Petra Diamonds Limited · LSE:PDL
Petra Diamonds — Investor Presentation (November 2014)
41 slides from Petra Diamonds's investor presentation, November 2014
Slide 1: Discover Petra – A Leading Independent Diamond Producer
The Finsch mine in South Africa Discover Petra – A Leading Independent Diamond Producer November 2014
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 LSE: PDL: Constituent of FTSE 250; market capitalisation of ca. £978m / US$1.5bn (as at 21 November 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
Slide 4: Organic Growth Path to 5 Million Carats pa
Organic Growth Path to 5 Million Carats pa • Significant free cashflow generation to come – dividend policy to be announced in FY 2015 FY 2019 production target of ca. 5.0 Mcts; revenue of ca. US$1.2bn FY 2015 6 FY 2014 production Carat production (million carats) production of target of 3.1 Mcts; 3
Slide 5: Favourable Market Outlook
Favourable Market Outlook • 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 clas
Slide 6: Focus on Africa
Focus on Africa • Diversified portfolio: four producing mines in South Africa, one in Tanzania and exploration in Botswana • World-class resource: +300 million carats (largest outside the majors) worth ~US$58.3 billion¹ Africa is source of ca. 60% of world’s diamonds by value 6 1. FY 2014 average ca
Slide 7: Petra Growth Path
Petra Growth Path Petra acquired five diamond mines from De Beers (four in South Africa, one in Tanzania): July 2007 July 2008 February 2009 May 2010 September 2011 Koffiefontein Cullinan Williamson Kimberley UG Finsch 74% Petra¹; 26% BEE 74%¹ Petra; 26% BEE 75% Petra¹; 25% 74% Petra¹; 26% BEE 74% P
Slide 8: Consistent Production Profile
Consistent Production Profile • Kimberlite production profile (diamond quality and size ranges) remains highly constant over time, resulting in accuracy for diamond price forecasting • Ever growing volumes across the full diamond spectrum (from lowest to highest value) • Growing trend for mass luxur
Slide 9: Rough Diamond Pricing
Rough Diamond Pricing • Bloomberg Rough Diamond Index shows a 7% real price per annum increase over 2004 to 2014 Rough Diamond Index Petra – Rough Diamond Prices (US$/ct) 400 Actual Guidance Actual 350 (US$/ct) (US$/ct) (US$/ct) Mine¹ Q1 FY 2015 FY 2015 FY 2014 300 Finsch 90¹ 108 99 250 Cullinan 293
Slide 10: 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 507.55 carats
Slide 11: Exceptional Diamonds – Contribution to Petra
Exceptional Diamonds – Contribution to Petra • Petra classifies ‘exceptional diamonds’ as stones that sell for +US$5 million each • Exceptional diamonds contributed on average US$18 million pa from FY 2008 to FY 2014 • Higher average in last two years: US$26 million pa from FY 2013 to FY 2014 • Comp
Slide 12: Moving into Undiluted Ore
Moving into 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 establishin
Slide 13: Significant Margin Expansion
Significant Margin Expansion Operating margins to gradually rise from ca. 40% 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. 95% • Unit costs to be well manage
Slide 14: Development Snapshot
Development Snapshot Underground development Optimising orehandling Plant refinements 14
Slide 15: Financial Overview
Financial Overview As at 30 September 20141 24 October 20141 25 November 20141 • Cash: US$45.5 million; diamond debtors: • Petra announced increase in total • Petra announced refinancing of BEE partners US$3.6 million; diamond inventories: Group debt and FX facilities of ca. in Cullinan and Finsch,
Slide 16: Q1 FY 2015 – On track to meet Guidance
Q1 FY 2015 – On track to meet Guidance Production and Sales Summary Unit Q1 FY 2015 Q1 FY 20141 Variance FY 20141 Sales Diamonds sold Carats 532,250 589,233 -10% 3,134,706 Gross revenue US$M 100.8 65.1 +55% 472.6 Production ROM diamonds Carats 600,499 577,161 +4% 2,174,835 Tailings and alluvial Cara
Slide 17: Production and Revenue – FY 2014 vs FY 2019
Production and Revenue – FY 2014 vs FY 2019 Gross Production Gross Revenue FY 2014 actual: 3.1 million carats1 FY 2014 actual: US$471.8 million1 26% Finsch 35% 39% Cullinan 61% 6% Williamson 2% Koffiefontein 11% 1% 4% 8% 6% Kimberley 1% Underground Helam FY 2019: c.5 million carats2 FY 2019: c.US$1.
