents 13 (12.23) 22.29 35.53
Diluted (loss) / earnings per share – US cents 13 (12.23) 22.29 35.53
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 6 MONTH PERIOD ENDED 31 DECEMBER 2022
US$ million (Unaudited) 1 July 2022- 31 December 2022 (Unaudited) 1 July 2021- 31 December 2021 (Audited) Year ended 30 June 2022
(Loss) / profit for the Period (17.6) 49.1 88.1
Exchange differences on translation of the share-based payment reserve — — (0.3)
Exchange differences on other reserves — — —
Exchange differences on translation of foreign operations (1) (18.1) (44.6) (46.8)
Exchange differences on non-controlling interest (1) (0.5) 0.3 (0.4)
Total comprehensive (loss) / income for the Period (36.2) 4.8 40.6
Total comprehensive income and expense attributable to:
Equity holders of the parent company (41.8) (1.4) 21.9
Non-controlling interest 5.6 6.2 18.7
(36.2) 4.8 40.6
¹ These items will be reclassified to the consolidated income statement if
specific future conditions are met.
ETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
US$ million Notes (Unaudited) 31 December 2022 (Unaudited) 31 December 2021 (Audited) 30 June 2022
ASSETS
Non-current assets
Property, plant and equipment 7 620.2 626.6 633.2
Right-of-use assets 20.0 26.8 21.9
BEE loans and receivables 11 38.2 43.1 44.6
Other receivables 2 5.1 1.8 2.6
Total non-current assets 683.5 698.3 702.3
Current assets
Trade and other receivables 24.7 26.2 49.8
Inventories 81.7 97.5 70.6
Cash and cash equivalents (including restricted amounts) 146.6 272.3 288.2
Total current assets 253.0 396.0 408.6
Total assets 936.5 1,094.3 1,110.9
EQUITY AND LIABILITIES
Equity
Share capital 12 145.7 145.7 145.7
Share premium account 12 609.5 959.5 959.5
Foreign currency translation reserve (467.0) (446.7) (448.9)
Share-based payment reserve 2.8 1.9 1.9
Other reserves (0.8) (0.8) (0.8)
Accumulated reserves / (losses) 12 142.7 (210.1) (183.6)
Attributable to equity holders of the parent company 432.9 449.5 473.8
Non-controlling interest 0.5 (7.8) 4.7
Total equity 433.4 441.7 478.5
Liabilities
Non-current liabilities
Loans and borrowings 8 221.1 398.0 353.9
Provisions 97.3 96.0 97.7
Lease liabilities 17.8 23.6 19.2
Deferred tax liabilities 82.4 55.3 71.3
Total non-current liabilities 418.6 572.9 542.1
Current liabilities
Loans and borrowings 8 20.6 27.3 12.3
Lease liabilities 3.0 3.2 3.2
Trade and other payables 56.5 49.2 74.8
Provisions 2 4.4 — —
Total current liabilities 84.5 79.7 90.3
Total liabilities 503.1 652.6 632.4
Total equity and liabilities 936.5 1,094.3 1,110.9
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2022
US$ million Notes (Unaudited) 1 July 2022- 31 December 2022 (Unaudited) 1 July 2021- 31 December 2021 (Audited) Year ended 30 June 2022
(Loss) / profit before taxation for the Period (3.4) 62.7 125.9
Depreciation of property plant and equipment 40.5 42.9 82.8
Amortisation of right-of-use asset 1.9 0.6 2.5
Impairment charge – non financial assets 15 0.3 0.3 (21.1)
Impairment charge / (reversal) – other receivables 15 3.5 (0.4) 1.5
Movement in provisions 4.3 (3.3) 1.6
Dividend received from BEE partner (0.5) (0.6) (0.6)
Financial income 6 (25.8) (11.4) (19.0)
Financial expense 6 52.8 56.3 92.1
Profit on disposal of property, plant and equipment — 0.1 1.5
Share based payment provision 0.9 0.1 1.1
Operating profit before working capital changes 74.5 147.3 268.3
Decrease / (increase) in trade and other receivables 15.7 25.3 (7.1)
(Decrease) / increase in trade and other payables (15.0) (2.2) 24.5
Increase in inventories (12.6) (29.5) (1.7)
Cash generated from operations 62.6 140.9 284.0
Net realised gains on foreign exchange contracts 4.1 8.7 12.6
Finance expense (0.4) (4.4) (6.3)
Income tax received / (paid) 0.3 (0.4) (7.8)
Net cash generated from operating activities 66.6 144.8 282.5
Cash flows from investing activities
Acquisition of property, plant and equipment (50.9) (18.5) (54.0)
Proceeds from sale of property, plant and equipment — 0.1 —
Loan repayment from BEE partners — 0.4 0.2
Dividend paid to BEE partners (2.7) (3.5) (3.5)
Dividend received from BEE partners 0.5 0.6 0.6
Repayment from KEMJV 0.3 1.9 2.5
Finance income 1.7 0.5 1.3
Net cash utilised in investing activities (51.1) (18.5) (52.9)
Cash flows from financing activities
Cash paid on lease liabilities (2.4) (0.8) (3.2)
Net realised foreign exchange loss on settlement of foreign currency loans (11.8) — —
Repayment of borrowings (including Notes redemption premium of US$1.4 million; 31 December 2021: US$nil; 30 June 2022: US$nil) 8 (146.1) (14.4) (98.2)
Net cash utilised by financing activities (160.3) (15.2) (101.4)
Net (decrease) / increase in cash and cash equivalents (144.8) 111.1 128.2
Cash and cash equivalents at beginning of the Period 271.9 156.9 156.9
Effect of exchange rate fluctuations on cash held 3.3 (11.3) (13.2)
Cash and cash equivalents at end of the Period (1) 130.4 256.7 271.9
1. Cash and cash equivalents in the Consolidated Statement of Financial
Position includes restricted cash of US$16.2 million (30 June 2022: US$16.3
million and 31 December 2021: US$15.6 million) and unrestricted cash of
US$130.4 million (30 June 2022: US$271.9 million and 31 December 2021:
US$256.7 million).
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2022
(Unaudited) US$ million Share capital Share premium account Foreign currency translation reserve Share-based payment reserve Other reserves
Six month Period ending 31 December 2022:
At 1 July 2022 145.7 959.5 (448.9) 1.9 (0.8)
(Loss) / profit for the Period — — — — —
Other comprehensive (expense) / income — — (18.1) — —
Conversion of share premium (refer note 12) — (350.0) — — —
Dividend paid to Non-controlling interest shareholders — — — — —
Equity settled share based payments — — — 0.9 —
At 31 December 2022 145.7 609.5 (467.0) 2.8 (0.8)
(Unaudited) US$ million Accumulated reserves / (losses) Attributable to the parent Non-controlling interest Total equity
Six month Period ending 31 December 2022:
At 1 July 2022 (183.6) 473.8 4.7 478.5
(Loss) / profit for the Period (23.7) (23.7) 6.1 (17.6)
Other comprehensive (expense) / income — (18.1) (0.5) (18.6)
Conversion of share premium (refer note 12) 350.0 — — —
Dividend paid to Non-controlling interest shareholders — — (9.8) (9.8)
Equity settled share based payments — 0.9 — 0.9
At 31 December 2022 142.7 432.9 0.5 433.4
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2022
(Unaudited) US$ million Share capital Share premium account Foreign currency translation reserve Share-based payment reserve Other reserves
Six month Period ending 31 December 2021:
At 1 July 2021 145.7 959.5 (402.1) 1.8 (0.8)
Profit for the Period — — — — —
Other comprehensive (expense) / income — — (44.6) — —
Dividend paid to Non-controlling interest shareholders — — — — —
Equity settled share based payments — — — 0.1 —
At 31 December 2021 145.7 959.5 (446.7) 1.9 (0.8)
(Unaudited) US$ million Accumulated losses Attributable to the parent Non-controlling interest Total equity
Six month Period ending 31 December 2021:
At 1 July 2021 (253.3) 450.8 (10.5) 440.3
Profit for the Period 43.2 43.2 5.9 49.1
Other comprehensive (expense) / income — (44.6) 0.3 (44.3)
Dividend paid to Non-controlling interest shareholders — — (3.5) (3.5)
Equity settled share based payments — 0.1 — 0.1
At 31 December 2021 (210.1) 449.5 (7.8) 441.7
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2022
(Unaudited) US$ million Share capital Share premium account Foreign currency translation reserve Share-based payment reserve Other reserves
Year ended 30 June 2022:
At 1 July 2021 145.7 959.5 (402.1) 1.8 (0.8)
Profit for the Year — — — — —
Other comprehensive expense — — (46.8) (0.3) —
Dividend paid to Non-controlling interest shareholders — — — — —
Equity settled share based payments — — — 1.1 —
Transfer between reserves: — — — (0.7) —
At 30 June 2022 145.7 959.5 (448.9) 1.9 (0.8)
(Unaudited) US$ million Accumulated losses Attributable to the parent Non-controlling interest Total equity
Year ended 30 June 2022:
At 1 July 2021 (253.3) 450.8 (10.5) 440.3
Profit for the Year 69.0 69.0 19.1 88.1
Other comprehensive expense — (47.1) (0.4) (47.5)
Dividend paid to Non-controlling interest shareholders — — (3.5) (3.5)
Equity settled share based payments — 1.1 — 1.1
Transfer between reserves: 0.7 — — —
At 30 June 2022 (183.6) 473.8 4.7 478.5
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2022
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 the United Kingdom. The Consolidated
Interim Financial Statements of the Company for the six month period ended 31
December 2022 comprise the Company and its subsidiaries, joint operations and
associates (together referred to as the “Group”).
