Petra Diamonds Limited · LSE:PDL
Petra Diamonds — H1 FY2016 Earnings Presentation
44 slides from Petra Diamonds's earnings presentation, Feb 22, 2016
Slide 1: Development on track at Cullinan – Interim Results
Development on track at Cullinan Interim Results (Six Months to 31 December 2015) 22 February 2016
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 2016 – KPIs
H1 FY 2016 – KPIs Production Revenue Safety Mcts 3.2 Guidance US$m 425.0 LTIFR 3.5 c.3.3- 450 0.40 3.0 3.4 400 0.35 350 0.30 2.5 1.6 210.2 300 0.25 2.0 250 0.20 1.5 200 0.37 150 0.15 0.29 1.0 0.10 1.6 1.6 100 214.8 0.5 154 0.05 50 0.0 0 0.00 FY 2015 H1 FY 2016 FY 2015 H1 FY 2016 FY 2015 H1 FY 2016 +
Slide 4: H1 FY 2016 – KPIs
H1 FY 2016 – KPIs Profit from Mining Activities¹ Operating Cashflow Capex US$m 154.5 US$m 132.4 US$m 274.1 180 140 300 160 120 28 250 140 61.6 100 120 200 148.9 100 80 150 80 60 60 104.4 100 92.9 40 40 125.2 151.3 55.1 20 45.6 50 20 0 0 0 FY 2015 H1 FY 2016 FY 2015 H1 FY 2016 FY 2015 H1 FY 2016 -41%
Slide 5: Balance Sheet Snapshot
Balance Sheet Snapshot Cash Net debt Bank facilities undrawn US$m US$m US$m 180.0 350 300 160.0 300 250 140.0 250 120.0 200 100.0 200 150 80.0 166.6 150 323.9 255.1 60.0 100 100 177.1 40.0 171.7 50 50 20.0 42.1 0.0 0 0 30/06/15 31/12/15 30/06/15 31/12/15 30/06/15 31/12/15 -75% to $42.1m +89% to $323
Slide 6: Summary Results
Summary Results H1 FY 2016 H1 FY 2015 FY 2015 Revenue 154.0 214.8 425.0 Adjusted mining and processing costs1 (99.6) (122.9) (272.7) Other direct income 0.7 1.0 2.2 Profit from mining activity1 55.1 92.9 154.5 Exploration expense (1.9) (2.4) (5.6) Corporate overhead (4.7) (5.6) (9.6) Adjusted EBITDA
Slide 7: Robust Profit Margin from Mining Activities
Robust Profit Margin from Mining Activities • Margins generally between 30 – 40% despite operating in diluted mining areas • Margins forecast to go to +50% once operating in new mining areas (not reliant on increase in diamond pricing) % 60 First major mine acquisition (Koffiefontein) 50 40 30 Globa
Slide 8: On Track for Full Year Guidance of 3.3 – 3.4 Mcts
On Track for Full Year Guidance of 3.3 – 3.4 Mcts H1 FY 2016 – Production and Sales Summary Unit H1 FY 2016 H1 FY 2015 Variance FY 2015 Sales Diamonds sold Carats 1,303,051 1,401,575 -7% 3,168,650 Gross revenue US$M 154.0 214.8 -28% 425.0 Production ROM diamonds Carats 1,243,706 1,167,982 +7% 2,276,
Slide 9: H1 FY 2016 Operating Costs
H1 FY 2016 Operating Costs • Petra’s focus on cost control and the weaker ZAR helped to mitigate On-mine cash cost make-up (Petra Group) inflationary pressures • On-mine cash operating costs in H1 FY 2016 remained in line with 8% expectations, despite the ongoing inflationary pressures. 13% 35% • On
Slide 10: Diamond Market – Overview
Diamond Market – Overview Supply Demand • Supply constraints: Global rough diamond production • US remains the major market: strong diamond buying decreased 4% to 125 Mcts worth $14.5bn in 2014 (average culture; retail sales currently performing well $116/ct); estimated to be flat or slightly lower
Slide 11: Rough Diamond Pricing
Rough Diamond Pricing • Rough diamond pricing achieved by Petra down ca. 20% over last 18 months • Impact of lower pricing has been mitigated by the Rand weakening ca. 25% over the same period Bloomberg Rough Diamond Index (Jan 04 to Dec 15) Bloomberg Rough Diamond Index – ZAR terms (Jan 04 to Dec 1
