REG-Petra Diamonds: Interim Results for the Six Months ended 31 Dec 2021
22/02/2022 07:15
22 February 2022 LSE: PDL
Petra Diamonds Limited
Interim results for the Six Months ended 31 December 2021
Investor update on strategy and operational guidance
Petra Diamonds Limited ("Petra" or the "Company" or the “Group”) announces
its unaudited interim results for the six months ended 31 December 2021 (the
“Period”, “H1 FY 2022”, or “H1”). These results together with
operational guidance for the next three years will be provided as part of the
Investor Day which Petra is holding at 09:30am GMT, both in person and online.
Details of how to access the event are provided below.
HIGHLIGHTS OF THE INTERIM RESULTS (Unaudited)
Significant growth in revenue, earnings and cash flow with lower net debt,
driven by higher production, Exceptional Stones, and strong diamond prices
Richard Duffy, Chief Executive of Petra Diamonds, commented:
”Petra has delivered strong results, growing revenue by 49% and adjusted
EBTIDA by 87%, as well as reducing net debt significantly. We have benefitted
from the recovery in rough diamond prices, record proceeds from the sale of
Exceptional Stones, and the improvements we have made in our operations,
resulting in significantly improved safety levels, profitability and cash
flow. Our strengthened operating platform and balance sheet coupled with the
robust rough diamond market, sets us well for the second half of the year and
we are well on track to meet FY 2022 operational guidance.
“At our investor day later on this morning, we will expand on the buoyancy
of the diamond market and set out how we expect our medium-term plans to
benefit from this stronger market. As well as discussing our operations and
capital structure, we will present our strategy for the business going
forward, including growth opportunities, and provide more detailed operational
guidance on production, costs and our capital requirements.”
Strong financial performance and diamond pricing underpins confidence for the
full year
H1 FY 2022 H1 FY 2021 FY 2021 (2)
Revenue (US$m) 264.7 178.1 406.9
Adjusted EBITDA (1) ( US$m) 150.9 80.8 130.2
Adjusted EBITDA margin 57% 45% 32%
Adjusted profit / (loss) before tax (US$m) 91.1 6.5 (18.3)
Adjusted net profit / (loss) after tax (US$m) 66.4 2.7 (25.5)
Net profit after tax (US$m) 49.1 67.6 196.6
Operational free cash flow (1) 122.4 54.0 120.1
Consolidated net debt (US$m) 152.3 700.4 228.2
Unrestricted cash (US$m) 256.7 92.4 147.7
Basic earnings per share (US$c) 22.29 315.29 260.70
Adjusted basic earnings / (loss) per share (1)(US$c) 29.01 4.23 (36.20)
1 For all non-GARP measures refer to the Summary of Results table within the
Financial Results section below.
2 For comparative purposes, the FY 2021 income statement figures include
Williamson as it is no longer a discontinued operation. Consolidated net
debt and cash balances for FY 2021 have not been adjusted.
* Revenue up 49% driven by the sale of Exceptional Stones totalling US$77.9
million (H1 FY 2021: US$40.4 million) and a 16% increase in rough diamond
prices.
* Adjusted EBITDA rose 87% reflecting improved prices, the sale of Exceptional
Stones, and Project 2022 cost reductions during the period. EBITDA margin rose
from 45% to 57% significantly enhanced by revenue from the sale of Exceptional
Stones, which may not be repeated at a similar level in future reporting
periods.
* Adjusted profit before tax increased to US$91.1 million (H1 FY 2021 US$6.5
million).
* Net profit after tax reduced to US$49.1 million from US$67.6 million
impacted by negative non-cash foreign exchange movement amounting to US$63.4
million (net of tax).
* Operational free cash flow before restructuring costs rose US$68.4 million
to US$122.4 million on the back of increased EBITDA.
* Further strengthening of the Balance Sheet * Consolidated net debt reduced
by US$75.9 million to US$152.3 million from US$228.2 million as at 30 June
2021 with Consolidated net debt : Adjusted EBITDA at 1.0x compared with 1.8x
at 30 June 2021.
* Unrestricted cash increased US$109.0 million to US$256.7 million from
US$147.7 million as at 30 June 2021.
* Basic earnings per share from continuing operations were 22.29 US$ cents per
share and 29.01 US$ cents on an adjusted basis.
Good safety and operational performance
Unit H1 FY 2022 H1 FY 2021 Variance FY 2021 (1)
Lost time injury frequency rate (LTIFR) 0.18 0.50 -64% 0.44
Total injuries 15 19 -21% 42
Gross ore processed Mt 5.6 4.4 +27% 8.1
Gross diamonds recovered Carats 1,777,424 1,740,862 +2% 3,240,312
Gross diamonds sold Carats 1,595,851 1,712,797 -7% 3,960,475
Gross revenue US$m 264.7 178.1 +49% 406.9
Adjusted mining and processing costs US$m 109.8 99.2 +11% 276.1
Operational capital expenditure US$m 16.1 8.1 +99% 22.8
* Strong safety performance with a 64% reduction in LTIFR reflecting the
concerted effort to address behavioural factors that were compounded by the
pandemic.
* Good production results due to Williamson restarting operations in September
2021, steps taken to address the waste ingress at Finsch, and the successful
management of the tunnel convergence at Cullinan.
* Absolute costs remained within expectations despite inflationary pressures.
* Operational Capex of US$16.1 million (H1 FY 2021: US$8.1 million) largely
due to the new expansion project at Cullinan and resumption of projects
delayed by COVID-19.
* Preliminary conclusions of the Business Re-Engineering (BRE) project
identified opportunities to lower the cost base at Finsch and curtail the
negative cash flow at Koffiefontein.
Strategic developments and board appointment
* Petra has taken steps through the Framework Agreement with the Government of
Tanzania and Memorandum of Understanding entered into with Caspian Limited in
December 2021 to reduce its exposure in Tanzania while retaining a controlling
interest in Williamson.
* Post Period end, completion of the refinancing of Petra’s first lien debt
facility will deliver some US$5 million in savings over the next two years, as
a result of more favourable terms than the current facility. Completion is
expected in Q3 FY 2022.
* As previously announced, Jon Dudas will join the Board as an independent
Non-Executive Director from 1 March 2022, further strengthening the Board
through his broad experience across the mining and resources sectors, in
operations, general management, finance and strategy.
Outlook
This strong performance and considerably improved balance sheet, supported by
a robust rough diamond market, sets us well for the second half of the year,
although we may not benefit from the same levels of record contribution from
Exceptional Stones. FY 2022 production is on track to meet guidance of 3.3
to 3.6 Mcts, and Capex is expected to be at the lower end of the guidance of
US$78 to US$92 million.
With the strong recovery in the diamond market, and the actions we have taken,
Petra is now also well placed for the future.
HIGHLIGHTS OF INVESTOR DAY PRESENTATION
The following new information will be covered in today’s Investor Day:
* Two major projects have been approved by the Board: * Cullinan’s CC1E
SLC: US$173 million capital estimate, extending mine plan to 2031, project
IRR greater than 30%.
* Finsch’s 3 level SLC: US$216 million capital estimate, extending mine plan
to 2030, project IRR greater than 30%.
* Cullinan and Finsch have additional resources to potentially extend their
mine plans well beyond 2031 and 2030 respectively.
* Petra does not provide guidance on diamond pricing. However, it should be
noted that the Cullinan mine has a history of recovering Exceptional Stones
which have contributed an average of US$47 million per annum over the last
three years to Group revenues, and US$37 million per annum over the last five
years.
Key operational guidance metrics
Unit FY22E FY23E FY24E FY25E
Total carats recovered Mcts 3.3 – 3.6 3.3 – 3.6 3.3 – 3.6 3.6 – 3.9
Cash on-mine costs and G&A (1) $m 300 - 310 300 – 320 300 – 320 300 - 320
Expansion capex (1) $m 47 – 50 105 – 115 125 – 135 115 - 120
Sustaining capex (1) $m 28 – 30 30 -32 30 – 32 26 - 28
Note 1: Opex and Capex guidance is stated in FY 2022 real terms and based on
an exchange rate of ZAR15 / USD1.
* Beyond the guidance period, further expansion capital expenditure of US$61
million, which is expected to be invested between 2026 and 2029, includes
completion of these two major projects mentioned above and provides for
certain infrastructure projects at Cullinan, which are still to be approved.
* Koffiefontein is expected to reach its end of life in depleting available
reserves by FY 2025. Petra is considering its options to ensure a
responsible exit while continuing to implement the outcomes of the BRE project
aiming to curtail the negative cash flow impact on the Group.
* Detailed guidance is available on Petra’s website at
https://www.petradiamonds.com/investors/analysts/analyst-guidance/
INVESTOR DAY PRESENTATION DETAILS
Investor Day, including a summary of the Interim Results: 09:30 GMT today
Peel Hunt, 100 Liverpool Street, London EC2M 2AT
Petra’s Chief Executive Richard Duffy and Finance Director Jacques
Breytenbach will host an in-person presentation to update the market on our
strategy and medium-term operational guidance. We will also briefly cover
the Interim results.
Live webcast of presentation
Please register at
https://webcasting.brrmedia.co.uk/broadcast/61fbded449f7751d18890b33
Dial in details
UK, tollfree/freephone: 0800 279 6877
UK, local: +44 (0)330 336 9601 (international calls may incur operator costs)
Participant passcode: 5189226
If you have any questions, please call +44 (0) 20 7494 8203 or email:
investorrelations@petradiamonds.com .
Recording of presentation
A recording of the webcast will be available later today on Petra’s website
at https://www.petradiamonds.com/investors/presentations/
ABOUT PETRA DIAMONDS
Petra Diamonds Limited is a leading independent diamond mining group and a
consistent supplier of gem quality rough diamonds to the international market.
The Company has a diversified portfolio incorporating interests in three
underground producing mines in South Africa (Finsch, Cullinan 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
of ca. 230 million carats, which supports the potential for long-life
operations.
Petra strives to conduct all operations according to the highest ethical
standards and will only operate in countries which are members of the
Kimberley Process. The Company aims to generate tangible value for each of its
stakeholders, thereby contributing to the socio-economic development of its
host countries and supporting long-term sustainable operations to the benefit
of its employees, partners and communities.
Petra is quoted with a premium listing on the Main Market of the London Stock
Exchange under the ticker 'PDL'. The Company’s US$336.7 million 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
FURTHER INFORMATION
Please contact:
Petra Diamonds,
London
Telephone: +44 7494 8203
Jill Sherratt
investorrelations@petradiamonds.com
Julia Stone
CEO’S REVIEW
Revenue growth, higher profitability and cash flow in a strong diamond market
These results demonstrate Petra’s success in improving safety measures,
production, and operations, which enables us to take advantage of the buoyancy
of the diamond market.
Revenue for the half year increased 49% to US$264.7 million, buoyed by the
strong jewellery sales over the holiday period, the contraction in supply and
a 16% increase in rough diamond prices. This and the contribution from
Exceptional Stones, amounting to US$77.9 million, more than offset the 7%
reduction in sales volumes which was the result of a deferral of post-pandemic
outbreak sales to July 2020, within the comparative period. Adjusted
EBITDA rose 87% to US$150.9 million with an Adjusted EBITDA margin of 57% (H1
FY 2021: 45%) supported by the sales of Exceptional Stones.
The marked improvement in safety is best illustrated by the 64% reduction in
LTIFR. Our COVID-19 vaccination drives continues and more than 50% of the
South African workforce has been fully vaccinated.
Diamond production was marginally up against the comparative period and in
line with guidance. Production was sustained notwithstanding previously
reported challenges following tunnel convergence at Cullinan and steps taken
to mitigate the waste ingress at Finsch, both ofwhich were successfully
implemented during the Period. Preliminary conclusions of the BRE projects
confirm the feasibility of future life extension capital projects at Finsch
and the removal of the negative cash flow performance of Koffiefontein.
Production resumed at Williamson during H1 FY 2022. During December Petra
entered into a Framework Agreement with the Government of Tanzania and a
Memorandum of Understanding with Caspian Limited to reduce its exposure in
Tanzania while retaining a controlling interest in Williamson.
We have engaged successfully at the national level on the proposed design of
the Independent Grievance Mechanism (“IGM”) and other remedial initiatives
and community programmes to address the historical allegations of human rights
abuses at the Williamson mine in Tanzania. Local engagements are now planned
for Q3 FY 2022.
Our improving cash flow generation is being enabled by Project 2022, which is
now in its final stages. Since commencement Project 2022 has delivered
US$182 million in cash flow benefits, exceeding its net free cash flow targets
of US$100 million to US$150 million over the three year period to June 2022,
supported by a higher incidence of Exceptional Stones.
Health and safety
The LTIFR for H1 FY 2022 decreased to 0.18 (H1 FY 2021: 0.50). The LTIs during
the Period continued to be of low severity and mostly behavioural in nature.
The various remedial actions and behaviour-based intervention programmes
previously announced have assisted in achieving the strong improvement in the
safety trend. The total number of injuries during H1 FY 2022, which includes
LTIs, decreased to 15 (H1 FY 2021: 19). Petra continues to target a zero-harm
working environment.
COVID-19 remains a risk to the health and safety of the Group’s workforce.
Petra has implemented systems and strategies across all its operations aimed
at preventing and/or containing the spread of the virus. Petra’s focus
remains on a vaccination drive of its employees. In South Africa, 2,228
employees have been fully vaccinated (53% of the workforce) and 266 partially
vaccinated (16% of the workforce), while at Williamson the vaccination
campaign is progressing, although the roll-out has been slower. More
information on the Company’s response to the pandemic is available on its
website:https://www.petradiamonds.com/sustainability/health-and-safety/our-response-to-covid-19/.
Production and operations
H1 FY 2022 production was in line with guidance and totalled 1,777,424 carats
(H1 FY 2021: 1,740,862 carats). During the Period, Williamson resumed
production, having been on care and maintenance since April 2020, while steps
to address both the prior waste ingress at Finsch as well as the convergence
of a tunnel during the Period at Cullinan have yielded positive results.
As previously announced, during September 2021 convergence was experienced at
the southern end of Tunnel 41 in the C-Cut. Remedial action was focused on
arresting convergence by stabilising the affected pillars and re-establishing
access to the production tunnel. The impact on production is now estimated
to be a loss of approximately 11,000 tonnes per month to the end of November
2022. Cullinan is still expected to deliver on its annual guidance for FY 2022
of 1.7 to 1.9 Mcts.
We have made good progress on the BRE Projects at Finsch and Koffiefontein,
initiated in July 2021 to comprehensively review and improve the mines’ cost
bases and enhance operating margins. Transition plans with recommended
deliverables and due dates have been drafted for both operations.
* The plan for Finsch concluded that it is possible to meet the targeted
production levels of c. 2.8 - 3.1 Mt per annum with a significant reduction in
the cost base in excess of ZAR100 million (c. US$6.7 million) per annum.
This level of cost savings ensures a long-term sustainable operation.
* The BRE Project conclusion for Koffiefontein reaffirmed the current mine
plan to 2025. At the same time, ideas identified to reduce cost and improve
efficiencies will result in curtailing negative cash flow.
Production ramp-up at Williamson commenced during H1 FY 2022 with 1.4 Mt ROM
processed in the period, yielding 82.9 Kcts, including the exceptional 32.32
carat pink stone covered in ‘Diamond Sales’.
Diamond market
The diamond market ended the calendar year in a strong state, with evidence of
buoyant jewellery sales during the important festive retail period as
consumers released pent-up demand for luxury items. The recent Bain Diamond
Report 2021-22 estimates that the diamond jewellery market experienced
decade-high growth of +29% to c. US$84 billion in 2021, with the major US
market growing 38% as consumers were keen to spend the savings accumulated in
2020 on meaningful items.
Demand at Petra’s most recent tender spanned across the entire spectrum of
rough assortments and sizes and reflected the shortages of goods further to
the recent contraction of global rough supply.
Petra’s Investor Day presentation today will address the compelling
fundamentals of the diamond market, where the supply side is characterised by
a small and depleting number of producing mines globally, with very limited
exploration and new projects in the pipeline. The demand side continues to be
driven by growing middle classes worldwide and the broadening of opportunities
to give and receive diamonds to mark the most important milestones in our
lives.
The Company continues to closely monitor the impact of COVID-19 on its
clients’ ability to attend tenders and will continue its flexible approach
in planning its upcoming sales events.
Diamond sales
H1 FY 2022 revenue increased 49% to US$264.7 million (H1 FY 2021: US$178.1
million) driven by the sale of Exceptional Stones totalling US$77.9 million
(H1 FY 2021: US$40.4 million), being:
* the exceptional 39.34 carat blue diamond from the Cullinan mine sold for
US$40.2 million;
* the 342.92 carat Type IIa white diamond from the Cullinan mine sold for
US$10.0 million (the Company has retained a 50% interest in the profit uplift
of the polished proceeds, after costs, of the 342.92 carat white diamond, as
well as an 18.30 carat Type IIb blue diamond which sold for US$3.5 million);
* the exceptional 32.32 carat pink diamond from the Williamson mine sold for
US$13.8 million; and
* the 295.79 carat white diamond from the Cullinan mine sold for US$13.9
million.
H1 revenue also benefited from realised diamond prices on a like-for-like
basis being up ca. 16% compared to the preceding six-month period to 30 June
2021.
Sales volumes reduced by some 7% compared to the comparative period when
significantly higher volumes were sold, mostly off-tender, following the
inventory build witnessed late in FY 2020 after the initial COVID-19 outbreak.
Tender volumes and resultant diamond inventories have now normalised in line
with normal tender timings.
