Petra Diamonds Limited · LSE:PDL
Petra Diamonds — Investor Presentation (February 2018)
49 slides from Petra Diamonds's investor presentation, February 2018
Slide 1: Corporate Presentation
Corporate Presentation February 2018 1
Slide 2: Important Notice
Important Notice • These Presentation Materials are being supplied to you by Petra Diamonds Limited (the “Company”) solely for your information and use at this presentation. These Presentation Materials may contain information that is confidential, legally privileged or otherwise protected by law. T
Slide 3: Discover Petra
Discover Petra… …a leading independent diamond miner with a diversified portfolio and high quality team Petra expansion plans expected to: • Improve grades • Improve product mix • Improve operative costs Driving VALUE • Production growth to come mainly from higher value ROM carats • Adj. EBITDA marg
Slide 4: H1 Trading Update
Johan Dippenaar CEO H1 Trading Update
Slide 5: H1 FY 2018 (six months to 31 December 2017)
H1 FY 2018 (six months to 31 December 2017) H1 FY 2018¹ H1 FY 2017¹ Variance FY 2017¹ Sales Diamonds sold Carats 1,811,154 1,910,113 -5% 4,006,856 Revenue US$m 225.2 228.5 -1% 477.0 Production ROM tonnes Mt 6.5 5.1 +28% 10.1 Tailings & other2 tonnes Mt 3.5 4.8 -27% 8.7 Total tonnes treated Mt 10.0 9
Slide 6: Cullinan – Grade versus Value Analysis
Cullinan – Grade versus Value Analysis • Original steady state grade guidance of ca. 50 cpht at Cullinan based on actual mine production records – see Figure 1 • The new plant at Cullinan was commissioned in Q1 FY 2018 – initial indications are that it will not be cost effective to pursue similar li
Slide 7: Impact of New Cullinan Value and Grade Guidance
Impact of New Cullinan Value and Grade Guidance FY 2017 vs H1 FY 2018 - Cumulative US$/ct price comparison per size Stones with a weight of 100 cts or class more recovered during H1 FY 2018 Cumulative Cumulative % Weight Description Size Class US$/ct US$/ct Increase FY 2017 H1 FY 2018 574.15 Clivage
Slide 8: Impact of New Cullinan Value and Grade Guidance (ROM)
Impact of New Cullinan Value and Grade Guidance (ROM) Grade impact Value per tonne impact 60 70 cpht $/t 50 60 50 40 Size category +10.8 Ct 40 30 -10.8 Ct +5 Ct -5 Ct +2 Ct 30 3 - 6 Grainers 20 Melee 20 -9 10 10 0 0 Previous grade Current Previous grade Current guidance impact guidance guidance impa
Slide 9: Impact of Strong ZAR on Petra
Impact of Strong ZAR on Petra • 70 – 80% of Petra’s operating costs are ZAR based • Petra FY 2018 consensus figure previously based on R13.40/US$1 for year; Petra now assuming R12.00/US$1 for H2 FY 2018; average of R12.70/US$1 for FY 2018 • Strengthening of the Rand therefore expected to see EBITDA
Slide 10: Positive Diamond Market and Prices
Positive Diamond Market and Prices Calendar 2017 Market Calendar 2018 Outlook • Stable rough market – pricing up ca. 2% in H1; pricing saw • Market started to strengthen in December 2017 due to positive seasonal weakness in Jul to Oct (down ca. 5%) and momentum around the festive sellingseason recov
Slide 11: Financial Position
Financial Position • The Group’s forecasts show that Petra has sufficient liquidity to meet its working capital and capital development requirements • However, the Company announced on 9 October it is likely to breach the EBITDA covenants related to its bank facilities (see slide 47) at the 31 Decem
Slide 12: FY 2018 Outlook
FY 2018 Outlook Production guided to increase Transformation continues ca. 16% in FY 2018 5 Mcts • Delivery of production rollout supported by: • Increasing mining footprints of new production areas • Undiluted ore expected to double from two major projects 4 • Addition of new ore handling systems •
Slide 13: Creating a Sustainable Business
Adonis Pouroulis Non-Executive Chairman Creating a Sustainable Business Petra Diamonds Limited: February 2018 13
Slide 14: What is a diamond?
