20 April 2022 LSE: PDL
Trading Update for the three and nine months ended
“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
“Petra’s balance sheet strengthened further during the Quarter with net debt of
“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
HIGHLIGHTS
Strong performance with quarterly revenue growth of 33%
-- Strong YTD safety performance o Lost Time Injury Frequency Rate (“LTIFR”) down 62% to 0.18 (9M FY 2021: 0.47) o Total injuries, including LTIs, down 20% to 24 (9M FY 2021: 30) -- Q3 revenue up 33% toUS$140.6 million (Q3 FY 2021:US$106.0 million ) driven by: o Strong prices achieved in the 4th Tender inMarch 2022 with like-for-like prices up 37.6% compared to the precedingDecember 2021 tender o The sale of one Exceptional Stone in the Quarter, a 157.88ct Type IIa white stone from Cullinan forUS$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 andJune 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 at31 March 2022 : o Consolidated net debt ofUS$107.0 million (31 December 2021 :US$152.3 million ) o Gross cash ofUS$249.2 million (31 December 2021 :US$272.3 million ) and unrestricted cash ofUS$233.2 million (31 December 2021 :US$256.7 million ) following settlement of theZAR404.6 million (US$27.7 million ) revolving credit facility (“RCF”) andZAR893.2 million (US$61.2 million ) term loan under the first lien facilities during the Quarter. The agreements for the newZAR1 billion (c.US$68 million ) RCF with Absa Bank, as announced in February, are in the process of being finalised with the new facility expected to become effective duringApril 2022 o Diamond debtors of US$nil (31 December 2021 :US$0.4 million ) o Diamond inventory valued atUS$98.1 million (31 December 2021 :US$79.6 million )
Q3 Diamond Production up 18% with the resumption of production at Williamson
Production and sales summary
Unit Q3 FY 2022 Q3 FY 2021 Var. 9M FY 2022 9M FY 2021 Var. FY 20211 Ore Mt 2.9 1.8 +61% 8.6 6.1 +41% 8.1 processed Diamonds MCts 830,456 704,498 +18% 2,607,880 2,445,360 +7% 3,240,312 recovered Diamonds MCts 735,225 1,069,205 -31% 2,331,076 2,782,002 -16% 3,960,475 sold Revenue US$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,
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&A1 $m 300 - 310 300 – 320 300 – 320 300 - 320 Expansion capex1 $m 47 – 50 105 – 115 125 – 135 115 - 120 Sustaining capex1 $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
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 guidance for expansion capital expenditure, ofUS$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 ofUS$47 million per annum over the last three years, andUS$37 million per annum over the last five years, to Group revenue.
Outlook
Our confidence in the outlook for Petra is supported by the structural changes in diamond market supply and demand which continue to underpin prices, despite some expected softening from the highs seen in the March tender as a result of the economic uncertainty arising from the war in Ukraine. The supportive structural market dynamic, coupled with the operational improvements we have made to drive margin and cash generation, give the potential for both improved financial performance and further reduction in our debt.
CONFERENCE CALLS
Petra’s Chief Executive,
Registration for calls:
United Kingdom 0800 640 6441
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Link for recording (available later today):
https://www.petradiamonds.com/investors/results-reports/
FURTHER INFORMATION
Please contact
Petra Diamonds, London Telephone: +44 207494 8203
Julia Stone
REVIEW
Q3 and 9M FY 2022 production and sales summary
Unit Q3 FY 2022 Q3 Variance 9M FY 2022 9M FY 2021 Variance FY 2021 Revenue US$M 140.6 106.0 +33% 405.4 284.2 +43% Exceptional US$M 5.5 12.2 -55% 83.4 52.5 +59% Stones Total Mt 2.9 1.8 +61% 8.6 6.1 +41% production 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
-- 39.34 carat blue diamond from the Cullinan mine which sold forUS$40.2 million -- 342.92 carat Type IIa white diamond from the Cullinan mine which sold forUS$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 forUS$3.5 million ) -- 32.32 carat pink diamond from the Williamson mine which sold forUS$13.8 million -- 295.79 carat white diamond from the Cullinan mine which sold forUS$13.9 million -- 157.88 carat white diamond from Cullinan mine which sold forUS$5.5 million
Revenue also benefited from a 37.6% like-for-like rise in realised diamond prices in the 4th tender as compared to the preceding tender which closed in
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
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
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 theFuture 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 4th 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
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
Petra is closely monitoring the impact of the war in
Strong cash generation supported by Project 2022
Project 2022, a three-year project that commenced in
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.
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
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:
a. Exceptional Stones: diamonds with a valuation and selling price ofUS$5m or more per stone b. cpht: carats per hundred tonnes c. Kcts: thousand carats d. Kt: thousand tonnes e. LOM: life of mine f. LTI: lost time injury g. LTIFR: lost time injury frequency rate h. Mcts: million carats i. Mt: million tonnes j. FY: financial year k. Q: quarter of the financial year l. ROM: run-of-mine (i.e. production from the primary orebody) m. SLC: sub level cave n. m: million
ABOUT PETRA DIAMONDS
Petra Diamonds is a leading independent diamond mining group and a supplier of gem quality rough diamonds to the international market. The Company’s portfolio incorporates interests in three underground producing mines in
Petra's strategy is to focus on value rather than volume production by optimising recoveries from its high-quality asset base in order to maximise their efficiency and profitability. The Group has a significant resource base of ca. 230 million carats, which supports the potential for long-life operations.