Prices achieved during H1 FY 2022 are set out in the table below:
Mine Actual H1 FY 2022 (US$/ct) Actual H1 FY 2021 (US$/ct) Actual FY 2021 (US$/ct)
Cullinan 192 120 111
Finsch 97 71 77
Koffiefontein 538 590 419
Williamson 760 150 150
Project 2022 update
Project 2022 commenced in July 2019 and has now reached the final half year of
this 36-month project scheduled for completion in June 2022. The project’s
key focus was to increase the cash flow generation of the Company through
increased production levels and reduced operating and capital expenditure,
while introducing a standardised business improvement process as part of the
Company’s operating model.
The production results of H1 FY 2022 are testament to the positive impact of
Project 2022’s ideas and principles on stabilising and improving operating
performance, evident at Cullinan and Finsch in particular. This, together with
the positive impact of Project 2022 on the operating and capital cost
performance of the operations, are expected to result in the Group exceeding
its earlier guidance for net free cashflow for the three year period to June
2022 of between US$100 and US$150 million, by realising at least US$200
million.
The first and second phases of the Project 2022 Organisational Design
(“OD”) Review have been completed, which involved updating role
descriptions, grading these roles and amending the Group’s Remuneration
Policy to address both market competitiveness and internal equity to
strategically manage the investment in our employees. The focus of the OD
Project in FY 2022 is on improving performance management through developing
and aligning KPIs across the business to further enhance accountability and
delivery.
The transition from Project 2022 to business improvement being integrated with
the Company’s operating model, to ensure that the benefits of the structures
and systems created by Project 2022 continue over the longer term, is in
progress and is scheduled to be concluded by June 2022.
Williamson Mine – human rights update
Petra has implemented various remedial initiatives and is putting in place the
Independent Grievance Mechanism (“IGM”) as well as community programmes to
address the historical allegations of human rights abuses at the Williamson
mine in Tanzania. More information on this can be found on Petra’s website
at:
https://www.petradiamonds.com/our-operations/our-mines/williamson/allegations-of-human-rights-abuses-at-the-williamson-mine/.
During H1 FY 2022, a series of engagements with Government Ministries and
Agencies, Civil Society and NGOs were conducted in Dodoma and Dar es Salaam,
seeking feedback and support on the proposed design of the IGM. Local
engagements, particularly with those for whom the IGM is intended, are planned
for Q3 FY 2022, following successful engagements at the national level. The
current target is for the launch of the pilot phase of the IGM by the end of
August 2022 (Q1 of FY 2023) provided that meaningful engagement with all
stakeholders is completed by the end of March 2022. This will allow the IGM to
be fully operational by the end of Q1 FY 2023.
Whilst the IGM is still being developed, a mechanism has been set up to enable
community members to confidentially and securely register alleged historical
Tier 2 grievances. This mechanism continues to receive such grievances and a
significant number have been registered to date. As the IGM is not yet
operational, and therefore unable to commence the investigation of such
grievances, it is too early to evaluate the merits of these grievances.
As previously announced, a number of projects are being put in place to
provide sustainable benefits to the communities located close to the mine,
with in excess of one million pounds of agreed funding paid by Petra into an
escrow account to fund these projects.
The gender-based violence campaign has since been launched and continues to
gain traction within the community. The medical support services project at
Mwadui hospital commenced on 10 January 2022 with physiotherapy screening
being provided to community members, as part of the project.
During H1 FY 2022, there was a total of 295 reported incidents of illegal
incursions onto the Williamson mine lease area, resulting in twelve illegal
miners, ten security officials and five police officials suffering minor
injuries and 74 arrests being made. These incidents will be further
investigated as appropriate and corrective actions taken where necessary.
Subject to the outcome of these investigations, the Company believe the
Williamson Diamonds Limited (“WDL”) and contracted security teams acted in
accordance with the Voluntary Principles on Security and Human Rights.
WDL is also continuing its extensive engagement with communities around the
mine to highlight the dangers of illegal mining, seeking to reduce illegal
incursions onto the Williamson mine lease area, with a particular focus on
seeking to reduce or eliminate the involvement of minors in illegal mining.
Further, WDL continues its engagement at local and central Government level to
work with the authorities to act against the illegal syndicates that are
believed to be funding many of the incursions.
Petra will continue to monitor the effects of actions taken to date and is
committed to the programmes and initiatives detailed in its 12 May 2021
announcement, available on the website link noted above.
Williamson – Framework Agreement and Memorandum of Understanding
On 13 December 2021, a Framework Agreement was entered into with the
Government of Tanzania regarding the Williamson mine, reducing Petra’s
indirect shareholding from 75% to 63%. On 15 December 2021 a non-binding
Memorandum of Understanding (“MoU”) was entered into to sell 50% (less one
share) of the entity that holds Petra’s shareholding in WDL to Caspian
Limited. Upon completion of the transactions contemplated by the MoU and the
capital restructuring in the Framework Agreement becoming effective (expected
in H2 2022), Petra and Caspian will each indirectly hold a 31.5% stake in WDL,
but with Petra retaining control through its controlling interest in the
entity that holds Petra’s shares in WDL and the Government of Tanzania
holding the remaining 37%. These agreements are in line with Petra’s
objective of reducing its exposure in Tanzania while retaining control. The
Williamson mine is therefore no longer classified as an asset held for sale
and has been consolidated for the period ending 31 December 2021. For further
detail refer to note 17.
Share consolidation
On 29 November 2021 the Company completed a share consolidation of one new
share for every 50 existing shares, with the Company’s resultant issued
share capital now consisting of 194,201,785 ordinary shares of 0.05 pence
each.
FINANCIAL RESULTS
SUMMARY RESULTS (unaudited)
6 months to 31 December 2021 (“H1 FY 2022”) 6 months to 31 December 2020 (“H1 FY 2021”) Year ended 30 June 2021 (“FY 2021”)
US$ million US$ million US$ million
Revenue 264.7 178.1 406.9
Adjusted mining and processing costs (1) (109.8) (99.2) (276.1)
Other direct income 0.3 5.1 6.8
Profit from mining activity (2) 155.2 84.0 137.6
Other corporate income 0.6 — —
Adjusted corporate overhead (16) (4.9) (3.2) (7.4)
Adjusted EBITDA (3) 150.9 80.8 130.2
Depreciation and Amortisation (43.5) (38.2) (80.8)
Share-based expense (0.1) (0.2) (0.5)
Net finance expense (16.2) (35.9) (67.2)
Adjusted profit/(loss) before tax 91.1 6.5 (18.3)
Tax expense (excluding taxation credit / charge on impairment charge and unrealised foreign exchange gain / (loss)) (13) (24.7) (3.8) (7.2)
Adjusted net profit/(loss) after tax (4) 66.4 2.7 (25.5)
Impairment reversal / (charge) – operations and other receivables (5) 0.1 (0.2) (38.4)
Impairment of BEE loans receivable – expected credit loss release (6) — 4.6 5.8
Gain on extinguishment of Notes net of unamortised costs — — 213.3
Profit on disposal of subsidiary (7) — 14.7 14.7
Recovery / (costs) and fees relating to investigation and settlement of human rights abuse claims 0.2 — (12.7)
Provision for unsettled and disputed tax claims — — (19.5)
Net unrealised foreign exchange (loss) / gain (28.7) 65.1 74.6
Taxation credit / (charge) on unrealised foreign exchange (loss) / gain (13) 11.1 (19.3) (19.9)
Taxation credit on impairment charge — — 4.2
Net profit after tax 49.1 67.6 196.6
Earnings per share attributable to equity holders of the Company – US cents
Basic profit per share 22.29 315.29 260.70
Adjusted profit / (loss) per share (8) 29.01 4.23 (36.20)
Unit As at 31 December 2021 (US$ million) As at 31 December 2020 (US$ million) As at 30 June 2021 (US$ million)
Cash at bank including Williamson– (including restricted amounts) US$m 272.3 106.3 173.0
Cash at bank - Williamson US$m 16.5 2.5 9.2
Diamond debtors – including Williamson US$m 0.4 3.7 38.3
Diamond debtors – Williamson US$m — — —
Diamond inventories - including Williamson (14) US$m /Cts 79.6 819,252 105.0 1,385,402 56.5 637,676
Diamond inventories - Williamson (14) US$m Cts 20.5 133,239 11.4 76,977 11.4 76,977
US$336.7m loan notes (issued March 2021) (9) US$m 346.4 — 327.3
US$650 million loan notes (9) US$m — 702.0 —
Bank loans and borrowings (10) US$m 78.6 61.2 103.0
BEE partner bank facilities (11) US$m — 47.2 —
Consolidated Net debt (12) US$m 152.3 700.4 228.2
Bank facilities undrawn and available (10) US$m 0.6 — 7.7
The following exchange rates have been used for this announcement: average for
H1 FY 2022 US$1:ZAR15.03 (H1 FY 2021: US$1: ZAR16.27, FY 2021: US$1:ZAR15.41);
closing rate as at 31 December 2021 US$1:ZAR15.99 (31 December 2020
US$1:ZAR14.69, 30 June 2021: US$1:ZAR14.27).
Notes:
The Group uses several non-GAAP measures above and throughout this report to
focus on actual trading activity by removing certain non-cash or non-recurring
items. These measures include adjusted mining and processing costs, profit
from mining activities, adjusted EBITDA, adjusted net profit after tax,
adjusted earnings per share, adjusted US$ loan note, net debt 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. Profit from mining activities is revenue less adjusted mining and
processing costs plus other direct income.
3. Adjusted EBITDA is stated before depreciation, amortisation of right-of-use
asset, costs and fees relating to investigation and settlement of human rights
abuse claims, share-based expense, net finance expense, tax expense, loss on
discontinued operations, net of tax, impairment charges, expected credit loss
release/ (charge), gain on extinguishment of Notes net of unamortised costs,
profit on disposal of subsidiary and net unrealised foreign exchange gains and
losses.
4. Adjusted net profit/(loss) after tax is net profit/(loss) after tax stated
before impairment charge, expected credit release (loss) provision, gain on
extinguishment of Notes net of unamortised costs, profit on disposal net
unrealised foreign exchange gains and losses, and excluding taxation (charge)
credit on net unrealised foreign exchange gains and losses and excluding
taxation credit on impairment charge.
5. Impairment reversal of US$0.1 million (30 June 2021: US$38.4 million charge
and 31 December 2020: US$0.2 million charge) was due to the Group’s
impairment review of its operations and other receivables. Refer to note 15
for further details.
6. Reversal of impairment of BEE loans receivable of US$nil (30 June 2021:
US$5.8 million and 31 December 2020: US$4.6 million) is due to the Group’s
expected credit loss assessment of its BEE loans receivable. Refer to note 11
for further details.
7. The profit on disposal of subsidiary of US$14.7 million in FY2021 includes
the reclassification of foreign currency translation reserve, net of tax of
Sekaka Diamonds (Pty) Ltd.
8. Adjusted EPS is stated before impairment charge, expected credit release
(loss) provision, gain on extinguishment of Notes net of unamortised costs,
profit on disposal of subsidiary, costs and fees relating to investigation and
settlement of human rights abuse claims, net unrealised foreign exchange gains
and losses, and excluding taxation (charge) credit on net unrealised foreign
exchange gains and losses and excluding taxation credit on impairment
charge.
9. The US$336.7 million loan notes have a carrying value of US$346.4 million
(FY2021: US$327.3 million) which represents the gross capital of US$336.7
million of notes, plus accrued interest and net of unamortised transaction
costs capitalised, issued following the capital restructuring (the
“Restructuring”) completed during March 2021. Refer to detailed Debt
Restructuring Note 18.
The US$650 million loan notes represent the gross capital of US$650 million of
notes issued on April 2017, plus accrued and unpaid interest for the relevant
periods; these loan notes were settled in full following the completion of the
Restructuring.
1. Bank loans and borrowings represent amounts drawn under the Group’s
refinanced South African bank facilities as part of the Restructuring and
comprise the ZAR856.1 million term loan (US$53.5 million), net of unamortised
transaction costs capitalised of US$1.2 million, and ZAR402.2 million (US$25.1
million) drawn (including accrued interest) under the ZAR408.8 million
(US$30.1 million) revolving credit facility. Under the revolving credit
facility, ZAR8.8 million (US$0.6 million) remains undrawn and available.
During FY 2021 and as part of the Restructuring, the BEE partner bank
facilities (which comprised the BEE guarantees) were settled by the Group
through proceeds of the ZAR1.2 billion term loan. Post Period end, the Group
settled the RCF (capital plus interest), for further detail refer to note 19.
2. BEE partner bank facilities represents the BEE guarantees of US$nil
(ZARnil) (30 June 2021: US$nil (ZARnil) and 31 December 2020: US$47.2 million
(ZAR692.8 million)).
3. Consolidated Net Debt is bank loans and borrowings plus loan notes, less
cash, less diamond debtors plus BEE partner bank facilities.
4. Tax (expense) / credit is the tax (expense) / credit for the Period
excluding taxation credit / (charge) on impairment charge and unrealised
foreign exchange gain / (loss) generated during the Period, such exclusion
more accurately reflects resultant Adjusted net profit / (loss).
5. Williamson’s diamond inventory includes the 71,654.45 carat parcel of
diamonds blocked for export during August 2017, with a carrying value of
US$10.6 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.
6. Operational free cashflow is defined as cash generated from operations less
acquisition of property, plant and equipment.
Revenue
H1 FY2022 revenue increased 49% to US$264.7 million (H1 FY 2021: US$178.1
million) driven by sales from Exceptional Stones contributing US$77.9 million
during the Year (H1 FY 2021: US$40.4 million); supported by the strong diamond
market. Diamonds sold for the Period decreased 7% to 1,595,851 carats (H1 FY
2020: 1,712,797 carats), which was offset by rough diamond prices on a
like-for-like basis by increasing ca. 16% compared to H1 FY2021.
Mining and processing costs
The mining and processing costs for H1 FY 2022 are comprised of on-mine cash
costs as well as other operational expenses. A breakdown of the total mining
and processing costs for the Year is set out below.
On-mine cash costs (1) US$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 Depreciation (3) US$m Total mining and processing costs (IFRS) US$m
H1 FY 2022 129.8 3.4 (29.5) 6.1 109.8 43.1 152.9
H1 FY 2021 94.4 2.4 (5.9) 8.3 99.2 37.7 136.9
FY 2021 (4) 208.9 3.2 42.2 21.8 276.1 80.0 356.1
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. Includes amortisation of right-of-use assets under IFRS 16 of US$0.6
million (H1 FY2021: US$2.3 million and FY 2021: US$0.6 million) and excludes
exploration and corporate / administration.
4. For comparative purposes, the FY 2021 figures include Williamson as it is
no longer held for sale at 31 December 2021.
Absolute on-mine cash costs in H1 FY 2022 increased by ca. 37% compared to H1
FY 2021 and in line with expectations, due to:
* The effect of translating ZAR denominated costs at the South African
operations at a stronger ZAR/USD average exchange rate (ca. 9.2% increase);
* Williamson mine resuming production in H1 FY2022 after being on care and
maintenance throughout the period in H1 FY2021 (ca. 11.2% increase);
* Other cost movements, due to deferral of certain expenditure as a result of
the Covid-19 restrictions during H1 FY2021, as well as the impact of T41
Tunnel convergence at CDM (ca. 4.0% increase); and
* inflationary increases (ca. 6.9% increase), the impact of electricity costs
(2.1% increase) and annual labour increases for FY2021 deferred to January
2021 (ca. 3.6% increase).
Royalties increased to US$3.4 million (H1 FY 2021: US$2.4 million) due to an
increase royalty percentage following increase in profit net of capex, as
defined in the royalty legislation of South Africa.
Profit from mining activities
Profit from mining activities increased 85% to US$155.2 million (H1 FY 2021:
US$84.0 million), mainly due to improved diamond pricing and the contributions
from Exceptional Stones.
Adjusted corporate overhead – general and administration
Corporate overhead (before depreciation and share based payments) increased to
US$4.9 million for the Period (H1 FY 2021: US$3.2 million) mainly attributable
to the ZAR strengthening against the USD and the increase in corporate
governance structures, strategic developments and Board appointments
introduced during the Period.
Adjusted EBITDA
Adjusted EBITDA, being profit from mining activities less adjusted corporate
overhead, increased 87% to US$150.9 million (H1 FY 2021: US$80.8 million),
representing an adjusted EBITDA margin of 57% (H1 FY 2021: 45%), driven by the
contribution from Exceptional Stones, the stronger diamond market and diamond
prices achieved.
Depreciation and amortisation
Depreciation and amortisation for the Period increased to US$43.1 million (H1
FY 2021: US$37.7 million), mainly due to the strengthening of the ZAR against
the USD and production recommencing at Williamson.
Impairment reversal / charge
As a result of the impairment reviews carried out at Cullinan, Finsch,
Koffiefontein and Williamson, and the Group’s other receivables during the
Period, the Board recognised an overall net impairment reversal of US$0.1
million (H1 FY 2021: US$0.2 million impairment charge), comprising impairment
charges of the Williamson VAT receivable of US$0.7 million (H1 FY2021: US$0.2
million) and Koffiefontein property, plant and equipment of US$0.3 million (H1
FY2021: US$nil) and the recoupment of US$1.1 million previously impaired in
respect of the KEM JV receivable. Further details are provided in note 15.
Impairment reviews carried out at Cullinan, Finsch, and Williamson operational
assets did not result in an impairment charge or reversal during the Period
(H1 FY 2021: US$nil). Asset level impairments at Koffiefontein amount to
US$0.3 million (H1 FY 2021: US$nil), of the Group’s carrying value of
property, plant and equipment of US$624.0 million (H1 FY 2021: US$773.3
million) pre-impairment.
