TIDMPDL
22 February 2022 LSE: PDL
Petra Diamonds Limited
Interim results for the Six Months ended 31 December 2021
Investor update on strategy and operational guidance
Petra Diamonds Limited ("Petra" or the "Company" or the "Group") announces its
unaudited interim results for the six months ended 31 December 2021 (the
"Period", "H1 FY 2022", or "H1"). These results together with operational
guidance for the next three years will be provided as part of the Investor Day
which Petra is holding at 09:30am GMT, both in person and online. Details of
how to access the event are provided below.
HIGHLIGHTS OF THE INTERIM RESULTS (Unaudited)
Significant growth in revenue, earnings and cash flow with lower net debt,
driven by higher production, Exceptional Stones, and strong diamond prices
Richard Duffy, Chief Executive of Petra Diamonds, commented:
"Petra has delivered strong results, growing revenue by 49% and adjusted EBTIDA
by 87%, as well as reducing net debt significantly. We have benefitted from the
recovery in rough diamond prices, record proceeds from the sale of Exceptional
Stones, and the improvements we have made in our operations, resulting in
significantly improved safety levels, profitability and cash flow. Our
strengthened operating platform and balance sheet coupled with the robust rough
diamond market, sets us well for the second half of the year and we are well on
track to meet FY 2022 operational guidance.
"At our investor day later on this morning, we will expand on the buoyancy of
the diamond market and set out how we expect our medium-term plans to benefit
from this stronger market. As well as discussing our operations and capital
structure, we will present our strategy for the business going forward,
including growth opportunities, and provide more detailed operational guidance
on production, costs and our capital requirements."
Strong financial performance and diamond pricing underpins confidence for the
full year
H1 FY 2022 H1 FY 2021 FY 20212
Revenue (US$m) 264.7 178.1 406.9
Adjusted EBITDA1 (US$m) 150.9 80.8 130.2
Adjusted EBITDA margin 57% 45% 32%
Adjusted profit / (loss) before tax 91.1 6.5 (18.3)
(US$m)
Adjusted net profit / (loss) after tax 66.4 2.7 (25.5)
(US$m)
Net profit after tax (US$m) 49.1 67.6 196.6
Operational free cash flow1 122.4 54.0 120.1
Consolidated net debt (US$m) 152.3 700.4 228.2
Unrestricted cash (US$m) 256.7 92.4 147.7
Basic earnings per share (US$c) 22.29 315.29 260.70
Adjusted basic earnings / (loss) per 29.01 4.23 (36.20)
share1 (US$c)
1 For all non-GARP measures refer to the Summary of Results table within the
Financial Results section below.
2 For comparative purposes, the FY 2021 income statement figures include
Williamson as it is no longer a discontinued operation. Consolidated net debt
and cash balances for FY 2021 have not been adjusted.
* Revenue up 49% driven by the sale of Exceptional Stones totalling US$77.9
million (H1 FY 2021: US$40.4 million) and a 16% increase in rough diamond
prices.
* Adjusted EBITDA rose 87% reflecting improved prices, the sale of
Exceptional Stones, and Project 2022 cost reductions during the period.
EBITDA margin rose from 45% to 57% significantly enhanced by revenue from
the sale of Exceptional Stones, which may not be repeated at a similar
level in future reporting periods.
* Adjusted profit before tax increased to US$91.1 million (H1 FY 2021 US$6.5
million).
* Net profit after tax reduced to US$49.1 million from US$67.6 million
impacted by negative non-cash foreign exchange movement amounting to
US$63.4 million (net of tax).
* Operational free cash flow before restructuring costs rose US$68.4 million
to US$122.4 million on the back of increased EBITDA.
* Further strengthening of the Balance Sheet
+ Consolidated net debt reduced by US$75.9 million to US$152.3 million
from US$228.2 million as at 30 June 2021 with Consolidated net debt :
Adjusted EBITDA at 1.0x compared with 1.8x at 30 June 2021.
+ Unrestricted cash increased US$109.0 million to US$256.7 million from
US$147.7 million as at 30 June 2021.
* Basic earnings per share from continuing operations were 22.29 US$ cents
per share and 29.01 US$ cents on an adjusted basis.
Good safety and operational performance
Unit H1 FY 2022 H1 FY 2021 Variance FY 20211
Lost time injury frequency rate 0.18 0.50 -64% 0.44
(LTIFR)
Total injuries 15 19 -21% 42
Gross ore processed Mt 5.6 4.4 +27% 8.1
Gross diamonds recovered Carats 1,777,424 1,740,862 +2% 3,240,312
Gross diamonds sold Carats 1,595,851 1,712,797 -7% 3,960,475
Gross revenue US$m 264.7 178.1 +49% 406.9
Adjusted mining and processing US$m 109.8 99.2 +11% 276.1
costs
Operational capital expenditure US$m 16.1 8.1 +99% 22.8
* Strong safety performance with a 64% reduction in LTIFR reflecting the
concerted effort to address behavioural factors that were compounded by the
pandemic.
* Good production results due to Williamson restarting operations in
September 2021, steps taken to address the waste ingress at Finsch, and the
successful management of the tunnel convergence at Cullinan.
* Absolute costs remained within expectations despite inflationary pressures.
* Operational Capex of US$16.1 million (H1 FY 2021: US$8.1 million) largely
due to the new expansion project at Cullinan and resumption of projects
delayed by COVID-19.
* Preliminary conclusions of the Business Re-Engineering (BRE) project
identified opportunities to lower the cost base at Finsch and curtail the
negative cash flow at Koffiefontein.
Strategic developments and board appointment
* Petra has taken steps through the Framework Agreement with the Government
of Tanzania and Memorandum of Understanding entered into with Caspian
Limited in December 2021 to reduce its exposure in Tanzania while retaining
a controlling interest in Williamson.
* Post Period end, completion of the refinancing of Petra's first lien debt
facility will deliver some US$5 million in savings over the next two years,
as a result of more favourable terms than the current facility. Completion
is expected in Q3 FY 2022.
* As previously announced, Jon Dudas will join the Board as an independent
Non-Executive Director from 1 March 2022, further strengthening the Board
through his broad experience across the mining and resources sectors, in
operations, general management, finance and strategy.
Outlook
This strong performance and considerably improved balance sheet, supported by a
robust rough diamond market, sets us well for the second half of the year,
although we may not benefit from the same levels of record contribution from
Exceptional Stones. FY 2022 production is on track to meet guidance of 3.3 to
3.6 Mcts, and Capex is expected to be at the lower end of the guidance of US$78
to US$92 million.
With the strong recovery in the diamond market, and the actions we have taken,
Petra is now also well placed for the future.
HIGHLIGHTS OF INVESTOR DAY PRESENTATION
The following new information will be covered in today's Investor Day:
* Two major projects have been approved by the Board:
+ Cullinan's CC1E SLC: US$173 million capital estimate, extending mine
plan to 2031, project IRR greater than 30%.
+ Finsch's 3 level SLC: US$216 million capital estimate, extending mine
plan to 2030, project IRR greater than 30%.
+ Cullinan and Finsch have additional resources to potentially extend
their mine plans well beyond 2031 and 2030 respectively.
* Petra does not provide guidance on diamond pricing. However, it should be
noted that the Cullinan mine has a history of recovering Exceptional Stones
which have contributed an average of US$47 million per annum over the last
three years to Group revenues, and US$37 million per annum over the last
five years.
Key operational guidance metrics
Unit FY22E FY23E FY24E FY25E
Total carats recovered Mcts 3.3 - 3.6 3.3 - 3.6 3.3 - 3.6 3.6 - 3.9
Cash on-mine costs and G& $m 300 - 310 300 - 320 300 - 320 300 - 320
A1
Expansion capex1 $m 47 - 50 105 - 115 125 - 135 115 - 120
Sustaining capex1 $m 28 - 30 30 -32 30 - 32 26 - 28
Note 1: Opex and Capex guidance is stated in FY 2022 real terms and based on an
exchange rate of ZAR15 / USD1.
* Beyond the guidance period, further expansion capital expenditure of US$61
million, which is expected to be invested between 2026 and 2029, includes
completion of these two major projects mentioned above and provides for
certain infrastructure projects at Cullinan, which are still to be
approved.
* Koffiefontein is expected to reach its end of life in depleting available
reserves by FY 2025. Petra is considering its options to ensure a
responsible exit while continuing to implement the outcomes of the BRE
project aiming to curtail the negative cash flow impact on the Group.
* Detailed guidance is available on Petra's website at https://
www.petradiamonds.com/investors/analysts/analyst-guidance/
INVESTOR DAY PRESENTATION DETAILS
Investor Day, including a summary of the Interim Results: 09:30 GMT today
Peel Hunt, 100 Liverpool Street, London EC2M 2AT
Petra's Chief Executive Richard Duffy and Finance Director Jacques Breytenbach
will host an in-person presentation to update the market on our strategy and
medium-term operational guidance. We will also briefly cover the Interim
results.
Live webcast of presentation
Please register at https://webcasting.brrmedia.co.uk/broadcast/
61fbded449f7751d18890b33
Dial in details
UK, tollfree/freephone: 0800 279 6877
UK, local: +44 (0)330 336 9601 (international calls may incur operator costs)
Participant passcode: 5189226
If you have any questions, please call +44 (0) 20 7494 8203 or email:
investorrelations@petradiamonds.com .
Recording of presentation
A recording of the webcast will be available later today on Petra's website at
https://www.petradiamonds.com/investors/presentations/
ABOUT PETRA DIAMONDS
Petra Diamonds Limited is a leading independent diamond mining group and a
consistent supplier of gem quality rough diamonds to the international market.
The Company has a diversified portfolio incorporating interests in three
underground producing mines in South Africa (Finsch, Cullinan and
Koffiefontein) and one open pit mine in Tanzania (Williamson).
Petra's strategy is to focus on value rather than volume production by
optimising recoveries from its high-quality asset base in order to maximise
their efficiency and profitability. The Group has a significant resource base
of ca. 230 million carats, which supports the potential for long-life
operations.
Petra strives to conduct all operations according to the highest ethical
standards and will only operate in countries which are members of the Kimberley
Process. The Company aims to generate tangible value for each of its
stakeholders, thereby contributing to the socio-economic development of its
host countries and supporting long-term sustainable operations to the benefit
of its employees, partners and communities.
Petra is quoted with a premium listing on the Main Market of the London Stock
Exchange under the ticker 'PDL'. The Company's US$336.7 million notes due in
2026 are listed on the Irish Stock Exchange and admitted to trading on the
Global Exchange Market. For more information, visit www.petradiamonds.com
FURTHER INFORMATION
Please contact:
Petra Diamonds, London
Telephone: +44 7494 8203
Jill Sherratt
investorrelations@petradiamonds.com
Julia Stone
CEO'S REVIEW
Revenue growth, higher profitability and cash flow in a strong diamond market
These results demonstrate Petra's success in improving safety measures,
production, and operations, which enables us to take advantage of the buoyancy
of the diamond market.
Revenue for the half year increased 49% to US$264.7 million, buoyed by the
strong jewellery sales over the holiday period, the contraction in supply and a
16% increase in rough diamond prices. This and the contribution from
Exceptional Stones, amounting to US$77.9 million, more than offset the 7%
reduction in sales volumes which was the result of a deferral of post-pandemic
outbreak sales to July 2020, within the comparative period. Adjusted EBITDA
rose 87% to US$150.9 million with an Adjusted EBITDA margin of 57% (H1 FY 2021:
45%) supported by the sales of Exceptional Stones.
The marked improvement in safety is best illustrated by the 64% reduction in
LTIFR. Our COVID-19 vaccination drives continues and more than 50% of the
South African workforce has been fully vaccinated.
Diamond production was marginally up against the comparative period and in line
with guidance. Production was sustained notwithstanding previously reported
challenges following tunnel convergence at Cullinan and steps taken to mitigate
the waste ingress at Finsch, both ofwhich were successfully implemented during
the Period. Preliminary conclusions of the BRE projects confirm the feasibility
of future life extension capital projects at Finsch and the removal of the
negative cash flow performance of Koffiefontein.
Production resumed at Williamson during H1 FY 2022. During December Petra
entered into a Framework Agreement with the Government of Tanzania and a
Memorandum of Understanding with Caspian Limited to reduce its exposure in
Tanzania while retaining a controlling interest in Williamson.
We have engaged successfully at the national level on the proposed design of
the Independent Grievance Mechanism ("IGM") and other remedial initiatives and
community programmes to address the historical allegations of human rights
abuses at the Williamson mine in Tanzania. Local engagements are now planned
for Q3 FY 2022.
Our improving cash flow generation is being enabled by Project 2022, which is
now in its final stages. Since commencement Project 2022 has delivered US$182
million in cash flow benefits, exceeding its net free cash flow targets of
US$100 million to US$150 million over the three year period to June 2022,
supported by a higher incidence of Exceptional Stones.
Health and safety
The LTIFR for H1 FY 2022 decreased to 0.18 (H1 FY 2021: 0.50). The LTIs during
the Period continued to be of low severity and mostly behavioural in nature.
The various remedial actions and behaviour-based intervention programmes
previously announced have assisted in achieving the strong improvement in the
safety trend. The total number of injuries during H1 FY 2022, which includes
LTIs, decreased to 15 (H1 FY 2021: 19). Petra continues to target a zero-harm
working environment.
COVID-19 remains a risk to the health and safety of the Group's workforce.
Petra has implemented systems and strategies across all its operations aimed at
preventing and/or containing the spread of the virus. Petra's focus remains on
a vaccination drive of its employees. In South Africa, 2,228 employees have
been fully vaccinated (53% of the workforce) and 266 partially vaccinated (16%
of the workforce), while at Williamson the vaccination campaign is progressing,
although the roll-out has been slower. More information on the Company's
response to the pandemic is available on its website: https://
www.petradiamonds.com/sustainability/health-and-safety/our-response-to-covid-19
/.
Production and operations
H1 FY 2022 production was in line with guidance and totalled 1,777,424 carats
(H1 FY 2021: 1,740,862 carats). During the Period, Williamson resumed
production, having been on care and maintenance since April 2020, while steps
to address both the prior waste ingress at Finsch as well as the convergence of
a tunnel during the Period at Cullinan have yielded positive results.
As previously announced, during September 2021 convergence was experienced at
the southern end of Tunnel 41 in the C-Cut. Remedial action was focused on
arresting convergence by stabilising the affected pillars and re-establishing
access to the production tunnel. The impact on production is now estimated to
be a loss of approximately 11,000 tonnes per month to the end of November 2022.
Cullinan is still expected to deliver on its annual guidance for FY 2022 of 1.7
to 1.9 Mcts.
We have made good progress on the BRE Projects at Finsch and Koffiefontein,
initiated in July 2021 to comprehensively review and improve the mines' cost
bases and enhance operating margins. Transition plans with recommended
deliverables and due dates have been drafted for both operations.
* The plan for Finsch concluded that it is possible to meet the targeted
production levels of c. 2.8 - 3.1 Mt per annum with a significant reduction
in the cost base in excess of ZAR100 million (c. US$6.7 million) per
annum. This level of cost savings ensures a long-term sustainable
operation.
* The BRE Project conclusion for Koffiefontein reaffirmed the current mine
plan to 2025. At the same time, ideas identified to reduce cost and
improve efficiencies will result in curtailing negative cash flow.
Production ramp-up at Williamson commenced during H1 FY 2022 with 1.4 Mt ROM
processed in the period, yielding 82.9 Kcts, including the exceptional 32.32
carat pink stone covered in 'Diamond Sales'.
Diamond market
The diamond market ended the calendar year in a strong state, with evidence of
buoyant jewellery sales during the important festive retail period as consumers
released pent-up demand for luxury items. The recent Bain Diamond Report
2021-22 estimates that the diamond jewellery market experienced decade-high
growth of +29% to c. US$84 billion in 2021, with the major US market growing
38% as consumers were keen to spend the savings accumulated in 2020 on
meaningful items.
Demand at Petra's most recent tender spanned across the entire spectrum of
rough assortments and sizes and reflected the shortages of goods further to the
recent contraction of global rough supply.
Petra's Investor Day presentation today will address the compelling
fundamentals of the diamond market, where the supply side is characterised by a
small and depleting number of producing mines globally, with very limited
exploration and new projects in the pipeline. The demand side continues to be
driven by growing middle classes worldwide and the broadening of opportunities
to give and receive diamonds to mark the most important milestones in our
lives.
The Company continues to closely monitor the impact of COVID-19 on its clients'
ability to attend tenders and will continue its flexible approach in planning
its upcoming sales events.
Diamond sales
H1 FY 2022 revenue increased 49% to US$264.7 million (H1 FY 2021: US$178.1
million) driven by the sale of Exceptional Stones totalling US$77.9 million (H1
FY 2021: US$40.4 million), being:
* the exceptional 39.34 carat blue diamond from the Cullinan mine sold for
US$40.2 million;
* the 342.92 carat Type IIa white diamond from the Cullinan mine sold for
US$10.0 million (the Company has retained a 50% interest in the profit
uplift of the polished proceeds, after costs, of the 342.92 carat white
diamond, as well as an 18.30 carat Type IIb blue diamond which sold for
US$3.5 million);
* the exceptional 32.32 carat pink diamond from the Williamson mine sold for
US$13.8 million; and
* the 295.79 carat white diamond from the Cullinan mine sold for US$13.9
million.
H1 revenue also benefited from realised diamond prices on a like-for-like basis
being up ca. 16% compared to the preceding six-month period to 30 June 2021.
Sales volumes reduced by some 7% compared to the comparative period when
significantly higher volumes were sold, mostly off-tender, following the
inventory build witnessed late in FY 2020 after the initial COVID-19 outbreak.
Tender volumes and resultant diamond inventories have now normalised in line
with normal tender timings.
Prices achieved during H1 FY 2022 are set out in the table below:
Actual Actual Actual
Mine H1 FY 2022 H1 FY 2021 FY 2021
(US$/ct) (US$/ct) (US$/ct)
Cullinan 192 120 111
Finsch 97 71 77
Koffiefontein 538 590 419
Williamson 760 150 150
Project 2022 update
Project 2022 commenced in July 2019 and has now reached the final half year of
this 36-month project scheduled for completion in June 2022. The project's key
focus was to increase the cash flow generation of the Company through increased
production levels and reduced operating and capital expenditure, while
introducing a standardised business improvement process as part of the
Company's operating model.
The production results of H1 FY 2022 are testament to the positive impact of
Project 2022's ideas and principles on stabilising and improving operating
performance, evident at Cullinan and Finsch in particular. This, together with
the positive impact of Project 2022 on the operating and capital cost
performance of the operations, are expected to result in the Group exceeding
its earlier guidance for net free cashflow for the three year period to June
2022 of between US$100 and US$150 million, by realising at least US$200
million.
The first and second phases of the Project 2022 Organisational Design ("OD")
Review have been completed, which involved updating role descriptions, grading
these roles and amending the Group's Remuneration Policy to address both market
competitiveness and internal equity to strategically manage the investment in
our employees. The focus of the OD Project in FY 2022 is on improving
performance management through developing and aligning KPIs across the business
to further enhance accountability and delivery.
The transition from Project 2022 to business improvement being integrated with
the Company's operating model, to ensure that the benefits of the structures
and systems created by Project 2022 continue over the longer term, is in
progress and is scheduled to be concluded by June 2022.
Williamson Mine - human rights update
Petra has implemented various remedial initiatives and is putting in place the
Independent Grievance Mechanism ("IGM") as well as community programmes to
address the historical allegations of human rights abuses at the Williamson
mine in Tanzania. More information on this can be found on Petra's website at:
https://www.petradiamonds.com/our-operations/our-mines/williamson/
allegations-of-human-rights-abuses-at-the-williamson-mine/.
During H1 FY 2022, a series of engagements with Government Ministries and
Agencies, Civil Society and NGOs were conducted in Dodoma and Dar es Salaam,
seeking feedback and support on the proposed design of the IGM. Local
engagements, particularly with those for whom the IGM is intended, are planned
for Q3 FY 2022, following successful engagements at the national level. The
current target is for the launch of the pilot phase of the IGM by the end of
August 2022 (Q1 of FY 2023) provided that meaningful engagement with all
stakeholders is completed by the end of March 2022. This will allow the IGM to
be fully operational by the end of Q1 FY 2023.
Whilst the IGM is still being developed, a mechanism has been set up to enable
community members to confidentially and securely register alleged historical
Tier 2 grievances. This mechanism continues to receive such grievances and a
significant number have been registered to date. As the IGM is not yet
operational, and therefore unable to commence the investigation of such
grievances, it is too early to evaluate the merits of these grievances.
