Petra Diamonds Limited · LSE:PDL
Petra Diamonds — RBC African Mining Conference 2014
38 slides from Petra Diamonds's conference presentation, May 2014
Slide 1: Discover Petra – A Leading Independent Diamond Producer
The Finsch mine in South Africa Discover Petra – A Leading Independent Diamond Producer May 2014
Slide 2: Important Notice
Important Notice These Presentation Materials do not constitute or form part of any invitation, offer for sale or subscription or any solicitation for any offer to buy or subscribe for any securities in the Company nor shall they or any part of them form the basis of or be relied upon in any manner
Slide 3: Discover Petra
Discover Petra LSE: PDL: Constituent of FTSE 250; market capitalisation of ca. £850m / US$1.4bn (as at 30 April 2014) 1. Pure play diamond exposure: uniquely poised to benefit from late cycle credentials and growing middle classes 2. Quality management and assets: consistent strategy, performance an
Slide 4: Organic Growth Path to 5 Million Carats pa
Organic Growth Path to 5 Million Carats pa • FY 2014 onwards – operating cashflow to cover capital programme FY 2019 production target of ca. 5.0 Mcts; revenue of ca. US$1bn 1000 6.0 FY 2014 production Carat production (million carats) target of ca. 5.0 3.0 Mcts; consensus FY 2013 revenue of product
Slide 5: 1. Pure Play Diamond Exposure
1. Pure Play Diamond Exposure • Limited supply: only ~30 significant kimberlite mines in production; no major discoveries since 1990’s • Major mines maturing: past production peak; smaller footprints and some moving underground • Late cycle credentials: demand driven by urbanisation, growing middle
Slide 6: 2. Quality Management and Assets
2. Quality Management and Assets • Diversified portfolio: five producing mines in South Africa, one in Tanzania and exploration in Botswana • World-class resource: +300 million carats (largest outside the majors) worth ~US$55.0 billion¹ (at 30 June 2013), incl. one Tier 1 asset (Cullinan) Africa pro
Slide 7: 2. Quality Management and Assets
2. Quality Management and Assets • Petra team is highly experienced in managing producing diamond mines in Africa • Consistent delivery of growth – target of 5 Mctpa established in January 2011 Mine Management Project Development • Focus on efficiencies and simplification of • Utilise in-house exper
Slide 8: 2. Quality Management and Assets
2. Quality Management and Assets • Kimberlite production profile (diamond quality and size ranges) remains highly constant over time, resulting in accuracy for diamond price forecasting • Ever growing volumes across the full diamond spectrum (from lowest to highest value) • Growing trend for mass lu
Slide 9: 2. Quality Management and Assets
2. Quality Management and Assets • Historic, high value diamonds are a regular feature of Petra’s production portfolio The Greater Star of The Williamson Pink Africa 55ct rough; 24ct polished; Largest polished yield gifted to Princess Elizabeth from the Cullinan at on her engagement 530ct; sits in t
Slide 10: 3. Strong Growth Profile
3. Strong Growth Profile • Caving is a safe and proven mechanised mining method • Expansion programmes to establish new block/sub level caves in undiluted kimberlite • Grades expected to rise significantly, increasing diamond content per tonne mined: • Finsch ca. 37 cpht to ca. 56 cpht¹ • Cullinan c
Slide 11: 4. Significant Margin Expansion
4. Significant Margin Expansion Operating margins to gradually rise from +30% to +50% by FY 2019 • ROM grades expected to increase ca. 50% once expansion programmes open up undiluted ore blocks • Higher value ROM carats in production mix expected to increase to ca. 90% • Unit costs to be well manage
Slide 12: 5. Fully Financed
5. Fully Financed Debt Facilities1 H1 FY 2014: operating cashflow covered capex US$ million • Operating cashflow of US$91.9 million (Percentage utilised in brackets) • Cash capex of US$84.7 million As at 31 December 2013: 48 • Cash: US$28.0 million and diamond inventories of ca. US$49.4 million (18%
Slide 13: Outlook