Slide 12: Diamond Market – Current Trading and Outlook
Diamond Market – Current Trading and Outlook FY 2016 Market Conditions The US remains the dominant diamond consumer market • Price decrease of ca. 9% for first tender of H1 FY RoW 21% 2016 and stable prices for second tender • Initial indications of solid Christmas sales in the major US market (esti
Slide 13: 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 14: Development Snapshot
Development Snapshot Drilling Undercut secondary support Orehandling systems ‘Blue’ development – rock sealing ‘Blue’ development – secondary support Construction of Cullinan Plant 14
Slide 15: Transition from Low to High Quality Tonnes
Transition from Low to High Quality Tonnes • Increase in ROM grades and lower contribution of tailings to drive ca. 60% growth in production • Flat tonnage throughput helps contain costs Split of Petra’s tonnage profile from different ore sources 20 Millions 18 16 14% 14% 22% 14 35% 32% 12 30% 29% 2
Slide 16: Improving Product Mix
Improving Product Mix • Lower value tailings to reduce from 1 in 3 carats in FY 2015 to 1 in 20 by FY 2018 • ROM carats are worth 2 to 3 times the value of tailings carats Split of carat production from ROM vs Tailings 6 Million carats 5 4% 4% 4 11% 3 23% 29% 96% 96% 2 89% 71% 77% 1 95% 0 FY 2015 FY
Slide 17: Kimberley Mines Acquisition
Kimberley Mines Acquisition • 18 January 2016: Petra completed acquisition of Kimberley Mines from DBCM in partnership with Ekapa Mining (Petra: 49.9%; Ekapa: 50.1%) • Petra share of acquisition cost: ZAR50.9 million ($3.6 million) • Kimberley Mines assets: • A number of tailings dumps (“TMRs”) in K
Slide 18: Outlook – Growth and Margin Expansion
Outlook – Growth and Margin Expansion FY 2019 production target of ca. 5.0 Mcts; revenue of ca. $0.85bn 900 6 30 FY 2015 FY 2016 25 5 production of production Carat production (million carats) 3.2 Mcts; target of 3.3 – FY 2007 revenue of 3.4 Mcts Tonnes treated (Mt) production $425m 4 20 of 0.2 Mcts
Slide 19: Sustainability at the Heart of Petra
Sustainability at the Heart of Petra • Petra strives for continuous improvement across all CSR areas 1.2 • Petra CSR programmes focus on sustainable job creation, poverty 1 alleviation, skills transfer and local enterprise development 0.8 • Good track record of managing labour relations in South Afr
Slide 20: Sustainability Highlights
Sustainability Highlights Community Support Volunteer work for Mandela Day Striving for the highest standards Education Finsch wins 2 MineSAFE Awards Williamson owns and operates the Mwadui Primary School Environmental Management Training & Development Biofiltration trials at Cullinan Leadership Dev
Slide 21: Appendix
Petra contributes to education- related projects in its host communities Appendix
Slide 22: Capital Structure
Capital Structure Share Price (1 year to 16 Feb 2016) High Quality Share Register % ISC vs FTSE 350 Mining (as at 16 February 2016) T. Rowe Price¹ 12.9% BlackRock Investment (UK) Limited 11.0% Standard Life Investments (Holdings) Limited 8.4% M&G Investment Funds 5.5% Directors 3.2% Listing LSE: PDL
Slide 23: World Diamond Mines
World Diamond Mines ” PetraDiamonds Archons: Archean areas (3 500-2 500 million years old) Procons: 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 Snap Lake 2 Ek
Slide 24: The Petra Board