As previously announced, a number of projects are being put in place to provide
sustainable benefits to the communities located close to the mine, with in
excess of one million pounds of agreed funding paid by Petra into an escrow
account to fund these projects.
The gender-based violence campaign has since been launched and continues to
gain traction within the community. The medical support services project at
Mwadui hospital commenced on 10 January 2022 with physiotherapy screening being
provided to community members, as part of the project.
During H1 FY 2022, there was a total of 295 reported incidents of illegal
incursions onto the Williamson mine lease area, resulting in twelve illegal
miners, ten security officials and five police officials suffering minor
injuries and 74 arrests being made. These incidents will be further
investigated as appropriate and corrective actions taken where necessary.
Subject to the outcome of these investigations, the Company believe the
Williamson Diamonds Limited ("WDL") and contracted security teams acted in
accordance with the Voluntary Principles on Security and Human Rights.
WDL is also continuing its extensive engagement with communities around the
mine to highlight the dangers of illegal mining, seeking to reduce illegal
incursions onto the Williamson mine lease area, with a particular focus on
seeking to reduce or eliminate the involvement of minors in illegal mining.
Further, WDL continues its engagement at local and central Government level to
work with the authorities to act against the illegal syndicates that are
believed to be funding many of the incursions.
Petra will continue to monitor the effects of actions taken to date and is
committed to the programmes and initiatives detailed in its 12 May 2021
announcement, available on the website link noted above.
Williamson - Framework Agreement and Memorandum of Understanding
On 13 December 2021, a Framework Agreement was entered into with the Government
of Tanzania regarding the Williamson mine, reducing Petra's indirect
shareholding from 75% to 63%. On 15 December 2021 a non-binding Memorandum of
Understanding ("MoU") was entered into to sell 50% (less one share) of the
entity that holds Petra's shareholding in WDL to Caspian Limited. Upon
completion of the transactions contemplated by the MoU and the capital
restructuring in the Framework Agreement becoming effective (expected in H2
2022), Petra and Caspian will each indirectly hold a 31.5% stake in WDL, but
with Petra retaining control through its controlling interest in the entity
that holds Petra's shares in WDL and the Government of Tanzania holding the
remaining 37%. These agreements are in line with Petra's objective of reducing
its exposure in Tanzania while retaining control. The Williamson mine is
therefore no longer classified as an asset held for sale and has been
consolidated for the period ending 31 December 2021. For further detail refer
to note 17.
Share consolidation
On 29 November 2021 the Company completed a share consolidation of one new
share for every 50 existing shares, with the Company's resultant issued share
capital now consisting of 194,201,785 ordinary shares of 0.05 pence each.
FINANCIAL RESULTS
SUMMARY RESULTS (unaudited)
6 months to 31 6 months to 31 Year ended 30
December 2021 December 2020 June 2021
("H1 FY 2022") ("H1 FY 2021") ("FY 2021")
US$ million US$ million US$ million
Revenue 264.7 178.1 406.9
Adjusted mining and processing costs1 (109.8) (99.2) (276.1)
Other direct income 0.3 5.1 6.8
Profit from mining activity2 155.2 84.0 137.6
Other corporate income 0.6 - -
Adjusted corporate overhead16 (4.9) (3.2) (7.4)
Adjusted EBITDA3 150.9 80.8 130.2
Depreciation and Amortisation (43.5) (38.2) (80.8)
Share-based expense (0.1) (0.2) (0.5)
Net finance expense (16.2) (35.9) (67.2)
Adjusted profit/(loss) before tax 91.1 6.5 (18.3)
Tax expense (excluding taxation credit / (24.7) (3.8) (7.2)
charge on impairment charge and
unrealised foreign exchange gain /
(loss))13
Adjusted net profit/(loss) after tax4 66.4 2.7 (25.5)
Impairment reversal / (charge) - 0.1 (0.2) (38.4)
operations and other receivables5
Impairment of BEE loans receivable - - 4.6 5.8
expected credit loss release 6
Gain on extinguishment of Notes net of - - 213.3
unamortised costs
Profit on disposal of subsidiary7 - 14.7 14.7
Recovery / (costs) and fees relating to 0.2 - (12.7)
investigation and settlement of human
rights abuse claims
Provision for unsettled and disputed tax - - (19.5)
claims
Net unrealised foreign exchange (loss) / (28.7) 65.1 74.6
gain
Taxation credit / (charge) on unrealised 11.1 (19.3) (19.9)
foreign exchange (loss) / gain13
Taxation credit on impairment charge - - 4.2
Net profit after tax 49.1 67.6 196.6
Earnings per share attributable to
equity holders of the Company -
US cents
Basic profit per share 22.29 315.29 260.70
Adjusted profit / (loss) per share8 29.01 4.23 (36.20)
As at 31 As at 31
December 2021 December 2020 As at
30 June 2021
(US$ million) (US$ million)
Unit (US$
million)
Cash at bank including US$m 272.3 106.3 173.0
Williamson- (including
restricted amounts)
Cash at bank - Williamson US$m 16.5 2.5 9.2
Diamond debtors - including US$m 0.4 3.7 38.3
Williamson
Diamond debtors - Williamson US$m - - -
Diamond inventories - US$m 79.6 105.0 56.5
including Williamson14 /Cts 819,252 1,385,402 637,676
Diamond inventories - US$m 20.5 11.4 11.4
Williamson14 Cts 133,239 76,977 76,977
US$336.7m loan notes (issued US$m 346.4 - 327.3
March 2021)9
US$650 million loan notes9 US$m - 702.0 -
Bank loans and borrowings10 US$m 78.6 61.2 103.0
BEE partner bank facilities11 US$m - 47.2 -
Consolidated Net debt12 US$m 152.3 700.4 228.2
Bank facilities undrawn and US$m 0.6 - 7.7
available10
The following exchange rates have been used for this announcement: average for
H1 FY 2022 US$1:ZAR15.03 (H1 FY 2021: US$1: ZAR16.27, FY 2021: US$1:ZAR15.41);
closing rate as at 31 December 2021 US$1:ZAR15.99 (31 December 2020 US$1:
ZAR14.69, 30 June 2021: US$1:ZAR14.27).
Notes:
The Group uses several non-GAAP measures above and throughout this report to
focus on actual trading activity by removing certain non-cash or non-recurring
items. These measures include adjusted mining and processing costs, profit from
mining activities, adjusted EBITDA, adjusted net profit after tax, adjusted
earnings per share, adjusted US$ loan note, net debt and consolidated net debt
for covenant measurement purposes. As these are non-GAAP measures, they should
not be considered as replacements for IFRS measures. The Group's definition of
these non-GAAP measures may not be comparable to other similarly titled
measures reported by other companies. The Board believes that such alternative
measures are useful as they exclude one-off items such as the impairment
charges and non-cash items to provide a clearer understanding of the underlying
trading performance of the Group.
1. Adjusted mining and processing costs are mining and processing costs stated
before depreciation.
2. Profit from mining activities is revenue less adjusted mining and
processing costs plus other direct income.
3. Adjusted EBITDA is stated before depreciation, amortisation of right-of-use
asset, costs and fees relating to investigation and settlement of human
rights abuse claims, share-based expense, net finance expense, tax expense,
loss on discontinued operations, net of tax, impairment charges, expected
credit loss release/ (charge), gain on extinguishment of Notes net of
unamortised costs, profit on disposal of subsidiary and net unrealised
foreign exchange gains and losses.
4. Adjusted net profit/(loss) after tax is net profit/(loss) after tax stated
before impairment charge, expected credit release (loss) provision, gain on
extinguishment of Notes net of unamortised costs, profit on disposal net
unrealised foreign exchange gains and losses, and excluding taxation
(charge) credit on net unrealised foreign exchange gains and losses and
excluding taxation credit on impairment charge.
5. Impairment reversal of US$0.1 million (30 June 2021: US$38.4 million charge
and 31 December 2020: US$0.2 million charge) was due to the Group's
impairment review of its operations and other receivables. Refer to note 15
for further details.
6. Reversal of impairment of BEE loans receivable of US$nil (30 June 2021:
US$5.8 million and 31 December 2020: US$4.6 million) is due to the Group's
expected credit loss assessment of its BEE loans receivable. Refer to note
11 for further details.
7. The profit on disposal of subsidiary of US$14.7 million in FY2021 includes
the reclassification of foreign currency translation reserve, net of tax of
Sekaka Diamonds (Pty) Ltd.
8. Adjusted EPS is stated before impairment charge, expected credit release
(loss) provision, gain on extinguishment of Notes net of unamortised costs,
profit on disposal of subsidiary, costs and fees relating to investigation
and settlement of human rights abuse claims, net unrealised foreign
exchange gains and losses, and excluding taxation (charge) credit on net
unrealised foreign exchange gains and losses and excluding taxation credit
on impairment charge.
9. The US$336.7 million loan notes have a carrying value of US$346.4 million
(FY2021: US$327.3 million) which represents the gross capital of US$336.7
million of notes, plus accrued interest and net of unamortised transaction
costs capitalised, issued following the capital restructuring (the
"Restructuring") completed during March 2021. Refer to detailed Debt
Restructuring Note 18.
The US$650 million loan notes represent the gross capital of US$650 million of
notes issued on April 2017, plus accrued and unpaid interest for the relevant
periods; these loan notes were settled in full following the completion of the
Restructuring.
1. Bank loans and borrowings represent amounts drawn under the Group's
refinanced South African bank facilities as part of the Restructuring and
comprise the ZAR856.1 million term loan (US$53.5 million), net of
unamortised transaction costs capitalised of US$1.2 million, and ZAR402.2
million (US$25.1 million) drawn (including accrued interest) under the
ZAR408.8 million (US$30.1 million) revolving credit facility. Under the
revolving credit facility, ZAR8.8 million (US$0.6 million) remains undrawn
and available. During FY 2021 and as part of the Restructuring, the BEE
partner bank facilities (which comprised the BEE guarantees) were settled
by the Group through proceeds of the ZAR1.2 billion term loan. Post Period
end, the Group settled the RCF (capital plus interest), for further detail
refer to note 19.
2. BEE partner bank facilities represents the BEE guarantees of US$nil
(ZARnil) (30 June 2021: US$nil (ZARnil) and 31 December 2020: US$47.2
million (ZAR692.8 million)).
3. Consolidated Net Debt is bank loans and borrowings plus loan notes, less
cash, less diamond debtors plus BEE partner bank facilities.
4. Tax (expense) / credit is the tax (expense) / credit for the Period
excluding taxation credit / (charge) on impairment charge and unrealised
foreign exchange gain / (loss) generated during the Period, such exclusion
more accurately reflects resultant Adjusted net profit / (loss).
5. Williamson's diamond inventory includes the 71,654.45 carat parcel of
diamonds blocked for export during August 2017, with a carrying value of
US$10.6 million. In terms of the framework agreement reached with the
Government of Tanzania, as announced on 13 December 2021, the proceeds from
the sale of this parcel will be allocated to Williamson.
6. Operational free cashflow is defined as cash generated from operations less
acquisition of property, plant and equipment.
Revenue
H1 FY2022 revenue increased 49% to US$264.7 million (H1 FY 2021: US$178.1
million) driven by sales from Exceptional Stones contributing US$77.9 million
during the Year (H1 FY 2021: US$40.4 million); supported by the strong diamond
market. Diamonds sold for the Period decreased 7% to 1,595,851 carats (H1 FY
2020: 1,712,797 carats), which was offset by rough diamond prices on a
like-for-like basis by increasing ca. 16% compared to H1 FY2021.
Mining and processing costs
The mining and processing costs for H1 FY 2022 are comprised of on-mine cash
costs as well as other operational expenses. A breakdown of the total mining
and processing costs for the Year is set out below.
On-mine Diamond Diamond Group Adjusted Depreciation3 Total
cash royalties inventory technical, mining and mining and
costs1 and support processing US$m processing
US$m stockpile and costs costs
US$m movement marketing (IFRS)
costs2 US$m
US$m US$m
US$m
H1 FY 2022 129.8 3.4 (29.5) 6.1 109.8 43.1 152.9
H1 FY 2021 94.4 2.4 (5.9) 8.3 99.2 37.7 136.9
FY 20214 208.9 3.2 42.2 21.8 276.1 80.0 356.1
Notes:
1. Includes all direct cash operating expenditure at operational level, i.e.
labour, contractors, consumables, utilities and on-mine overheads.
2. Certain technical, support and marketing activities are conducted on a
centralised basis.
3. Includes amortisation of right-of-use assets under IFRS 16 of US$0.6
million (H1 FY2021: US$2.3 million and FY 2021: US$0.6 million) and
excludes exploration and corporate / administration.
4. For comparative purposes, the FY 2021 figures include Williamson as it is
no longer held for sale at 31 December 2021.
Absolute on-mine cash costs in H1 FY 2022 increased by ca. 37% compared to H1
FY 2021 and in line with expectations, due to:
* The effect of translating ZAR denominated costs at the South African
operations at a stronger ZAR/USD average exchange rate (ca. 9.2% increase);
* Williamson mine resuming production in H1 FY2022 after being on care and
maintenance throughout the period in H1 FY2021 (ca. 11.2% increase);
* Other cost movements, due to deferral of certain expenditure as a result of
the Covid-19 restrictions during H1 FY2021, as well as the impact of T41
Tunnel convergence at CDM (ca. 4.0% increase); and
* inflationary increases (ca. 6.9% increase), the impact of electricity costs
(2.1% increase) and annual labour increases for FY2021 deferred to January
2021 (ca. 3.6% increase).
Royalties increased to US$3.4 million (H1 FY 2021: US$2.4 million) due to an
increase royalty percentage following increase in profit net of capex, as
defined in the royalty legislation of South Africa.
Profit from mining activities
Profit from mining activities increased 85% to US$155.2 million (H1 FY 2021:
US$84.0 million), mainly due to improved diamond pricing and the contributions
from Exceptional Stones.
Adjusted corporate overhead - general and administration
Corporate overhead (before depreciation and share based payments) increased to
US$4.9 million for the Period (H1 FY 2021: US$3.2 million) mainly attributable
to the ZAR strengthening against the USD and the increase in corporate
governance structures, strategic developments and Board appointments introduced
during the Period.
Adjusted EBITDA
Adjusted EBITDA, being profit from mining activities less adjusted corporate
overhead, increased 87% to US$150.9 million (H1 FY 2021: US$80.8 million),
representing an adjusted EBITDA margin of 57% (H1 FY 2021: 45%), driven by the
contribution from Exceptional Stones, the stronger diamond market and diamond
prices achieved.
Depreciation and amortisation
Depreciation and amortisation for the Period increased to US$43.1 million (H1
FY 2021: US$37.7 million), mainly due to the strengthening of the ZAR against
the USD and production recommencing at Williamson.
Impairment reversal / charge
As a result of the impairment reviews carried out at Cullinan, Finsch,
Koffiefontein and Williamson, and the Group's other receivables during the
Period, the Board recognised an overall net impairment reversal of US$0.1
million (H1 FY 2021: US$0.2 million impairment charge), comprising impairment
charges of the Williamson VAT receivable of US$0.7 million (H1 FY2021: US$0.2
million) and Koffiefontein property, plant and equipment of US$0.3 million (H1
FY2021: US$nil) and the recoupment of US$1.1 million previously impaired in
respect of the KEM JV receivable. Further details are provided in note 15.
Impairment reviews carried out at Cullinan, Finsch, and Williamson operational
assets did not result in an impairment charge or reversal during the Period (H1
FY 2021: US$nil). Asset level impairments at Koffiefontein amount to US$0.3
million (H1 FY 2021: US$nil), of the Group's carrying value of property, plant
and equipment of US$624.0 million (H1 FY 2021: US$773.3 million)
pre-impairment.
Impairment of BEE loans receivable - expected credit loss provision
The Group has applied the expected credit loss impairment model to its BEE
loans receivable. In determining the extent to which expected credit losses may
apply, the Group assessed the future free cashflows to be generated by the
mining operations based on the current mine plans. Based on the assessment, the
Group's free cashflows generated indicated a net credit loss reversal of US$nil
(H1 FY2021: US$4.6 million expected credit loss reversal, comprising of US$4.6
million provision reversal in respect of Cullinan and Finsch (refer to note 2
for further detail).
Net financial income
Net financial expense of US$44.9 million (H1 FY 2021: US$29.2 million income)
comprises:
* net realised foreign exchange gain on settlement of forward exchange
contracts of US$8.8 million (H1 FY 2021: US$3.6 million foreign exchange
losses).
* interest received on bank deposits of US$0.5 million (H1 FY 2021: US$0.4
million);
* net interest receivable on the BEE partner loans and amortisation of lease
liabilities in accordance with IFRS 16 of US$1.3 million (H1 FY 2021:
US$2.6 million net interest payable)
offset by:
* interest on the Group's debt and working capital facilities of US$23.8
million (H1 FY 2021: US$27.6 million);
* a charge for the unwinding of the present value adjustment for Group
rehabilitation costs of US$3.0 million (H1 FY 2021: US$2.5 million); and
* net unrealised foreign exchange losses of US$28.7 million due to the ZAR
strengthening against the US Dollar (H1 FY 2021: US$65.1 million foreign
exchange gains - ZAR weakness against the US Dollar) representing (i) the
unrealised foreign exchange gains/losses on the foreign currency
retranslation of cross border loans considered to be repayable in the
foreseeable future, and (ii) unrealised losses on forward exchange
contracts (refer to note 6 for further detail);
Tax credit / charge
The tax charge of US$13.6 million (H1 FY 2021: US$23.1 million) comprising
deferred tax charge of US$24.3 million (H1 FY 2021: US$3.8 million) in respect
of the utilisation of capital allowances at Cullinan and Finsch and US$11.1
million deferred tax credit (US$19.3 million charge due to unrealised foreign
exchange gains) relating to unrealised foreign exchange losses during the
Period, which reduced existing deferred tax liabilities, with an income tax
charge of US$0.4 million at Finsch for the Period (H1 FY 2021: US$nil).
Profit on disposal of subsidiary including associated impairment, net of tax
In H1 FY2021, the profit on disposal of subsidiary including associated
impairment, net of tax of US$14.7 million relates to the Group's disposal of
its interests in Sekaka, its exploration operations in Botswana, and is made up
of a US$0.3 million disposal consideration, net profit of US$1.3 million for
the Period 1 July 2020 to the 30 November 2020 disposal date and the recycling
of the foreign currency translation reserve of US$13.3 million, offset by a net
asset disposal amount of US$0.2 million. Refer to Note 16 for the detailed
breakdown.
Williamson
At the end of FY2021, the Board had decided to review its strategic options at
Williamson and the asset was classified as an asset held for sale.
In terms of the IFRS requirements to measure the assets of a disposal group at
the lower of carrying amount and fair value less costs to sell, the
determination of the fair value is complex and subject to considerable
judgement. Based on management's best estimate of the fair value at 30 June
2021, the following amounts were recognised as a result of that
reclassification:
* An impairment charge of US$21.4 million in respect of property, plant and
equipment;
* A US$11.2 million charge attributable to Williamson's net loss for FY2021;
and
* A US$19.5 million provision for unsettled and disputed tax claims arising
from the ordinary course of business.
During H1 FY2022, the Group entered into a Framework Agreement with the
Government of Tanzania regarding the Williamson mine reducing Petra's indirect
shareholding from 75% to 63%. Petra also entered into a non-binding Memorandum
of Understanding ("MoU") to sell 50% less one share of the entity that holds
Petra's shareholding in WDL to Caspian Limited. Upon completion of the
transactions contemplated by the MoU and the capital restructuring in the
Framework Agreement becoming effective (expected in H2 FY2022), Petra and
Caspian will each indirectly hold a 31.5% stake in WDL, but with Petra
retaining a controlling interest in WDL and the Government of Tanzania holding
the remaining 37%. These agreements are in line with Petra's objective of
reducing its exposure in Tanzania while retaining control, through its
controlling interest in the entity that holds Petra's shares in WDL. The
Williamson mine is therefore no longer classified as an asset held for sale in
H1 FY2022 which is the same treatment for the period H1 FY2021. Refer to Note
17 for additional detail.
Group profit / loss
The Group's net profit after tax is US$49.1 million (H1 FY 2020: US$67.6
million) impacted by negative non-cash foreign exchange movement amounting to
US$63.4 million (net of tax
Earnings per share
Basic profit per share from continuing operations of 22.29 US$ cents was
recorded (H1 FY 2021: 315.29 US$ cents, including gain on extinguishment of
Notes).
Adjusted profit per share from continuing operations (adjusted for impairment
charges, taxation credit on net unrealised foreign exchange losses and net
unrealised foreign exchange gains and losses) of 29.01 US$ cents was recorded
(H1 FY 2021: 4.23 US$ cents loss (adjusted for impairment charges, taxation
charge on net unrealised foreign exchange gains and net unrealised foreign
exchange gains and losses)).
