Petra Diamonds Ltd - H1 FY 2023 Operating Update
16 January 2023 LSE: PDL
H1 FY 2023 Operating Update
Petra reports its operating results for the first half of FY 2023
“
Despite some challenges in the first half of FY 2023, Petra continues to benefit from the operational improvements we have made across the business which provide for greater stability and resilience. As a result, we are seeing improvements to equipment and tunnel availability at Finsch, resulting in an increase in ROM grades from
Although lower grades at the
Strong relationships at both government and local level, as well as a robust governance framework, provided for a swift response to the regrettable tailings storage facility (TSF) breach that occurred at Williamson on
After having commenced mining in the early 1880s and being a renowned source of gem-quality white and coloured diamonds, the Board, in ongoing consultation with its stakeholders, has taken the difficult decision to cease operations and place Koffiefontein on care and maintenance. Engagement with our key stakeholders remains constructive as we seek to ensure an inclusive and responsible process towards mine closure.
Following on from the above, we have reduced our diamond production guidance for this financial year to circa 2.8 Mcts and 3.0 to 3.3 Mcts for FY 2024, which includes the impact of lost production at Williamson and Koffiefontein. Guidance in FY 2025 remains unchanged.
With a stronger product mix offsetting the recent softness in rough diamond prices, we remain confident that we will continue to generate cash to fund capex, allow further deleveraging and pay dividends.”
Highlights vs H1 FY 2022
-- LTIFR and LTIs marginally increased to 0.19 and 7 respectively
-- Ore processed decreased 4% to 5.4Mt, largely due to the suspension of
production at Williamson and lower tonnes mined at Finsch
-- Total diamond production decreased 21% to 1.4 million carats due to
lower grades at the Cullinan Mine , lower tonnes mined at Finsch and
production suspensions at Williamson and Koffiefontein
-- Support from a weaker Rand and more stable diamond pricing
-- Revenue amounted to US$212.1 million (H1 FY 2022: US$264.7 million )
o Post the Tender 3 sales results announcement released on 13 December
2022 , additional off-tender sales of some US$4.3 million (40,246
carats) to local South African cutting & polishing clients were
effected, bringing total rough diamond sales for the period to
US$210.7 million
o Revenue includes US$1.4 million from Petra’s 50% share in the profit
from the sale of polished stones cut from the 342.92 carat rough white
diamond sold into a partnership for US$10 million in August 2021
o Gross debt decreased to US$241.7 million (30 June 2022 : US$366.2
million ) reflecting the successful tender offer to repurchase second
lien notes
Safety, sales H1 FY 2023 H1 FY 2022 and Unit production Q2 Q1 Total Q2 Q1 Total Safety LTIFR - 0.22 0.16 0.19 0.06 0.31 0.18 LTIs Number 4 3 7 1 5 6 Sales Diamonds sold Carats 792,889 520,011 1,312,900 1,017,665 578,186 1,595,851 Revenue1 US$m 107.8 102.9 210.7 149.9 114.9 264.7 Contribution US$m 0.0 0.0 0.0 27.7 50.2 77.9 from Exceptional Stones Production ROM tonnes Tonnes 2,198,975 3,042,017 5,240,992 2,935,488 2,466,044 5,401,532 Tailings and Tonnes 92,375 105,715 198,090 122,699 115,593 238,292 other tonnes Total tonnes Tonnes 2,291,350 3,147,732 5,439,082 3,058,187 2,581,637 5,639,824 treated ROM diamonds Carats 604,917 733,014 1,337,931 839,643 810,346 1,649,989 Tailings and Carats 31,612 30,206 61,818 61,370 66,065 127,435 other diamonds Total Carats 636,529 763,220 1,399,749 901,013 876,411 1,777,424 diamonds
1 Revenue reflects proceeds from the sale of rough diamonds and excludes revenue from profit share arrangements (as noted in the text above)
2
Petra classifies “Exceptional Stones” as rough diamonds which sell for
-- Production guidance for FY 2023 & FY 2024 revised downwards from 3.3 to
3.6 Mcts for each of these years to circa 2.8 Mcts for FY 2023,
increasing to 3.0 to 3.3 Mcts for FY 2024. The adjustment incorporates
the impact of production curtailment at Williamson on FY 2023 of c. 200
kcts, cessation of production at Koffiefontein during H1 FY 2023 of c.
40 kcts p.a. for both FY 2023 and FY 2024, lower H1 FY 2023 production
at Finsch compared to earlier guidance of c. 85 kcts and a restated
grade forecast for the Cullinan Mine for FY 2023 and FY 2024 given
accelerated waste ingress of c. 200 kcts per year for each of the two
years
Production and guidance
-- LTI and LTIFR increased marginally in H1 FY 2023 due to an increase in
the number of LTIs, with the LTIFR impacted by a smaller number of hours
worked at Koffiefontein. Petra continues to strive for a zero harm
environment and has increased its focus on identifying and mitigating
safety risks through behaviour-based intervention programmes.
