REG-Petra Diamonds: Trading Update
20/04/2022 07:15
20 April 2022 LSE: PDL
Petra Diamonds Limited
Trading Update for the three and nine months ended 31 March 2022
Petra Diamonds Limited ("Petra", the "Company" or the “Group”) announces
its unaudited Trading Update for the three months ended 31 March 2022 (the
“Quarter”, “Q3 FY 2022” or “Q3”) and the nine months to 31 March
2022 (“9M FY 2022”, “Year to Date” or “YTD”).
Richard Duffy, Chief Executive of Petra Diamonds, commented:
“Petra has benefitted from strong diamond prices during the Quarter
underpinned by strong operational, cost and safety performance. The 43%
increase in the YTD revenue to US$405.4 million was driven by Exceptional
Stones sales contributing US$83.3 million YTD, coupled with the upward trend
in diamond prices. This culminated in the significant like-for-like 37.6%
price increase we saw in the 4(th) Tender in March compared to the preceding
December 2021 tender. Petra’s production of Exceptional Stones in the Year
to Date in part reflects our investment in throughput as part of Project 2022.
This Project is now integrated throughout our business and is expected to
deliver net free cash of over US$200 million for the three years to June 2022,
a significant improvement over our target of US$100-150 million. We also
confirm our production, cost and capex guidance as announced at the Investor
Day held in February 2022.
“Petra’s balance sheet strengthened further during the Quarter with net
debt of US$107.0 million and unrestricted cash balances totalling US$233.2
million at Period end after settling the Group’s first lien facilities of
US$88.9 million (including interest) during the Quarter.
“Although we anticipate some pull back in diamond prices from the elevated
March tender levels as a result of the economic impact of the war in Ukraine,
the structural shift in the diamond market continues to provide positive
momentum. This, coupled with our operational improvements driving margin and
cash generation, supports a positive outlook for the business with the
potential for further reductions in our debt levels.”
HIGHLIGHTS
Strong performance with quarterly revenue growth of 33%
* Strong YTD safety performance * Lost Time Injury Frequency Rate
(“LTIFR”) down 62% to 0.18 (9M FY 2021: 0.47)
* Total injuries, including LTIs, down 20% to 24 (9M FY 2021: 30)
* Q3 revenue up 33% to US$140.6 million (Q3 FY 2021: US$106.0 million) driven
by: * Strong prices achieved in the 4(th) Tender in March 2022 with
like-for-like prices up 37.6% compared to the preceding December 2021 tender
* The sale of one Exceptional Stone in the Quarter, a 157.88ct Type IIa white
stone from Cullinan for US$5.5 million
* Notwithstanding the revenue increase, carats sold were down 31% and 16% in
the Quarter and YTD respectively, given that there was only one sales tender
in Q3. However, no impact is foreseen on expected sales volumes for the full
year with further tenders in April and June 2022
* Quarterly production up 18% to 830,456 carats (Q3 2021: 704,498 carats) with
YTD production up 7% to 2,607,880 carats (9M FY 2021: 2,445,360 carats),
largely attributable to Williamson’s resumption of production following a
period of care and maintenance. In addition, the remedial steps taken at
Finsch following waste ingress in Q2 FY 2021 positively affected the quarterly
comparison
* Balance Sheet as at 31 March 2022: * Consolidated net debt of US$107.0
million (31 December 2021: US$152.3 million)
* Gross cash of US$249.2 million (31 December 2021: US$272.3 million) and
unrestricted cash of US$233.2 million (31 December 2021: US$256.7 million)
following settlement of the ZAR404.6 million (US$27.7 million) revolving
credit facility (“RCF”) and ZAR893.2 million (US$61.2 million) term loan
under the first lien facilities during the Quarter. The agreements for the new
ZAR1 billion (c. US$68 million) RCF with Absa Bank, as announced in February,
are in the process of being finalised with the new facility expected to become
effective during April 2022
* Diamond debtors of US$nil (31 December 2021: US$0.4 million)
* Diamond inventory valued at US$98.1 million (31 December 2021: US$79.6
million)
Q3 Diamond Production up 18% with the resumption of production at Williamson
Production and sales summary
Unit Q3 FY 2022 Q3 FY 2021 Var. 9M FY 2022 9M FY 2021 Var. FY 2021 (1)
Ore processed Mt 2.9 1.8 +61% 8.6 6.1 +41% 8.1
Diamonds recovered MCts 830,456 704,498 +18% 2,607,880 2,445,360 +7% 3,240,312
Diamonds sold MCts 735,225 1,069,205 -31% 2,331,076 2,782,002 -16% 3,960,475
Revenue US$M 140.6 106.0 +33% 405.4 284.2 +43% 406.9
Note 1: For comparative purposes the FY 2021 figures have been restated to
include Williamson as it is no longer a discontinued operation
Credit rating upgrades
On 23 March, Moody’s Investor Services upgraded Petra’s Corporate Family
Rating (CFR) and its second lien bond rating from Caa1 to B3, taking the
outlook from Positive to Stable. This reflects “Petra’s stronger financial
and business outlook”. On 26 February, S&P Global Ratings upgraded its
outlook for Petra’s bonds to positive “reflecting the recovery in the
diamond market and improved liquidity” while maintaining its B rating.
