REG - Petra Diamonds Ltd - Preliminary Results for FY 2023
15/09/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230915:nRSO5239Ma&default-theme=true
RNS Number : 5239M Petra Diamonds Limited 15 September 2023
15 September 2023 LSE: PDL
Petra Diamonds Limited
("Petra or "the Company")
Preliminary Results for FY 2023 (unaudited)
Strengthened Balance Sheet and Stabilising Production sets Path for Growth
Petra announces its preliminary results (unaudited) for the year ended 30 June
2023 (FY 2023 or Year).
Richard Duffy, Chief Executive Officer of Petra, commented:
"FY 2023 has demonstrated the improved resilience of Petra's operating model
as we realise value from our operations, placing us in a strong position to
deliver on our stated target of increasing annual group production by up to
1.3 million carats in FY 2026 as we continue to develop the long-term
potential of our large resource base.
Production in FY 2023 at 2.67 Mcts, while marginally below revised guidance
on the back of some operating challenges, showed an improving trend during the
second half as operating performance stabilised. Williamson restarted
production in July 2023 and is ramping up ahead of schedule. Key Group
operational guidance is maintained.
In line with our objective of reducing gross debt while investing in organic
growth and life extension, we successfully repurchased just over one-third, or
US$144.6 million, of the Company's 2026 loan notes during the Year, both
strengthening our balance sheet and reducing future interest costs. This,
coupled with our flexible sales process, enabled us to delay the sales of some
diamonds from our last two Tenders of FY 2023, in expectation of improved
pricing.
The first Tender of FY 2024 reflected persistent softer market conditions due
to prevailing macro-economic uncertainties around high interest and inflation
rates. Although there has been some stabilisation in global economies and
growth outlooks for CY 2023, the economic outlook for CY 2024 is now more
subdued. Notwithstanding this, we continue to see the prevailing structural
supply deficit of diamonds providing market support in the medium to longer
term.
Actions taken to strengthen our business and improve cash flow generation,
together with our capital discipline around investing in the growth and life
extension of our operations, means that Petra is resilient in the short-term
and well placed in the medium to longer term to leverage these continued
supportive diamond market fundamentals."
Balance sheet remains robust despite lower production and deferred tender
sales
· The results, where appropriate, exclude Koffiefontein which has been
classified as a discontinued operation
· FY 2023 revenue amounted to US$325.3 million (FY 2022: US$563.7
million), including revenue from profit share agreements of US$1.4 million (FY
2022: US$1.1 million)
· The average realised price in FY 2023 was US$139/ct, down 14% from
US$161/ct in FY 2022, largely due to product mix, partially offset by a 2%
like-for-like price increase
· Adjusted mining and processing costs benefitted from a weaker
ZAR:USD, lower production volumes and royalties, cost savings and diamond
inventory movement. These factors were partly offset by cost inflation and
care & maintenance costs at Williamson following the Tailings Storage
Facility (TSF) failure
· Adjusted EBITDA, being profit from mining activities less adjusted
corporate overheads, reduced to US$113.1 million (FY 2022: US$277.8 million),
representing a margin of 35%, driven by lower production, Williamson being on
care and maintenance for around 7 months of the Year and the reduced
contribution from Exceptional Stones (those sold for US$5 million or more
each), partially off-set by a weaker ZAR:USD
· Adjusted net loss of US$2.3 million down from US$115.2 million profit
(FY 2022)
· Adjusted loss per share of USc2.96, down from USc48.01 profit (FY
2022)
· Operational free cash outflow of US$66.5 million (FY 2022: US$230.0
million inflow) due to reduced sales, including the deferral of sales to FY
2024, and the planned increase in capital expenditure
· Consolidated net debt increased to US$176.8 million (30 June 2022:
US$40.6 million)
· In September 2022, the Group repurchased a portion of the 2026 loan
notes which reduced the Group's loan and borrowings to US$247.5 million at
Year-end, and reduced future interest costs
US$m unless stated otherwise FY 2023 FY 2022 Variance
Restated(2)
Rough diamonds sold (carats) 2,329,817 3,499,412 -33%
Revenue 325.3 563.7 -42%
Average realised price per carat (US$/carat) 139 161 -14%
Adjusted mining and processing costs 202.1 272.5 -26%
Adjusted EBITDA(1) 113.1 277.8 -59%
Adjusted EBITDA margin (%)(1) 35% 49% -29%
Adjusted profit before tax(1) 8.3 155.1 -95%
Adjusted (loss) / profit after tax(1) (2.3) 115.2 -102%
Net (loss) / profit after tax (102.4) 88.1 -216%
Basic (loss) / profit per share (USc) (38.10) 40.74 -193%
Adjusted (loss) / profit per share(1) (USc) (2.96) 48.01 -106%
Capital expenditure 117.1 51.6 127%
Operational free cashflow(1) (66.5) 230.0 -129%
Consolidated net debt(1) 176.8 40.6 335%
Unrestricted cash 44.1 271.9 -84%
Consolidated net debt : Adjusted EBITDA(1) 1.6x 0.15x 970%
Note 1: For all non-GAAP measures refer to the Summary of Results table within
the Financial Results section below
Note 2: During the Year, Koffiefontein was place on care and maintenance
activities in the run-up to a responsible closure. Koffiefontein is classified
as a discontinued operation in FY 2023 as it has been 'abandoned" in terms of
IFRS 5. For comparative purposes, the relevant FY 2022 results have been
restated to exclude Koffiefontein
Ongoing focus on sustainability and zero harm working environment
Our Sustainability Framework is being embedded into Petra's operating model.
Sustainability targets will be detailed in the FY 2023 Sustainability Report
due to be released in October 2023.
Valuing our people
· In FY 2023, we recorded 17 lost time injuries (LTIs), a 13% increase
from FY 2022, which translated to a lost time injury frequency rate (LTIFR) of
0.24 per 200,000 hours worked, up from 0.22 in FY 2022. This largely reflected
the ramping up of the two extension projects at Cullinan Mine and Finsch and a
single, blasting-related, incident at Cullinan Mine in which four employees
were regrettably injured and have since fully recovered
· In striving for a zero-harm environment, we continue to focus on
remedial actions and behaviour-based intervention programmes across our
operations
· New Petra Culture Code roll out underway
Respecting our Planet
· Progress on Petra's response to Climate Change was achieved through
formulating a Climate Change Mitigation and Adaptation Strategy, setting
interim milestones to reach a 35-40% reduction by 2030 (against the 2019
baseline) towards our ambition to reach net-zero for Scopes 1 and 2 emissions
by 2040
· Following the TSF failure at Williamson, efforts focused on achieving
soil remediation and restoring the ecological functionality of the affected
areas, with preliminary indicators reflecting positive outcomes
Driving Shared Value Partnerships
· Our support for local communities was accelerated through our
committed efforts in generating sustainable value through our Social and
Labour compacts
· Prioritised actions were taken to ensure all affected community
members following Williamson's TSF failure were provided alternative
arrangements, including temporary and new accommodation, livelihood
restoration and health and wellness support
Delivering Reliable Production
· Continuing focus on stabilising operational performance, with
Cullinan Mine on track, Williamson's ramp-up ahead of schedule and Finsch
experiencing some volatility
· Our on-mine capital investments increased by 129% to US$115.3
million, of which US$72.4m was spent on life extension projects that will
contribute to our increased carat production over the coming years
Adjusted profit contribution per mine
US$ millions FY 2023(1) FY 2022 Restated(1,2)
CDM FDM WDL Central Total CDM FDM WDL Central Total
Revenue 182.9 93.3 49.1 - 325.3 322.4 165.7 75.9 (0.3) 563.7
Adjusted mining and processing costs(3) (82.0) (65.6) (54.3) (0.2) (202.1) (116.7) (109.0) (45.5) (1.3) (272.5)
Other direct income/(expenses) - 0.1 (0.6) - (0.5) (0.7) (0.4) 0.1 - (1.0)
Adjusted profit from mining activities 100.9 27.8 (5.8) (0.2) 122.7 205.0 56.3 30.5 (1.6) 290.2
Adjusted profit margin 55% 30% -12% 38% 64% 34% 40% 52%
Other corporate income Not allocated per mine 1.0 Not allocated per mine 0.6
Adjusted Group G&A (10.6) (13.0)
Adjusted EBITDA(1) 113.1 277.8
Note 1: For all non-GAAP measures refer to the Summary of Results table within
the Financial Results section below
Note 2: FY 2022 restated to exclude Koffiefontein which is classified as a
discontinued operation.
Note 3: Adjusted mining and processing costs include certain technical and
support activities which are conducted on a centralised basis; these include
sales & marketing, human resources, finance & supply chain, technical,
and other functions. For purposes of above, these costs have been allocated
60% to CDM and 40% to FDM. For more information, refer to operational cost
reconciliation available on the analyst guidance pages on our website.
Adjusted profit from mining activities decreased 58% to US$122.7 million (FY
2022: US$290.2 million), mainly due to lower sales of Exceptional Stones
(those sold for US$5 million or more each) during the Year, the impact of
lower carats recovered and increased costs at Williamson for care and
maintenance following the TSF failure.
Capital expenditure breakdown
US$ millions FY 2023 FY 2022 Adjusted(1)
Cullinan Finsch Williamson Central Total Cullinan Finsch Williamson Central Total
Mine Mine
Extension 41.1 31.3 - - 72.4 27.3 7.0 - - 34.3
Stay in Business 11.7 11.9 19.3 1.8 44.7 7.7 5.0 3.3 1.3 17.3
Total 52.8 43.2 19.3 1.8 117.1 35.0 12.0 3.3 1.3 51.6
Note 1: FY 2022 restated to exclude Koffiefontein, classified as a
discontinued operation
Total capital expenditure amounted to US$117.1 million for the Year following
the ramping up of underground extension projects at both Cullinan Mine and
Finsch.
The increase in stay in business capital expenditure was largely due to the
replacement of underground fleet at Finsch to mitigate the machine
availability challenges encountered during the Year and an increase at
Williamson due to the construction of the new TSF facility.
Dividends
In line with our dividend policy, no dividends are proposed for FY 2023 and
the Board will review this again in FY 2024.
Group production summary
Below is a summary of Group production for FY 2023 (excluding Koffiefontein)
Production FY 2023 FY 2022
ROM tonnes Tonnes 8,637,232 10,772,811
Tailings and other tonnes Tonnes 399,877 416,335
Total tonnes treated Tonnes 9,037,109 11,189,146
ROM diamonds Carats 2,517,309 3,112,956
Tailings and other diamonds Carats 149,216 205,412
Total diamonds Carats 2,666,525 3,318,368
Outlook
Actions taken to strengthen our business and improve cash flow generation,
together with our capital discipline, means that Petra is well placed to take
advantage of the medium and longer-term supportive diamond market
fundamentals. In FY 2024, we will continue to focus on stabilising operational
performance. Our projects remain on track to contribute to the Group's
increased annual production by up to 1.3 million carats in FY 2026 as we
continue to develop the long-term potential of our large resource base. We
remain confident that we will continue to generate sufficient cash to fund
capex.
Market outlook
We expect rough diamond demand will continue to be subdued in the short-term
on account of increased polished inventory, prolonged weakness in the Chinese
market, lab-grown diamond sales in the bridal jewellery segment and higher
interest rates impacting the mid-stream in particular. Although demand for lab
grown goods increased, this was coupled with further price depreciation that
continues to substantially differentiate this market segment from our unique
and rare natural diamonds that provide enduring benefit in celebrating life's
most significant moments. As a result, the Group expects ongoing price
volatility in the short-term, but remains confident that the structural supply
deficit will support medium to long-term diamond prices.
Group pricing assumptions
Set out below are the Group's current diamond pricing assumptions for each of
its mines for FY 2024 and how these compare to FY 2023 achieved prices. Future
diamond prices are influenced by a range of factors outside of the Group's
control and so these assumptions are internal estimates only and no reliance
should be placed on them. The Company's pricing assumptions will be considered
on an ongoing basis and may be updated by the Company from time to time.
Average US$ per carat price FY 2023 achieved FY 2024 assumptions(1)
Cullinan Mine 139(2) 125 - 140
Finsch 110(2) 105 - 120
Williamson 280 (H1 only) 240 - 270
Note 1: Excluding the contribution of Exceptional Stones of US$15 million or
more, as defined below
Note 2: Prices achieved were impacted by the deferral of sales to FY 2024
Given the impact of product mix on average prices, tender to tender price
variability is expected.
Williamson is expected to see some variability in its product mix and prices
over coming tenders as it continues its ramp-up to steady-state production.
Change to the Company's definition of Exceptional Stones
The Company has historically defined diamonds which sell for US$5 million or
more as being Exceptional Stones. From FY 2024, the Company has amended this
definition to diamonds which sell for US$15 million or more. Since 2016, only
three Exceptional Stones have been sold that meet this new threshold,
highlighting the rarity of such diamonds. Revenue from Exceptional Stones
exceeding US$15 million may be regarded as windfall earnings for the Group, to
be applied in line with our Capital Allocation framework.
Key operational guidance maintained
FY 24E FY 25E FY 26E
Total carats recovered (Mcts) 2.9 - 3.2 3.4 - 3.7 3.7 - 4.0
Cash on-mine costs and G&A(1) (US$m) 270 - 290 270 - 290 280 - 300
Extension capex(1)(US$m) 124 - 135 109 - 125 85 - 92
Sustaining capex(1)(US$m) 31 - 36 24 - 28 24 - 28
Note 1: Real amounts stated in FY 2024 money terms using 6% SA CPI & 2.5%
US CPI. US$ equivalent for SA operations converted at USD:ZAR exchange rate of
18.36
More detailed guidance is available on Petra's website at
https://www.petradiamonds.com/investors/analysts/analyst-guidance/
(https://www.petradiamonds.com/investors/analysts/analyst-guidance/)
PRESENTATION DETAILS
Richard Duffy, CEO, Jacques Breytenbach, CFO, will present the results to
investors and analysts.