The Petra Board Adonis Pouroulis Johan Dippenaar David Abery Jim Davidson 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 Founded Petra Diamonds
Slide 25: An Exceptional Growth Path
An Exceptional Growth Path July 2007 July 2008 February 2009 Koffiefontein Cullinan Williamson Petra has acquired six non-core diamond mining operations from De Beers Petra approach: 70% Petra¹; 30% BEE 74%¹ Petra; 26% BEE 75% Petra¹; 25% Government of Tanzania • Flat management structures Sub-level
Slide 26: Focus on Southern Africa
Focus on Southern Africa Diversified portfolio: 5 producing mines (4 in South Africa, 1 in Tanzania), extensive tailings operations in Kimberley and exploration in Botswana Africa is source of ca. 58% of world’s diamonds by value 26
Slide 27: 2015 Resource Statement (30 June 2015)
2015 Resource Statement (30 June 2015) • World-class Resource base of 308.7 million carats¹ worth ca. $54.3 billion² Gross Resources (Mcts) 195.4 100 49.1 50 38.1 6.7 6.4 - Cullinan Finsch Williamson Koffiefontein Kimberley Underground Gross In Situ Value (US$bn)² 34.0 11.4 4.4 2.6 1.9 - Cullinan Wi
Slide 28: Petra Portfolio – FY 2015 vs FY 2019
Petra Portfolio – FY 2015 vs FY 2019 Gross Production Gross Revenue FY 2015 actual: 3.2 million carats FY 2015 actual: US$425.0 million 23% 28% Finsch 43% 6% Cullinan 65% 2% Williamson 4% 15% Koffiefontein Kimberley 10% Underground 4% FY 2019: ca. 5 million carats1 FY 2019: ca. US$850 million1 29% 4
Slide 29: Petra Production Profile
Petra Production Profile • The production profile of a kimberlite is highly consistent when the mine is in steady state production; Petra experienced volatility in product mix in FY 2015 due to the reliance on the heavily diluted old mining areas at its underground operations • Ever growing volumes
Slide 30: Exceptional Diamond Sales Remain Strong
Exceptional Diamond Sales Remain Strong • Very rare coloured diamonds or large white diamonds continue to break records at auction • Petra classifies ‘Exceptional Diamonds’ as stones that sell for +$5 million each • Exceptional diamonds contributed on average $21 million pa from FY 2009 to FY 2015 W
Slide 31: Robust Financial Position
Robust Financial Position • Capex remains fully funded from treasury, bank facilities and cashflows Unit 31 December 2015 30 June 2015 Closing exchange rate used for R15.46/US$1 R12.16/US$1 conversion Cash at bank US$m 42.1 166.6 Diamond inventories Carats 666,357 339,489 US$m 57.4 33.5 Diamond debt
Slide 32: H1 FY 2016 – Operations Results
H1 FY 2016 – Operations Results Operation Finsch Cullinan Koffiefontein Kimberley UG Williamson (74%¹ Petra; 26% BEE) (74%¹ Petra; 26% BEE) (74%¹ & 2 Petra; 26% BEE) (74%¹ Petra; 26% BEE) (75% Petra; 25% Government of Tanzania) ROM Production Tonnes treated (t) 1,656,256 1,530,455 1,180,399 1,292,89
Slide 33: Petra Rough Diamond Pricing
Petra Rough Diamond Pricing Actual Guidance Actual Ranges of Weighted Weighted Weighted Individual Tender Average¹ Average Average Results² US$/ct US$/ct US$/ct US$/ct H1 FY 2016 FY 2016 FY 2015 FY 2015 Finsch 82 94 90 82 – 112 Cullinan 110 1263 1744 106 – 135 Koffiefontein 459 570 386 226 – 536 Kim
Slide 34: Finsch – Development Programme
Finsch – Development Programme Expansion Plan FY 2015 Development : 4,217 metres; Raiseboring: 376 metres; Kimberlite: 1,038 metres • Expansion plan to take production to ca. 2.0 Mctpa (ROM) by FY 2018 • Sub level cave – development of 3 out of 4 levels complete • New Block 5 Block Cave to be instal