Impairment of BEE loans receivable – expected credit loss provision
The Group has applied the expected credit loss impairment model to its BEE
loans receivable. In determining the extent to which expected credit losses
may apply, the Group assessed the future free cashflows to be generated by the
mining operations based on the current mine plans. Based on the assessment,
the Group’s free cashflows generated indicated a net credit loss reversal of
US$nil (H1 FY2021: US$4.6 million expected credit loss reversal, comprising of
US$4.6 million provision reversal in respect of Cullinan and Finsch (refer to
note 2 for further detail).
Net financial income
Net financial expense of US$44.9 million (H1 FY 2021: US$29.2 million income)
comprises:
* net realised foreign exchange gain on settlement of forward exchange
contracts of US$8.8 million (H1 FY 2021: US$3.6 million foreign exchange
losses).
* interest received on bank deposits of US$0.5 million (H1 FY 2021: US$0.4
million);
* net interest receivable on the BEE partner loans and amortisation of lease
liabilities in accordance with IFRS 16 of US$1.3 million (H1 FY 2021: US$2.6
million net interest payable)
offset by:
* interest on the Group’s debt and working capital facilities of US$23.8
million (H1 FY 2021: US$27.6 million);
* a charge for the unwinding of the present value adjustment for Group
rehabilitation costs of US$3.0 million (H1 FY 2021: US$2.5 million); and
* net unrealised foreign exchange losses of US$28.7 million due to the ZAR
strengthening against the US Dollar (H1 FY 2021: US$65.1 million foreign
exchange gains – ZAR weakness against the US Dollar) representing (i) the
unrealised foreign exchange gains/losses on the foreign currency retranslation
of cross border loans considered to be repayable in the foreseeable future,
and (ii) unrealised losses on forward exchange contracts (refer to note 6 for
further detail);
Tax credit / charge
The tax charge of US$13.6 million (H1 FY 2021: US$23.1 million) comprising
deferred tax charge of US$24.3 million (H1 FY 2021: US$3.8 million) in respect
of the utilisation of capital allowances at Cullinan and Finsch and US$11.1
million deferred tax credit (US$19.3 million charge due to unrealised foreign
exchange gains) relating to unrealised foreign exchange losses during the
Period, which reduced existing deferred tax liabilities, with an income tax
charge of US$0.4 million at Finsch for the Period (H1 FY 2021: US$nil).
Profit on disposal of subsidiary including associated impairment, net of tax
In H1 FY2021, the profit on disposal of subsidiary including associated
impairment, net of tax of US$14.7 million relates to the Group’s disposal of
its interests in Sekaka, its exploration operations in Botswana, and is made
up of a US$0.3 million disposal consideration, net profit of US$1.3 million
for the Period 1 July 2020 to the 30 November 2020 disposal date and the
recycling of the foreign currency translation reserve of US$13.3 million,
offset by a net asset disposal amount of US$0.2 million. Refer to Note 16 for
the detailed breakdown.
Williamson
At the end of FY2021, the Board had decided to review its strategic options at
Williamson and the asset was classified as an asset held for sale.
In terms of the IFRS requirements to measure the assets of a disposal group at
the lower of carrying amount and fair value less costs to sell, the
determination of the fair value is complex and subject to considerable
judgement. Based on management’s best estimate of the fair value at 30
June 2021, the following amounts were recognised as a result of that
reclassification:
* An impairment charge of US$21.4 million in respect of property, plant and
equipment;
* A US$11.2 million charge attributable to Williamson’s net loss for FY2021;
and
* A US$19.5 million provision for unsettled and disputed tax claims arising
from the ordinary course of business.
During H1 FY2022, the Group entered into a Framework Agreement with the
Government of Tanzania regarding the Williamson mine reducing Petra’s
indirect shareholding from 75% to 63%. Petra also entered into a non-binding
Memorandum of Understanding (“MoU”) to sell 50% less one share of the
entity that holds Petra’s shareholding in WDL to Caspian Limited. Upon
completion of the transactions contemplated by the MoU and the capital
restructuring in the Framework Agreement becoming effective (expected in H2
FY2022), Petra and Caspian will each indirectly hold a 31.5% stake in WDL, but
with Petra retaining a controlling interest in WDL and the Government of
Tanzania holding the remaining 37%. These agreements are in line with
Petra’s objective of reducing its exposure in Tanzania while retaining
control, through its controlling interest in the entity that holds Petra’s
shares in WDL. The Williamson mine is therefore no longer classified as an
asset held for sale in H1 FY2022 which is the same treatment for the period H1
FY2021. Refer to Note 17 for additional detail.
Group profit / loss
The Group’s net profit after tax is US$49.1 million (H1 FY 2020: US$67.6
million) impacted by negative non-cash foreign exchange movement amounting
to US$63.4 million (net of tax
Earnings per share
Basic profit per share from continuing operations of 22.29 US$ cents was
recorded (H1 FY 2021: 315.29 US$ cents, including gain on extinguishment of
Notes).
Adjusted profit per share from continuing operations (adjusted for impairment
charges, taxation credit on net unrealised foreign exchange losses and net
unrealised foreign exchange gains and losses) of 29.01 US$ cents was recorded
(H1 FY 2021: 4.23 US$ cents loss (adjusted for impairment charges, taxation
charge on net unrealised foreign exchange gains and net unrealised foreign
exchange gains and losses)).
The comparative basic profit per share and adjusted profit per share have been
adjusted to give effect to the share consolidation of one new share for every
50 existing shares completed on 29 November 2021, with the Company’s
resultant issued share capital now consisting of 194,201,785 ordinary shares
of 0.05 pence each.
Operational free cash flow
During the Period operational free cash flow of US$122.4 million (H1 FY 2021:
US$54.0 million before restructuring fees of US$15.5 million) reflects the
impact from the sale of Exceptional Stones and stronger diamond prices. This
strong cash flow performance compared to H1 FY2021 was positively impacted by:
* US$4.8 million inflow (H1 FY 2021: US$5.7 million outflow) cash finance
expenses net of finance income and net realised foreign exchange
gains/(losses).
This was offset by:
* Restructuring fees settled during the Period of US$nil (H1 FY 2020:US$15.5
million; FY 2021 US$29.9 million); and
* US$3.5 million dividend paid to BEE partners (H1 FY 2021: US$5.0 million
advances to BEE partners, largely related to servicing of BEE bank debt, with
the advances recoverable against future BEE partner distributions).
Cash and Diamond Debtors
As at 31 December 2021, Petra had cash at bank of US$272.3 million (H1 FY
2021: US$106.3 million). Of these cash balances, US$256.7 million was held
as unrestricted cash (H1 FY 2021: US$92.4 million), US$14.8 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 2021: US$12.9 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 2021: US$0.8
million).
Diamond debtors at 31 December 2021 were US$0.4 million (H1 FY 2021: US$3.7
million).
Loans and Borrowings
The Group had loans and borrowings (measured under IFRS) at Period end of
US$425.3 million (H1 FY 2021: US$810.4 million) mainly comprised of US$346.4
million Notes (includes US$30.5 million accrued interest and unamortised
transaction costs of US$17.3 million) (H1 FY 2020: US$702.0 million), bank
loans and borrowings of US$78.6 million (includes interest of US$0.1 million
and unamortised transaction costs of US$1.7 million) (H1 FY 2021: US$61.2
million) and BEE partner bank facilities of US$nil (H1 FY 2021: US$47.2
(off-balance sheet guarantees)). Bank debt facilities undrawn and available to
the Group at 31 December 2021 were US$0.6 million (H1 FY 2021: US$nil). Post
Period end, the Company repaid the RCF of ZAR404.5 million (US$25.3 million),
the RCF facility was not cancelled and remains available to the Group.
Consolidated net debt at 31 December 2021 was US$152.3 million (H1 FY 2021:
US$700.4 million).
Covenant Measurements attached to banking facilities
The Company’s EBITDA-related covenants associated with its banking
facilities during the Period were as outlined below:
* To maintain a 1.3x debt service cover ratio tested semi-annually on a
rolling 12-month basis; and
* To maintain liquidity requirements, of ZAR200 million (US$12.5 million)
based on covenant measurements every half year. The minimum liquidity
requirement immediately after a Fixed Income Investor’s coupon repayment is
US$20.0 million.
Post Period end, Petra refinanced its first lien banking facilities with
amended covenants. For further detail refer to Note 19 below.
Going concern considerations
The Board has reviewed the Group’s forecasts with various sensitivities
applied, for the 18 months to June 2023, 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. These included risks associated
with COVID-19, the likelihood and impact of which has been assessed as having
reduced since the previous report date. As such, the risks of production
disruptions, deferral of tenders due to travel restrictions and adverse
impacts on diamond pricing directly related to COVID-19 were removed from the
sensitivity analyses. Instead, more general disruptions to operations were
considered, which may relate to, inter alia, either COVID-19, labour or
adverse weather conditions.
The following have been key considerations in assessing the Group’s ability
to operate as a going concern at the date of this report:
* a disruption in forecast production taking production offline for a period
of two weeks at either Cullinan or Finsch;
* a sustained 5% decrease in forecast rough diamond prices throughout the
forecast period;
* a sustained 5% decrease in forecast rough diamond prices throughout the
forecast period; and
* a combination of the above.
Under all the cases, the forecasts indicate that the Company will be able to
operate within the covenants and maintain sufficient liquidity. The Group’s
liquidity outlook over the 18-month period to June 2023 remains strong, even
when applying 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, both
in the base case and all stressed cases, although the combined stressed case
shows marginal headroom for the required interest cover ratio, specifically in
the December 2022 measurement period. The above-plan actual cash flow
generation during H1 FY 2022 coupled with improving market conditions and
further supported by more appropriate First Lien facilities and covenants,
mitigated the risk of covenant breaches in the 18-month forecast period as
previously noted in the Company’s going concern assessment included in the
FY 2021 Annual Report.
As a result, the Board concluded that there are no material uncertainties that
would cast doubt of the Company continuing as a going concern. See ‘Basis
of preparation including going concern’ in the Financial Statements for
further information.
Capex
Total Group Capex for the Period increased to US$16.7 million (H1 FY 2021:
US$8.6 million), comprising:
* US$11.7 million expansion Capex (H1 FY 2021: US$6.3 million); and
* US$5.0 million sustaining Capex (H1 FY 2021: US$2.3 million).
Capex Unit H1 FY 2022 H1 FY 2021
Cullinan US$m 12.5 5.9
Finsch US$m 2.5 1.3
Koffiefontein US$m 0.3 0.6
Williamson US$m 0.8 0.3
Subtotal – Capex incurred by operations US$m 16.1 8.1
Corporate US$m 0.6 0.5
Total Group Capex US$m 16.7 8.6
Dividend
No dividend was declared for H1 FY 2022 (H1 FY2021: US$nil).
OPERATIONAL REVIEW
H1 FY 2022 Sales, Production and Capex – Summary
Unit H1 FY 2022 H1 FY 2021 Variance FY 2021 (1)
Sales
Diamonds sold Carats 1,595,851 1,712,797 -7% 3,960,475
Gross revenue US$m 264.7 178.1 +49% 406.9
Production
ROM tonnes Mt 5.4 4.2 +29% 7.7
Tailings & other (1)tonnes Mt 0.2 0.2 0% 0.4
Total tonnes treated Mt 5.6 4.4 +27% 8.1
ROM diamonds Carats 1,649,989 1,644,846 0% 3,057,860
Tailings & other diamonds Carats 127,435 96,016 +33% 182,452
Total diamonds Carats 1,777,424 1,740,862 +2% 3,240,312
Capex
Expansion US$m 11.7 6.3 +86% 16.9
Sustaining US$m 5.0 2.3 +117% 6.9
Total US$m 16.7 8.6 +94% 23.8
Note:
1. FY2021 comparatives have been restated to include Williamson.
Overall carat production increased 2% to 1,777,424 carats (H1 FY 2021:
1,740,862 carats), largely attributable to Williamson resuming production
during the Period, following an extended period of care and maintenance.
Cullinan – South Africa
Unit H1 FY 2022 H1 FY 2021 Variance FY 2021
Sales
Gross revenue US$M 167.7 107.3 +56% 250.6
Diamonds sold Carats 872,304 894,758 -3% 2,261,058
Average price per carat US$ 192 120 +60% 111
ROM Production
Tonnes treated Tonnes 2,306,986 2,339,473 -1% 4,614,802
Diamonds produced Carats 843,202 913,626 -8% 1,761,490
Grade¹ Cpht 36.5 39.1 -7% 38.2
Tailings Production
Tonnes treated Tonnes 238,293 221,385 +8% 445,538
Diamonds produced Carats 127,435 96,016 +33% 182,452
Grade¹ Cpht 53.5 43.4 +23% 41.0
Total Production
Tonnes treated Tonnes 2,545,279 2,560,858 -1% 5,060,339
Diamonds produced Carats 970,637 1,009,642 -2% 1,943,942
Costs
On-mine cash cost per total tonne treated ZAR 298 239 +25% 260
Capex
Expansion Capex US$m 10.2 5.2 +96% 14.5
Sustaining Capex US$m 2.3 0.7 +229% 2.3
Total Capex US$m 12.5 5.9 +112% 16.8
Note:
1. The Company is not able to precisely measure the ROM / tailings grade split
because ore from both sources is processed through the same plant; the Company
therefore back-calculates the grade with reference to resource grades.
Production
Cullinan’s overall carat production decreased by 4% to 970,637 carats (H1 FY
2021: 1,009,642 carats). ROM production decreased by 8% to 843,202 carats
(H1 FY 2021: 913,626 carats) partially offset by an increase in Tailings
production of 127,435 carats (H1 FY 2021: 96,016 carats). ROM production was
impacted by the convergence experienced in Tunnel 41 on the eastern side of
the C-Cut block cave during the Period. Although the ROM grade of 36.5 cpht
(H1 FY 2020: 39.1 cpht) was at the lower end of FY 2022 guidance, we maintain
our guidance for the full year.
Sales
Cullinan’s revenue increased 56% to US$167.7million (H1 FY 2021: US$107.3
million), due to the sale of three Exceptional Stones for US$64.1 million (H1
FY 2021: US$40.4 million), as well as the increase in diamond prices on a
like-for-like basis of ca.16% compared to the preceding six-month period to 30
June 2021.
Costs
The on-mine unit cash cost per total tonne treated increased 25% to ZAR298 (H1
FY 2021: ZAR239), mainly resulting from the low unit cost in H1 FY 2021 due to
deferral of certain expenditure as result of the Covid-19 restrictions (H1 FY
2021: ZAR239). US$0.5 million of additional expenditure was incurred in H1 FY
2021 to manage the tunnel convergence in T41, and the above-CPI increases in
electricity.
New project
During the Period, the board approved the CC1E project estimated at a cost of
ZAR2.6 billion (US$173 million) with an IRR in excess of 30% to deliver the
current mineplan to 2031.
Capex
Cullinan’s H1 FY2022 Capex spend of US$12.5m (H1 FY 2020: US$5.9 million)
was mainly for the finalisation of the North Crusher 2 chamber, including the
tip construction, development of the early access to the CC1E decline and
underground workshop, and equipment for the 6(th) XRL stream in the processing
plant.
Finsch – South Africa
Unit H1 FY 2022 H1 FY 2021 Variance FY 2021
Sales
Gross revenue US$M 65.7 54.8 +20% 123.5
Diamonds sold Carats 676,295 768,647 -12% 1,602,312
Average price per carat US$ 97 71 +37% 77
ROM Production
Tonnes treated Tonnes 1,423,119 1,323,000 +8% 2,311,195
Diamonds produced Carats 701,543 695,308 +1% 1,237,219
Grade Cpht 49.3 52.6 -6% 53.5
Total Production
Tonnes treated Tonnes 1,423,119 1,323,000 +8% 2,311,195
Diamonds produced Carats 701,543 695,308 +1% 1,237,219
Costs
On-mine cash cost per total tonne treated ZAR 484 456 +6% 536
Capex
Expansion Capex US$m 1.4 0.8 +75% 1.7
Sustaining Capex US$m 1.1 0.5 +120% 2.3
Total Capex US$m 2.5 1.3 +92% 4.0
Production
Finsch’s overall carat production was in the previous Period at 701,543
carats (H1 FY 2021: 695,308 carats).
During H1 FY 2021, the areas surrounding the Finsch mine experienced above
average rainfall. Due to the excessive amount of rainfall and an influx of
water into the pit, pit wall failures were experienced on the northern side of
the pit. These failures have not impacted production to date, but they may
have a future impact on the stability of the decline from surface which also
serves as the second escape route from the underground operations. Measures to
mitigate the impact on the second escape route are being put in place and
include the re-commissioning of a temporary hoisting facility from surface
down to the 70 level.
The BRE Project confirmed production capacity of 2.8 - 3.1mt per annum with a
sustainable reduction in the cost base estimated at R100 million (US$6.7
million) per annum.
Sales
Sales increased +20% to US$65.7 million (H1 FY 2021: US$54.8 million),
reflecting the strong diamond market, further supported by an improving
product mix, delivering a 37% increase in average value per carat.
Costs
Despite the above inflationary increase in costs (associated with the water
ingress, additional maintenance required for an ageing fleet, and the
above-CPI increases in electricity), coupled with the 8% increase in total
tonnes treated, the on-mine increase in unit cash cost per total tonne treated
was limited to 6% to ZAR484 (H1 FY 2021: ZAR456). This containment in the
cost increase reflected the positive impact of the BRE initiatives which are
sustainably lowering the fixed cost base.