Online at 09.30 BST
To join https://stream.brrmedia.co.uk/broadcast/64be9e441589e5759adc7f73
Dial in details
· South Africa (toll free): 0800 980 512
· UK: +44 (0)33 0551 0200
· USA: +1 786 697 3501
Password: Quote Petra Diamonds when prompted by the operator
Recording of presentation
A recording of the webcast will be available later today on Petra's website
at https://www.petradiamonds.com/investors/presentations or on
https://brrmedia.news/PDL_FY23
Investor Meet company presentation 14.30 BST
Petra will present the results on the Investor Meet company platform,
predominantly aimed at retail investors. To join:
https://www.investormeetcompany.com/petra-diamonds-limited/register-investor
FURTHER INFORMATION
Petra Diamonds, London +44 207 494 8203
Patrick
Pittaway
investorrelations@petradiamonds.com
(mailto:investorrelations@petradiamonds.com)
Julia Stone
Kelsey Traynor
Camarco (Financial PR)
Gordon
Poole
Telephone: +44 20 3757 4980
Owen
Roberts
petradiamonds@camarco.co.uk (mailto:petradiamonds@camarco.co.uk)
Elfie Kent
ABOUT PETRA DIAMONDS
Petra Diamonds is a leading independent diamond mining group and a supplier of
gem quality rough diamonds to the international market. The Group's portfolio
incorporates interests in three underground mines in South Africa (Finsch,
Cullinan Mine and Koffiefontein) and one open pit mine in Tanzania
(Williamson).
Petra's strategy is to focus on value rather than volume production by
optimising recoveries from its high-quality asset base in order to maximise
their efficiency and profitability. The Group has a significant resource base
which supports the potential for long-life operations.
Petra strives to conduct all operations according to the highest ethical
standards and only operates in countries which are members of the Kimberley
Process. The Group aims to generate tangible value for each of its
stakeholders, thereby contributing to the socio-economic development of its
host countries and supporting long-term sustainable operations to the benefit
of its employees, partners and communities.
Petra is quoted with a premium listing on the Main Market of the London Stock
Exchange under the ticker 'PDL'. The Group's loan notes due in 2026 are listed
on the Irish Stock Exchange and admitted to trading on the Global Exchange
Market. For more information, visit www.petradiamonds.com
(http://www.petradiamonds.com) .
FINANCIAL RESULTS
SUMMARY RESULTS (unaudited)
Year ended 30 June 2023 (Restated)
("FY 2023") Year ended 30 June 2022
("FY 2022")
US$ million US$ million
Revenue 325.3 563.7
Adjusted mining and processing costs(1) (202.1) (272.5)
Other net direct mining income / (expense) (0.5) (1.0)
Adjusted profit from mining activity(2) 122.7 290.2
Other corporate income 1.0 0.6
Adjusted corporate overhead(3) (10.6) (13.0)
Adjusted EBITDA(4) 113.1 277.8
Depreciation and Amortisation (80.5) (85.0)
Share-based expense (2.3) (1.1)
Net finance expense(8) (22.0) (36.6)
Adjusted profit before tax 8.3 155.1
Tax expense (excluding taxation credit on unrealised foreign exchange gain / (10.6) (39.9)
(loss))(5)
Adjusted net (loss)/profit after tax(6) (2.3) 115.2
Impairment reversal - operations and other receivables(7) 52.7 24.3
Impairment charge - operations and non-financial receivables(7) (37.6) (4.4)
Transaction costs and acceleration of unamortised costs on partial redemption (9.1) -
of Notes(8)
Gain on extinguishment of Notes 0.6 -
Williamson tailings facility - remediation costs (10.7) -
Williamson tailings facility - accelerated depreciation (5.2) -
WDL blocked parcel inventory write down and related receivable recognition(14) (12.5) -
WDL receivable recognition(14) 12.4
Movement in provision for unsettled and disputed tax claims 0.3 -
Human rights IGM claims provision and transaction (costs) / reversal of (8.5) 0.8
settlement agreement
Net unrealised foreign exchange loss (29.4) (36.4)
Taxation credit on unrealised foreign exchange loss(4) 1.2 2.2
Taxation charge on impairment reversal (13.8) -
(Loss) / profit from continuing operations (61.9) 101.7
Loss on discontinued operations, net of tax(7) (40.5) (13.6)
Net (loss) / profit after tax (102.4) 88.1
Earnings per share attributable to equity holders of the Company -
US cents
Basic (loss) / profit per share - from continuing and discontinued operations (54.21) 35.53
Basic (loss) / profit per share - from continuing operations (38.10) 40.74
Adjusted (loss) / profit per share - from continuing operations(9) (2.96) 48.01
As at 30 June 2023
As at
(US$ million) 30 June 2022
Unit (US$ million)
Cash at bank - (including restricted amounts) US$m 61.8 288.2
Diamond debtors US$m 8.9 37.4
Diamond inventories(14) US$m 65.9 52.7
/Cts 715,222 453,380
Loan notes (issued March 2021)(10) US$m 247.5 366.2
Bank loans and borrowings(11) US$m - -
Consolidated net debt(12) US$m 176.8 40.6
Bank facilities undrawn and available(11) US$m 53.1 61.5
Consolidated net debt : Adjusted EBITDA (rolling twelve months) 1.6x 0.15x
The following exchange rates have been used for this announcement: average for
FY 2023 US$1:ZAR17.77 (FY 2022: US$1:ZAR15.22); closing rate as at 30 June
2023 US$1:ZAR18.83 (30 June 2022: US$1:ZAR16.27).
Notes:
The Group uses several non-GAAP measures above and throughout this report to
focus on actual trading activity by removing certain non-cash or non-recurring
items. These measures include adjusted mining and processing costs, profit
from mining activities, adjusted EBITDA, adjusted net profit after tax,
adjusted earnings per share, adjusted US$ loan note, and consolidated net debt
for covenant measurement purposes. As these are non-GAAP measures, they
should not be considered as replacements for IFRS measures. The Group's
definition of these non-GAAP measures may not be comparable to other similarly
titled measures reported by other companies. The Board believes that such
alternative measures are useful as they exclude one-off items such as the
impairment charges and non-cash items to provide a clearer understanding of
the underlying trading performance of the Group.
1. Adjusted mining and processing costs are mining and processing
costs stated before depreciation.
2. Adjusted profit from mining activities is revenue less adjusted
mining and processing costs plus other direct income.
3. Adjusted corporate overhead is corporate overhead expenditure
less corporate depreciation, tender offer transaction costs and share-based
expense.
4. Adjusted EBITDA is stated before depreciation, amortisation of
right-of-use asset, share-based expense, net finance expense, tax expense,
impairment reversal/(charges), expected credit loss release/ (charge),
recovery of fees relating to investigation and settlement of human rights
abuse claims, Williamson tailings facility remediation costs and accelerated
depreciation, unrealised foreign exchange gains and (losses) and loss on
discontinued operations.
5. Tax expense is the tax expense for the Period excluding taxation
credit on unrealised foreign exchange gain/(loss) generated during the Year;
such exclusion more accurately reflects resultant adjusted net profit.
6. Adjusted net (loss)/profit after tax is net (loss)/profit after
tax stated before impairment (charge)/reversal, Williamson tailings facility
remediation costs and accelerated depreciation, recovery of fees relating to
investigation and settlement of human rights abuse claims net unrealised
foreign exchange losses and excluding taxation credit on net unrealised
foreign exchange losses and excluding a taxation charge on impairment
reversals.
7. Net impairment reversal of US$15.1 million (30 June 2022: US$19.9
million reversal) was due to the Group's impairment review of its operations
and other receivables. Refer to note 15 for further details.
The loss on discontinued operations reflects the results of the Koffiefontein
operation (net of tax), including impairment, of US$40.5 million (FY 2022
results have been amended for comparability) as per the requirements of IFRS 5
for an abandoned operation; refer to Note 18.
8. Transaction costs and acceleration of unamortised costs on
partial redemption of Notes comprise transaction costs of US$0.8 million
included within corporate expenditure (refer to note 5) and US$8.3 million in
respect of the redemption premium and acceleration of unamortised costs
included within Finance expense (refer to note 6).
9. Adjusted EPS from continuing operations is stated before
impairment reversal, gain on extinguishment of Notes net of unamortised costs,
acceleration of unamortised costs on Notes, Williamson tailings facility
remediation costs and accelerated depreciation, costs relating to
investigation and settlement of human rights abuse claims, and net unrealised
foreign exchange gains and losses, and excluding taxation credit on net
unrealised foreign exchange gains and losses and excluding a taxation charge
on impairment reversals.
10. The 2026 US$336.7 million loan notes, originally issued following
the capital restructuring (the "Restructuring") completed during March 2021,
have a carrying value of US$247.5 million (30 June 2022: US$366.2 million)
which represents the outstanding principal amount of US$209.7 million (after
the debt tender offers as announced in September and October 2022) plus
US$48.1 million of accrued interest and is stated net of unamortised
transaction costs capitalised of US$10.3 million. Refer to Note 8 for further
detail.
11. Bank loans and borrowings represent the Group's ZAR1 billion
(US$53.1 million) revolving credit facility which remained undrawn at Year end
and available. Subsequent to Year end, as a result of the deferment of the
June 2023 diamond tender, the Group drew down ZAR850 million (US$45.1 million)
on the RCF.
During the FY 2022, the South African banking facilities held with the Group's
previous consortium of South African lenders were settled and cancelled,
comprising of the revolving credit facility of ZAR404.6 million (US$24.9
million) (capital plus interest) and the term loan of ZAR893.2 million
(US$54.9 million) (capital plus interest).
12. Consolidated Net Debt is bank loans and borrowings plus loan notes,
less cash and less diamond debtors.
13. Operational free cashflow is defined as cash generated from
operations less cash outflows on the acquisition of property, plant and
equipment.
14. Diamond inventories for periods prior to 30 June 2023 include the
71,654.45 carat Williamson parcel of diamonds blocked for export during August
2017, with a carrying value of US$12.5 million. Under the Framework Agreement
entered into with the Government of Tanzania (GoT) in December 2021, it is
stated that the proceeds from the sale of this parcel are to be applied to the
Williamson mine to assist with the restart of operations and that in the event
such proceeds are not received by Williamson, Williamson is not required to
pay a US$20 million liability relating to the settlement of past tax disputes.
During recent discussions, the GoT confirmed that the blocked parcel was
partially sold during the period and so this parcel has been excluded from
diamond inventories and expensed to other direct mining expense with the
calculated fair value proceeds of US$12.3 million for the blocked parcel
recognised as other direct mining income and trade and other receivables as at
30 June 2023. During these recent discussions, the parties also confirmed
their intent to resolve the treatment of the blocked parcel sale proceeds and
the related US$20 million settlement liability.
Principal Business Risks
The Group is exposed to a number of risks and uncertainties which could have a
material impact on its long-term sustainability. Performance and management of
these risks forms an integral part of the management of the Group.
A summary of the risks identified as the Group's principal external, strategic
and operational risks (in no order of priority), which may impact the Group
over the next 12 months is listed below. A more detailed description of the
Group's principal risks will be included in the Company's FY 2023 Annual
Report.
External Risks Change in FY 2023
1. Rough diamond prices Higher - whilst diamond prices for Q1 to Q3 FY 2023 remained robust,
like-for-like diamond prices softened in Q4 FY 2023, with Tender 5 (May)
Risk appetite: High seeing a 13% reduction in like-for-like prices on Tender 4 (March). Due to
continuing softer prices resulting from elevated inventory levels in the
Risk Rating: Medium mid-stream on the back of what we consider to be a temporary slowdown in
demand for rough diamonds, the majority of sales from Tender 6, together with
Nature of risk: Long term the c. 76kcts withdrawn from Tender 5, were deferred and offered for sale in
Tender 1 of FY 2024 in August 2023, with like-for-like prices in Tender 1
declining by 4.3% on Tender 5. While subdued demand and pricing volatility are
expected to continue in the short-term, including from increased polished
inventory, prolonged weakness in the Chinese market, lab-grown diamond sales
in the bridal jewellery segment and higher interest rates impacting the
mid-stream in particular, we see the prevailing structural supply deficit
providing market support in the medium to longer term.
2. Currency Lower - The ZAR/USD rate weakened during FY 2023, opening at R16.27 and ending
the Year at R18.83, averaging R17.77 over the twelve-month period. Since Q3 FY
Risk appetite: High 2023, various domestic South African factors have contributed to the Rand's
continuing weakness which positively impacted Petra's FY 2023 financial
Risk Rating: Medium results.
Nature of risk: Long term
3. Country and political No change - The risk of political instability remains in South Africa and with
general elections due in 2024, is expected to increase. In addition, increased
Risk appetite: High levels of load shedding/curtailment in the Year continued to disrupt South
Africa. Furthermore, South Africa's non-aligned stance in the war between
Risk Rating: Medium Russia and Ukraine has been increasingly questioned.
Nature of risk: Long term Country and political risk in Tanzania has decreased due to the positive
economic and structural changes implemented by the government which was well
received by the international community. This has resulted in a significant
increase in Foreign Direct Investment and an upgrade in the country's credit
rating.
Strategic Risks Change in FY 2023
4. Group Liquidity Higher - Whilst the Group's balance sheet was strengthened through the
repurchase of the Company's loan notes totalling US$144.6m, resulting in
Risk appetite: Medium annual interest savings of c.US$15m, the Group experienced softening rough
diamond prices (see above) and operational challenges in FY 2023, including
Risk Rating: Medium lower grades at the Cullinan Mine, lower tonnes mined at Finsch and the
production suspension and remediation costs at Williamson arising from the TSF
Nature of risk: Short to long term failure in November 2022, which all impacted Petra's liquidity position. A
number of ongoing mitigating actions are being taken to address these
challenges. Koffiefontein was placed on care and maintenance during the Year
with activities underway towards closure.
5. Licence to operate: regulatory and social impact & community relations No Change - In light of operations at Koffiefontein having ceased and the mine
being placed on care and maintenance, community tensions in H1 of FY 2023
Risk appetite: Medium increased, though improved relations have been observed in H2 FY 2023
following extensive engagements with the local communities, the DMRE and the
Risk Rating: High local municipality.
Nature of risk: Long term At Williamson, the IGM became operational at the end of November 2022 with the
commencement of the pilot scheme and following completion of feasibility
studies for the ASM and ADI projects, the remaining escrow funds will now be
committed towards the ADI projects.
Whilst no fatalities or serious injuries were reported after the TSF failure
at Williamson, the livelihoods of a number of community members were affected.
A variety of short-term measures were initially taken, followed by an
assessment of the impact on the surrounding communities and longer-term
remediation measures. An Entitlement Framework has been developed that enables
community members impacted by the TSF failure to be appropriately compensated,
with Phase 1 and 2 compensation payments having already been made.
