Petra Diamonds Limited · LSE:PDL
Petra Diamonds — Spotlight on Africa Conference 2017
43 slides from Petra Diamonds's conference presentation, Nov 7, 2017
Slide 1: Spotlight on Africa Conference
Spotlight on Africa Conference 7 November 2017 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: 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 operating costs Driving VALUE • Significantly higher operating margins Driving VOLUME 1. Adj. EBITDA is net prof
Slide 4: 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 5: 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 5
Slide 6: Ramp up of Undiluted Ore
Ramp up of Undiluted Ore • Caving is a safe and proven mechanised mining method; provides access to higher volumes of ore than other methods • Transition from diluted, mature caves nearing end of lives to new block/sub level caves in undiluted kimberlite well underway • ROM grades already increasing
Slide 7: FY 2017 – Driving Forward
FY 2017 – Driving Forward Continued production growth to 4 Mcts • Disappointing not to achieve guidance but Petra ended the Year at run rates to support guided FY 2018 production levels Major development work achieved in FY 2017 • Completion of 11.4 km development (out of a total 63.3 km to date) an
Slide 8: Growth and Margin Expansion
Growth and Margin Expansion Adjusted EBITDA margin expected to rise from 33% in FY 2017 to 45 - 50% by FY 2019 • Increase in ROM grades together with an increase in tonnage throughput to lead to ca. 28% growth in production • Lower value tailings carat production to reduce from 29% in FY 2017 to ca.
Slide 9: Transformation Underway
Transformation Underway • Replacement of poorer quality tonnes with better quality tonnes will significantly grow production and margins due to less waste dilution, higher FY 2020 grades and improved product mix production FY 2018 guidance of production 5.0 - 5.0 Mcts; guidance of revenue of ca. 6 4
Slide 10: 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 40) at the 31 Decem
Slide 11: Q1 FY 2018 (3 months to 30 September 2017)
Q1 FY 2018 (3 months to 30 September 2017) Unit Q1 FY 2018¹ Q1 FY 2017¹ Variance FY 2017¹ Sales Diamonds sold Carats 711,277 745,447 -5% 4,006,856 Gross revenue US$M 78.7 94.7 -17% 477.0 Production ROM tonnes Mt 3,127,485 2,796,670 +12% 10.1 Tailings & other tonnes Mt 1,669,728 2,577,792 -35% 8.7 To
Slide 12: 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 13: 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. 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 14: New Cullinan Plant
New Cullinan Plant • Plant delay in FY 2017 due to contractor labour disruptions / commissioning issues • Fully operational as at end September 2017, with optimisation ongoing to improve recoveries and efficiencies • Processing rates already at 60% of nameplate capacity (6 New plant uses AG milling,
Slide 15: Diamond Market – Overview
Diamond Market – Overview Supply Demand • Supply constraints: Global rough diamond production • Global market: rose 0.3% to record high of $80bn in 2016 rose 6% to 134 Mcts worth $12.4bn in 2015 (average • US recovery: economy continues to improve; very strong $92/ct) diamond buying culture (ca. 47%
Slide 16: Diamond Prices
Diamond Prices FY 2017 Market FY 2018 Outlook • Stable rough market – Petra achieved flat pricing in H1 and • Market showing signs of seasonable weakness, but still assessed pricing up ca. 2% in H2 to be stable; mixed results from US retailers, improving retail • Steady demand experienced across all
Slide 17: DPA ramps up Generic Marketing
DPA ramps up Generic Marketing Diamond Producers Association seeks to actively influence sustainable consumer demand by: • Promoting the integrity of the diamond industry and maintaining consumer confidence • Providing generic marketing support, ensuring diamonds remain relevant to the next generati
Slide 18: FY 2018 Outlook
FY 2018 Outlook Trading to date in FY 2018 • Solid production start to FY 2018; Company maintains guidance of 4.8 – 5.0 Mcts in FY 2018; 5.0 – 5.3 Mcts in FY 2019 • YTD sales of $131.8 million (South African goods only) Transformation continues • Delivery of production rollout supported by: • Undilu
Slide 19: FY 2017A versus FY 2019F
FY 2017A versus FY 2019F Production by mine Revenue by mine Production split - carats 20% 19% Tailings / Other 29% 53% 45% 6% 1% 12% 20% 6% 71% 17% ROM Finsch FY 2017 Actual FY 2017 Actual FY 2017 Actual Cullinan Williamson Koffiefontein Tailings KEM JV / Other 10% 40% 33% 37% 40% 7% 11% 12% 90% 11%
Slide 20: Generating Value for all Stakeholders
Generating Value for all Stakeholders Development of our People Environmental Awareness Local Economic Development Finsch employees who have graduated from Tree planting at Williamson Kimberley Enterprise Development Centre one of Petra’s many training programmes Community Health Education Community
Slide 21: Appendix
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Slide 22: Capital Structure
Capital Structure Share Price (1 year to 6 November 2017) As at 6 November 2017 Number of voting % ISC rights BlackRock Investment (UK) 81,421,777 15.3% Limited T. Rowe Price 51,958,815 9.8% Standard Life Aberdeen plc 31,535,532 5.9% Prudential (incorporating M&G 28,175,972 5.3% Group Limited) Direc