Slide 18: Outlook
Outlook Rising Production Rising Prices Rising Margins • Organic growth to ca. 5 million • Petra expects firmer market • Total tonnage profile to remain carats based on existing portfolio conditions, underpinned by relatively flat FY 2015 to FY 2019, constrained supply and robust but production to g
Slide 19: Sustainability Highlights
Sustainability Highlights Education Training Koffiefontein supports local Reikaeletse Secondary School Carpentry skills training taking place at Cullinan Environmental Initiatives Community Health Biogas project in Tanzania A nurse does her ward rounds at the Mwadui Hospital, owned and operated by W
Slide 20: Appendix
Dump Truck at Williamson Appendix
Slide 21: Capital Structure
Capital Structure Share Price (1 year) High Quality Share Register % ISC (as at 21 November 2014) vs FTSE 250 & FTSE 350 Mining Al Rajhi Holdings W.W.L. 12.9% T. Rowe Price¹ 10.2% JP Morgan Asset Management Holdings Inc. 7.8% BlackRock Investment (UK) Limited 7.3% Prudential plc group of companies²
Slide 22: 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 23: 2014 Resource Statement (30 June 2014)
2014 Resource Statement (30 June 2014) • World-class Resource base of 301.1 million carats worth ca. US$58.3 billion Gross Resources (Mcts) 100 199.6 51.3 50 33.1 6.7 6.4 4.1 - Cullinan Finsch Williamson Koffiefontein Kimberley Underground Helam Gross In Situ Value (US$bn)¹ 31.6 10.2 5.1 3.6 1.9 0.6
Slide 24: Diamond Market - Falling Supply
Diamond Market - Falling Supply • Production fell 27% from 2005 (177 Mcts) to 2013 (130 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 1990s • Long lead times
Slide 25: Diamond Market – Growing Demand
Diamond Market – Growing Demand Per capita consumption of key commodities: China relative to the US “steady state” • Demand growth driven by ‘mass luxury’ – affordable diamond jewellery for the middle classes ($200 to +$2,000) • Ca. 3 billion people to join the middle classes over the next 20 years
Slide 26: Diamond Market – US
Diamond Market – US (+7% Growth in 2013) • Total US retail sales of diamond jewellery reached Most desired fine jewellery to receive (% of women), 2013 pre-2009 downturn levels in 2013 39% • Polished diamond content in jewellery increased 20% from 2008 US bridal market (De Beers research): 14% • 79%
Slide 27: Diamond Market – China
Diamond Market – China (+14% Growth in 2013) Penetration of bridal diamond jewellery (%) Chinese Demand (De Beers research) • Share of diamonds sold in jewellery to Chinese consumers grew from 3% in 2003 to 21% in 2013 • Average prices jumped 32% from 2003 to 2013 to +RMB8,000 (ca. US$1,300); averag
Slide 28: Coloured Diamonds Continue to Break Records
Coloured Diamonds Continue to Break Records 20 November 2014: 7 October 2014: The Zoe Diamond, a 9.75ct A 8.4ct fancy vivid purple- fancy vivid blue pear-shaped pink, internally flawless diamond achieved US$32.6 diamond sold for US$17.8 million or ca. US$3.3 million, or ca. US$2.1 million per carat,
Slide 29: FY 2014 – Summary of Results
FY 2014 – Summary of Results FY 2014 FY 2013 (US$m) (US$m) Revenue¹ 471.8 392.5 Adjusted mining and processing costs¹ (277.4) (254.8) Other direct income 6.7 6.1 Profit from mining activities1 201.1 143.8 Exploration expense (2.8) (4.8) Corporate overhead (10.6) (11.4) Adjusted EBITDA1 187.7 127.6 D
Slide 30: FY 2014 – Operations Results
