Correction to the Key operational
guidance metrics’ table in respect of Cash on-mine costs and
G&A for H1 FY23A and H2 FY23E
21 February 2023 |
LSE:
PDL |
Petra Diamonds
Limited
Interim results
for the six months ended 31 December
2022
H1 in
line with expectations; annual production on track to increase by
c.1 Mct in FY 2025
Petra Diamonds Limited ("Petra" or the "Company" or the “Group”)
announces its unaudited interim results for the six months ended
31 December 2022 (the “Period”, “H1
FY 2023”, or “H1”).
Richard Duffy, Chief Executive
Officer at Petra Diamonds commented:
“Petra’s new culture and ongoing
focus on continuous improvement through our operating model has
enabled the Company to respond swiftly and efficiently to the
operational challenges experienced in H1 FY 2023.
We are optimistic that the
fundamentals of the diamond market will continue to support prices,
with demand for luxury goods remaining robust in the USA, notwithstanding recent economic
volatility. We also expect that the ending of lock-down
restrictions in China will benefit
diamond pricing in the near to medium term.
We remain on track to meet recent
production guidance, while our cost guidance remains largely
unchanged despite inflationary pressures as a result of our ongoing
focus on costs, supported by a weaker Rand. Both the Finsch &
Cullinan Mines have a significant
resource base giving them potential for long lives, and our
projects at both mines continue to progress in line with
expectations. As a result, our guidance shows annual production
increasing by c.1 million carats from 2.8 million carats in FY 2023
to 3.6 - 3.9 million carats in FY 2025. Production will be further
boosted from the recently approved C-Cut extension at the Cullinan
Mine, set to deliver a total of 2.3 million additional carats from
FY 2025 through to FY 2033.
At Williamson, we have made
considerable progress in addressing the social and environmental
impact of the tailings storage facility wall breach. The necessary
permits are being put in place, with production anticipated to
resume during Q1 FY 2024. Ahead of this resumption, maintenance is
being accelerated and waste stripping is being carried out to
construct the interim tailings storage facility and to enable an
efficient ramp-up in production.
Koffiefontein has been loss making
for a number of years and incurred an operating loss of
US$8.7 million in H1. We are taking
important steps towards responsible closure in discussion with all
relevant stakeholders.
Revenue for the half year decreased from US$264.7 million in H1 FY 2022 to US$212.1 million, with the strength of our
product mix and an increase in like-for-like diamond prices of
12.6% helping to offset lower production and no contribution from
Exceptional Stones[1] (H1 FY 2022: US$77.9 million).
Post period-end, two blue diamonds
recovered from the Cullinan Mine, including an Exceptional Stone,
were sold into partnership. The 17.4 and 10.4 carat gem quality
blue diamonds were sold for US$7
million and US$2 million
respectively. We will share equally in any upside on the sale of
the stones once cut and polished, extending our partnership
approach on selected diamonds.”
[1] Petra classifies “Exceptional Stones” as rough diamonds
which sell for US$5 million or more
each
Summary of financial results
US$m unless stated
otherwise |
H1 FY
2023 |
H1 FY
2022 |
|
FY
2022 |
Revenue |
212.1 |
264.7 |
|
585.2 |
Revenue from rough
diamond sales |
210.7 |
264.7 |
|
584.1 |
Average realised price
per carat |
160 |
166 |
|
165 |
Adjusted mining and
processing costs |
130.4 |
109.8 |
|
307.1 |
Adjusted
EBITDA1 |
77.4 |
150.9 |
|
264.9 |
Adjusted EBITDA
margin1 |
36% |
57% |
|
45% |
Adjusted profit before
tax1 |
18.9 |
91.1 |
|
141.9 |
Adjusted net profit
after tax1 |
4.5 |
66.4 |
|
102.0 |
Net (loss) / profit
after tax |
(17.6) |
49.1 |
|
88.1 |
Adjusted basic (loss)
/ earnings per share1 (USc) |
(0.91) |
29.01 |
|
42.93 |
Basic (loss) /
earnings per share (USc) |
(12.23) |
22.29 |
|
35.53 |
Capital
expenditure |
51.9 |
16.7 |
|
52.2 |
Operational free cash
flow1 |
11.7 |
122.4 |
|
230.0 |
Consolidated net
debt1 |
90.2 |
152.3 |
|
40.6 |
Unrestricted cash |
130.4 |
256.7 |
|
271.9 |
Consolidated net debt
: Adjusted EBITDA1 |
0.47x |
1.0x |
|
0.15x |
Note 1: For all non-GAAP measures refer to the Summary of
Results table within the Financial Results section below.
