Petra Diamonds Ltd - Interim Results for the Six Months ended 31 Dec 2021

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 (US$m)	91.1	6.5	(18.3)
Adjusted net profit / (loss) after tax (US$m)	66.4	2.7	(25.5)
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 share¹ (US$c)	29.01	4.23	(36.20)

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 (LTIFR)		0.18	0.50	-64%	0.44
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$m	264.7	178.1	+49%	406.9
Adjusted mining and processing costs	US$m	109.8	99.2	+11%	276.1
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&A¹	$m	300 - 310	300 – 320	300 – 320	300 - 320
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:

Mine	Actual H1 FY 2022 (US$/ct)	Actual H1 FY 2021 (US$/ct)	Actual FY 2021 (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 December 2021 (“H1 FY 2022”)	6 months to 31 December 2020 (“H1 FY 2021”)	Year ended 30 June 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 / charge on impairment charge and unrealised foreign exchange gain / (loss))¹³	(24.7)	(3.8)	(7.2)
Adjusted net profit/(loss) after tax⁴	66.4	2.7	(25.5)
Impairment reversal / (charge) – operations and other receivables⁵	0.1	(0.2)	(38.4)
Impairment of BEE loans receivable – expected credit loss release ⁶	—	4.6	5.8
Gain on extinguishment of Notes net of unamortised costs	—	—	213.3
Profit on disposal of subsidiary⁷	—	14.7	14.7
Recovery / (costs) and fees relating to investigation and settlement of human rights abuse claims	0.2	—	(12.7)
Provision for unsettled and disputed tax claims	—	—	(19.5)
Net unrealised foreign exchange (loss) / gain	(28.7)	65.1	74.6
Taxation credit / (charge) on unrealised foreign exchange (loss) / gain¹³	11.1	(19.3)	(19.9)
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)

	Unit	As at 31 December 2021 (US$ million)	As at 31 December 2020 (US$ million)	As at 30 June 2021 (US$ million)
Cash at bank including Williamson– (including restricted amounts)	US$m	272.3	106.3	173.0
Cash at bank - Williamson	US$m	16.5	2.5	9.2
Diamond debtors – including Williamson	US$m	0.4	3.7	38.3
Diamond debtors – Williamson	US$m	—	—	—
Diamond inventories - including Williamson¹⁴	US$m /Cts	79.6 819,252	105.0 1,385,402	56.5 637,676
Diamond inventories - Williamson¹⁴	US$m Cts	20.5 133,239	11.4 76,977	11.4 76,977
US$336.7m loan notes (issued March 2021)⁹	US$m	346.4	—	327.3
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$m	152.3	700.4	228.2
Bank facilities undrawn and available¹⁰	US$m	0.6	—	7.7

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.

Adjusted mining and processing costs are mining and processing costs stated before depreciation.
Profit from mining activities is revenue less adjusted mining and processing costs plus other direct income.
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.
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.
Impairment reversal of US$0.1 million (30 June 2021: US$38.4 million charge and 31 December 2020: US$0.2 million charge) was due to the Group’s impairment review of its operations and other receivables. Refer to note 15 for further details.
Reversal of impairment of BEE loans receivable of US$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.
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.
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.
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.

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$0.6 million) remains undrawn and available. During FY 2021 and as part of the Restructuring, the BEE partner bank facilities (which comprised the BEE guarantees) were settled by the Group through proceeds of the ZAR1.2 billion term loan. Post Period end, the Group settled the RCF (capital plus interest), for further detail refer to note 19.
BEE partner bank facilities represents the BEE guarantees of US$nil (ZARnil) (30 June 2021: US$nil (ZARnil) and 31 December 2020: US$47.2 million (ZAR692.8 million)).
Consolidated Net Debt is bank loans and borrowings plus loan notes, less cash, less diamond debtors plus BEE partner bank facilities.
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).
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.
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 cash costs¹ US$m	Diamond royalties US$m	Diamond inventory and stockpile movement US$m	Group technical, support and marketing costs² US$m	Adjusted mining and processing costs US$m	Depreciation³ US$m	Total mining and processing costs (IFRS) 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:

Includes all direct cash operating expenditure at operational level, i.e. labour, contractors, consumables, utilities and on-mine overheads.
Certain technical, support and marketing activities are conducted on a centralised basis.
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.
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

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 operations	US$m	16.1	8.1
Corporate	US$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 diamonds	Carats	127,435	96,016	+33%	182,452
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:

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$M	167.7	107.3	+56%	250.6
Diamonds sold	Carats	872,304	894,758	-3%	2,261,058
Average price per carat	US$	192	120	+60%	111

ROM Production
Tonnes treated	Tonnes	2,306,986	2,339,473	-1%	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 total tonne treated	ZAR	298	239	+25%	260

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:

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 6^th XRL stream in the processing plant.

