Petra Diamonds Limited · LSE:PDL
Petra Diamonds — Shareholder Meeting (November 2017)
52 slides from Petra Diamonds's shareholder meeting presentation, Nov 24, 2017
Slide 1: 2017 AGM
V4 PetraDiamonds 2017 AGM 24 November 2017 BEGeee 3 ©) 33888 JUCERS ~ AS ee London LISTED PREMIUM
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 • Production growth to come mainly from higher value ROM carats • Adj. EBITDA marg
Slide 4: Johan Dippenaar CEO – Trading Update
Johan Dippenaar CEO Trading Update
Slide 5: FY 2017 – Driving Forward
FY 2017 – Driving Forward Continued production growth to 4 Mcts • Disappointing not to achieve guidance of 4.4 to 4.6 Mcts (ca. 9% below) but still represented record production for Group Major development work achieved in FY 2017 • Completion of 11.4 km development (out of a total 63.3 km to date)
Slide 6: YTD FY 2018 (Year to June 2018)
YTD FY 2018 (Year to 30 June 2018) 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 Total tonn
Slide 7: Transformation Underway
Transformation Underway • Replacement of poorer quality tonnes with better quality tonnes will grow production and margins due to less waste dilution, higher grades and improved product mix 1000 6 36 FY 2017 production of 5 30 4.0 Mcts; Carat production (million carats) revenue of $477m Tonnes treat
Slide 8: 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 9: 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 • YTD sales announced of $131.8 million (South African goods only) Transformation continues • Delivery of production rollout supported by: • Undiluted ore expected
Slide 10: 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 11: Adonis Pouroulis Non-Executive Chairman – Creating a Sustainable Business
Adonis Pouroulis Non-Executive Chairman Creating a Sustainable Business
Slide 12: Diamonds are rare…and getting rarer
Diamonds are rare…and getting rarer Only 30 significant kimberlite mines in production today 12
Slide 13: Exploration has a less than 1% success rate
Exploration has a less than 1% success rate Diamond exploration results Only 7 ‘Tier 1’ mines 6,800 (+US$20 billion Reserves) 1. Jwaneng 2. Orapa 1,000 3. Udachnaya 4. Venetia 5. Catoca 60 7 6. Cullinan Kimberlites Sampled Diamondiferous Economic Tier 1 7. Mir kimberlites Source: De Beers Petra Diam
Slide 14: Diamond supply may already have peaked…
Diamond supply may already have peaked… • Production peaked at 177 million carats in 2005 – not expected to reach there again • 2016 production of 134 million carats (Kimberley Process Statistics) • Major diamond mines have passed their production peak; once mines go underground, can no longer keep
Slide 15: 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 16: Our growth path
Our growth path • Production has grown from 0.1 to 4.0 million carats • Revenue has grown from $2.3 million to $477.0 million US$m Mcts 800 6 Agreement to acquire Kimberley Acquisition of Mines 700 Finsch 5 600 Acquisition of Kimberley UG 4.0 4 Acquisition of 3.7 477 500 472 Williamson 3.1 425 3.2 4
Slide 17: Many challenges had to be overcome
Many challenges had to be overcome Petra acquired mines that were either closed down or facing closure • Lack of investment, development and resource allocation to the mines in the years pre takeover • Unproven business model and initial scepticism about our assets Challenges along the way • Global
Slide 18: Succeeding against the odds
Succeeding against the odds Significant investments made • Petra will have invested a total of ca. $1.4 billion over the period FY 2008 to FY 2019 • Mining is a long-term industry – e.g. investment made today may will only reap rewards in 10 years time Achievements so far • Cost base of each asset a
Slide 19: The health and safety of our people is our priority
The health and safety of our people is our priority • Our mines and mining method are inherently safe, but accidents can happen due to being a heavy industry • Our mines are certified OHSAS 18001:2007, the international safety management framework • Petra has reinforced its safety procedures to addr
Slide 20: Sustainability – providing stable employment
Sustainability – providing stable employment • By investing its resources in its mines, Petra has put in place long-term, sustainable mine plans • When Petra acquired mines: +/- 2,500 employees • Today Petra employs more than 5,600 employees • And several thousand contractors during expansion progra
Slide 21: Focus on developing our people
Focus on developing our people • Petra has increased its training spend to $8.5 million in FY 2017 • Efforts start at grassroots level – improving education standards in local schools • Bursaries, scholarships and training offered to community members • Numerous Company programmes to develop our emp