Operating Risks Change in FY 2023
6. Mining; production (including ROM grade and product mix volatility) Higher - Lower grades at the Cullinan Mine are expected to continue through FY
2024. This is attributable to the C-Cut cave maturity as the cave progresses
Risk appetite: Medium from SW to NE and the earlier than anticipated waste ingress from the
overlying depleted mining blocks. Several mitigating actions are underway to
Risk Rating: High address these grade issues, including:
Nature of risk: Long term • Tailings treatment has been maximised to partially offset lower carats
from the C-Cut.
• The re-opening of Tunnel 36 (which has already occurred) and Tunnel 41
and the establishment of Tunnels 46 and 50 (the development of which was
approved by the Board in FY 2023) will provide additional volume from FY 2025
and, in conjunction with production from the CC1E development (expected to
contribute meaningfully from FY 2025), will see grades move back towards
40cpht.
Finsch's production target fell short of guidance largely attributable to low
machine availability owing to an ageing underground fleet, challenges with the
centralised blasting system and emulsion quality and an extended rock-winder
breakdown, with mitigating actions in place to stabilise production, with the
extension projects at Finsch expected to improve grade and production
levels.
Whilst production at Williamson was suspended for the remainder of FY 2023 due
to the TSF failure in November 2022, commissioning of the interim TSF took
place in July 2023, enabling operations to restart at the beginning of Q1 FY
2024, ahead of schedule.
Operations at Koffiefontein have ceased and the mine has been placed on care
and maintenance.
7. Labour relations No Change - Stable labour relations were experienced at all operations
throughout FY 2023, noting that at Koffiefontein a section 189 retrenchment
Risk appetite: Medium process was concluded, with the mine subsequently being placed on care and
maintenance. For FY 2023, the Group has introduced a quarterly production
Risk Rating: Medium bonus scheme for lower band employees to ensure alignment with other incentive
structures across the Group.
Nature of risk: Short to medium term
Discussions with organised labour concerning a new wage agreement for the
South African operations are planned to commence in the coming months given
the current agreement ends in June 2024.
A Collective Bargaining Agreement with TAMICO, the majority union at
Williamson, was signed in November 2022.
8. Safety Higher - LTIFR and LTIs marginally increased to 0.24 and 17 respectively in
comparison to FY 2022 (0.22 and 15). The increased activities associated with
Risk appetite: Medium the ramping up of extension projects at the Cullinan and Finsch Mines has
contributed to this regression in safety performance and increased risk.
Risk Rating: Medium Whilst FY 2023 safety indicators showed a declining trend, improvements have
been made in Q4 FY 2023. Remedial actions, Group-wide learnings, visible felt
Nature of risk: Short to medium term leadership and behaviour intervention programmes with various focus areas have
been undertaken to address this trend.
9. Environment Higher - Following the TSF failure at Williamson in November 2022, significant
work was undertaken to contain the breach, determine the extent of the
Risk appetite: Medium environmental impact and commence environmental remediation. An investigation
is being conducted to determine the root cause of the TSF failure. WDL
Risk Rating: Medium continues to engage with Tanzania's environmental regulator regarding the
breach.
Nature of risk: Long term
Elevated water levels at the tailings facility (No 7 Dam) at the Cullinan Mine
have required permitted emergency releases of water to be made. The releases
have resulted in water quality and volume requirements being temporarily
exceeded which is permitted for emergency releases. Short- and long-term
mitigation measures to address water levels at the dam are being taken.
10. Climate Change No Change - During the Year, the Company developed its Climate Change Position
Statement and engaged Ernst & Young to develop a Climate Scenario Analysis
Risk appetite: High which identifies key climate risks and opportunities using different scenarios
across different time horizons, together with the impacts of these risks and
Risk Rating: Medium opportunities and existing and future resilience measures. Petra also
initiated a renewables strategy that, once implemented, will be key in
Nature of risk: Long term enabling Petra to reach its 2030 interim target of a 35-40% reduction in Scope
1 & 2 emissions (against Petra's 2019 baseline). Management continues to
monitor progress against annual climate change targets set for on-mine water
and electricity consumption and efficiency.
11. Capital Projects Higher - Whilst the CC1E and C-Cut extension projects at the Cullinan Mine and
the Lower Block 5 3 Levels SLC at Finsch remain on-track to deliver production
Risk appetite: Medium growth over the next three years, management have proactively initiated
various mitigating actions and expedited Trackless Mining Machinery and drill
Risk Rating: High rig availability to address the risk of these projects falling behind project
plans. Alternate labour sourcing strategies are also being considered.
Nature of risk: Short to medium term
12. Supply Chain Governance Higher - An independent external expert was engaged to conduct a gap analysis
of existing Supply Chain processes and systems, and this has resulted in
Risk appetite: Medium management initiating a project to address areas that require improvement.
During FY 2023, the diagnostic and design phases of the project were largely
Risk Rating: High completed, with implementation to commence during Q1 FY 2024. Management
expects to roll-out and embed the new way of working during FY 2024. The
Nature of risk: Short to medium term project focuses on Supply Chain processes, systems and structures with
enhancements expected in compliance, governance and risk management, improved
procurement, tender and supplier registration procedures and filling critical
roles in the function. An online due diligence platform, administered by an
external third party, went live in December 2022 to improve the vetting and
screening of suppliers.
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2023
US$ million Notes (Unaudited) (Restated)
Year ended Year ended
30 June 30 June
2023 2022
Revenue 325.3 563.7
Mining and processing costs (297.6) (356.6)
Other direct mining expense (12.9) (1.0)
Other direct mining income 12.3 -
Corporate expenditure including settlement costs 5 (22.9) (14.1)
Other corporate income 1.0 0.6
Impairment reversal of non-financial assets 15 52.7 21.4
Impairment charges of non-financial assets 15 (32.7) -
Impairment charge of other receivables 15 (4.9) (1.5)
Total operating costs (305.0) (351.2)
Financial income 6 11.1 18.7
Financial expense 6 (70.8) (91.7)
Gain on extinguishment of Notes net of unamortised costs 6,8 0.6 -
(Loss) / profit before tax (38.8) 139.5
Income tax charge (23.1) (37.8)
(Loss)/profit for the year from continuing operations (61.9) 101.7
Loss on discontinued operation including associated impairment charges (net of 18
tax)
(40.5) (13.6)
(Loss)/profit for the Year (102.4) 88.1
Attributable to:
Equity holders of the parent company (105.3) 69.0
Non-controlling interest 2.9 19.1
(102.4) 88.1
(Loss) / Profit per share attributable to the equity holders of the parent
during the Period:
From continuing operations:
Basic (loss)/earnings per share - US$ cents 13 (38.10) 40.74
Diluted (loss)/earnings per share - US$ cents 13 (38.10) 40.74
From continuing and discontinued operations:
Basic (loss)/earnings per share - US$ cents 13 (54.21) 35.53
Diluted (loss)/earnings per share - US$ cents 13 (54.21) 35.53
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2023
US$ million (Unaudited) (Audited)
Year ended Year ended
30 June 30 June
2023 2022
(Loss) / profit for the Year (102.4) 88.1
Exchange differences on translation of the share-based payment reserve 0.2 (0.3)
Exchange differences on translation of foreign operations(1) (50.4) (46.8)
Exchange differences on non-controlling interest(1) (1.9) (0.4)
Total comprehensive (loss) / income for the Year (154.5) 40.6
Total comprehensive income and expense attributable to:
Equity holders of the parent company (155.5) 21.9
Non-controlling interest 1.0 18.7
(154.5) 40.6
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 30 JUNE 2023
US$ million Notes (Unaudited) (Audited)
30 June 30 June
2023 2022
ASSETS
Non-current assets
Property, plant and equipment 7 598.1 633.2
Right-of-use assets 26.6 21.9
BEE loans and receivables 11 37.3 44.6
Other receivables 2 6.6 2.6
Total non-current assets 668.6 702.3
Current assets
Trade and other receivables 42.0 49.8
Inventories 88.4 70.6
Cash and cash equivalents (including restricted amounts) 61.8 288.2
Total current assets 192.2 408.6
Total assets 860.8 1,110.9
EQUITY AND LIABILITIES
Equity
Share capital 12 145.7 145.7
Share premium account 12 609.5 959.5
Foreign currency translation reserve (499.3) (448.9)
Share-based payment reserve 3.9 1.9
Other reserves (0.8) (0.8)
Accumulated reserves / (losses) 12 61.7 (183.6)
Attributable to equity holders of the parent company 320.7 473.8
Non-controlling interest (3.9) 4.7
Total equity 316.8 478.5
Liabilities
Non-current liabilities
Loans and borrowings 8 222.4 353.9
Provisions 2 104.1 97.7
Lease liabilities 25.8 19.2
Deferred tax liabilities 82.0 71.3
Total non-current liabilities 434.3 542.1
Current liabilities
Loans and borrowings 8 25.1 12.3
Lease liabilities 3.0 3.2
Trade and other payables 69.0 74.8
Provisions 2 12.6 -
Total current liabilities 109.7 90.3
Total liabilities 544.0 632.4
Total equity and liabilities 860.8 1,110.9
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2023
US$ million Notes (Unaudited) (Restated)
Year ended 30 June Year ended
2023 30 June
2022
(Loss)/profit before taxation for the Year from continuing and discontinued
operations
(79.3) 125.9
Depreciation of property plant and equipment 82.5 82.5
Amortisation of right-of-use asset 3.2 2.5
Impairment reversal of non-financial assets 15 (52.7) (21.4)
Impairment charges of non-financial assets 15 32.7 -
Impairment charge - other receivables 15 4.9 1.5
Movement in provisions 7.0 1.0
Dividend received from BEE partner (0.5) (0.6)
Gain on extinguishment on Notes (0.6) -
Non-cash items relating to discontinued operations 21.5 1.2
Financial income 6 (11.1) (18.7)
Financial expense 6 70.8 91.7
Loss on disposal of property, plant and equipment 1.4 1.6
Share based payments 2.3 1.1
Operating profit before working capital changes 82.1 268.3
Increase in trade and other receivables 0.4 (7.1)
Increase in trade and other payables (9.9) 24.5
Increase in inventories (26.1) (1.7)
Cash generated from operations 46.5 284.0
Net realised gains on foreign exchange contracts 1.9 12.6
Finance costs paid (8.4) (6.3)
Income tax received / (paid) 0.6 (7.8)
Net cash generated from operating activities 40.6 282.5
Cash flows from investing activities
Acquisition of property, plant and equipment (113.0) (54.0)
Proceeds from sale of property, plant and equipment 1.0 -
Loan repayment from BEE partners - 0.2
Dividend paid to BEE partners (3.8) (3.5)
Dividend received from BEE partners 0.5 0.6
Repayment from KEMJV 0.5 2.5
Finance income received 3.9 1.3
Net cash utilised in investing activities (110.9) (52.9)
Cash flows from financing activities
Cash paid on lease liabilities (4.6) (3.2)
Repayment of borrowings (including Notes redemption premium of US$1.5 million; 8
30 June 2022: US$nil)
(146.1) (98.2)
Net cash utilised by financing activities (150.7) (101.4)
Net (decrease) / increase in cash and cash equivalents (221.0) 128.2
Cash and cash equivalents at beginning of the Year 271.9 156.9
Effect of exchange rate fluctuations on cash held (6.8) (13.2)
Cash and cash equivalents at end of the Year(1) 44.1 271.9
1. Cash and cash equivalents in the Consolidated Statement of
Financial Position includes restricted cash of US$17.7 million (30 June 2022:
US$16.3 million) and unrestricted cash of US$44.1 million (30 June 2022:
US$271.9 million.
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2023
(Unaudited) Share Share Foreign Share-based Other Accumulated reserves / (losses) Attributable Non-controlling Total
capital premium currency payment reserves to the interest equity
account translation reserve parent
US$ million reserve
At 1 July 2022 145.7 959.5 (448.9) 1.9 (0.8) (183.6) 473.8 4.7 478.5
(Loss) / profit for the Year - - - - - (105.3) (105.3) 2.9 (102.4)
Other comprehensive (expense) / income - - (50.4) 0.2 - - (50.2) (1.9) (52.1)
Conversion of share premium (refer note 12) - (350.0) - - - 350.0 - - -
Dividend paid to non-controlling interest shareholders - - - - - - - (9.6) (9.6)
Equity settled share-based payments - - - 2.4 - - 2.4 - 2.4
Transfer between reserves - - - (0.6) - 0.6 - - -
At 30 June 2023 145.7 609.5 (499.3) 3.9 (0.8) 61.7 320.7 (3.9) 316.8
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FOR THE YEAR ENDED 30 JUNE 2023
(Unaudited) Share Share Foreign Share-based Other Accumulated losses Attributable Non-controlling Total
capital premium currency payment reserves to the interest equity
account translation reserve parent
US$ million reserve
At 1 July 2021 145.7 959.5 (402.1) 1.8 (0.8) (253.3) 450.8 (10.5) 440.3
Profit for the Year - - - - - 69.0 69.0 19.1 88.1
Other comprehensive expense - - (46.8) (0.3) - - (47.1) (0.4) (47.5)
Dividend paid to non-controlling interest shareholders - - - - - - - (3.5) (3.5)
Equity settled share-based payments - - - 1.1 - - 1.1 - 1.1
Transfer between reserves: - - - (0.7) - 0.7 - - -
At 30 June 2022 145.7 959.5 (448.9) 1.9 (0.8) (183.6) 473.8 4.7 478.5
NOTES TO THE CONDENSED CONSOLIDATED PRELIMINARY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2023
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
Preliminary Financial Statements of the Company for the year ended 30 June
2023 comprise the Company and its subsidiaries, joint operations and
associates (together referred to as the "Group").
2. ACCOUNTING POLICIES
This preliminary report, which is unaudited, does not include all the notes of
the type normally included in an annual financial report. This condensed
report is to be read in conjunction with the Annual Report for the year ended
30 June 2022, and any public announcements made by the Group during the
reporting period. The annual financial report for the year ended 30 June 2022
was prepared in accordance with International Financial Reporting Standards as
adopted by the European Union ("IFRS's") and the accounting policies applied
in this condensed preliminary report are consistent with the polices applied
in the annual financial report for the year ended 30 June 2022 unless
otherwise noted. The preliminary report has been prepared in accordance with
accounting policies compliant with International Financial Reporting Standards
as adopted by the European Union.