-- Cullinan Mine ROM grade reduced to 31.2cpht and is expected to be
between 30cpht and 32cpht for the full year. As announced previously,
this is attributable to the C-Cut cave maturity as the cave progresses
from SW to NE. From March 2022 , the C-Cut experienced early ingress of
waste from the overlying depleted mining blocks. The change in ore
makeup (lower grade and higher density) as a result of the cave
progression also resulted in processing challenges due to the high
process yields, causing a reduction in plant capacity to process
tailings treatment.
Ingress of overlying waste into the extraction draw points is a natural process in block cave mining. However, the onset and rate of the observed waste ingress occurred earlier and much more rapidly than predicted by the depletion model provided by an independent external expert. The C-Cut depletion model has been recalibrated by the independent external expert and model parameters adjusted to obtain alignment between the modelled and observed waste ingress. Once the ingress of waste commences, dilution of the ore is unavoidable and will increase as the cave maturity progresses. The impact of the change in the ore makeup on treatment capacity has, however, been largely negated with changes made in the dense media separation plant.
Several mitigating action plans to reduce the loss in carats are being considered and evaluated. Tailings treatment has been optimised but, in isolation, is not sufficient to address the extent of the carat loss associated with waste ingress in the C-Cut. Other mitigation action plans include the re-opening of Tunnels 36 and 41, which have already commenced, and the establishment of two new tunnels, Tunnels 46 and 50 (C-Cut extension), which are being evaluated. The re-opening of Tunnels 36 and 41 and the establishment of Tunnels 46 and 50 are expected to provide additional volume from FY 2025 onwards. Early development spend has been approved for Tunnels 46 and 50 and the additional production from these two tunnels is expected to more than offset the impact of lower grades in FY 2023 and FY 2024. Production from the CC1E capital expansion project will contribute meaningfully from FY 2025 onwards and is expected to see grades move back towards 40cpht.
As a consequence of the continued lower grades being experienced, production guidance for the full year and for FY 2024, which was expected to be towards the lower end of guidance, is now expected to fall below previously guided ranges with an annual negative impact of around 200 to 250 kcts for both FY 2023 and FY 2024, with FY 2025 guidance remaining unchanged at 1.7 to 1.9 Mct.
-- Finsch mined and treated 1.1Mt in H1 FY 2023. Finsch experienced further
production challenges in Q2 FY 2023, resulting in tonnes hoisted and
treated being significantly below target in the first half. These
challenges included low machine availability owing to an aging
underground fleet, challenges with the centralised blasting system and
emulsion quality and an extended rock-winder breakdown. In December
2022 , production improved on the back of new underground equipment being
delivered and commissioned following the previously announced increased
lead-times, coupled with positive changes to the blasting process. These
blasting process changes, together with 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, supports the
expected improvement in production in the second half.
The lower production in the first half is expected to result in full year production falling short of earlier guidance by some 75kcts. Guidance for FY 2024 onwards remains unchanged.
-- Production at Williamson was trending positively against guidance until
the TSF breach in November 2022 . Following the incident, all production
activities were suspended, with no further production expected for FY
2023. On-mine activities are focused on remedial steps and critical
maintenance to allow for a smooth start-up once the TSF has been
recommissioned. A separate announcement will be released shortly by the
Company to provide an update on activities at Williamson since the
incident.
On
-- As previously announced, Petra has been exploring options for a
responsible exit at Koffiefontein as the mine approaches the end of its
mine plan and with the sales process announced in April 2022 having not
resulted in a potential buyer for the mine. The asset has been
loss-making for several years and low morale remains a risk to the
mine’s safety performance. A Section 189(3) notice was issued to all KDM
employees during November 2022 informing them of the economic realities
of the mine and inviting them to join a collaborative process to
determine the optimal way forward towards achieving the mine being
placed on care and maintenance. Operations were halted to ensure all
assessed risks were adequately mitigated for. Our consultations with the
mine’s key stakeholders remain constructive and we are optimistic that
an inclusive and responsible process towards mine closure will be
achieved. As a result, further production from Koffiefontein has been
removed from our updated guidance.
-- Guidance – the following items are amended, with items not shown being
unchanged with reference to earlier guidance. Updated cost and capital
guidance, including actual results to December 2022 , will be provided
with the Company’s interim results on 21 February 2023 .