Guidance reiterated
Key operational guidance
Unit FY22E FY23E FY24E FY25E
Total carats recovered Mcts 3.3 – 3.6 3.3 – 3.6 3.3 – 3.6 3.6 – 3.9
Cash on-mine costs and G&A (1) $m 300 - 310 300 – 320 300 – 320 300 - 320
Expansion capex (1) $m 47 – 50 105 – 115 125 – 135 115 - 120
Sustaining capex (1) $m 28 – 30 30 -32 30 – 32 26 - 28
Note 1: Opex and Capex guidance is stated in FY 2022 real terms and based on
an exchange rate of ZAR15 / USD1.
Detailed guidance is available on Petra’s website at
https://www.petradiamonds.com/investors/analysts/analyst-guidance/
* Petra reiterates the detailed operational guidance provided for the FY 2022
to 2025 period and the (null) guidance for expansion capital expenditure, of
US$61 million, beyond the FY 2025 guidance period.
* Petra does not provide guidance on diamond pricing. However, it should be
noted that Exceptional Stones have contributed an average of US$47 million per
annum over the last three years, and US$37 million per annum over the last
five years, to Group revenue.
Outlook
Our confidence in the outlook for Petra is supported by the structural changes
in diamond market supply and demand which continue to underpin prices, despite
some expected softening from the highs seen in the March tender as a result of
the economic uncertainty arising from the war in Ukraine. The supportive
structural market dynamic, coupled with the operational improvements we have
made to drive margin and cash generation, give the potential for both improved
financial performance and further reduction in our debt.
CONFERENCE CALLS
09:30am and 16:00 BST today
Petra’s Chief Executive, Richard Duffy, and Finance Director, Jacques
Breytenbach, will host calls today to discuss this trading update at 09:30 and
16:00 BST.
Registration for calls:
United Kingdom 0800 640 6441
United Kingdom (Local) 020 3936 2999
United States 1 646 664 1960
All other locations +44 20 3936 2999
09:30: Access code: 122879
16:00: Access code: 853531
Press *1 to ask a question, *2 to withdraw your question, or *0 for operator
assistance.