Outlook Rising Production Rising Margins Rising Prices? • Organic growth profile to ca. • Group margins expected to • Petra rough diamond prices 5 million carats go from +30% to +50% (FY up ca. 10% Jan to Apr 2014; 2019) firmer market conditions expected to end FY 2014 • Management of unit costs – •
Slide 14: Integrated Approach to Sustainability
Integrated Approach to Sustainability Safety 1.2 1 Safety of employees is top 0.8 priority for management 0.6 Petra striving for 0.4 zero harm across its operations 0.2 Left: Petra’s LTIFR 0 Rate FY 2010 FY 2011 FY 2012 FY 2013 Q3 FY 2014 Striving for the highest standards Employee and Community Hea
Slide 15: Appendix
The Cullinan mine in South Africa Appendix
Slide 16: Capital Structure
Capital Structure High Quality Share Register PDL Share Price (blue) vs FTSE 350 Mining % ISC (as at 30 April 2014) (1 year) Al Rajhi Holdings W.W.L. 13.0% Saad Investments Company Ltd / AWAL Bank 11.9% T. Rowe Price 10.2% JP Morgan Asset Management Holdings Inc. 7.8% Listing LSE: PDL BlackRock Inve
Slide 17: Significant Diamond Producers
Significant Diamond Producers Majors: Mid cap: LSE: PDL (FTSE 250) TSX: DDC TSX: LUC LSE: GEMD Market cap: US$1,453m¹ Market cap: US$1,061m¹ Market cap: US$645m¹ Market cap: US$378m¹ Assets: five producing mines; Assets: two producing mines Assets: one producing mine; Assets: one producing mine; exp
Slide 18: The Petra Board
The Petra Board Adonis Pouroulis (43) Johan Dippenaar (56) David Abery (51) Jim Davidson (68) Non-Executive Chairman CEO Finance Director Technical Director Successful mining entrepreneur One of South Africa’s most successful Extensive experience as Chief Financial Acknowledged world authority on Fo
Slide 19: Petra's Growth Path
Petra’s Growth Path • Petra has acquired five non-core diamond mines from De Beers (four in South Africa, one in Tanzania) • Group resource base of 309.6 million carats² worth ~US$55.0 billion³ (at 30 June 2013) July 2007 July 2008 February 2009 May 2010 September 2011 Koffiefontein Cullinan William
Slide 20: Production and Revenue – FY 2013 vs FY 2019
Production and Revenue – FY 2013 vs FY 2019 Gross Production Gross Revenue FY 2013 actual: 2.67 million carats FY 2013 actual: US$402.7 million 33% 33% 41% 53% Cullinan Williamson 6% 10% Koffiefontein 4% 1% 8% 4% 3%4% Kimberley Underground Fissure Mines FY 2019: ca. 5 million carats¹ FY 2019: ca. US
Slide 21: FY 2013 – Key Performance Indicators
FY 2013 – Key Performance Indicators Revenue Profit from Mining Activity¹ Adjusted EBITDA² Adjusted operating cashflow³ US$M US$402.7m US$M US$136.8m US$M US$122.4m US$132.8m +27% +34% +36% US$M +57% 450 160 140 150 400 140 120 130 350 120 100 110 300 100 90 250 80 80 70 200 60 60 50 150 40 40 30 10
Slide 22: Q3 FY 2014 Production and Sales Summary
Q3 FY 2014 Production and Sales Summary Unit Nine months to Nine months to Variance 31 March 2014 31 March 2013 Production ROM diamonds Carats 1,623,304 1,466,769 +11% Tailings and alluvial diamonds Carats 755,836 427,998 +77% Total diamonds Carats 2,379,140 1,894,767 +26% Sales Diamonds sold Carats
Slide 23: Summary of Financial Results
Summary of Financial Results H1 FY 2014 FY 2013 FY 2012 (US$m) (US$m) (US$m) Revenue 185.5 402.7 316.9 Adjusted mining and processing costs¹ (114.2) (270.3) (222.6) Other direct income 2.1 6.2 9.0 Profit from mining activity¹ 73.4 138.6 103.3 Exploration expense¹ (1.4) (4.8) (3.0) Corporate overhead
Slide 24: FY 2013 – Operations Results
FY 2013 – Operations Results Operation Finsch Cullinan Koffiefontein Kimberley UG Williamson (74%¹ Petra; 26% BEE) (74%¹ Petra; 26% BEE) (74%¹ & 2 Petra; 26% BEE) (74%¹ Petra; 26% BEE) (75% Petra; 25% Government of Tanzania) Total Production Tonnes treated (Mt) 5,210,546 3,861,012 4,080,893 3,172,67
Slide 25: Falling Supply
Falling Supply • Production fell 28% from 2005 (177 Mcts; Zimbabwe 0.2 Mcts) to 2012 (128 Mcts; Zimbabwe: 12.1 Mcts) • Success rate for finding an economic diamondiferous kimberlite is estimated to be <1% (De Beers) • No Tier 1 discoveries for 20 years, despite US$ billions spent on exploration in 1
Slide 26: Growing Demand