Original Guidance Restated Guidance
Carats recovered
3.3 – 3.6 Mcts ~2.8 Mcts
3.3 – 3.6 Mcts ~3.0 – 3.3 Mcts
Cullinan Mine Carats recovered
ROM grade 1.61 – 1.79 Mcts 1.4 – 1.5 Mcts
1.66 – 1.85 Mcts 1.45 – 1.55 Mcts
36.5 – 38.5 cpht ~30.8 cpht
36.7 – 38.8 cpht ~30.7 cpht
Carats recovered
1.28 – 1.39 Mcts 1.15 – 1.25 Mcts
Carats recovered
319 – 358 kcts 141 kcts
Carats Recovered
47 – 52 kcts 6 kcts
45 – 49 kcts
29 – 32 kcts
More detailed guidance is available on Petra’s website at https://www.petradiamonds.com/investors/analysts/analyst-guidance/
Balance sheet further strengthened through successful debt tender offer
-- Balance Sheet as at 31 December 2022 :
o Gross debt decreased toUS$241.7 million (30 June 2022 :US$366.2 million ) reflecting the successful tender offer in September/October 2022 to repurchase second lien notes. o Gross cash ofUS$146.6 million (30 June 2022 :US$288.2 million ) and unrestricted cash ofUS$130.4 million (30 June 2022 :US$271.9 million ) reflecting the repurchase of the Company’s loan notes totallingUS$145.0 million during the period. o Consolidated net debt ofUS$90.8 million (30 June 2022 :US$40.6 million ) increased due partly to timing of the Company’s tender cycles and resultant inventory build during the period together with the previously announced increase in capital expenditure for the expansion projects at theCullinan Mine and Finsch.
Outlook
Although the recent grade and dilution issues at the
The backdrop of structural changes to the supply and demand fundamentals in the diamond market remains unchanged and we anticipate it to remain supportive going forward. We are cautiously optimistic that the resilience seen in the luxury goods market, together with the easing of lockdown restrictions in
This announcement includes inside information as defined in Article 7 of the
INVESTOR WEBCASTS
Webcast presentation for institutional investors and analysts
Petra’s CEO,
Please register at:
https://www.investis-live.com/petra-diamonds/63c12fedaba36a0c0021ee6a/hyaie
Dial in details:
United Kingdom 0800 640 6441
South Africa 087 550 8441
All other locations +44 20 3936 2999
09:30: Access code: 723364
Press *1 to ask a question, *2 to withdraw your question, or *0 for operator assistance.
Link for recording (available later in the day):
https://www.petradiamonds.com/investors/results-reports/
Investor Meet webcast at 14.30 GMT on
Petra will also present the results on the
FURTHER INFORMATION
Please contact
Petra Diamonds, London Telephone: +44 207494 8203
Notes:
1. The following definitions have been used in this announcement:
a. Exceptional Stones: diamonds with a valuation and selling price ofUS$5m or more per stone b. cpht: carats per hundred tonnes c. LTIs: lost time injuries d. LTIFR: lost time injury frequency rate, calculated as the number of LTIs multiplied by 200,000 and divided by the number of hours worked e. FY: financial year ending 30 June f. CY: calendar year ending 31 December g. H: half of the financial year h. ROM: run-of-mine (i.e. production from the primary orebody) i. m: million j. Mt: million tonnes k. LHD: Load Haul Dump loaders
ABOUT PETRA DIAMONDS
Petra Diamonds is a leading independent diamond mining group and a supplier of gem quality rough diamonds to the international market. The Company’s portfolio incorporates interests in three underground mines in
Petra's strategy is to focus on value rather than volume production by optimising recoveries from its high-quality asset base in order to maximise their efficiency and profitability. The Group has a significant resource base which supports the potential for long-life operations.
Petra strives to conduct all operations according to the highest ethical standards and only operates in countries which are members of the Kimberley Process. The Company aims to generate tangible value for each of its stakeholders, thereby contributing to the socio-economic development of its host countries and supporting long-term sustainable operations to the benefit of its employees, partners and communities.
Petra is quoted with a premium listing on the Main Market of the
Corporate and financial summary
Unit As at 31 December As at 30 September As at 30 June
2022 2022 2022
Cash at bank – US$m 146.6 154.0 288.2
(including restricted
amounts)¹
Diamond debtors US$m 4.3 4.2 37.4
Diamond inventories2,3 US$m 59.9 76.3 52.7
Carats 540,153 692,219 453,380
2026 US$336.7m loan US$m 241.7 235.8 366.2
notes4
Bank loans and US$m — — —
borrowings5
Consolidated Net Debt6 US$m 90.8 77.6 40.6
Bank facilities US$m 58.8 55.1 61.5
undrawn and available5
Note:
The following exchange rates have been used for this announcement: average for H1 FY 2023 US$1:
Notes:
1. The Group’s cash balances comprise unrestricted balances ofUS$130.4 million , and restricted balances ofUS$16.2 million . 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$12.5 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. The 2026US$336.7 million loan notes, originally issued following the capital restructuring (the “Restructuring”) completed duringMarch 2021 , have a carrying value ofUS$241.7 million which represents the outstanding principal amount ofUS$210.2 million (after the early participation phase of the debt tender offers as announced in September andOctober 2022 ) plusUS$45.5 million of accrued interest and net of unamortised transaction costs capitalised ofUS$14.0 million . 5. Bank loans and borrowings represent the Group’sZAR1 billion revolving credit facility which remains undrawn and available. 6. Consolidated Net Debt is bank loans and borrowings plus loan notes, less cash and diamond debtors.