Link for recording (available later today):
https://www.petradiamonds.com/investors/results-reports/
FURTHER INFORMATION
Please contact
Petra Diamonds,
London
Telephone: +44 207494 8203
Jill Sherratt
investorrelations@petradiamonds.com
Julia Stone
REVIEW
Q3 and 9M FY 2022 production and sales summary
Unit Q3 FY 2022 Q3 FY 2021 Variance 9M FY 2022 9M FY 2021 Variance
Revenue US$M 140.6 106.0 +33% 405.4 284.2 +43%
Exceptional Stones US$M 5.5 12.2 -55% 83.4 52.5 +59%
Total production Mt 2.9 1.8 +61% 8.6 6.1 +41%
Total diamonds Carats 830,456 704,498 +18% 2,607,880 2,445,360 +7%
Strong YTD revenue growth in a robust diamond market
The 43% increase in revenue for the nine months to 31 March 2022 to US$405.4
million (9M FY 2021: US$284.2 million) was driven in part by the sale of
Exceptional Stones totalling US$83.4 million (9M FY 2021: US$52.5 million)
comprising the following:
* 39.34 carat blue diamond from the Cullinan mine which sold for US$40.2
million
* 342.92 carat Type IIa white diamond from the Cullinan mine which sold for
US$10 million (the Company has retained a 50% interest in the profit uplift of
the polished proceeds, after costs, of the 342.92 carat white diamond, as well
as an 18.30 carat Type IIb blue diamond which sold for US$3.5 million)
* 32.32 carat pink diamond from the Williamson mine which sold for US$13.8
million
* 295.79 carat white diamond from the Cullinan mine which sold for US$13.9
million
* 157.88 carat white diamond from Cullinan mine which sold for US$5.5 million
Revenue also benefited from a 37.6% like-for-like rise in realised diamond
prices in the 4(th) tender as compared to the preceding tender which closed in
December 2021.
YTD carats sold reduced by some 16% compared to the comparative period when
significantly higher volumes were sold, mostly off-tender, following the
inventory build-up witnessed late in FY 2020 after the initial COVID-19
outbreak, while sales in Q3 FY 2022 were limited to one tender during the
Quarter. Two further sales tenders are planned in this last quarter, in April
and June, as previously announced. The higher diamond inventory at the end of
Q3 is expected to unwind to normal year-end levels during the fourth quarter.
Production benefiting from operational improvements and good safety
performance
Health and safety
The Lost Time Injury Frequency Rate (“LTIFR”) for 9M FY 2022 decreased to
0.18 (9M FY 2021: 0.47). The LTIs during the Period continued to be of low
severity and mostly behavioural in nature. The various remedial actions and
behaviour-based intervention programmes previously announced have assisted in
achieving the strong improvement in the safety trend. The total number of
injuries during 9M FY 2022, which includes LTIs, decreased to 24 (9M FY 2021:
30). Petra continues to target a zero-harm working environment.
COVID-19 remains a risk to the health and safety of the Group’s workforce.
Petra has implemented systems and strategies across all of its operations
aimed at preventing and/or containing the spread of the virus with an ongoing
drive to vaccinate its employees. In South Africa, 2,479 employees have been
fully vaccinated (58.4% of the workforce) and 244 partially vaccinated (6% of
the workforce), while at Williamson the roll-out has been slower with 173
employees fully vaccinated (14% of the workforce).
Production
9M FY 2022 production was in line with guidance, totalling 2,607,880 carats
(9M FY 2021: 2,445,360 carats). Williamson resumed production during the
period, having been on care and maintenance since April 2020. The previously
reported waste ingress at Finsch has been largely mitigated through the
implementation of enhanced drill and blast and draw controls. The convergence
of tunnel 41 at Cullinan has been remediated and will continue to be monitored
in terms of re-accessing the tunnel.
The Business Re-engineering Projects at Finsch and Koffiefontein concluded in
transition plans with recommended deliverables and due dates.
* The cost savings and production improvement initiatives at Finsch, to
enhance margins and ensure a long-term sustainable operation, are being
implemented as part of the annual three year planning cycle.
* While the conclusion for Koffiefontein reaffirmed running the mine to
closure by 2025 as well as exploring other alternatives in parallel, we have
been considering options to curtail the negative cash flow. To this end, we
have been engaging with the Future Forum, comprising organised labour and
management, with the intention of aligning the operations to a reduced tonnage
profile and improved efficiencies. Regretfully, this is expected to result in
job losses.
Production ramp-up at Williamson commenced during the first half and 2.4 Mt
ROM was processed in 9M FY2022, yielding 147,876 carats, including the
exceptional 32.32 carat pink stone sold during H1 FY 2022.
The diamond market
The strength of the diamond market was evident in the sales results from
Petra’s 4(th) Tender in March. Strong demand for rough diamonds, with
resultant price increases, was seen across all size and quality categories.