The comparative basic profit per share and adjusted profit per share have been
adjusted to give effect to the share consolidation of one new share for every
50 existing shares completed on 29 November 2021, with the Company's resultant
issued share capital now consisting of 194,201,785 ordinary shares of 0.05
pence each.
Operational free cash flow
During the Period operational free cash flow of US$122.4 million (H1 FY 2021:
US$54.0 million before restructuring fees of US$15.5 million) reflects the
impact from the sale of Exceptional Stones and stronger diamond prices. This
strong cash flow performance compared to H1 FY2021 was positively impacted by:
* US$4.8 million inflow (H1 FY 2021: US$5.7 million outflow) cash finance
expenses net of finance income and net realised foreign exchange gains/
(losses).
This was offset by:
* Restructuring fees settled during the Period of US$nil (H1 FY 2020:US$15.5
million; FY 2021 US$29.9 million); and
* US$3.5 million dividend paid to BEE partners (H1 FY 2021: US$5.0 million
advances to BEE partners, largely related to servicing of BEE bank debt,
with the advances recoverable against future BEE partner distributions).
Cash and Diamond Debtors
As at 31 December 2021, Petra had cash at bank of US$272.3 million (H1 FY 2021:
US$106.3 million). Of these cash balances, US$256.7 million was held as
unrestricted cash (H1 FY 2021: US$92.4 million), US$14.8 million was held by
Petra's reinsurers as security deposits on the Group's cell captive insurance
structure (with regards to the Group's environmental guarantees) (H1 FY 2021:
US$12.9 million) and US$0.8 million was held by Petra's bankers as security for
other environmental rehabilitation bonds lodged with the Department of Mineral
Resources and Energy in South Africa (H1 FY 2021: US$0.8 million).
Diamond debtors at 31 December 2021 were US$0.4 million (H1 FY 2021: US$3.7
million).
Loans and Borrowings
The Group had loans and borrowings (measured under IFRS) at Period end of
US$425.3 million (H1 FY 2021: US$810.4 million) mainly comprised of US$346.4
million Notes (includes US$30.5 million accrued interest and unamortised
transaction costs of US$17.3 million) (H1 FY 2020: US$702.0 million), bank
loans and borrowings of US$78.6 million (includes interest of US$0.1 million
and unamortised transaction costs of US$1.7 million) (H1 FY 2021: US$61.2
million) and BEE partner bank facilities of US$nil (H1 FY 2021: US$47.2
(off-balance sheet guarantees)). Bank debt facilities undrawn and available to
the Group at 31 December 2021 were US$0.6 million (H1 FY 2021: US$nil). Post
Period end, the Company repaid the RCF of ZAR404.5 million (US$25.3 million),
the RCF facility was not cancelled and remains available to the Group.
Consolidated net debt at 31 December 2021 was US$152.3 million (H1 FY 2021:
US$700.4 million).
Covenant Measurements attached to banking facilities
The Company's EBITDA-related covenants associated with its banking facilities
during the Period were as outlined below:
* To maintain a 1.3x debt service cover ratio tested semi-annually on a
rolling 12-month basis; and
* To maintain liquidity requirements, of ZAR200 million (US$12.5 million)
based on covenant measurements every half year. The minimum liquidity
requirement immediately after a Fixed Income Investor's coupon repayment is
US$20.0 million.
Post Period end, Petra refinanced its first lien banking facilities with
amended covenants. For further detail refer to Note 19 below.
Going concern considerations
The Board has reviewed the Group's forecasts with various sensitivities
applied, for the 18 months to June 2023, including both forecast liquidity and
covenant measurements. As per the First Lien agreements, the liquidity and
covenant measurements exclude contributions from Williamson's trading results
and only recognises cash distributions payable to Petra upon forecasted
receipt, or Petra's funding obligations towards Williamson upon payment.
The Board has given careful consideration to potential risks identified in
meeting the forecasts under the review period. These included risks associated
with COVID-19, the likelihood and impact of which has been assessed as having
reduced since the previous report date. As such, the risks of production
disruptions, deferral of tenders due to travel restrictions and adverse impacts
on diamond pricing directly related to COVID-19 were removed from the
sensitivity analyses. Instead, more general disruptions to operations were
considered, which may relate to, inter alia, either COVID-19, labour or adverse
weather conditions.
The following have been key considerations in assessing the Group's ability to
operate as a going concern at the date of this report:
* a disruption in forecast production taking production offline for a period
of two weeks at either Cullinan or Finsch;
* a sustained 5% decrease in forecast rough diamond prices throughout the
forecast period;
* a sustained 5% decrease in forecast rough diamond prices throughout the
forecast period; and
* a combination of the above.
Under all the cases, the forecasts indicate that the Company will be able to
operate within the covenants and maintain sufficient liquidity. The Group's
liquidity outlook over the 18-month period to June 2023 remains strong, even
when applying sensitivities to the base case forecast.
The forward-looking covenant measurements associated with the new First Lien
facility do not indicate any breaches during the 18-month review period, both
in the base case and all stressed cases, although the combined stressed case
shows marginal headroom for the required interest cover ratio, specifically in
the December 2022 measurement period. The above-plan actual cash flow
generation during H1 FY 2022 coupled with improving market conditions and
further supported by more appropriate First Lien facilities and covenants,
mitigated the risk of covenant breaches in the 18-month forecast period as
previously noted in the Company's going concern assessment included in the FY
2021 Annual Report.
As a result, the Board concluded that there are no material uncertainties that
would cast doubt of the Company continuing as a going concern. See 'Basis of
preparation including going concern' in the Financial Statements for further
information.
Capex
Total Group Capex for the Period increased to US$16.7 million (H1 FY 2021:
US$8.6 million), comprising:
* US$11.7 million expansion Capex (H1 FY 2021: US$6.3 million); and
* US$5.0 million sustaining Capex (H1 FY 2021: US$2.3 million).
Capex Unit H1 FY 2022 H1 FY 2021
Cullinan US$m 12.5 5.9
Finsch US$m 2.5 1.3
Koffiefontein US$m 0.3 0.6
Williamson US$m 0.8 0.3
Subtotal - Capex incurred by US$m 16.1 8.1
operations
Corporate US$m 0.6 0.5
Total Group Capex US$m 16.7 8.6
Dividend
No dividend was declared for H1 FY 2022 (H1 FY2021: US$nil).
OPERATIONAL REVIEW
H1 FY 2022 Sales, Production and Capex - Summary
Unit H1 FY 2022 H1 FY 2021 Variance FY 20211
Sales
Diamonds sold Carats 1,595,851 1,712,797 -7% 3,960,475
Gross revenue US$m 264.7 178.1 +49% 406.9
Production
ROM tonnes Mt 5.4 4.2 +29% 7.7
Tailings & other1 tonnes Mt 0.2 0.2 0% 0.4
Total tonnes treated Mt 5.6 4.4 +27% 8.1
ROM diamonds Carats 1,649,989 1,644,846 0% 3,057,860
Tailings & other Carats 127,435 96,016 +33% 182,452
diamonds
Total diamonds Carats 1,777,424 1,740,862 +2% 3,240,312
Capex
Expansion US$m 11.7 6.3 +86% 16.9
Sustaining US$m 5.0 2.3 +117% 6.9
Total US$m 16.7 8.6 +94% 23.8
Note:
1. FY2021 comparatives have been restated to include Williamson.
Overall carat production increased 2% to 1,777,424 carats (H1 FY 2021:
1,740,862 carats), largely attributable to Williamson resuming production
during the Period, following an extended period of care and maintenance.
Cullinan - South Africa
Unit H1 FY 2022 H1 FY 2021 Variance FY 2021
Sales
Gross revenue US$M 167.7 107.3 +56% 250.6
Diamonds sold Carats 872,304 894,758 -3% 2,261,058
Average price per US$ 192 120 +60% 111
carat
ROM Production
Tonnes treated Tonnes -1%
2,306,986 2,339,473 4,614,802
Diamonds produced Carats 843,202 913,626 -8% 1,761,490
Grade¹ Cpht 36.5 39.1 -7% 38.2
Tailings Production
Tonnes treated Tonnes 238,293 221,385 +8% 445,538
Diamonds produced Carats 127,435 96,016 +33% 182,452
Grade¹ Cpht 53.5 43.4 +23% 41.0
Total Production
Tonnes treated Tonnes 2,545,279 2,560,858 -1% 5,060,339
Diamonds produced Carats 970,637 1,009,642 -2% 1,943,942
Costs
On-mine cash cost per ZAR 298 239 +25% 260
total tonne treated
Capex
Expansion Capex US$m 10.2 5.2 +96% 14.5
Sustaining Capex US$m 2.3 0.7 +229% 2.3
Total Capex US$m 12.5 5.9 +112% 16.8
Note:
1. The Company is not able to precisely measure the ROM / tailings grade split
because ore from both sources is processed through the same plant; the
Company therefore back-calculates the grade with reference to resource
grades.
Production
Cullinan's overall carat production decreased by 4% to 970,637 carats (H1 FY
2021: 1,009,642 carats). ROM production decreased by 8% to 843,202 carats (H1
FY 2021: 913,626 carats) partially offset by an increase in Tailings production
of 127,435 carats (H1 FY 2021: 96,016 carats). ROM production was impacted by
the convergence experienced in Tunnel 41 on the eastern side of the C-Cut block
cave during the Period. Although the ROM grade of 36.5 cpht (H1 FY 2020: 39.1
cpht) was at the lower end of FY 2022 guidance, we maintain our guidance for
the full year.
Sales
Cullinan's revenue increased 56% to US$167.7million (H1 FY 2021: US$107.3
million), due to the sale of three Exceptional Stones for US$64.1 million (H1
FY 2021: US$40.4 million), as well as the increase in diamond prices on a
like-for-like basis of ca.16% compared to the preceding six-month period to 30
June 2021.
Costs
The on-mine unit cash cost per total tonne treated increased 25% to ZAR298 (H1
FY 2021: ZAR239), mainly resulting from the low unit cost in H1 FY 2021 due to
deferral of certain expenditure as result of the Covid-19 restrictions (H1 FY
2021: ZAR239). US$0.5 million of additional expenditure was incurred in H1 FY
2021 to manage the tunnel convergence in T41, and the above-CPI increases in
electricity.
New project
During the Period, the board approved the CC1E project estimated at a cost of
ZAR2.6 billion (US$173 million) with an IRR in excess of 30% to deliver the
current mineplan to 2031.
Capex
Cullinan's H1 FY2022 Capex spend of US$12.5m (H1 FY 2020: US$5.9 million) was
mainly for the finalisation of the North Crusher 2 chamber, including the tip
construction, development of the early access to the CC1E decline and
underground workshop, and equipment for the 6th XRL stream in the processing
plant.
Finsch - South Africa
Unit H1 FY 2022 H1 FY 2021 Variance FY 2021
Sales
Gross revenue US$M 65.7 54.8 +20% 123.5
Diamonds sold Carats 676,295 768,647 -12% 1,602,312
Average price per US$ 97 71 +37% 77
carat
ROM Production
Tonnes treated Tonnes 1,423,119 1,323,000 +8% 2,311,195
Diamonds produced Carats 701,543 695,308 +1% 1,237,219
Grade Cpht 49.3 52.6 -6% 53.5
Total Production
Tonnes treated Tonnes 1,423,119 1,323,000 +8% 2,311,195
Diamonds produced Carats 701,543 695,308 +1% 1,237,219
Costs
On-mine cash cost per ZAR 484 456 +6% 536
total tonne treated
Capex
Expansion Capex US$m 1.4 0.8 +75% 1.7
Sustaining Capex US$m 1.1 0.5 +120% 2.3
Total Capex US$m 2.5 1.3 +92% 4.0
Production
Finsch's overall carat production was in the previous Period at 701,543 carats
(H1 FY 2021: 695,308 carats).
During H1 FY 2021, the areas surrounding the Finsch mine experienced above
average rainfall. Due to the excessive amount of rainfall and an influx of
water into the pit, pit wall failures were experienced on the northern side of
the pit. These failures have not impacted production to date, but they may have
a future impact on the stability of the decline from surface which also serves
as the second escape route from the underground operations. Measures to
mitigate the impact on the second escape route are being put in place and
include the re-commissioning of a temporary hoisting facility from surface down
to the 70 level.
The BRE Project confirmed production capacity of 2.8 - 3.1mt per annum with a
sustainable reduction in the cost base estimated at R100 million (US$6.7
million) per annum.
Sales
Sales increased +20% to US$65.7 million (H1 FY 2021: US$54.8 million),
reflecting the strong diamond market, further supported by an improving product
mix, delivering a 37% increase in average value per carat.
Costs
Despite the above inflationary increase in costs (associated with the water
ingress, additional maintenance required for an ageing fleet, and the above-CPI
increases in electricity), coupled with the 8% increase in total tonnes
treated, the on-mine increase in unit cash cost per total tonne treated was
limited to 6% to ZAR484 (H1 FY 2021: ZAR456). This containment in the cost
increase reflected the positive impact of the BRE initiatives which are
sustainably lowering the fixed cost base.
New project
During the Period, the board approved the 3 Level SLC project estimated at a
cost of ZAR3.2 billion (US$216 million) with an IRR in excess of 30% to deliver
the current mine plan to 2030.
Capex
Capex of US$2.5 million for the Period (H1 FY 2021: US$1.3 million) is higher
due to the continuation of certain key projects such as Block 5 exploration
drilling and 78 Level Phase 2, which were delayed in FY2021 as result of
COVID-19 restrictions.
Koffiefontein - South Africa
Unit H1 FY 2022 H1 FY 2021 Variance FY 2021
Sales
Gross revenue US$M 11.1 11.2 -1% 28.0
Diamonds sold Carats 20,638 18,945 +9% 66,650
Average price per US$ 538 590 -9% 419
carat
ROM Production
Tonnes treated Tonnes
317,310 493,661 -36% 754,369
Diamonds produced Carats 22,371 35,912 -38% 59,151
Grade Cpht 7.1 7.3 -3% 7.8
Total Production
Tonnes treated Tonnes 317,310 493,661 -36% 754,369
Diamonds produced Carats 22,371 35,912 -38% 59,151
Costs
On-mine cash cost per ZAR 811 459 +76% 651
total tonne treated
Capex
Expansion Capex US$m 0.1 0.3 -66% 0.6
Sustaining Capex US$m 0.2 0.3 -33% 1.1
Total Capex US$m 0.3 0.6 -50% 1.7
Production
Koffiefontein's production decreased 38% to 22,371 carats (H1 FY 2021: 35,912
carats), following tunnel depletion on 60L East, waste ingress, impacting the
recovered grade, and drill rig availability during the Period affected by the
ageing fleet.
Sales
Koffiefontein's revenue remained in line with the prior Period at US$11.1
million (H1 FY 2021: US$11.2 million). Higher diamond prices were offset by
lower quality.
Costs
The unit cash cost per total tonne treated increased to ZAR811 (H1 FY 2021:
ZAR459), mainly due to reduced throughput and the above-CPI increases in
electricity.
The BRE Project identified opportunities to reduce costs intended to curtail
negative cash flow.
Capex
Capex decreased to US$0.3 million (H1 FY 2021: US$0.6 million).
Williamson - Tanzania
Unit H1 FY 2022 H1 FY 2021 Variance FY 2021
Sales
Gross revenue US$M 20.2 4.6 +339% 4.6
Diamonds sold Carats 26,611 30,339 -12% 30,339
Average price per US$ 760 150 +407% 150
carat
ROM Production
Tonnes treated Tonnes 1,354,116 0 n.a 0
Diamonds produced Carats 82,873 0 n.a 0
Grade Cpht 6.1 0 n.a 0
Total Production
Tonnes treated Tonnes 1,354,116 0 n.a 0
Diamonds produced Carats 82,873 0 n.a 0
Costs
On-mine cash cost per US$ 12 n.a n.a. n.a
total tonne treated
Capex
Expansion Capex US$m 0.0 0.0 0% 0.0
Sustaining Capex US$m 0.8 0.3 +166% 0.3
Total Capex US$m 0.8 0.3 +166% 0.3
Production
Following an 18 month period of care and maintenance and in light of the
improving market conditions, production at Williamson recommenced during H1 FY
2022.
Sales
Williamson's revenue increased to US$20.2 million (H1 FY 2020: US$4.6 million),
following the first tender of rough diamonds post the restart of operations in
Q1 FY 2022. This included the sale of an exceptional 32.32 carat pink stone for
US$13.8 million.
Costs and Capex
On-mine cash costs were US$12.1 per tonne treated (H1 FY2021 the operation was
under care and maintenance) and capex at US$0.8 million were in line with
expectations.
PRINCIPAL BUSINESS RISKS
The Group is exposed to a number of risks and uncertainties which could have a
material impact on its long-term development, and performance and management of
these risks is an integral part of the management of the Group.
A summary of the risks identified as the Group's principal external, operating
and strategic risks (in no order of priority), which may impact the Group over
the next twelve months, is listed below.
Risk Risk Risk Nature Change in H1 FY 2022
appetite rating of risk
External Risks
1. Diamond High Medium Long No Change - the rough diamond market remains
price term positive with stable demand expected to
continue from manufacturing centers and
increased demand of polished diamonds
especially over the festive season indicating
a continued positive end consumer market.
Sales are currently not negatively influenced
by Covid-19 restrictions and the first tender
of Williamson, post restart of operations,
yielded good results. Exceptional stones from
Cullinan and Williamson continue to boost
sales revenue.
2. Currency High Medium Long No change-- the exchange rate was relatively
term stable over the last six months with an
average of 15.14 ZAR/USD, high of 16.3 at the
start of December 2021 and a low of 14.15 in
September 2021.
3. Country High Medium Long Lower - the risk of political instability in
and political term SA has reduced since the unrest in July and
elections in November. The risk of political
instability in Tanzania has also reduced
under the new President and following entry
by Petra into a Framework Agreement, which
was subject to shareholder approval, with the
Government of Tanzania that resolves various
legacy matters.
4. COVID-19 Medium Medium Short to Lower - the impact of the COVID-19 pandemic
pandemic medium is ongoing. The new Omicron variant,
(operational term identified in late November 2021, resulted in
impact) South Africa's fourth wave of infections
which is believed to have already peaked and
which saw much higher rates of infections,
albeit lower hospitalizations and deaths.
Petra's vaccination drive as well as other
mitigation measures are continuing which
enables Petra to manage the pandemic without
any significant impact to production and
sales.
Operating
Risks
5. Mining and Medium Medium Long Lower - positive throughput improvements
production term supported by Project 2022 continue to yield
good results. Production at Williamson
continues to ramp up and is expected to
reach full production by end of February.
Steps to address prior waste ingress at
Finsch and the Tunnel 41 convergence at
Cullinan have yielded positive results, with
production targets at both mines in line
with FY 2022 annual guidance.
6. ROM grade Medium Medium Short No change - Cullinan and Finsch ROM grades
and product term remain in line or ahead of budget, whilst
mix volatility Koffiefontenin ROM grades remain below
guidance.
7. Labour Medium Medium Short to No change - stable labour relations were
relations medium experienced during H1 FY 2022. The Company
term reached agreement with NUM on a new
three-year wage agreement for employees in
the Paterson A and B Bands at the South
African operations. The Company also
concluded a three-year wage agreement for
employees on the Paterson C-Lower Band with
both NUM and UASA. Wage negotiations at
Williamson are set to commence in H2 FY
2022.
Strategic
risks
8. Financing Medium Medium Short to Lower - continued progress with Project 2022
medium initiatives, strong diamond markets, the
term sale of exceptional stones and successful
management of the Covid-19 pandemic
continued to support free cash flow and to
further reduce net debt. Petra has signed a
binding credit approved term sheet to
re-finance its first lien debt which, once
completed, will simplify its capital
structure, lead to a less onerous covenant
package and reduce financing costs.
9. Licence to Medium Medium Long No change -uncertainty regarding the future
operate: term at Koffiefontein has raised tensions with
regulatory and the community at the mine. Local community
social impact and political pressure regarding Social and
& community Labour Plans (SLPs), jobs and business
relations opportunities at all our mines continue.
Whilst there have been delays in the
implementation of the IGM and community
projects at Williamson and increased
pressure on the IGM through a significant
increase in Tier 2 grievances being
registered, recent support from the
Government for the IGM should enable local
engagements to proceed shortly and recent
support from the District Commissioner
should allow the community projects to
progress. The risk of illegal incursions at
Williamson is ongoing, although the rate of
incursions has stabilised.
