Petra Diamonds Limited · LSE:PDL
Petra Diamonds — FY2016 Earnings Presentation
43 slides from Petra Diamonds's earnings presentation, Sep 19, 2016
Slide 1: FY 2016 Preliminary Results
FY 2016 Preliminary Results 12 months to 30 June 2016 19 September 2016 Driving Forward
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: FY 2016 – Driving Forward
FY 2016 – Driving Forward Continued production growth • Record production of 3.7 Mcts and 19.0 Mt in FY 2016 • FY 2019 target increased from ca. 5 Mcts to ca. 5.3 Mcts Expansion programmes on track • SLC at Finsch and new C-Cut block cave at Cullinan commenced initial production • Cullinan mill plan
Slide 4: FY 2016 – Key Performance Indicators
FY 2016 – Key Performance Indicators ROUGH DIAMOND PRODUCTION REVENUE SAFETY Million carats US dollars (millions) LTIFR 3.7 +16% 430.9 +1% 0.29 0% 3.7 471.8 3.1 3.2 425.0 430.9 2.7 392.5 1.13 2.2 316.9 0.67 0.32 0.29 0.29 12 13 14 15 16 12 13 14 15 16 12 13 14 15 16 • Increased contribution of • Inc
Slide 5: FY 2016 – Key Performance Indicators
FY 2016 – Key Performance Indicators EBITDA1 OPERATING CASHFLOW2 CAPEX3 US dollars (millions) US dollars (millions) US dollars (millions) 164.3 +18% 192.0 +36% 295.8 +17% 187.7 164.3 295.8 139.3 192.0 127.6 181.2 252.2 132.8 141.3 201.9 90.3 186.0 131.7 79.9 12 13 14 15 16 12 13 14 15 16 12 13 14 15
Slide 6: Financial Position
Financial Position Unit 30 June 2016 30 June 2015 Closing exchange rate used for conversion R14.68:US$1 R12:16:US$1 Cash at bank US$m 48.7 166.6 US$ loan notes (including accrued interest) US$m 302.0 303.3 Bank loans and borrowings US$m 131.5 35.0 Net debt US$m 384.8 171.7 Bank facilities undrawn an
Slide 7: FY 2016 – Operational Results
FY 2016 – Operational Results Production by mine Revenue by mine Production Split - Carats Finsch 19% 18% Tailings Cullinan / Other 30% 43% 6% 2% 60% Williamson 18% 14% Koffiefontein 70% Combined Kimberley ROM Operations 14% 6% Unit FY 20161 FY 2015 Variance SALES Revenue US$M 430.9 425.0 +1% Diamon
Slide 8: Operating Costs
Operating Costs Petra’s focus on cost control and the weaker ZAR helped to mitigate inflationary pressures FY 2016 On-mine cash cost breakdown (South Africa operations) 9% Group on-mine US$ cash costs decreased 3% due to: 15% • Increase in tonnes treated (7% increase) 39% • Inflationary increases, i
Slide 9: FY 2016 – Summary of Results
FY 2016 – Summary of Results FY 2016 FY 2015 (US$m) (US$m) Revenue 430.9 425.0 Adjusted mining and processing costs2 (257.7) (272.7) Other direct income 2.8 2.2 Profit from mining activities2 176.0 154.5 Exploration expense (2.7) (5.6) Corporate overhead (9.0) (9.6) Adjusted EBITDA2 164.3 139.3 Depr
Slide 10: Diamond Market – Overview
Diamond Market – Overview Supply Demand • Supply constraints: Global rough diamond production • US recovery: economy continues to improve; very strong rose 2% to 127 Mcts worth $13.9bn in 2015 (average diamond buying culture (ca. 45% of world demand); retail $109/ct) demand currently performing well
Slide 11: Diamond Market – Overview
Diamond Market – Overview FY 2016 Market FY 2017 Outlook • Petra pricing down ca. 6% for Year • Market conditions will depend on continued supply discipline from • H1: Market experienced challenging conditions in H1 2016 – the major producers, as well as a stable retail market, particularly Petra pr
Slide 12: Exceptional Diamonds
Exceptional Diamonds • Petra classifies ‘exceptional diamonds’ as stones that sell for +$5 million each • Exceptional diamonds contributed on average $23 million pa from FY 2009 to FY 2016 • Average increased to ca. $36 million pa in FY 2014 to FY 2016 Exceptional Diamond Sales – FY 2016 Williamson
Slide 13: Moving to Undiluted Ore
Moving to Undiluted Ore • Caving is a safe and proven mechanised mining method; provides access to higher volumes of ore than other methods • Current underground mining taking place in diluted, mature caves nearing end of lives • Expansion programmes to take next ‘cut’ by deepening and establishing
Slide 14: Growth and Margin Expansion
Growth and Margin Expansion Adjusted EBITDA margin expected to rise from ca. 38% in FY 2016 to +50% by FY 2019 • Increase in ROM grades and increase in tonnage throughput (mainly due to Kimberley Mines transaction) to lead to ca. 43% growth in production • Lower value tailings carat production to re