- Revenue amounted to US$212.1
million (H1 FY 2022: US$264.7
million), including US$1.4
million from Petra’s realised profit share from partnership
stones
- The average realised price per carat in H1 FY 2023 was
US$160/ct down 3% to US$166 in H1 FY 2022 and US$165/ct for FY 2022
- Adjusted mining and processing costs remained within
expectations despite inflationary pressures. The increase was
largely attributable to diamond inventory movement while cash on
mine cost remained largely flat
- Adjusted EBITDA 49% lower YoY, due to the lack of contribution
from Exceptional Stones (US$64
million at Cullinan Mine and US$13.9
million at Williamson Mine in the prior period), together
with lower sales volumes
- Basic loss per share from continuing operations of USc12.23 per
share and USc0.91 on an adjusted basis after accounting for
non-controlling interests
- Capex increased to US$51.9
million (H1 FY 2022: US$ 16.7
million) largely due to the planned capital expenditure
relating to expansion projects at the Cullinan and Finsch Mines,
coupled with accelerated equipment replacement at Finsch
- Operational free cash flow down to US$11.7 million on the back of reduced sales and
the planned increase in capital expenditure relating to expansion
projects
- Further strengthening of the Balance Sheet:
- Unrestricted cash decreased by US$141.5
million to US$130.4 million
following the successful repurchase of Loan Notes totaling
US$146.1 million
- Consolidated net debt increased to US$90.2 million from US$40.6 million as at 30
June 2022, with Consolidated net debt : Adjusted EBITDA at
0.47x compared with 0.15x at 30 June
2022
Safety and operational performance
|
Unit |
H1 FY
2023 |
H1 FY
2022 |
Variance |
FY
2022 |
Lost time injury
frequency rate (LTIFR) |
|
0.19 |
0.18 |
6% |
0.23 |
Lost time injuries
(LTIs) |
|
7 |
7 |
0% |
15 |
Gross ore
processed |
Mt |
5.4 |
5.6 |
-4% |
11.7 |
Gross diamonds
recovered |
Carats |
1,399,749 |
1,777,424 |
-21% |
3,353,670 |
Gross diamonds
sold |
Carats |
1,312,900 |
1,595,581 |
-18% |
3,536,316 |
Updates on Williamson
Tailings storage facility (TSF) wall
breach
- Financial: As a result of the TSF wall breach, a
US$5.9 million remediation charge is
reflected in the profit and loss statement (after Adjusted NPAT).
Approximately US$1.5 million of this
amount was incurred up to 31 December
2022, with the balance accrued for at period-end and is
expected to be incurred during H2 FY 2023.