Slide 35: Finsch – Production Plan
Finsch – Production Plan • ROM tonnages to rise ca. 16%, but ROM carat production to rise ca. 56% due to higher grade • Positive impact on average value per carat as tailings production winds down Tonnes treated and grades Carat production and average diamond values¹ 3.0 140 6.0 Million carats $/ct
Slide 36: Cullinan – Development Programme
Cullinan – Development Programme Expansion Plan FY 2015: Development: 4,282 metres; Raiseboring: 614 metres; Kimberlite: 2,285 metres • Expansion plan to take production to +2 Mcts by FY 2019 • C-Cut Phase 1: new block cave being established on the western side of the orebody • Development work tran
Slide 37: Cullinan Case Study – New Plant
Cullinan Case Study – New Plant Expected benefits of new plant Existing Cullinan Plant • Footprint decreases from ca. 26 to ca. 5 hectares • Expected reduction in number of conveyor belts from 151 (ca. 15km) to 22 (ca. 3km) • Increase in revenue per tonne • Increase in grade due to increased liberat
Slide 38: Cullinan – Production Plan
Cullinan – Production Plan • ROM tonnages to rise 60%, but ROM carat production expected to rise +200%, due to increase in grade as result of mining undiluted C-Cut tonnes Tonnes treated and grades Carat production and average diamond values 3.0 200 7.5 60 Million carats $/ct cpht Million tonnes 6.0
Slide 39: Koffiefontein – Development Programme
Koffiefontein – Development Programme Expansion Plan – to take Koffiefontein Kimberlite Pipe Schematic production to ca. 100,000 ctpa by FY 2017 • 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 • ROM production supplemente
Slide 40: Kimberley Underground – Development Programme
Kimberley Underground – Development Programme Expansion Plan – planned Kimberley Underground Kimberlite Pipes Schematic production of ca. 170,000 ctpa by FY 2016 • Planned ROM tonnes treated of ca. 1.2 Mtpa – from FY 2015 • Planned grade of 13 – 15 cpht from FY 2016 • Scope refinement of underground
Slide 41: Williamson – Development Programme
Williamson – Development Programme Expansion Plan – to take Williamson Kimberlite Pipe Schematic production to ca. 350,000 ctpa by FY 2018 1km • Plant modifications N (additional crusher circuit, 2 autogenous mills) to commence – FY 2016 LOM Pit Shell • Commissioning of crusher – FY 2016 205m • Comm
Slide 42: Debt Facilities
Debt Facilities Bank facilities (excl FX lines) ca. $241 million as at 31 December 2015 Lender Type Size Size Interest Rate Repayment ZARM US$M1 Absa & RMB ZAR Amortising term 3M JIBAR + 3 semi-annual payments from 800 52 (FNB) facility 3.5% Mar 2018 USD Amortising term 3M LIBOR + 3 semi-annual paym
Slide 43: Capex Profile
Capex Profile 1. All Capex numbers are stated in FY 2016 money terms (except for FY 2015 actuals). 2. Depreciation on mining assets for FY 2016 guided at ca. $52 million. 3. As in prior guidance, capital estimates above do not include any capitalised borrowing costs. Guidance is to assume majority o
Slide 44: Further enquiries: Petra Diamonds
Petra contributes to education- related projects in its host communities Further enquiries: Petra Diamonds Cathy Malins [email protected] +44 20 7494 8203 www.petradiamonds.com