Slide 23: The Petra Board
The Petra Board Adonis Pouroulis Johan Dippenaar Jim Davidson Non-Executive Chairman CEO Technical Director Successful mining entrepreneur One of South Africa’s most successful Acknowledged world authority on kimberlite diamond entrepreneurs with 27 years’ geology and exploration Founded Petra Diamo
Slide 24: World Diamond Mines
World Diamond Mines ” PetraDiamonds Archons: Archean areas (3 500-2 500 million years old) Protons: Early and middle proterozoic areas (2500-1 500 million years old) Tectons: Late proterozoic areas (1 500-600 million years old) O Major kimberlite diamond mines currently in operation 1 2 3 4 5 6 tA 8
Slide 25: 2017 Resource Statement (30 June 2017)
2017 Resource Statement (30 June 2017) World-class Resource base of 305.0 million carats¹ Gross Resources (Mcts) 192.7 45.0 39.0 9.7 5.8 - Cullinan Finsch Williamson Kimberley KEM Operations JV² Koffiefontein 1. The total Group Resource includes 4.1 Mcts for the Helam mine in South Africa (now on ca
Slide 26: The Diamond Market in 2016
The Diamond Market in 2016 • Global diamond jewellery sales +0.3%: ca. $80 billion Share of World Polished Diamond Consumption in Value (US$ PWP) Diamond Jewellery Value (US$bn) Source: De Beers Diamond Insight Report 2017 26
Slide 27: Petra Production Profile
Petra Production Profile • Production profile of a kimberlite is highly consistent when the mine is in steady state production • Growing volumes across the full diamond spectrum (from lowest to highest value) • Growing trend for mass luxury supported by strong pricing performance in smaller / 2nd to
Slide 28: 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 29: The Most Highly Concentrated Form of Wealth
The Most Highly Concentrated Form of Wealth Examples of recent polished coloured 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 $4.0m per carat, 12 November 2015 The 24.18ct The 59.
Slide 30: FY 2017 – Summary of Results
FY 2017 – Summary of Results FY 2017 FY 2016 (US$m) (US$m) Revenue 477.0 430.9 Adjusted mining and processing costs1 (311.3) (257.7) Other direct income 2.8 2.8 Profit from mining activities1 168.5 176.0 Exploration expense (0.6) (2.7) Corporate overhead (10.7) (9.0) Adjusted EBITDA1 157.2 164.3 Dep
Slide 31: FY 2017 Operational Results
FY 2017 Operational Results Finsch Cullinan Koffiefontein KEM JV Williamson² Q1 FY Q1 FY Q1 FY Q1 FY Q1 FY FY18 2017 FY18 2017 FY18 2017 FY18 2017 FY18 2017 ROM PRODUCTION Tonnes Treated (t) 768,165 3,212,169 757,781 1,882,911 155,263 667,821 239,825 597,025 1,206,451 3,667,781 Grade (cpht) 60.9 56.
Slide 32: Operating Costs
Operating Costs FY 2017 On-mine cash cost breakdown (South Africa operations) Group on-mine US$ 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% increase
Slide 33: Finsch Production Profile
Finsch Production Profile • ROM production to rise from 3.2 Mt in FY 2017 to ca. 3.5 Mt in FY 2018 • Tailings production to cease to reduce from 1.7 Mt in FY 2017 to ca. 0.35 Mt in FY 2018 and 0 Mt from FY 2019 onwards Tonnes treated and grades Carat production and average diamond values 7.5 75 3.0
Slide 34: Cullinan Production Profile
Cullinan Production Profile • ROM tonnages to rise 112%, but ROM carat production expected to rise +196%, due to increase in grade as result of mining undiluted C-Cut tonnes Tonnes treated and grades Carat production and average diamond values New plant fully New plant fully 7.5 60 3.0 200 $/ct cpht
Slide 35: Cullinan Grade Progression
Cullinan Grade Progression From takeover to date Low of 20.9 cpht reached 45 in Q3 FY 2015 40 39.1 39.9 38.0 35 36.6 Grade (cpht) 34.5 30 33.3 30.7 30.3 27.8 25 25.8 25.7 20 22.0 15 10 5 0 2009 2010 2011 2012 2013 2014 2015 2015 2016 2016 2017 2017 FY FY FY FY FY FY H1 H2 H1 H2 H1 H2 Petra Diamonds
Slide 36: 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 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 15 cpht – FY 201
Slide 38: 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 39: Debt Facilities
Debt Facilities • Bank facilities (excl. FX lines) as at 30 September 2017: ca. $100.6 million • Bank debt facilities undrawn and available to the Group as at 30 September 2017: $20.9 million, in addition to cash at bank of $125.8 million Lender Type Size Size Utilised at Interest Rate Repayment ZAR
Slide 40: Bank Debt Facilities – Covenants
Bank Debt Facilities – Covenants Maintenance Covenants Distribution Covenants 12 months to 12 months to 12 months to Covenant 30 June 2017 31 Dec 2017 30 June 2018 All periods Required ratio Required ratio Required ratio Required ratio Consolidated Net Debt2 to n/a1 ≤4.0x ≤2.5x ≤2.0x Consolidated EB
Slide 41: 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 EBITDA margin4 % 33 38 Consolidated net debt: EBITDA5 x 3.9 2.8 EBITDA net interest cover6 x 2.8 4.
Slide 42: Capex Profile – FY 2018 to FY 2019
Capex Profile – FY 2018 to FY 2019 1. All Capex numbers are stated in FY 2018 money terms (ZAR13:$1 where applicable) 2. Depreciation on mining assets for FY 2018 guided at ca. US$70 – 75 million at ZAR13:$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