New project
During the Period, the board approved the 3 Level SLC project estimated at a
cost of ZAR3.2 billion (US$216 million) with an IRR in excess of 30% to
deliver the current mine plan to 2030.
Capex
Capex of US$2.5 million for the Period (H1 FY 2021: US$1.3 million) is higher
due to the continuation of certain key projects such as Block 5 exploration
drilling and 78 Level Phase 2, which were delayed in FY2021 as result of
COVID-19 restrictions.
Koffiefontein – South Africa
Unit H1 FY 2022 H1 FY 2021 Variance FY 2021
Sales
Gross revenue US$M 11.1 11.2 -1% 28.0
Diamonds sold Carats 20,638 18,945 +9% 66,650
Average price per carat US$ 538 590 -9% 419
ROM Production
Tonnes treated Tonnes 317,310 493,661 -36% 754,369
Diamonds produced Carats 22,371 35,912 -38% 59,151
Grade Cpht 7.1 7.3 -3% 7.8
Total Production
Tonnes treated Tonnes 317,310 493,661 -36% 754,369
Diamonds produced Carats 22,371 35,912 -38% 59,151
Costs
On-mine cash cost per total tonne treated ZAR 811 459 +76% 651
Capex
Expansion Capex US$m 0.1 0.3 -66% 0.6
Sustaining Capex US$m 0.2 0.3 -33% 1.1
Total Capex US$m 0.3 0.6 -50% 1.7
Production
Koffiefontein’s production decreased 38% to 22,371 carats (H1 FY 2021:
35,912 carats), following tunnel depletion on 60L East, waste ingress,
impacting the recovered grade, and drill rig availability during the Period
affected by the ageing fleet.
Sales
Koffiefontein’s revenue remained in line with the prior Period at US$11.1
million (H1 FY 2021: US$11.2 million). Higher diamond prices were offset by
lower quality.
Costs
The unit cash cost per total tonne treated increased to ZAR811 (H1 FY 2021:
ZAR459), mainly due to reduced throughput and the above-CPI increases in
electricity.
The BRE Project identified opportunities to reduce costs intended to curtail
negative cash flow.
Capex
Capex decreased to US$0.3 million (H1 FY 2021: US$0.6 million).
Williamson – Tanzania
Unit H1 FY 2022 H1 FY 2021 Variance FY 2021
Sales
Gross revenue US$M 20.2 4.6 +339% 4.6
Diamonds sold Carats 26,611 30,339 -12% 30,339
Average price per carat US$ 760 150 +407% 150
ROM Production
Tonnes treated Tonnes 1,354,116 0 n.a 0
Diamonds produced Carats 82,873 0 n.a 0
Grade Cpht 6.1 0 n.a 0
Total Production
Tonnes treated Tonnes 1,354,116 0 n.a 0
Diamonds produced Carats 82,873 0 n.a 0
Costs
On-mine cash cost per total tonne treated US$ 12 n.a n.a. n.a
Capex
Expansion Capex US$m 0.0 0.0 0% 0.0
Sustaining Capex US$m 0.8 0.3 +166% 0.3
Total Capex US$m 0.8 0.3 +166% 0.3
Production
Following an 18 month period of care and maintenance and in light of the
improving market conditions, production at Williamson recommenced during H1 FY
2022.
Sales
Williamson’s revenue increased to US$20.2 million (H1 FY 2020: US$4.6
million), following the first tender of rough diamonds post the restart of
operations in Q1 FY 2022. This included the sale of an exceptional 32.32 carat
pink stone for US$13.8 million.
Costs and Capex
On-mine cash costs were US$12.1 per tonne treated (H1 FY2021 the operation was
under care and maintenance) and capex at US$0.8 million were in line with
expectations.
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 H1 FY 2022
External Risks
1. Diamond price High Medium Long term No Change – the rough diamond market remains positive with stable demand expected to continue from manufacturing centers and increased demand of polished diamonds especially over the festive season indicating a continued positive end consumer market. Sales are currently not negatively influenced by Covid-19 restrictions and the
first tender of Williamson, post restart of operations, yielded good results. Exceptional stones from Cullinan and Williamson continue to boost sales revenue.
2. Currency High Medium Long term No change –- the exchange rate was relatively stable over the last six months with an average of 15.14 ZAR/USD, high of 16.3 at the start of December 2021 and a low of 14.15 in September 2021.
3. Country and political High Medium Long term Lower – the risk of political instability in SA has reduced since the unrest in July and elections in November. The risk of political instability in Tanzania has also reduced under the new President and following entry by Petra into a Framework Agreement, which was subject to shareholder approval, with the Government of Tanzania
that resolves various legacy matters.
4. COVID-19 pandemic (operational impact) Medium Medium Short to medium term Lower – the impact of the COVID-19 pandemic is ongoing. The new Omicron variant, identified in late November 2021, resulted in South Africa’s fourth wave of infections which is believed to have already peaked and which saw much higher rates of infections, albeit lower hospitalizations and deaths. Petra’s vaccination drive as well
as other mitigation measures are continuing which enables Petra to manage the pandemic without any significant impact to production and sales.
Operating Risks
5. Mining and production Medium Medium Long term Lower – positive throughput improvements supported by Project 2022 continue to yield
good results. Production at Williamson continues to ramp up and is expected to reach
full production by end of February. Steps to address prior waste ingress at Finsch
and the Tunnel 41 convergence at Cullinan have yielded positive results, with
production targets at both mines in line with FY 2022 annual guidance.
6. ROM grade and product mix volatility Medium Medium Short term No change – Cullinan and Finsch ROM grades remain in line or ahead of budget, whilst
Koffiefontenin ROM grades remain below guidance.
7. Labour relations Medium Medium Short to medium term No change – stable labour relations were experienced during H1 FY 2022. The Company
reached agreement with NUM on a new three-year wage agreement for employees in the
Paterson A and B Bands at the South African operations. The Company also concluded a
three-year wage agreement for employees on the Paterson C-Lower Band with both NUM
and UASA. Wage negotiations at Williamson are set to commence in H2 FY 2022.
Strategic risks
8. Financing Medium Medium Short to medium term Lower – continued progress with Project 2022 initiatives, strong diamond markets, the
sale of exceptional stones and successful management of the Covid-19 pandemic
continued to support free cash flow and to further reduce net debt. Petra has signed
a binding credit approved term sheet to re-finance its first lien debt which, once
completed, will simplify its capital structure, lead to a less onerous covenant
package and reduce financing costs.
9. Licence to operate: regulatory and social impact & community relations Medium Medium Long term No change –uncertainty regarding the future at Koffiefontein has raised tensions with
the community at the mine. Local community and political pressure regarding Social
and Labour Plans (SLPs), jobs and business opportunities at all our mines continue.
Whilst there have been delays in the implementation of the IGM and community projects
at Williamson and increased pressure on the IGM through a significant increase in
Tier 2 grievances being registered, recent support from the Government for the IGM
should enable local engagements to proceed shortly and recent support from the
District Commissioner should allow the community projects to progress. The risk of
illegal incursions at Williamson is ongoing, although the rate of incursions has
stabilised.
Richard Duffy
Chief Executive Officer
21 February 2022
Notes
The following definitions have been used in this announcement:
1. Exceptional Stones: diamonds with a valuation and selling price of US$5m or
more per stone
2. cpht: carats per hundred tonnes
3. Kcts: thousand carats
4. Kt: thousand tonnes
5. LTI: lost time injury
6. LTIFR: lost time injury frequency rate
7. Mcts: million carats
8. Mt: million tonnes
9. FY: financial year
10. Q: quarter of the financial year
11. ROM: run-of-mine (i.e. production from the primary orebody)
12. SLC: sub level cave
13. m: million
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE 6 MONTH PERIOD ENDED 31 DECEMBER 2021
US$ million Notes (Unaudited) 1 July 2021- 31 December 2021 (Unaudited) 1 July 2020- 31 December 2020 (Restated - Audited) Year ended 30 June 2021 (1)
Revenue 264.7 178.1 406.9
Mining and processing costs (152.9) (136.9) (356.1)
Other direct income 0.3 5.1 6.8
Corporate expenditure including settlement costs 5 (5.2) (3.9) (40.8)
Other corporate income 0.6 — —
Impairment reversal / (charge) of non-financial assets 15 0.1 (0.2) (38.4)
Impairment of BEE loans receivable – expected credit loss release 11 — 4.6 5.8
Total operating costs (157.1) (131.3) (422.7)
Profit on disposal including associated impairment, net of tax 16 — 14.7 14.7
Financial income 6 11.4 69.0 81.6
Financial expense 6 (56.3) (39.8) (74.2)
Gain on extinguishment of Notes net of unamortised costs 6 — — 213.3
Profit before tax 62.7 90.7 219.6
Income tax charge (13.6) (23.1) (23.0)
Profit for the Period 49.1 67.6 196.6
Attributable to:
Equity holders of the parent company 43.2 54.5 187.1
Non-controlling interest 5.9 13.1 9.5
49.1 67.6 196.6
Profit per share attributable to the equity holders of the parent during the Period:
Continuing operations:
Basic earnings per share – US cents 13 22.29 315.29 260.70
Diluted earnings per share – US cents 13 22.29 315.29 260.70
(1) The condensed consolidated income statement for FY2021 has been restated
with the operating results of Williamson which were previously classified
under loss on discontinued operations, for further detail refer to note 17.
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 6 MONTH PERIOD ENDED 31 DECEMBER 2021
US$ million (Unaudited) 1 July 2021- 31 December 2021 (Unaudited) 1 July 2020- 31 December 2020 (Audited) Year ended 30 June 2021
Profit for the Period 49.1 67.6 196.6
Exchange differences on translation of the share-based payment reserve — 0.2 0.2
Exchange differences on translation of foreign operations (1) (44.6) 54.7 64.2
Exchange differences on non-controlling interest (1) 0.3 (0.1) (1.2)
Total comprehensive income for the Period 4.8 122.4 259.8
Total comprehensive income and expense attributable to:
Equity holders of the parent company (1.4) 109.4 251.5
Non-controlling interest 6.2 13.0 8.3
4.8 122.4 259.8
¹ These items will be reclassified to the consolidated income statement if
specific future conditions are met.
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
US$ million Notes (Unaudited) 31 December 2021 (Unaudited) 31 December 2020 (Audited) 30 June 2021
ASSETS
Non-current assets
Property, plant and equipment 7 626.6 773.3 696.8
Right-of-use assets 26.8 3.0 1.2
BEE loans and receivables 11 43.1 175.1 46.6
Other receivables 1.8 10.6 —
Deferred tax assets — 0.1 —
Total non-current assets 698.3 962.1 744.6
Current assets
Trade and other receivables 26.2 42.8 50.7
Inventories 97.5 126.4 59.9
Cash and cash equivalents (including restricted amounts) 272.3 106.3 163.8
Total current assets 396.0 275.5 274.4
Non-current assets classified as held for sale 17 — — 59.6
Total assets 1,094.3 1,237.6 1,078.6
EQUITY AND LIABILITIES
Equity
Share capital 12 145.7 133.4 145.7
Share premium account 959.5 790.2 959.5
Foreign currency translation reserve (446.7) (411.6) (402.1)
Share-based payment reserve 1.9 1.5 1.8
Other reserves (0.8) (0.8) (0.8)
Accumulated losses (210.1) (385.9) (253.3)
Attributable to equity holders of the parent company 449.5 126.8 450.8
Non-controlling interest (7.8) (5.8) (10.5)
Total equity 441.7 121.0 440.3
Liabilities
Non-current liabilities
Loans and borrowings 8 398.0 — 400.0
Lease liabilities 23.6 1.0 0.5
BEE loans payable 11 — 133.4 —
Provisions 96.0 73.7 71.3
Deferred tax liabilities 55.3 49.3 48.9
Total non-current liabilities 572.9 257.4 520.7
Current liabilities
Loans and borrowings 8 27.3 810.4 30.3
Lease liabilities 3.2 1.3 0.5
Trade and other payables 49.2 47.5 49.1
Provisions — — 4.2
Total current liabilities 79.7 859.2 84.1
Liabilities directly associated with non-current assets classified as held for sale 17 — — 33.5
Total liabilities 652.6 1,116.6 638.3
Total equity and liabilities 1,094.3 1,237.6 1,078.6
In FY2021, the Company disclosed the net assets of the Williamson mine under
non-current assets held for sale and liabilities directly associated with
non-current assets held for sale in the Statement of Financial Position, for
further detail refer to note 17.
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2021
US$ million Notes (Unaudited) 1 July 2021- 31 December 2021 (Unaudited) 1 July 2020- 31 December 2020 (Restated - Audited) Year ended 30 June 2021 (1)
Profit before taxation for the Period 62.7 90.7 219.6
Depreciation of property plant and equipment 42.9 35.9 76.2
Amortisation of right-of-use asset 0.6 2.3 4.6
Unrealised gain on lease liability — (2.5) (3.7)
Impairment charge – non financial assets 15 0.3 0.2 38.7
Impairment (reversal) / charge– other receivables 15 (0.4) — (0.3)
Impairment of BEE loans receivable – expected credit loss (release) / charge 11 — (4.6) (5.8)
Gain on extinguishment of Notes net of unamortised costs 6 — — (213.3)
Profit on disposal of subsidiary 16 — (14.7) (14.7)
Movement in provisions (3.3) 0.4 24.3
Dividend received from BEE partner (0.6) — —
Financial income 6 (11.4) (69.0) (81.6)
Financial expense 6 56.3 39.8 74.2
Profit on disposal of property, plant and equipment 0.1 (0.2) (0.6)
Share based payment provision 0.1 0.2 0.5
Operating profit before working capital changes 147.3 78.5 118.1
Decrease / (increase) in trade and other receivables 25.3 (25.7) (26.9)
(Decrease) / increase in trade and other payables (2.2) 1.2 5.5
(Increase) / decrease in inventories (29.5) (6.8) 42.8
Cash generated from operations 140.9 47.2 139.5
Net realised gains / (losses) on foreign exchange contracts 8.7 (3.6) (6.1)
Finance expense (4.4) (2.5) (6.7)
Income tax received / (paid) (0.4) 0.1 0.3
Net cash generated from operating activities 144.8 41.2 127.0
Cash flows from investing activities
Acquisition of property, plant and equipment (18.5) (8.7) (19.4)
Proceeds from sale of property, plant and equipment 0.1 — 0.3
Loan repayment from / (advanced to) BEE partners 0.4 (5.0) (7.0)
Dividend paid to BEE partners (3.5) — —
Dividend received from BEE partners 0.6 — —
Repayment from KEMJV 1.9 — —
Finance income 0.5 0.4 0.7
Net cash utilised in investing activities (18.5) (13.3) (25.4)
Cash flows from financing activities
Cash transaction costs settled – Debt Restructuring — — (29.9)
Cash paid on lease liabilities (0.8) (0.3) (0.7)
Increase in borrowings — — 30.0
Repayment of borrowings (14.4) — (7.4)
Net cash generated from financing activities (15.2) (0.3) (8.0)
Net increase in cash and cash equivalents 111.1 27.6 93.6
Cash and cash equivalents at beginning of the Period 156.9 53.6 53.6
Effect of exchange rate fluctuations on cash held (11.3) 11.2 9.7
Cash and cash equivalents at end of the Period (2) 256.7 92.4 156.9
¹ The condensed consolidated statement of cash flows for FY2021 has been
restated with the operating results of Williamson which were previously
classified under loss on discontinued operations, for further detail refer to
note 17.
(2) Cash and cash equivalents in the Consolidated Statement of Financial
Position includes restricted cash of US$15.6 million (30 June 2021: US$16.1
million and 31 December 2020: US$13.9 million) and unrestricted cash of
US$256.7 million (30 June 2021: US$147.7 million (excludes unrestricted cash
attributable to Williamson of US$9.2 million) and 31 December 2020: US$92.4
million).
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2021
(Unaudited) US$ million Share capital Share premium account Foreign currency translation reserve Share-based payment reserve Hedging and 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 2021
(Unaudited) US$ million Share capital Share premium account Foreign currency translation reserve Share-based payment reserve Hedging and other reserves
Six month Period ending 31 December 2020:
At 1 July 2020 133.4 790.2 (453.0) 1.1 (0.8)
Profit for the Period — — — — —
Other comprehensive income / (expense) — — 54.7 0.2 —
Recycling of foreign currency translation reserve on disposal of Sekaka — — (13.3) — —
Equity settled share based payments — — — 0.2 —
At 31 December 2020 133.4 790.2 (411.6) 1.5 (0.8)
(Unaudited) US$ million Accumulated losses Attributable to the parent Non-controlling interest Total equity
Six month Period ending 31 December 2020:
At 1 July 2020 (440.4) 30.5 (18.8) 11.7
Profit for the Period 54.5 54.5 13.1 67.6
Other comprehensive income / (expense) — 54.9 (0.1) 54.8
Recycling of foreign currency translation reserve on disposal of Sekaka — (13.3) — (13.3)
Equity settled share based payments — 0.2 — 0.2
At 31 December 2020 (385.9) 126.8 (5.8) 121.0
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2021
(Unaudited) US$ million Share capital Share premium account Foreign currency translation reserve Share-based payment reserve Hedging and other reserves
Twelve month Period ended 20 June 2021:
At 1 July 2020 133.4 790.2 (453.0) 1.1 (0.8)
Profit for the Period — — — — —
Other comprehensive income / (expense) — — 64.2 0.2 —
Recycling of foreign currency translation reserve on disposal of Sekaka — — (13.3) — —
Equity settled share based payments — — — 0.5 —
Allotments during the Period:
- Ordinary shares – Debt for equity issue (net of US$12.3 million issue costs) 12.3 169.3 — — —
At 30 June 2021 145.7 959.5 (402.1) 1.8 (0.8)
(Unaudited) US$ million Accumulated losses Attributable to the parent Non-controlling interest Total equity
Twelve month Period ended 20 June 2021:
At 1 July 2020 (440.4) 30.5 (18.8) 11.7
Profit for the Period 187.1 187.1 9.5 196.6
Other comprehensive income / (expense) — 64.4 (1.2) 63.2
Recycling of foreign currency translation reserve on disposal of Sekaka — (13.3) — (13.3)
Equity settled share based payments — 0.5 — 0.5
Allotments during the Period:
- Ordinary shares – Debt for equity issue (net of US$12.3 million issue costs) — 181.6 — 181.6
At 30 June 2021 (253.3) 450.8 (10.5) 440.3
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2021
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 2021 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 2021, and any public
announcements made by the Group during the interim reporting period. The
annual financial report for the year ended 30 June 2021 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 2021 unless otherwise noted.