Richard Duffy
Chief Executive Officer
21 February 2022
Notes
The following definitions have been used in this announcement:
a. Exceptional Stones: diamonds with a valuation and selling price of US$5m or
more per stone
b. cpht: carats per hundred tonnes
c. Kcts: thousand carats
d. Kt: thousand tonnes
e. LTI: lost time injury
f. LTIFR: lost time injury frequency rate
g. Mcts: million carats
h. Mt: million tonnes
i. FY: financial year
j. Q: quarter of the financial year
k. ROM: run-of-mine (i.e. production from the primary orebody)
l. SLC: sub level cave
m. m: million
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE 6 MONTH PERIODED 31 DECEMBER 2021
US$ million Notes (Unaudited) (Unaudited) (Restated -
1 July 1 July Audited)
2021- 2020- Year ended
31 December 31 December 30 June
2021 2020 20211
Revenue 264.7 178.1 406.9
Mining and processing costs (152.9) (136.9) (356.1)
Other direct income 0.3 5.1 6.8
Corporate expenditure including 5
settlement costs (5.2) (3.9) (40.8)
Other corporate income 0.6 - -
Impairment reversal / (charge) of 15 0.1 (0.2) (38.4)
non-financial assets
Impairment of BEE loans receivable - 11
expected credit loss release - 4.6 5.8
Total operating costs (157.1) (131.3) (422.7)
Profit on disposal including associated 16
impairment, net of tax - 14.7 14.7
Financial income 6 11.4 69.0 81.6
Financial expense 6 (56.3) (39.8) (74.2)
Gain on extinguishment of Notes net of 6 - - 213.3
unamortised costs
Profit before tax 62.7 90.7 219.6
Income tax charge (13.6) (23.1) (23.0)
Profit for the Period 49.1 67.6 196.6
Attributable to:
Equity holders of the parent company 43.2 54.5 187.1
Non-controlling interest 5.9 13.1 9.5
49.1 67.6 196.6
Profit per share attributable to the
equity holders of the parent during the
Period:
Continuing operations:
Basic earnings per share - US cents 13 22.29 315.29 260.70
Diluted earnings per share - US cents 13 22.29 315.29 260.70
1 The condensed consolidated income statement for FY2021 has been restated with
the operating results of Williamson which were previously classified under loss
on discontinued operations, for further detail refer to note 17.
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 6 MONTH PERIODED 31 DECEMBER 2021
US$ million (Unaudited) (Unaudited) (Audited)
1 July 1 July Year ended
2021- 2020- 30 June
31 December 31 December 2021
2021 2020
Profit for the Period 49.1 67.6 196.6
Exchange differences on translation of the - 0.2 0.2
share-based payment reserve
Exchange differences on translation of foreign (44.6) 54.7 64.2
operations1
Exchange differences on non-controlling 0.3 (0.1) (1.2)
interest1
Total comprehensive income for the Period 4.8 122.4 259.8
Total comprehensive income and expense
attributable to:
Equity holders of the parent company (1.4) 109.4 251.5
Non-controlling interest 6.2 13.0 8.3
4.8 122.4 259.8
¹ These items will be reclassified to the consolidated income statement if
specific future conditions are met.
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
US$ million Notes (Unaudited) (Unaudited) (Audited)
31 31 December 30 June
December 2020 2021
2021
ASSETS
Non-current assets
Property, plant and equipment 7 626.6 773.3 696.8
Right-of-use assets 26.8 3.0 1.2
BEE loans and receivables 11 43.1 175.1 46.6
Other receivables 1.8 10.6 -
Deferred tax assets - 0.1 -
Total non-current assets 698.3 962.1 744.6
Current assets
Trade and other receivables 26.2 42.8 50.7
Inventories 97.5 126.4 59.9
Cash and cash equivalents (including 272.3 106.3 163.8
restricted amounts)
Total current assets 396.0 275.5 274.4
Non-current assets classified as held for 17 - - 59.6
sale
Total assets 1,094.3 1,237.6 1,078.6
EQUITY AND LIABILITIES
Equity
Share capital 12 145.7 133.4 145.7
Share premium account 959.5 790.2 959.5
Foreign currency translation reserve (446.7) (411.6) (402.1)
Share-based payment reserve 1.9 1.5 1.8
Other reserves (0.8) (0.8) (0.8)
Accumulated losses (210.1) (385.9) (253.3)
Attributable to equity holders of the 449.5 126.8 450.8
parent company
Non-controlling interest (7.8) (5.8) (10.5)
Total equity 441.7 121.0 440.3
Liabilities
Non-current liabilities
Loans and borrowings 8 398.0 - 400.0
Lease liabilities 23.6 1.0 0.5
BEE loans payable 11 - 133.4 -
Provisions 96.0 73.7 71.3
Deferred tax liabilities 55.3 49.3 48.9
Total non-current liabilities 572.9 257.4 520.7
Current liabilities
Loans and borrowings 8 27.3 810.4 30.3
Lease liabilities 3.2 1.3 0.5
Trade and other payables 49.2 47.5 49.1
Provisions - - 4.2
Total current liabilities 79.7 859.2 84.1
Liabilities directly associated with
non-current assets classified as held for 17 - - 33.5
sale
Total liabilities 652.6 1,116.6 638.3
Total equity and liabilities 1,094.3 1,237.6 1,078.6
In FY2021, the Company disclosed the net assets of the Williamson mine under
non-current assets held for sale and liabilities directly associated with
non-current assets held for sale in the Statement of Financial Position, for
further detail refer to note 17.
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIODED 31 DECEMBER 2021
US$ million Notes (Unaudited) (Unaudited) (Restated -
1 July 1 July Audited)
2021- 2020- Year ended
31 December 31 December 30 June
2021 2020 20211
Profit before taxation for the Period
62.7 90.7 219.6
Depreciation of property plant and 42.9 35.9 76.2
equipment
Amortisation of right-of-use asset 0.6 2.3 4.6
Unrealised gain on lease liability - (2.5) (3.7)
Impairment charge - non financial assets 15 0.3 0.2 38.7
Impairment (reversal) / charge- other 15 (0.4) - (0.3)
receivables
Impairment of BEE loans receivable - 11
expected credit loss (release) / charge - (4.6) (5.8)
Gain on extinguishment of Notes net of 6 - - (213.3)
unamortised costs
Profit on disposal of subsidiary 16 - (14.7) (14.7)
Movement in provisions (3.3) 0.4 24.3
Dividend received from BEE partner (0.6) - -
Financial income 6 (11.4) (69.0) (81.6)
Financial expense 6 56.3 39.8 74.2
Profit on disposal of property, plant and 0.1 (0.2) (0.6)
equipment
Share based payment provision 0.1 0.2 0.5
Operating profit before working capital 147.3 78.5 118.1
changes
Decrease / (increase) in trade and other 25.3 (25.7) (26.9)
receivables
(Decrease) / increase in trade and other (2.2) 1.2 5.5
payables
(Increase) / decrease in inventories (29.5) (6.8) 42.8
Cash generated from operations 140.9 47.2 139.5
Net realised gains / (losses) on foreign 8.7 (3.6) (6.1)
exchange contracts
Finance expense (4.4) (2.5) (6.7)
Income tax received / (paid) (0.4) 0.1 0.3
Net cash generated from operating 144.8 41.2 127.0
activities
Cash flows from investing activities
Acquisition of property, plant and (18.5) (8.7) (19.4)
equipment
Proceeds from sale of property, plant and 0.1 - 0.3
equipment
Loan repayment from / (advanced to) BEE 0.4 (5.0) (7.0)
partners
Dividend paid to BEE partners (3.5) - -
Dividend received from BEE partners 0.6 - -
Repayment from KEMJV 1.9 - -
Finance income 0.5 0.4 0.7
Net cash utilised in investing activities (18.5) (13.3) (25.4)
Cash flows from financing activities
Cash transaction costs settled - Debt - - (29.9)
Restructuring
Cash paid on lease liabilities (0.8) (0.3) (0.7)
Increase in borrowings - - 30.0
Repayment of borrowings (14.4) - (7.4)
Net cash generated from financing (15.2) (0.3) (8.0)
activities
Net increase in cash and cash equivalents 111.1 27.6 93.6
Cash and cash equivalents at beginning of 156.9 53.6 53.6
the Period
Effect of exchange rate fluctuations on (11.3) 11.2 9.7
cash held
Cash and cash equivalents at end of the 256.7 92.4 156.9
Period2
¹ The condensed consolidated statement of cash flows for FY2021 has been
restated with the operating results of Williamson which were previously
classified under loss on discontinued operations, for further detail refer to
note 17.
2 Cash and cash equivalents in the Consolidated Statement of Financial Position
includes restricted cash of US$15.6 million (30 June 2021: US$16.1 million and
31 December 2020: US$13.9 million) and unrestricted cash of US$256.7 million
(30 June 2021: US$147.7 million (excludes unrestricted cash attributable to
Williamson of US$9.2 million) and 31 December 2020: US$92.4 million).
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIODED 31 DECEMBER 2021
(Unaudited) Share Share Foreign Share-based Hedging
capital premium currency payment and other
account translation reserve reserves
US$ million reserve
Six month Period ending 31
December 2021:
At 1 July 2021 145.7 959.5 (402.1) 1.8 (0.8)
Profit for the Period - - - - -
Other comprehensive (expense) / - - (44.6) - -
income
Dividend paid to Non-controlling - - - - -
interest shareholders
Equity settled share based - - - 0.1 -
payments
At 31 December 2021 145.7 959.5 (446.7) 1.9 (0.8)
(Unaudited) Accumulated Attributable Non-controlling Total
losses to the interest equity
parent
US$ million
Six month Period ending 31 December
2021:
At 1 July 2021 (253.3) 450.8 (10.5) 440.3
Profit for the Period 43.2 43.2 5.9 49.1
Other comprehensive (expense) / income - (44.6) 0.3 (44.3)
Dividend paid to Non-controlling - - (3.5) (3.5)
interest shareholders
Equity settled share based payments - 0.1 - 0.1
At 31 December 2021 (210.1) 449.5 (7.8) 441.7
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIODED 31 DECEMBER 2021
(Unaudited) Share Share Foreign Share-based Hedging
capital premium currency payment and other
account translation reserve reserves
US$ million reserve
Six month Period ending 31
December 2020:
At 1 July 2020 133.4 790.2 (453.0) 1.1 (0.8)
Profit for the Period - - - - -
Other comprehensive income / - - 54.7 0.2 -
(expense)
Recycling of foreign currency - - (13.3) - -
translation reserve on disposal
of Sekaka
Equity settled share based - - - 0.2 -
payments
At 31 December 2020 133.4 790.2 (411.6) 1.5 (0.8)
(Unaudited) Accumulated Attributable Non-controlling Total
losses to the interest equity
parent
US$ million
Six month Period ending 31 December
2020:
At 1 July 2020 (440.4) 30.5 (18.8) 11.7
Profit for the Period 54.5 54.5 13.1 67.6
Other comprehensive income / - 54.9 (0.1) 54.8
(expense)
Recycling of foreign currency - (13.3) - (13.3)
translation reserve on disposal of
Sekaka
Equity settled share based payments - 0.2 - 0.2
At 31 December 2020 (385.9) 126.8 (5.8) 121.0
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIODED 31 DECEMBER 2021
(Unaudited) Share Share Foreign Share-based Hedging
capital premium currency payment and other
account translation reserve reserves
US$ million reserve
Twelve month Period ended 20 June
2021:
At 1 July 2020 133.4 790.2 (453.0) 1.1 (0.8)
Profit for the Period - - - - -
Other comprehensive income / - - 64.2 0.2 -
(expense)
Recycling of foreign currency - - (13.3) - -
translation reserve on disposal
of Sekaka
Equity settled share based - - - 0.5 -
payments
Allotments during the Period:
- Ordinary shares - Debt for 12.3 169.3 - - -
equity issue (net of US$12.3
million issue costs)
At 30 June 2021 145.7 959.5 (402.1) 1.8 (0.8)
(Unaudited) Accumulated Attributable Non-controlling Total
losses to the interest equity
parent
US$ million
Twelve month Period ended 20 June
2021:
At 1 July 2020 (440.4) 30.5 (18.8) 11.7
Profit for the Period 187.1 187.1 9.5 196.6
Other comprehensive income / (expense) - 64.4 (1.2) 63.2
Recycling of foreign currency - (13.3) - (13.3)
translation reserve on disposal of
Sekaka
Equity settled share based payments - 0.5 - 0.5
Allotments during the Period:
- Ordinary shares - Debt for equity - 181.6 - 181.6
issue (net of US$12.3 million issue
costs)
At 30 June 2021 (253.3) 450.8 (10.5) 440.3
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIODED 31 DECEMBER 2021
1. GENERAL INFORMATION
Petra Diamonds Limited (the "Company"), a limited liability company listed on
the Main Market of the London Stock Exchange, is registered in Bermuda with its
Group management office domiciled in the United Kingdom. The Consolidated
Interim Financial Statements of the Company for the six month period ended 31
December 2021 comprise the Company and its subsidiaries, joint operations and
associates (together referred to as the "Group").
2. ACCOUNTING POLICIES
The interim results, which are unaudited, have been prepared in accordance with
the requirements of International Accounting Standard 34. This condensed
interim report does not include all the notes of the type normally included in
an annual financial report. This condensed report is to be read in conjunction
with the Annual Report for the year ended 30 June 2021, and any public
announcements made by the Group during the interim reporting period. The annual
financial report for the year ended 30 June 2021 was prepared in accordance
with International Financial Reporting Standards adopted by the European Union
("IFRS's") and the accounting policies applied in this condensed interim report
are consistent with the polices applied in the annual financial report for the
year ended 30 June 2021 unless otherwise noted.
Basis of preparation including going concern
Going concern
The six-month period to 31 December 2021 delivered US$150.9 million in adjusted
EBITDA and US$122.4 million in operational free cash flow for the Group, while
Consolidated Net Debt reduced from $228.2 million as at 30 June 2021 to
US$152.3 million at 31 December 2021.
Production at both Cullinan and Finsch was generally in line with earlier
guidance, with the tunnel convergence at Cullinan largely mitigated during the
Period. The Group's overall production also benefited with the restart of
operations at Williamson during Q1 FY2022 following an 18-month period of care
and maintenance. The Company also announced the conclusion of a new three-year
wage agreement in September 2021 at its SA operations with the National Union
of Mineworkers ("NUM") covering FY 2022 to FY 2024, which should allow for
further workforce stability over this timeframe.
Diamond prices strengthened over the first half of FY2022, with a 16% increase
on a like-for-like basis compared to the preceding six-month period. In
addition, Cullinan's run of Exceptional Stone recovery and sales continued with
a total of US$64.1 million realised in this Period. Williamson also benefited
from the sale of an exceptional pink diamond at its first tender after
restarting operations, yielding $13.8 million in and significantly de-risking
Williamson's own liquidity profile.
During December, the Group announced reaching a framework agreement with the
Government of Tanzania, which sets out key principles on the economic benefit
sharing amongst shareholders, treatment of outstanding VAT balances, as well as
agreement reached on the blocked parcel of diamonds and settlement of historic
disputes, amongst others. This agreement should provide important fiscal
stability for the mine and its investors and is expected to become effective
during the second half of FY2022, pending completion of certain suspensive
conditions. Petra also announced entering into a memorandum of understanding
with Caspian Ltd to sell 50% less one share of Petra's stake in Williamson to
this Tanzanian company for a purchase consideration of US$15.0 million.
Petra's approach to managing COVID-19 mitigated any negative impact during the
Period, while our flexible tender approach also allowed us to navigate through
this period largely unscathed while also being able to normalise inventory
holding (apart from the 71,654.45ct blocked parcel from Williamson).
Post Period end, Petra settled the amounts drawn under the Revolving Credit
Facility (RCF) (R402.2 million / US$25.1 million). The Company also announced
on 2 February 2022 that it entered into a binding term sheet with Absa Bank to
restructure its first lien facilities and utilised available cash to settle the
existing Term Loan (R856.1 million/US$53.5 million). The Group will benefit
from reduced interest rates compared to the outgoing facilities and will also
have access to a new R1,000 million RCF to December 2025 coupled with more
appropriate leverage-based covenants (Net Debt : EBITDA and Interest Cover
Ratio).
The factors above, coupled with the successful completion of the Capital
Restructuring during March 2021, resulted in further significant progress
towards stabilising the Group's balance sheet and strengthening cash reserves
to the date of this report as well as an improved outlook for the 18-month
review period.
Forecast liquidity and covenants
The Board has reviewed the Group's forecasts with various sensitivities
applied, for the 18 months to June 2023, including both forecast liquidity and
covenant measurements. As per the First Lien agreements, the liquidity and
covenant measurements exclude contributions from Williamson's trading results
and only recognises cash distributions payable to Petra upon forecasted
receipt, or Petra's funding obligations towards Williamson upon payment.
The Board has given careful consideration to potential risks identified in
meeting the forecasts under the review period. These included risks associated
with COVID-19, the likelihood and impact of which has been assessed as having
reduced since the previous report date. As such, the risks of production
disruptions, deferral of tenders due to travel restrictions and adverse impacts
on diamond pricing directly related to COVID-19 were removed from the
sensitivity analyses. Instead, more general disruptions to operations were
considered, which may relate to, inter alia, either COVID-19, labour or adverse
weather conditions.
The following have been key considerations in assessing the Group's ability to
operate as a going concern at the date of this report:
* a disruption in forecast production taking production offline for a period
of two weeks at either Cullinan or Finsch;
* a sustained 5% decrease in forecast rough diamond prices throughout the
forecast period;
* a sustained 5% decrease in forecast rough diamond prices throughout the
forecast period; and
* a combination of the above.
Under the all cases, the forecasts indicate that the Company will be able to
operate within the covenants and maintain sufficient liquidity. The Group's
liquidity outlook over the 18-month period to June 2023 remains strong, even
when applying sensitivities to the base case forecast.
The forward-looking covenant measurements associated with the new First Lien
facility do not indicate any breaches during the 18-month review period, both
in the base case and all stressed cases, although the combined stressed case
shows marginal headroom for the required interest cover ratio, specifically in
the December 2022 measurement period. The above-plan actual cash flow
generation during H1 FY 2022 coupled with improving market conditions and
further supported by more appropriate First Lien facilities and covenants,
mitigated the risk of covenant breaches in the 18-month forecast period as
previously noted in the Company's going concern assessment included in the 30
June 2021 Annual Report.
Conclusion
The Board is of the view that the longer-term fundamentals of the diamond
market remain sound and that the Group will continue to benefit from an
improving operating model throughout the review period and beyond.
Based on its assessment of the forecasts, principal risks and uncertainties and
mitigating actions considered available to the Group in the event of downside
scenarios, the Board confirms that it is satisfied the Group will be able to
continue to operate and meet its liabilities as they fall due over the review
period. Accordingly, the Board have concluded that the going concern basis in
the preparation of the financial statements is appropriate and that there are
no material uncertainties that would cast doubt on that basis of preparation.
New standards and interpretations applied
The IASB has issued new standards, amendments and interpretations to existing
standards with an effective date on or after 1 July 2021 which are not
considered to have a material impact on the Group during the Period under
review.
New standards and interpretations not yet effective
Certain new standards, amendments and interpretations to existing standards
have been published that are mandatory for the Group's accounting periods
beginning after 1 July 2021 or later periods. The only standard which is
anticipated to be significant or relevant to the Group is:
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
Amendments to IAS 1, which are intended to clarify the requirements that an
entity applies in determining whether a liability is classified as current or
non-current. The amendments are intended to be narrow scope in nature and are
meant to clarify the requirements in IAS 1 rather than modify the underlying
principles. The amendments include clarifications relating to:
* how events after the end of the reporting period affect liability
classification;
* what the rights of an entity must be in order to classify a liability as
non-current;
* how an entity assesses compliance with conditions of a liability (e.g. bank
covenants); and
* how conversion features in liabilities affect their classification.
The amendments were originally effective for periods beginning on or after 1
January 2022 which was deferred to 1 January 2023 by the IASB in July 2020.
Earlier application is permitted but Amendments to IAS 1 has not yet been
endorsed for application by the European Union.
Significant assumptions and judgements:
The preparation of the condensed consolidated interim financial statements
requires management to make estimates and judgements and form assumptions that
affect the reported amounts of the assets and liabilities, reported revenue and
costs during the periods presented therein, and the disclosure of contingent
liabilities at the date of the interim financial statements. Estimates and
judgements are continually evaluated and based on management's historical
experience and other factors, including future expectations and events that are
believed to be reasonable. The estimates and assumptions that have a
significant risk of causing a material adjustment to the financial results of
the Group in future reporting periods are discussed below.
