Petra Diamonds Limited · LSE:PDL
Petra Diamonds — H1 FY2018 Earnings Presentation
45 slides from Petra Diamonds's earnings presentation, Feb 19, 2018
Slide 1: H1 FY 2018 Interim Results
H1 FY 2018 Interim Results Six Months to 31 December 2017 19 February 2018
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: H1 FY 2018 Operational Performance
H1 FY 2018 Operational Performance Solid operational performance • Production +10% to 2.2 Mcts; 10 Mt treated • ROM carats represented 81% of carat profile (H1 FY 2017: 66%) • Adj. EBITDA¹ margin of 36% despite strengthening Rand Expansion programmes on track • New Cullinan Plant processed 1 Mt ROM
Slide 4: H1 FY 2018 – KPIs
Key: H1 FY 2018 – KPIs H2 H1 PRODUCTION REVENUE SAFETY Guidance Million carats US$ (million) LTIFR c.4.6 – 4.7 Mcts 4.5 4.0 450 477.0 0.28 0.27 4.0 400 0.27 3.5 350 3.0 2.0 300 188.0 0.26 2.5 250 0.25 2.0 200 0.27 1.5 150 0.24 1.0 2.0 2.2 100 228.5 225.2 0.23 0.24 0.5 50 0.0 0 0.22 FY 2017 H1 FY 201
Slide 5: H1 FY 2018 – KPIs
Key: H1 FY 2018 – KPIs H2 H1 ADJUSTED EBITDA1 OPERATING CASHFLOW CAPEX2 US$ (million) US$ (million) US$ (million) 180 157.2 180 160.2 300 254.6 160 160 250 140 140 120 70.1 120 73.8 200 119.7 100 100 150 80 80 60 60 100 40 87.1 80.1 40 86.4 134.9 50 77.5 20 20 38.9 0 0 0 FY 2017 H1 FY 2018 FY 2017 H
Slide 6: Financial Position
Financial Position • The Group’s forecasts show that Petra has sufficient liquidity to meet its working capital and capital development requirements (assuming an average exchange rate of ZAR12:USD1 and the sale of the blocked Williamson parcel in H2), although headroom remains sensitive to diamond p
Slide 7: Operating Costs
Operating Costs H1 FY 2018 On-mine cash cost breakdown Group on-mine US$ cash costs increased 16% due to: (South Africa operations) • increased volumes treated, mainly due to commissioning of the Cullinan Plant coupled with the ongoing ramp-up of underground production across the operations (5% 9% i
Slide 8: Impact of Strong ZAR on Petra
Impact of Strong ZAR on Petra • 70 – 80% of Petra’s operating costs are ZAR based • H1 FY 2018 averaged R13.40/US$1; Petra now assuming R12.00/US$1 for H2 FY 2018 and average of R12.70/US$1 for FY 2018 • Movement of R1/US$1 from base case of R12/US$1 would see ca. US$20 million on FY EBITDA and ca.
Slide 9: H1 FY 2018 – Summary of Results
FY H1 FY 2018 – Summary of Results H1 H1 FY 2018 FY 2017 FY 2017 (US$m) (US$m) (US$m) Revenue 225.2 228.5 477.0 Adjusted mining and processing costs1 (140.0) (137.7) (311.3) Other direct income 0.4 1.4 2.8 Profit from mining activities1 85.6 92.2 168.5 Exploration expense (0.4) (0.3) (0.6) Corporate
Slide 10: Sustainability
Sustainability Labour Relations • Labour disruption experienced in September 2017 at the South African operations (except Cullinan) prior to finalisation of new three year wage agreement • Disruption contained to less than two weeks due to the concerted effort of Petra’s management to engage with al
Slide 11: Stable Diamond Market and Prices
Stable 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; pricin
Slide 12: DPA increases Budget to US$70 million for 2018
DPA increases Budget to US$70 million for 2018 Diamond Producers Association comprises De Beers, ALROSA, Rio Tinto, Dominion, Petra, Lucara, Gem – together 75% of world supply by value The DPA seeks to actively influence sustainable consumer demand by: • Promoting the integrity of the diamond indust
Slide 13: Finsch – Development Programme
Finsch – Development Programme Expansion Plan FY 2017 Development: Waste: 1,523 metres; Raiseboring:427 metres; Kimberlite 3,733 metres • Expansion plan to take production to ca. 2.0 Mctpa (ROM) by FY 2018 • Sub level cave - tunnelling in host rock complete - All 22 tunnels in production – first 2 l
Slide 14: Cullinan – Development Programme
Cullinan – Development Programme Expansion Plan FY 2017 Development: Waste: 1,049 metres; Raiseboring: 673 metres; Kimberlite: 2,530 metres • Expansion plan: to take production to ca. 1.7 Mcts by FY 2019 (1.6 ROM & 0.1 tailings) based on Jan 2018 grade estimates • C-Cut Phase 1: New block cave being
Slide 15: New Cullinan Plant – Simplified Process Flow Diagram
New Cullinan Plant – Simplified Process Flow Diagram Key levers Annual capacity of 6 Mtpa: B 1) Top cut-off size 4 Mtpa ROM and 2 Mtpa Tailings 2) Recirculating load 150 tonne 3) Bottom cut-off size 4) Discard size Jaw crusher 5) Non aggressive milling XRL 6) DMS yield 7) Increased cost to process F
Slide 16: New Plant Designed to Match Cullinan’s Unique Characteristics
New Plant Designed to Match Cullinan’s Unique Characteristics • Each kimberlite orebody has its own unique fingerprint • Characteristics specific to the Cullinan ore: • Prevalence of large diamonds • Historically C-Cut area produced low-luminescent Type II diamonds, including high value blue diamond
Slide 17: Impact of New Cullinan Value and Grade Guidance
Impact of New Cullinan Value and Grade Guidance Contribution to overall average US$/ct price per size class Stones with a weight of 100 cts or more FY 2017 vs H1 FY 2018 recovered during H1 FY 2018 Cumulative US$/ct Cumulative US$/ct Size Class % Increase Weight Description FY 2017 H1 FY 2018 +10.8c