2. ACCOUNTING POLICIES
The interim results, which are unaudited, have been prepared in accordance
with the requirements of International Accounting Standard 34. This condensed
interim report does not include all the notes of the type normally included in
an annual financial report. This condensed report is to be read in conjunction
with the Annual Report for the year ended 30 June 2022, and any public
announcements made by the Group during the interim reporting period. The
annual financial report for the year ended 30 June 2022 was prepared in
accordance with International Financial Reporting Standards adopted by the
European Union (“IFRS’s”) and the accounting policies applied in this
condensed interim report are consistent with the polices applied in the annual
financial report for the year ended 30 June 2022 unless otherwise noted.
Basis of preparation including going concern
Going concern
The six-month period to 31 December 2022 delivered US$77.4 million in adjusted
EBITDA and US$11.7 million in operational free cash flow for the Group, while
Consolidated Net Debt reduced from $40.6 million as at 30 June 2022 to US$90.2
million at 31 December 2022.
Production
The first half of FY23 saw all of the Petra operations deal with operational
challenges. The Cullinan Mine experienced lower grades in the block cave on
account of accelerated waste ingress, resulting in lower ROM carats being
recovered, while also lowering the ROM carats production for the remainder of
FY23 and FY24. Several mitigation steps are currently being investigated to
minimise the impact of the lower grade. These include re-opening of T36 & T41,
while also evaluating the addition of two more tunnels (T46&T50) adjacent to
the current C-Cut centre.
Finsch experienced production challenges as a result of machine availability
owing to an aging underground fleet, challenges with the centralised blasting
system and emulsion quality and an extended rock-winder breakdown. Several
mitigation steps were implemented at Finsch, such as new underground equipment
being delivered and commissioned, coupled with positive changes to the
blasting process, 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. Furthermore, the 3-Level SLC project scope was amended to 90L,
which adds additional production tonnes to the Life of Mine plan. The
mitigation steps undertaken are expected to limit the lower production to
FY23, with FY24 expected to deliver as per previous guidance, while the new
project is expected to add value beyond this Going Concern assessment period.
Williamson performed well throughout FY2023 until the Tailings Storage
Facility incident in the first week of November 2022. Production has been
suspended until the new tailings storage facility is completed. It is assumed
that production will only commence in July 2023. Progress is also being made
in closing out the Framework Agreement with the Government of Tanzania and the
MoU with Caspian).
Following the unsuccessful sales process during the Period, production at
Koffiefontein was stopped in November 2022 and the operation has subsequently
been placed on care and maintenance.
Diamond prices and diamonds market
Diamond prices continued their upward trend, with a 12.7% increase on a
like-for-like basis compared H1 FY22. While the Cullinan Mine did not
contribute revenue from exceptional stones (>US$5.0 million), it has generated
a robust $/ct price on account of a strong product mix, including several high
value single stones that did not individually breach the US$5.0 million
threshold.
Diamond prices are now the highest since the peaks experienced in 2011/2012.
In general, the market continues to be supported by a fundamental supply
deficit, with robust demand recovery experienced post COVID-19. From a demand
perspective, the Chinese lockdown had potentially moderated demand for certain
categories of polished goods, while the rising inflation and interest rate
cycles may impact disposable income and therefore further moderate/reduce
short-term demand for diamonds. This may lead to some short-term price
volatility, but the medium-long term supply/demand fundamentals are expected
to support the diamond price outlook.
Williamson framework agreement and MoU
The Group announced that it had entered into a framework agreement with the
Government of Tanzania in December 2021, which sets out key principles on the
economic benefit sharing amongst WDL shareholders, treatment of outstanding
VAT balances, the allocation of proceeds of the blocked parcel of diamonds and
settlement of historic disputes, amongst others. This agreement should provide
important fiscal stability for the mine and its investors and will become
effective upon completion of certain suspensive conditions. At the same time,
Petra also announced entering into a non-binding Memorandum of Understanding
(MoU) with Caspian Ltd to sell 50% (less 1 share) of Petra’s indirect stake
in WDL for a purchase consideration of US$15 million.
Bond tender offer and South African banking facilities
During the Period, the Group carried out a successful tender offer to its
Noteholders, repaying the Noteholders US$144.6 million (principal plus
interest), utilising existing cash reserves at the time, resulting in the
deleveraging of the gross debt balances within the Group.
The Group’s ZAR 1 billion senior Revolving Credit Facility (RCF) facility
remains undrawn at 31 December 2022, with the Group having access to the full
ZAR 1 billion (US$58.8 million).
The factors above, coupled with the further significant progress towards
stabilising the Group’s balance sheet positions the Group well for this
Going Concern period.
Forecast liquidity and covenants
The Board has reviewed the Group’s forecasts with various sensitivities
applied for the 18 months to June 2024, including both forecast liquidity and
covenant measurements. As per the First Lien agreements, the liquidity and
covenant measurements exclude contributions from Williamson’s trading
results and only recognises cash distributions payable to Petra upon
forecasted receipt, or Petra’s funding obligations towards Williamson upon
payment.
The Board has given careful consideration to potential risks identified in
meeting the forecasts under the review period. The following sensitivities
have been performed in assessing the Group’s ability to operate as a going
concern (in addition to the Base Case) at the date of this report:
* a 10% decrease in forecast rough diamond prices from January 2023 to June
2024
* a 10% strengthening in the forecast South African Rand (ZAR) exchange rate
from January 2023 to June 2024
* a 5% increase in Operating Costs from July 2022 to Dec 2023
* a US$15 million reduction in revenue contribution from the effects of
product mix and/or from Exceptional Stones
* Combined sensitivity: Prices down 10% and ZAR stronger by 10% and
Exceptional Stones contributions reduced by US$15 million and Operating Costs
up 5%
Under all the cases, the forecasts indicate the Group’s liquidity outlook
over the 18-month period to June 2024 remains strong, even when applying the
above sensitivities to the base case forecast.
The forward-looking covenant measurements associated with the new First Lien
facility do not indicate any breaches during the 18-month review period for
the base case as well as all the above sensitivities, except for the worse
case combined sensitivity, which shows a covenant breach for the required
interest cover ratio in the June 2024. While the ICR is projected to be
breached in this combined sensitivity, both the Net Debt : EBITDA covenant and
the liquidity covenant remain healthy, while the RCF remains undrawn. It is
therefore assumed that the RCF remains available, with the 1L lender assumed
to agree to an ICR covenant waiver, given that the Group does not expect to
utilise the RCF for servicing of its 2L interest obligations. Furthermore,
this potential ICR breach may be cured by means of cost savings and revenue
enhancing opportunities through entering into partnership agreements on the
sale of Exceptional stones.
Conclusion
The Board is of the view that the longer-term fundamentals of the diamond
market remain sound and that the Group will continue to benefit from an
improving operating model throughout the review period and beyond.
Based on its assessment of the forecasts, principal risks and uncertainties
and mitigating actions considered available to the Group in the event of
downside scenarios, the Board confirms that it is satisfied the Group will be
able to continue to operate and meet its liabilities as they fall due over the
review period. Accordingly, the Board have concluded that the going concern
basis in the preparation of the financial statements is appropriate and that
there are no material uncertainties that would cast doubt on that basis of
preparation.
New standards and interpretations applied
The IASB has issued new standards, amendments and interpretations to existing
standards with an effective date on or after 1 July 2022 which are not
considered to have a material impact on the Group during the Period under
review.
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 2022 or later periods. The only standard which is
anticipated to be significant or relevant to the Group is:
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
Amendments to IAS 1, which are intended to clarify the requirements that an
entity applies in determining whether a liability is classified as current or
non-current. The amendments are intended to be narrow scope in nature and are
meant to clarify the requirements in IAS 1 rather than modify the underlying
principles. The amendments include clarifications relating to:
* how events after the end of the reporting period affect liability
classification;
* what the rights of an entity must be in order to classify a liability as
non-current;
* how an entity assesses compliance with conditions of a liability (e.g. bank
covenants); and
* how conversion features in liabilities affect their classification.
The amendments were originally effective for periods beginning on or after 1
January 2022 which was deferred to 1 January 2023 by the IASB in July 2020.
Earlier application is permitted but Amendments to IAS 1 has not yet been
endorsed for application by the European Union.
Significant assumptions and judgements:
The preparation of the condensed consolidated interim 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, and the disclosure of
contingent liabilities at the date of the interim financial statements.
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:
Impairment reviews
The Group prepares impairment models and assesses mining assets for impairment
or reversals of previous impairments. While conducting an impairment test of
its assets using recoverable values using the current life of mine plans, the
Group exercised judgement in making assumptions about future rough diamond
prices, foreign exchange rates, volumes of production, ore reserves and
resources included in the current life of mine plans, future development and
production costs and 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’.
Cullinan, Finsch, Koffiefontein and Williamson Mines
The impairment tests for the Cullinan, Finsch and Williamson Mines indicated
no further impairment charges or reversals to be recognised. The impairment
test for Koffiefontein indicated an impairment of US$0.3 million on a carrying
value of the Group’s property, plant and equipment of US$615.3 million
(pre-impairment). This follows US$21.1 million impairment reversal recognised
at 30 June 2022 (comprising Koffiefontein impairment charge of US$0.3 million
and a Group level impairment reversal relating to Williamson, previously
recognised under IFRS 5, of US$21.4 million as Williamson was no longer
considered an asset held for sale.) on a carrying value of the Group’s
property, plant and equipment of US$608.2 million (pre-impairment) at the time
of recognition. For further details of the inputs, assumptions and
sensitivities in the impairment model, refer to note 15.