Slide 15: Finsch – Development Programme
Finsch – Development Programme Expansion Plan FY 2016 Development: Waste: 2,484 metres; Raiseboring: 99 metres; Kimberlite: 2,969 metres • Expansion plan to take production to ca. 2.0 Mctpa (ROM) by FY 2018 • Sub level cave - tunnelling in host rock complete - 6/11 tunnels in production – 1st level
Slide 16: Finsch Development Snapshot
Finsch Development Snapshot Long hole drilling, 70 Level SLC kimberlite Tipping blasted ore through rockbreaker Access development tunnel UG conveyor used to transport broken ore Installation of the Apron Feeder Bulkhead The new bulk sample plant Petra Diamonds Limited FY 2016 Preliminary Results 16
Slide 17: Cullinan – Development Programme
Cullinan – Development Programme Expansion Plan FY 2016 Development: Waste: 1,911 metres; Raiseboring: 838 metres; Kimberlite: 2,837 metres • Expansion plan to take production to ca. 2.2 Mcts by FY 2019 (2.0 ROM & 0.2 tailings) • C-Cut Phase 1: new block cave being established on the western side of
Slide 18: Cullinan Development Snapshot
Cullinan Development Snapshot Rock breaker south extraction Long hole drilling draw point North production conveyor 2 Mill plant, mill basis and DMS feed area Crusher installation 101 conveyor to mill Petra Diamonds Limited FY 2016 Preliminary Results 18
Slide 19: Cullinan Mill Plant Project
Cullinan Mill Plant Project Recovery, XRL and HPGR 2 Silos and conveyor belts Mill structure • Increase in diamond liberation and gentler process likely to result in less breakage • Saving of ca. ZAR20 – 25/t in processing costs • Strong standalone economics Payback of ca. 3 years IRR of 25% • C
Slide 20: Growth and Margin Expansion
Growth and Margin Expansion Petra to maintain a fairly flat tonnage profile from FY 2017 onwards, but the replacement of poor quality tonnes with better quality tonnes will significantly grow production and increase the average value per carat FY 2019 production target of ca. 5.3 Mcts; revenue of ca
Slide 21: Sustainability Highlights
Sustainability Highlights Health and Safety • Achievements: Stable LTIFR; Finsch won two MineSAFE Awards • Challenges: Petra’s mining method and operations are inherently safe but there is an ever present risk of accidents • Fatality in Jul 15 at Tailings Treatment Plant at Cullinan related to equip
Slide 22: Integrated Approach to Sustainability
Integrated Approach to Sustainability Williamson Children’s Day Environmental Awareness Local Economic Development An annual fun day for children of all ages Tree planting at local schools Finsch’s Small Business Hub for entrepreneurs Professional Development Education Community Exposure to career o
Slide 23: Appendix
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Slide 24: Capital Structure
Capital Structure Share Price (1 year to 15 Sep 16) vs As at 16 September 2016 Number FTSE 250 & FTSE 350 Mining of voting % ISC rights BlackRock Investment (UK) Limited 68,084,516 13.2% T. Rowe Price 58,276,543 11.1% M&G Investment Fund 44,010,631 8.4% Standard Life Investment (Holdings) Limited 28
Slide 25: The Petra Board
The Petra Board Adonis Pouroulis Johan Dippenaar Jim Davidson Non-Executive Chairman CEO Technical Director One of South Africa’s most successful Acknowledged world authority on kimberlite Successful mining entrepreneur diamond entrepreneurs with 25 years’ geology and exploration Founded Petra Diamo
Slide 26: World Diamond Mines
World Diamond Mines Petra Diamonds Limited FY 2016 Preliminary Results 26
Slide 27: Focus on Africa
Focus on Africa • Five producing mines (four in South Africa and one in Tanzania), plus exploration in Botswana and South Africa • Diversified portfolio is key to managing production risk across the Group Petra Diamonds Limited FY 2016 Preliminary Results 27
Slide 28: An Exceptional Growth Plan
An Exceptional Growth Plan July 2007 July 2008 February 2009 Koffiefontein Cullinan Williamson Petra has acquired six non-core diamond mining operations from De Beers Petra approach: • Flat management structures 70% Petra¹; 30% BEE 74%¹ Petra; 26% BEE 75% Petra¹; 25% Government of Tanzania • Focus o
Slide 29: 2016 Resource Statement (30 June 2016)