Accounting policy for discontinued operations
Where an operation within the Group is separately identified or forms part of
a separate reporting structure, the Group will classify the asset as a
discontinued operation, in accordance with IFRS 5. For this to be the case,
the asset must represent a separate major line of business or geographical
area of operations, is part of a single coordinated 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. Non-current assets (or
disposal groups) to be abandoned include non-current assets (or disposal
groups) that are to be used to the end of their economic life and non-current
assets (or disposal groups) that are to be closed rather than sold. The
disposal group's assets are measured at the lower of their carrying amount and
recoverable value less costs to sell. An impairment loss is recognised for any
initial or subsequent write-down of the asset to recoverable value less costs
to sell. A gain is recognised for any subsequent increases in recoverable
value less costs to sell of an asset but not in excess of any cumulative
impairment loss previously recognised. The assets and liabilities of a
disposal group are presented separately from the other assets and liabilities
in the statement of financial position.
A discontinued operation is a component of the entity that has been disposed
of or is classified as held for sale, or if it is designated as abandoned and
represents a separate major line of business or geographical area of
operations, is part of a single coordinated plan to dispose of such a line of
business or area of operations, or is a subsidiary acquired exclusively with a
view to resell. The results of discontinued operations are presented
separately in the statement of profit or loss.
Unrealised foreign exchange gains and losses on historic retranslation of the
subsidiaries results into US Dollars are recycled to the consolidated income
statement upon cessation of the subsidiary. The Group designates the results
of discontinued activities, including those of disposed subsidiaries,
separately in accordance with IFRS and reclassifies the results of the
operation in the comparative period from continuing to discontinued
operations.
Basis of preparation including going concern
Going concern
The twelve-month period to 30 June 2023 delivered US$113.1 million in adjusted
EBITDA and US$40.6 million in cash from operating activities, while total
capital expenditure amounted to US$117.1 million for the Year following the
ramping up of underground development projects at both Cullinan Mine and
Finsch. Consolidated Net Debt increased from US$40.6 million at 30 June 2022
to US$176.8 million as at 30 June 2023. This was largely driven by the
decision to defer a portion of Tender 5 (May) and the majority of Tender 6
(June) in FY 2023 on account of seasonal weakness coupled with a more cautious
and disciplined approach with regards to inventory management by the
mid-stream as a result of high finance costs. Based on the previous definition
of Exceptional Stones (diamonds sold for US$5 million or more each), FY 2023
realised US$12.6 million as a contribution from these Exceptional Stones,
compared to US$89.1 million in FY 2022. Applying the updated definition of
Exceptional Stones (diamonds sold for US$15 million or more each), there was
no contribution from Exceptional Stones in FY 2023, compared to US$40.2
million realised in FY 2022.
Operational Update
The first half of FY 2023 saw Petra's operations having to deal with
operational challenges. CDM experienced lower grades in the C-Cut block cave
on account of earlier than expected waste ingress, resulting in lower ROM
carats being recovered, while also lowering the projected ROM carat production
for the remainder of FY 2023 and FY 2024. FDM challenges were as a result of
low machine availability owing to an aging underground fleet, challenges with
the centralised blasting system and emulsion quality and an extended
rock-winder breakdown. WDL was performing well during H1 FY 2023, until the
Tailings Storage Facility (TSF) incident in the 1st week of November 2022,
which led to a suspension of operations for the remainder of the Year.
Finally, KDM continued to struggle in achieving its budgeted production
targets and was subsequently placed on Care & Maintenance (C&M) in
November 2022.
Several mitigation steps were initiated during H2 FY 2023 to minimise the
above impacts. At CDM, these included re-opening of Tunnels 36 (which has
already occurred) and 41 and the addition of pillar retreats, while the
addition of two more tunnels (T46 and T50) adjacent to the current C-Cut
centre was also approved during H2 FY 2023, both of which are anticipated to
deliver on relatively higher-grade ore towards the end of FY 2024 (compared to
the current grades being achieved from the balance of the C-Cut). The CC1E
project, which is expected to significantly increase the overall ROM grade
at CDM, remains on track for production to commence in FY 2025.
At FDM, mitigation steps included new underground equipment being delivered
and commissioned, coupled with positive changes to the blasting process, the
introduction of new long hole drill rigs and Load Haul Dump (LHDs) loaders as
well as the appointment of individuals to a number of key positions.
Furthermore, the 3-Level SLC project scope was amended to go up to 90L, which
adds additional production tonnes to the Life of Mine plan. The mitigation
steps undertaken are expected to stabilise production at FDM, while the
3-Level-SLC 90L project is planned to start contributing to production from FY
2025 onwards, supporting increased grades at FDM.
At Williamson, the TSF failure in November 2022 significantly disrupted WDL's
operational run-rate which had largely stabilised after a lengthy care &
maintenance period post the COVID-19 pandemic. There were no serious injuries
as a result of the failure, both at the mine and the surrounding communities.
Since the TSF incident, WDL has been focused on rehabilitation efforts due to
the tailings failure, with new infrastructure being built to further
safe-guard the communities downstream of the mine. In parallel, a new TSF was
constructed, which received the required permits and complies with the GISTM
standards. Subsequently, production resumed at WDL in July 2023, shortly after
Year-end, with a steady ramp-up currently underway. While most of the
activities were funded by WDL's on-mine cash reserves, PDL and the mining
contractor, Taifa, have advanced priority loans totalling US$12m to assist
WDL's liquidity requirements, with a local overdraft facility also in place.
WDL's short term liquidity needs are receiving focused attention to ensure WDL
remains as a going concern.
As noted above, KDM was placed on C&M in November 2022. The KDM workforce
was retrenched through a Section 189(3) process, as set out in the South
African Labour Relations Act. Certain of the retrenched employees were
appointed on fixed-term contracts to carry out C&M activities. In
parallel, the KDM sales process failed to identify a possible buyer.
Consequently, the mine has commenced with detailed closure planning, with the
main focus on obtaining the required permits to cease dewatering of the
underground workings, which remains a significant cost element during the
C&M period. The Social transition, including implementation of the
committed Social & Labour Plans (SLP) also continue in parallel to the
C&M activities and the closure roadmap planning.
Diamond prices and Market Outlook
The diamond prices consolidated their gains from FY 2022 up until the Q3 FY
2023, but experienced softness in Q4 of FY 2023. The softening of the diamond
prices during Q4 FY 2023 is ascribed to two main factors, namely the seasonal
weakness due to summer holidays and lack of festive induced demand coupled
with high financing costs, on account of the elevated interest rates,
resulting in a far more cautious and disciplined approach applied by the
midstream for their inventory management. Indications are that interest rates
have now peaked and will start to decline, providing support to our view of
improved demand in the medium-term because of the structural supply deficit,
as well as entering the seasonally stronger period ahead of Diwali,
Thanksgiving, Christmas and the Chinese New Year, with an anticipated increase
in demand for diamond jewellery.
The Group achieved an all-in diamond price of US$135/ct during FY 2023
(excluding contributions from Exceptional Stones, applying the previous
definition) compared to an all-in diamond price of US$140/ct during FY 2022
(also excluding contributions from Exceptional Stones, again applying the
previous definition). This represents a marginal reduction of 3.6%
year-on-year and was partly also influenced by lower contributions from both
WDL and KDM product mix, which averages higher US$/ct prices, albeit at
reduced volumes. Post period end, Tender 1 of FY 2024 closed in August, and
realised prices in line with expected levels.
Williamson updates
The Group announced the signing of a framework agreement with the Government
of Tanzania (GoT) in December 2021, 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. During the Year, it came to
Petra's attention that the GoT sold the blocked diamond parcel, either
partially or fully. The framework agreement provides for the proceeds of the
sale of this parcel to be allocated to Williamson. The GoT has not yet
remitted the proceeds to the mine, and Petra has opened discussions with the
GoT to resolve this matter in due course. Should the proceeds not be remitted,
in accordance with the terms of the framework agreement, the obligation to
commence with payments towards settling an amount of US$20 million owed to the
GoT related to historic disputes, would not be triggered.
The framework agreement is expected to provide fiscal stability for the mine
and its investors and is expected to become effective during the second half
of FY 2024, pending satisfaction of certain suspensive conditions.
During FY 2023, Petra and Taifa (previously Caspian) executed a Sale of Shares
Agreement, to give effect to a Memorandum of Understanding (MOU) entered into
in December 2021, for Taifa to acquire 50% of Petra's stake in Williamson for
a purchase consideration of US$15m. This agreement is subject to certain
regulatory approvals and is anticipated to become effective during the
second half of FY 2024.
Williamson short term liquidity outlook
It should be noted that the Group's Going Concern assessment is performed
excluding Williamson's trading results, as Williamson is considered a
ring-fenced operation for these purposes, as per the definitions and
requirements set forth in the Group's Financing agreements.
Williamson continues to focus on steadily ramping-up production post its
restart in July 2023, and is currently performing ahead of its assumed ramp-up
profile. Williamson has also successfully upsized its overdraft facility from
US$7 million to US$10 million, effective September 2023. Williamson may,
however, encounter short-term liquidity challenges over the next 12 - 18
months. These may be mitigated by means of optimising tender timings,
initiating cost reduction/deferral opportunities, and/or benefitting from the
faster-than-anticipated startup and increasing production.
From a Group perspective, if these levers at Williamson materialise, then as
a last resort, there may be further contribution of up to US$5 million from
the Group to Williamson, as a priority shareholder loan, during the going
concern assessment period. This further cash contribution to Williamson will
be at the discretion of the Petra Board and is not expected to impact the
Group's ability to continue as a Going Concern, should this materialise.
Bond tender offer and South African banking facilities
During FY 2023, the Group carried out a successful tender offer to its
Noteholders, repaying the Noteholders US$144.6 million (principal plus
interest), utilising existing cash reserves, resulting in further deleveraging
of the Group. This will save the Group c.US$15 million per annum in interest.
The Group's ZAR 1 billion senior Revolving Credit Facility (RCF) facility
remained undrawn at 30 June 2023, with the Group having access to the full ZAR
1 billion (US$53.1 million). Post Year-end, the Group utilised ZAR 850 million
following a decision to defer tenders during Q4 FY 2023, as noted above. The
Group anticipates settling the drawn balances during H1 FY 2024 from the
proceeds of sales tenders.
The Group continues to assess opportunities for further debt optimization in
the current market, with the Group's bonds maturing in March 2026.
Forecast liquidity and covenants
The Board has reviewed the Group's forecasts with various sensitivities
applied for the Going Concern assessment to December 2024, including both
forecast liquidity and covenant measurements. As per the First Lien
agreements, the liquidity and covenant measurements exclude contributions from
Williamson's trading results and only recognises cash distributions payable to
Petra upon forecasted receipt, or Petra's funding obligations towards
Williamson upon payment.
The Board has given careful consideration to potential risks identified in
meeting the forecasts under the review period. Therefore, the following
downside sensitivities have been performed (sensitivities applied throughout
the period) in assessing the Group's ability to operate as a going concern (in
addition to the Base Case) at the date of this report:
• ZAR stronger by 5%
• Revenue down 10%
• OPEX up by 5% (could be higher inflation, logistics costs,
direct energy costs, etc.)
• Extension CAPEX up by 5%
• Combined Sensitivity: Revenue down 5% + ZAR stronger by 5%
(effectively resulting in OPEX and total CAPEX up by 5% in USD terms)
The forward-looking covenant measurements for the base case and sensitised
cases do not project any breaches for any of the covenants, other than the
potential minimum liquidity covenant for the unmitigated Combined- and Revenue
down 10% sensitivities during the 18-month review period.
Any potential liquidity breaches as a result of the above sensitivities could
be cured by means of the following levers at Management's disposal:
a. Hedging opportunities - the Group actively monitors the USD:ZAR
exchange rate and pro-actively locks in hedges to benefit from periods of
weaker ZAR, which results in cash flow savings compared to the base case
USD:ZAR forecast;
b. Deferral of Feasibility Studies - this includes planned costs
associated with feasibility studies on future extension opportunities;
c. Release of diamond inventory - the Group would be able to release
inventory through optimising mine to market lead times and/or more frequent
tenders;
d. Deferral of extension CAPEX - the Group is projecting substantial
CAPEX spend largely driven by the approved extension projects at CDM &
FDM;
e. OPEX and SIB CAPEX Cost Savings or deferrals - the Group, upon
further assessment and as may be required once the above levers are
extinguished, will look to initiate potential cost avoidance and/or deferral
measures, such as temporary freezing of non-critical appointments, cash cost
reduction initiatives targeting non-critical spend, working capital
management, etc.
Management will implement the required mitigation levers and believes it would
be able to prevent potential liquidity covenant breaches, in the event that
the downside sensitivities materialise during the going concern period.
Conclusion
The Board is of the view that despite the current volatility being
experienced, the supply/demand fundamentals of the diamond market remain
intact, with the Group also continuing to benefit from an improving operating
model throughout the review period and beyond.
Based on its assessment of the forecasts, principal risks and uncertainties
and mitigating actions considered available to the Group in the event of
downside scenarios, the Board confirms that it is satisfied the Group will be
able to continue to operate and meet its liabilities as they fall due over the
review period. Accordingly, the Board have concluded that the going concern
basis in the preparation of the financial statements is appropriate and that
there are no material uncertainties that would cast doubt on that basis of
preparation.
New standards and interpretations applied
The IASB has issued new standards, amendments and interpretations to existing
standards with an effective date on or after 1 July 2022 which are not
considered to have a material impact on the Group during the Period under
review.
New standards and interpretations not yet effective
Certain new standards, amendments and interpretations to existing standards
have been published that are mandatory for the Group's accounting periods
beginning after 1 July 2023 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 to IAS1 are effective for periods beginning on or after 1
January 2024. 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 preliminary financial statements
requires management to make estimates and judgements and form assumptions that
affect the reported amounts of the assets and liabilities, reported revenue
and costs during the periods presented therein, and the disclosure of
contingent liabilities at the date of the preliminary 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:
Going concern
Management have considered the Group's ability to meet its obligations as they
fall due for a period of at least 12 months from the date of this report and,
in light of this review and the current financial position, they are satisfied
that the Group has access to adequate resources to continue in operational
existence for the foreseeable future. As part of its going concern assessment,
the Group exercised judgement in making assumptions about forecasted 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 and other macroeconomic factors.