Recoverability and ownership of diamond parcel in Tanzania
The Group holds diamond inventory valued at US$12.5 million (30 June 2022:
US$12.5 million and 31 December 2021: US$10.6 million) in the Statement of
Financial Position in respect of the Williamson mine’s confiscated diamond
parcel. The diamond inventory parcel was written up from the net realisable
value of prior periods to historical cost during FY2022. The recommencing of
operations and the sales tenders at Williamson during the FY 2022 provided
additional information for management to assess the value of the diamond
parcel and was the basis used to revalue the diamond parcel to the lower of
cost or net realisable value. During FY 2018, an investigation into the
Tanzanian diamond sector by a parliamentary committee in Tanzania was
undertaken to determine if diamond royalty payments were being understated. In
connection with this, Petra announced on 11 September 2017 that a parcel of
diamonds (71,654.45 carats) from the Williamson mine in Tanzania (owned 75% by
Petra and 25% by the Government of the United Republic of Tanzania
(“GoT”)) had been blocked for export to Petra’s marketing office in
Antwerp.
The assessment of the recoverability of the diamond parcel required
significant judgement. In making such a judgement, the Group considered the
Framework Agreement that was signed with the GoT on 13 December 2021,
confirmation received from the GoT in FY 2018 that they held the diamond
parcel of 71,654.45 carats, ongoing discussions held with the GoT, an
assessment of the internal process used for the sale and export of diamonds
confirming such process is in full compliance with legislation in Tanzania and
the Kimberley Process and legal advice received from the Group’s in-country
attorneys which supports the Group’s position.
The Framework Agreement which refers to the diamond parcel as the
“Government Diamond Parcel” sets out that the GoT agrees to allocate
proceeds from the sale of the Parcel to Williamson Diamonds Limited
(“WDL”). Post period end, the Company was informed that a portion of the
Parcel was sold and the Company is engaging with the GoT to confirm the
application of the proceeds. For further details refer to note 18.
While these engagements between the Company and the GoT are ongoing, based on
the above judgements and assessment thereof, management remain confident that
based on the signed Framework Agreement, and the legal advice received from
the Group’s in-country attorneys, WDL will derive future economic benefit
from the sale proceeds of the parcel (both the portion already sold and any
portion that is yet to be sold).
Recoverability of VAT in Tanzania
The Group has VAT receivable of US$5.1 million (30 June 2022: US$2.6 million
and 31 December 2021: US$1.8 million) in respect of the Williamson mine, all
of which are past due and have therefore been classified, after provision
including amounts related to providing for a time-value of money inclusive of
risk adjustments for various factors, as non-current given the potential
delays in receipt.
The VAT receivable as at 31 December 2022, can be split into two identifiable
component time periods as set out below:
31 December 2022
US$ million VAT Receivable Provision Carrying value
Pre July 2017 and Post June 2020 14.6 (9.5) 5.1
14.6 (9.5) 5.1
31 December 2021
US$ million VAT Receivable Provision Written off Carrying value
July 2017 to June 2020 26.9 — (26.9) —
Pre July 2017 and Post June 2020 4.4 (2.6) — 1.8
31.3 (2.6) (26.9) 1.8
30 June 2022
US$ million VAT Receivable Provision Written off Carrying value
July 2017 to June 2020 26.9 — (26.9) —
Pre July 2017 and Post June 2020 8.6 (6.0) — 2.6
35.5 (6.0) (26.9) 2.6
Pre July 2017 and Post June 2020
An amount of US$14.6 million (30 June 2022: US$8.6 million and 31 December
2021: US$4.4 million) of VAT is receivable for the period for the period pre
July 2017 and subsequent to 1 July 2020. The Group is considering various
alternatives in pursuing payment in accordance with legislation. A provision
of US$9.5 million (30 June 2022: US$6.0 million and 31 December 2021: US$2.6
million), given the uncertainty around the timing of receipts of the amount
outstanding, has been provided for against the US$14.6 million (30 June 2022:
US$8.6 million and 31 December 2021: US$4.4 million) receivable resulting in a
carrying value of US$5.1 million (30 June 2022: US$2.6 million and 31 December
2021: US$1.8 million).
While the remaining pre July 2017 and post 1 July 2020 VAT balance is
considered recoverable, significant uncertainty exists regarding the timing of
receipt. A discount rate of 14.00% inclusive of estimated country credit risk
has been applied to the expected cash receipts. A 1% increase in the discount
rate would increase the provision by US$0.3 million and a one year delay would
increase the provision by US$0.6 million.
During the Period, an impairment charge of US$3.5 million (30 June 2022:
US$4.1 million and 31 December 2021: US$0.7 million) was recognised in the
Consolidated Income Statement.
BEE receivables – expected credit loss provision
The Group has applied the expected credit loss impairment model to its BEE
loans receivable. In determining the extent to which expected credit losses
may apply, the Group assessed the future free cashflows to be generated by the
mining operations, based on the current mine plans. In assessing the future
cashflows, the Group considered the diamond price outlook and the probability
of reaching an offset agreement. Based on the assessment, no expected credit
loss reversal was recognised in the respective periods. For further detail
refer to note 11.
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 Resource 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. Refer to note 15 for further detail on
the assumptions.
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, outside the current
mine plan further impact the estimated date of decommissioning and
rehabilitation.
Williamson Tailings Storage Facility
On 7 November 2022, the tailings storage facility at the Williamson mine was
breached, resulting in flooding away from the pit which has extended into
certain areas outside of the mine lease area. As a result, remediation costs
relating to the incident have been incurred during the Period and additional
costs will be incurred going forward. The remediation costs comprise
establishing the root cause of the failure, humanitarian relief to the
affected community, livelihood and environmental restoration and costs to
repair. Judgement has been applied by Management in assessing the future
remediation costs. Management have considered the current work streams, the
estimated time of completion and appropriate information received from
suppliers and contractors involved in the remediation process.
In H1 FY2023, US$4.4 million of costs, comprising management’s best estimate
based on the current information available, has been provided for in respect
of ongoing remediation costs.
Other key estimates and judgements
In addition to the key estimates and judgements disclosed above, the following
estimates and judgements have not significantly changed from those disclosed
in the FY 2022 Annual Report and will be discussed in further detail in the FY
2023 Annual Report:
* Provision for rehabilitation
* Inventory and inventory stockpile
* Depreciation
* Pension and post-retirement medical fund schemes
* Net investments in foreign operations
* Taxation
3. DIVIDENDS
No dividends have been declared in respect of the current Period under review
(30 June 2022: US$nil and 31 December 2021: US$nil).
4. SEGMENTAL INFORMATION
Segment information is presented in respect of the Group’s operating and
geographical segments:
Mining – the extraction and sale of rough diamonds from mining operations in
South Africa and Tanzania.
Corporate – administrative activities in the United Kingdom.
Beneficiation – beneficiation activities in South Africa.
Segments are based on the Group’s management and internal reporting
structure. Management reviews the Group’s performance by reviewing the
results of the mining activities in South Africa, Tanzania and reviewing the
results of reviewing the corporate administration expenses in the United
Kingdom. Each segment derives, or aims to derive, its revenue from diamond
mining and diamond sales, except for the corporate and administration cost
centre.
Segment results, assets and liabilities include items directly attributable to
a segment, as well as those that can be allocated on a reasonable basis.
Segment results are calculated after charging direct mining costs,
depreciation and other income and expenses. Unallocated items comprise mainly
interest-earning assets and revenue, interest-bearing borrowings and expenses
and corporate assets and expenses. Segment capital expenditure is the total
cost incurred during the year to acquire segment assets that are expected to
be used for more than one period. Eliminations comprise transactions between
Group companies that are cancelled on consolidation. The results are not
materially affected by seasonal variations. Revenues are generated from
tenders held in South Africa and Antwerp for external customers from various
countries, the ultimate customers of which are not known to the Group.
4. SEGMENTAL INFORMATION (continued)
Operating segments South Africa – Mining activities Tanzania -Mining activities
US$ million Cullinan Mine Finsch Koffiefontein Williamson
(6 month period ended 31 December 2022) 1 July 2022 - 31 December 2022 1 July 2022 - 31 December 2022 1 July 2022 - 31 December 2022 1 July 2022 - 31 December 2022
Revenue 104.1 55.4 3.6 49.1
Segment result¹ 42.8 10.1 (8.4) (9.4)
Impairment charge – operations — — (0.3) —
Impairment charge – other receivables — — — (3.5)
Other direct income — 0.5 — 0.1
Operating profit / (loss)² 42.8 10.6 (8.7) (12.8)
Financial income
Financial expense
Income tax charge
Non-controlling interest
Profit attributable to equity holders of the parent company
Segment assets 446.7 203.2 4.7 124.5
Segment liabilities 343.3 117.4 22.6 64.4
Capital expenditure 23.3 23.1 0.3 3.2
Operating segments United Kingdom South Africa
US$ million Corporate and treasury Beneficiation (3) Inter-segment Consolidated
(6 month period ended 31 December 2022) 1 July 2022 - 31 December 2022 1 July 2022 - 31 December 2022 1 July 2022 - 31 December 2022 1 July 2022 - 31 December 2022
Revenue — 0.5 (0.6) 212.1
Segment result¹ (7.6) 0.5 (1.7) 26.3
Impairment charge – operations — — — (0.3)
Impairment charge – other receivables — — — (3.5)
Other direct income 0.5 — — 1.1
Operating profit / (loss)² (7.1) 0.5 (1.7) 23.6
Financial income 25.8
Financial expense (52.8)
Income tax charge (14.2)
Non-controlling interest (6.1)
Profit attributable to equity holders of the parent company (23.7)
Segment assets 3,189.5 5.7 (3,037.8) 936.5
Segment liabilities 2,097.5 6.5 (2,148.6) 503.1
Capital expenditure 2.0 — — 51.9
¹ Total depreciation of US$40.5 million included in the segmental result
comprises depreciation incurred at the Cullinan Mine US$23.0 million, Finsch
US$9.1 million, Koffiefontein US$0.1 million, Williamson US$8.0 million and
Corporate and treasury US$0.3 million.