FY 2014 – 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) ROM Production Tonnes treated (t) 2,910,195 2,609,935 2,546,383 2,595,004 2
Slide 31: Cullinan – Historical Large Diamond Records
31 Date of acquisition 2013 2011 by Petra 2009 2007 2005 2003 2001 1999 1997 1995 1993 1991 +100 and +200 carat stones recovered at Cullinan 1989 Cullinan – Historical Large Diamond Records 1987 1985 1983 1981 1979 1977 1975 1973 1971 +200 1968 1966 +100 1964 1962 1960 1958 1956 1954 1952 1950 1931
Slide 32: Finsch – Development Programme
Finsch – Development Programme Expansion Plan – to take production to c.2.0 Mctpa by FY 4,055 development metres and 302 raiseboring metres in FY 2014 2017 • Mining currently taking place in Block 4 at 630m – FY 2014 • Development of SLC over 4 levels from 700m to 780m; first production – from FY 20
Slide 33: Cullinan – Development Programme
Cullinan – Development Programme Expansion Plan – to take 5,669 development metres and 854 raiseboring metres in FY 2014 production to c. 2.2 Mctpa by FY 2019 (2.0 Mctpa ROM & 0.2 Mctpa tailings) • Commenced rehabilitation of BA5 areas at 645m to create access to undiluted ore – FY 2013 • Developmen
Slide 34: Koffiefontein – Development Programme
Koffiefontein – Development Programme Expansion Plan – to take Koffiefontein Kimberlite Pipe Schematic production to c. 100,000 ctpa by FY 2017 • ROM production supplemented by ore from Ebenhaezer open pit (~5ha) – FY 2015 to FY 2016 • Installation of SLC from 560m to 600m – FY 2014 to FY 2016 SCOPE
Slide 35: Kimberley Underground – Development Programme
Kimberley Underground – Development Programme Expansion Plan – planned Kimberley Underground Kimberlite Pipes Schematic production of ca. 170,000 ctpa from FY 2015 • Construction and commissioning of plants at both Joint Shaft and Wesselton Shaft – completed in FY 2013 • ROM stockpile of ca. 244 Kt
Slide 36: Williamson – Development Programme
Williamson – Development Programme Expansion Plan – to take Williamson Kimberlite Pipe Schematic production to c. 300,000 ctpa by FY 2017 1km • Re-crush circuit in plant, N plus other plant design efficiencies, allowing for increased throughput – from FY 2014 LOM Pit Shell • Successful ramp-up of pr
Slide 37: FY 2014 – Operating Costs
FY 2014 – Operating Costs • On-mine cash costs decreased by 1% On-mine cash cost make-up (Petra Group) • South Africa inflationary pressures (electricity and 7% labour: +8%), offset by higher tonnages (+4%), tight 13% cost control, combined with the positive impact of a 38% weaker Rand (-13%) • Sept
Slide 38: Debt Facilities
Debt Facilities Bank loans and borrowing (excl FX lines) after increases in facilities during Oct 2014 Lender Type Size Interest Rate Repayment US$M Absa & RMB Amortising term facility 71 JIBAR + 3.5% 5 semi-annual payments from Mar 2016 (FNB) IFC Amortising term facility 35 LIBOR + 4.0% 5 semi-annu
Slide 39: Capex Profile
Capex Profile 1. All Capex numbers are stated in FY 2015 money terms (except for FY 2014 actuals). 2. Depreciation on mining assets for FY 2014 guided at c. US$40 million (at a R10.3/US$1 exchange rate). 3. As in prior guidance, capital estimates above do not include any capitalised borrowing costs.
Slide 40: 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 41: Further enquiries: Petra Diamonds
Open pit mining at Williamson Further enquiries: Petra Diamonds Cathy Malins [email protected] +44 20 7494 8203 www.petradiamonds.com
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