Impairment reviews
The Group prepares impairment models and assesses mining assets for impairment
or reversals of previous impairments. While conducting an impairment test of
its assets using recoverable values using the current life of mine plans, the
Group exercised judgement in making assumptions about future rough diamond
prices, foreign exchange rates, volumes of production, ore reserves and
resources included in the current life of mine plans, future development and
production costs and factors such as inflation and discount rates. Changes in
estimates used can result in significant changes to the 'Consolidated Income
Statement' and 'Statement of Financial Position'.
Cullinan, Finsch, Koffiefontein and Williamson Mines
The impairment tests for the Cullinan, Finsch and Williamson Mines indicated a
net impairment reversal of US$20.0 million to be recognised, on a carrying
value of the Group's property, plant and equipment of US$573.8 million
(pre-impairment). This follows US$21.1 million impairment reversal recognised
at 30 June 2022 (comprising Koffiefontein impairment charge of US$0.3 million
and a Group level impairment reversal relating to Williamson, previously
recognised under IFRS 5, of US$21.4 million as Williamson was no longer
considered an asset held for sale) on a carrying value of the Group's
property, plant and equipment of US$608.2 million (pre-impairment) at the time
of recognition. For further details of the inputs, assumptions and
sensitivities in the impairment model, refer to note 15. For impairment
considerations of Koffiefontein, refer to note 18.
Recoverability of trade and other receivable, ownership of blocked diamond
parcel and disputed tax claims provision in Tanzania
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 had been blocked for export to Petra's
marketing office in Antwerp.
The confirmation from the GoT confirming that the blocked diamond parcel has
been partially sold, resulted in the inventory no longer being available for
sale. As such, the full carrying value of US$12.5 million (30 June 2022:
US$12.5 million) has been expensed as other direct mining expense in the
Consolidated Income Statement as at 30 June 2023. Management have applied
judgement to the sales proceeds of the blocked diamond parcel by estimating
the fair value as at 30 June 2023, based on the original valuation of US$14.8
million (11 September 2017), the movement in the diamond index (147.1 in Q1
FY2017, compared to 162.1 at June 2023), a two-year expected delay to
concluding the discussions with the GoT and a discount rate of 14%. Based on
the aforesaid factors a fair value of US$12.3 million was recognised in the
Consolidated Income Statement as other direct mining income/expense with a
trade and other receivable recognised in the Statement of Financial Position
as at 30 June 2023. The blocked diamond parcel was written up from its net
realisable value of prior periods to historical cost during FY 2022. The
recommencement of operations and the diamond tenders at Williamson during FY
2022 provided additional information for management to assess the value of the
blocked diamond parcel forming the basis used to revalue the diamond parcel to
the lower of cost or net realisable value.
The assessment of the recoverability of the trade and other receivable
required significant judgement. In making such a judgement, the Group
considered the Framework Agreement that was signed with the GoT on 13 December
2021, ongoing discussions held with the GoT regarding the receipt of the
proceeds from the partial disposal of the diamond parcel and legal advice
received from the Group's in-country attorneys which supports the Group's
position.
Under the Framework Agreement entered into with the GoT in December 2021, it
is stated that the proceeds from the sale of the blocked diamond parcel are to
be applied to the Williamson mine to assist with the restart of operations
(which had previously been on C&M from April 2020 to August 2021) and that
in the event such proceeds are not received by Williamson, Williamson is not
required to pay a US$20 million liability relating to the settlement of past
tax disputes (refer to note 16 for further detail). During recent discussions,
the parties also confirmed their intent to resolve how to treat the blocked
parcel sale proceeds and the related US$20 million settlement liability.
While these engagements between the Company and the GoT are ongoing, based on
the above judgements and assessment thereof, management remain confident that
based on the signed Framework Agreement, and the legal advice received from
the Group's in-country attorneys, WDL will derive future economic benefit from
the sale proceeds of the parcel (both the portion already sold and any portion
that is yet to be sold).
Recoverability of VAT in Tanzania
The Group has VAT receivable of US$6.6 million (30 June 2022: US$2.6 million)
in respect of the Williamson mine, all of which are past due and have
therefore been classified, after provision including amounts related to
providing for a time-value of money inclusive of risk adjustments for various
factors, as non-current given the potential delays in receipt.
The VAT receivable as at 30 June 2023, can be split into two identifiable
component time periods as set out below:
30 June 2023
US$ million VAT Receivable Provision Carrying value
Pre July 2017 and Post June 2020 16.5 (9.9) 6.6
16.5 (9.9) 6.6
30 June 2022
US$ million VAT Receivable Provision Written off Carrying value
July 2017 to June 2020 26.9 - (26.9) -
Pre July 2017 and Post June 2020 8.6 (6.0) - 2.6
35.5 (6.0) (26.9) 2.6
Pre-July 2017 and Post-June 2020
An amount of US$16.5 million (30 June 2022: US$8.6 million) of VAT is
receivable for the period for the period pre-July 2017 and subsequent to 1
July 2020. The Group is considering various alternatives in pursuing payment
in accordance with legislation. A provision of US$9.9 million (30 June 2022:
US$6.0 million), given the uncertainty around the timing of receipts of the
amount outstanding, has been provided for against the US$16.5 million (30 June
2022: US$8.6 million) receivable resulting in a carrying value of US$6.6
million (30 June 2022: US$2.6 million).
While the remaining pre-July 2017 and post-July 2020 VAT balance is considered
recoverable, significant uncertainty exists regarding the timing of receipt. A
discount rate of 14.00% inclusive of estimated country credit risk has been
applied to the expected cash receipts. A 1% increase in the discount rate
would increase the provision by US$0.4 million and a one year delay would
increase the provision by US$0.8 million.
During the Year, an impairment charge of US$3.9 million (30 June 2022: US$4.1
million) was recognised in the Consolidated Income Statement.
BEE receivables - expected credit loss provision
The Group has applied the expected credit loss impairment model to its BEE
loans receivable. In determining the extent to which expected credit losses
may apply, the Group assessed the future free cashflows to be generated by the
mining operations, based on the current mine plans. In assessing the future
cashflows, the Group considered the diamond price outlook and the probability
of reaching an offset agreement. Based on the assessment, no expected credit
loss reversal was recognised in the respective periods. For further detail
refer to note 11.
Life of mine and ore reserves and resources
There are numerous risks inherent in estimating ore reserves and resources and
the associated current life of mine plan. The life of mine plan is the current
approved management plan for ore extraction that considers specific resources
and associated capital expenditure. The life of mine plan frequently includes
less tonnes than the total reserves and resources that are set out in the
Group's Resource Statement and which management may consider to be
economically viable and capable of future extraction.
Management must make a number of assumptions when making estimates of reserves
and resources, including assumptions as to exchange rates, rough diamond and
other commodity prices, extraction costs, recovery and production rates. Any
such estimates and assumptions may change as new information becomes
available. Changes in exchange rates, commodity prices, extraction costs,
recovery and production rates may change the economic viability of ore
reserves and resources and may ultimately result in the restatement of the ore
reserves and resources and potential impairment to the carrying value of the
mining assets and life of mine plans. Refer to note 15 for further detail on
the assumptions.
The current life of mine plans are used to determine the ore tonnes and
capital expenditure in the impairment tests. Ore reserves and resources,
both those included in the life of mine and certain additional tonnes which
form part of reserves and resources considered to be sufficiently certain and
economically viable, also impact the depreciation of mining assets depreciated
on a unit of production basis. Ore reserves and resources, outside the current
mine plan further impact the estimated date of decommissioning and
rehabilitation.
Williamson Tailings Storage Facility
On 7 November 2022, the tailings storage facility at the Williamson mine was
breached, resulting in flooding away from the pit which extended into certain
areas outside of the mine lease area. As a result, remediation costs relating
to the incident have been incurred during the Period and additional costs will
be incurred going forward. The remediation costs comprise establishing the
root cause of the failure, humanitarian relief to the affected community,
livelihood and environmental restoration and costs to repair. Judgement has
been applied by Management in assessing the future remediation costs.
Management have considered the current work streams, the estimated time of
completion and appropriate information received from suppliers and contractors
involved in the remediation process.
In FY 2023, US$2.4 million of costs, comprising management's best estimate
based on the current information available, has been provided for in respect
of ongoing remediation costs.
Human rights settlement claims
The IGM is a non-judicial process that has the capacity to investigate and
resolve complaints alleging severe human rights impacts in connection with
security operations at the Williamson mine. It is being overseen by an
Independent Panel of Tanzanian experts taking an approach informed by
principles of Tanzanian law, and with complainants having access to free and
independent advice from local lawyers. The overall aim of the IGM is to
promote reconciliation between the Williamson Diamond Mine, directly affected
parties and the broader community by providing remedy to those individuals who
have suffered severe human rights impacts. Petra Diamonds Limited (PDL) has
agreed to fund the remedies determined by the IGM.
On 28 November 2022, the IGM became operational with the commencement of the
IGM's pilot phase. The pilot phase, which was completed in May 2023, has
allowed the IGM's systems and procedures to be further developed and adjusted
to take into account learnings. The Independent Panel ("IP") have started
making decisions on the merits of the cases considered during the pilot phase
and the associated remedies for successful grievances.
Judgement has been applied by Management in assessing the estimated future
cost of remedies for successful grievances based on the outcome of claims
investigated during the pilot phase. Management have assessed the results and
performed their own estimate based on calculations received from consultants.
The estimate makes a number of different assumptions, including, amongst
others, regarding the categories of the grievances, the success rates of the
grievances and the settlement payment that apply to successful grievances.
These estimates also do not make any allowance for non-financial remedies that
the IP may award. The concluded cases of the initial pilot phase grievances
have been extrapolated across the grievance population of 5,577, based on the
average claim settlement per category and the various categories of the
grievances (nature of claim). Management's assessment resulted in estimated
aggregate costs of US$7.9 million to be provided at Year end; this compares to
a range estimated by external consultants of US$ 7.2 - 10.1 million. The
estimate will be reassessed at each future reporting date.
Koffiefontein - discontinued operation
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
abandoned, and represents a separate major line of business or geographical
area of operations. Judgement is required when determining whether the
component represents a separate major line of business or geographical area of
operations. Judgement is required when determining whether the component
represents an abandoned operation. This was applied to the classification of
the Koffiefontein mine as a discontinued operation. The Koffiefontein mine is
considered a major geographical area of operations which has been reported as
a separate segment in the past.
The Koffiefontein operation was placed on care and maintenance in November
2022 after it continuously failed in achieving its budgeted production
targets. The operation mine is considered to have reached the end of its
economic life and has commenced with detailed closure planning. The income
producing activities of the operation which involve the mining, recovery and
sale of rough diamonds have ceased. Care and maintenance activities have
commenced and are ongoing. These ongoing activities at the Koffiefontein
operation are more focused towards identifying and managing the mine's ongoing
environmental compliance obligations in terms of local mining and
environmental legislation and the implementation of the committed Social and
Labour Plans (SLP). As these are legislative requirements, these activities
are necessary and cannot be avoided.
Based on the above, management considered that the Koffiefontein mine is
abandoned and therefore a discontinued operation and as such Management have
determined that the classification of a discontinued operation in terms of
IFRS 5 to be appropriate at 30 June 2023. Refer to note 18 for further
details.
Koffiefontein - care and maintenance
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of past events, for which it is probable that an
outflow of economic benefits will occur and where a reliable estimate can be
made of the amount of the obligation. Where the effect of discounting is
material, provisions are discounted. The discount rate used is a pre-tax rate
that reflects current market assessments of the time value of money and, where
appropriate, the risks specific to the liability.
As mentioned above, income producing activities of the Koffiefontein operation
have ceased and care and maintenance activities have commenced. These ongoing
activities are a necessary bridge to eventual closure of the mine.
When a mine is not in production, environmental degradation continues and
needs to be monitored closely even though the mine is not fully operational.
As the Koffiefontein operation has reached end of its Life of Mine (LOM) and a
decision has been taken by management to close the operation, the committed
costs associated with operating Koffiefontein during the care and maintenance
phase are more focused towards identifying and managing the mine's ongoing
environmental compliance obligations until such time that a closure
certificate is issued by the Department of Mineral Resources and Energy
(DMRE). As such, there is a present obligation that exists for these committed
costs related to care and maintenance at Year end.
Significant estimates and assumptions are made in determining the amount
attributable to care and maintenance provisions. These deal with uncertainties
such as the regulatory framework, timing and future costs. In determining
the amount attributable to care and maintenance provisions at Koffiefontein,
management used a discount rate of 10.5%, estimated timing to final closure of
11 years and an inflation rate of 6%. Management's estimate of costs has taken
into account discussions with suppliers, contractors, quotes and historical on
mine costs. Management's assessment resulted in estimated aggregate costs of
US$10.7 million provided at Year end. The estimate will be reassessed at
each future reporting date.
Other key estimates and judgements
In addition to the key estimates and judgements disclosed above, the following
estimates and judgements have not significantly changed from those disclosed
in the FY 2022 Annual Report and will be discussed in further detail in the FY
2023 Annual Report:
- Provision for rehabilitation
- Inventory and inventory stockpile
- Depreciation
- Pension and post-retirement medical fund schemes
- Net investments in foreign operations
- Taxation
3. DIVIDENDS
No dividends have been declared in respect of the current Year (30 June 2022:
US$nil).
4. SEGMENTAL INFORMATION
Segment information is presented in respect of the Group's operating and
geographical segments:
Mining - the extraction and sale of rough diamonds from mining operations in
South Africa and Tanzania.
Corporate - administrative activities in the United Kingdom.
Beneficiation - beneficiation activities in South Africa.
Segments are based on the Group's management and internal reporting structure.
Management reviews the Group's performance by reviewing the results of the
mining activities in South Africa, Tanzania and reviewing the results of
reviewing the corporate administration expenses in the United Kingdom. Each
segment derives, or aims to derive, its revenue from diamond mining and
diamond sales, except for the corporate and administration cost centre.
Segment results, assets and liabilities include items directly attributable to
a segment, as well as those that can be allocated on a reasonable basis.
Segment results are calculated after charging direct mining costs,
depreciation and other income and expenses. Unallocated items comprise mainly
interest-earning assets and revenue, interest-bearing borrowings and expenses
and corporate assets and expenses. Segment capital expenditure is the total
cost incurred during the year to acquire segment assets that are expected to
be used for more than one period. Eliminations comprise transactions between
Group companies that are cancelled on consolidation. The results are not
materially affected by seasonal variations. Revenues are generated from
tenders held in South Africa and Antwerp for external customers from various
countries, the ultimate customers of which are not known to the Group.