Basis of preparation including going concern
Going concern
The six-month period to 31 December 2021 delivered US$150.9 million in
adjusted EBITDA and US$122.4 million in operational free cash flow for the
Group, while Consolidated Net Debt reduced from $228.2 million as at 30 June
2021 to US$152.3 million at 31 December 2021.
Production at both Cullinan and Finsch was generally in line with earlier
guidance, with the tunnel convergence at Cullinan largely mitigated during the
Period. The Group’s overall production also benefited with the restart of
operations at Williamson during Q1 FY2022 following an 18-month period of care
and maintenance. The Company also announced the conclusion of a new three-year
wage agreement in September 2021 at its SA operations with the National Union
of Mineworkers (“NUM”) covering FY 2022 to FY 2024, which should allow for
further workforce stability over this timeframe.
Diamond prices strengthened over the first half of FY2022, with a 16% increase
on a like-for-like basis compared to the preceding six-month period. In
addition, Cullinan’s run of Exceptional Stone recovery and sales continued
with a total of US$64.1 million realised in this Period. Williamson also
benefited from the sale of an exceptional pink diamond at its first tender
after restarting operations, yielding $13.8 million in and significantly
de-risking Williamson’s own liquidity profile.
During December, the Group announced reaching a framework agreement with the
Government of Tanzania, which sets out key principles on the economic benefit
sharing amongst shareholders, treatment of outstanding VAT balances, as well
as agreement reached on 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 is expected to become
effective during the second half of FY2022, pending completion of certain
suspensive conditions. Petra also announced entering into a memorandum of
understanding with Caspian Ltd to sell 50% less one share of Petra’s stake
in Williamson to this Tanzanian company for a purchase consideration of
US$15.0 million.
Petra’s approach to managing COVID-19 mitigated any negative impact during
the Period, while our flexible tender approach also allowed us to navigate
through this period largely unscathed while also being able to normalise
inventory holding (apart from the 71,654.45ct blocked parcel from Williamson).
Post Period end, Petra settled the amounts drawn under the Revolving Credit
Facility (RCF) (R402.2 million / US$25.1 million). The Company also announced
on 2 February 2022 that it entered into a binding term sheet with Absa Bank to
restructure its first lien facilities and utilised available cash to settle
the existing Term Loan (R856.1 million/US$53.5 million). The Group will
benefit from reduced interest rates compared to the outgoing facilities and
will also have access to a new R1,000 million RCF to December 2025 coupled
with more appropriate leverage-based covenants (Net Debt : EBITDA and Interest
Cover Ratio).
The factors above, coupled with the successful completion of the Capital
Restructuring during March 2021, resulted in further significant progress
towards stabilising the Group’s balance sheet and strengthening cash
reserves to the date of this report as well as an improved outlook for the
18-month review period.
Forecast liquidity and covenants
The Board has reviewed the Group’s forecasts with various sensitivities
applied, for the 18 months to June 2023, 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. These included risks associated
with COVID-19, the likelihood and impact of which has been assessed as having
reduced since the previous report date. As such, the risks of production
disruptions, deferral of tenders due to travel restrictions and adverse
impacts on diamond pricing directly related to COVID-19 were removed from the
sensitivity analyses. Instead, more general disruptions to operations were
considered, which may relate to, inter alia, either COVID-19, labour or
adverse weather conditions.
The following have been key considerations in assessing the Group’s ability
to operate as a going concern at the date of this report:
* a disruption in forecast production taking production offline for a period
of two weeks at either Cullinan or Finsch;
* a sustained 5% decrease in forecast rough diamond prices throughout the
forecast period;
* a sustained 5% decrease in forecast rough diamond prices throughout the
forecast period; and
* a combination of the above.
Under the all cases, the forecasts indicate that the Company will be able to
operate within the covenants and maintain sufficient liquidity. The Group’s
liquidity outlook over the 18-month period to June 2023 remains strong, even
when applying 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, both
in the base case and all stressed cases, although the combined stressed case
shows marginal headroom for the required interest cover ratio, specifically in
the December 2022 measurement period. The above-plan actual cash flow
generation during H1 FY 2022 coupled with improving market conditions and
further supported by more appropriate First Lien facilities and covenants,
mitigated the risk of covenant breaches in the 18-month forecast period as
previously noted in the Company’s going concern assessment included in the
30 June 2021 Annual Report.
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 2021 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 2021 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
The impairment tests for Cullinan, Finsch, and Williamson indicated no further
impairment charges 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$644.9 million (pre-impairment). This
follows US$17.3 million recognised at 30 June 2021 (comprising Finsch
impairment of US$15.5 million and Koffiefontein impairment of US$2.2 million)
on a carrying value of the Group’s property, plant and equipment of US$711.8
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$10.6 million (30 June 2021:
US$10.6 million and 31 December 2020: US$10.6 million) in the Statement of
Financial Position in respect of the Williamson mine’s confiscated diamond
parcel. 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 was 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 proceeds from the sale of
the Parcel will flow to Williamson Diamonds Limited (“WDL”).
While a resolution has not yet been reached with regards to the mechanism to
sell the parcel of diamonds that was blocked from export, 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, the diamond parcel will be made available for
future sale, and that WDL will derive future economic benefit from the sales
proceeds.
Recoverability of VAT in Tanzania
The Group has VAT receivable of US$1.8 million (30 June 2021: US$0.7 million
and 31 December 2020: US$10.6 million) in respect of the Williamson mine, all
of which are past due and have therefore been classified, after provision
including amounts related to providing for a time-value of money inclusive of
risk adjustments for various factors, as non-current given the potential
delays in receipt.
The VAT receivable as at 31 December 2021, can be split into three
identifiable component time periods as set out below:
US$ million VAT Receivable Provision Written off Carrying value
Pre July 2017 1.8 (1.3) — 0.5
July 2017 to June 2020 26.9 — (26.9) —
Post June 2020 2.6 (1.3) — 1.3
31.3 (2.6) (26.9) 1.8
Pre July 2017
Of the total VAT receivables, US$1.8 million (30 June 2021: US$1.8 million and
31 December 2020: US$13.0 million) relates to historic VAT pre July 2017.
During FY2021, the Group received US$10.0 million in VAT refunds from the
Tanzanian Revenue Authority in respect of the pre July 2017 period and US$1.2
million was disallowed by the Tanzanian Revenue Authority. A provision of
US$1.3 million is recorded against the US$1.8 million receivable resulting in
a carrying value of US$0.5 million as at 31 December 2021, given the
uncertainty around the timing of receipts of the amount outstanding.
July 2017 to June 2020
A further US$26.9.million (30 June 2021: US$26.9 million and 31 December 2020:
US$27.4 million) of VAT is receivable which relates to VAT under the
legislation, effective from July 2017 to 30 June 2020.
In prior periods management considered the amendment to the VAT legislation
for the period July 2017 to July 2020 and based on legal advice and the
confirmed application of the legislation by the TRA considered that the input
VAT was not recoverable and a full provision was recorded in prior periods.
Further to this, the Framework Agreement provisions do not allow for
offsetting of these historically disputed amounts and as such the full US$26.9
million has been written off. There has been no income statement impact as a
result of this write-off.
Post June 2020
An amount of US$2.6 million of VAT is receivable for the period subsequent to
1 July 2020. The Group is considering various alternatives in pursuing payment
in accordance with legislation. A provision of US$1.3 million, given the
uncertainty around the timing of receipts of the amount outstanding, has been
provided for against the US$2.6 million receivable resulting in a carrying
value of US$1.3 million.
While the remaining pre July 2017 and post 1 July 2020 VAT balance is
considered receivable, significant uncertainty exists regarding the timing of
receipt. A discount rate of 16.25% has been applied to the expected cash
receipts inclusive of estimated country credit risk. A 1% increase in the
discount rate would increase the provision by US$0.04 million and a one year
delay would increase the provision by US$0.1 million.
The provision against the VAT balance is US$2.6 million (30 June 2021: US$28.7
million and 31 December 2020: US$29.8 million). The provision relates to
US$2.6 million that is recorded against the pre July 2017 and post June 2020
amount..The full disputed July 2017 to June 2020 amount of US$ US$26.9
million, that was fully provided for as at 30 June 2021 has been written
off. During the Period, an impairment charge of US$0.7 million (30 June
2021: US$0.7 million (impairment reversal recognised in the Loss on
discontinued operations) and 31 December 2020: US$0.2 million) was recognised
in the Consolidated Income Statement.
BEE receivables – expected credit loss provision
The Group has applied the expected credit loss impairment model to its BEE
loans receivable. In determining the extent to which expected credit losses
may apply, the Group assessed the future free cashflows to be generated by the
mining operations, based on the current mine plans. In assessing the future
cashflows, the Group considered the diamond price outlook and the probability
of reaching an offset agreement. Based on the assessment, the analysis
generated an expected credit loss reversal totalling US$nil (30 June 2021:
US$5.8 million expected credit loss reversal and 31 December 2020: US$4.6
million expected credit loss reversal), comprising of US$nil provision
reversal in respect of Cullinan and Finsch (30 June 2021: US$5.8 million
provision comprising of US$6.1 million provision reversal in respect of
Cullinan and Finsch and US$0.3 million expected credit loss provision in
respect of Koffiefontein; and 31 December 2020: US$4.6 million comprising of
US$4.6 million provision reversal in respect of Cullinan and Finsch).
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.
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.
Restructuring (30 June 2021)
Transaction costs associated with the restructuring exercise were apportioned
to the listed debt, equity issued and ZAR banking facilities based on the
value of each element at the date of restructuring.
Williamson Diamond Mine (31 December 2021)
At 30 June 2021, the accounting treatment of Williamson as an AHFS was in line
with the conditions required under IFRS 5 Asset Held for Sale and Discontinued
Operations.
During the Period, an amended MOU was entered into with Caspian. Per the
amended MOU, the original Put Option in the MOU was removed and PDL will now
sell 50% less one share in the entity that holds Petra’s shares in WDL to
Caspian. With the amendment to the MOU an assessment was required to determine
if Williamson still met the asset held for sale criteria or if Williamson
(through the proposed shareholding structure in the MOU) should be
reconsolidated into the results of the Group. Consideration was also given on
the long-term intention of Williamson remaining in the Group for the
foreseeable future.
IFRS 10 Consolidated Financial Statements sets out the criteria required for a
company to consolidate an entity in which it has an investment or interest in.
A company determines whether it is a parent by assessing whether it controls
one or more investees, considering all relevant facts, circumstances and
rights (through voting rights) to variable returns from its involvement with
the investee and has the ability to affect those returns through its power
over the investee.
An investor controls an investee if and only if the investor has all of the
following elements:
* power over the investee, i.e. the investor has existing rights that give it
the ability to direct the relevant activities (the activities that
significantly affect the investee's returns);
* exposure, or rights, to variable returns from its involvement with the
investee; and
* the ability to use its power over the investee to affect the amount of the
investor's returns.
Management considered the terms of the MOU where the Company will retain a 50%
plus one share shareholding in the entity that holds Petra’s shares in WDL
which entity will have a right to appoint three directors to WDL’s Board,
thus having the ability to use its power to affect the decision making and the
strategy of WDL. The Framework Agreement sets out a change in the
shareholdings in WDL whereby the Government of Tanzania (GoT) shall receive a
16% free carry interest, as required by local legislation, while GoT’s
existing 25% shareholding, as well as Petra’s existing 75% shareholding will
dilute to 21% and 63% respectively. The structure of the WDL Board comprises 5
Board members, comprising three appointments by the entity that holds
Petra’s shares in WDL and the remaining two Board members being GoT
representatives. Petra will, through its control of the entity that holds
Petra’s shares in WDL, therefore control WDL.
Based on the Group meeting the requirements of control under IFRS 10 and the
intention that the Group will not dispose of its remaining interest in
Williamson in the near future, Williamson is longer considered to be an asset
held for sale at 31 December 2021 and has been reconsolidated into the Group
results for the Period
Williamson Diamond Mine – asset held for sale (30 June 2021)
The Group needs to apply judgment when determining whether an asset should be
classified as held for sale. For this to be the case, the asset must be
available for immediate sale in its present condition and its sale must be
highly probable. The following factors are considered by management in
determining whether a sale is highly probable: Management must be committed to
a plan to sell the asset; an active programme to locate a buyer and complete
the plan must have been initiated; the asset must be actively marketed for
sale at a reasonable price and any transaction should be expected to be
completed within 12 months of classification of the asset as held for sale.
Based on the above factors, management considered that the Williamson mine was
an asset held for sale at 30 June 2021.
Judgement is required when determining whether a component of an entity
classifies as a discontinued operation. A component of the Group should be
classified as a discontinued operation when it has been disposed of, or if it
is classified as held for sale, and represents a separate major line of
business or geographical area of operations, is part of a single co-ordinated
plan to dispose of a separate major line of business or geographical area of
operations, or is a subsidiary acquired exclusively with a view to resale.
Judgement is required when determining whether the component represents a
separate major line of business or geographical area of operations. This was
applied to the classification of the Williamson mine as a discontinued
operation. The Williamson mine is considered a major geographical area of
operations which has been reported as a separate segment in the past, and as
such we have determined the classification of a discontinued operation to be
appropriate. In terms of the measurement requirements of IFRS 5, once
classified as held for sale, the assets are required to be measured at the
lower of their carrying amount and fair value less costs to sell. Judgment
is required in order to determine the fair value of the disposal group. In
determining the fair value used to calculate the appropriate write down,
management took into consideration, current discussions with vendors, the
latest mine plan assessment and the best available information at the present
time. Refer to note 17 for further details.
Taxation
The Group operates in South Africa and Tanzania, and accordingly it is subject
to, and pays annual income taxes under the various income tax regimes in the
countries in which it operates. From time to time the Group is subject to a
review of its income tax filings and in connection with such reviews, disputes
can arise with the taxing authorities over the interpretation or application
of certain rules to the Group's business conducted within the country
involved. Management evaluates each of the assessments and recognises a
provision based on its best estimate of the ultimate resolution of the
assessment, through either negotiation or through a legal process.
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 2021 Annual Report and will be discussed in further detail in the FY
2022 Annual Report:
* Provision for rehabilitation
* Inventory and inventory stockpile
* Depreciation
* Pension and post-retirement medical fund schemes
* Net investments in foreign operations
3. DIVIDENDS
No dividends have been declared in respect of the current Period under review
(30 June 2021: US$nil and 31 December 2020: US$nil).
4. SEGMENTAL INFORMATION
Segment information is presented in respect of the Group’s operating and
geographical segments:
Mining – the extraction and sale of rough diamonds from mining operations in
South Africa and Tanzania.
Corporate – administrative activities in the United Kingdom.
Beneficiation – beneficiation activities in South Africa.
Exploration assets in Botswana were disposed of during FY 2021 via the sale of
the Group’s interest in Sekaka Diamonds Exploration (Pty) Ltd.
Segments are based on the Group’s management and internal reporting
structure. Management reviews the Group’s performance by reviewing the
results of the mining activities in South Africa, Tanzania and reviewing the
results of reviewing the corporate administration expenses in the United
Kingdom. Each segment derives, or aims to derive, its revenue from diamond
mining and diamond sales, except for the corporate and administration cost
centre.
Segment results, assets and liabilities include items directly attributable to
a segment, as well as those that can be allocated on a reasonable basis.
Segment results are calculated after charging direct mining costs,
depreciation and other income and expenses. Unallocated items comprise mainly
interest-earning assets and revenue, interest-bearing borrowings and expenses
and corporate assets and expenses. Segment capital expenditure is the total
cost incurred during the year to acquire segment assets that are expected to
be used for more than one period. Eliminations comprise transactions between
Group companies that are cancelled on consolidation. The results are not
materially affected by seasonal variations. Revenues are generated from
tenders held in South Africa and Antwerp for external customers from various
countries, the ultimate customers of which are not known to the Group.
4. SEGMENTAL INFORMATION (continued)
Operating segments South Africa – Mining activities Tanzania -Mining activities
US$ million Cullinan 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 (2,171.8) 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 Cullinan 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$157.1 million as disclosed in the Consolidated Income Statement.
(3) The beneficiation segment represents Tarorite, a cutting and polishing
business in South Africa, which can on occasion cut and polish select rough
diamonds.