Mine-by-mine tables:
H1 FY 2023 H1 FY 2022
Unit
Q2 Q1 Total Q2 Q1 Total
Sales
Revenue US$m 45.8 56.9 102.7 74.9 92.8 167.7
Diamonds sold Carats 400,999 267,728 668,727 500,008 372,296 872,304
Average price US$ 114 212 154 150 249 192
per carat
ROM
Production
Tonnes Tonnes 1,120,282 1,110,912 2,231,194 1,099,643 1,207,343 2,306,986
treated
Diamonds Carats 328,137 368,796 696,933 411,235 431,967 843,202
produced
Grade1 Cpht 29.3 33.2 31.2 37.4 35.8 36.5
Tailings
Production
Tonnes Tonnes 62,178 77,572 139,750 122,700 115,593 238,293
treated
Diamonds Carats 28,211 26,790 55,001 61,370 66,065 127,435
produced
Grade1 Cpht 45.4 34.5 39.4 50.0 57.2 53.5
Total
Production
Tonnes Tonnes 1,182,460 1,188,484 2,370,944 1 222,343 1,322,936 2,545,279
treated
Diamonds Carats 356,348 395,586 751,934 472,605 498,032 970,637
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 –
H1 FY 2023 H1 FY 2022
Unit
Q2 Q1 Total Q2 Q1 Total
Sales
Revenue US$m 32.0 23.4 55.4 46.4 19.3 65.7
Diamonds sold Carats 283,833 177,285 461,118 474,643 201,652 676,295
Average price per US$ 113 132 120 98 96 97
carat
ROM Production
Tonnes treated Tonnes 522,578 572,976 1,095,554 721,741 701,378 1,423,119
Diamonds produced Carats 234,150 260,217 494,367 351,175 350,368 701,543
Grade1 Cpht 44.8 45.4 45.1 48.7 50.0 49.3
Tailings Production
Tonnes treated Tonnes 30,197 17,305 47,502 - - -
Diamonds produced Carats 3,402 3,160 6,562 - - -
Grade1 Cpht 11.3 18.3 13.8 - - -
Total Production
Tonnes treated Tonnes 552,775 590,281 1,143,056 721,741 701,378 1,423,119
Diamonds produced Carats 237,552 263,377 500,929 351,175 350,368 701,543
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.
Williamson –
H1 FY 2023 H1 FY 2022
Unit
Q2 Q1 Total Q2 Q1 Total
Sales
Revenue US$m 27.9 21.2 49.1 20.2 - 20.2
Diamonds sold Carats 103,829 71,295 175,124 26,611 - 26,611
Average price per US$ 269 297 280 760 - 760
carat
ROM Production
Tonnes treated Tonnes 520,017 1,309,359 1,829,376 988,978 365,138 1,354,116
Diamonds produced Carats 39,766 100,750 140,516 68,453 14,420 82,873
Grade1 Cpht 7.6 7.7 7.7 6.9 3.9 6.1
Total Production
Tonnes treated Tonnes 520,017 1,309,359 1,829,376 988,978 365,138 1,354,116
Diamonds produced Carats 39,766 100,750 140,516 68,453 14,420 82,873
Koffiefontein –
H1 FY 2023 H1 FY 2023
Unit
Q2 Q1 Total Q2 Q1 Total
Sales
Revenue US$m 2.2 1.4 3.6 8.3 2.8 11.1
Diamonds sold Carats 4,228 3,703 7,931 16,400 4,238 20,638
Average price per carat US$ 508 383 450 505 664 538
ROM Production
Tonnes treated Tonnes 36,099 48,770 84,869 125,126 192,184 317,310
Diamonds produced Carats 2,862 3,253 6,115 8,779 13,592 22,371
Grade1 Cpht 7.9 6.7 7.2 7.0 7.1 7.1
Tailings Production
Tonnes treated Tonnes - 10,837 10,837 - - -
Diamonds produced Carats - 255 255 - - -
Grade1 Cpht - 2.4 2.4 - - -
Total Production
Tonnes treated Tonnes 36,099 59,607 95,706 125,126 192,184 317,310
Diamonds produced Carats 2,862 3,508 6,370 8,779 13,592 22,371
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.