Growing Demand Per capita consumption of key commodities: • Demand growth driven by urbanisation and growing middle China relative to the US “steady state” classes in emerging markets, as well as continued economic recovery in major US market • Additional 1.3bn people to attain middle income status
Slide 27: Current Rough Diamond Market
Current Rough Diamond Market • Rough diamond market had strong start to calendar 2014 – prices achieved by Petra up ca. 10% • Firm market conditions in H2 further to solid seasonal sales, indicators of increasing global economic confidence, restocking of inventories and cautious optimism from Petra
Slide 28: Consistent Production of Specials
28 Date of acquisition 2013 2011 2009 2007 2005 2003 2001 1999 1997 1995 1993 +100 and +200 carat stones recovered at Cullinan 1991 1989 1987 1985 1983 1981 1979 1977 1975 1973 1971 Consistent Production of Specials +200 1968 1966 +100 1964 1962 1960 1958 1956 1954 1952 1950 1931 1929 1927 1925 1923
Slide 29: H1 FY 2014 Operating Costs
H1 FY 2014 Operating Costs • On-mine cash costs decreased by 8% in US$ terms: On-mine cash cost make-up • SA operations costs increased in ZAR terms by ca. 7% 11%, mainly due to increased production and 14% inflationary pressures 40% • Offset by weakening ZAR vs USD (R10.07 average for H1 FY 2014 vs
Slide 30: Finsch – Development Programme
Finsch – Development Programme Expansion Plan – to take 2,953 metres of SLC tunnels developed to date (out of 10,072 metres in total) production to c.1.8 Mctpa by FY 2016 and c.2.0 Mctpa from FY 2017 Dedicated conveyor ore-handling system • Mining currently taking place in Block 4 at 630m – FY 2014
Slide 31: Cullinan – Development Programme
Cullinan – Development Programme Expansion Plan – to take 7,068 metres of tunnels developed to date (out of 24,575 metres in total) production to c. 2.2 Mctpa by FY 2019 (2.0 Mctpa ROM & 0.2 Mctpa tailings) • Commenced rehabilitation of Current Infrastructure Men & Material BA5 areas at 645m to crea
Slide 32: Kimberley Underground – Development Programme
Kimberley Underground – Development Programme Expansion Plan – to Kimberley Underground Kimberlite Pipes Schematic maintain annual production of c. 130,000 ctpa • Construction and commissioning of plants at both Joint Shaft and BULTFONTEIN Wesselton Shaft – completed in FY 2013 • Substantial stockpi
Slide 33: Koffiefontein – Development Programme
Koffiefontein – Development Programme Expansion Plan – to take Koffiefontein Kimberlite Pipe Schematic production to c. 105,000 ctpa by FY 2017 • ROM production supplemented by ore from Ebenhaezer open pit (~5ha) – FY 2014 to FY 2016 • Installation of SLC from 560m to 580m – FY 2014 to FY 2015 • SLC
Slide 34: Williamson – Development Programme
Williamson – Development Programme Expansion Plan – to take Williamson Kimberlite Pipe Schematic production to c. 300,000 ctpa by FY 2017 • Production resumed further 1km to the enhanced rebuild of N plant – Q4 FY 2012 • Successful ramp-up of production to 2.7 Mt – FY 2013 LOM Pit Shell • Re-crush c
Slide 35: Debt Facilities
Debt Facilities • Nov 2012: new debt facilities put in place of ca. US$213 million¹ with Absa, RMB (FNB) and IFC • An increase and optimisation of Petra’s prior debt structures (previously ca. US$138 million ) Lender Type Size Interest Rate Repayment Absa & Amortising term facility US$76.0 JIBAR + 4
Slide 36: Capex Profile
Capex Profile Financial Year 2013A 2014F 2015F 2016F 2017F 2018F 2019F Operation Finsch ROM tonnes treated (Mt) 2.6 2.8 2.9 3.2 3.2 3.2 3.2 Tailings tonnes treated (Mt) 2.6 2.6 3.0 3.0 3.0 3.0 3.0 Expansion Capex (ZARm) 296.1 512.3 422.2 346.9 467.9 403.0 354.3 Sustaining Capex (ZARm) 93.7 132.7 115
Slide 37: South Africa and Tanzania
South Africa and Tanzania South Africa Tanzania Corporate tax 28% 30% Diamond royalty Formula based on profitability of 5% of turnover mining operation; 0.5% up to 7% of turnover Rough diamond export levy 5%, certain exemptions apply; n/a Petra sells all SA goods in Joburg State Diamond Trader Petra
Slide 38: Further enquiries: Petra Diamonds
The Cullinan mine in South Africa Further enquiries: Petra Diamonds Cathy Malins [email protected] +44 20 7494 8203 www.petradiamonds.com