What is a diamond? • One of the oldest substances known to man - diamonds are as old as the stars “A scientist will tell you a diamond is pure carbon. I • Thought to have been formed between 1-3 billion believe it is much more.” years ago, diamonds are time capsules into an era before life began on
Slide 15: A brief history of diamond mining
A brief history of diamond mining • 4BC Diamonds believed to be first discovered in Golconda, India – the birthplace of diamonds; until the end of 19th C, it was the source of the finest and largest diamonds in the world, incl. the Koh-i-Noor (105.6cts) • 1400s Diamonds started to become fashionable
Slide 16: Diamonds linked to economic development
Diamonds linked to economic development • ca. 5 million people have access to appropriate healthcare globally thanks to diamond revenues • ca. 10 million people globally are directly or indirectly supported by the diamond industry • Diamonds led to the industrialisation of South Africa • Diamonds ac
Slide 17: A truly scarce commodity
A truly scarce commodity Putting annual production into perspective Diamond Gold Copper Iron ore 27 tonnes 2,952 tonnes 20 million tonnes 2 billion tonnes US$12 billion US$118 billion¹ US$98 billion¹ US$118 billion¹ Source: Kimberley Source: SNL Metals Source: SNL Metals Source: SNL Metals Process S
Slide 18: Putting historical production into perspective
Putting historical production into perspective • Only 5.7 billion carats have been mined since antiquity = 1,150 tonnes • The specific gravity of a diamond is 3.52 = 327m3 • 327m3 = 8m x 8m x 5m high • However, if we assume roughly 1/2 of these diamonds are industrial quality then this = 163m3 • Cir
Slide 19: Diamonds are rare…and getting rarer
Diamonds are rare…and getting rarer Only 30 significant kimberlite mines in production today Petra Diamonds Limited: February 2018 19
Slide 20: Exploration has a less than 1% success rate
Exploration has a less than 1% success rate Diamond exploration results Only 7 ‘Tier 1’ mines 6,800 (+US$20 billion Reserves) 1. Jwaneng 2. Orapa 1,000 3. Udachnaya 4. Venetia 5. Catoca 60 7 6. Cullinan Kimberlites Sampled Diamondiferous Economic Tier 1 7. Mir kimberlites Source: De Beers Petra Diam
Slide 21: Diamond supply may already have peaked…
Diamond supply may already have peaked… • Production peaked at 177 million carats in 2005 – not expected to reach there again • 2016 production of 134 million carats (Kimberley ProcessStatistics) • Major diamond mines have passed their production peak; once mines go underground, can no longer keep u
Slide 22: …but demand for diamonds continues to grow
…but demand for diamonds continues to grow Global diamond jewellery sales of ca. US$80 billion Demand is driven by: • Continued growth in US and developed markets Share of World Polished DiamondConsumption in Value (US$ PWP) • Bridal diamond jewellery is the bedrock • Self-purchase by women is an im
Slide 23: Petra has grown by acquisitions, not discoveries
Petra has grown by acquisitions, not discoveries • Petra explored for diamonds from 1997 to 2008 in Angola; despite discovery of +200 kimberlites, was not able to identify economic orebody (efforts hampered by GFC and difficulty operating in country) • These former De Beers mines were the mainstay o
Slide 24: Iconic diamonds from iconic mines
Iconic diamonds from iconic mines 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 the Royal Williamson,1947 Sceptre Cullinan,1905 The Golden Jubilee The Oppenheimer 755
Slide 25: Our production profile - the full spectrum
Our production profile - the full spectrum High volumes of lower quality and commercial goods at a typical Small volumes of higher quality and larger diamonds tender layout Only ca. 1 in 10,000 diamonds is fancy coloured World-class gems: The Cullinan Heritage and The Star of Josephine Petra Diamond