Key estimates and judgements:
Impairment reviews
The Group prepares impairment models and assesses mining assets for impairment
or reversals of previous impairments. While conducting an impairment test of
its assets using recoverable values using the current life of mine plans, the
Group exercised judgement in making assumptions about future rough diamond
prices, foreign exchange rates, volumes of production, ore reserves and
resources included in the current life of mine plans, future development and
production costs and factors such as inflation and discount rates. Changes in
estimates used can result in significant changes to the 'Consolidated Income
Statement' and 'Statement of Financial Position'.
Cullinan, Finsch, Koffiefontein and Williamson
The impairment tests for Cullinan, Finsch, and Williamson indicated no further
impairment charges to be recognised. The impairment test for Koffiefontein
indicated an impairment of US$0.3 million on a carrying value of the Group's
property, plant and equipment of US$644.9 million (pre-impairment). This
follows US$17.3 million recognised at 30 June 2021 (comprising Finsch
impairment of US$15.5 million and Koffiefontein impairment of US$2.2 million)
on a carrying value of the Group's property, plant and equipment of US$711.8
million (pre-impairment) at the time of recognition. For further details of the
inputs, assumptions and sensitivities in the impairment model, refer to note
15.
Recoverability and ownership of diamond parcel in Tanzania
The Group holds diamond inventory valued at US$10.6 million (30 June 2021:
US$10.6 million and 31 December 2020: US$10.6 million) in the Statement of
Financial Position in respect of the Williamson mine's confiscated diamond
parcel. During FY 2018, an investigation into the Tanzanian diamond sector by a
parliamentary committee in Tanzania was undertaken to determine if diamond
royalty payments were being understated. In connection with this, Petra
announced on 11 September 2017 that a parcel of diamonds (71,654.45 carats)
from the Williamson mine in Tanzania (owned 75% by Petra and 25% by the
Government of the United Republic of Tanzania ("GoT")) had been blocked for
export to Petra's marketing office in Antwerp.
The assessment of the recoverability of the diamond parcel required significant
judgement. In making such a judgement, the Group considered the Framework
Agreement that was signed with the GoT on 13 December 2021, confirmation was
received from the GoT in FY 2018 that they held the diamond parcel of 71,654.45
carats, ongoing discussions held with the GoT, an assessment of the internal
process used for the sale and export of diamonds confirming such process is in
full compliance with legislation in Tanzania and the Kimberley Process, and
legal advice received from the Group's in-country attorneys which supports the
Group's position.
The Framework Agreement which refers to the diamond parcel as the "Government
Diamond Parcel" sets out that the proceeds from the sale of the Parcel will
flow to Williamson Diamonds Limited ("WDL").
While a resolution has not yet been reached with regards to the mechanism to
sell the parcel of diamonds that was blocked from export, based on the above
judgements and assessment thereof, management remain confident that based on
the signed Framework Agreement, and the legal advice received from the Group's
in-country attorneys, the diamond parcel will be made available for future
sale, and that WDL will derive future economic benefit from the sales proceeds.
Recoverability of VAT in Tanzania
The Group has VAT receivable of US$1.8 million (30 June 2021: US$0.7 million
and 31 December 2020: US$10.6 million) in respect of the Williamson mine, all
of which are past due and have therefore been classified, after provision
including amounts related to providing for a time-value of money inclusive of
risk adjustments for various factors, as non-current given the potential delays
in receipt.
The VAT receivable as at 31 December 2021, can be split into three identifiable
component time periods as set out below:
US$ million VAT Receivable Provision Written off Carrying value
Pre July 2017 1.8 (1.3) - 0.5
July 2017 to June 26.9 - (26.9) -
2020
Post June 2020 2.6 (1.3) - 1.3
31.3 (2.6) (26.9) 1.8
Pre July 2017
Of the total VAT receivables, US$1.8 million (30 June 2021: US$1.8 million and
31 December 2020: US$13.0 million) relates to historic VAT pre July 2017.
During FY2021, the Group received US$10.0 million in VAT refunds from the
Tanzanian Revenue Authority in respect of the pre July 2017 period and US$1.2
million was disallowed by the Tanzanian Revenue Authority. A provision of
US$1.3 million is recorded against the US$1.8 million receivable resulting in a
carrying value of US$0.5 million as at 31 December 2021, given the uncertainty
around the timing of receipts of the amount outstanding.
July 2017 to June 2020
A further US$26.9.million (30 June 2021: US$26.9 million and 31 December 2020:
US$27.4 million) of VAT is receivable which relates to VAT under the
legislation, effective from July 2017 to 30 June 2020.
In prior periods management considered the amendment to the VAT legislation for
the period July 2017 to July 2020 and based on legal advice and the confirmed
application of the legislation by the TRA considered that the input VAT was not
recoverable and a full provision was recorded in prior periods. Further to
this, the Framework Agreement provisions do not allow for offsetting of these
historically disputed amounts and as such the full US$26.9 million has been
written off. There has been no income statement impact as a result of this
write-off.
Post June 2020
An amount of US$2.6 million of VAT is receivable for the period subsequent to 1
July 2020. The Group is considering various alternatives in pursuing payment in
accordance with legislation. A provision of US$1.3 million, given the
uncertainty around the timing of receipts of the amount outstanding, has been
provided for against the US$2.6 million receivable resulting in a carrying
value of US$1.3 million.
While the remaining pre July 2017 and post 1 July 2020 VAT balance is
considered receivable, significant uncertainty exists regarding the timing of
receipt. A discount rate of 16.25% has been applied to the expected cash
receipts inclusive of estimated country credit risk. A 1% increase in the
discount rate would increase the provision by US$0.04 million and a one year
delay would increase the provision by US$0.1 million.
The provision against the VAT balance is US$2.6 million (30 June 2021: US$28.7
million and 31 December 2020: US$29.8 million). The provision relates to US$2.6
million that is recorded against the pre July 2017 and post June 2020
amount..The full disputed July 2017 to June 2020 amount of US$ US$26.9 million,
that was fully provided for as at 30 June 2021 has been written off. During
the Period, an impairment charge of US$0.7 million (30 June 2021: US$0.7
million (impairment reversal recognised in the Loss on discontinued operations)
and 31 December 2020: US$0.2 million) was recognised in the Consolidated Income
Statement.
BEE receivables - expected credit loss provision
The Group has applied the expected credit loss impairment model to its BEE
loans receivable. In determining the extent to which expected credit losses may
apply, the Group assessed the future free cashflows to be generated by the
mining operations, based on the current mine plans. In assessing the future
cashflows, the Group considered the diamond price outlook and the probability
of reaching an offset agreement. Based on the assessment, the analysis
generated an expected credit loss reversal totalling US$nil (30 June 2021:
US$5.8 million expected credit loss reversal and 31 December 2020: US$4.6
million expected credit loss reversal), comprising of US$nil provision reversal
in respect of Cullinan and Finsch (30 June 2021: US$5.8 million provision
comprising of US$6.1 million provision reversal in respect of Cullinan and
Finsch and US$0.3 million expected credit loss provision in respect of
Koffiefontein; and 31 December 2020: US$4.6 million comprising of US$4.6
million provision reversal in respect of Cullinan and Finsch).
Life of mine and ore reserves and resources
There are numerous risks inherent in estimating ore reserves and resources and
the associated current life of mine plan. The life of mine plan is the current
approved management plan for ore extraction that considers specific resources
and associated capital expenditure. The life of mine plan frequently includes
less tonnes than the total reserves and resources that are set out in the
Group's Resource Statement and which management may consider to be economically
viable and capable of future extraction.
Management must make a number of assumptions when making estimates of reserves
and resources, including assumptions as to exchange rates, rough diamond and
other commodity prices, extraction costs, recovery and production rates. Any
such estimates and assumptions may change as new information becomes available.
Changes in exchange rates, commodity prices, extraction costs, recovery and
production rates may change the economic viability of ore reserves and
resources and may ultimately result in the restatement of the ore reserves and
resources and potential impairment to the carrying value of the mining assets
and life of mine plans.
The current life of mine plans are used to determine the ore tonnes and capital
expenditure in the impairment tests. Ore reserves and resources, both those
included in the life of mine and certain additional tonnes which form part of
reserves and resources considered to be sufficiently certain and economically
viable, also impact the depreciation of mining assets depreciated on a unit of
production basis. Ore reserves and resources, outside the current mine plan
further impact the estimated date of decommissioning and rehabilitation.
Restructuring (30 June 2021)
Transaction costs associated with the restructuring exercise were apportioned
to the listed debt, equity issued and ZAR banking facilities based on the value
of each element at the date of restructuring.
Williamson Diamond Mine (31 December 2021)
At 30 June 2021, the accounting treatment of Williamson as an AHFS was in line
with the conditions required under IFRS 5 Asset Held for Sale and Discontinued
Operations.
During the Period, an amended MOU was entered into with Caspian. Per the
amended MOU, the original Put Option in the MOU was removed and PDL will now
sell 50% less one share in the entity that holds Petra's shares in WDL to
Caspian. With the amendment to the MOU an assessment was required to determine
if Williamson still met the asset held for sale criteria or if Williamson
(through the proposed shareholding structure in the MOU) should be
reconsolidated into the results of the Group. Consideration was also given on
the long-term intention of Williamson remaining in the Group for the
foreseeable future.
IFRS 10 Consolidated Financial Statements sets out the criteria required for a
company to consolidate an entity in which it has an investment or interest in.
A company determines whether it is a parent by assessing whether it controls
one or more investees, considering all relevant facts, circumstances and rights
(through voting rights) to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over the
investee.
An investor controls an investee if and only if the investor has all of the
following elements:
* power over the investee, i.e. the investor has existing rights that give it
the ability to direct the relevant activities (the activities that
significantly affect the investee's returns);
* exposure, or rights, to variable returns from its involvement with the
investee; and
* the ability to use its power over the investee to affect the amount of the
investor's returns.
Management considered the terms of the MOU where the Company will retain a 50%
plus one share shareholding in the entity that holds Petra's shares in WDL
which entity will have a right to appoint three directors to WDL's Board, thus
having the ability to use its power to affect the decision making and the
strategy of WDL. The Framework Agreement sets out a change in the shareholdings
in WDL whereby the Government of Tanzania (GoT) shall receive a 16% free carry
interest, as required by local legislation, while GoT's existing 25%
shareholding, as well as Petra's existing 75% shareholding will dilute to 21%
and 63% respectively. The structure of the WDL Board comprises 5 Board members,
comprising three appointments by the entity that holds Petra's shares in WDL
and the remaining two Board members being GoT representatives. Petra will,
through its control of the entity that holds Petra's shares in WDL, therefore
control WDL.
Based on the Group meeting the requirements of control under IFRS 10 and the
intention that the Group will not dispose of its remaining interest in
Williamson in the near future, Williamson is longer considered to be an asset
held for sale at 31 December 2021 and has been reconsolidated into the Group
results for the Period
Williamson Diamond Mine - asset held for sale (30 June 2021)
The Group needs to apply judgment when determining whether an asset should be
classified as held for sale. For this to be the case, the asset must be
available for immediate sale in its present condition and its sale must be
highly probable. The following factors are considered by management in
determining whether a sale is highly probable: Management must be committed to
a plan to sell the asset; an active programme to locate a buyer and complete
the plan must have been initiated; the asset must be actively marketed for sale
at a reasonable price and any transaction should be expected to be completed
within 12 months of classification of the asset as held for sale. Based on the
above factors, management considered that the Williamson mine was an asset held
for sale at 30 June 2021.
Judgement is required when determining whether a component of an entity
classifies as a discontinued operation. A component of the Group should be
classified as a discontinued operation when it has been disposed of, or if it
is classified as held for sale, and represents a separate major line of
business or geographical area of operations, is part of a single co-ordinated
plan to dispose of a separate major line of business or geographical area of
operations, or is a subsidiary acquired exclusively with a view to resale.
Judgement is required when determining whether the component represents a
separate major line of business or geographical area of operations. This was
applied to the classification of the Williamson mine as a discontinued
operation. The Williamson mine is considered a major geographical area of
operations which has been reported as a separate segment in the past, and as
such we have determined the classification of a discontinued operation to be
appropriate. In terms of the measurement requirements of IFRS 5, once
classified as held for sale, the assets are required to be measured at the
lower of their carrying amount and fair value less costs to sell. Judgment is
required in order to determine the fair value of the disposal group. In
determining the fair value used to calculate the appropriate write down,
management took into consideration, current discussions with vendors, the
latest mine plan assessment and the best available information at the present
time. Refer to note 17 for further details.
Taxation
The Group operates in South Africa and Tanzania, and accordingly it is subject
to, and pays annual income taxes under the various income tax regimes in the
countries in which it operates. From time to time the Group is subject to a
review of its income tax filings and in connection with such reviews, disputes
can arise with the taxing authorities over the interpretation or application of
certain rules to the Group's business conducted within the country involved.
Management evaluates each of the assessments and recognises a provision based
on its best estimate of the ultimate resolution of the assessment, through
either negotiation or through a legal process.
Other key estimates and judgements
In addition to the key estimates and judgements disclosed above, the following
estimates and judgements have not significantly changed from those disclosed in
the FY 2021 Annual Report and will be discussed in further detail in the FY
2022 Annual Report:
* Provision for rehabilitation
* Inventory and inventory stockpile
* Depreciation
* Pension and post-retirement medical fund schemes
* Net investments in foreign operations
3. DIVIDS
No dividends have been declared in respect of the current Period under review
(30 June 2021: US$nil and 31 December 2020: US$nil).
4. SEGMENTAL INFORMATION
Segment information is presented in respect of the Group's operating and
geographical segments:
Mining - the extraction and sale of rough diamonds from mining operations in
South Africa and Tanzania.
Corporate - administrative activities in the United Kingdom.
Beneficiation - beneficiation activities in South Africa.
Exploration assets in Botswana were disposed of during FY 2021 via the sale of
the Group's interest in Sekaka Diamonds Exploration (Pty) Ltd.
Segments are based on the Group's management and internal reporting structure.
Management reviews the Group's performance by reviewing the results of the
mining activities in South Africa, Tanzania and reviewing the results of
reviewing the corporate administration expenses in the United Kingdom. Each
segment derives, or aims to derive, its revenue from diamond mining and diamond
sales, except for the corporate and administration cost centre.
Segment results, assets and liabilities include items directly attributable to
a segment, as well as those that can be allocated on a reasonable basis.
Segment results are calculated after charging direct mining costs, depreciation
and other income and expenses. Unallocated items comprise mainly
interest-earning assets and revenue, interest-bearing borrowings and expenses
and corporate assets and expenses. Segment capital expenditure is the total
cost incurred during the year to acquire segment assets that are expected to be
used for more than one period. Eliminations comprise transactions between Group
companies that are cancelled on consolidation. The results are not materially
affected by seasonal variations. Revenues are generated from tenders held in
South Africa and Antwerp for external customers from various countries, the
ultimate customers of which are not known to the Group.
4. SEGMENTAL INFORMATION (continued)
Operating segments South Africa - Mining activities Tanzania
-Mining
activities
Cullinan Finsch Koffiefontein Williamson
US$ million
(6 month period ended 31 December 2021) 1 July 1 July 1 July 2021 - 1 July
2021 - 2021 - 31 December 2021 -
31 31 2021 31
December December December
2021 2021 2021
Revenue 167.7 65.7 11.1 20.2
Segment result¹ 97.2 10.9 (4.8) 10.1
Impairment charge - operations - - (0.3) -
Impairment reversal / (charge) - other - - - (0.7)
receivables
Other direct income / (loss) (0.1) 0.1 0.2 0.1
Operating profit / (loss)² 97.1 11.0 (4.9) 9.5
Financial income
Financial expense
Income tax charge
Non-controlling interest
Profit attributable to equity holders
of the parent company
Segment assets 509.2 221.3 12.1 93.3
Segment liabilities 483.5 114.7 31.1 52.5
Capital expenditure 12.5 2.5 0.3 0.8
Operating segments United South Africa
Kingdom
Corporate Beneficiation3 Inter-segment Consolidated
US$ million and
treasury
(6 month period ended 31 December 2021) 1 July 1 July 2021 - 1 July 2021 - 1 July 2021
2021 - 31 December 31 December -
31 2021 2021 31 December
December 2021
2021
Revenue - - - 264.7
Segment result¹ (5.2) (1.0) (0.6) 106.6
Impairment charge - operations - - - (0.3)
Impairment reversal / (charge) - other 1.1 - - 0.4
receivables
Other direct income / (loss) 0.6 - - 0.9
Operating profit / (loss)² (3.5) (1.0) (0.6) 107.6
Financial income 11.4
Financial expense (56.3)
Income tax charge (13.6)
Non-controlling interest (5.9)
Profit attributable to equity holders 43.2
of the parent company
Segment assets 3,373.5 4.1 (3,119.2) 1,094.3
Segment liabilities 2,137.5 4.9 (2,171.8) 652.6
Capital expenditure 0.6 - - 16.7
¹ Total depreciation of US$42.9 million included in the segmental result
comprises depreciation incurred at Cullinan US$27.2 million, Finsch US$12.7
million, Koffiefontein US$0.1 million, Williamson US$2.6 million and Corporate
and treasury US$0.3 million.
² Operating profit is equivalent to revenue of US$264.7 million less total
costs of US$157.1 million as disclosed in the Consolidated Income Statement.
3 The beneficiation segment represents Tarorite, a cutting and polishing
business in South Africa, which can on occasion cut and polish select rough
diamonds.
4. SEGMENTAL INFORMATION (continued)
Operating segments South Africa - Mining activities Tanzania Botswana
-Mining
activities
Cullinan Finsch Koffiefontein Williamson Exploration4
US$ million
(6 month period ended 31 1 July 1 July 1 July 2020 - 1 July 1 July 2020
December 2020) 2020 - 2020 - 31 December 2020 - -
31 31 2020 31 31 December
December December December 2020
2020 2020 2020
Revenue 107.3 54.8 11.2 4.6 -
Segment result¹ 44.4 1.9 2.6 (6.3) -
Impairment charge - other - - - (0.2) -
receivables
Impairment of BEE loans - - - -
receivable - expected credit -
loss release / (charge)
Other direct income 0.3 1.1 0.1 3.6 -
Operating profit / (loss)² 44.7 3.0 2.7 (2.9) -
Profit on disposal including
associated impairment, net of
tax
Financial income
Financial expense
Income tax credit
Non-controlling interest
Profit attributable to equity
holders of the parent company
Segment assets 560.2 332.1 168.3 89.0 -
Segment liabilities 574.8 185.4 170.0 295.1 -
Capital expenditure 5.9 1.3 0.6 0.3 -
Operating segments United South Africa
Kingdom
Corporate Beneficiation3 Inter-segment Consolidated
US$ million and treasury
(6 month period ended 31 December 1 July 2020 1 July 2020 - 1 July 2020 - 1 July 2020
2020) - 31 December 31 December -
31 December 2020 2020 31 December
2020 2020
Revenue - 0.2 - 178.1
Segment result¹ (3.9) (0.4) (1.0) 37.3
Impairment charge - other - - - (0.2)
receivables
Impairment of BEE loans receivable 4.6 - - 4.6
- expected credit loss release /
(charge)
Other direct income - - - 5.1
Operating profit / (loss)² 0.7 (0.4) (1.0) 46.8
Profit on disposal including 14.7
associated impairment, net of tax
Financial income 69.0
Financial expense (39.8)
Income tax credit (23.1)
Non-controlling interest (13.1)
Profit attributable to equity 54.5
holders of the parent company
Segment assets 3,390.6 4.6 (3,307.2) 1,237.6
Segment liabilities 2,424.9 5.5 (2,539.1) 1,116.6
Capital expenditure 0.5 - - 8.6
¹ Total depreciation of US$35.9 million included in the segmental result
comprises depreciation incurred at Cullinan US$24.0 million, Finsch US$11.4
million, Koffiefontein US$0.1 million, Williamson US$0.1 million and Corporate
and treasury US$0.3 million.
² Operating profit is equivalent to revenue of US$178.1 million less total
costs of US$131.3 million as disclosed in the Consolidated Income Statement.
3 The beneficiation segment represents Tarorite, a cutting and polishing
business in South Africa, which can on occasion cut and polish select rough
diamonds.
4 In FY 2021, Petra sold its exploration assets in Botswana to Botswana
Diamonds PLC via the sale of its interest in Sekaka Diamonds Exploration (Pty)
Ltd, refer to note 16 for further detail.