Like-for-like rough diamond prices increased by 37.6% on Tender 3, which
closed in December 2021.
The much stronger diamond market has been evident since mid-2021 with Q3
pricing for rough driven by strong sales of polished and increased demand from
the manufacturing centres, bolstered by record sales during the festive
season. We believe this market dynamic reflects the structural change in
underlying supply and demand, which we expect to continue to be supportive.
However, the effects of the current conflict in Ukraine have led to some
uncertainty as to the impact on the global economy, which we expect will
result in some softening in prices from the highs seen in Q3 FY 2022.
Petra is closely monitoring the impact of the war in Ukraine and sanctions on
Russian companies. We also continue to monitor COVID-19 and the impact it
may have on clients’ ability to attend tenders and we will remain flexible
in our approach to planning upcoming sales events. The final sales for FY 2022
are planned for April and June, bringing the number of tenders to six for FY
2022.
Strong cash generation supported by Project 2022
Project 2022, a three-year project that commenced in July 2019, is now in its
final three months. It has successfully increased cash generation through
increased production levels and reduced operating and capital expenditure. The
benefits are particularly reflected in the improving operating performance at
Cullinan and Finsch. Having achieved net free cash flow of US$182 million for
the thirty months to 31 December 2021, we are confident that the Project will
deliver over US$200 million in net free cash flow for the three years to end
June 2022, comfortably exceeding its US$100 to US$150 million target.
Continuous business improvement processes are now embedded in the Company’s
Operating Model and Organisational Design and is expected to continue to drive
future performance improvement.
Williamson Mine – Human Rights update
As previously announced, Petra has implemented remedial initiatives and is
putting in place the Independent Grievance Mechanism (“IGM”) as well as
community programmes to address the historical allegations of human rights
abuses at the Williamson mine in Tanzania. The Government of Tanzania gave its
approval to proceed with local stakeholder engagement on the IGM in February
2022 and the first phase commenced during March. Further engagement will take
place before the IGM is launched. Following delays in the necessary
stakeholder engagements, the current target is for the IGM to become
operational during Q4 of this calendar year.
A number of other projects are being put in place to provide sustainable
benefits to the communities located close to the mine funded by the one
million pounds escrow account established by Petra. The Gender Based Violence
project completed all planned activities in the first quarter of this calendar
year and the next step is to confirm community action plans with the district
commissioner. The medical services project continues to provide
physiotherapy services and further services are being considered. Feasibility
studies for the income generating projects (agri business and artisanal
mining) are also progressing.
More information on this can be found on Petra’s website at:
https://www.petradiamonds.com/our-operations/our-mines/williamson/allegations-of-human-rights-abuses-at-the-williamson-mine/.
Notes:
1. The following definitions have been used in this announcement:
1. Exceptional Stones: diamonds with a valuation and selling price of US$5m or
more per stone
2. cpht: carats per hundred tonnes
3. Kcts: thousand carats
4. Kt: thousand tonnes
5. LOM: life of mine
6. LTI: lost time injury
7. LTIFR: lost time injury frequency rate
8. Mcts: million carats
9. Mt: million tonnes
10. FY: financial year
11. Q: quarter of the financial year
12. ROM: run-of-mine (i.e. production from the primary orebody)
13. SLC: sub level cave
14. m: million
ABOUT PETRA DIAMONDS
Petra Diamonds is a leading independent diamond mining group and a supplier of
gem quality rough diamonds to the international market. The Company’s
portfolio incorporates interests in three underground producing mines in South
Africa (Finsch, Cullinan and Koffiefontein) and one open pit mine in Tanzania
(Williamson).
Petra's strategy is to focus on value rather than volume production by
optimising recoveries from its high-quality asset base in order to maximise
their efficiency and profitability. The Group has a significant resource base
of ca. 230 million carats, which supports the potential for long-life
operations.
Petra strives to conduct all operations according to the highest ethical
standards and only operates in countries which are members of the Kimberley
Process. The Company aims to generate tangible value for each of its
stakeholders, thereby contributing to the socio-economic development of its
host countries and supporting long-term sustainable operations to the benefit
of its employees, partners and communities.