Slide 26: The health and safety of our people is our priority
The health and safety of our people is our priority • Our mines and mining method are inherently safe, but accidents can happen due to being a heavy industry • Our mines are certified OHSAS 18001:2007, the international safety management framework • Petra has reinforced its safety procedures to addr
Slide 27: Sustainability – providing stable employment
Sustainability – providing stable employment • By investing its resources in its mines, Petra has put in place long-term, sustainable mine plans • When Petra acquired mines: +/- 2,500 employees • Today Petra employs more than 5,600 employees • And several thousand contractors during expansion progra
Slide 28: Focus on developing our people
Focus on developing our people • Petra has increased its training spend to US$8.5 million in FY 2017 • Efforts start at grassroots level – improving education standards in local schools • Bursaries, scholarships and training offered to community members • Numerous Company programmes to develop our e
Slide 29: Driving grassroots development
Driving grassroots development The Petra Foundation funded the construction of a new science The Williamson mine owns and operates the Mwadui Primary laboratory for the Chipa-Tabane High School School, providing education to 492 students Petra supports My Maths Buddy in South Africa, which focuses C
Slide 30: The Petra Graduation Ceremony 2017
The Petra Graduation Ceremony 2017 A celebration of the many Petra graduates who completed one of our development programmes Petra Diamonds Limited: February 2018 30
Slide 31: Focus on the development of women
Focus on the development of women Diversity is proven to result in improved decision making and better results • Number of Company initiatives aimed at encouraging and developing women at all levels of the business, with women representing: • 33% of engineering learnerships • 31% of mining learnersh
Slide 32: Focus on long-term socio-economic development
Focus on long-term socio-economic development • Petra doubled its social spend to US$3.4 million in FY 2017 • Our development work focuses on addressing the most critical needs of our communities in order to drive meaningful sustainable development • Projects are agreed in consultation with stakehol
Slide 33: Minimising our environmental footprint
Minimising our environmental footprint • Diamond mining is energy and water intensive but it does not use any harmful chemicals – vegetation grows freely on our tailings dumps • Ongoing initiatives to reduce energy usage, including continual investigation of renewable energy sources • Continual redu
Slide 34: Ensuring ethical provenance
Ensuring ethical provenance • Petra will only operate in countries which are members of the Kimberley Process and will only sell diamonds mined at our operations • We are fully committed to upholding the human rights of all our stakeholders, including employees, contractors, partners and communities
Slide 35: Sustaining consumer demand – today and tomorrow
Sustaining consumer demand – today and tomorrow Diamond Producers Association comprises De Beers, ALROSA, Rio Tinto, Dominion, Petra, Lucara, Gem – together 75% of world supply by value The DPA seeks to actively influence sustainable consumer demand by: • Promoting the integrity of the diamond indus
Slide 36: The most highly concentrated form of wealth
The most highly concentrated form of wealth What happens when you combine incredible rarity, beauty, ethical provenance and heritage? The 12.03ct Blue Moon of Josephine Cut from a 29ct rough stone from the Cullinan mine Fancy vivid blue, internally flawless 12 November 2015: sold to Hong Kong proper
Slide 37: Appendix
” PetraDiamonds Appendix
Slide 38: Capital Structure