4. SEGMENTAL INFORMATION (continued)
Operating segments South Africa - Mining activities Tanzania Botswana
-Mining
activities
Cullinan Finsch Koffiefontein Williamson Exploration4
US$ million
(12 month period ended 30 June 2021 2021 2021 2021 2021
2021)
Revenue 250.6 123.5 27.9 4.6 -
Segment result¹ 76.8 (0.5) (8.1) (14.3) -
Impairment charge - operations - (15.1) (2.2) (21.4) -
Impairment charge - other - - - 0.7 -
receivables
Impairment of BEE loans - - - -
receivable - expected credit -
loss release
Expenditure for unsettled and - - - (19.5) -
disputed tax claims
Other direct income 0.6 1.0 0.1 5.1 -
Operating profit / (loss)² 77.4 (14.6) (10.2) (49.4) -
Financial income
Financial expense
Gain on extinguishment of Notes
and unamortised costs
Profit on disposal of
subsidiary
Income tax charge
Non-controlling interest
Profit attributable to equity
holders of the parent company
Segment assets 559.0 249.9 6.9 59.6 -
Segment liabilities 559.2 119.7 22.1 33.5 -
Capital expenditure 16.8 4.0 1.7 0.3 -
Operating segments United South Africa
Kingdom
Corporate Beneficiation3 Inter-segment Consolidated
US$ million and treasury
(12 month period ended 30 June 2021 2021 2021
2021)
Revenue - 0.3 - 406.9
Segment result¹ (21.2) (1.6) (1.6) 29.5
Impairment charge - operations - - - (38.7)
Impairment charge - other (0.4) - - 0.3
receivables
Impairment of BEE loans receivable 5.8 - - 5.8
- expected credit loss release
Expenditure for unsettled and - - - (19.5)
disputed tax claims
Other direct income - - - 6.8
Operating profit / (loss)² (15.8) (1.6) (1.6) (15.8)
Financial income 81.6
Financial expense (74.2)
Gain on extinguishment of Notes and 213.3
unamortised costs
Profit on disposal of subsidiary 14.7
Income tax charge (23.0)
Non-controlling interest (9.5)
Profit attributable to equity 187.1
holders of the parent company
Segment assets 3,488.7 4.5 (3,290.0) 1,078.6
Segment liabilities 2,134.7 5.5 (2,236.4) 638.3
Capital expenditure 1.0 - - 23.8
¹ Total depreciation of US$76.2 million included in the segmental result
comprises depreciation incurred at Cullinan of US$52.2 million, Finsch of
US$23.0 million, Koffiefontein US$ 0.1 million, Williamson US$0.3 million and
Corporate and treasury of US$0.6 million.
² Operating loss is equivalent to revenue of US$406.9 million less total costs
of US$422.7 million as disclosed in the Consolidated Income Statement.
3 The beneficiation segment represents Tarorite, a cutting and polishing
business in South Africa, which on occasion cuts and polishes select rough
diamonds.
4 In FY 2021, Petra sold its exploration assets in Botswana to Botswana
Diamonds PLC via the sale of its interest in Sekaka Diamonds Exploration (Pty)
Ltd, refer to note 16 for further detail.
US$ million 1 July 2021 1 July 2020 1 July 2020
- - - 30 June
31 31 2021
December December
2021 2020
5. CORPORATE EXPITURE
Corporate expenditure includes:
Depreciation of property, plant and 0.3 0.3 0.6
equipment
Amortisation of right-of-use asset 0.1 0.1 0.3
London Stock Exchange and other 0.8 0.6 1.5
regulatory expenses
Unsettled and disputed tax claims at - - 19.5
Williamson¹
Settlement (reversal) / costs - human 12.7
rights claims at Williamson2 (0.2) -
Share-based expense - Directors 0.1 0.2 0.5
Other staff costs 1.4 1.0 2.3
Total staff costs 1.5 1.2 2.8
1 During FY2021 the Company provided for costs in respect of unsettled and
disputed tax claims in respect of Williamson as set out in the Framework
Agreement.
2 During FY2021, the settlement costs for the human rights claims at Williamson
comprised US$4.8 million for the part settlement of the claimant's legal costs
and for distribution to the claimants and US$1.3 million to invest in
programmes dedicated to providing sustainable support to the communities living
around the Williamson mine as a condition of the Settlement. The Company
incurred and provided for additional total costs of US$6.6 million relating to
this matter, the majority of which relate to legal, consultant, investigation
and expert fees.
6. FINANCING (EXPENSE) / INCOME
US$ million
1 July 2021 1 July 2020 1 July 2020
- - - 30 June
31 31 2021
December December
2021 2020
Net unrealised foreign exchange gains - 65.1 74.6
Interest received on BEE loans and other 2.1 2.7 5.4
receivables
Interest received bank deposits 0.5 0.4 0.7
Realised foreign exchange gains on the 8.8 0.8 0.9
settlement of foreign loans and forward
exchange contracts
Financial income 11.4 69.0 81.6
Gross interest on senior secured second (23.8) (27.6) (51.5)
lien notes, bank loans and overdrafts
Other debt finance costs, including BEE (0.8) (5.3) (8.4)
loan interest, facility fees and IFRS 16
charges
Unwinding of present value adjustment for (3.0) (2.5) (4.6)
rehabilitation costs
Net unrealised foreign exchange losses1 (28.7) - -
Acceleration of unamortised Notes costs - - (2.7)
Realised foreign exchange losses on the - (4.4) (7.0)
settlement of foreign loans and forward
exchange contracts
Financial expense (56.3) (39.8) (74.2)
Loss on substantial modification of - - (7.7)
Notes2
Gain on extinguishment of Notes - debt - - 221.0
for equity conversion2
Net gain on extinguishment of Notes - - 213.3
Net financial (expense) / income (44.9) 29.2 220.7
1 .The Group predominantly enters into hedge contracts where the risk being
hedged is the volatility in the South African Rand, Pound Sterling and US
Dollar exchange rates affecting the proceeds in South African Rand of the
Group's US Dollar denominated diamond tenders. The fair value of the Group's
hedges as at the end of the Period are based on Level 2 mark-to-market
valuations performed by the counterparty financial institutions. The contracts
are all short dated in nature and mature within the next 12 months. A weakening
of the South African Rand against the US Dollar from ZAR14.27 (30 June 2021) to
ZAR15.99 (31 December 2021) resulted in an unrealised loss of US$28.7 million
(30 June 2021: US$77.1 million unrealised gain and 31 December 2020: US$65.1
million unrealised gain) comprising a unrealised gain on foreign exchange
contracts held at Period end of US$0.1 million (30 June 2021: US$12.4 million
unrealised gain and 31 December 2020: US$13.0 million unrealised gain) and
losses on inter-group foreign denominated loans of US$28.8 million (30 June
2021: US$64.7 million unrealised gain and 31 December 2020: US$52.1 million
unrealised gain); and a net realised foreign exchange gain of US$8.8 million
(30 June 2021: US$6.1 million realised loss and 31 December 2020: US$3.6
million realised loss) in respect of foreign exchange contracts closed during
the Period is included in the net finance and expense amount.
2 The loss on substantial modification and gain on extinguishment of Notes in
FY2021 arose from the Debt Restructuring completed by the Group on 10 March
2021.
7. PROPERTY, PLANT AND EQUIPMENT
The net movement in property, plant and equipment for the Period is a decrease
of US$70.2 million (30 June 2021: US$21.0 million increase and 31 December
2020: US$97.5 million increase). This is primarily as a result of:
* the movement in the US$/ZAR foreign exchange rate resulting in a foreign
exchange decrease on Rand based assets of US$75.4 million (30 June 2021:
US$136.8 million increase and 31 December 2020: US$118.7 million increase);
* an increase in property, plant and equipment from capital expenditure of
US$16.7 million (30 June 2021: US$23.8 million and 31 December 2020: US$8.6
million),
* the transfer of the Williamson assets from non-current assets held for sale
of US$31.2 million, net of IFRS 5 adjustment (30 June 2021: US$31.3 million
transfer to non-current assets held for sale and 31 December 2020: US$nil);
* an increase in the rehabilitation asset of US$0.8 million (30 June 2021:
US$6.4 million (due to Cullinan's estimated period to decommissioning
reducing from 45 years to 25 years reflecting updated scoping studies for
future development outside of its current approved mine plan) and 31
December 2020: US$6.2 million);
* depreciation of US$42.9 million (30 June 2021: US$75.9 million and 31
December 2020: US$35.9 million);
* the impairment of the Koffiefontein assets of US$0.3 million (30 June
2021: US$17.3 million (Finsch and Koffiefontein) and 31 December 2020:
US$nil); and
* assets of US$0.3 million (30 June 2021: US$0.1 million and 31 December
2020: US$0.1 million) disposed of during the Period.
8. LOANS AND BORROWINGS
US$ million 31 December 31 December 30 June
2021 2020 2021
Non-current liabilities
Loans and borrowings - Senior secured 327.3
second lien notes 346.4 -
Loans and borrowings - Senior secured 72.7
lender debt facilities 51.6 -
398.0 - 400.0
Current liabilities
Loans and borrowings - BEE Partner - 47.2 -
debt facilities
Loans and borrowings - senior secured
lender debt facilities 27.0 61.2 30.3
Loans and borrowings - premium 0.3 - -
financing
Loans and borrowings - senior secured -
second lien notes¹ - 702.0
27.3 810.4 30.3
Total loans and borrowings - bank 425.3 810.4 430.3
facilities
¹ Prior to the Debt Restructuring finalisation date of 9 March 2021, the
Company had US$650 million Notes which had been issued by a wholly owned
subsidiary, Petra Diamonds US$ Treasury Plc. As at 31 December 2020, the Notes
were classified as a current liability as the company did not have an
unconditional right to defer settlement for at least 12 months at that
date.These Notes were restructured during FY2021 with the existing Notes being
extinguished through a debt for equity conversion (US$415.0 million), the issue
of new Notes for US$306.7 million (including costs of US$11.7 million) and
additional new Notes via a cash injection of US$30.0 million and additional.
a) US$336.7 million Senior Secured Second Lien Notes
As part of the Debt Restructuring, a wholly owned subsidiary of the Company,
Petra Diamonds US$ Treasury Plc, issued debt securities consisting of US$336.7
million five-year senior secured second lien loan notes ("Notes"), with a
maturity date of 8 March 2026. The Notes are guaranteed by the Company and by
the Group's material subsidiaries and are secured on a second lien basis on the
assets of the Group's material subsidiaries. The Notes carry a coupon from:
* 9 March 2021 to 31 December 2022 of 10.50% per annum, which is capitalised
to the outstanding principal amount semi-annually in arrears on 31 December
and 30 June of each year;
* 1 January 2023 to 30 June 2023 of 10.50% per annum on 37.7778% of the
aggregate principal amount outstanding, which is capitalised to the
outstanding principal amount semi-annually in arrears on 31 December and 30
June of each year and 9.75% per annum on 62.2222% of the aggregate
principal amount outstanding which is payable in cash semi-annually in
arrears on 31 December and 30 June of each year;
* 1 July 2023 to 31 December 2025 of 9.75% per annum on the aggregate
principal amount outstanding which is payable in cash semi-annually in
arrears on 31 December and 30 June of each year; and
* 1 January 2026 to 8 March 2026 (final coupon payment) of 9.75% per annum on
the aggregate principal amount outstanding which is payable in cash
The costs associated with issuing the Notes of US$20.7 million have been
capitalised against the principal amount and US$17.3 million remains
unamortised as at 31 December 2021 (30 June 2021: US$19.4 million and 31
December 2020: US$nil). Interest of US$30.5 million has been accrued as at 31
December 2021.
Further details about the Notes (including security) have been included in the
Group's FY 2021 Annual Report.
b) Senior Secured Lender Debt Facilities
The Group's South African Lender Group (Absa Corporate and Investment Banking
("Absa"), FirstRand Bank Limited (acting through its Rand Merchant Bank
division) ("RMB"), and Nedbank Limited) and lending facilities are detailed
below.
As part of the Restructuring in FY2021, the existing banking facilities were
amended on a first lien basis and on the following terms, the creation of a new
Term Loan of ZAR1.2 billion (US$76.6 million) comprising ZAR500.0 million
(US$35.0 million) under the existing WCF and ZAR683.1 (US$41.6 million) million
relating to the BEE Partner debt facilities; and the rollover of the existing
RCF increasing by ZAR160.0 million (US$11.2 million) to ZAR560 million (US$39.2
million). The revised terms and conditions are set out in the table below. The
costs associated with restructuring of the banking facilities of US$1.7 million
and US$0.7 million cash transaction costs allocated based on the total
Restructuring costs were capitalised against the principal amount.
The new terms under the Term loan are:
* maturity date 8 March 2024;
* scheduled amortisation of 9% of principal per quarter (starting in June
2021) with a final 10% of principal repayment at maturity,
* 1.3x debt service cover ratio tested semi-annually on a rolling 12-month
basis, which if breached will give rise to an event of default under the
new bank facilities; and
* interest rate of SA JIBAR + 5.25% per annum (with an upfront fee of 1% of
the term loan amount capitalised).
The revised terms under the RCF are:
* maturity date 8 March 2024;
* scheduled amortisation of 9% of principal per quarter (starting in June
2021) with a final 10% of principal repayment at maturity;
* 1.3x debt service cover ratio tested semi-annually on a rolling 12-month
basis, which if breached will give rise to an event of default under the
new bank facilities; and
* interest rate of SA JIBAR + 5.25% per annum (with an upfront fee of 1% of
the RCF amount capitalised and a commitment fee based on undrawn balances).
The Group's debt and hedging facilities are detailed in the table below:
Senior Lender Debt Facilities 31 December 31 December 30 June
2021 2020 2021
Facility Facility Facility
amount amount amount
ZAR Debt Facilities:
ZAR Lenders RCF ZAR408.8 ZAR400 million ZAR560 million
million
ZAR Lenders Term loan ZAR876.4 ZARnil ZAR1.2 billion
million
ZAR Lenders WCF ZARnil ZAR500 million ZARnil
Absa/RMB - FX Hedging facilities ZAR150 million ZAR300 million ZAR150 million
The terms and conditions of the Group facilities are detailed in the Group's FY
2021 Annual Report.
The facilities are secured on the Group's interests in Cullinan, Finsch and
Koffiefontein.
As at date of this report, the Term loan was fully drawn while the RCF had
available capacity of ZAR8.8 million (US$0.6 million). The Company paid
ZAR404.6 million (US$25.3 million) (capital plus interest) to settle the RCF on
24 January 2022. The RCF was not cancelled and remains available for drawdown.
For further details regarding changes to the Group's senior secured lender
facilities subsequent to Period end refer to note 18.
Covenant ratios
As part of the revised Term loan and RCF facilities entered into with the South
African Lender Group in FY2021, the Company is required:
- to maintain a 1.3x debt service cover ratio tested semi-annually on a
rolling 12-month basis; and
- to maintain liquidity requirements being the aggregate of the undrawn
amounts available under the RCF and consolidated cash and cash equivalents
(excluding diamond debtors) not falling below ZAR200 million (US$12.5 million).
Refer to the Financial Review for further commentary with regards to covenants.
For further details regarding changes to the Group's covenant ratios subsequent
to Period end refer to note 18.
c) BEE Partner debt facilities
The BEE Partner debt facilities have been restructured and now form part of the
new Term Loan (refer to (b) above).
9. COMMITMENTS
As at 31 December 2021, the Company had committed to future capital expenditure
totalling US$33.8 million (30 June 2021: US$10.2 million and 31 December 2020:
US$8.2 million), mainly comprising Cullinan US$25.3 million (30 June 2021:
US$8.1 million 31 December 2020: US$5.7 million), Finsch US$8.3 million (30
June 2021: US$1.5 million 31 December 2020: US$1.8 million), Koffiefontein
US$0.2 million (30 June 2021: US$0.6 million 31 December 2020: US$0.7 million)
and Williamson US$nil (30 June 2021: US$nil and 31 December 2020: US$nil).
10. RELATED PARTY TRANSACTIONS
The Group's related party BEE partners, Kago Diamonds (Pty) Ltd ("Kago
Diamonds") and its gross interests in the mining operations of the Group are
disclosed in the table below.
Mine Partner and respective Partner and respective Partner and respective
interest interest interest
as at 31 December 2021 as at 31 December 2020 as at 30 June 2021 (%)
(%) (%)
Cullinan Kago Diamonds (14%) Kago Diamonds (14%) Kago Diamonds (14%)
Finsch Kago Diamonds (14%) Kago Diamonds (14%) Kago Diamonds (14%)
Koffiefontein Kago Diamonds (14%) Kago Diamonds (14%) Kago Diamonds (14%)
The Itumeleng Petra Diamonds Employee Trust ("IPDET") holds a 12% interest in
each of the Group's South African operations, with Petra's commercial BEE
Partners holding the remaining 14% interest through their respective
shareholdings in Kago Diamonds, in which Petra has a 31.46% interest. The
effective interest percentages attributable to the remaining operations for the
Group's shareholders is 78.4%.
The non-current loans receivable, non-current loans payable, finance income and
finance expense, due from and due to the related party BEE partners and other
related parties, including dividends paid are disclosed in the table below:
US$ million 31 December 31 December
2021 2020 30 June 2021
Non-current receivable
Kago Diamonds1 27.1 92.9 33.5
27.1 92.9 33.5
Non-current payable
Kago Diamonds - 71.9 -
- 71.9 -
Current trade and other
receivables
KEM JV2 5.5 9.4 9.7
Impairment provision2 (4.9) (8.1) (8.4)
0.6 1.3 1.3
1 July 2021 - 1 July 2020 -
31 December 31 December 1 July 2020 -
2021 2020 30 June 2021
Finance income
Kago Diamonds 1.0 2.1 3.7
1.0 2.1 3.7
Finance expense
Kago Diamonds - 2.6 3.8
- 2.6 3.8
Dividend paid
Kago Diamonds3 1.3 - -
1.3 - -
¹ The movement in the Kago Diamonds receivable of US$6.4 million (30 June 2021:
US$38.6 million and 31 December 2020: US$20.8 million) is mainly attributable
to amounts advanced to Kago Diamonds during the Period totalling US$nil (30
June 2021: US$3.8 million and 31 December 2020: US$2.8 million), a foreign
exchange decrease of US$3.6 million (30 June 2021: US$15.4 million increase and
31 December 2020: US$15.5 million increase) and offset by the reversal of
prior period expected credit loss provision of US$nil million (30 June 2021:
US$4.2 million reversal and 31 December 2020: US$2.5 million reversal) and the
loan payable of US$nil (30 June 2021: US$62.1 million and 31 December 2020:
US$nil) by the Group to Kago against the Kago receivable.
2 Included in current trade and other receivables are amounts advanced to KEM
JV in respect of a working capital facility and equipment finance facility of
US$nil (30 June 2021: US$nil and 31 December 2020: US$nil) and the balance of
the KEM JV purchase consideration of US$nil (30 June 2021: US$1.3 million and
31 December 2020: US$1.1 million). During FY H1 2021 the Group received
payments of US$1.2 million (FY 2021 US$nil and FY H1 2020: US$nil) from the KEM
JV as settlement of the outstanding purchase consideration this also resulted
in an expected credit loss reversal of US$1.1 million (H1 FY2021: US$nil)
during the Period. The Group has applied the expected credit loss impairment
model to the KEM JV receivables, taking into account various factors, and the
expected credit loss was deemed to be US$nil (30 June 2021: US$8.4 million and
31 December 2020: US$8.1 million).
3 During the Period, Finsch declared and paid a dividend out of profits
generated in FY2021 to its shareholders. The BEE partners received a total net
dividend payment of US$2.5 million comprising Kago US$1.3 million and IPDET
US$1.2 million.
Kago Diamonds is one of the BEE partners which obtained bank financing from
ABSA, RMB and Ninety-One (the "BEE Lenders") to acquire its interests in
Cullinan and Finsch. During FY2020, the Group had provided a guarantee to the
BEE Lenders for repayment of loans advanced to the Group's BEE Partners,
however during FY2021 as part of the Debt Restructuring, the BEE Partner debt
facilities were restructured and now form part of the Group's new Term Loan
(refer to note 8 for further detail).
11. BEE LOANS RECEIVABLE AND PAYABLE
US$ million 31 December 31 December 30 June
2021 2020 2021
Non-current assets
Loans and other receivables 43.1 175.1 46.6
Non-current liabilities
Trade and other payables - 133.4 -
BEE Loans Receivable
The non-current BEE loans receivable represents those amounts receivable from
the Group's BEE Partners (Kago Diamonds and the IPDET) in respect of advances
historically provided to the Group's BEE Partners to enable them to discharge
interest and capital commitments under the BEE Lender facilities, advances to
the BEE Partners to enable trickle payment distributions to both Kago Diamonds
shareholders and to the beneficiaries of the IPDET (Petra Directors and Senior
Managers do not qualify as beneficiaries under the IPDET Trust Deed), and
financing of their interests in the Koffiefontein mine. In addition, US$48.6
million (30 June 2021: US$45.4 million and 31 December 2020: US$47.2 million)
has been recorded as part of the gross receivable (before expected credit loss
provisions) in respect of amounts to be reimbursed to the Group in respect of
the guarantee under the BEE Lender facilities. Judgment was required in
determining the extent to which reimbursement is applicable based on the terms
of the agreements, South African legislation and discussions with the BEE
partners.