2016 Resource Statement (30 June 2016) World-class Resource base of 312.2 million carats¹ worth ca. US$48.6 billion² Gross Resources (Mcts) 100 49.1 50 40.4 194.2 9.0 6.7 - Cullinan Finsch Williamson Operations3 Kimberley Operations Koffiefontein Gross In Situ Value (US$bn)² 15.5 24.5 4.4 3.1 1.2 -
Slide 30: Production and Revenue – FY 2016 vs. FY 2019
Production and Revenue – FY 2016 vs. FY 2019 Gross Production Gross Revenue FY 2016 actual: 3.7 million carats FY 2016 actual: US$430.9 million 18% 19% Finsch 6% 43% 60% 2% Cullinan 18% 14% Williamson Koffiefontein 6% Kimberley 14% FY 2019: ca. 5.3 million carats1 FY 2019: ca. US$0.8 billion1 39% 39
Slide 31: The Diamond Market in 2015
The Diamond Market in 2015 • Global diamond jewellery sales +2% in local currency but -2% in USD: ca. $79 billion Share of World Polished Diamond Consumption in Value (US$ PWP) Diamond Jewellery Value, Growth by Geography (US$bn) Source: De Beers Diamond Insight Report 2016 Petra Diamonds Limited FY
Slide 32: Petra Production Profile
Petra Production Profile • Production profile of a kimberlite is highly consistent when the mine is in steady state production • Ever growing volumes across the full diamond spectrum (from lowest to highest value) • Growing trend for mass luxury supported by strong pricing performance in smaller / 2
Slide 33: 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 Cullinan Heritage 507.5 carats r
Slide 34: The Most Highly Concentrated Form of Wealth
The Most Highly Concentrated Form of Wealth Examples of recent polished diamond sales at auction The 14.62ct The 12.03ct Blue Oppenheimer Moon of Blue diamond Josephine diamond Sold for $57.7m $3.9m per carat, Sold for $48.4m 18 May 2016 $4.0m per carat, 12 November 2015 The 24.18ct The 15.38ct Cull
Slide 35: FY 2016 Operational Results
FY 2016 Operational Results Combined Finsch Cullinan Koffiefontein Williamson Kimberley Ops FY FY FY FY FY FY FY FY FY FY 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 ROM PRODUCTION Tonnes Treated (t) 3,547,798 3,016,385 2,302,892 2,513,004 681,344 341,783 721,513 1,196,269 4,003,180 4,056,638
Slide 36: Koffiefontein – Development Programme
Koffiefontein – Development Programme Expansion Plan Koffiefontein Kimberlite Pipe Schematic Expansion Plan – to take production to ca. 95,000 ctpa by FY 2017 • SLC to be mined over 3 levels from 560 mL to 600 mL • Production commenced from first tunnels of SLC on 560 mL – end FY 2015 • 52L Western
Slide 37: 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 13 – 14 cpht – f
Slide 38: Williamson – Development Programme
Williamson – Development Programme Expansion Plan Williamson Kimberlite Pipe Schematic Expansion Plan – to take production to ca. 325,000 ctpa by FY 2018 • Plant modifications (additional crusher circuit, 2 autogenous mills) commenced – FY 2016 • Commissioning of crusher – FY 2016 • Commissioning of
Slide 39: Debt Facilities
Debt Facilities • Bank facilities (excl. FX lines) as at 30 June 2016: ca. $242 million • Bank debt facilities undrawn and available to the Group as at 30 June 2016: $110 million Lender Type Size Size Utilised at Interest Rate Repayment ZARM US$M1 30 Jun 2016 ZARM/US$M Absa & RMB ZAR Amortising term
Slide 40: Bank Debt Facilities – Covenants
Bank Debt Facilities – Covenants Distribution Maintenance Covenants Covenants 12 months to 12 months to 12 months to 12 months to 12 months to Covenant 30 June 2016 30 June 2016 31 Dec 2016 30 June 2017 31 Dec 2017 All periods and thereafter Actual Required ratio Required ratio Required ratio Requir
Slide 41: Leverage Ratios
Leverage Ratios 30 June 2016 30 June 2015 IFRS Net debt¹ USDm 375.8 160.5 Consolidated net debt (for bank debt covenant measurement) USDm 464.6 256.1 Gearing² % 69 26 Adjusted EBITDA³ USDm 164.3 139.3 EBITDA margin4 % 38 33 Consolidated net debt: EBITDA5 x 2.8 1.8 EBITDA net interest cover6 x 4.3 7.
Slide 42: Capex Profile – FY 2017 to FY 2019
Capex Profile – FY 2017 to FY 2019 1. All Capex numbers are stated in FY 2017 money terms (ZAR14:$1 where applicable) 2. Depreciation on mining assets for FY 2017 guided at ca. US$70 – 75 million at ZAR14:$1 3. As in prior guidance, capital estimates above do not include any capitalised borrowing co
Slide 43: Thank You
Thank You Further enquiries: Petra Diamonds Cathy Malins Corporate Communications Manager [email protected] +44 20 7494 8203 www.petradiamonds.com