Capital Structure Share Price (1 year to 1 February 2018) As at 1 February 2018 Number of voting % ISC rights BlackRock Investment (UK) 69,987,534 13.1% Limited Standard Life Aberdeen plc 31,535,532 5.9% Prudential (incorporating M&G 28,175,972 5.3% Group Limited) T. Rowe Price Associates 25,956,589
Slide 39: FY 2017 Operational Results
FY 2017 Operational Results Finsch Cullinan Koffiefontein KEM JV Williamson² H1 FY H1 FY H1 FY H1 FY H1 FY FY18 2017 FY18 2017 FY18 2017 FY18 2017 FY18 2017 ROM PRODUCTION Tonnes Treated (t) 1,559,280 3,212,169 1,783,229 1,882,911 289,478 667,821 430,188 597,025 2,403,393 3,667,781 Grade (cpht) 59.8
Slide 40: FY 2017 Operating Costs
FY 2017 Operating Costs FY 2017 On-mine cash cost breakdown (South Africaoperations) Group on-mine US$ cash costs increased 17% due to: • Inclusion of Kimberley Ekapa Mining JV for the full Year (4% increase) 9% • Inflationary increases, including the impact of 13% electricity and labour costs (7% i
Slide 41: Moving to Undiluted Ore
Moving to Undiluted Ore • Caving is a safe and proven mechanised mining method • Allows for the bulk mining of large orebodies and enables a higher ore extraction percentage compared to other underground mining methods • A highly cost effective mining method once the capital to put the associated in
Slide 42: Finsch – Development Programme
Finsch – Development Programme Expansion Plan FY 2017 Development: Waste: 1,523 metres; Raiseboring:427 metres; Kimberlite 3,733 metres • Expansion plan to take production to ca. 2.0 Mctpa (ROM) by FY 2018 • Sub level cave - tunnelling in host rock complete - All 22 tunnels in production – first 2 l
Slide 43: Cullinan – Development Programme
Cullinan – Development Programme Expansion Plan FY 2017 Development: Waste: 1,049 metres; Raiseboring: 673 metres; Kimberlite: 2,530 metres • Expansion plan: to take production to ca. 1.7 Mcts by FY 2019 (1.6 ROM & 0.1 tailings) based on Jan 2018 grade estimates • C-Cut Phase 1: New block cave being
Slide 44: Koffiefontein – Development Programme
Koffiefontein – Development Programme Expansion Plan Koffiefontein Kimberlite Pipe Schematic Expansion Plan – to take production to ca. 85,000 ctpa by FY 2018 • SLC to be mined over 3 levels from 560mL to 600 mL • Production commenced from first tunnels of SLC on 560 mL – end FY 2015 • 52L Western F
Slide 45: Kimberley Underground – Development Programme
Kimberley Underground – Development Programme Expansion Plan Kimberley Underground Kimberlite Pipes Schematic Expansion Plan – planned underground production of ca. 215,000 ctpa from FY 2019 • Underground ore to be treated at Central Treatment Plant – from FY 2017 • Planned grade of 15 cpht – FY 201
Slide 46: Williamson – Development Programme
Williamson – Development Programme Expansion Plan Williamson Kimberlite Pipe Schematic Expansion Plan – to take production to ca. 337,500 ctpa by FY 2019 • Plant modifications (additional crusher circuit, 2 autogenous mills) completed – FY 2017 • ROM throughput planned at 4.6 Mt – FY 2018 • Ramp up
Slide 47: Bank Debt Facilities – Covenants
Bank Debt Facilities – Covenants Maintenance Covenants Distribution Covenants 12 months to 12 months to 12 months to Covenant 30 June2017 31 Dec 2017 30 June2018 All periods Required ratio Required ratio Required ratio Required ratio Consolidated Net Debt2 to n/a1 ≤4.0x ≤2.5x ≤2.0x Consolidated EBIT
Slide 48: Leverage Ratios
Leverage Ratios 30 June 2017 30 June 2016 IFRS Net debt¹ USDM 555.3 375.8 Consolidated net debt (for bank debt covenant measurement) USDM 616.8 464.6 Gearing² % 86 69 Adjusted EBITDA³ USDM 157.2 164.3 EBITDAmargin4 % 33 38 Consolidated net debt: EBITDA5 x 3.9 2.8 EBITDA net interestcover6 x 2.8 4.3
Slide 49: Thank You
Thank You Further enquiries: Petra Diamonds Cathy Malins Corporate CommunicationsManager [email protected] +44 20 74948203 www.petradiamonds.com Petra Diamonds Limited: February 2018 49
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