4. SEGMENTAL INFORMATION (continued)
Operating segments South Africa – Mining activities Tanzania -Mining activities Botswana
US$ million Cullinan Finsch Koffiefontein Williamson Exploration (4)
(6 month period ended 31 December 2020) 1 July 2020 - 31 December 2020 1 July 2020 - 31 December 2020 1 July 2020 - 31 December 2020 1 July 2020 - 31 December 2020 1 July 2020 - 31 December 2020
Revenue 107.3 54.8 11.2 4.6 —
Segment result¹ 44.4 1.9 2.6 (6.3) —
Impairment charge – other receivables — — — (0.2) —
Impairment of BEE loans receivable – expected credit loss release / (charge) — — — — —
Other direct income 0.3 1.1 0.1 3.6 —
Operating profit / (loss)² 44.7 3.0 2.7 (2.9) —
Profit on disposal including associated impairment, net of tax
Financial income
Financial expense
Income tax credit
Non-controlling interest
Profit attributable to equity holders of the parent company
Segment assets 560.2 332.1 168.3 89.0 —
Segment liabilities 574.8 185.4 170.0 295.1 —
Capital expenditure 5.9 1.3 0.6 0.3 —
Operating segments United Kingdom South Africa
US$ million Corporate and treasury Beneficiation (3) Inter-segment Consolidated
(6 month period ended 31 December 2020) 1 July 2020 - 31 December 2020 1 July 2020 - 31 December 2020 1 July 2020 - 31 December 2020 1 July 2020 - 31 December 2020
Revenue — 0.2 — 178.1
Segment result¹ (3.9) (0.4) (1.0) 37.3
Impairment charge – other receivables — — — (0.2)
Impairment of BEE loans receivable – expected credit loss release / (charge) 4.6 — — 4.6
Other direct income — — — 5.1
Operating profit / (loss)² 0.7 (0.4) (1.0) 46.8
Profit on disposal including associated impairment, net of tax 14.7
Financial income 69.0
Financial expense (39.8)
Income tax credit (23.1)
Non-controlling interest (13.1)
Profit attributable to equity holders of the parent company 54.5
Segment assets 3,390.6 4.6 (3,307.2) 1,237.6
Segment liabilities 2,424.9 5.5 (2,539.1) 1,116.6
Capital expenditure 0.5 — — 8.6
¹ Total depreciation of US$35.9 million included in the segmental result
comprises depreciation incurred at Cullinan US$24.0 million, Finsch US$11.4
million, Koffiefontein US$0.1 million, Williamson US$0.1 million and Corporate
and treasury US$0.3 million.
² Operating profit is equivalent to revenue of US$178.1 million less total
costs of US$131.3 million as disclosed in the Consolidated Income Statement.
(3) The beneficiation segment represents Tarorite, a cutting and polishing
business in South Africa, which can on occasion cut and polish select rough
diamonds.
(4) In FY 2021, Petra sold its exploration assets in Botswana to Botswana
Diamonds PLC via the sale of its interest in Sekaka Diamonds Exploration (Pty)
Ltd, refer to note 16 for further detail.
4. SEGMENTAL INFORMATION (continued)
Operating segments South Africa – Mining activities Tanzania -Mining activities Botswana
US$ million Cullinan Finsch Koffiefontein Williamson Exploration (4)
(12 month period ended 30 June 2021) 2021 2021 2021 2021 2021
Revenue 250.6 123.5 27.9 4.6 —
Segment result¹ 76.8 (0.5) (8.1) (14.3) —
Impairment charge – operations — (15.1) (2.2) (21.4) —
Impairment charge – other receivables — — — 0.7 —
Impairment of BEE loans receivable – expected credit loss release — — — — —
Expenditure for unsettled and disputed tax claims — — — (19.5) —
Other direct income 0.6 1.0 0.1 5.1 —
Operating profit / (loss)² 77.4 (14.6) (10.2) (49.4) —
Financial income
Financial expense
Gain on extinguishment of Notes and unamortised costs
Profit on disposal of subsidiary
Income tax charge
Non-controlling interest
Profit attributable to equity holders of the parent company
Segment assets 559.0 249.9 6.9 59.6 —
Segment liabilities 559.2 119.7 22.1 33.5 —
Capital expenditure 16.8 4.0 1.7 0.3 —
Operating segments United Kingdom South Africa
US$ million Corporate and treasury Beneficiation (3) Inter-segment Consolidated
(12 month period ended 30 June 2021) 2021 2021 2021
Revenue — 0.3 — 406.9
Segment result¹ (21.2) (1.6) (1.6) 29.5
Impairment charge – operations — — — (38.7)
Impairment charge – other receivables (0.4) — — 0.3
Impairment of BEE loans receivable – expected credit loss release 5.8 — — 5.8
Expenditure for unsettled and disputed tax claims — — — (19.5)
Other direct income — — — 6.8
Operating profit / (loss)² (15.8) (1.6) (1.6) (15.8)
Financial income 81.6
Financial expense (74.2)
Gain on extinguishment of Notes and unamortised costs 213.3
Profit on disposal of subsidiary 14.7
Income tax charge (23.0)
Non-controlling interest (9.5)
Profit attributable to equity holders of the parent company 187.1
Segment assets 3,488.7 4.5 (3,290.0) 1,078.6
Segment liabilities 2,134.7 5.5 (2,236.4) 638.3
Capital expenditure 1.0 — — 23.8
¹ Total depreciation of US$76.2 million included in the segmental result
comprises depreciation incurred at Cullinan of US$52.2 million, Finsch of
US$23.0 million, Koffiefontein US$ 0.1 million, Williamson US$0.3 million and
Corporate and treasury of US$0.6 million.
² Operating loss is equivalent to revenue of US$406.9 million less total
costs of US$422.7 million as disclosed in the Consolidated Income Statement.
(3) The beneficiation segment represents Tarorite, a cutting and polishing
business in South Africa, which on occasion cuts and polishes select rough
diamonds.
(4) In FY 2021, Petra sold its exploration assets in Botswana to Botswana
Diamonds PLC via the sale of its interest in Sekaka Diamonds Exploration (Pty)
Ltd, refer to note 16 for further detail.
US$ million 1 July 2021 - 31 December 2021 1 July 2020 - 31 December 2020 1 July 2020 - 30 June 2021
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 0.3
London Stock Exchange and other regulatory expenses 0.8 0.6 1.5
Unsettled and disputed tax claims at Williamson¹ — — 19.5
Settlement (reversal) / costs – human rights claims at Williamson (2) (0.2) — 12.7
Share-based expense - Directors 0.1 0.2 0.5
Other staff costs 1.4 1.0 2.3
Total staff costs 1.5 1.2 2.8
(1) During FY2021 the Company provided for costs in respect of unsettled and
disputed tax claims in respect of Williamson as set out in the Framework
Agreement.
(2) During FY2021, the settlement costs for the human rights claims at
Williamson comprised US$4.8 million for the part settlement of the
claimant’s legal costs and for distribution to the claimants and US$1.3
million to invest in programmes dedicated to providing sustainable support to
the communities living around the Williamson mine as a condition of the
Settlement. The Company incurred and provided for additional total costs of
US$6.6 million relating to this matter, the majority of which relate to legal,
consultant, investigation and expert fees.
6. FINANCING (EXPENSE) / INCOME
US$ million 1 July 2021 - 31 December 2021 1 July 2020 - 31 December 2020 1 July 2020 - 30 June 2021
Net unrealised foreign exchange gains — 65.1 74.6
Interest received on BEE loans and other receivables 2.1 2.7 5.4
Interest received bank deposits 0.5 0.4 0.7
Realised foreign exchange gains on the settlement of foreign loans and forward exchange contracts 8.8 0.8 0.9
Financial income 11.4 69.0 81.6
Gross interest on senior secured second lien notes, bank loans and overdrafts (23.8) (27.6) (51.5)
Other debt finance costs, including BEE loan interest, facility fees and IFRS 16 charges (0.8) (5.3) (8.4)
Unwinding of present value adjustment for rehabilitation costs (3.0) (2.5) (4.6)
Net unrealised foreign exchange losses (1) (28.7) — —
Acceleration of unamortised Notes costs — — (2.7)
Realised foreign exchange losses on the settlement of foreign loans and forward exchange contracts — (4.4) (7.0)
Financial expense (56.3) (39.8) (74.2)
Loss on substantial modification of Notes (2) — — (7.7)
Gain on extinguishment of Notes – debt for equity conversion (2) — — 221.0
Net gain on extinguishment of Notes — — 213.3
Net financial (expense) / income (44.9) 29.2 220.7
(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 ZAR14.27 (30 June 2021) to ZAR15.99 (31 December 2021) resulted in
an unrealised loss of US$28.7 million (30 June 2021: US$77.1 million
unrealised gain and 31 December 2020: US$65.1 million unrealised gain)
comprising a unrealised gain on foreign exchange contracts held at Period end
of US$0.1 million (30 June 2021: US$12.4 million unrealised gain and 31
December 2020: US$13.0 million unrealised gain) and losses on inter-group
foreign denominated loans of US$28.8 million (30 June 2021: US$64.7 million
unrealised gain and 31 December 2020: US$52.1 million unrealised gain); and a
net realised foreign exchange gain of US$8.8 million (30 June 2021: US$6.1
million realised loss and 31 December 2020: US$3.6 million realised loss) in
respect of foreign exchange contracts closed during the Period is included in
the net finance and expense amount.
(2) The loss on substantial modification and gain on extinguishment of Notes
in FY2021 arose from the Debt Restructuring completed by the Group on 10 March
2021.
7. PROPERTY, PLANT AND EQUIPMENT
The net movement in property, plant and equipment for the Period is a decrease
of US$70.2 million (30 June 2021: US$21.0 million increase and 31 December
2020: US$97.5 million increase). This is primarily as a result of:
* the movement in the US$/ZAR foreign exchange rate resulting in a foreign
exchange decrease on Rand based assets of US$75.4 million (30 June 2021:
US$136.8 million increase and 31 December 2020: US$118.7 million increase);
* an increase in property, plant and equipment from capital expenditure of
US$16.7 million (30 June 2021: US$23.8 million and 31 December 2020: US$8.6
million),
* the transfer of the Williamson assets from non-current assets held for sale
of US$31.2 million, net of IFRS 5 adjustment (30 June 2021: US$31.3 million
transfer to non-current assets held for sale and 31 December 2020: US$nil);
* an increase in the rehabilitation asset of US$0.8 million (30 June 2021:
US$6.4 million (due to Cullinan’s estimated period to decommissioning
reducing from 45 years to 25 years reflecting updated scoping studies for
future development outside of its current approved mine plan) and 31 December
2020: US$6.2 million);
* depreciation of US$42.9 million (30 June 2021: US$75.9 million and 31
December 2020: US$35.9 million);
* the impairment of the Koffiefontein assets of US$0.3 million (30 June
2021: US$17.3 million (Finsch and Koffiefontein) and 31 December 2020:
US$nil); and
* assets of US$0.3 million (30 June 2021: US$0.1 million and 31 December 2020:
US$0.1 million) disposed of during the Period.
8. LOANS AND BORROWINGS
US$ million 31 December 2021 31 December 2020 30 June 2021
Non-current liabilities
Loans and borrowings – Senior secured second lien notes 346.4 — 327.3
Loans and borrowings – Senior secured lender debt facilities 51.6 — 72.7
398.0 — 400.0
Current liabilities
Loans and borrowings – BEE Partner debt facilities — 47.2 —
Loans and borrowings – senior secured lender debt facilities 27.0 61.2 30.3
Loans and borrowings – premium financing 0.3 — —
Loans and borrowings – senior secured second lien notes¹ — 702.0 —
27.3 810.4 30.3
Total loans and borrowings - bank facilities 425.3 810.4 430.3
¹ Prior to the Debt Restructuring finalisation date of 9 March 2021, the
Company had US$650 million Notes which had been issued by a wholly owned
subsidiary, Petra Diamonds US$ Treasury Plc. As at 31 December 2020, the Notes
were classified as a current liability as the company did not have an
unconditional right to defer settlement for at least 12 months at that
date.These Notes were restructured during FY2021 with the existing Notes being
extinguished through a debt for equity conversion (US$415.0 million), the
issue of new Notes for US$306.7 million (including costs of US$11.7 million)
and additional new Notes via a cash injection of US$30.0 million and
additional.
a) US$336.7 million Senior Secured Second Lien Notes
As part of the Debt Restructuring, a wholly owned subsidiary of the Company,
Petra Diamonds US$ 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
The costs associated with issuing the Notes of US$20.7 million have been
capitalised against the principal amount and US$17.3 million remains
unamortised as at 31 December 2021 (30 June 2021: US$19.4 million and 31
December 2020: US$nil). Interest of US$30.5 million has been accrued as at 31
December 2021.
Further details about the Notes (including security) have been included in the
Group’s FY 2021 Annual Report.
b) Senior Secured Lender Debt Facilities
The Group’s South African Lender Group (Absa Corporate and Investment
Banking (“Absa”), FirstRand Bank Limited (acting through its Rand Merchant
Bank division) (“RMB”), and Nedbank Limited) and lending facilities are
detailed below.
As part of the Restructuring in FY2021, the existing banking facilities were
amended on a first lien basis and on the following terms, the creation of a
new Term Loan of ZAR1.2 billion (US$76.6 million) comprising ZAR500.0 million
(US$35.0 million) under the existing WCF and ZAR683.1 (US$41.6 million)
million relating to the BEE Partner debt facilities; and the rollover of the
existing RCF increasing by ZAR160.0 million (US$11.2 million) to ZAR560
million (US$39.2 million). The revised terms and conditions are set out in the
table below. The costs associated with restructuring of the banking facilities
of US$1.7 million and US$0.7 million cash transaction costs allocated based on
the total Restructuring costs were capitalised against the principal amount.
The new terms under the Term loan are:
* maturity date 8 March 2024;
* scheduled amortisation of 9% of principal per quarter (starting in June
2021) with a final 10% of principal repayment at maturity,
* 1.3x debt service cover ratio tested semi-annually on a rolling 12-month
basis, which if breached will give rise to an event of default under the new
bank facilities; and
* interest rate of SA JIBAR + 5.25% per annum (with an upfront fee of 1% of
the term loan amount capitalised).
The revised terms under the RCF are:
* maturity date 8 March 2024;
* scheduled amortisation of 9% of principal per quarter (starting in June
2021) with a final 10% of principal repayment at maturity;
* 1.3x debt service cover ratio tested semi-annually on a rolling 12-month
basis, which if breached will give rise to an event of default under the new
bank facilities; and
* interest rate of SA JIBAR + 5.25% per annum (with an upfront fee of 1% of
the RCF amount capitalised and a commitment fee based on undrawn balances).
The Group's debt and hedging facilities are detailed in the table below:
Senior Lender Debt Facilities 31 December 2021 31 December 2020 30 June 2021
Facility amount Facility amount Facility amount
ZAR Debt Facilities:
ZAR Lenders RCF ZAR408.8 million ZAR400 million ZAR560 million
ZAR Lenders Term loan ZAR876.4 million ZARnil ZAR1.2 billion
ZAR Lenders WCF ZARnil ZAR500 million ZARnil
Absa/RMB – FX Hedging facilities ZAR150 million ZAR300 million ZAR150 million
The terms and conditions of the Group facilities are detailed in the Group’s
FY 2021 Annual Report.
The facilities are secured on the Group’s interests in Cullinan, Finsch and
Koffiefontein.
As at date of this report, the Term loan was fully drawn while the RCF had
available capacity of ZAR8.8 million (US$0.6 million). The Company paid
ZAR404.6 million (US$25.3 million) (capital plus interest) to settle the RCF
on 24 January 2022. The RCF was not cancelled and remains available for
drawdown.
For further details regarding changes to the Group’s senior secured lender
facilities subsequent to Period end refer to note 18.
Covenant ratios
As part of the revised Term loan and RCF facilities entered into with the
South African Lender Group in FY2021, the Company is required:
- to maintain a 1.3x debt service cover ratio tested semi-annually
on a rolling 12-month basis; and
- to maintain liquidity requirements being the aggregate of the
undrawn amounts available under the RCF and consolidated cash and cash
equivalents (excluding diamond debtors) not falling below ZAR200 million
(US$12.5 million).
Refer to the Financial Review for further commentary with regards to
covenants.
For further details regarding changes to the Group’s covenant ratios
subsequent to Period end refer to note 18.
c) BEE Partner debt facilities
The BEE Partner debt facilities have been restructured and now form part of
the new Term Loan (refer to (b) above).
9. COMMITMENTS
As at 31 December 2021, the Company had committed to future capital
expenditure totalling US$33.8 million (30 June 2021: US$10.2 million and 31
December 2020: US$8.2 million), mainly comprising Cullinan US$25.3 million (30
June 2021: US$8.1 million 31 December 2020: US$5.7 million), Finsch US$8.3
million (30 June 2021: US$1.5 million 31 December 2020: US$1.8 million),
Koffiefontein US$0.2 million (30 June 2021: US$0.6 million 31 December 2020:
US$0.7 million) and Williamson US$nil (30 June 2021: US$nil and 31 December
2020: US$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 2021 (%) Partner and respective interest as at 31 December 2020 (%) Partner and respective interest as at 30 June 2021 (%)
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 2021 31 December 2020 30 June 2021
Non-current receivable
Kago Diamonds (1) 27.1 92.9 33.5
27.1 92.9 33.5
Non-current payable
Kago Diamonds — 71.9 —
— 71.9 —
Current trade and other receivables
KEM JV (2) 5.5 9.4 9.7
Impairment provision (2) (4.9) (8.1) (8.4)
0.6 1.3 1.3
1 July 2021 - 31 December 2021 1 July 2020 - 31 December 2020 1 July 2020 - 30 June 2021
Finance income
Kago Diamonds 1.0 2.1 3.7
1.0 2.1 3.7
Finance expense
Kago Diamonds — 2.6 3.8
— 2.6 3.8
Dividend paid
Kago Diamonds (3) 1.3 — —
1.3 — —
¹ The movement in the Kago Diamonds receivable of US$6.4 million (30 June
2021: US$38.6 million and 31 December 2020: US$20.8 million) is mainly
attributable to amounts advanced to Kago Diamonds during the Period totalling
US$nil (30 June 2021: US$3.8 million and 31 December 2020: US$2.8 million), a
foreign exchange decrease of US$3.6 million (30 June 2021: US$15.4 million
increase and 31 December 2020: US$15.5 million increase) and offset by the
reversal of prior period expected credit loss provision of US$nil million
(30 June 2021: US$4.2 million reversal and 31 December 2020: US$2.5 million
reversal) and the loan payable of US$nil (30 June 2021: US$62.1 million and 31
December 2020: US$nil) by the Group to Kago against the Kago receivable.