- Environment, Local Community, Technical and Production:
We continue to make good progress with regards to the
environmental, social and economic impact evaluation and
remediation process, with humanitarian relief remaining in place
for those affected. The geotechnical evaluation to establish the
root cause of the subsidence that caused the breach is underway,
with operations anticipated to restart using an interim TSF in Q1
FY 2024. More detailed information regarding these processes and
assessments is available on our website:
https://www.petradiamonds.com/our-operations/our-mines/williamson/tailings-storage-facility-breach/
Blocked diamond parcel
- Under the Framework Agreement entered into by the Government of
Tanzania (“GoT”), the Company and
Williamson Diamonds Limited (“WDL”) in December 2021, the GoT agreed to allocate the
proceeds of the confiscated diamond parcel of 71,654.45 carats
(“Blocked Parcel”) to WDL. It has come to our attention that a
portion of the Blocked Parcel has recently been sold. We are
engaging with GoT to confirm the application of the proceeds. More
information on the history of the Blocked Parcel can be found on
our website: Petra Diamonds | Blocked Diamond Parcel - Petra
Diamonds
Independent Grievance Mechanism and
community projects at Williamson
- The Independent Grievance Mechanism (IGM), a non-judicial
process to address the historical allegations of human rights
abuses at Williamson became operational in November 2022 and is now in its pilot phase. The
pilot phase will involve the award of remedy to those determined to
have suffered severe human rights impacts whilst allowing for the
IGM’s systems and procedures to be further developed to take into
account the learnings of the pilot phase. More detailed information
on the IGM and the Restorative Justice Projects being put in place
to provide sustainable benefits to the communities located around
the mine can be found on our website:
https://www.petradiamonds.com/our-operations/our-mines/williamson/allegations-of-humanrights-abuses-at-the-williamson-mine/
Outlook
Actions taken to strengthen our business and improve cash flow
generation, together with our capital discipline, means that Petra
is well placed to take advantage of the supportive diamond market
fundamentals. Our projects remain on track to deliver a c.1Mct
annual increase in FY 2025, with work commencing on the C-cut
extension to unlock a further 2.3Mct from FY 2025 through to FY
2033, as we continue to develop the long term potential of our
resource base. We remain confident that we will continue to
generate sufficient cash to fund capex and allow further
deleveraging. The Company will consider the payment of a FY 2023
dividend when finalising its year end results.
Key operational guidance
metrics1,2
|
Unit |
H1 FY23A |
H2 FY23E |
FY23E |
FY24E |
FY25E |
Total carats
recovered |
Mcts |
1.4 |
1.35 -
1.45 |
2.75 -
2.85 |
3.0 –
3.3 |
3.6 –
3.9 |
Cash on-mine costs and
G&A2 |
US$m |
140.93 |
140 -
160 |
280 -
300 |
280 -
300 |
280 –
300 |
Expansion
capex2 |
US$m |
38.2 |
59 –
62 |
92 –
104 |
117 –
129 |
110 - 125 |
Sustaining
capex2 |
US$m |
13.7 |
26 –
28 |
35 -
39 |
31 –
36 |
25 -
28 |
Note 1: Production guidance revised
in January 2023 to reflect the
revised grade outlook at Cullinan Mine, a challenging H1 2023 at
Finsch and temporary closure at Williamson
Note 2: Real amounts stated in FY
2023 money terms using 6% CPI. US$ amounts converted at exchange
rate of USD1:ZAR17 apart from H1-FY23 converted at exchange
rate of USD1:ZAR17.32.
Note 3: Cash on-mine costs and
G&A (H1 FY 23a) comprises Cash on-mine costs US$128.4m, Group technical, support and marketing
costs US$7.1m and Adjusted corporate
overhead US$5.4m
More detailed guidance is available on Petra’s website at:
https://www.petradiamonds.com/investors/analysts/analyst-guidance/
PRESENTATION DETAILS
Richard Duffy, CEO, Jacques Breytenbach, CFO, will present the
results to investors and analysts.
Online and in person at 9.30am
GMT
In-person: Storey Club, 100 Liverpool St, Broadgate, London EC2M 2AU
Webcast: To join
https://stream.brrmedia.co.uk/broadcast/63ece9ed46729d09e3663d62
Dial in details:
·
Johannesburg, toll/tollfree: +27
(0) 0800 980 512
· UK: +44
(0)33 0551 0200
·
USA local: +1 786 697 3501
Password: Quote “Petra Diamonds Interim Results” when
prompted by the operator
Recording of presentation
A recording of the webcast will be available later today on
Petra’s website at
https://www.petradiamonds.com/investors/presentations
Investor Meet Company presentation at 2pm
GMT
Petra will present the results on the Investor Meet company
platform, predominantly aimed at retail investors. To join:
https://www.investormeetcompany.com/petra-diamonds-limited/register-investor
FURTHER INFORMATION
Petra Diamonds,
London
+44 207 494 8203
Patrick
Pittaway
investorrelations@petradiamonds.com
Julia Stone
About Petra Diamonds Limited
Petra Diamonds is a leading independent diamond mining group and
a supplier of gem quality rough diamonds to the international
market. The Group’s portfolio incorporates interests in three
underground mines in South Africa
(Finsch, Cullinan Mine 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 which supports the potential
for long-life operations.