4. SEGMENTAL INFORMATION (continued)
Operating segments South Africa - Mining activities Tanzania -Mining activities United Kingdom South Africa
Cullinan Mine Finsch Koffiefontein(5) Williamson Corporate and treasury Beneficiation(4) Inter-segment Consolidated
US$ million
2023 2023 2023 2023 2023 2023 2023 2023
Revenue(1) 182.9 93.3 - 49.1 - 0.2 (0.2) 325.3
Segment result(2) 49.1 10.1 - (29.2) (23.2) (0.1) (1.9) 4.8
Impairment reversal / (charge) - operations (1.5) 52.7 - (31.2) - - - 20.0
Impairment charge - other receivables - - - (3.9) (1.0) - - (4.9)
Other direct income - - - (0.6) 1.0 - - 0.4
Operating profit / (loss)(3) 47.6 62.8 - (64.9) (23.2) (0.1) (1.9) 20.3
Financial income 11.1
Financial expense (70.8)
Gain on extinguishment of Notes net of unamortised costs 0.6
Income tax charge (23.1)
Loss on discontinued operation including associated impairment charges (net of (40.5)
tax) (5)
Non-controlling interest (2.9)
Profit attributable to equity holders of the parent company (105.3)
Segment assets 418.6 248.9 0.3 85.0 3,018.6 5.5 (2,916.1) 860.8
Segment liabilities 335.6 143.1 50.1 84.1 1,946.3 6.2 (2,021.4) 544.0
Capital expenditure 52.8 43.2 0.3 19.3 1.8 - - 117.4
¹ The Group's revenue of US$325.3 million comprises the sale of rough
diamonds and polished stones. The sale of rough diamonds contributed US$323.7
million, with polished stones contributing US$0.2 million and US$1.4 million
from profit share agreements. The sale of rough diamonds for Koffiefontein of
US$4.4 million is included under loss on discontinued operation.
(2) Total depreciation of US$82.5 million included in the segmental result
comprises depreciation incurred at the Cullinan Mine US$53.5 million, Finsch
US$20.2 million, Williamson US$8.2 million and Corporate and treasury US$0.6
million.
(3) Operating profit is equivalent to revenue of US$325.3 million less total
costs of US$305.0 million as disclosed in the Consolidated Income Statement.
(4) The beneficiation segment represents Tarorite, a cutting and polishing
business in South Africa, which can on occasion cut and polish select rough
diamonds.
(5) The operating results in respect of Koffiefontein have been reflected
within loss on discontinued operation (refer to note 18).
4. SEGMENTAL INFORMATION (continued)
Operating segments (Restated) South Africa - Mining activities Tanzania -Mining activities United Kingdom South Africa
Cullinan Mine Finsch Koffiefontein(5) Williamson Corporate and treasury Beneficiation(3) Inter-segment Consolidated
US$ million
2022 2022 2022 2022 2022 2022 2022 2022
Revenue¹ 322.4 165.7 - 75.9 - 2.2 (2.5) 563.7
Segment result(2) 154.4 34.8 - 22.2 (14.5) 0.4 (4.3) 193.0
Impairment charge - operations - - - 21.4 - - - 21.4
Impairment reversal / (charge) - other receivables - - - (4.1) 2.6 - - (1.5)
Other direct income (0.7) (0.4) - 0.1 0.6 - - (0.4)
Operating profit / (loss)² 153.7 34.4 - 39.6 (11.3) 0.4 (4.3) 212.5
Financial income 18.7
Financial expense (91.7)
Income tax charge (37.8)
Loss on discontinued operation including associated impairment charges (net of (13.6)
tax)
Non-controlling interest (19.1)
Profit attributable to equity holders of the parent company 69.0
Segment assets 463.9 229.8 6.0 123.2 3,575.2 5.1 (3,292.3) 1,110.9
Segment liabilities 384.0 111.2 17.1 75.1 2,430.1 5.9 (2,391.0) 632.4
Capital expenditure 35.0 12.0 0.6 3.3 1.6 - (0.3) 52.2
¹ The Group's revenue comprises the sale of rough diamonds and polished
stones. The sale of rough diamonds contributed US$560.4 million with polished
stones contributing US$3.3 million. Included within the US$3.3 million
polished stones contribution is US$1.1 million from a profit share agreement.
(2) Total depreciation of US$82.5 million included in the segmental result
comprises depreciation incurred at the Cullinan Mine US$52.5 million, Finsch
US$24.4 million, Williamson US$5.0 million and Corporate and treasury US$0.6
million.
(3) Operating profit is equivalent to revenue of US$563.7 million less total
costs of US$351.2 million as disclosed in the Consolidated Income Statement.
(4) The beneficiation segment represents Tarorite, a cutting and polishing
business in South Africa, which can on occasion cut and polish select rough
diamonds.
(5) The operating results in respect of Koffiefontein have been reflected
within loss on discontinued operation (refer to note 18).
US$ million
2023 2022
5. CORPORATE EXPENDITURE
Corporate expenditure includes:
Depreciation of property, plant and equipment 0.6 0.6
Amortisation of right-of-use asset 0.2 0.2
London Stock Exchange and other regulatory expenses 1.4 1.5
Transaction costs - redemption of Notes 0.8 -
Costs / (settlement reversal) - human rights claims at Williamson (including (0.8)
IGM remedies)
8.5
Share-based expense - Directors 2.3 1.1
Other staff costs 4.9 5.1
Total staff costs 7.2 6.2
6. FINANCING EXPENSE
US$ million
2023 (Restated)
2022
Interest received on BEE loans and other receivables 5.3 4.1
Interest received bank deposits 3.9 1.3
Foreign exchange gains on settlement of forward exchange contracts(1) 1.9 13.3
Financial income 11.1 18.7
Gross interest on senior secured second lien notes, bank loans and overdrafts (27.9) (45.3)
Other debt finance costs, including facility fees and IFRS 16 charges (1.6) (2.3)
Unwinding of present value adjustment for rehabilitation costs (5.7) (5.0)
Notes redemption premium and acceleration of unamortised bank facility and (8.3) (1.6)
Notes costs(2)
Foreign exchange losses on the settlement of forward exchange contracts(1) - (1.0)
Net foreign exchange losses (27.3) (36.5)
Financial expense (70.8) (91.7)
Gain on extinguishment of Notes(3) 0.6 -
Net financial expense (59.1) (73.0)
(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.
(2) The Notes redemption premium and acceleration of unamortised bank facility
and Notes costs of US$8.3 million relate to the costs associated with the
tender offer to Noteholders during the Year (30 June 2022: early settlement of
RCF), comprising unamortised upfront costs of US$6.8 million (30 June 2022:
US$1.6 million) previously capitalised and the make-whole premium of US$1.5
million.
(3) The gain on extinguishment of Notes in the Year arose from the cancelation
of US$492,000 Notes during the Year. Refer to note 8 for further detail.
7. PROPERTY, PLANT AND EQUIPMENT
The net movement in property, plant and equipment for the Period is a decrease
of US$35.1 million (30 June 2022: US$63.6 million decrease). This is primarily
as a result of:
US$ million 30 June 2023 30 June 2022
As at 1 July 633.2 696.8
Foreign exchange movement (84.4) (83.4)
Additions 117.4 52.2
Reconsolidation of non-current assets held for sale (including reversal of
IFRS 5 impairment) relating to Williamson
- 52.6
Change in rehabilitation assets (2.8) -
Depreciation (82.7) (82.8)
Impairments reversal / (charge) 19.2 (0.3)
Disposals (1.8) (1.9)
As at 30 June 598.1 633.2
8. LOANS AND BORROWINGS
US$ million 30 June 2023 30 June 2022
Non-current liabilities
Loans and borrowings - Senior secured second lien notes 222.4 353.9
222.4 353.9
Current liabilities
Loans and borrowings - senior secured lender debt facilities 25.1 12.3
25.1 12.3
Total loans and borrowings - bank facilities 247.5 366.2
Significant non-cash transactions
US$ million 1 July 2022 - 1 July 2021 -
30 June 2023 30 June 2022
Senior secured second lien notes and secured debt facilities:
As at 1 July 366.2 430.2
Cash payments:
Repayment of Notes and bank debt facilities (144.6) (103.7)
Coupon payment (7.6) -
Non-cash:
Acceleration of unamortised transaction costs 6.8 (1.6)
Interest accrued during the year 27.3 44.4
Cancelation of Notes (0.6)
Effect of foreign exchange - (3.1)
247.5 366.2
a) US$336.7 million Senior Secured Second Lien Notes
A wholly owned subsidiary of the Company, Petra Diamonds US$ Treasury Plc,
issued debt securities consisting of US$336.7 million five-year senior secured
second lien loan notes ("Notes"), with a maturity date of 8 March 2026. The
Notes are guaranteed by the Company and by the Group's material subsidiaries
and are secured on a second lien basis on the assets of the Group's material
subsidiaries. The Notes carry a coupon from:
- 9 March 2021 to 31 December 2022 of 10.50% per annum, which is
capitalised to the outstanding principal amount semi-annually in arrears on 31
December and 30 June of each year;
- 1 January 2023 to 30 June 2023 of 10.50% per annum on 37.7778% of
the aggregate principal amount outstanding, which is capitalised to the
outstanding principal amount semi-annually in arrears on 31 December and 30
June of each year and 9.75% per annum on 62.2222% of the aggregate principal
amount outstanding which is payable in cash semi-annually in arrears on 31
December and 30 June of each year;
- 1 July 2023 to 31 December 2025 of 9.75% per annum on the
aggregate principal amount outstanding which is payable in cash semi-annually
in arrears on 31 December and 30 June of each year; and
- 1 January 2026 to 8 March 2026 (final coupon payment) of 9.75% per
annum on the aggregate principal amount outstanding which is payable in cash
On 27 September 2022, the Group repaid, through a debt tender offer to
Noteholders, an amount of US$143,627,622, comprising the principal amount of
US$125,590,338 and PIK interest of US$18,037,284. On 12 October 2022, a
further US$1,000,667 was repaid to Noteholders comprising the principal amount
of US$875,000 and PIK interest of US$125,667. A further principal amount of
US$492,000 and PIK interest of US$124,528 were cancelled due to Notes not
being claimed by Noteholders in the prescribed period post the Debt
Restructuring in FY 2021. The principal amount of Notes outstanding after the
repayments to Noteholders is US$209,698,662 (excluding the accrued PIK
interest to 30 June 2023). Cash costs of US$1,521,187 relating to the
repayment of Noteholders have been expensed in the Consolidated Income
Statement under finance expense (refer to Note 6).
The Group performed an assessment under its accounting policies and the
requirements of IFRS 9 as to whether the debt tender offer to the Noteholders
represented a substantial modification. A qualitative test was performed which
determined the terms of the Notes, repayment profile and interest rate were
not amended or modified as part of the tender offer process therefore, no
substantial modification was relevant.
The remaining costs associated with issuing the Notes of US$13.9 million,
after adjusting for the acceleration of US$6.8 million of unamortised costs
associated with the debt tender offer to Noteholders which have been expensed
through profit and loss within net finance expense (refer to note 6) have been
capitalised against the principal amount and US$10.5 million remains
unamortised as at 30 June 2023 (30 June 2022: US$18.5 million). Interest of
US$48.3 million has been accrued as at 30 June 2023.
Further details about the Notes (including security) have been included in the
Group's FY 2023 Annual Report.
b) Senior Secured Lender Debt Facilities
In June 2022, the Group restructured its existing banking facilities resulting
in Absa Corporate and Investment Banking ("Absa") becoming the Group's banking
partner under the new banking facilities.
The terms under the RCF are:
· termination date of 7 January 2026 with a 60-day buffer between the
redemption of the Notes and the maturity of the RCF;
· interest rate of SA JIBAR + 4.15% per annum (with the margin to be
reconsidered annually based on Petra's credit metrics with a view of further
optimising the margin to be achieved); and
· certain covenant ratios as mentioned below.
.
The Group's debt and hedging facilities are detailed in the table below:
Senior Lender Debt Facilities 2023 2022
Facility amount Facility amount
ZAR Debt Facilities:
ZAR Lenders RCF ZAR1.0 billion ZAR1.0 billion
FX Hedging facilities ZAR300 million ZAR300 million
The terms and conditions of the Group facilities are detailed in the Group's
FY 2023 Annual Report. The facilities are secured on the Group's interests in
the Cullinan, Finsch and Koffiefontein Mines.
As at date of this report, an amount of ZAR150 million (US$8.0 million)
remained available for drawdown on the RCF, following drawdowns of ZAR850
million (US$45.1 million) during July and August 2023 for working capital
requirements due to the deferral of the June 2023 diamond tender. During FY
2022, the Company paid ZAR404.6 million (US$24.9 million) (capital plus
interest) to settle the old RCF and ZAR893.2 million (US$54.9 million)
(capital plus interest) to settle the previous Term Loan.
Covenant ratios
As part of the revised RCF facility entered into with ABSA in FY 2022, the
Company is required:
· to maintain a consolidated net debt : consolidated EBITDA ratio tested
semi-annually on a rolling 12-month basis;
· to maintain an Interest Cover Ratio tested semi-annually on a rolling
12-month basis; and
· to maintain minimum 12 month forward looking liquidity requirement that
consolidated cash and equivalents shall not fall below US$20.0 million.
All the covenants associated with the RCF facility exclude Williamson. The
Company's revised RCF covenant levels for the respective measurement periods
are outlined below:
FY23 H1 FY23 H2 FY24 H1 FY24 H2 FY25 H1 FY25 H2 FY26 H1
Consolidated net debt : EBITDA Leverage ratio (maximum)
4.00 3.50 3.50 3.25 3.25 3.00 3.00
1.85 2.50 2.50 2.75 2.75 3.00 3.00
Interest Cover Ratio (minimum)
The covenants were not in breach at the measurement date.
9. COMMITMENTS
As at 30 June 2023, the Company had committed to future capital expenditure
totalling US$102.5 million (30 June 2022: US$49.5 million), mainly comprising
the Cullinan Mine US$36.9 million (30 June 2022: US$25.2 million), Finsch
US$64.9 million (30 June 2022: US$23.7 million), Koffiefontein US$nil (30 June
2022: US$0.3 million) and Williamson US$0.7 million (30 June 2022: US$0.3
million).