(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$nil (30 June 2021: US$nil and 31 December 2020: US$nil) and the balance
of the KEM JV purchase consideration of US$nil (30 June 2021: US$1.3 million
and 31 December 2020: US$1.1 million). During FY H1 2021 the Group received
payments of US$1.2 million (FY 2021 US$nil and FY H1 2020: US$nil) from the
KEM JV as settlement of the outstanding purchase consideration this also
resulted in an expected credit loss reversal of US$1.1 million (H1 FY2021:
US$nil) during the Period. 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$nil (30 June 2021:
US$8.4 million and 31 December 2020: US$8.1 million).
(3) During the Period, Finsch declared and paid a dividend out of profits
generated in FY2021 to its shareholders. The BEE partners received a total net
dividend payment of US$2.5 million comprising Kago US$1.3 million and IPDET
US$1.2 million.
Kago Diamonds is one of the BEE partners which obtained bank financing from
ABSA, RMB and Ninety-One (the “BEE Lenders”) to acquire its interests in
Cullinan and Finsch. During FY2020, the Group had provided a guarantee to the
BEE Lenders for repayment of loans advanced to the Group’s BEE Partners,
however during FY2021 as part of the Debt Restructuring, the BEE Partner debt
facilities were restructured and now form part of the Group’s new Term Loan
(refer to note 8 for further detail).
11. BEE LOANS RECEIVABLE AND PAYABLE
US$ million 31 December 2021 31 December 2020 30 June 2021
Non-current assets
Loans and other receivables 43.1 175.1 46.6
Non-current liabilities
Trade and other payables — 133.4 —
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$48.6 million (30 June 2021: US$45.4 million and 31 December 2020:
US$47.2 million) has been recorded as part of the gross receivable (before
expected credit loss provisions) in respect of amounts to be reimbursed to the
Group in respect of the guarantee under the BEE Lender facilities. Judgment
was required in determining the extent to which reimbursement is applicable
based on the terms of the agreements, South African legislation and
discussions with the BEE partners.
As a result of historical delays in the Cullinan plant ramp-up and the Finsch
SLC ramp-up, the Group has historically and through the Period elected to
advance the BEE Partners’ funds using Group treasury to enable the BEE
Partners to service their interest and capital commitments under the BEE
Lender facilities (refer below). These BEE receivables, including interest
raised, will be recoverable from the BEE Partners’ share of future cashflows
from the underlying mining operations.
As part of the in principle agreement reached during the Period as part of the
Restructuring, Petra will assume the BEE Lender facility obligations under the
terms outlined in note 8.
As part of the Debt Restructuring in FY2021, Petra has assumed the BEE Lender
facility obligations under the terms outlined in notes 8 and 18.
For detail on expected credit loss provision and reversal associated with the
BEE loans receivable refer to note 2.
US$ million 1 July 2021 - 31 December 2021 1 July 2020 - 31 December 2020 1 July 2020 - 30 June 2021
As at 1 July 46.6 137.0 137.0
Foreign exchange movement on opening balance (5.1) 25.8 30.7
Discretionary advance – capital and interest commitment (BEE Lender facility) — 2.9 4.7
Discretionary advance – distributions to beneficiaries — 2.1 2.0
Interest receivable 2.0 2.7 5.2
Reversal of BEE loans receivable – expected credit loss provision — 4.6 5.8
Repayment of loan from BEE partner (0.4) — —
BEE payable restructuring – offset against BEE receivable — — (138.8)
As at 30 June 43.1 175.1 46.6
BEE loans payable
BEE loans payable represent those loans advanced by the BEE partners to the
Group to acquire their interest in Cullinan and Finsch. Details of the
movements are set out below.
US$ million 1 July 2021 - 31 December 2021 1 July 2020 - 31 December 2020 1 July 2020 - 30 June 2021
As at 1 July — 108.6 108.6
Foreign exchange movement on opening balance — 20.0 23.2
Interest payable — 4.8 7.0
BEE payable restructuring – offset against BEE receivable — — (138.8)
As at 30 June — 133.4 —
Group guarantee provided to BEE Lenders
The BEE Partners obtained bank financing from ABSA, RMB and Investec (“the
BEE Lenders”) to refinance amounts owing by the BEE Partners to Petra, which
had provided funding to the BEE Partners to enable them to acquire their
interests in Cullinan and Finsch. As part of historical refinancing
arrangements, the Group provided a guarantee to the BEE Lenders over the
repayment of loans advanced to the Group’s BEE Partners. The BEE Partners
were expected to settle their loan obligations with the BEE Lenders from their
share of future operational cashflows from the South African operations,
either through repayment of the amounts owing to the BEE Partners by Petra or
through recoverable advances provided by Petra from Group treasury.
In March 2021, the Group completed its Restructuring, the BEE Lender facility
was included as part of the Group’s new banking facilities and the guarantee
provided by the Group on behalf of the BEE Partners was extinguished (refer to
note 8 for further detail).
12. SHARES ISSUED
During the Period, the Company’s shareholders approved at the FY2021 Annual
General Meeting 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.
In FY2021, as part of the Restructuring and subsequent to the approval by
shareholders at a special general meeting held on 13 January 2021, the Company
allotted 8,844,657,929 Ordinary Shares to the Noteholders valued at US$194.0
million (comprising Ordinary shares valued at US$12.3 million and share
premium of US$181.7 million before capitalised costs), based on the share
price at 9 March 2021 (the date upon which all implementation steps for the
Debt Restructuring were met). The allotment was pursuant to the Debt for
Equity Conversion, announced on 22 December 2020, which resulted in the
Noteholders holding 91% of the enlarged share capital of the Company in the
following proportions:
- 56.0% of the enlarged share capital was issued to all Noteholders,
including the New Money Noteholders, pro rata to their holdings of existing
Notes at the close of the Restructuring (to the extent any Noteholder did not
take up their equity entitlement, such entitlement was allocated to the
remaining Noteholders who did not opt out of their equity entitlement, on a
pro rata basis); and
- 35.0% of the enlarged share capital was issued to the New Money
Noteholders only, pro rata to their contribution of the New Money (to the
extent any such Noteholders did not take up their equity entitlement, such
entitlement was allocated to the remaining Noteholders who contributed to the
New Money and who did not opt out of their equity entitlements, on a pro rata
basis).
As a consequence of the Debt for Equity Conversion, 9% of the Company’s
enlarged share capital remains with the previous shareholders (subject to
dilution as a result of standard management equity incentive arrangements).
The costs associated with the allotment of the new ordinary shares of US$12.3
million were capitalised against share premium. For additional information
regarding the Restructuring refer to note 18.
13. EARNINGS PER SHARE
Total 1 July 2021 - 31 December 2021 US$ Total 1 July 2020 - 31 December 2020 US$ Total 30 June 2021 US$
Numerator
Profit for the Period 43,288,096 54,571,655 187,021,893
Denominator
Shares Shares Shares
Weighted average number of ordinary shares used in basic EPS
Brought forward 9,710,089,272 865,431,343 865,431,343
Effect of shares issued during the Period — — 2,721,433,209
Effect of 50 for 1 share consolidation November 2021 (9,515,887,487) (848,122,716) (3,515,127,261)
Carried forward 194,201,785 17,308,627 71,737,291
Shares Shares Shares
Dilutive effect of potential ordinary shares — — —
Weighted average number of ordinary shares in issue used in diluted EPS 194,201,785 17,308,627 71,737,291
US cents US cents US cents
Basic profit per share – US cents 22.29 315.29 260.70
Diluted profit per share – US cents 22.29 315.29 260.70
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 2021: nil and 31 December 2020: nil).
For the 12 months ending 30 June 2021, the basic and diluted profit per share
have been restated and adjusted for the 50 for 1 share consolidation which
became effective in November 2021, in accordance with IAS 33 Earning per
Share. Amounts as originally stated were 5.22 cents basic and 5.22 cents
dilutive profit per share.
For the 6 months ending 31 December 2020, the basic and diluted loss per share
have been restated and adjusted for the 50 for 1 share consolidation which
became effective in November 2021, in accordance with IAS 33 Earning per
Share. Amounts as originally stated were 6.31 cents basic loss and 6.31 cents
dilutive profit per share.
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 2021 - 31 December 2021 US$ Total 1 July 2020 - 31 December 2020 US$ Total 30 June 2021 US$
Numerator
Profit for the Period 43,288,096 54,571,655 187,021,893
Net unrealised foreign exchange loss / (gain) 22,015,553 (49,936,067) (59,819,931)
Present value discount – Williamson VAT receivable 663,803 211,488 (763,537)
Profit on disposal of subsidiary — (14,696,171) (14,696,171)
Impairment charge - operations* 227,304 — 34,989,716
Impairment / (reversal) charge – other receivables (1,118,250) — 439,236
Reversal of BEE loans receivable – expected credit loss provision — (4,585,295) (5,824,201)
Taxation charge / (credit) on unrealised foreign exchange (gain) / loss (8,507,107) 15,165,971 17,228,580
Taxation credit on impairment charge* — — (3,308,166)
Gain on extinguishment of Notes — — (213,349,503)
Transaction costs (reversal) / expense – Human rights settlement agreement and provisions for unsettled and disputed tax claims (239,494) — 31, 110,891
Adjusted loss for the Year attributable to parent 56,329,905 731,581 (25,971,193)
*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 9,710,089,272 865,431,343 865,431,343
Effect of shares issued during the Period — — 2,721,433,209
Effect of 50 for 1 share consolidation November 2021 (9,515,887,487) (848,122,716) (3,515,127,261)
Carried forward 194,201,785 17,308,627 71,737,291
Shares Shares Shares
Dilutive effect of potential ordinary shares — — —
Weighted average number of ordinary shares in issue used in diluted EPS 194,201,785 17,308,627 71,737,291
US cents US cents US cents
Adjusted basic profit / (loss) per share – US cents 29.01 4.23 (36.20)
Adjusted diluted profit / (loss) per share – US cents 29.01 4.23 (36.20)
For the 12 months ending 30 June 2021, the basic and diluted profit per share
have been restated and adjusted for the 50 for 1 share consolidation which
became effective in November 2021, in accordance with IAS 33 Earning per
Share. Amounts as originally stated were 0.73 cents basic and 0.73 cents
dilutive loss per share.
For the 6 months ending 31 December 2020, the basic and diluted loss per share
have been restated and adjusted for the 50 for 1 share consolidation which
became effective in November 2021, in accordance with IAS 33 Earning per
Share. Amounts as originally stated were 0.08 cents basic loss and 0.08 cents
dilutive profit per share.
15. IMPAIRMENT CHARGE
The current market conditions in the global rough diamond market, the ongoing
impact of the COVID-19 pandemic, volatility of and variability in product mix
are all factors impacting the rough diamond prices achieved by Petra during
the Period, resulting 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.
The operations of Cullinan, Finsch, Koffiefontein and Williamson are held at
recoverable value as a result of FY2021 impairments. 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 Cullinan, Finsch and Williamson, 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 recognised a consolidated income statement charge of US$0.7
million comprising management’s estimate of the recoverability of the
Tanzania VAT receivable and an impairment reversal of US$1.1 million of the
KEM JV receivable.
.
Impairment (US$ million) Asset class Carrying value pre impairment Impairment Carrying value post impairment
Impairment operations:
Cullinan 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 (refer to note 10) 1.5 1.1 2.6
Other – non-current Tanzania VAT receivable (refer to note 2) 2.5 (0.7) 1.8
Sub-total 4.0 0.4 4.4
Total 628.0 0.1 628.1
31 December 2020
During the 6 month period ending 31 December 2020, 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 Cullinan, Finsch,
Koffiefontein and Williamson, nor was any impairment reversal considered
appropriate in the current Period. The Group recognised a consolidated income
statement charge of US$0.2 million comprising management’s estimate of the
recoverability of the Tanzania VAT receivable.
Details of the impairment assessment are shown below:
Impairment (US$ million) Asset class Carrying value pre impairment Impairment Carrying value post impairment
Impairment – non-financial receivables:
Other Tanzania VAT receivable (refer note 2) 10.8 (0.2) 10.6
Total 10.8 (0.2) 10.6
30 June 2021
The operations of Cullinan, Finsch and Koffiefontein were held at recoverable
value as a result of FY 2020 impairments. During FY 2021, the Group reviewed
the carrying value of its investments, loan receivables and operational assets
for indicators of impairment. Following the assessment, impairment of
property, plant and equipment was considered appropriate for Finsch and
Koffiefontein. No impairment was considered necessary for Cullinan, nor was
any impairment reversal considered appropriate in the current year. The Group
recognised a consolidated income statement charge of US$17.3 million being the
amount required to write down management’s estimate of recoverable value of
the Finsch and Koffiefontein assets. Williamson was classified as Held for
Sale as at 30 June 2021 (refer to note 17).
Impairment (US$ million) Asset class Carrying value pre impairment Impairment Carrying value post impairment
Impairment operations:
Cullinan Property, plant & equipment 497.9 — 497.9
Finsch Property, plant & equipment 210.6 (15.1) 195.5
Koffiefontein Property, plant & equipment 3.3 (2.2) 1.1
Williamson Property, plant & equipment (refer note 17) 52.7 (21.4) 31.3
Sub-total 764.5 (38.7) 725.8
Impairment – non-financial receivables:
Other – current Tanzanian VAT receivable reversal (refer note 2) — 0.7 0.7
Other – current Other receivables 0.6 (0.4) 0.2
Sub-total 0.6 0.3 0.9
Total 765.1 (38.4) 726.7
Cullinan, Finsch, Koffiefontein and Williamson 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, 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 2021 and 30 June 2021:
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 current mine plans for
the operations are as follows: Cullinan: FY 2031 (FY 2021: FY 2031) Finsch: FY 2031 (FY 2021: FY 2030) Koffiefontein: FY 2025 ( (FY 2021: FY 2023) 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 Finsch: Current mine plan over the next nine years; total resource processed 25.8 Mt (FY 2021: Current mine plan over the next ten years; total resource processed 26.8 Mt).
Cullinan: Current mine plan over the next nine years; total resource processed 38.5 Mt (FY 2021: Current mine plan over the next ten years; total resource processed 38.6 Mt).
Koffiefontein: Current mine plan over the next two years; total resource processed 2.1 Mt (FY 2021: Current mine plan over the next three years; total resource processed 2.2 Mt).
Williamson: Current mine plan over the next 9 years, total resource processed 46.5 Mt (FY2021: Williamson was on care and maintenance).
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: 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.
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 2021 impairment testing models starting
price assumptions have been adjusted for Cullinan and Finsch when compared to the 30 June 2021 impairment models to be in line with actual prices achieved in the preceding 6 month Period. Diamond prices (excluding Exceptional Stones) have been assumed to
remain unchanged FY 2022 and FY2023, then increase by 1.7% in FY2024 and thereafter at 3.9% from FY 2025. The long-term models incorporate normalised diamond price escalation of 1.9% above a long-term US inflation rate of 2.5% per annum from FY 2025 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
Cullinan from US$25.0 million to US$35.0 million per annum. The 30 June 2021 impairment testing models starting price assumptions have been updated to reflect the improved pricing achieved during the Year when compared to the 30 June 2020 impairment
models. Diamond prices have been assumed to increase from FY 2022 and then 4% from FY 2024, returning to pricing levels achieved before the impact of COVID-19, representing an increase of 25-30% from pricing achieved at the lowest point during FY2020. The
long-term models incorporate normalised diamond price escalation of 1.9% above a long-term US inflation rate of 2.5% per annum from FY 2025 to FY 2030. Estimates for the contribution of Exceptional Diamonds sold for more than US$5.0 million each are
determined with reference to historical trends.
Discount rate A ZAR discount rate of 12.0% (30 June 2021: 12.0%) was used for the South African operations in and a USD discount rate of 13.25% (30 June 2021: 13.25%) for Williamson. Discount rates calculated based on a nominal weighted average cost of capital including
the effect of factors such as market risk and country risk as at the Year end. USD and ZAR discount rates are applied based on respective functional currency of the cash generating unit. As Williamson was held for sale as at 30 June 2021, the discount rate
was applied to cashflows expected from a disposal transaction.
Cost inflation rate Long-term inflation rates of 3.5%–7.8% (30 June 2021: 3.5%–7.8%) above the long-term US$ inflation rate were used for Opex and Capex escalators.
Exchange rates Exchange rates are estimated based on an assessment of current market fundamentals and long-term expectations. The US$/ZAR exchange rate range used for all South African operations commenced at ZAR15.00 (30 June 2021: ZAR14.50) reflecting the current
volatility experienced during H1 FY2022, before further devaluing at 5.5% (30 June 2021: 5.5% from FY 2023) per annum until FY 2027 and thereafter devaluing at 3.5% per annum. Given the volatility in the USD/ZAR exchange rate and the current levels of
economic uncertainty, the determination of the exchange rate assumptions required significant judgement.