² Operating profit is equivalent to revenue of US$212.1 million less total
costs of US$188.5 million as disclosed in the Consolidated Income Statement.
(3) The beneficiation segment represents Tarorite, a cutting and polishing
business in South Africa, which can on occasion cut and polish select rough
diamonds.
1. SEGMENTAL INFORMATION (continued)
Operating segments South Africa – Mining activities Tanzania -Mining activities
US$ million Cullinan Mine Finsch Koffiefontein Williamson
(6 month period ended 31 December 2021) 1 July 2021 - 31 December 2021 1 July 2021 - 31 December 2021 1 July 2021 - 31 December 2021 1 July 2021 - 31 December 2021
Revenue 167.7 65.7 11.1 20.2
Segment result¹ 97.2 10.9 (4.8) 10.1
Impairment charge – operations — — (0.3) —
Impairment reversal / (charge) – other receivables — — — (0.7)
Other direct income / (loss) (0.1) 0.1 0.2 0.1
Operating profit / (loss)² 97.1 11.0 (4.9) 9.5
Financial income
Financial expense
Income tax charge
Non-controlling interest
Profit attributable to equity holders of the parent company
Segment assets 509.2 221.3 12.1 93.3
Segment liabilities 483.5 114.7 31.1 52.5
Capital expenditure 12.5 2.5 0.3 0.8
Operating segments United Kingdom South Africa
US$ million Corporate and treasury Beneficiation (3) Inter-segment Consolidated
(6 month period ended 31 December 2021) 1 July 2021 - 31 December 2021 1 July 2021 - 31 December 2021 1 July 2021 - 31 December 2021 1 July 2021 - 31 December 2021
Revenue — — — 264.7
Segment result¹ (5.2) (1.0) (0.6) 106.6
Impairment charge – operations — — — (0.3)
Impairment reversal / (charge) – other receivables 1.1 — — 0.4
Other direct income / (loss) 0.6 — — 0.9
Operating profit / (loss)² (3.5) (1.0) (0.6) 107.6
Financial income 11.4
Financial expense (56.3)
Income tax charge (13.6)
Non-controlling interest (5.9)
Profit attributable to equity holders of the parent company 43.2
Segment assets 3,373.5 4.1 (3,119.2) 1,094.3
Segment liabilities 2,137.5 4.9 (2,171.6) 652.6
Capital expenditure 0.6 — — 16.7
¹ Total depreciation of US$42.9 million included in the segmental result
comprises depreciation incurred at the Cullinan Mine US$27.2 million, Finsch
US$12.7 million, Koffiefontein US$0.1 million, Williamson US$2.6 million and
Corporate and treasury US$0.3 million.
² Operating profit is equivalent to revenue of US$264.7 million less total
costs of US$157.1 million as disclosed in the Consolidated Income Statement.
(3) The beneficiation segment represents Tarorite, a cutting and polishing
business in South Africa, which can on occasion cut and polish select rough
diamonds.
4. SEGMENTAL INFORMATION (continued)
Operating segments South Africa – Mining activities Tanzania -Mining activities
US$ million Cullinan Mine Finsch Koffiefontein Williamson
(12 month period ended 30 June 2022) 2022 2022 2022 2022
Revenue¹ 322.4 165.7 21.5 75.9
Segment result (2) 154.4 34.8 (13.8) 22.2
Impairment charge – operations — — (0.3) 21.4
Impairment reversal / (charge) – other receivables — — — (4.1)
Other direct income (0.7) (0.4) 0.2 0.1
Operating profit / (loss)² 153.7 34.4 (13.9) 39.6
Financial income
Financial expense
Income tax charge
Non-controlling interest
Profit attributable to equity holders of the parent company
Segment assets 463.9 229.8 6.0 123.2
Segment liabilities 384.0 111.2 17.1 75.1
Capital expenditure 35.0 12.0 0.6 3.3
Operating segments United Kingdom South Africa
US$ million Corporate and treasury Beneficiation (3) Inter-segment Consolidated
(12 month period ended 30 June 2022) 2022 2022 2022 2022
Revenue¹ — 2.2 (2.5) 585.2
Segment result (2) (14.1) 0.4 (4.3) 179.6
Impairment charge – operations — — — 21.1
Impairment reversal / (charge) – other receivables 2.6 — — (1.5)
Other direct income 0.6 — — (0.2)
Operating profit / (loss)² (10.9) 0.4 (4.3) 199.0
Financial income 19.0
Financial expense (92.1)
Income tax charge (37.8)
Non-controlling interest (19.1)
Profit attributable to equity holders of the parent company 69.0
Segment assets 3,575.2 5.1 (3,292.3) 1,110.9
Segment liabilities 2,430.1 5.9 (2,391.0) 632.4
Capital expenditure 1.6 — (0.3) 52.2
¹ The Group’s revenue comprises the sale of rough diamonds and polished
stones. The sale of rough diamonds contributed US$581.9 million with polished
stones contributing US$3.3 million. Included within the US$3.3 million
polished stones contribution is US$1.1 million from a profit share agreement.
(2) Total depreciation of US$82.8 million included in the segmental result
comprises depreciation incurred at the Cullinan Mine US$52.5 million, Finsch
US$24.4 million, Koffiefontein US$0.3 million, Williamson US$5.0 million and
Corporate and treasury US$0.6 million.
(3) Operating profit is equivalent to revenue of US$585.2 million less total
costs of US$386.2 million as disclosed in the Consolidated Income Statement.
(4) The beneficiation segment represents Tarorite, a cutting and polishing
business in South Africa, which can on occasion cut and polish select rough
diamonds.
US$ million 1 July 2022 - 31 December 2022 1 July 2021 - 31 December 2021 1 July 2021 - 30 June 2022
5. CORPORATE EXPENDITURE
Corporate expenditure includes:
Depreciation of property, plant and equipment 0.3 0.3 0.6
Amortisation of right-of-use asset 0.1 0.1 0.2
London Stock Exchange and other regulatory expenses 0.6 0.8 1.5
Transaction costs – redemption of Notes 0.8 — —
Settlement (reversal) / costs – human rights claims at Williamson — (0.2) (0.8)
Share-based expense - Directors 0.9 0.1 1.1
Other staff costs 2.4 1.4 5.1
Total staff costs 3.3 1.5 6.2
6. FINANCING EXPENSE
US$ million 1 July 2022 - 31 December 2022 1 July 2021 - 31 December 2021 1 July 2021 - 30 June 2022
Net unrealised foreign exchange gains 1.6 — —
Interest received on BEE loans and other receivables 2.1 2.1 4.1
Interest received bank deposits 1.7 0.5 1.3
Realised foreign exchange gains on the settlement of foreign loans and forward exchange contracts 20.4 8.8 13.6
Financial income 25.8 11.4 19.0
Gross interest on senior secured second lien notes, bank loans and overdrafts (13.6) (23.8) (45.3)
Other debt finance costs, including facility fees and IFRS 16 charges (1.3) (0.8) (2.3)
Unwinding of present value adjustment for rehabilitation costs (1.6) (3.0) (5.4)
Net unrealised foreign exchange losses (1) — (28.7) (36.5)
Notes redemption premium and acceleration of unamortised bank facility and Notes costs (2) (8.2) — (1.6)
Realised foreign exchange losses on the settlement of foreign loans and forward exchange contracts (28.1) — (1.0)
Financial expense (52.8) (56.3) (92.1)
Net financial expense (27.0) (44.9) (73.1)
(1) .The Group predominantly enters into hedge contracts where the risk being
hedged is the volatility in the South African Rand, Pound Sterling 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 the end of the Period are based on Level 2
mark-to-market valuations performed by the counterparty financial
institutions. The contracts are all short dated in nature and mature within
the next 12 months. A weakening of the South African Rand against the US
Dollar from ZAR16.27 (30 June 2022) to ZAR17.00 (31 December 2022) resulted in
an unrealised gain of US$1.6 million (30 June 2022: US$36.5 million unrealised
loss and 31 December 2021: US$28.7 million unrealised loss) comprising an
unrealised gain on foreign exchange contracts held at Period end of US$1.9
million (30 June 2022: US$0.7 million and 31 December 2021: US$0.1 million)
and losses on inter-group foreign denominated loans of US$0.3 million (30 June
2022: US$37.2 million and 31 December 2021: US$28.8 million); and a net
realised foreign exchange loss of US$7.7 million (30 June 2022: US$12.6
million realised gain and 31 December 2021: US$8.8 million realised gain)
comprising US$20.4 million (30 June 2022: US$13.6 million and 31 December
2021: US$8.8 million) in respect of foreign exchange contracts closed during
the Period and US$28.1 million in respect of realised foreign exchange losses
on settlement of foreign loans, is included in the net finance and expense
amount.
(2) The Notes redemption premium and acceleration of unamortised bank facility
and Notes costs of US$8.2 million relate to the costs associated with the
tender offer to Noteholders during the Period (30 June 2022: early settlement
of RCF), comprising unamortised upfront costs of US$6.8 million (31 December
2021: US$nil and 30 June 2022: US$1.6 million) previously capitalised and the
make-whole premium of US$1.4 million.