Petra is quoted with a premium listing on the Main Market of the London Stock
Exchange under the ticker 'PDL'. The Company’s US$336.7 million notes due in
2026 are listed on the Irish Stock Exchange and admitted to trading on the
Global Exchange Market. For more information, visit www.petradiamonds.com.
APPENDIX
Corporate and financial summary 31 March 2022
Unit As at 31 March 2022 As at 31 December 2021 As at 30 June 2021 As 31 March 2021
Cash at bank – (including restricted amounts)¹ US$m 249.2 272.3 173.0 153.8
Diamond debtors US$m — 0.4 38.3 2.6
Diamond inventories (2,3) US$m Cts 98.1 914,402 79.6 819,252 56.5 637,676 75.5 1,020,973
US$336.7m loan notes (issued March 2021) (4) US$m 356.2 346.4 327.3 338.7
Bank loans and borrowings (5) US$m — 78.6 103.0 108.4
Consolidated Net debt (6) US$m 107.0 152.3 228.2 290.7
Bank facilities undrawn and available (5) US$m 24.5 0.6 7.7 10.8
Note: The following exchange rates have been used for this announcement:
average for 9M FY 2022 US$1: ZAR15.10 (9M FY 2021: US$1: ZAR15.84, FY 2021:
US$1: ZAR15.41); closing rate as at 31 March 2022 US$1: ZAR14.60 (31 March
2021 US$1: ZAR14.77, 30 June 2021: US$1: ZAR14.27).
Notes:
1. Cash at bank and diamond inventories include balances at Williamson as at
31 March 2022 following the Company entering into the MoU with Caspian during
December 2021. Comparatives for 31 December 2021, 30 June 2021 and 31 March
2021 have been adjusted to include balances attributable to Williamson.
2. Recorded at the lower of cost and net realisable value.
3. Diamond inventories includes the Williamson 71,654.45 carat parcel of
diamonds blocked for export during August 2017, with a carrying value of
US$10.6 million. Under the framework agreement reached with the Government of
Tanzania, as announced on 13 December 2021, the proceeds from the sale of this
parcel are required to be allocated to Williamson.
4. The US$336.7 million loan notes have a carrying value of US$356.2 million
which represents the gross capital of US$336.7 million of notes, plus accrued
interest and net of unamortised transaction costs capitalised, issued
following the capital restructuring (the “Restructuring”) completed during
March 2021.
5. Bank loans and borrowings represent amounts drawn under the Group’s
refinanced South African bank facilities as part of the Restructuring and
comprise the term loan and revolving credit facility. Under the revolving
credit facility, ZAR358.4 million (US$24.5 million) remains undrawn and
available. During the Period, the Group settled the revolving credit facility
of ZAR404.6 million (US$27.7 million) (capital plus interest) and the term
loan of ZAR893.2 million (US$61.2 million) (capital plus interest). The
revolving credit facility remains available for drawdown with the term loan
being cancelled upon settlement.
6. Consolidated Net Debt is bank loans and borrowings plus loan notes, less
cash and diamond debtors.
