Petra Diamonds Limited · LSE:PDL
Petra Diamonds — Westhouse Securities – Optimising Resources Forum (April 2014)
40 slides from Petra Diamonds's conference presentation, Apr 10, 2014
Slide 1: Westhouse Securities – Optimising Resources Forum
The exceptional 29.6 carat Cullinan blue sold for US$25.6 million on 14 February 2014 Westhouse Securities – Optimising Resources Forum 10 April 2014
Slide 2: Important Notice
Important Notice • These Presentation Materials do not constitute or form part of any invitation, offer for sale or subscription or any solicitation for any offer to buy or subscribe for any securities in the Company nor shall they or any part of them form the basis of or be relied upon in any manne
Slide 3: Why Diamonds?
Why Diamonds? • Limited supply: only ~30 significant kimberlite mines in production; no major discoveries since 1990’s • Major mines maturing: past production peak; moving underground = lower tonnages + higher operating costs • Late cycle credentials: demand driven by urbanisation trend and growing
Slide 4: Late Cycle 'Commodity' / 'Luxury Good'
Late Cycle ‘Commodity’ / ‘Luxury Good’ While Chinese consumers have a natural affinity for diamonds and a growing knowledge about the product, the market remains relatively undeveloped. Wong noted that China’s jewelry consumption lags far behind developed countries. China has an estimated jewelry co
Slide 5: Why Petra?
Why Petra? • Quality management team delivering strong growth • World-class resource base of +300m carats • Diversified portfolio of producing mines and exploration • Strong growth – on track for 5 Mctpa / ca. US$1bn¹ revenue by FY 2019 – all brownfields expansion • Fully financed – sufficient cashf
Slide 6: 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 7: Focus on Africa
Focus on Africa • Six producing mines (five in South Africa and one in Tanzania), plus exploration in Botswana • Diversified portfolio is key to managing production risk across the Group Africa is source of ca. 60% of world’s diamonds by value 7
Slide 8: An Exceptional Growth Path
An Exceptional Growth Path Petra has acquired five non-core 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%
Slide 9: Roadmap to Million Carats pa
Roadmap to 5 Million Carats pa • Growth profile is solely organic and brownfields – expansion programmes to open up new mining areas • Fully financed using debt, treasury and operating cashflows FY 2019 production target of ca. 5.0 Mcts; revenue of ca. US$1bn 1000 6.0 FY 2014 production Carat produc
Slide 10: H1 FY 2014 Highlights
H1 FY 2014 Highlights Unit H1 FY 2014 Variance Profit from mining Adjusted EBITDA¹ activity Sales Diamonds sold Carats 1,417,694 +33% +115% +157% US$65.8m Revenue US$M 185.5 +19% US$73.4m Production ROM diamonds Carats 1,140,479 +15% US$34.2m US$25.6m Tailings / alluvial diamonds Carats 495,237 +97%
Slide 11: Fully Financed Capex Profile
Fully Financed Capex Profile Debt Facilities1 H1 FY 2014: Free Cashflow Positive US$ million • Operating cashflow of US$91.9 million (Percentage utilised in brackets) • Cash capex of US$84.7 million As at 31 December 2013: 48 • Cash: US$28.0 million and diamond inventories of ca. US$49.4 million (18
Slide 12: Petra Production Profile
Petra Production Profile • Kimberlite production profile (diamond quality and size ranges) remains highly constant over time • Ever growing volumes across the full diamond spectrum • Petra well positioned to supply into the growing mass luxury diamond segment 12
Slide 13: Regular Production of Specials
Regular Production of Specials • ca. US$1m stones are fairly regular and considered run of mine The exceptional 29.6ct Cullinan Type IIb blue • +US$5m stones are considered exceptional – average sold for US$25.6m (US$862k per carat) contribution to revenue of ca. US$16m pa over last five years 126ct
Slide 14: Current Rough Diamond Market