7. PROPERTY, PLANT AND EQUIPMENT
The net movement in property, plant and equipment for the Period is a decrease
of US$13.0 million (30 June 2022: US$63.6 million decrease and 31 December
2021: US$70.2 million decrease). This is primarily as a result of:
US$ million 1 July 2022 - 31 December 2022 1 July 2021 - 31 December 2021 1 July 2021 - 30 June 2022
As at 1 July 633.2 696.8 696.8
Foreign exchange movement (24.8) (75.4) (83.4)
Additions 51.9 16.7 52.2
Reconsolidation of non-current assets held for sale (including reversal of IFRS 5 impairment) relating to Williamson — 31.2 52.6
Change in rehabilitation assets 0.7 0.8 —
Depreciation (40.5) (42.9) (82.8)
Impairments (0.3) (0.3) (0.3)
Disposals — (0.3) (1.9)
As at 30 June 620.2 626.6 633.2
8. LOANS AND BORROWINGS
US$ million 31 December 2022 31 December 2021 30 June 2022
Non-current liabilities
Loans and borrowings – Senior secured second lien notes 221.1 346.4 353.9
Loans and borrowings – Senior secured lender debt facilities — 51.6 —
221.1 398.0 353.9
Current liabilities
Loans and borrowings – senior secured lender debt facilities 20.6 27.0 12.3
Loans and borrowings – premium financing — 0.3 —
20.6 27.3 12.3
Total loans and borrowings - bank facilities 241.7 425.3 366.2
Significant non-cash transactions
US$ million 1 July 2022 - 31 December 2022 1 July 2021 - 31 December 2021 1 July 2021 - 30 June 2022
Senior secured second lien notes and secured debt facilities:
As at 1 July 366.2 430.2 430.2
Cash payments (144.6) (18.7) (103.7)
Non-cash:
Acceleration of unamortised transaction costs 6.8 — (1.6)
Interest accrued during the period 13.3 25.0 44.4
Effect of foreign exchange — (11.2) (3.1)
241.7 425.3 366.2
a) US$336.7 million Senior Secured Second Lien Notes
A wholly owned subsidiary of the Company, Petra Diamonds US$ Treasury Plc,
issued debt securities consisting of US$336.7 million five-year senior secured
second lien loan notes (“Notes”), with a maturity date of 8 March 2026.
The Notes are guaranteed by the Company and by the Group’s material
subsidiaries and are secured on a second lien basis on the assets of the
Group’s material subsidiaries. The Notes carry a coupon from:
* 9 March 2021 to 31 December 2022 of 10.50% per annum, which is capitalised
to the outstanding principal amount semi-annually in arrears on 31 December
and 30 June of each year;
* 1 January 2023 to 30 June 2023 of 10.50% per annum on 37.7778% of the
aggregate principal amount outstanding, which is capitalised to the
outstanding principal amount semi-annually in arrears on 31 December and 30
June of each year and 9.75% per annum on 62.2222% of the aggregate principal
amount outstanding which is payable in cash semi-annually in arrears on 31
December and 30 June of each year;
* 1 July 2023 to 31 December 2025 of 9.75% per annum on the aggregate
principal amount outstanding which is payable in cash semi-annually in arrears
on 31 December and 30 June of each year; and
* 1 January 2026 to 8 March 2026 (final coupon payment) of 9.75% per annum on
the aggregate principal amount outstanding which is payable in cash
On 27 September 2022, the Group repaid, through a debt tender offer to
Noteholders, an amount of US$143,627,622, comprising the principal amount of
US$125,590,338 and PIK interest of US$18,037,284. On 12 October 2022 a further
US$1,000,667 was repaid to Noteholders comprising the principal amount of
US$875,000 and PIK interest of US$125,667. The principal amount of Notes
outstanding after the repayments to Noteholders is US$210,190,662. Cash costs
of US$1,446,283 relating to the repayment of Noteholders have been expensed in
the Consolidated Income Statement under finance expense (refer to Note 6).
The Group performed an assessment under its accounting policies and the
requirements of IFRS 9 as to whether the debt tender offer to the Noteholders
represented a substantial modification. A qualitative test was performed which
determined the terms of the Notes, repayment profile and interest rate were
not amended or modified as part of the tender offer process therefore, no
substantial modification was relevant.
The remaining costs associated with issuing the Notes of US$13.9 million,
after adjusting for the acceleration of US$6.8 million of unamortised costs
associated with the debt tender offer to Noteholders which have been expensed
through profit and loss within net finance expense (refer to note 6) have been
capitalised against the principal amount and US$11.5 million remains
unamortised as at 31 December 2022 (30 June 2022: US$18.5 million and 31
December 2021: US$19.4 million). Interest of US$43.0 million has been accrued
as at 31 December 2022.
Further details about the Notes (including security) have been included in the
Group’s FY 2022 Annual Report.
b) Senior Secured Lender Debt Facilities
In June 2022, the Group restructured its existing banking facilities providing
for more favourable terms than the Group’s current first lien facilities and
resulting in Absa Corporate and Investment Banking (“Absa”) becoming the
Group’s banking partner under the new banking facilities.
A new Revolving Credit Facility (“RCF”) of ZAR1 billion (US$58.8 million)
with Absa replaced the previous RCF and term lending arrangements with the
previous South African lender syndicate comprising Absa, Nedbank, RMB and
NinetyOne.
The terms under the RCF are:
* maturity date December 2025 with a 60 day buffer between the redemption of
the Notes and the maturity of the RCF:
* interest rate of SA JIBAR + 4.15% per annum (with the margin to be
reconsidered annually based on Petra’s credit metrics with a view of further
optimising the margin to be achieved) and
* certain covenant ratios as mentioned below.
.
The Group's debt and hedging facilities are detailed in the table below:
Senior Lender Debt Facilities 31 December 2022 31 December 2021 30 June 2022
Facility amount Facility amount Facility amount
ZAR Debt Facilities:
ZAR Lenders RCF ZAR1.0 billion ZAR408.8 million ZAR1.0 billion
ZAR Lenders Term loan ZAR nil ZAR876.4 million ZAR nil
Absa/RMB – FX Hedging facilities ZAR300 million ZAR150 million ZAR300 million
The terms and conditions of the Group facilities are detailed in the Group’s
FY 2022 Annual Report.
The facilities are secured on the Group’s interests in the Cullinan, Finsch
and Koffiefontein Mines.
As at date of this report, the RCF was undrawn and ZAR1.0 billion (US$58.8
million) remained available for drawdown. During FY2022, the Company paid
ZAR404.6 million (US$24.9 million) (capital plus interest) to settle the old
RCF and ZAR893.2 million (US$54.9 million) (capital plus interest) to settle
the previous Term Loan.
Covenant ratios
As part of the revised RCF facility entered into with ABSA in FY2022, the
Company is required:
* to maintain a Net Debt : Adjusted EBITDA ratio tested semi-annually on a
rolling 12-month basis;
* to maintain an Interest Cover Ratio tested semi-annually on a rolling
12-month basis and
* to maintain minimum 12 month forward looking liquidity requirement that
consolidated cash and cash equivalents (excluding diamond debtors) shall not
fall below US$20.0 million.
The Company’s new covenant levels for the respective measurement periods are
outlined below:
FY22 H2 FY23 H1 FY23 H2 FY24 H1 FY24 H2 FY25 H1 FY25 H2 FY26 H1
Consolidated net debt : EBITDA Leverage ratio ( maximum ) 4.00 4.00 3.50 3.50 3.25 3.25 3.00 3.00
Interest Cover Ratio ( minimum ) 1.85 1.85 2.50 2.50 2.75 2.75 3.00 3.00
The covenants were not in breach at the measurement date.
9. COMMITMENTS
As at 31 December 2022, the Company had committed to future capital
expenditure totalling US$55.1 million (30 June 2022: US$49.5 million and 31
December 2021: US$33.8 million), mainly comprising the Cullinan Mine US$30.1
million (30 June 2022: US$25.2 million 31 December 2021: US$25.3 million),
Finsch US$24.8 million (30 June 2022: US$23.7 million 31 December 2021: US$8.3
million), Koffiefontein US$nil (30 June 2022: US$0.3 million 31 December 2021:
US$0.2 million) and Williamson US$0.2 million (30 June 2022: US$0.3 million
and 31 December 2021: US$nil).
10. RELATED PARTY TRANSACTIONS
The Group’s related party BEE partners, Kago Diamonds (Pty) Ltd (“Kago
Diamonds”) and its gross interests in the mining operations of the Group are
disclosed in the table below.
Mine Partner and respective interest as at 31 December 2022 (%) Partner and respective interest as at 31 December 2021 (%) Partner and respective interest as at 30 June 2022 (%)
Cullinan Kago Diamonds (14%) Kago Diamonds (14%) Kago Diamonds (14%)
Finsch Kago Diamonds (14%) Kago Diamonds (14%) Kago Diamonds (14%)
Koffiefontein Kago Diamonds (14%) Kago Diamonds (14%) Kago Diamonds (14%)
The Itumeleng Petra Diamonds Employee Trust (“IPDET”) holds 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, in which Petra has a 31.46% interest. The
effective interest percentages attributable to the remaining operations for
the Group’s shareholders is 78.4%.