10. RELATED PARTY TRANSACTIONS
The Group's related party BEE partners, Kago Diamonds (Pty) Ltd ("Kago
Diamonds") and its gross interests in the mining operations of the Group are
disclosed in the table below.
Mine Partner and respective interest Partner and respective interest
as at 30 June 2023 (%) as at 30 June 2022 (%)
Cullinan Kago Diamonds (14%) Kago Diamonds (14%)
Finsch Kago Diamonds (14%) Kago Diamonds (14%)
Koffiefontein Kago Diamonds (14%) Kago Diamonds (14%)
The Itumeleng Petra Diamonds Employee Trust ("IPDET") holds a 12% interest in
each of the Group's South African operations, with Petra's commercial BEE
Partners holding the remaining 14% interest through their respective
shareholdings in Kago Diamonds, in which Petra has a 31.46% interest. The
effective interest percentages attributable to the remaining operations for
the Group's shareholders is 78.4%.
The non-current loans receivable, non-current loans payable, finance income
and finance expense, due from and due to the related party BEE partners and
other related parties, including dividends paid are disclosed in the table
below:
US$ million 2023 2022
Non-current receivable
Kago Diamonds(1) 21.1 26.6
21.1 26.6
Current trade and other receivables
KEM JV(2) 2.7 3.7
Impairment provision(2) (2.6) (2.0)
0.1 1.7
1 July 2022 - 1 July 2021 -
30 June 2023 30 June 2022
Finance income
Kago Diamonds 2.4 2.1
2.4 2.1
Dividend paid
Kago Diamonds(3) 1.1 1.3
1.1 1.3
¹ The movement in the Kago Diamonds receivable of US$4.5 million (30 June
2022: US$6.9 million) is attributable to repayments received from Kago
Diamonds during the Year totalling US$3.5 million (30 June 2022: US$nil), a
foreign exchange decrease of US$3.0 million (30 June 2022: US$4.1 million
decrease) and accrued interest of US$2.4 million (30 June 2022: US$2.1
million).
(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$0.1 million (30 June 2022: US$1.7 million). During the Year, the Group
received payments of US$0.5 million (FY 2022: US$2.5 million) from the KEM JV
as settlement of the outstanding purchase consideration. The Group has applied
the expected credit loss impairment model to the KEM JV receivables, taking
into account various factors, including an amended agreement entered into
during the which resulted in the expected credit loss increasing by US$1.0
million to US$3.1 million (30 June 2022: US$2.0 million).
(3) During the Year, Finsch declared and paid a dividend out of profits
generated in FY 2022 to its shareholders. The BEE partners received a gross
dividend of US$9.6 million (30 June 2022: US$2.5 million). An amount of US$6.1
million (30 June 2022: US$0.2 million) was used by BEE partners to repay a
portion of their loans owing to the Group and a net cash payment of US$2.0
million (30 June 2022: US$2.5 million) was received by the BEE partners,
comprising Kago US$1.1 million (30 June 2022: US$1.3 million) and IPDET US$0.9
million (30 June 2022: US$1.2 million).
11. BEE LOANS RECEIVABLE
US$ million 2023 2022
Non-current assets
Loans and other receivables 37.3 44.6
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$36.3
million (30 June 2022: US$42.0 million) has been recorded as part of the gross
receivable (before expected credit loss provisions) in respect of amounts to
be reimbursed to the Group in respect of the guarantee under the BEE Lender
facilities. Judgement was required in determining the extent to which
reimbursement is applicable based on the terms of the agreements, South
African legislation and discussions with the BEE partners.
As a result of historical delays in the Cullinan Mine plant ramp-up and the
Finsch SLC ramp-up, the Group has historically and through the Period elected
to advance the BEE Partners' funds using Group treasury to enable the BEE
Partners to service their interest and capital commitments under the BEE
Lender facilities (refer below). These BEE receivables, including interest
raised, will be recoverable from the BEE Partners' share of future cashflows
from the underlying mining operations. As part of a previous Debt
Restructuring in FY 2021, Petra has assumed the BEE Lender facility
obligations.
For detail on expected credit loss provision and reversal associated with the
BEE loans receivable refer to note 2.
1 July 2022 - 1 July 2021 -
US$ million 30 June 2023 30 June 2022
As at 1 July 44.6 46.6
Foreign exchange movement on opening balance (6.0) (5.9)
Interest receivable 4.8 4.1
Repayment of loan from BEE partner (6.1) (0.2)
As at 30 June 37.3 44.6
12. SHARES ISSUED AND SHARE PREMIUM
During the Year, there were no new shares issued by the Company. On 16
November 2022, at the FY 2022 Annual General Meeting, the Company's
shareholders approved the Company's share premium account be reduced by US$350
million with such amount being credited against accumulated losses with the
balance being credited to the Company's other distributable reserves.
Share premium Accumulated reserves / (losses)
US$ million
As at 1 July 2022 959.5 (183.6)
Conversion of share premium to distributable reserves (350.0) 350.0
Transfer between reserves - 0.6
Movement during year - (105.3)
As at 30 June 2023 609.5 61.7
In FY 2022, at the FY 2021 Annual General Meeting the Company's shareholders
approved a 50 for 1 Share Consolidation. Admission of the Company's New
Ordinary Shares took place on 29 November 2021. As a result of the Share
Consolidation, the Company's shares in issue comprise of 194,201,785 ordinary
shares of 0.05 pence each.
13. EARNINGS PER SHARE
Continuing operations 30 June 2023 Discontinued operation30 June 2023 Total Continuing operations 30 June 2022 Discontinued operation 30 June 2022
US$ US$ 30 June 2023 US$ US$ Total
US$ 30 June 2022
US$
Numerator
(Loss) / profit for the Year (73,991,245) (31,290,280) (105,281,525) 79,122,756 (10,127,219) 68,995,537
Denominator
Shares Shares Shares Shares Shares Shares
Weighted average number of ordinary shares used in basic EPS
Brought forward 194,201,785 194,201,785 194,201,785 9,710,089,272 9,710,089,272 9,710,089,272
Effect of 50 for 1 share consolidation November 2021 - - - (9,515,887,487) (9,515,887,487) (9,515,887,487)
Carried forward 194,201,785 194,201,785 194,201,785 194,201,785 194,201,785 194,201,785
Shares Shares Shares Shares Shares Shares
Dilutive effect of potential ordinary shares - - - - - -
Weighted average number of ordinary shares in issue used in diluted EPS 194,201,785 194,201,785 194,201,785
194,201,785 194,201,785 194,201,785
US cents US cents US cents US cents US cents US cents
Basic (loss) / profit per share - US cents (38.10) (16.11) (54.21) 40.74 (5.21) 35.53
Diluted (loss) / profit per share - US cents (38.10) (16.11) (54.21) 40.74 (5.21) 35.53
The number of potentially dilutive ordinary shares, in respect of employee
share options, Executive Director and Senior Management share award schemes is
nil (30 June 2022: nil).
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.
Continuing operations 30 June 2023 Discontinued operation30 June 2023 Total Continuing operations 30 June 2022 Discontinued operation30 June 2022
US$ US$ 30 June 2023 US$ US$ Total
US$ 30 June 2022
US$
Numerator
(Loss) / profit for the Year (73,991,245) (31,290,280) (105,281,525) 79,122,756 (10,127,219) 68,995,537
Net unrealised foreign exchange loss* 29,322,988 (2,678) 29,320,310 34,824,936 26,799 34,851,735
Taxation credit on unrealised foreign exchange loss* (892,795) - (892,795) (1,618,908) - (1,618,908)
Present value discount - Williamson VAT receivable 3,938,983 - 3,938,983 4,076,760 - 4,076,760
Impairment (reversal) / charge - operations* (8,903,290) 646,142 (8,257,148) (21,438,351) 231,616 (21,206,735)
Impairment (reversal) / charge - other receivables 957,770 - 957,770 (2,544,704) - (2,544,704)
Taxation charge on impairment reversal* 10,812,285 - 10,812,285 - - -
Transaction costs and acceleration of unamortised costs on Notes and 1,628,757
restructured bank facilities
9,040,386 - 9,040,386 1,628,757 -
Gain on extinguishment of Notes net of unamortised costs (616,528) - (616,528) - - -
Williamson tailings facility - remediation costs 10,740,548 - 10,740,548 - - -
Williamson tailings facility - accelerated depreciation 5,220,536 - 5,220,536 - - -
Human rights IGM claims provision and transaction costs / (reversal) of 8,485,571 (816,270)
settlement agreement
8,485,571 - (816,270) -
Inventory Impairment (WDL blocked parcel 1 Inventory and related receivable (112,284) - (112,284) - - -
adjustment)
Movement in provision for unsettled and disputed tax claims 253,941 - 253,941 - - -
Adjusted loss for the Year attributable to parent (5,743,134) (30,646,816) (36,389,950) 93,234,976 (9,868,804) 83,366,172
*Portion attributable to equity shareholders of the Company
Denominator
Shares Shares Shares Shares Shares Shares
Weighted average number of ordinary shares used in basic EPS
As at 1 July 194,201,785 194,201,785 194,201,785 9,710,089,272 9,710,089,272 9,710,089,272
Effect of shares issued during the Period - - - - - -
Effect of 50 for 1 share consolidation November 2021 - - - (9,515,887,487) (9,515,887,487) (9,515,887,487)
Carried forward 194,201,785 194,201,785 194,201,785 194,201,785 194,201,785 194,201,785
Shares Shares Shares Shares Shares Shares
Dilutive effect of potential ordinary shares - - - - - -
Weighted average number of ordinary shares in issue used in diluted EPS 194,201,785 194,201,785 194,201,785 194,201,785 194,201,785 194,201,785
US cents US cents US cents US cents US cents US cents
Adjusted basic profit / (loss) per share - US cents (2.96) (15.78) (18.74) 48.01 (5.08) 42.93
Adjusted diluted profit / (loss) per share - US cents (2.96) (15.78) (18.74) 48.01 (5.08) 42.93
15. IMPAIRMENT CHARGE
The current market conditions in the global rough diamond market, volatility
of and variability in product mix are all factors impacting the rough diamond
prices achieved by Petra during the Period, and the tailings facility failure
at Williamson which have resulted in management taking a critical review of
the Group's business models and operational assets. The carrying amounts of
the Group's assets are reviewed at each reporting date to determine whether
there is any indication of impairment. If there is any indication that an
asset may be further impaired or an impairment reversal may apply, its
recoverable amount is estimated. The recoverable amount is determined on a
fair value less cost to develop basis.
During the Year under review, 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 Cullinan and Williamson, and an
impairment reversal was considered appropriate for Finsch in the current Year.
The Group recognised an asset level net impairment reversal of US$20.0 million
being managements' estimate of the increase in the value of the Cullinan,
Finsch and Williamson Mines. The Group also recognised a non-financial
receivables charge of US$4.9 million, comprising an impairment charge of
US$3.9 million being management's estimate of the recoverability of the
Tanzania VAT receivable, an impairment charge of US$1.0 million related to the
KEM JV receivable. For impairment considerations of Koffiefontein, refer to
note 18.
Impairment Asset class Carrying value pre impairment Impairment reversal / (charge) Carrying value post impairment
(US$ million)
Impairment operations:
Cullinan Mine Property, plant & equipment 356.8 (1.5) 355.3
Finsch Property, plant & equipment 155.1 52.7 207.8
Williamson Property, plant & equipment 61.9 (31.2) 30.7
Sub-total 573.8 20.0 593.8
Impairment - non-financial receivables:
Other - current receivable KEM JV receivable 1.1 (1.0) 0.1
Other - non-current Tanzania VAT receivable (refer to note 2) 10.5 (3.9) 6.6
Sub-total 11.6 (4.9) 6.7
Total 585.4 15.1 600.5
30 June 2022
The operations of the Cullinan, Finsch, Koffiefontein and Williamson Mines are
held at recoverable value as a result of FY 2021 impairments. During FY 2022,
the Group reviewed the carrying value of its investments, loan receivables and
operational assets for indicators of impairment. Following the assessment, no
further impairment of property, plant and equipment was considered appropriate
for the Cullinan, Finsch and Williamson Mines, nor was any impairment reversal
considered appropriate in the current Year. The Group recognised an asset
level impairment charge of US$0.3 million being managements' estimate of the
decrease in the value of the Koffiefontein assets. The Group also reversed a
Group level impairment charge relating to Williamson, previously recognised
under IFRS 5, of US$21.4 million as Williamson is no longer considered an
asset held for sale. The Group recognised a non-financial receivables charge
of US$1.5 million comprising an impairment charge of US$4.1 million being
management's estimate of the recoverability of the Tanzania VAT receivable, an
impairment charge of US$0.3 million related to other receivables and an
impairment reversal of US$2.9 million of the KEM JV receivable.
Impairment Asset class Carrying value pre impairment Impairment reversal / (charge) Carrying value post impairment
(US$ million)
Impairment operations:
Cullinan Mine Property, plant & equipment 419.9 - 419.9
Finsch Property, plant & equipment 157.9 - 157.9
Williamson Property, plant & equipment 29.3 21.4 50.7
Sub-total 607.1 21.4 628.5
Impairment - non-financial receivables:
Other - current receivable KEM JV receivable (1.2) 2.9 1.7
Other - current receivable Other receivables 0.3 (0.3) -
Other - non-current Tanzania VAT receivable 6.8 (4.1) 2.7
Sub-total 5.9 (1.5) 4.4
Total 613.0 19.9 632.9
Cullinan, Finsch, Koffiefontein and Williamson Mine impairment considerations
and assumptions
The Group performs impairment testing on an annual basis of all operations and
when there are potential indicators of impairment. The impairment testing
performed resulted in impairments of the Cullinan Mine, Finsch, Koffiefontein
and Williamson assets. The key assumptions used in determining the recoverable
value calculations, determined on fair value less cost to develop basis, are
listed in the table below:
Group assumptions for 30 June 2023 and 30 June 2022:
Key assumptions Explanation
Current mine plan and recoverable value of reserves and resources Economically recoverable reserves and resources are based on management's
expectations based on the availability of reserves and resources at mine sites
and technical studies undertaken in house and by third party specialists.
The end of life of mine based on current mine plans for the operations are as
follows:
Cullinan Mine: FY 2032 (FY 2022: FY 2031)
Finsch: FY 2031 (FY 2022: FY 2030)
Koffiefontein: Mine on C&M (FY 2022: FY 2025) - current production has
ceased and the operation has been placed on permanent care and maintenance
with no intention of bringing the operation back into production in the
future.