Slide 18: Completion of Heavy Investment Phase
Completion of Heavy Investment Phase 1000 5 30 FY 2017 Production of 4.0 Mcts; Revenue of US$477m 4 24 Carat production (million carats) FY 2012 Production of 2.2 Mcts; 3 18 Tonnes treated (Mt) Revenue of US$317m 500 US$m 2 12 Significant decline in Capex from FY 2018 1 6 0 0 0 2012A 2013A 2014A 201
Slide 19: H2 FY 2018 Outlook
H2 FY 2018 Outlook Transformation continues 5 Mcts • Delivery of guidance of 2.4 – 2.5 Mcts in H2 supported by: • Increasing mining footprints of new production areas • Undiluted ore expected to double from two major projects on full year basis 4 • Addition of new ore handlingsystems and new Cullina
Slide 20: Appendix
x< = = 5 ioe BS 2]
Slide 21: Capital Structure
Capital Structure Share Price (1 year to 15 Feb 2018) vs As at 15 February 2018 Number of FTSE 250 voting % ISC rights BlackRock Investment (UK) Limited 69,987,534 13.1% I PDL I FTSE 250 Standard Life Aberdeen plc 31,535,532 5.9% Prudential (incorporating M&G Group 28,175,972 5.3% Limited) T. Rowe P
Slide 22: The Petra Board
The Petra Board Adonis Pouroulis Johan Dippenaar Jim Davidson Jacques Breytenbach Non-Executive Chairman CEO Technical Director Finance Director Acknowledged world authority on kimberlite Assumed role in February 2018. Mr Successful mining entrepreneur One of South Africa’s most successful geology a
Slide 23: World Diamond Mines
World Diamond Mines Petra Diamonds Limited: H1 FY 2018 Interim Results 23
Slide 24: 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: H1 FY 2018 Interim Results 24
Slide 25: 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 26: Our Growth Path
Our Growth Path • Production has grown from 0.1 to 4.0 million carats • Revenue has grown from US$2.3 million to US$477.0 million US$m Mcts 700 5 Agreement to acquire Kimberley Acquisition of Mines 600 Finsch 4.0 4 Acquisition of 3.7 500 Kimberley UG 477 472 3.1 3.2 Acquisition of 425 431 Williamson
Slide 27: 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 28: 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 2016 (average • US recovery: economy continues to improve; very strong $92/ct) diamond buying culture (ca. 47%
Slide 29: 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 30: 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 31: 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 32: 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$bn) Source: De Beers Diamond Insight Report 2017 Petra Diamonds Limited: H1 FY 2018 Interim Results 32
Slide 33: FY 2017 Operational Results
FY 2017 Operational Results Finsch Cullinan Koffiefontein KEM JV Williamson² H1 FY H1 FY H1 FY H1 FY H1 FY FY18 2017 FY18 2017 FY18 2017 FY18 2017 FY18 2017 ROM PRODUCTION Tonnes Treated (t) 1,559,280 3,212,169 1,783,229 1,882,911 289,478 667,821 430,188 597,025 2,403,393 3,667,781 Grade (cpht) 59.8
Slide 34: Moving to Undiluted Ore
Moving to Undiluted Ore • Caving is a safe and proven mechanised mining method • Allows for the bulk mining of large orebodies and enables a higher ore extraction percentage compared to other underground mining methods • A highly cost effective mining method once the capital to put the associated in
Slide 35: New Cullinan Plant – Simplified Process Flow Diagram
New Cullinan Plant – Simplified Process Flow Diagram -55m +12mm +9mm Key points 1) Maximum value extraction from ore ($/t) 2) Maximum $/hr revenue – -9mm Large stones & Type IIs 3) Reduced cost Key levers 1) Top cut-off size 2) Recirculating load 3) Bottom cut-off size 4) Discard size 5) Non aggress
Slide 36: Impact of New Cullinan ROM Value and Grade Guidance
Impact of New Cullinan ROM Value and Grade Guidance 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 impact
Slide 37: 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 di
Slide 38: 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 39: 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 40: 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 41: Debt Facilities
Debt Facilities • Bank facilities (excl. FX lines) as at 31 December 2017: ca. US$121.2 million • Bank debt facilities undrawn and available to the Group as at 31 December 2017: US$7.4 million, in addition to cash at bank of US$119.1 million (including restricted amounts of ca. US$14.4 million) Lend
Slide 42: Bank Debt Facilities – Covenants
Bank Debt Facilities – Covenants Maintenance Covenants Distribution Covenants 12 months to 12 months to 12 months to 31 Dec 2017 30 June2018 31 Dec 2018 All periods Covenant Required ratio Required ratio Required ratio Required ratio Consolidated Net Debt2 n/a¹ ≤3.5x ≤3.5x ≤2.0x to Consolidated EBIT
Slide 43: 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 interest cover6 x 2.8 4.
Slide 44: Revised Capex Profile – FY 2018 – FY 2020
Revised Capex Profile – FY 2018 – FY 2020 1. All Capex numbers are stated in FY 2018 money terms 2. Where applicable, an exchange rate of ZAR12:US$1 was used from H2 FY 2018 onwards, following R13.40 achieved in H1 3. Capex estimates above do not include capitalised borrowing costs; guidance is to a
Slide 45: Thank You
Thank You Further enquiries: Investor Relations [email protected] +44 20 7494 8203 www.petradiamonds.com