The non-current loans receivable, non-current loans payable, finance income
and finance expense, due from and due to the related party BEE partners and
other related parties, including dividends paid are disclosed in the table
below:
US$ million 31 December 2022 31 December 2021 30 June 2022
Non-current receivable
Kago Diamonds (1) 21.8 27.1 26.6
27.1 26.6
Current trade and other receivables
KEM JV (2) 3.3 5.5 3.7
Impairment provision (2) (2.0) (4.9) (2.0)
1.3 0.6 1.7
1 July 2022 - 31 December 2022 1 July 2021 - 31 December 2021 1 July 2021 - 30 June 2022
Finance income
Kago Diamonds 1.0 1.0 2.1
1.0 1.0 2.1
Dividend paid
Kago Diamonds (3) 1.2 1.3 1.3
1.2 1.3 1.3
¹ The movement in the Kago Diamonds receivable of US$4.8 million (30 June
2022: US$6.9 million and 31 December 2021: US$6.4 million) is mainly
attributable to repayments received from Kago Diamonds during the Period
totalling US$3.6 million (30 June 2022: US$nil and 31 December 2021: US$nil)
and a foreign exchange decrease of US$1.2 million (30 June 2022: US$4.1
million decrease and 31 December 2021: US$3.6 million decrease).
(2) Included in current trade and other receivables are amounts advanced to
KEM JV in respect of a working capital facility and equipment finance facility
of US$1.3 million (30 June 2022: US$1.7 million and 31 December 2021: US$0.6
million) and the balance of the KEM JV purchase consideration of US$nil (30
June 2022: US$nil and 31 December 2021: US$nil). During H1 FY 2023 the Group
received payments of US$0.3 million (FY 2022: US$2.5 million and FY H1 2022:
US$1.2 million) from the KEM JV as settlement of the outstanding purchase
consideration this did not result in any further expected credit loss reversal
during the Period as the full reversal was accounted for in prior periods (FY
2022: US$2.9 million and H1 FY2022: US$1.1 million). The Group has applied the
expected credit loss impairment model to the KEM JV receivables, taking into
account various factors, and the expected credit loss was deemed to be US$2.0
million (30 June 2022: US$2.0 million and 31 December 2021: US$4.9 million).
(3) During the Period, Finsch declared and paid a dividend out of profits
generated in FY2022 to its shareholders. The BEE partners received a gross
dividend of US$9.8 million (30 June 2022: US$2.5 million). An amount of US$6.3
million (30 June 2022: US$0.2 million) was used by BEE partners to repay a
portion of their loans owing to the Group and a net cash payment of US$2.2
million (30 June 2022: US$2.5 million) was received by the BEE partners,
comprising Kago US$1.2 million (30 June 2022: US$1.3 million) and IPDET US$1.0
million (30 June 2022: US$1.2 million).
11. BEE LOANS RECEIVABLE
US$ million 31 December 2022 31 December 2021 30 June 2022
Non-current assets
Loans and other receivables 38.2 43.1 44.6
BEE Loans Receivable
The non-current BEE loans receivable represents those amounts receivable from
the Group’s BEE Partners (Kago Diamonds and the IPDET) in respect of
advances historically provided to the Group’s BEE Partners to enable them to
discharge interest and capital commitments under the BEE Lender facilities,
advances to the BEE Partners to enable trickle payment distributions to both
Kago Diamonds shareholders and to the beneficiaries of the IPDET (Petra
Directors and Senior Managers do not qualify as beneficiaries under the IPDET
Trust Deed), and financing of their interests in the Koffiefontein mine. In
addition, US$40.2 million (30 June 2022: US$42.0 million and 31 December 2021:
US$48.6 million) has been recorded as part of the gross receivable (before
expected credit loss provisions) in respect of amounts to be reimbursed to the
Group in respect of the guarantee under the BEE Lender facilities. Judgement
was required in determining the extent to which reimbursement is applicable
based on the terms of the agreements, South African legislation and
discussions with the BEE partners.
As a result of historical delays in the Cullinan Mine plant ramp-up and the
Finsch SLC ramp-up, the Group has historically and through the Period elected
to advance the BEE Partners’ funds using Group treasury to enable the BEE
Partners to service their interest and capital commitments under the BEE
Lender facilities (refer below). These BEE receivables, including interest
raised, will be recoverable from the BEE Partners’ share of future cashflows
from the underlying mining operations. As part of a previous Debt
Restructuring in FY2021, Petra has assumed the BEE Lender facility obligations
For detail on expected credit loss provision and reversal associated with the
BEE loans receivable refer to note 2.
US$ million 1 July 2022 - 31 December 2022 1 July 2021 - 31 December 2021 1 July 2021 - 30 June 2022
As at 1 July 44.6 46.6 46.6
Foreign exchange movement on opening balance (2.0) (5.1) (5.9)
Interest receivable 1.9 2.0 4.1
Reversal of BEE loans receivable – expected credit loss provision — — —
Repayment of loan from BEE partner (6.3) (0.4) (0.2)
As at 30 June 38.2 43.1 44.6
12. SHARES ISSUED AND SHARE PREMIUM
During the Period, there were no new shares issued by the Company.
On 16 November 2022, at the FY 2022 Annual General Meeting, the Company’s
shareholders approved the Company’s share premium account be reduced by
US$350 million with such amount being credited against accumulated losses with
the balance being credited to the Company’s other distributable reserves.
US$ million Share premium Accumulated reserves / (losses)
As at 1 July 2022 959.5 (183.6)
Conversion of share premium to distributable reserves (350.0) 350.0
Movement during period — (23.7)
As at 31 December 609.5 142.7
In FY 2022, at the FY 2021 Annual General Meeting the Company’s shareholders
approved a 50 for 1 Share Consolidation. Admission of the Company's New
Ordinary Shares took place on 29 November 2021. As a result of the Share
Consolidation, the Company’s shares in issue comprise of 194,201,785
ordinary shares of 0.05 pence each.
13. EARNINGS PER SHARE
Total 1 July 2022 - 31 December 2022 US$ Total 1 July 2021 - 31 December 2021 US$ Total 1 July 2021 - 30 June 2022 US$
Numerator
(Loss) / profit for the Period (23,752,879) 43,288,096 68,995,537
Denominator
Shares Shares Shares
Weighted average number of ordinary shares used in basic EPS
Brought forward 194,201,785 9,710,089,272 9,710,089,272
Effect of shares issued during the Period — — —
Effect of 50 for 1 share consolidation November 2021 — (9,515,887,487) (9,515,887,487)
Carried forward 194,201,785 194,201,785 194,201,785
Shares Shares Shares
Dilutive effect of potential ordinary shares — — —
Weighted average number of ordinary shares in issue used in diluted EPS 194,201,785 194,201,785 194,201,785
US cents US cents US cents
Basic (loss) / profit per share – US cents (12.23) 22.29 35.53
Diluted (loss) / profit per share – US cents (12.23) 22.29 35.53
The number of potentially dilutive ordinary shares, in respect of employee
share options, Executive Director and Senior Management share award schemes is
nil (30 June 2022: nil and 31 December 2021: nil).
14. ADJUSTED EARNINGS PER SHARE (non-GAAP measure)
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.
Total 1 July 2022 - 31 December 2022 US$ Total 1 July 2021 - 31 December 2021 US$ Total 1 July 2021 - 30 June 2022 US$
Numerator
(Loss) / profit for the Period (23,752,879) 43,288,096 68,995,537
Net unrealised foreign exchange (gain) / loss (1,695,466) 22,015,553 34,851,735
Present value discount – Williamson VAT receivable 3,473,980 663,803 4,076,760
Impairment (reversal) / charge - operations* 216,437 227,304 (21,206,735)
Impairment (reversal) / charge – other receivables 1,176 (1,118,250) (2,544,704)
Taxation (credit) / charge on unrealised foreign exchange (gain) / loss (138,605) (8,507,107) (1,618,908)
Taxation credit on impairment charge* — — —
Transaction costs and acceleration of unamortised costs on Notes and restructured bank facilities 9,015,171 — 1,628,757
Williamson tailings facility - remediation costs 5,897,182 — —
Williamson tailings facility - accelerated depreciation 5,220,536 — —
Transaction costs (reversal) / expense – Human rights settlement agreement and provisions for unsettled and disputed tax claims — (239,494) (816,270)
Adjusted loss for the Period attributable to parent (1,762,468) 56,329,905 83,366,172
*Portion attributable to equity shareholders of the Company
Denominator
Shares Shares Shares
Weighted average number of ordinary shares used in basic EPS
As at 1 July 194,201,785 9,710,089,272 9,710,089,272
Effect of shares issued during the Period — — —
Effect of 50 for 1 share consolidation November 2021 — (9,515,887,487) (9,515,887,487)
Carried forward 194,201,785 194,201,785 194,201,785
Shares Shares Shares
Dilutive effect of potential ordinary shares — — —
Weighted average number of ordinary shares in issue used in diluted EPS 194,201,785 194,201,785 194,201,785
US cents US cents US cents
Adjusted basic profit / (loss) per share – US cents (0.91) 29.01 42.93
Adjusted diluted profit / (loss) per share – US cents (0.91) 29.01 42.93
15. IMPAIRMENT CHARGE
The current market conditions in the global rough diamond market, volatility
of and variability in product mix are all factors impacting the rough diamond
prices achieved by Petra during the Period, and the tailings facility failure
at Williamson which have resulted in management taking a critical review of
the Group’s business models and operational assets. The carrying amounts of
the Group’s assets are reviewed at each reporting date to determine whether
there is any indication of impairment. If there is any indication that an
asset may be further impaired or an impairment reversal may apply, its
recoverable amount is estimated. The recoverable amount is determined on a
fair value less cost to develop basis.
During the Period under review, the Group reviewed the carrying value of its
investments, loan receivables and operational assets for indicators of
impairment. Following the assessment, no further impairment of property, plant
and equipment was considered appropriate for the Cullinan, Finsch and
Williamson Mines, nor was any impairment reversal considered appropriate in
the current Period. The Group recognised an asset level impairment charge of
US$0.3 million being managements’ estimate of the decrease in the value of
the Koffiefontein assets. The Group also recognised a non-financial
receivables charge of US$3.5 million, being management’s estimate of the
impact on the recoverability of the Tanzania VAT receivable.