Valuation basis Discounted present value of future cash flows.
Williamson During the Period, Williamson recommenced production. For impairment testing at Williamson, management have used the above assumptions. During FY2021, Williamson was classified as an asset held for sale, for further detail refer to note 17.
Sensitivity analysis
The impact of applying reasonable downside sensitivities on the key inputs
based on management’s assumptions at 31 December 2021 is noted below:
Additional Impairment charge
(US$ million) Cullinan Finsch Koffiefontein Williamson
Base case
Increase in discount rate by 2% 31.6 13.6 0.8 4.1
Reduction in pricing by 5% over Life of Mine 42.3 34.1 0.8 19.6
Reduction in short-term production by 10% 9.7 7.6 0.8 0.5
Increase in Opex by 5% 22.3 14.9 0.8 32.0
Reduction in Exceptional Stones contribution by US$10.0 million per annum 36.7 n/a n/a n/a
Strengthening of the ZAR from US$/ZAR15.00 to US$/ZAR13.50 105.5 71.4 0.8 n/a
16. DISPOSAL OF OPERATION (30 June 2021)
1. Disposal of Botswana (exploration)
During FY 2021, the Company disposed of its exploration assets in Botswana via
the sale of 100% of its holding in Sekaka Diamonds Exploration (Pty) Limited
(“Sekaka”) to Botswana Diamonds PLC for a total consideration of
US$300,000 and a 5% royalty on future diamond revenues should any of the
prospects within the exploration licences be brought into production. Refer to
note 36 of FY2021 Annual Report for details.
The profit on disposal of subsidiary of US$14.7 million comprises a US$0.3
million disposal consideration, net profit of US$1.3 million for the Period 1
July 2020 to the 30 November 2020 disposal date, and the recycling of the
foreign currency translation reserve of US$13.3 million, offset by a net asset
disposal amount of US$0.2 million.
17. WILLIAMSON
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).
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. Petra has already provided funding and 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.
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 the consent of Petra’s South African
lender group, and is therefore not yet effective as at 31 December 2021. Petra
is entering into the Framework Agreement with the Government of Tanzania in
the latter's capacity principally as a regulator and collector of taxes in
Tanzania. However, the Government of Tanzania is also a related party to Petra
for the purposes of the UK Listing Rules, due to the Government’s
shareholding in WDL. Accordingly, the Framework Agreement cannot become
legally binding on the parties until approval is obtained from Petra’s
shareholders. Notwithstanding, the Government of Tanzania's right to a 16%
free carried interest under the Tanzanian Mining Act, 2017 is an entitlement
as a matter of Tanzanian law, and is not of itself ultimately subject to any
approval or condition in any respect. Accordingly, Petra acknowledges that
arrangements to reflect this will need to be implemented regardless of the
Framework Agreement becoming effective. On 9 February 2022, Petra received
shareholder approval of the Framework Agreement.
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 Petra
retains a controlling interest in Williamson.
Caspian’s purchase will be funded through the settlement of US$11.1 million
of past technical services payments owed by WDL to Caspian, including services
rendered during the recent restart of operations following the care and
maintenance period, with the remaining amount being funded by Caspian
rendering US$3.9 million of technical services to WDL in order to ramp-up
operations at the Williamson Mine.
The sale of the 50% stake in the entity that holds Petra’s shares in WDL is
subject to the parties obtaining all necessary Governmental, regulatory and
lender approvals, including approvals from the Tanzanian Mining Commission,
the Tanzanian Fair Competition Commission and The Bank of Tanzania, and a
binding ruling from the Tanzania Revenue Authority on the tax treatment of the
transaction. The parties are seeking to obtain such approvals by the end of
H2 FY 2022.
As at 30 June 2021, the criteria for classification as Asset Held for sale was
met. Refer to (b) below for FY2021 disclosures). Subsequently, the signing of
the MOU will result in Petra retaining its controlling interest in WDL and
will see Petra consolidating WDL’s operating and financial results, with an
appropriate recognition of non-controlling interest attributable to both
Caspian and the Government of Tanzania. As neither agreement mentioned above
is effective as at 31 December 2021, WDL has been consolidated in the same
proportions as prior to its Held for Sale classification being 75% Petra and
25% Government of Tanzania.
1. Asset Held for Sale (30 June 2021)
As at 30 June 2021, the assets and liabilities of the Williamson operation
(being Petra’s 75.0% interest) were classified as held for sale in the
Statement of Financial Position at 30 June 2021, in accordance with IFRS 5.
The financial results of the Williamson operation for FY2021 were disclosed in
the Consolidated Income Statement in Loss on discontinued operation. These
have been restated for the period ending 31 December 2021. The Williamson
mining operation is a separate operating segment for the purposes of the
Group’s segmental reporting.
1. Net assets of Williamson:
US$ million Book value prior to reclassification of as held for sale Impairment 30 June 2021
Mining property, plant and equipment 52.7 (21.4)¹ 31.3
Non-current trade and other receivables 0.7 — 0.7
Trade and other receivables 2.9 — 2.9
Inventory 15.5 — 15.5
Cash and cash equivalents 9.2 — 9.2
Non-current assets held for sale 81.0 (21.4) 59.6
Environmental liabilities, provisions and other non-current trade and other payables (22.9) — (22.9)
Trade and other payables and provisions (10.6) — (10.6)
Non-current liabilities associated with non-current assets held for sale (33.5) — (33.5)
Net assets 47.5 (21.4) 26.1
1. Result of Williamson:
US$ million 1 July 2020 – 30 June 2021 1 July 2019 – 30 June 2020
Revenue 4.6 52.5
Cost of sales (13.8) (68.7)
Gross loss (9.2) (16.2)
Impairment charge – operations — (34.6)
Impairment reversal / (charge) - other receivables 0.7 (6.8)
Provisions for unsettled and disputed tax claims (19.5) —
Financial income — 0.6
Financial expense (2.7) (0.8)
Loss before tax (30.7) (57.8)
Income tax charge — (0.2)
Loss after tax before impairment charge (30.7) (58.0)
Impairment charge (1) (21.4) —
Net loss for the Year (52.1) (58.0)
Attributable to:
* Equity holders of the parent (52.1) (58.0)
* Non-controlling interest — —
(52.1) (58.0)
The US$21.4 million impairment loss recorded on the Williamson assets
represented the difference between the assets measured at the lower of their
carrying amount and fair value less costs to sell considering the best
available information at the present time with reference to ongoing
discussions with a potential investor. The impairment charge of US$21.4
million was recognised to reduce assets of Williamson to equal the fair value
less costs to sell.
1. Consolidated balance reconciliation - Williamson (31 December 2021)
US$ million Consolidated (excluding WDL) 31 December 2021 Williamson 31 December 2021 Consolidated (including WDL) 31 December 2021
ASSETS Non-current assets
Property, plant and equipment 596.6 30.0 626.6
Right-of-use assets 0.7 26.1 26.8
BBE loans and receivables 43.1 — 43.1
Other receivables — 1.8 1.8
Deferred tax assets (0.1) 0.1 —
Total non-current assets 640.3 58.0 698.3
Current assets
Trade and other receivables 19.6 6.6 26.2
Inventories 71.9 25.6 97.5
Cash and cash equivalents (including restricted amounts) 255.2 17.1 272.3
Total current assets 346.7 49.3 396.0
Total assets 987.0 107.3 1,094.3
EQUITY AND LIABILITIES
Equity
Share capital 145.7 — 145.7
Share premium account 959.5 — 959.5
Foreign currency translation reserve (447.3) 0.6 (446.7)
Share-based payment reserve 1.9 — 1.9
Other reserves (0.8) — (0.8)
Accumulated losses (218.6) 8.5 (210.1)
Attributable to equity holders of the parent company 440.4 9.1 449.5
Non-controlling interest (7.8) — (7.8)
Total equity 432.6 9.1 441.7
Liabilities
Non-current liabilities
Loans and borrowings 371.9 26.1 398.0
Lease liabilities 0.4 23.2 23.6
Provisions 67.1 28.9 96.0
Deferred tax liabilities 55.3 — 55.3
Total non-current liabilities 494.7 78.2 572.9
Current liabilities
Loans and borrowings 27.0 0.3 27.3
Lease liabilities 0.4 2.8 3.2
Trade and other payables 32.3 16.9 49.2
Total current liabilities 59.7 20.0 79.7
Total liabilities 554.4 98.2 652.6
Total equity and liabilities 987.0 107.3 1,094.3
US$ million Consolidated (excluding WDL) 1 July 2021 – 31 December 2021 Williamson 1 July 2021 – 31 December 2021 Consolidated (including WDL) 1 July 2021 – 31 December 2021
Revenue 244.5 20.2 264.7
Mining and processing costs (143.1) (9.8) (152.9)
Other direct income 0.2 0.1 0.3
Corporate expenditure including settlement costs (5.2) — (5.2)
Other corporate income 0.6 — 0.6
Expenditure for unsettled and disputed tax claims — — —
Impairment of non-financial assets (0.3) (0.7) (1.0)
Impairment of BEE loans receivable – expected credit loss release 1.1 — 1.1
Impairment charge — — —
Total operating costs (146.7) (10.4) (157.1)
Profit on disposal including associated impairment, net of tax — — —
Financial income 9.7 1.7 11.4
Financial expense (55.6) (0.7) (56.3)
Profit before tax 51.9 10.8 62.7
Income tax charge (13.6) — (13.6)
Profit for the Period 38.3 10.8 49.1
Attributable to:
Equity holders of the parent 43.2
Non-controlling interest 5.9
49.1
18. Restructuring of the US$650 million Loan Notes (30 June 2021)
On 10 March 2021, the Company completed the implementation of the debt
Restructuring project with the Noteholders and the South African Lender Group.
The key features of the Restructuring of the US$650 million Notes and the
Senior secured lender debt facilities of ZAR1.6 billion were as follows:
* conversion of Notes debt valued at US$415.0 million into equity, which
resulted in the Noteholder group holding 91% of the enlarged share capital of
the Company (refer (a) below);
* the remainder of the Notes exchanged for the issue of US$295.0 million new
Notes and the contribution by holders of the existing Notes of US$30.0 million
in new money, each to take the form of New Notes (refer (a) below); and
* restructuring of the first lien facilities to provide for a Term Loan of
ZAR1.2 billion and a Revolving Credit Facility (“RCF”) of ZAR560 million
provided by the South African Lender Group (refer (b) below).
1. Debt for Equity conversion and the issue of New Notes
1. Debt for Equity swap
The Company completed a debt for equity conversion consisting of the partial
repayment of the US$650 million Loan Notes by issuing 8,844,657,929 new
Ordinary Shares with a nominal value of 0.001 pence per share in the Company
to the existing Noteholders. The fair value of the shares at the date of the
conversion was 1.58 pence per share, giving a total consideration of U$194.0
million. The carrying value of the liability at the date of the conversion was
US$415.0 million. The resulting gain, before restructuring costs, of US$221.0
million has been recognised in the Income Statement as part of the gain on
extinguishment of the Notes. Restructuring costs identified as being directly
associated with the debt for equity conversion, of US$12.4 million have been
taken directly to share premium. The Debt for Equity Conversion resulted in
the Noteholders holding 91% of the enlarged share capital of the Company.
ii) Issue of New Notes
The New Notes of US$336.7 million were issued and allocated as
follows:
* US$30.0 million allocated only to those Noteholders that subscribed, and
funded that subscription, to the New Money, pro rata to their New Money
contribution (the “New Money Noteholders”);
* US$150.0 million allocated only to those New Money Noteholders, pro rata to
each holder's contribution to the New Money; * US$145.0 million allocated to
all Noteholders (including the New Money Noteholders), pro rata to their
holdings of existing Notes at the close of the Restructuring; and
* a further amount of New Notes as consideration to certain Noteholders, in
remuneration for the commercial risks and other commercial considerations
borne by those Noteholders whilst restricted for the purposes of negotiations
with other stakeholders and work performed in connection with the
Restructuring. The quantum of New Notes issued for this purpose was US$11.7
million, which has been capitalised as part of the Notes liability and will be
amortised over the term of the Notes.
The restructuring of the terms of the Loan Notes represented a substantial
modification as the net present value of the cash flows under the original
terms and the modified terms was greater than 10%.As such, carrying value of
the Loan Notes of US$299.0 million was de-recognised and the amended new Notes
with a nominal value of US306.7 million were recognised on the balance sheet
at the date of modification. The loss arising on substantial modification of
the Loan Notes of US$7.7 million has been recognised in the Income Statement
as part of the gain on extinguishment of the Notes. The acceleration of
unamortised costs associated with the substantial modification were expensed
and included within net finance income (refer to note 6).
1. First lien facilities
The previous facilities held with the South African Lender Group, included the
ZAR500.0 million working capital facility (the "WCF"), the ZAR400.0 million
RCF, the financing arrangements in respect of the Group's BEE partners (the
"BEE Facilities") of ZAR683.1 million and the Group's general banking
facilities were restructured through the extinguishment of the existing
facilities and the replacement of such facilities with a new Term Loan and
RCF, as part of the Restructuring.
A new Term Loan was made available to the Group for a principal amount of
ZAR1.2 billion, in order to refinance the previous drawn ZAR500.0 million WCF
and the outstanding principal amounts of the BEE Facilities (ZAR683.1
million). Transaction costs of ZAR17.4 million (US$1.7 million) and cash
transaction costs of US$0.7 million directly associated with the Term loan
were capitalised to the liability to be amortised over the period of the loan.
The Term Loan is fully drawn.
A new RCF was made available comprising a rollover of the previous ZAR400.0
million RCF but increased by a further ZAR160.0 million. An amount of ZAR400.0
million remains drawn at Year end under the RCF with the RCF reducing at Year
end to ZAR509.6 million in line with the amortisation profile, with ZAR109.6
million still available for drawdown. For the terms of the new First lien
facilities refer to note 8.
1. Transaction costs
A total of US$33.7 million (FY2020: US$3.8 million included under prepayments)
were incurred during the Year for the Restructuring. The transaction costs
have been apportioned to Equity, the Notes and bank facilities based on each
components contribution to the total Restructuring. Cash costs incurred in the
Year amounted to US$29.9 million (FY 2020: US$3.8 million included under
prepayments).
19. EVENTS AFTER THE REPORTING PERIOD
Vesting of share awards
On 12 January the Company announced the vesting of 9,445 shares in the Company
under the 2018 and 2019 deferred share scheme. The shares have been settled by
purchasing the shares in the market at 78.0 pence.
Settlement of RCF
On 24 January 2022, the Company paid ZAR404.6 million (capital plus interest)
to settle the RCF. The RCF has not been terminated and remains available for
drawdown.
New First Lien Banking Facility on more favourable terms
On 2 February 2022, the Company announced that it had concluded a binding,
credit approved term sheet for the refinancing of its first lien debt facility
with its South African Lender Group, providing for more favourable terms than
the Group’s current first lien facilities. The conclusion of the new
facility is subject to completion of appropriate definitive agreements,
expected to be finalised during Q3 FY 2022.
A new Revolving Credit Facility (“RCF”) with Absa Bank Limited (acting
through its corporate and investment banking divisions) (“Absa”) will
replace the existing RCF and term lending arrangements with the current South
African lender syndicate comprising Absa, Nedbank, RMB and Ninety One. The new
terms include, inter alia:
* improved structure with a single ZAR1 billion RCF replacing the existing
amortising term loan (ZAR856.1 million owed at 31 December 2021 net of
unamortised transaction costs of ZAR20.2million) and the ZAR408.8 million RCF;
* more appropriate covenant package resulting in improved headroom and
flexibility on the balance sheet;
* extended tenure for the RCF with a maturity date of December 2025 and a more
usual bullet payment at maturity; and
* reduced financing costs with improved margin and commitment fees.
Details of the new terms compared with the previous terms:
Previous terms New terms
Facility R408.8 million amortising RCF and R876.3 million gross term loan (as at 31 Dec 2021) R1,000 million RCF
Duration 3 years (Mar-24) 4 years (Dec-25), with a 60 day buffer between the redemption of the Notes and the maturity of the RCF
Lenders Absa, Nedbank, RMB & Ninety One Absa
Margin JIBAR + 525 bps JIBAR + 415 bps, with the margin to be reconsidered annually based on Petra’s credit metrics with a view of further optimising the margin to be achieved
Commitment fee 210 bps per annum 125 bps per annum
Covenants
FY22 H2 FY23 H1 FY23 H2 FY24 H1 FY24 H2 FY25 H1 FY25 H2 FY26 H1
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
Special General Meeting – Shareholder approval of Framework Agreement.
The Framework Agreement entered into between Petra, Williamson Diamonds
Limited and the Government of Tanzania constituted a related party transaction
for purposes of the UK Listing Rules and in order for it to become
unconditionally effective and legally binding on Petra, approval of its
shareholders at the SGM was required. On 9 February 2022, the Company received
shareholder approval at its Special General Meeting. The Framework Agreement
remains subject to a number of other conditions, including customary
government approvals and the approval of the Petra South African lender
group. Subject to the satisfaction of these conditions, the Framework
Agreement is expected to become effective in the second half of FY 2022.
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
21 February 2022
INDEPENDENT REVIEW REPORT ON THE UNAUDITED FINANCIAL STATEMENTS OF PETRA
DIAMONDS LIMITED
Conclusion
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 2021 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
accompanying Notes to the Condensed Consolidated Interim Financial Statements.
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 2021 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.
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
21 February 2022
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127)
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