Petra strives to conduct all operations according to the highest ethical standards and only operates in countries which are members of the Kimberley Process. The Company aims to generate tangible value for each of its stakeholders, thereby contributing to the socio-economic development of its host countries and supporting long-term sustainable operations to the benefit of its employees, partners and communities.
Petra is quoted with a premium listing on the Main Market of the
APPENDIX
Corporate and financial summary
Unit As at 31 March As at 31 December As at 30 June As 31 March 2022 2021 2021 2021 Cash at bank – US$m 249.2 272.3 173.0 153.8 (including restricted amounts)¹ Diamond debtors US$m — 0.4 38.3 2.6 Diamond US$m 98.1 79.6 56.5 75.5 inventories2,3 Cts 914,402 819,252 637,676 1,020,973US$336.7m loan US$m 356.2 346.4 327.3 338.7 notes (issued March 2021)4 Bank loans and US$m — 78.6 103.0 108.4 borrowings5 Consolidated Net US$m 107.0 152.3 228.2 290.7 debt6 Bank facilities US$m 24.5 0.6 7.7 10.8 undrawn and available5
Note:
The following exchange rates have been used for this announcement: average for 9M FY 2022 US$1:
Notes:
1. Cash at bank and diamond inventories include balances at Williamson as at31 March 2022 following the Company entering into the MoU withCaspian duringDecember 2021 . Comparatives for31 December 2021 ,30 June 2021 and31 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 duringAugust 2017 , with a carrying value ofUS$10.6 million . Under the framework agreement reached with the Government ofTanzania , as announced on13 December 2021 , the proceeds from the sale of this parcel are required to be allocated to Williamson. 4. TheUS$336.7 million loan notes have a carrying value ofUS$356.2 million which represents the gross capital ofUS$336.7 million of notes, plus accrued interest and net of unamortised transaction costs capitalised, issued following the capital restructuring (the “Restructuring”) completed duringMarch 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 ofZAR404.6 million (US$27.7 million ) (capital plus interest) and the term loan ofZAR893.2 million (US$61.2 million ) (capital plus interest). The revolving credit facility remains available for drawdown with the term loan being cancelled upon settlement. 6. Consolidated Net Debt is bank loans and borrowings plus loan notes, less cash and diamond debtors.
Q3 and 9M FY 2022 production and sales summary
Group
Unit Q3 Q3 Variance 9M 9M Variance FY 2022 FY 2021 FY 2022 FY 2021 Sales Diamonds sold Carats 735,225 1,069,205 -31% 2,331,076 2,782,002 -16% Revenue US$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 & other1 Mt 0.1 0.1 n.a. 0.4 0.3 +33% tonnes Total tonnes Mt 2.9 1.8 +61% 8.6 6.1 +41% treated ROM diamonds Carats 780,896 656,461 +19% 2,430,885 2,301,307 +6% Tailings & other1 Carats 49,560 48,037 +3% 176,995 144,053 +23% diamonds Total diamonds Carats 830,456 704,498 +18% 2,607,880 2,445,360 +7%
Cullinan –
Unit Q3 Q3 Variance 9M FY 2022 9M Variance FY 2022 FY 2021 FY 2021 Sales Revenue US$M 73.7 62.9 +17% 241.4 170.2 +42% Diamonds sold Carats 409,030 651,268 -37% 1,281,334 1,546,026 -17% Average price US$ 180 97 +86% 188 110 +71% per carat ROM production Tonnes treated Tonnes 1,053,631 1,054,978 -0% 3,360,618 3,394,451 -1% Diamonds Carats 404,473 388,666 +4% 1,247,675 1,302,292 -4% produced Grade1 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 Carats 49,560 48,037 +3% 176,995 144,053 +23% produced Grade1 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 Carats 454,033 436,703 +4% 1,424,670 1,446,345 -1% produced
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 –
Unit Q3 Q3 Variance 9M FY 2022 9M FY 2021 Variance FY 2022 FY 2021 Sales Revenue US$M 39.2 31.4 +25% 104.9 86.2 +22% Diamonds sold Carats 259,164 391,921 -34% 935,459 1,160,568 -19% Average price perUS$ 151 80 +89% 112 74 +51% carat 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% Grade1 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 –
Unit Q3 Q3 Variance 9M 9M Variance FY 2022 FY 2021 FY 2022 FY 2021 Sales Revenue US$M 5.4 11.7 -54% 16.5 22.9 -28% Diamonds sold Carats 6,269 26,007 -76% 26,907 44,951 -40% Average price per caratUS$ 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 –
Unit Q3 Q3 Variance 9M FY 2022 9M FY 2021 Variance FY 2022 FY 2021 Sales Revenue US$M 22.4 0 n.a 42.6 4.6 n.a Diamonds sold Carats 60,759 0 n.a 87,370 30,339 n.a Average price US$ 369 0 n.a 488 150 n.a per carat ROM production Tonnes treated Tonnes 1,005,901 0 n.a 2,360,017 0 n.a Diamonds Carats 65,003 0 n.a 147,876 0 n.a produced 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 Carats 65,003 0 n.a 147,876 0 n.a produced