Impairment (US$ million) Asset class Carrying value pre impairment Impairment Carrying value post impairment
Impairment operations:
Cullinan Mine Property, plant & equipment 402.3 — 402.3
Finsch Property, plant & equipment 165.4 — 165.4
Koffiefontein Property, plant & equipment 1.0 (0.3) 0.7
Williamson Property, plant & equipment 46.6 — 46.6
Sub-total 615.3 (0.3) 615.0
Impairment – non-financial receivables:
Other – non-current Tanzania VAT receivable (refer to note 2) 8.6 (3.5) 5.1
Sub-total 8.6 (3.5) 5.1
Total 623.9 (3.8) 620.1
31 December 2021
During the 6 month period ending 31 December 2021, the Group reviewed the
carrying value of its investments, loan receivables and operational assets for
indicators of impairment. Following the assessment, no impairment of property,
plant and equipment was considered appropriate for the Cullinan, Finsch, and
Williamson Mines, nor was any impairment reversal considered appropriate in
the Period. The Group recognised an asset level impairment charge of US$0.3
million being managements’ estimate of the decrease in the value of the
Koffiefontein assets. The Group also recognised a non-financial receivables
impairment reversal of US$0.4 million, comprising US$0.7 million impairment
charge being management’s estimate of the recoverability of the Tanzania VAT
receivable and an impairment reversal of US$1.1 million of the KEM JV
receivable.
Details of the impairment assessment are shown below:
Impairment (US$ million) Asset class Carrying value pre impairment Impairment Carrying value post impairment
Impairment operations:
Cullinan Mine Property, plant & equipment 429.2 — 429.2
Finsch Property, plant & equipment 163.7 — 163.7
Koffiefontein Property, plant & equipment 1.1 (0.3) 0.8
Williamson Property, plant & equipment 30.0 — 30.0
Sub-total 624.0 (0.3) 623.7
Impairment – non-financial receivables:
Other – current receivable KEM JV receivable 1.5 1.1 2.6
Other – non-current Tanzania VAT receivable 2.5 (0.7) 1.8
Sub-total 4.0 0.4 4.4
Total 628.0 0.1 628.1
30 June 2022
The operations of the Cullinan, Finsch, Koffiefontein and Williamson Mines are
held at recoverable value as a result of FY 2021 impairments. During FY 2022,
the Group reviewed the carrying value of its investments, loan receivables and
operational assets for indicators of impairment. Following the assessment, no
further impairment of property, plant and equipment was considered appropriate
for the Cullinan, Finsch and Williamson Mines, nor was any impairment reversal
considered appropriate in the current Year. The Group recognised an asset
level impairment charge of US$0.3 million being managements’ estimate of the
decrease in the value of the Koffiefontein assets. The Group also reversed a
Group level impairment charge relating to Williamson, previously recognised
under IFRS 5, of US$21.4 million as Williamson is no longer considered an
asset held for sale. The Group recognised a non-financial receivables charge
of US$1.5 million comprising an impairment charge of US$4.1 million being
management’s estimate of the recoverability of the Tanzania VAT receivable,
an impairment charge of US$0.3 million related to other receivables and an
impairment reversal of US$2.9 million of the KEM JV receivable.
Impairment (US$ million) Asset class Carrying value pre impairment Impairment Carrying value post impairment
Impairment operations:
Cullinan Mine Property, plant & equipment 419.9 — 419.9
Finsch Property, plant & equipment 157.9 — 157.9
Koffiefontein Property, plant & equipment 1.1 (0.3) 0.8
Williamson Property, plant & equipment 29.3 21.4 50.7
Sub-total 608.2 21.1 629.3
Impairment – non-financial receivables:
Other – current receivable KEM JV receivable (1.2) 2.9 1.7
Other – current receivable Other receivables 0.3 (0.3) —
Other – non-current Tanzania VAT receivable 6.8 (4.1) 2.7
Sub-total 5.9 (1.5) 4.4
Total 614.1 19.6 633.7
Cullinan, Finsch, Koffiefontein and Williamson Mine impairment considerations
and assumptions
The Group performs impairment testing on an annual basis of all operations and
when there are potential indicators of impairment. The impairment testing
performed resulted in impairments of the Cullinan Mine, Finsch, Koffiefontein
and Williamson assets. The key assumptions used in determining the recoverable
value calculations, determined on fair value less cost to develop basis, are
listed in the table below:
Group assumptions for 31 December 2022 and 30 June 2022:
Key assumptions Explanation
Current mine plan and recoverable value of reserves and resources Economically recoverable reserves and resources are based on management’s expectations based on the availability of reserves and resources at mine sites and technical studies undertaken in house and by third party specialists. The end of life of mine based
on current mine plans for the operations are as follows: Cullinan Mine: FY 2033 (FY 2022: FY 2031) Finsch: FY 2031 (FY 2022: FY 2030) Koffiefontein: FY 2025 (FY 2022: FY 2025) – current production has ceased and the operation has been placed on care and
maintenance Williamson: FY 2030 Resources remaining after the current mine plans have not been included in impairment testing for the operations.
Current mine plan reserves and resources Cullinan Mine: Current mine plan over the next ten years; total resource processed 37.6 Mt (FY 2022: Current mine plan over the next nine years; total resource processed 36.4 Mt). Cullinan Mine is implementing a project for 2 additional tunnels (46 and 50)
resulting in an increase in reserves and mine plan.
Finsch: Current mine plan over the next nine years; total resource processed 23.7 Mt (FY 2022: Current mine plan over the next nine years; total resource processed 23.2 Mt). Additional SLC project approved taking mining to 90L approved during H1 FY 2023.
Koffiefontein has been put on care and maintenance and has ceased production.
Williamson: Current mine plan over the next eight years, total resource processed 38.0 Mt (FY2022: Current mine plan over the next eight years, total resource processed 43.3 Mt).
Current mine plans – capital expenditure Management has estimated the timing and quantum of the capital expenditure based on the Group’s current mine plans for each operation. There is no inclusion of capital expenditure to enhance the asset beyond exploitation of the current mine plan orebody.
Residual Value Cullinan Mine: Management included a residual value of property, plant and equipment to be used beyond the current mine plan, given the significant resource base estimated to be available at the end of the current mine plan. No residual values were
included in the impairment assessments of the other mining operations due to the mine plan aligning with the resource base estimated to be available at the end of the current mine plan.
Diamond prices The diamond prices used in the impairment test have been set with reference to recently achieved pricing and market trends, and long-term diamond price escalators are informed by industry views of long-term market supply/demand fundamentals. Given the
current market uncertainty, the assessment of short-term diamond prices and the rate and extent of pricing recovery, together with the longer-term pricing escalators, represented a critical judgement. The 31 December 2022 impairment testing models
starting price assumptions have been adjusted to reflect the improved pricing achieved during the FY2022. Diamond prices (excluding Exceptional Stones) have been assumed to remain unchanged during FY2023, then increase by 3.9% from FY2024 onwards. The long
-term models incorporate normalised diamond price escalation of 1.9% above a long-term US inflation rate of 2.0% per annum from FY 2024 to FY 2030. Estimates for the contribution of Exceptional Diamonds sold for more than US$5.0 million each are determined
with reference to historical trends. Based on the historical trends, management have retained the contribution from Exceptional Stones at the Cullinan Mine at US$35.0 million per annum. The 30 June 2022 impairment testing models starting price assumptions
have been adjusted to reflect the improved pricing achieved during the Year when compared to the 30 June 2021 impairment models. Diamond prices (excluding Exceptional Stones) have been assumed to remain unchanged during FY2023, then increase by 3.9% from
FY2024 onwards. The long-term models incorporate normalised diamond price escalation of 1.9% above a long-term US inflation rate of 2.0% per annum from FY 2024 to FY 2030. Estimates for the contribution of Exceptional Diamonds sold for more than US$5.0
million each are determined with reference to historical trends. Based on the historical trends, management have increased the contribution from Exceptional Stones at the Cullinan Mine from US$25.0 million to US$35.0 million per annum.
Discount rate A ZAR discount rate of 13.0% (30 June 2022: 13.0%) was used for the South African operations and a USD discount rate of 14.0% (30 June 2022: 14.00%) for Williamson. Discount rates calculated based on a nominal weighted average cost of capital including the
effect of factors such as market risk and country risk as at the Year end. USD and ZAR discount rates are applied based on respective functional currency of the cash generating unit.
Cost inflation rate Long-term inflation rates of 3.5%–8.0% (30 June 2022: 3.5%–7.5%) above the long-term US$ inflation rate were used for Opex and Capex escalators. Management have taken into account the current short-term pressures in the inflation environment and the impact
on Opex and capex costs, allowing for the inflation rate to normalise over the longer-term.
Exchange rates Exchange rates are estimated based on an assessment of current market fundamentals and long-term expectations. The US$/ZAR exchange rate range used for all South African operations commenced at ZAR17.00 (30 June 2022: ZAR16.04) for H2 FY2023 reflecting the
current volatility, inflationary pressures and quantitative tightening by Central banks, and ZAR16.75 for FY2024 and thereafter devaluing at 3.5% per annum. Given the volatility in the USD/ZAR exchange rate and the current levels of economic uncertainty,
the determination of the exchange rate assumptions required significant judgement.
Valuation basis Discounted present value of future cash flows.
Williamson For impairment testing at Williamson, management used the above assumptions, noting that no sales were forecast for H2 FY2023 following the TSF breach in November 2022. Accelerated depreciation of US$5.2 million attributable to the TSF assets has been
included in the depreciation charge in mining and processing costs. During the FY2022, Williamson recommenced production.
