REG-Petra Diamonds Ltd: Cost savings target increased to more than US$30m per annum and entry into definitive transaction agreement for the sale of Koffiefontein.

Petra DiamondsAnnouncement

08/04/2024 07:15

8 April 2024  LSE: PDL  

 

Petra Diamonds Limited

(Petra, the Company or the Group)

 

Cost savings target increased to more than US$30m per annum and entry into
definitive transaction agreement for the sale of Koffiefontein

 

In line with its approach to building business resilience, Petra announces
additional steps to reduce costs and provides an update of the sale of its
interest in the Koffiefontein Diamond Mine (KDM).

 

Richard Duffy, Petra’s Chief Executive Officer, said:

 

“We remain on track to deliver the US$75 million of cash savings in FY 2024
as a result of capital deferrals and cost savings of circa US$10 million. The
Company has further increased its cost savings target for FY 2025 to more than
US$30 million per annum, on a sustainable basis going forward, across its
South African operations, centralised services and overheads. This cost rebase
will align our group support structures with our more streamlined operational
requirements and transition Petra to a more smoothed capital profile to enable
sustainable net free cash flow generation, notwithstanding the continued
slower recovery of the diamond market as a result of ongoing economic
uncertainty and weakness in China.

 

Regular updates on the Company’s delivery against the US$30 million plus
annualised cost savings target will be provided and an update on our revised
Life of Mine Plans, incorporating our transition to a more smoothed capital
profile, will be shared at the end of June 2024. 

 

Since taking the decision to close Koffiefontein, Petra has remained committed
to also exploring a responsible exit in consultation with its stakeholders. I
am pleased that the sale agreement reached with Stargems will, once completed,
provide ongoing economic activity in the region. We believe Stargems has the
technical and financial capability to conduct operations in a responsible
manner for all stakeholders. We look forward to working closely with the DMRE,
employees, community representatives and other key stakeholders in completing
the sale. As a result of this transaction, Petra will avoid incurring
closure-related costs of US$15-18 million included in the Company’s 31
December 2023 balance sheet provisions.ʺ

 

Further reduction in operating expenditure

 

The Company’s group structure is being realigned to meet the requirements of
the operations. Regrettably, as a result of this group restructure, S189(3)
notices (proposed retrenchments) under the South African Labour Regulations
Act (LRA) have been issued to all group employees to commence consultations
around affected roles.

 

At Finsch Mine, a proposal to revise throughput tonnages from circa 2.8 to 2.2
million tonnes per annum has required a review of the current continuous
operations shift configuration. As a result, S189(3) notices under the LRA
have been issued to affected employees and consultations with organised labour
have commenced.

 

At Cullinan Mine, cost savings targets have been set assuming currently
planned throughput tonnages going forward.

Collectively, the measures outlined above are expected to deliver in excess of
US$30 million of sustainable annualised operating cost savings from FY 2025
onwards.  

 

Entry into definitive transaction agreement for the sale of Koffiefontein

 

Further to Petra’s announcement on 13 December 2023 regarding its entry into
a non-binding term sheet for the sale of KDM, Petra is pleased to announce it
has now entered into a definitive transaction agreement with affiliates of the
Stargems diamond group (Stargems) for this transaction. Stargems has a
significant global presence in the diamond and jewellery industry, including
as an owner and operator of diamonds mines in South Africa.

 

On completion of the sale, Petra will transfer its stake in the entity that
owns KDM to Stargems for a nominal cash consideration and will no longer be
responsible for KDM’s environmental rehabilitation liabilities and care and
maintenance costs. In Petra’s interim results for H1 FY 2024, provisions
totalling US$23.1 million were made for liabilities, costs and commitments
associated with KDM. After completion, Petra will remain liable for funding
certain ongoing social commitments relating to KDM that were made during
Petra’s ownership.

 

Completion of the sale is subject to obtaining the consent of the Department
of Mineral Resources and Energy in accordance with Section 11 of South
Africa’s Mineral and Petroleum Resources Development Act.

 

Petra will provide further updates on the progress of completing the sale in
due course.

 

Petra is being advised on the sale by Questco Corporate Advisory, a South
African-based boutique corporate advisory firm, and Edward Nathan Sonnenbergs
Inc. as legal advisors.

 

For further information, please contact:

 

Investor Relations, London  Telephone: +44 20 7494 8203    

Patrick Pittaway    investorrelations@petradiamonds.com

Julia Stone

Kelsey Traynor

   

About Petra Diamonds Limited

Petra Diamonds is a leading independent diamond mining group and a supplier of
gem quality rough diamonds to the international market. The Company’s
portfolio incorporates interests in three underground mines in South Africa
(Finsch and Cullinan Mine) and one open pit mine in Tanzania (Williamson). The
Koffiefontein mine is currently on care and maintenance in preparation for
sale or closure.

 

Petra's strategy is to focus on value rather than volume production by
optimising recoveries from its high-quality asset base in order to maximise
their efficiency and profitability. The Group has a significant resource base
which supports the potential for long-life operations.

 

Petra strives to conduct all operations according to the highest ethical
standards and only operates in countries which are members of the Kimberley
Process. The Company aims to generate tangible value for each of its
stakeholders, thereby contributing to the socio-economic development of its
host countries and supporting long-term sustainable operations to the benefit
of its employees, partners and communities.

 

Petra is quoted with a premium listing on the Main Market of the London Stock
Exchange under the ticker 'PDL'. The Company’s loan notes due in 2026 are
listed on the Irish Stock Exchange and admitted to trading on the Global
Exchange Market. For more information, visit www.petradiamonds.com.

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