Q3 and 9M FY 2022 production and sales summary
Group
Unit Q3 FY 2022 Q3 FY 2021 Variance 9M FY 2022 9M FY 2021 Variance
Sales
Diamonds sold Carats 735,225 1,069,205 -31% 2,331,076 2,782,002 -16%
Revenue US$M 140.6 106.0 +33% 405.4 284.2 +43%
Production
ROM tonnes Mt 2.8 1.7 +65% 8.2 5.8 +41%
Tailings & other (1)tonnes Mt 0.1 0.1 n.a. 0.4 0.3 +33%
Total tonnes treated Mt 2.9 1.8 +61% 8.6 6.1 +41%
ROM diamonds Carats 780,896 656,461 +19% 2,430,885 2,301,307 +6%
Tailings & other (1)diamonds Carats 49,560 48,037 +3% 176,995 144,053 +23%
Total diamonds Carats 830,456 704,498 +18% 2,607,880 2,445,360 +7%
Cullinan – South Africa
Unit Q3 FY 2022 Q3 FY 2021 Variance 9M FY 2022 9M FY 2021 Variance
Sales
Revenue US$M 73.7 62.9 +17% 241.4 170.2 +42%
Diamonds sold Carats 409,030 651,268 -37% 1,281,334 1,546,026 -17%
Average price per carat US$ 180 97 +86% 188 110 +71%
ROM production
Tonnes treated Tonnes 1,053,631 1,054,978 -0% 3,360,618 3,394,451 -1%
Diamonds produced Carats 404,473 388,666 +4% 1,247,675 1,302,292 -4%
Grade (1) cpht 38.4 36.8 +4% 37.1 38.4 -3%
Tailings production
Tonnes treated Tonnes 112,414 105,825 +6% 350,706 327,210 +7%
Diamonds produced Carats 49,560 48,037 +3% 176,995 144,053 +23%
Grade (1) cpht 44.1 45.4 -3% 50.5 44.0 +15%
Total production
Tonnes treated Tonnes 1,166,045 1,160,803 +0% 3,711,324 3,721,661 +0%
Diamonds produced Carats 454,033 436,703 +4% 1,424,670 1,446,345 -1%
Note: 1. Petra is not able to precisely measure the ROM / tailings grade split
because ore from both sources is processed through the same plant; the Company
therefore back-calculates the grade with reference to resource grades.
Finsch – South Africa
Unit Q3 FY 2022 Q3 FY 2021 Variance 9M FY 2022 9M FY 2021 Variance
Sales
Revenue US$M 39.2 31.4 +25% 104.9 86.2 +22%
Diamonds sold Carats 259,164 391,921 -34% 935,459 1,160,568 -19%
Average price per carat US$ 151 80 +89% 112 74 +51%
ROM production
Tonnes treated Tonnes 656,408 460,057 +43% 2,079,527 1,783,057 +17%
Diamonds produced Carats 303,591 253,607 +20% 1,005,134 948,915 +6%
Grade (1) cpht 46.3 55.1 -16% 48.3 53.2 -9%
Total production
Tonnes treated Tonnes 656,408 460,057 +43% 2,079,527 1,783,057 +17%
Diamonds produced Carats 303,591 253,607 +20% 1,005,134 948,915 +6%
Note: 1. Petra is not able to precisely measure the ROM / tailings grade split
because ore from both sources is processed through the same plant; the Company
therefore back-calculates the grade with reference to resource grades.
Koffiefontein – South Africa
Unit Q3 FY 2022 Q3 FY 2021 Variance 9M FY 2022 9M FY 2021 Variance
Sales
Revenue US$M 5.4 11.7 -54% 16.5 22.9 -28%
Diamonds sold Carats 6,269 26,007 -76% 26,907 44,951 -40%
Average price per carat US$ 856 451 +90% 612 509 +20%
ROM production
Tonnes treated Tonnes 76,453 130,494 -41% 393,763 624,155 -37%
Diamonds produced Carats 7,829 14,188 -45% 30,200 50,101 -40%
Grade cpht 10.2 10.9 -6% 7.7 8.0 -4%
Total production
Tonnes treated Tonnes 76,453 130,494 -41% 393,763 624,155 -37%
Diamonds produced Carats 7,829 14,188 -45% 30,200 50,101 -40%
Williamson – Tanzania
Unit Q3 FY 2022 Q3 FY 2021 Variance 9M FY 2022 9M FY 2021 Variance
Sales
Revenue US$M 22.4 0 n.a 42.6 4.6 n.a
Diamonds sold Carats 60,759 0 n.a 87,370 30,339 n.a
Average price per carat US$ 369 0 n.a 488 150 n.a
ROM production
Tonnes treated Tonnes 1,005,901 0 n.a 2,360,017 0 n.a
Diamonds produced Carats 65,003 0 n.a 147,876 0 n.a
Grade cpht 6.5 0 n.a 6.3 0 n.a
Total production
Tonnes treated Tonnes 1,005,901 0 n.a 2,360,017 0 n.a
Diamonds produced Carats 65,003 0 n.a 147,876 0 n.a
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