Current Rough Diamond Market • Solid seasonal sales, indicators of increasing global economic confidence, restocking of inventories and cautious optimism from Petra client base provides positive basis for firm market conditions in H2 • H1 prices largely in line with guidance, with exception of Finsc
Slide 15: Expansion Programmes Snapshot
Expansion Programmes Snapshot Underground development Tailings retreatment Optimising orehandling Plant refinements 15
Slide 16: 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 17: Finsch – Development Programme
Finsch – Development Programme Expansion Plan – to take 2,953 metres of SLC tunnels developed to date (out of 10,072 metres in total) production to c.1.8 Mctpa by FY 2016 and c.2.0 Mctpa from FY 2017 Dedicated conveyor ore-handling system • Mining currently taking place in Block 4 at 630m – FY 2014
Slide 18: Cullinan – Development Programme
Cullinan – Development Programme Expansion Plan – to take 7,068 metres of tunnels developed to date (out of 24,575 metres in total) production to c. 2.2 Mctpa by FY 2019 (2.0 Mctpa ROM & 0.2 Mctpa tailings) • Commenced rehabilitation of Current Infrastructure Men & Material BA5 areas at 645m to crea
Slide 19: Production and Revenue – FY 2013 vs FY 2019
Production and Revenue – FY 2013 vs FY 2019 Gross Production Gross Revenue FY 2013 actual: 2.67 million carats FY 2013 actual: US$402.7 million 33% 33% 41% 53% Cullinan Williamson 6% 10% Koffiefontein 4% 1% 8% 4% 3%4% Kimberley Underground Fissure Mines FY 2019: ca. 5 million carats¹ FY 2019: ca. US
Slide 20: Outlook
Outlook Rising Production Rising Margins Rising Prices? • Firmly on track for c. 3 million • Grades expected to rise c. 50% • Petra expects firmer market carats in FY 2014 once expansion plans access conditions to continue in H2 undiluted ore 2014 • Organic growth to c. 5 million • Carat production
Slide 21: Integrated Approach to Sustainability
Integrated Approach to Sustainability Safety 1.2 1 Safety of employees is top 0.8 priority for management 0.6 Petra striving for 0.4 zero harm across its operations 0.2 Left: Petra’s LTIFR 0 Rate FY 2010 FY 2011 FY 2012 FY 2013 H1 FY 2014 Striving for the highest standards Investing in communities F
Slide 22: Appendix
The Cullinan mine in South Africa Appendix
Slide 23: Capital Structure
Capital Structure High Quality Share Register PDL Share Price (blue) vs FTSE 350 Mining % ISC (as at 7 April 2014) (1 year) Al Rajhi Holdings W.W.L. 13.1% Saad Investments Company Ltd / AWAL Bank 11.9% T. Rowe Price 10.2% JP Morgan Asset Management Holdings Inc. 7.8% Listing LSE: PDL BlackRock Inves
Slide 24: Significant Diamond Producers
Significant Diamond Producers Majors: Mid cap: LSE: PDL (FTSE 250) TSX: DDC TSX: LUC LSE: GEMD Market cap: US$1,279m¹ Market cap: US$1,142m¹ Market cap: US$641m¹ Market cap: US$386m¹ Assets: five producing mines; Assets: two producing mines Assets: one producing mine; Assets: one producing mine; exp
Slide 25: World-class Resource Base
World-class Resource Base • Largest resource base outside the majors (Alrosa, De Beers, Rio Tinto) • Group resource base of 309.6 million carats worth ~US$55.0 billion¹ (at 30 June 2013) • Solid foundation for sustainable, long-term mining operations Gross Resources (Mcts) 200.8 100 50.9 50 39.4 7.2
Slide 26: FY 2013 – Key Performance Indicators
FY 2013 – Key Performance Indicators Revenue Profit from Mining Activity¹ Adjusted EBITDA² Adjusted operating cashflow³ US$M US$402.7m US$M US$136.8m US$M US$122.4m US$132.8m +27% +34% +36% US$M +57% 450 160 140 150 400 140 120 130 350 120 100 110 300 100 90 250 80 80 70 200 60 60 50 150 40 40 30 10
Slide 27: Summary of Financial Results
Summary of Financial Results H1 FY 2014 FY 2013 FY 2012 (US$m) (US$m) (US$m) Revenue 185.5 402.7 316.9 Adjusted mining and processing costs¹ (114.2) (270.3) (222.6) Other direct income 2.1 6.2 9.0 Profit from mining activity¹ 73.4 138.6 103.3 Exploration expense¹ (1.4) (4.8) (3.0) Corporate overhead