Slide 22: Driving grassroots development
Driving grassroots development The Petra Foundation funded the construction of a new science The Williamson mine owns and operates the Mwadui Primary laboratory for the Chipa-Tabane High School School, providing education to 492 students Petra supports My Maths Buddy in South Africa, which focuses C
Slide 23: The Petra Graduation Ceremony 2017
The Petra Graduation Ceremony 2017 A celebration of the many Petra graduates who completed one of our development programmes Petra Diamonds Limited: November 2017 23
Slide 24: Focus on the development of women
Focus on the development of women Diversity is proven to result in improved decision making and better results • Number of Company initiatives aimed at encouraging and developing women at all levels of the business, with women representing: • 33% of engineering learnerships • 31% of mining learnersh
Slide 25: Focus on long-term socio-economic development
Focus on long-term socio-economic development • Petra doubled its social spend to $3.4 million in FY 2017 • Our development work focuses on addressing the most critical needs of our communities in order to drive meaningful sustainable development • Projects are agreed in consultation with stakeholde
Slide 26: Minimising our environmental footprint
Minimising our environmental footprint • Diamond mining is energy and water intensive but it does not use any harmful chemicals – vegetation grows freely on our tailings dumps • Ongoing initiatives to reduce energy usage, including continual investigation of renewable energy sources • Continual redu
Slide 27: Ensuring ethical provenance
Ensuring ethical provenance • Petra will only operate in countries which are members of the Kimberley Process and will only sell diamonds mined at our operations • We are fully committed to upholding the human rights of all our stakeholders, including employees, contractors, partners and communities
Slide 28: Sustaining consumer demand – today and tomorrow
Sustaining consumer demand – today and tomorrow 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 indus
Slide 29: The most highly concentrated form of wealth
The most highly concentrated form of wealth What happens when you combine incredible rarity, beauty, ethical provenance and heritage? The 12.03ct Blue Moon of Josephine Cut from a 29ct rough stone from the Cullinan mine Fancy vivid blue, internally flawless 12 November 2015: sold to Hong Kong proper
Slide 30: Appendix
” PetraDiamonds Appendix
Slide 31: Capital Structure
Capital Structure Share Price (1 year to 6 November 2017) As at 21 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) Dire
Slide 32: 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 33: 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 33
Slide 34: 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 35: 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 35
Slide 36: 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 37: 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 38: 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 $4.0m per carat, 12 November 2015 The 24.18ct The 59.
Slide 39: FY 2017 – Summary of Results
FY 2017 – Summary of Results FY 2017 FY 2016 (US$m) (US$m) Revenue 477.0 430.9 Adjusted mining and processing costs1 (311.3) (257.7) Other direct income 2.8 2.8 Profit from mining activities1 168.5 176.0 Exploration expense (0.6) (2.7) Corporate overhead (10.7) (9.0) Adjusted EBITDA1 157.2 164.3 Dep
Slide 40: FY 2017 Operational Results
FY 2017 Operational Results Finsch Cullinan Koffiefontein KEM JV Williamson² Q1 FY Q1 FY Q1 FY Q1 FY Q1 FY FY18 2017 FY18 2017 FY18 2017 FY18 2017 FY18 2017 ROM PRODUCTION Tonnes Treated (t) 768,165 3,212,169 757,781 1,882,911 155,263 667,821 239,825 597,025 1,206,451 3,667,781 Grade (cpht) 60.9 56.
Slide 41: FY 2017 Operating Costs
FY 2017 Operating Costs FY 2017 On-mine cash cost breakdown (South Africa operations) Group on-mine US$ 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%
Slide 42: 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 43: 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 44: 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 45: 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 46: 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 47: 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 48: 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 49: 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 50: 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 51: 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 52: Thank You
Thank You Further enquiries: Petra Diamonds Cathy Malins Corporate Communications Manager [email protected] +44 20 7494 8203 www.petradiamonds.com