As a result of historical delays in the Cullinan plant ramp-up and the Finsch
SLC ramp-up, the Group has historically and through the Period elected to
advance the BEE Partners' funds using Group treasury to enable the BEE Partners
to service their interest and capital commitments under the BEE Lender
facilities (refer below). These BEE receivables, including interest raised,
will be recoverable from the BEE Partners' share of future cashflows from the
underlying mining operations.
As part of the in principle agreement reached during the Period as part of the
Restructuring, Petra will assume the BEE Lender facility obligations under the
terms outlined in note 8.
As part of the Debt Restructuring in FY2021, Petra has assumed the BEE Lender
facility obligations under the terms outlined in notes 8 and 18.
For detail on expected credit loss provision and reversal associated with the
BEE loans receivable refer to note 2.
1 July 2021 - 1 July 2020 - 1 July 2020 -
US$ million 31 December 31 December 30 June 2021
2021 2020
As at 1 July 46.6 137.0 137.0
Foreign exchange movement on 30.7
opening balance (5.1) 25.8
Discretionary advance - capital
and interest commitment (BEE - 2.9 4.7
Lender facility)
Discretionary advance - 2.0
distributions to beneficiaries - 2.1
Interest receivable 2.0 2.7 5.2
Reversal of BEE loans
receivable - expected credit - 4.6 5.8
loss provision
Repayment of loan from BEE (0.4) - -
partner
BEE payable restructuring - - - (138.8)
offset against BEE receivable
As at 30 June 43.1 175.1 46.6
BEE loans payable
BEE loans payable represent those loans advanced by the BEE partners to the
Group to acquire their interest in Cullinan and Finsch. Details of the
movements are set out below.
1 July 2021 - 1 July 2020 - 1 July 2020 -
US$ million 31 December 31 December 30 June 2021
2021 2020
As at 1 July - 108.6 108.6
Foreign exchange movement on - 23.2
opening balance 20.0
Interest payable - 4.8 7.0
BEE payable restructuring - - - (138.8)
offset against BEE receivable
As at 30 June - 133.4 -
Group guarantee provided to BEE Lenders
The BEE Partners obtained bank financing from ABSA, RMB and Investec ("the BEE
Lenders") to refinance amounts owing by the BEE Partners to Petra, which had
provided funding to the BEE Partners to enable them to acquire their interests
in Cullinan and Finsch. As part of historical refinancing arrangements, the
Group provided a guarantee to the BEE Lenders over the repayment of loans
advanced to the Group's BEE Partners. The BEE Partners were expected to settle
their loan obligations with the BEE Lenders from their share of future
operational cashflows from the South African operations, either through
repayment of the amounts owing to the BEE Partners by Petra or through
recoverable advances provided by Petra from Group treasury.
In March 2021, the Group completed its Restructuring, the BEE Lender facility
was included as part of the Group's new banking facilities and the guarantee
provided by the Group on behalf of the BEE Partners was extinguished (refer to
note 8 for further detail).
12. SHARES ISSUED
During the Period, the Company's shareholders approved at the FY2021 Annual
General Meeting a 50 for 1 Share Consolidation.
Admission of the Company's New Ordinary Shares took place on 29 November 2021.
As a result of the Share Consolidation, the Company's shares in issue comprise
of 194,201,785 ordinary shares of 0.05 pence each.
In FY2021, as part of the Restructuring and subsequent to the approval by
shareholders at a special general meeting held on 13 January 2021, the Company
allotted 8,844,657,929 Ordinary Shares to the Noteholders valued at US$194.0
million (comprising Ordinary shares valued at US$12.3 million and share premium
of US$181.7 million before capitalised costs), based on the share price at 9
March 2021 (the date upon which all implementation steps for the Debt
Restructuring were met). The allotment was pursuant to the Debt for Equity
Conversion, announced on 22 December 2020, which resulted in the Noteholders
holding 91% of the enlarged share capital of the Company in the following
proportions:
- 56.0% of the enlarged share capital was issued to all Noteholders,
including the New Money Noteholders, pro rata to their holdings of existing
Notes at the close of the Restructuring (to the extent any Noteholder did not
take up their equity entitlement, such entitlement was allocated to the
remaining Noteholders who did not opt out of their equity entitlement, on a pro
rata basis); and
- 35.0% of the enlarged share capital was issued to the New Money
Noteholders only, pro rata to their contribution of the New Money (to the
extent any such Noteholders did not take up their equity entitlement, such
entitlement was allocated to the remaining Noteholders who contributed to the
New Money and who did not opt out of their equity entitlements, on a pro rata
basis).
As a consequence of the Debt for Equity Conversion, 9% of the Company's
enlarged share capital remains with the previous shareholders (subject to
dilution as a result of standard management equity incentive arrangements). The
costs associated with the allotment of the new ordinary shares of US$12.3
million were capitalised against share premium. For additional information
regarding the Restructuring refer to note 18.
13. EARNINGS PER SHARE
Total Total
1 July 2021 - 1 July 2020 - Total
31 December 31 December 30 June 2021
2021 2020 US$
US$ US$
Numerator
Profit for the Period 43,288,096 54,571,655 187,021,893
Denominator
Shares Shares Shares
Weighted average number of ordinary shares used
in basic EPS
Brought forward 9,710,089,272 865,431,343 865,431,343
Effect of shares issued during the Period - - 2,721,433,209
Effect of 50 for 1 share consolidation November (9,515,887,487) (848,122,716) (3,515,127,261)
2021
Carried forward 194,201,785 17,308,627 71,737,291
Shares Shares Shares
Dilutive effect of potential ordinary shares - - -
Weighted average number of ordinary shares in 194,201,785 17,308,627
issue used in diluted EPS 71,737,291
US cents US cents US cents
Basic profit per share - US cents 22.29 315.29 260.70
Diluted profit per share - US cents 22.29 315.29 260.70
The number of potentially dilutive ordinary shares, in respect of employee
share options, Executive Director and Senior Management share award schemes is
nil (30 June 2021: nil and 31 December 2020: nil).
For the 12 months ending 30 June 2021, the basic and diluted profit per share
have been restated and adjusted for the 50 for 1 share consolidation which
became effective in November 2021, in accordance with IAS 33 Earning per Share.
Amounts as originally stated were 5.22 cents basic and 5.22 cents dilutive
profit per share.
For the 6 months ending 31 December 2020, the basic and diluted loss per share
have been restated and adjusted for the 50 for 1 share consolidation which
became effective in November 2021, in accordance with IAS 33 Earning per Share.
Amounts as originally stated were 6.31 cents basic loss and 6.31 cents dilutive
profit per share.
14. ADJUSTED EARNINGS PER SHARE (non-GAAP measure)
In order to show earnings per share from operating activities on a consistent
basis, an adjusted earnings per share is presented which excludes certain items
as set out below. It is emphasised that the adjusted earnings per share is a
non-GAAP measure. The Petra Board considers the adjusted earnings per share to
better reflect the underlying performance of the Group. The Company's
definition of adjusted earnings per share may not be comparable to other
similarly titled measures reported by other companies.
Total Total
1 July 2021 - 1 July 2020 - Total
31 December 31 December 30 June 2021
2021 2020 US$
US$ US$
Numerator
Profit for the Period 43,288,096 54,571,655 187,021,893
Net unrealised foreign exchange loss / (gain) 22,015,553 (49,936,067) (59,819,931)
Present value discount - Williamson VAT 663,803 211,488 (763,537)
receivable
Profit on disposal of subsidiary - (14,696,171) (14,696,171)
Impairment charge - operations* 227,304 - 34,989,716
Impairment / (reversal) charge - other (1,118,250) - 439,236
receivables
Reversal of BEE loans receivable - expected - (4,585,295) (5,824,201)
credit loss provision
Taxation charge / (credit) on unrealised foreign (8,507,107) 15,165,971 17,228,580
exchange (gain) / loss
Taxation credit on impairment charge* - - (3,308,166)
Gain on extinguishment of Notes - - (213,349,503)
Transaction costs (reversal) / expense - Human (239,494) - 31, 110,891
rights settlement agreement and provisions for
unsettled and disputed tax claims
Adjusted loss for the Year attributable to parent 56,329,905 731,581
(25,971,193)
*Portion attributable to equity shareholders of
the Company
Denominator
Shares Shares Shares
Weighted average number of ordinary shares used
in basic EPS
As at 1 July 9,710,089,272 865,431,343 865,431,343
Effect of shares issued during the Period - - 2,721,433,209
Effect of 50 for 1 share consolidation November (9,515,887,487) (848,122,716) (3,515,127,261)
2021
Carried forward 194,201,785 17,308,627 71,737,291
Shares Shares Shares
Dilutive effect of potential ordinary shares - - -
Weighted average number of ordinary shares in 194,201,785 17,308,627 71,737,291
issue used in diluted EPS
US cents US cents US cents
Adjusted basic profit / (loss) per share - US 29.01 4.23 (36.20)
cents
Adjusted diluted profit / (loss) per share - US 29.01 4.23 (36.20)
cents
For the 12 months ending 30 June 2021, the basic and diluted profit per share
have been restated and adjusted for the 50 for 1 share consolidation which
became effective in November 2021, in accordance with IAS 33 Earning per Share.
Amounts as originally stated were 0.73 cents basic and 0.73 cents dilutive loss
per share.
For the 6 months ending 31 December 2020, the basic and diluted loss per share
have been restated and adjusted for the 50 for 1 share consolidation which
became effective in November 2021, in accordance with IAS 33 Earning per Share.
Amounts as originally stated were 0.08 cents basic loss and 0.08 cents dilutive
profit per share.
15. IMPAIRMENT CHARGE
The current market conditions in the global rough diamond market, the ongoing
impact of the COVID-19 pandemic, volatility of and variability in product mix
are all factors impacting the rough diamond prices achieved by Petra during the
Period, resulting in management taking a critical review of the Group's
business models and operational assets. The carrying amounts of the Group's
assets are reviewed at each reporting date to determine whether there is any
indication of impairment. If there is any indication that an asset may be
further impaired or an impairment reversal may apply, its recoverable amount is
estimated. The recoverable amount is determined on a fair value less cost to
develop basis.
The operations of Cullinan, Finsch, Koffiefontein and Williamson are held at
recoverable value as a result of FY2021 impairments. During the Period under
review, the Group reviewed the carrying value of its investments, loan
receivables and operational assets for indicators of impairment. Following the
assessment, no further impairment of property, plant and equipment was
considered appropriate for Cullinan, Finsch and Williamson, nor was any
impairment reversal considered appropriate in the current Period. The Group
recognised an asset level impairment charge of US$0.3 million being
managements' estimate of the decrease in the value of the Koffiefontein assets.
The Group recognised a consolidated income statement charge of US$0.7 million
comprising management's estimate of the recoverability of the Tanzania VAT
receivable and an impairment reversal of US$1.1 million of the KEM JV
receivable.
.
Impairment Asset class Carrying Impairment Carrying value
(US$ million) value pre post
impairment impairment
Impairment operations:
Cullinan Property, plant & equipment 429.2 - 429.2
Finsch Property, plant & equipment 163.7 - 163.7
Koffiefontein Property, plant & equipment 1.1 (0.3) 0.8
Williamson Property, plant & equipment 30.0 - 30.0
Sub-total 624.0 (0.3) 623.7
Impairment -
non-financial
receivables:
Other - current KEM JV receivable (refer to 1.5 1.1 2.6
receivable note 10)
Other - non-current Tanzania VAT receivable 2.5 (0.7) 1.8
(refer to note 2)
Sub-total 4.0 0.4 4.4
Total 628.0 0.1 628.1
31 December 2020
During the 6 month period ending 31 December 2020, the Group reviewed the
carrying value of its investments, loan receivables and operational assets for
indicators of impairment. Following the assessment, no impairment of property,
plant and equipment was considered appropriate for Cullinan, Finsch,
Koffiefontein and Williamson, nor was any impairment reversal considered
appropriate in the current Period. The Group recognised a consolidated income
statement charge of US$0.2 million comprising management's estimate of the
recoverability of the Tanzania VAT receivable.
Details of the impairment assessment are shown below:
Impairment Asset class Carrying Impairment Carrying value
(US$ million) value pre post
impairment impairment
Impairment -
non-financial
receivables:
Other Tanzania VAT receivable 10.8 (0.2) 10.6
(refer note 2)
Total 10.8 (0.2) 10.6
30 June 2021
The operations of Cullinan, Finsch and Koffiefontein were held at recoverable
value as a result of FY 2020 impairments. During FY 2021, the Group reviewed
the carrying value of its investments, loan receivables and operational assets
for indicators of impairment. Following the assessment, impairment of property,
plant and equipment was considered appropriate for Finsch and Koffiefontein. No
impairment was considered necessary for Cullinan, nor was any impairment
reversal considered appropriate in the current year. The Group recognised a
consolidated income statement charge of US$17.3 million being the amount
required to write down management's estimate of recoverable value of the Finsch
and Koffiefontein assets. Williamson was classified as Held for Sale as at 30
June 2021 (refer to note 17).
Impairment Asset class Carrying Impairment Carrying value
(US$ million) value pre post
impairment impairment
Impairment operations:
Cullinan Property, plant & equipment 497.9 - 497.9
Finsch Property, plant & equipment 210.6 (15.1) 195.5
Koffiefontein Property, plant & equipment 3.3 (2.2) 1.1
Williamson Property, plant & equipment 52.7 (21.4) 31.3
(refer note 17)
Sub-total 764.5 (38.7) 725.8
Impairment -
non-financial
receivables:
Other - current Tanzanian VAT receivable 0.7 0.7
reversal (refer note 2) -
Other - current Other receivables 0.6 (0.4) 0.2
Sub-total 0.6 0.3 0.9
Total 765.1 (38.4) 726.7
Cullinan, Finsch, Koffiefontein and Williamson impairment considerations and
assumptions
The Group performs impairment testing on an annual basis of all operations and
when there are potential indicators of impairment. The impairment testing
performed resulted in impairments of the Cullinan, Finsch, Koffiefontein and
Williamson assets. The key assumptions used in determining the recoverable
value calculations, determined on fair value less cost to develop basis, are
listed in the table below:
Group assumptions for 31 December 2021 and 30 June 2021:
Key assumptions Explanation
Current mine plan and Economically recoverable reserves and resources are based on
recoverable value of management's expectations based on the availability of reserves
reserves and resources and resources at mine sites and technical studies undertaken in
house and by third party specialists.
The current mine plans for the operations are as follows:
Cullinan: FY 2031 (FY 2021: FY 2031)
Finsch: FY 2031 (FY 2021: FY 2030)
Koffiefontein: FY 2025 ( (FY 2021: FY 2023)
Williamson: FY 2030
Resources remaining after the current mine plans have not been
included in impairment testing for the operations.
Current mine plan reserves Finsch: Current mine plan over the next nine years; total
and resources resource processed 25.8 Mt (FY 2021: Current mine plan over the
next ten years; total resource processed 26.8 Mt).
Cullinan: Current mine plan over the next nine years; total
resource processed 38.5 Mt (FY 2021: Current mine plan over the
next ten years; total resource processed 38.6 Mt).
Koffiefontein: Current mine plan over the next two years; total
resource processed 2.1 Mt (FY 2021: Current mine plan over the
next three years; total resource processed 2.2 Mt).
Williamson: Current mine plan over the next 9 years, total
resource processed 46.5 Mt (FY2021: Williamson was on care and
maintenance).
Current mine plans - Management has estimated the timing and quantum of the capital
capital expenditure expenditure based on the Group's current mine plans for each
operation. There is no inclusion of capital expenditure to
enhance the asset beyond exploitation of the current mine plan
orebody.
Residual Value Cullinan: Management included a residual value of property,
plant and equipment to be used beyond the current mine plan,
given the significant resource base estimated to be available
at the end of the current mine plan.
No residual values were included in the impairment assessments
of the other mining operations.
Diamond prices The diamond prices used in the impairment test have been set
with reference to recently achieved pricing and market trends,
and long-term diamond price escalators are informed by industry
views of long-term market supply/demand fundamentals. Given the
current market uncertainty, the assessment of short-term
diamond prices and the rate and extent of pricing recovery,
together with the longer-term pricing escalators, represented a
critical judgement
The 31 December 2021 impairment testing models starting price
assumptions have been adjusted for Cullinan and Finsch when
compared to the 30 June 2021 impairment models to be in line
with actual prices achieved in the preceding 6 month Period.
Diamond prices (excluding Exceptional Stones) have been assumed
to remain unchanged FY 2022 and FY2023, then increase by 1.7%
in FY2024 and thereafter at 3.9% from FY 2025. The long-term
models incorporate normalised diamond price escalation of 1.9%
above a long-term US inflation rate of 2.5% per annum from FY
2025 to FY 2030. Estimates for the contribution of Exceptional
Diamonds sold for more than US$5.0 million each are determined
with reference to historical trends. Based on the historical
trends, management have increased the contribution from
Exceptional Stones at Cullinan from US$25.0 million to US$35.0
million per annum.
The 30 June 2021 impairment testing models starting price
assumptions have been updated to reflect the improved pricing
achieved during the Year when compared to the 30 June 2020
impairment models. Diamond prices have been assumed to increase
from FY 2022 and then 4% from FY 2024, returning to pricing
levels achieved before the impact of COVID-19, representing an
increase of 25-30% from pricing achieved at the lowest point
during FY2020. The long-term models incorporate normalised
diamond price escalation of 1.9% above a long-term US inflation
rate of 2.5% per annum from FY 2025 to FY 2030. Estimates for
the contribution of Exceptional Diamonds sold for more than
US$5.0 million each are determined with reference to historical
trends.
Discount rate A ZAR discount rate of 12.0% (30 June 2021: 12.0%) was used for
the South African operations in and a USD discount rate of
13.25% (30 June 2021: 13.25%) for Williamson. Discount rates
calculated based on a nominal weighted average cost of capital
including the effect of factors such as market risk and country
risk as at the Year end. USD and ZAR discount rates are applied
based on respective functional currency of the cash generating
unit. As Williamson was held for sale as at 30 June 2021, the
discount rate was applied to cashflows expected from a disposal
transaction.
Cost inflation rate Long-term inflation rates of 3.5%-7.8% (30 June 2021:
3.5%-7.8%) above the long-term US$ inflation rate were used for
Opex and Capex escalators.
Exchange rates Exchange rates are estimated based on an assessment of current
market fundamentals and long-term expectations. The US$/ZAR
exchange rate range used for all South African operations
commenced at ZAR15.00 (30 June 2021: ZAR14.50) reflecting the
current volatility experienced during H1 FY2022, before further
devaluing at 5.5% (30 June 2021: 5.5% from FY 2023) per annum
until FY 2027 and thereafter devaluing at 3.5% per annum. Given
the volatility in the USD/ZAR exchange rate and the current
levels of economic uncertainty, the determination of the
exchange rate assumptions required significant judgement.
Valuation basis Discounted present value of future cash flows.
Williamson During the Period, Williamson recommenced production. For
impairment testing at Williamson, management have used the
above assumptions.
During FY2021, Williamson was classified as an asset held for
sale, for further detail refer to note 17.
Sensitivity analysis
The impact of applying reasonable downside sensitivities on the key inputs
based on management's assumptions at 31 December 2021 is noted below:
Additional Impairment charge
(US$ million) Cullinan Finsch Koffiefontein Williamson
Base case
Increase in discount rate by 2% 31.6 13.6 0.8 4.1
Reduction in pricing by 5% over Life of 42.3 34.1 0.8 19.6
Mine
Reduction in short-term production by 10% 9.7 7.6 0.8 0.5
Increase in Opex by 5% 22.3 14.9 0.8 32.0
Reduction in Exceptional Stones 36.7 n/a n/a n/a
contribution by US$10.0 million per annum
Strengthening of the ZAR from US$/ZAR15.00 105.5 71.4 0.8 n/a
to US$/ZAR13.50
16. DISPOSAL OF OPERATION (30 June 2021)
a. Disposal of Botswana (exploration)
During FY 2021, the Company disposed of its exploration assets in Botswana via
the sale of 100% of its holding in Sekaka Diamonds Exploration (Pty) Limited
("Sekaka") to Botswana Diamonds PLC for a total consideration of US$300,000 and
a 5% royalty on future diamond revenues should any of the prospects within the
exploration licences be brought into production. Refer to note 36 of FY2021
Annual Report for details.