Slide 28: FY 2013 – Operations Results
FY 2013 – Operations Results Operation Finsch Cullinan Koffiefontein Kimberley UG Williamson (74%¹ Petra; 26% BEE) (74%¹ Petra; 26% BEE) (74%¹ & 2 Petra; 26% BEE) (74%¹ Petra; 26% BEE) (75% Petra; 25% Government of Tanzania) Total Production Tonnes treated (Mt) 5,210,546 3,861,012 4,080,893 3,172,67
Slide 29: Falling Supply
Falling Supply • Production fell 28% from 2005 (177 Mcts; Zimbabwe 0.2 Mcts) to 2012 (128 Mcts; Zimbabwe: 12.1 Mcts) • Success rate for finding an economic diamondiferous kimberlite is estimated to be ca. 1% (De Beers) • No Tier 1 discoveries for 20 years, despite US$ billions spent on exploration i
Slide 30: Growing Demand
Growing Demand • Demand growth driven by urbanisation and growing middle Number of middle class households, millions classes in emerging markets, as well as continued economic recovery in major US market • Additional 1.3bn people to attain middle income status by 2030; 2.6bn by 2050 (HSBC ‘Consumer
Slide 31: Iconic Gems from Iconic Mines
Iconic Gems 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 roug
Slide 32: Consistent Production of Specials
32 Date of acquisition 2013 2011 2009 2007 2005 2003 2001 1999 1997 1995 1993 +100 and +200 carat stones recovered at Cullinan 1991 1989 1987 1985 1983 1981 1979 1977 1975 1973 1971 Consistent Production of Specials +200 1968 1966 +100 1964 1962 1960 1958 1956 1954 1952 1950 1931 1929 1927 1925 1923
Slide 33: Kimberley Underground – Development Programme
Kimberley Underground – Development Programme Expansion Plan – to Kimberley Underground Kimberlite Pipes Schematic maintain annual production of c. 130,000 ctpa • Construction and commissioning of plants at both Joint Shaft and BULTFONTEIN Wesselton Shaft – completed in FY 2013 • Substantial stockpi
Slide 34: Koffiefontein – Development Programme
Koffiefontein – Development Programme Expansion Plan – to take Koffiefontein Kimberlite Pipe Schematic production to c. 105,000 ctpa by FY 2017 • ROM production supplemented by ore from Ebenhaezer open pit (~5ha) – FY 2014 to FY 2016 • Installation of SLC from 560m to 580m – FY 2014 to FY 2015 • SLC
Slide 35: Williamson – Development Programme
Williamson – Development Programme Expansion Plan – to take Williamson Kimberlite Pipe Schematic production to c. 300,000 ctpa by FY 2017 • Production resumed further 1km to the enhanced rebuild of N plant – Q4 FY 2012 • Successful ramp-up of production to 2.7 Mt – FY 2013 LOM Pit Shell • Re-crush c
Slide 36: H1 FY 2014 Operating Costs
H1 FY 2014 Operating Costs • On-mine cash costs decreased by 8% in US$ terms: On-mine cash cost make-up • SA operations costs increased in ZAR terms by ca. 7% 11%, mainly due to increased production and 14% inflationary pressures 40% • Offset by weakening ZAR vs USD (R10.07 average for H1 FY 2014 vs
Slide 37: Debt Facilities
Debt Facilities • Nov 2012: new debt facilities put in place of ca. US$213 million¹ with Absa, RMB (FNB) and IFC • An increase and optimisation of Petra’s prior debt structures (previously ca. US$138 million ) Lender Type Size Interest Rate Repayment Absa & Amortising term facility US$76.0 JIBAR + 4
Slide 38: Capex Profile
Capex Profile Financial Year 2013A 2014F 2015F 2016F 2017F 2018F 2019F Operation Finsch ROM tonnes treated (Mt) 2.6 2.8 2.9 3.2 3.2 3.2 3.2 Tailings tonnes treated (Mt) 2.6 2.6 3.0 3.0 3.0 3.0 3.0 Expansion Capex (ZARm) 296.1 512.3 422.2 346.9 467.9 403.0 354.3 Sustaining Capex (ZARm) 93.7 132.7 115
Slide 39: 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 40: Further enquiries: Petra Diamonds
The Cullinan mine in South Africa Further enquiries: Petra Diamonds Cathy Malins [email protected] +44 20 7494 8203 www.petradiamonds.com
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