Sensitivity analysis
The impact of applying reasonable downside sensitivities on the key inputs
based on management’s assumptions at 31 December 2022 is noted below:
Additional Impairment charge
(US$ million) Cullinan Mine Finsch¹ Koffiefontein² Williamson
Base case
Increase in discount rate by 2% 32.7 — n/a 4.8
Reduction in pricing by 5% over Life of Mine 40.5 — n/a 19.8
Reduction in short-term production by 10% 25.8 23.1 n/a 13.6
Increase in Opex by 5% 20.5 — n/a 9.6
Reduction in Exceptional Stones contribution by US$10.0 million per annum 43.6 n/a n/a n/a
Strengthening of the ZAR from US$/ZAR17.00 to US$/ZAR16.15 47.3 — n/a n/a
1. Additional impairments will occur at Finsch if the discount rate is
increased by 4%, or a reduction in pricing by 6.5% over Life of Mine, or an
increase in Opex of 13.5% and or a strengthening of the US$/ZAR from R17.00 to
US$/ZAR 15.81.
2. Production at Koffiefontein has ceased and the operation has been placed on
care and maintenance.
16. WILLIAMSON (30 June 2022)
1. Framework Agreement
On 13 December 2021, the Company signed an agreement in principle with the
Government of Tanzania relating to the Williamson operations. Williamson
resumed operations and sales during the Period, having been on care and
maintenance since April 2020.
The Framework Agreement provides for a capital restructuring of the Williamson
Diamonds Limited (“WDL”), the entity that owns the Williamson Mine,
including the 16% free carried interest that the Government of Tanzania is
entitled to receive in WDL and its shareholder loans under Section 10 of the
Tanzanian Mining Act, 2017 and Regulation 10 of the Tanzanian Mining (State
Participation) Regulations, 2020. The capital restructuring will include:
* a WDL share issue with the effect of reducing Petra's indirect shareholding
from 75% to 63% and consequently increasing the Government of Tanzania's
shareholding from 25% to 37%;
* a contribution to the Government of Tanzania of 16% of the principal
outstanding value of the Group’s shareholder loans payable by WDL, with the
remaining 84% of such principal outstanding loans continuing to be owed to the
Group; and
* the transfer of the WDL shares held by the Group to another member of the
Petra Group (either Petra itself or a special purpose subsidiary). Petra have
registered Mwadui Mining Holdings Ltd, a subsidiary registered in the United
Kingdom, for this purpose.
With respect to the reorganisation of the parties' legal interests in WDL, the
Framework Agreement also provides for an overall 55:45 economic benefit
sharing ratio between the Government of Tanzania and Petra in relation to
future economic benefits from the Williamson Mine. This arrangement is
intended to capture the parties' entitlements as shareholders as well as, with
respect to the Government of Tanzania, the revenue it collects from WDL
arising from taxes, royalties, duties, fees and other fiscal levies
(“Government Imposed Charges”). The Framework Agreement also provides that
WDL shall be entitled to off-set its undisputed unpaid and overdue VAT
receivables against future Government Imposed Charges, whereby such Government
Imposed Charges will be off-set and treated as paid for the purposes of the
economic benefit sharing ratio.
The Framework Agreement provides that Petra and the Government of Tanzania
will provide financial assistance for the restart of operations at the
Williamson Mine. The Government of Tanzania has agreed to allocate the sales
proceeds of the 71,654.45 carat diamond parcel from the Williamson Mine that
was previously confiscated and blocked for export. The original value of this
parcel was assessed in September 2017 at approximately US$15 million, as
previously disclosed, although Petra has not had the parcel independently
valued. For further information on the confiscated diamond parcel refer to
note 18.
The Framework Agreement records an important US$20.0 million settlement
between the parties concerning long-standing historic disputes with the
Government of Tanzania. In FY2021, as at 30 June 2021 the Group raised a
provision of US$19.5 million (adjusted for time-value of money) in respect of
the aforementioned settlement. This settlement payment shall be made in
instalments, with the first instalment of US$5.0 million to be paid when the
Framework Agreement becomes effective and upon receipt of proceeds by WDL from
the sale of the confiscated diamond parcel. The subsequent annual
instalments of the settlement amount are to be made annually at amounts as
determined by WDL’s board of directors.
The Framework Agreement is subject to a number of conditions, including
Tanzanian regulatory approvals and is therefore not yet effective as at 31
December 2022. Certain conditions precedent remain outstanding awaiting
resolution from GoT.
Memorandum of Understanding with Caspian
Limited (“MoU”)
On 15 December 2021, the Company announced that it had signed a non-binding
Memorandum of Understanding (“MoU”) to sell 50% less one share of the
entity that holds the Group’s shareholding in Williamson Diamonds Limited
(“WDL”), along with a pro rata portion of shareholder loans owed by WDL,
to Caspian Limited or its nominee (“Caspian”) for a total consideration of
US$15.0 million. Caspian is the long-term technical services contractor at the
Williamson Mine.
Upon completion of the transactions contemplated by the MoU and the capital
restructuring in the aforementioned Framework Agreement becoming effective,
Petra and Caspian will each indirectly hold a 31.5% stake in WDL but with
Petra retaining a controlling interest in Williamson.
Caspian’s purchase will be funded through the settlement of US$15 million of
past technical services payments owed by WDL to Caspian.
The sale of the 50% less 1 share stake in the entity that holds Petra’s
shares in WDL is subject to the parties first entering into definitive
transaction agreements and once such agreements are entered into, then
obtaining all necessary Governmental, regulatory and lender approvals,
including approvals from the Tanzanian Mining Commission, the Tanzanian Fair
Competition Commission and The Bank of Tanzania, and a binding ruling from the
Tanzania Revenue Authority on the tax treatment of the transaction.
17. CONTINGENCIES
Williamson – Independent Grievance Mechanism
(“IGM”)
The IGM is a non-judicial process that has the capacity to investigate and
resolve complaints alleging severe human rights impacts in connection with
security operations at the Williamson mine. It will be overseen by an
Independent Panel of Tanzanian experts taking an approach informed by
Tanzanian law, and with complainants having access to free and independent
advice from local lawyers. The overall aim of the IGM is to promote
reconciliation between the Williamson Diamond Mine, directly affected parties
and the broader community by providing remedy to those individuals who have
suffered severe human rights impacts. The Group has agreed to fund the
remedies determined by the IGM.
On 28 November 2022, the IGM became operational with the commencement of the
IGM’s pilot phase. The pilot phase, which is expected to continue until the
end of March 2023, will allow for the IGM’s systems and procedures to be
further developed. Where appropriate, the design of the IGM will then be
adjusted to take into account the learnings of the pilot phase.
Whilst the IGM was still being established, a mechanism was set up to enable
community members to confidentially and securely register alleged historical
human rights grievances. This mechanism continued to receive grievances, with
a significant amount of grievances having been registered to date. As the IGM
is currently in its pilot phase, it is too early to evaluate the merits of
these grievances.
Judgement has been applied by management in assessing the merits and outcome
of the grievances. Consideration was given, amongst other things, to the fact
that the IGM remains in the pilot phase and is yet to assess the merits of the
grievances registered. Accordingly, management is of the opinion that the
estimated costs and outcome of the grievance remains uncertain and have
therefore not raised a provision at Period end.
18. EVENTS AFTER THE REPORTING PERIOD
Williamson Blocked Parcel
Subsequent to Period end, it has come to the attention of the Company that a
portion of the blocked diamond parcel of 71,654.45 carats that was confiscated
by the Government of Tanzania (“GoT”) in 2017 has recently been sold.
Under the Framework Agreement entered into by the GoT, the Company and WDL in
December 2021, the GoT agreed to allocate the proceeds of this blocked diamond
parcel to WDL. The Company is engaging with GoT to confirm the application of
the proceeds.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
1. the Condensed Financial Statements have been prepared in accordance with
IAS 34 Interim Financial Reporting, and give a true and fair view of the
assets, liabilities, financial position and profit of the Group; and
1. the Interim Management Report includes a fair review of the information
required by FCA’s Disclosure and Transparency Rules (DTR 4.2.7 R and 4.2.8
R).
By order of the Board
Richard Duffy
Chief Executive Officer
20 February 2023
INDEPENDENT REVIEW REPORT ON THE UNAUDITED FINANCIAL STATEMENTS OF PETRA
DIAMONDS LIMITED
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 December 2022 is not prepared, in
all material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom’s Financial Conduct Authority.
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
December 2022 which comprises Condensed Consolidated Income Statement,
Condensed Consolidated Statement of Comprehensive Income, Condensed
Consolidated Statement of Financial Position, Condensed Consolidated Statement
of Cash Flows, Condensed Consolidated Statement of Changes in Equity and Notes
to the Condensed Consolidated Interim Financial Statements.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, “Review of Interim Financial Information Performed by
the Independent Auditor of the Entity” (“ISRE (UK) 2410”). A review of
interim financial information consists of making enquiries, primarily of
persons responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially less in
scope than an audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be identified in an
audit. Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, “Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the group to
cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom’s Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor’s responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the Disclosure Guidance and
Transparency Rules of the United Kingdom’s Financial Conduct Authority and
for no other purpose. No person is entitled to rely on this report unless
such a person is a person entitled to rely upon this report by virtue of and
for the purpose of our terms of engagement or has been expressly authorised to
do so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other purpose
and we hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
Location: London UK
20 February 2023
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127)
1 Petra classifies “Exceptional Stones” as rough diamonds which sell for
US$5 million or more each
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