The profit on disposal of subsidiary of US$14.7 million comprises a US$0.3
million disposal consideration, net profit of US$1.3 million for the Period 1
July 2020 to the 30 November 2020 disposal date, and the recycling of the
foreign currency translation reserve of US$13.3 million, offset by a net asset
disposal amount of US$0.2 million.
17. WILLIAMSON
a. Framework Agreement
On 13 December 2021, the Company signed an agreement in principle with the
Government of Tanzania relating to the Williamson operations. Williamson
resumed operations and sales during the Period, having been on care and
maintenance since April 2020.
The Framework Agreement provides for a capital restructuring of the Williamson
Diamonds Limited ("WDL"), the entity that owns the Williamson Mine, including
the 16% free carried interest that the Government of Tanzania is entitled to
receive in WDL and its shareholder loans under Section 10 of the Tanzanian
Mining Act, 2017 and Regulation 10 of the Tanzanian Mining (State
Participation) Regulations, 2020. The capital restructuring will include:
* a WDL share issue with the effect of reducing Petra's indirect shareholding
from 75% to 63% and consequently increasing the Government of Tanzania's
shareholding from 25% to 37%;
* a contribution to the Government of Tanzania of 16% of the principal
outstanding value of the Group's shareholder loans payable by WDL, with the
remaining 84% of such principal outstanding loans continuing to be owed to
the Group; and
* the transfer of the WDL shares held by the Group to another member of the
Petra Group (either Petra itself or a special purpose subsidiary).
With respect to the reorganisation of the parties' legal interests in WDL, the
Framework Agreement also provides for an overall 55:45 economic benefit sharing
ratio between the Government of Tanzania and Petra in relation to future
economic benefits from the Williamson Mine. This arrangement is intended to
capture the parties' entitlements as shareholders as well as, with respect to
the Government of Tanzania, the revenue it collects from WDL arising from
taxes, royalties, duties, fees and other fiscal levies ("Government Imposed
Charges"). The Framework Agreement also provides that WDL shall be entitled to
off-set its undisputed unpaid and overdue VAT receivables against future
Government Imposed Charges, whereby such Government Imposed Charges will be
off-set and treated as paid for the purposes of the economic benefit sharing
ratio.
The Framework Agreement provides that Petra and the Government of Tanzania will
provide financial assistance for the restart of operations at the Williamson
Mine. Petra has already provided funding and the Government of Tanzania has
agreed to allocate the sales proceeds of the 71,654.45 carat diamond parcel
from the Williamson Mine that was previously confiscated and blocked for
export. The original value of this parcel was assessed in September 2017 at
approximately US$15 million, as previously disclosed, although Petra has not
had the parcel independently valued.
The Framework Agreement records an important US$20.0 million settlement between
the parties concerning long-standing historic disputes with the Government of
Tanzania. In FY2021, as at 30 June 2021 the Group raised a provision of US$19.5
million (adjusted for time-value of money) in respect of the aforementioned
settlement. This settlement payment shall be made in instalments, with the
first instalment of US$5.0 million to be paid when the Framework Agreement
becomes effective and upon receipt of proceeds by WDL from the sale of the
confiscated diamond parcel. The subsequent annual instalments of the
settlement amount are to be made annually at amounts as determined by WDL's
board of directors.
The Framework Agreement is subject to a number of conditions, including
Tanzanian regulatory approvals and the consent of Petra's South African lender
group, and is therefore not yet effective as at 31 December 2021. Petra is
entering into the Framework Agreement with the Government of Tanzania in the
latter's capacity principally as a regulator and collector of taxes in
Tanzania. However, the Government of Tanzania is also a related party to Petra
for the purposes of the UK Listing Rules, due to the Government's shareholding
in WDL. Accordingly, the Framework Agreement cannot become legally binding on
the parties until approval is obtained from Petra's shareholders.
Notwithstanding, the Government of Tanzania's right to a 16% free carried
interest under the Tanzanian Mining Act, 2017 is an entitlement as a matter of
Tanzanian law, and is not of itself ultimately subject to any approval or
condition in any respect. Accordingly, Petra acknowledges that arrangements to
reflect this will need to be implemented regardless of the Framework Agreement
becoming effective. On 9 February 2022, Petra received shareholder approval of
the Framework Agreement.
Memorandum of Understanding with Caspian Limited ("MOU")
On 15 December 2021, the Company announced that it had signed a non-binding
Memorandum of Understanding ("MoU") to sell 50% less one share of the entity
that holds the Group's shareholding in Williamson Diamonds Limited ("WDL"),
along with a pro rata portion of shareholder loans owed by WDL, to Caspian
Limited or its nominee ("Caspian") for a total consideration of US$15.0
million. Caspian is the long-term technical services contractor at the
Williamson Mine.
Upon completion of the transactions contemplated by the MoU and the capital
restructuring in the aforementioned Framework Agreement becoming effective,
Petra and Caspian will each indirectly hold a 31.5% stake in WDL but Petra
retains a controlling interest in Williamson.
Caspian's purchase will be funded through the settlement of US$11.1 million of
past technical services payments owed by WDL to Caspian, including services
rendered during the recent restart of operations following the care and
maintenance period, with the remaining amount being funded by Caspian rendering
US$3.9 million of technical services to WDL in order to ramp-up operations at
the Williamson Mine.
The sale of the 50% stake in the entity that holds Petra's shares in WDL is
subject to the parties obtaining all necessary Governmental, regulatory and
lender approvals, including approvals from the Tanzanian Mining Commission, the
Tanzanian Fair Competition Commission and The Bank of Tanzania, and a binding
ruling from the Tanzania Revenue Authority on the tax treatment of the
transaction. The parties are seeking to obtain such approvals by the end of H2
FY 2022.
As at 30 June 2021, the criteria for classification as Asset Held for sale was
met. Refer to (b) below for FY2021 disclosures). Subsequently, the signing of
the MOU will result in Petra retaining its controlling interest in WDL and will
see Petra consolidating WDL's operating and financial results, with an
appropriate recognition of non-controlling interest attributable to both
Caspian and the Government of Tanzania. As neither agreement mentioned above is
effective as at 31 December 2021, WDL has been consolidated in the same
proportions as prior to its Held for Sale classification being 75% Petra and
25% Government of Tanzania.
a. Asset Held for Sale (30 June 2021)
As at 30 June 2021, the assets and liabilities of the Williamson operation
(being Petra's 75.0% interest) were classified as held for sale in the
Statement of Financial Position at 30 June 2021, in accordance with IFRS 5. The
financial results of the Williamson operation for FY2021 were disclosed in the
Consolidated Income Statement in Loss on discontinued operation. These have
been restated for the period ending 31 December 2021. The Williamson mining
operation is a separate operating segment for the purposes of the Group's
segmental reporting.
i. Net assets of Williamson:
US$ million Book value prior Impairment 30 June
to 2021
reclassification
of as held for
sale
Mining property, plant and equipment 52.7 (21.4)¹ 31.3
Non-current trade and other 0.7 - 0.7
receivables
Trade and other receivables 2.9 - 2.9
Inventory 15.5 - 15.5
Cash and cash equivalents 9.2 - 9.2
Non-current assets held for sale 81.0 (21.4) 59.6
Environmental liabilities, provisions (22.9) - (22.9)
and other non-current trade and other
payables
Trade and other payables and (10.6) - (10.6)
provisions
Non-current liabilities associated
with non-current assets held for sale (33.5) - (33.5)
Net assets 47.5 (21.4) 26.1
i. Result of Williamson:
1 July 2020 - 1 July 2019
US$ million 30 June 2021 - 30 June
2020
Revenue 4.6 52.5
Cost of sales (13.8) (68.7)
Gross loss (9.2) (16.2)
Impairment charge - operations - (34.6)
Impairment reversal / (charge) - other 0.7 (6.8)
receivables
Provisions for unsettled and disputed tax (19.5) -
claims
Financial income - 0.6
Financial expense (2.7) (0.8)
Loss before tax (30.7) (57.8)
Income tax charge - (0.2)
Loss after tax before impairment charge (30.7) (58.0)
Impairment charge1 (21.4) -
Net loss for the Year (52.1) (58.0)
Attributable to:
* Equity holders of the parent (52.1) (58.0)
* Non-controlling interest - -
(52.1) (58.0)
The US$21.4 million impairment loss recorded on the Williamson assets
represented the difference between the assets measured at the lower of their
carrying amount and fair value less costs to sell considering the best
available information at the present time with reference to ongoing discussions
with a potential investor. The impairment charge of US$21.4 million was
recognised to reduce assets of Williamson to equal the fair value less costs to
sell.
a. Consolidated balance reconciliation - Williamson (31 December 2021)
US$ million Consolidated Williamson Consolidated
(excluding WDL) 31 December (including WDL)
31 December 2021 31 December
2021 2021
ASSETS
Non-current assets
Property, plant and equipment 596.6 30.0 626.6
Right-of-use assets 0.7 26.1 26.8
BBE loans and receivables 43.1 - 43.1
Other receivables - 1.8 1.8
Deferred tax assets (0.1) 0.1 -
Total non-current assets 640.3 58.0 698.3
Current assets
Trade and other receivables 19.6 6.6 26.2
Inventories 71.9 25.6 97.5
Cash and cash equivalents 255.2 17.1 272.3
(including restricted amounts)
Total current assets 346.7 49.3 396.0
Total assets 987.0 107.3 1,094.3
EQUITY AND LIABILITIES
Equity
Share capital 145.7 - 145.7
Share premium account 959.5 - 959.5
Foreign currency translation (447.3) 0.6 (446.7)
reserve
Share-based payment reserve 1.9 - 1.9
Other reserves (0.8) - (0.8)
Accumulated losses (218.6) 8.5 (210.1)
Attributable to equity holders 440.4 9.1 449.5
of the parent company
Non-controlling interest (7.8) - (7.8)
Total equity 432.6 9.1 441.7
Liabilities
Non-current liabilities
Loans and borrowings 371.9 26.1 398.0
Lease liabilities 0.4 23.2 23.6
Provisions 67.1 28.9 96.0
Deferred tax liabilities 55.3 - 55.3
Total non-current liabilities 494.7 78.2 572.9
Current liabilities
Loans and borrowings 27.0 0.3 27.3
Lease liabilities 0.4 2.8 3.2
Trade and other payables 32.3 16.9 49.2
Total current liabilities 59.7 20.0 79.7
Total liabilities 554.4 98.2 652.6
Total equity and liabilities 987.0 107.3 1,094.3
Consolidated Williamson Consolidated
US$ million (excluding WDL) 1 July 2021 - (including WDL)
1 July 2021 - 31 December 1 July 2021 -
31 December 2021 31 December
2021 2021
Revenue 244.5 20.2 264.7
Mining and processing costs (143.1) (9.8) (152.9)
Other direct income 0.2 0.1 0.3
Corporate expenditure including (5.2) - (5.2)
settlement costs
Other corporate income 0.6 - 0.6
Expenditure for unsettled and - - -
disputed tax claims
Impairment of non-financial assets (0.3) (0.7) (1.0)
Impairment of BEE loans receivable 1.1 - 1.1
- expected credit loss release
Impairment charge - - -
Total operating costs (146.7) (10.4) (157.1)
Profit on disposal including - - -
associated impairment, net of tax
Financial income 9.7 1.7 11.4
Financial expense (55.6) (0.7) (56.3)
Profit before tax 51.9 10.8 62.7
Income tax charge (13.6) - (13.6)
Profit for the Period 38.3 10.8 49.1
Attributable to:
Equity holders of the parent 43.2
Non-controlling interest 5.9
49.1
18. Restructuring of the US$650 million Loan Notes (30 June 2021)
On 10 March 2021, the Company completed the implementation of the debt
Restructuring project with the Noteholders and the South African Lender Group.
The key features of the Restructuring of the US$650 million Notes and the
Senior secured lender debt facilities of ZAR1.6 billion were as follows:
* conversion of Notes debt valued at US$415.0 million into equity, which
resulted in the Noteholder group holding 91% of the enlarged share capital
of the Company (refer (a) below);
* the remainder of the Notes exchanged for the issue of US$295.0 million new
Notes and the contribution by holders of the existing Notes of US$30.0
million in new money, each to take the form of New Notes (refer (a) below);
and
* restructuring of the first lien facilities to provide for a Term Loan of
ZAR1.2 billion and a Revolving Credit Facility ("RCF") of ZAR560 million
provided by the South African Lender Group (refer (b) below).
a. Debt for Equity conversion and the issue of New Notes
i. Debt for Equity swap
The Company completed a debt for equity conversion consisting of the partial
repayment of the US$650 million Loan Notes by issuing 8,844,657,929 new
Ordinary Shares with a nominal value of 0.001 pence per share in the Company to
the existing Noteholders. The fair value of the shares at the date of the
conversion was 1.58 pence per share, giving a total consideration of U$194.0
million. The carrying value of the liability at the date of the conversion was
US$415.0 million. The resulting gain, before restructuring costs, of US$221.0
million has been recognised in the Income Statement as part of the gain on
extinguishment of the Notes. Restructuring costs identified as being directly
associated with the debt for equity conversion, of US$12.4 million have been
taken directly to share premium. The Debt for Equity Conversion resulted in the
Noteholders holding 91% of the enlarged share capital of the Company.
ii) Issue of New Notes
The New Notes of US$336.7 million were issued and allocated as follows:
* US$30.0 million allocated only to those Noteholders that subscribed, and
funded that subscription, to the New Money, pro rata to their New Money
contribution (the "New Money Noteholders");
* US$150.0 million allocated only to those New Money Noteholders, pro rata to
each holder's contribution to the New Money;
+ US$145.0 million allocated to all Noteholders (including the New Money
Noteholders), pro rata to their holdings of existing Notes at the close
of the Restructuring; and
+ a further amount of New Notes as consideration to certain Noteholders,
in remuneration for the commercial risks and other commercial
considerations borne by those Noteholders whilst restricted for the
purposes of negotiations with other stakeholders and work performed in
connection with the Restructuring. The quantum of New Notes issued for
this purpose was US$11.7 million, which has been capitalised as part of
the Notes liability and will be amortised over the term of the Notes.
The restructuring of the terms of the Loan Notes represented a substantial
modification as the net present value of the cash flows under the original
terms and the modified terms was greater than 10%.As such, carrying value of
the Loan Notes of US$299.0 million was de-recognised and the amended new Notes
with a nominal value of US306.7 million were recognised on the balance sheet at
the date of modification. The loss arising on substantial modification of the
Loan Notes of US$7.7 million has been recognised in the Income Statement as
part of the gain on extinguishment of the Notes. The acceleration of
unamortised costs associated with the substantial modification were expensed
and included within net finance income (refer to note 6).
a. First lien facilities
The previous facilities held with the South African Lender Group, included the
ZAR500.0 million working capital facility (the "WCF"), the ZAR400.0 million
RCF, the financing arrangements in respect of the Group's BEE partners (the
"BEE Facilities") of ZAR683.1 million and the Group's general banking
facilities were restructured through the extinguishment of the existing
facilities and the replacement of such facilities with a new Term Loan and RCF,
as part of the Restructuring.
A new Term Loan was made available to the Group for a principal amount of
ZAR1.2 billion, in order to refinance the previous drawn ZAR500.0 million WCF
and the outstanding principal amounts of the BEE Facilities (ZAR683.1 million).
Transaction costs of ZAR17.4 million (US$1.7 million) and cash transaction
costs of US$0.7 million directly associated with the Term loan were capitalised
to the liability to be amortised over the period of the loan. The Term Loan is
fully drawn.
A new RCF was made available comprising a rollover of the previous ZAR400.0
million RCF but increased by a further ZAR160.0 million. An amount of ZAR400.0
million remains drawn at Year end under the RCF with the RCF reducing at Year
end to ZAR509.6 million in line with the amortisation profile, with ZAR109.6
million still available for drawdown. For the terms of the new First lien
facilities refer to note 8.
a. Transaction costs
A total of US$33.7 million (FY2020: US$3.8 million included under prepayments)
were incurred during the Year for the Restructuring. The transaction costs have
been apportioned to Equity, the Notes and bank facilities based on each
components contribution to the total Restructuring. Cash costs incurred in the
Year amounted to US$29.9 million (FY 2020: US$3.8 million included under
prepayments).
19. EVENTS AFTER THE REPORTING PERIOD
Vesting of share awards
On 12 January the Company announced the vesting of 9,445 shares in the Company
under the 2018 and 2019 deferred share scheme. The shares have been settled by
purchasing the shares in the market at 78.0 pence.
Settlement of RCF
On 24 January 2022, the Company paid ZAR404.6 million (capital plus interest)
to settle the RCF. The RCF has not been terminated and remains available for
drawdown.
New First Lien Banking Facility on more favourable terms
On 2 February 2022, the Company announced that it had concluded a binding,
credit approved term sheet for the refinancing of its first lien debt facility
with its South African Lender Group, providing for more favourable terms than
the Group's current first lien facilities. The conclusion of the new facility
is subject to completion of appropriate definitive agreements, expected to be
finalised during Q3 FY 2022.
A new Revolving Credit Facility ("RCF") with Absa Bank Limited (acting through
its corporate and investment banking divisions) ("Absa") will replace the
existing RCF and term lending arrangements with the current South African
lender syndicate comprising Absa, Nedbank, RMB and Ninety One. The new terms
include, inter alia:
* improved structure with a single ZAR1 billion RCF replacing the existing
amortising term loan (ZAR856.1 million owed at 31 December 2021 net of
unamortised transaction costs of ZAR20.2million) and the ZAR408.8 million
RCF;
* more appropriate covenant package resulting in improved headroom and
flexibility on the balance sheet;
* extended tenure for the RCF with a maturity date of December 2025 and a
more usual bullet payment at maturity; and
* reduced financing costs with improved margin and commitment fees.
Details of the new terms compared with the previous terms:
Previous terms New terms
Facility R408.8 million amortising RCF and R1,000 million RCF
R876.3 million gross term loan
(as at 31 Dec 2021)
Duration 3 years (Mar-24) 4 years (Dec-25), with a 60 day
buffer between the redemption of
the Notes and the maturity of the
RCF
Lenders Absa, Nedbank, RMB & Ninety One Absa
Margin JIBAR + 525 bps JIBAR + 415 bps, with the margin
to be reconsidered annually based
on Petra's credit metrics with a
view of further optimising the
margin to be achieved
Commitment fee 210 bps per annum 125 bps per annum
Covenants
FY22 H2 FY23 H1 FY23 H2 FY24 H1 FY24 H2 FY25 H1 FY25 H2 FY26 H1
Net Debt :
EBITDA Leverage 4.00 4.00 3.50 3.50 3.25 3.25 3.00 3.00
ratio (maximum)
Interest Cover 1.85 1.85 2.50 2.50 2.75 2.75 3.00 3.00
Ratio (minimum)
Special General Meeting - Shareholder approval of Framework Agreement.
The Framework Agreement entered into between Petra, Williamson Diamonds Limited
and the Government of Tanzania constituted a related party transaction for
purposes of the UK Listing Rules and in order for it to become unconditionally
effective and legally binding on Petra, approval of its shareholders at the SGM
was required. On 9 February 2022, the Company received shareholder approval at
its Special General Meeting. The Framework Agreement remains subject to a
number of other conditions, including customary government approvals and the
approval of the Petra South African lender group. Subject to the satisfaction
of these conditions, the Framework Agreement is expected to become effective in
the second half of FY 2022.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
a. the Condensed Financial Statements have been prepared in accordance with
IAS 34 Interim Financial Reporting, and give a true and fair view of the
assets, liabilities, financial position and profit of the Group; and
a. the Interim Management Report includes a fair review of the information
required by FCA's Disclosure and Transparency Rules (DTR 4.2.7 R and 4.2.8
R).
By order of the Board
Richard Duffy
Chief Executive
Officer
21 February 2022
INDEPENDENT REVIEW REPORT ON THE UNAUDITED FINANCIAL STATEMENTS OF PETRA
DIAMONDS LIMITED
Conclusion
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
December 2021 which comprises Condensed Consolidated Income Statement,
Condensed Consolidated Statement of Comprehensive Income, Condensed
Consolidated Statement of Financial Position, Condensed Consolidated Statement
of Cash Flows, Condensed Consolidated Statement of Changes in Equity and
accompanying Notes to the Condensed Consolidated Interim Financial Statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 December 2021 is not prepared, in
all material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the Group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International Accounting
Standard 34, "Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern that
are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the Group to
cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report in
accordance with the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the company
or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive than
audit procedures, as described in the Basis for Conclusion paragraph of this
report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and for
no other purpose. No person is entitled to rely on this report unless such a
person is a person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised to do so by
our prior written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
Location: London UK
21 February 2022
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127)
END
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