Williamson: FY 2030 (FY 2022: FY 2030)
Resources remaining after the current mine plans have not been included in
impairment testing for the operations.
Current mine plan reserves and resources Cullinan Mine: Current mine plan, including the C-Cut Extension approved
during FY 2023, over the next nine years; total resource processed 32.9 Mt (FY
2022: Current mine plan over the next nine years; total resource processed
34.2 Mt).
Finsch: Current mine plan, including the rescoped 3L-SLC project to 90L
approved during FY 2023, over the next eight years; total resource processed
22.3 Mt (FY 2022: Current mine plan over the nine years; total resource
processed 23.1 Mt).
Koffiefontein has been put on permanent care and maintenance and has ceased
production.
Williamson: Current mine plan over the next seven years, total resource
processed 37.4 Mt (FY 2022: Current mine plan over the next eight years,
total resource processed 43.3 Mt).
Current mine plans - capital expenditure Management has estimated the timing and quantum of the capital expenditure
based on the Group's current mine plans for each operation. There is no
inclusion of capital expenditure to enhance the asset beyond exploitation of
the current mine plan orebody.
Residual Value Cullinan Mine: Management included a residual value of property, plant and
equipment to be used beyond the current mine plan, given the significant
resource base estimated to be available at the end of the current mine plan.
No residual values were included in the impairment assessments of the other
mining operations due to the mine plan aligning with the resource base
estimated to be available at the end of the current mine plan.
Diamond prices The diamond prices used in the impairment test have been set with reference to
recently achieved pricing and market trends, and long-term diamond price
escalators are informed by industry views of long-term market supply/demand
fundamentals. Given the current market uncertainty, the assessment of
short-term diamond prices and the rate and extent of pricing recovery,
together with the longer-term pricing escalators, represented a critical
judgement.
The 30 June 2023 impairment testing models starting price assumptions have
been adjusted to reflect the pricing achieved during the FY 2023. The
long-term models incorporate normalised diamond price escalation of 1.9% above
a long-term US inflation rate of 2.0% per annum from FY 2025 onwards. The
Cullinan Mine and Williamson, from time to time, recover stones of high value.
The Group used to classify stones above US$5m in value as Exceptional Stones.
From FY 2024 onwards, the Group has revised its definition of Exceptional
Stones to those stones with a value above US$15m. The Group does not include
any contribution from Exceptional Stones (as per the new definition of US$15m)
as part of the Business Planning or price assumptions, and these stones would
represent windfall earnings for the Group. For context, the Group has sold
stones meeting the new Exceptional Stones definition on three occasions
since FY2016.
The 30 June 2022 impairment testing models starting price assumptions have
been adjusted to reflect the improved pricing achieved during the Year when
compared to the 30 June 2021 impairment models. Diamond prices (excluding
Exceptional Stones) have been assumed to remain unchanged during FY 2023, then
increase by 3.9% from FY 2024 onwards. The long-term models incorporate
normalised diamond price escalation of 1.9% above a long-term US inflation
rate of 2.0% per annum from FY 2024 to FY 2030. Estimates for the contribution
of Exceptional Diamonds sold for more than US$5m each are determined with
reference to historical trends. Based on the historical trends, management
have increased the contribution from Exceptional Stones (as per previous US$5m
definition) at the Cullinan Mine from US$25m to US$35m per annum.
Discount rate A ZAR discount rate of 13.5% (30 June 2022: 13.0%) was used for the South
African operations and a USD discount rate of 15.2% (30 June 2022: 14.00%) for
Williamson. Discount rates calculated based on a nominal weighted average cost
of capital including the effect of factors such as market risk and country
risk as at the Year end. USD and ZAR discount rates are applied based on
respective functional currency of the cash generating unit.
Cost inflation rate Long-term inflation rates of 3.5%-9.0% (30 June 2022: 3.5%-7.5%) above the
long-term US$ inflation rate were used for Opex and Capex escalators.
Management have taken into account the current short-term pressures in the
inflation environment and the impact on Opex and capex costs, allowing for the
inflation rate to normalise over the longer-term.
Exchange rates Exchange rates are estimated based on an assessment of current market
fundamentals and long-term expectations. The US$/ZAR exchange rate range used
for all South African operations commenced at ZAR18.36 (30 June 2022:
ZAR16.04) for FY 2024 and FY 2025 reflecting the current volatility,
inflationary pressures and quantitative tightening by Central banks, and
thereafter devaluing at 3.5% per annum (which is the theoretical inflation
differential between the US and SA, as per their policy targets). Given the
volatility in the USD/ZAR exchange rate and the current levels of economic
uncertainty, the determination of the exchange rate assumptions required
significant judgement.
Valuation basis Discounted present value of future cash flows.
Williamson For impairment testing at Williamson, management used the above assumptions,
noting that production recommenced in July 2023 following the TSF failure in
November 2022.
Sensitivity analysis
The impact of applying reasonable downside sensitivities on the key inputs
based on management's assumptions at 30 June 2023 is noted below:
Potential Impairment impact
(US$ million) Cullinan Mine Finsch Koffiefontein(1) Williamson
Base case
Increase in discount rate by 2% No impairment No impairment n/a 3.1
Reduction in pricing by 5% over Life of Mine 14.1 No impairment n/a 23.5
Reduction in production by 10% 53.2 37.2 n/a 35.6
Increase in Opex by 5% No impairment No impairment n/a 27.8
ZAR stronger by 5% through the LOM period 112 89 n/a n/a
1. Production at Koffiefontein has ceased and the operation
has been placed on permanent care and maintenance.
16. WILLIAMSON (30 June 2022)
a) 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 August 2021, having been on care and
maintenance since April 2020.
The Framework Agreement provides for a capital restructuring of Williamson
Diamonds Limited ("WDL"), the entity that owns the Williamson Mine, including
the 16% free carried interest that the Government of Tanzania is entitled to
receive in WDL and its shareholder loans under Section 10 of the Tanzanian
Mining Act, 2017 and Regulation 10 of the Tanzanian Mining (State
Participation) Regulations, 2020. The capital restructuring will include:
· a WDL share issue with the effect of reducing Petra's indirect
shareholding from 75% to 63% and consequently increasing the Government of
Tanzania's shareholding from 25% to 37%;
· a contribution to the Government of Tanzania of 16% of the
principal outstanding value of the Group's shareholder loans payable by WDL,
with the remaining 84% of such principal outstanding loans continuing to be
owed to the Group; and
· the transfer of the WDL shares held by the Group to another
member of the Petra Group (either Petra itself or a special purpose
subsidiary). Petra have registered Mwadui Mining Holdings Ltd, a subsidiary
registered in the United Kingdom, for this purpose.
With respect to the reorganisation of the parties' legal interests in WDL, the
Framework Agreement also provides for an overall 55:45 economic benefit
sharing ratio between the Government of Tanzania and Petra in relation to
future economic benefits from the Williamson Mine. This arrangement is
intended to capture the parties' entitlements as shareholders as well as, with
respect to the Government of Tanzania, the revenue it collects from WDL
arising from taxes, royalties, duties, fees and other fiscal levies
("Government Imposed Charges"). The Framework Agreement also provides that WDL
shall be entitled to off-set its undisputed unpaid and overdue VAT receivables
against future Government Imposed Charges, whereby such Government Imposed
Charges will be off-set and treated as paid for the purposes of the economic
benefit sharing ratio.
The Framework Agreement provides that Petra and the Government of Tanzania
will provide financial assistance for the restart of operations at the
Williamson Mine. The Government of Tanzania does this by allocating the sales
proceeds of the 71,654.45 carat diamond parcel from the Williamson Mine that
was previously confiscated and blocked for export. Based on the recent
confirmation that the parcel was sold in whole or part, the full carrying
value of US$12.5 million (30 June 2022: US$12.5 million) has been expensed as
other direct mining/expense in the Consolidated Income Statement and a fair
value of US$12.3 million in respect of the sale of the parcel has been
recognised in the Consolidated Income Statement as other direct mining
income/expense with a trade and other receivable recognised in the Statement
of Financial Position at 30 June 2023.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 FY 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 is required to be made in instalments,
with the first instalment of US$5.0 million to be paid when the Framework
Agreement becomes effective and upon receipt of proceeds by WDL from the sale
of the confiscated diamond parcel. The subsequent annual instalments of the
settlement amount are to be made annually at amounts as determined by WDL's
board of directors.
The Framework Agreement is subject to a number of conditions, including
Tanzanian regulatory approvals and is therefore not yet effective as at 30
June 2023. Certain conditions precedent remain outstanding awaiting resolution
from the GoT.
Memorandum of Understanding with Caspian
Limited ("MoU")
On 15 December 2021, the Company announced that it had signed a non-binding
Memorandum of Understanding ("MoU") to sell 50% less one share of the entity
that holds the Group's shareholding in Williamson Diamonds Limited ("WDL"),
along with a pro rata portion of shareholder loans owed by WDL, to Caspian
Limited or its nominee (a company now known as Taifa Mining and Civils Limited
or "Taifa") for a total consideration of US$15.0 million. Taifa 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 Taifa will each indirectly hold a 31.5% stake in WDL but with Petra
retaining a controlling interest in Williamson.
Taifa's purchase will be funded through the settlement of US$15 million of
past technical services payments owed by WDL to Caspian.
Completion of the Transaction with Taifa is subject to the parties obtaining
all necessary Governmental, regulatory and lender approvals, including the
Tanzanian Fair Competition Commission.
17. PROVISIONS
Williamson - Independent Grievance Mechanism
("IGM")
The IGM is a non-judicial process that has the capacity to investigate and
resolve complaints alleging severe human rights impacts in connection with
security operations at the Williamson mine. It is being overseen by an
Independent Panel of Tanzanian experts taking an approach informed by
principles of Tanzanian law, and with complainants having access to free and
independent advice from local lawyers. The overall aim of the IGM is to
promote reconciliation between the Williamson Diamond Mine, directly affected
parties and the broader community by providing remedy to those individuals who
have suffered severe human rights impacts. The Group has agreed to fund the
remedies determined by the IGM.
On 28 November 2022, the IGM became operational with the commencement of the
IGM's pilot phase. The pilot phase, which completed in May 2023, has allowed
the IGM's systems and procedures to be further developed and adjusted to take
into account learnings.
Whilst the IGM was still being established, a mechanism was set up to enable
community members to confidentially and securely register alleged historical
human rights grievances, with 5,577 having been registered to date. The
Independent Panel ("IP") has started making decisions on the merits of the
cases considered during pilot phases and the associated remedies for
successful grievances (i.e., grievances that meet the evidential threshold).
Judgement has been applied by Management in assessing estimated future costs
of remedies for successful grievances based on the outcome of the pilot phase.
Management have assessed the results and performed their own estimate based on
calculations received from consultants. The estimate makes a number of
different assumptions, including, amongst others, regarding the categories of
the grievances, the success rates of the grievances and the settlement
payments that apply to successful grievances. These estimates also do not make
any allowance for non-financial remedies that the IP may award. The concluded
cases of the initial pilot phase grievances have been extrapolated across the
grievance population of 5,577, based on the average claim settlement per
category and the various categories of the grievances (nature of claim).
Management's assessment resulted in estimated aggregate costs of US$7.9
million to be provided at Year end; this compares to a range estimated by
external consultants of US$ 7.2 - 10.1 million. The estimate will be
reassessed at each future reporting date.
18. DISCONTINUED OPERATION
Post the unsuccessful disposal process of Koffiefontein mine, management took
the decision to put the mine on care and maintenance. The Company has started
the process of winding-up the operation and has, completed a significant
restructuring of the staff complement at the operation, completed the
retrenchment process, finalising workstreams to meet its rehabilitation
obligations and is in discussions with the DMRE to formalize the ultimate
closure of the operation.
A discontinued operation is a component of the entity that has been disposed
of and is classified as held for sale or abandoned (as the Koffiefontein
assets are currently not undergoing a formal sales process, it met the
criteria of IFRS 5 and were classified as a discontinued operation) and that
represents a separate major line of business or geographical area of
operation, is part of a single co-ordinated plan to dispose of such a line of
business or area of operations, or is a subsidiary acquired exclusively with a
view to resale. The results of discontinued operations are presented
separately in the statement of profit or loss.
Results of Koffiefontein:
1 July 2022- 1 July 2021-
US$ million 30 June 2023 30 June 2022
Revenue 4.4 21.5
Cost of sales (19.7) (34.7)
Gross loss (15.3) (13.2)
Impairment charge - property, plant and equipment (0.8) (0.3)
Provisions for closure(1) (22.0) -
Financial income - -
Financial expense (2.4) (0.1)
Loss before tax (40.5) (13.6)
Income tax charge - -
Net loss for the Year (40.5) (13.6)
Attributable to:
Equity holders of the parent (31.3) (10.2)
Non-controlling interest (9.2) (3.4)
(40.5) (13.6)
(1. ) Included in provisions for closure are estimated cost for the
environmental rehabilitation and decommissioning, social development
programmes to closure and care and maintenance costs at Koffiefontein, which
is based on current legal requirements and the Group's planned rehabilitation
strategy.
19. EVENTS AFTER THE REPORTING PERIOD
Revolving Credit Facility drawdown - in July and August 2023, as a result of
the deferment of the June 2023 diamond tender, the Group drew down, in total,
an amount of ZAR850 million (US$45.1 million) from the RCF.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
a) the preliminary financial statements have been prepared in accordance
with International Financial Reporting Standards as adopted by the European
Union, and give a true and fair view of the assets, liabilities, financial
position and profit of the Group for the Year; and
b) the preliminary management report for the Year includes a fair review
of the information required by the FCA's Disclosure and Transparency Rules
(DTR 4.1.8 R and 4.1.9 R).
By order of the Board
Richard Duffy
Chief Executive
Officer
15 September 2023
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR EAPNLFDLDEFARecent news on Petra Diamonds
See all newsREG-Petra Diamonds Ltd: Partial Tender 5 sale results for Finsch and Williamson; Cullinan sales postponement
AnnouncementREG-Petra Diamonds Ltd: TR-1: Standard form for notification of major holdings
AnnouncementREG-Petra Diamonds Ltd: Director/PDMR Shareholding
AnnouncementREG-Petra Diamonds Ltd: H1 FY 2025 Interim Results (correction to title)
AnnouncementREG-Petra Diamonds Ltd: Director Change
Announcement