Finsch – South Africa

	Unit	H1 FY 2022	H1 FY 2021	Variance	FY 2021
Sales
Gross revenue	US$M	65.7	54.8	+20%	123.5
Diamonds sold	Carats	676,295	768,647	-12%	1,602,312
Average price per carat	US$	97	71	+37%	77

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 total tonne treated	ZAR	484	456	+6%	536

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$M	11.1	11.2	-1%	28.0
Diamonds sold	Carats	20,638	18,945	+9%	66,650
Average price per carat	US$	538	590	-9%	419

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 total tonne treated	ZAR	811	459	+76%	651

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$M	20.2	4.6	+339%	4.6
Diamonds sold	Carats	26,611	30,339	-12%	30,339
Average price per carat	US$	760	150	+407%	150

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 total tonne treated	US$	12	n.a	n.a.	n.a

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 appetite	Risk rating	Nature of risk	Change in H1 FY 2022
External Risks
1. Diamond price	High	Medium	Long term	No Change – the rough diamond market remains 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 term	No change–- the exchange rate was relatively 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 and political	High	Medium	Long term	Lower – the risk of political instability in 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 pandemic (operational impact)	Medium	Medium	Short to medium term	Lower – the impact of the COVID-19 pandemic is ongoing. The new Omicron variant, identified in late November 2021, resulted in 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 production	Medium	Medium	Long term	Lower – positive throughput improvements 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 and product mix volatility	Medium	Medium	Short term	No change – Cullinan and Finsch ROM grades remain in line or ahead of budget, whilst Koffiefontenin ROM grades remain below guidance.
7. Labour relations	Medium	Medium	Short to medium term	No change – stable labour relations were experienced during H1 FY 2022. The Company 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 medium term	Lower – continued progress with Project 2022 initiatives, strong diamond markets, the 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 operate: regulatory and social impact & community relations	Medium	Medium	Long term	No change –uncertainty regarding the future at Koffiefontein has raised tensions with the community at the mine. Local community and political pressure regarding Social and Labour Plans (SLPs), jobs and business 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:

Exceptional Stones: diamonds with a valuation and selling price of US$5m or more per stone
cpht: carats per hundred tonnes
Kcts: thousand carats
Kt: thousand tonnes
LTI: lost time injury
LTIFR: lost time injury frequency rate
Mcts: million carats
Mt: million tonnes
FY: financial year
Q: quarter of the financial year
ROM: run-of-mine (i.e. production from the primary orebody)
SLC: sub level cave
m: million

PETRA DIAMONDS LIMITED

CONDENSED CONSOLIDATED INCOME STATEMENT

FOR THE 6 MONTH PERIOD ENDED 31 DECEMBER 2021

US$ million	Notes	(Unaudited) 1 July 2021- 31 December 2021	(Unaudited) 1 July 2020- 31 December 2020	(Restated - Audited) Year ended 30 June 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 settlement costs	5	(5.2)	(3.9)	(40.8)
Other corporate income		0.6	—	—
Impairment reversal / (charge) of non-financial assets	15	0.1	(0.2)	(38.4)
Impairment of BEE loans receivable – expected credit loss release	11	—	4.6	5.8
Total operating costs		(157.1)	(131.3)	(422.7)

Profit on disposal including associated impairment, net of tax	16	—	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 unamortised costs	6	—	—	213.3
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 PERIOD ENDED 31 DECEMBER 2021

US$ million	(Unaudited) 1 July 2021- 31 December 2021	(Unaudited) 1 July 2020- 31 December 2020	(Audited) Year ended 30 June 2021
Profit for the Period	49.1	67.6	196.6
Exchange differences on translation of the share-based payment reserve	—	0.2	0.2
Exchange differences on translation of foreign operations¹	(44.6)	54.7	64.2
Exchange differences on non-controlling interest¹	0.3	(0.1)	(1.2)
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) 31 December 2021	(Unaudited) 31 December 2020	(Audited) 30 June 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 restricted amounts)		272.3	106.3	163.8
Total current assets		396.0	275.5	274.4
Non-current assets classified as held for sale	17	—	—	59.6
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 parent company		449.5	126.8	450.8
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 sale	17	—	—	33.5
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