Petra strives to conduct all operations according to the highest
ethical standards and only operates in countries which are members
of the Kimberley Process. The Group 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 Group’s loan
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.
FINANCIAL RESULTS
SUMMARY RESULTS (unaudited)
|
6
months to 31 December 2022
(“H1 FY 2023”) |
6
months to 31 December 2021
(“H1 FY 2022”) |
Year
ended 30 June 2022
(“FY 2022”) |
US$
million |
US$
million |
US$
million |
Revenue |
212.1 |
264.7 |
585.2 |
Adjusted mining and
processing costs1 |
(130.4) |
(109.8) |
(307.1) |
Other direct
income |
0.6 |
0.3 |
(0.8) |
Adjusted profit
from mining activity2 |
82.3 |
155.2 |
277.3 |
Other corporate
income |
0.5 |
0.6 |
0.6 |
Adjusted corporate
overhead3 |
(5.4) |
(4.9) |
(13.0) |
Adjusted
EBITDA4 |
77.4 |
150.9 |
264.9 |
Depreciation and
Amortisation |
(37.2) |
(43.5) |
(85.3) |
Share-based
expense |
(0.9) |
(0.1) |
(1.1) |
Net finance
expense8 |
(20.4) |
(16.2) |
(36.6) |
Adjusted profit
before tax |
18.9 |
91.1 |
141.9 |
Tax expense (excluding
taxation credit on unrealised foreign exchange gain /
(loss))5 |
(14.4) |
(24.7) |
(39.9) |
Adjusted net profit
after tax6 |
4.5 |
66.4 |
102.0 |
Impairment (charge) /
reversal – operations and other receivables7 |
(3.8) |
0.1 |
19.6 |
Transaction costs and
acceleration of unamortised costs on partial redemption of
Notes8 |
(9.0) |
— |
— |
Williamson tailings
facility - remediation costs |
(5.9) |
— |
— |
Williamson tailings
facility - accelerated depreciation |
(5.2) |
— |
— |
Recovery of fees
relating to investigation and settlement of human rights abuse
claims |
— |
0.2 |
0.8 |
Net unrealised foreign
exchange gain / (loss) |
1.6 |
(28.7) |
(36.5) |
Taxation credit on
unrealised foreign exchange gain / (loss)4 |
0.2 |
11.1 |
2.2 |
Net (loss) / profit
after tax |
(17.6) |
49.1 |
88.1 |
Earnings per share attributable to equity holders of the Company
–
US cents |
|
|
|
Basic (loss) / profit
per share |
(12.23) |
22.29 |
35.53 |
Adjusted (loss) /
profit per share9 |
(0.91) |
29.01 |
42.93 |
|
Unit |
As
at 31 December 2022
(US$ million) |
As
at 31 December 2021
(US$ million) |
As at
30 June 2022
(US$ million) |
Cash at bank –
(including restricted amounts) |
US$m |
146.6 |
272.3 |
288.2 |
Diamond debtors |
US$m |
4.9 |
0.4 |
37.4 |
Diamond
inventories14 |
US$m
/Cts |
59.9
540,153 |
79.6
819,252 |
52.7
453,380 |
Loan notes (issued
March 2021)10 |
US$m |
241.7 |
346.4 |
366.2 |
Bank loans and
borrowings11 |
US$m |
— |
78.6 |
— |
Consolidated net
debt12 |
US$m |
90.2 |
152.3 |
40.6 |
Bank facilities
undrawn and available11 |
US$m |
58.8 |
0.6 |
61.5 |
Consolidated net debt
: Adjusted EBITDA (rolling twelve months) |
|
0.47x |
1.0x |
0.15x |
The following
exchange rates have been used for this announcement: average for H1
FY 2023 US$1:ZAR17.32 (H1 FY 2022: US$1: ZAR15.03, FY
2022: US$1:ZAR15.22); closing rate as at 31 December 2022 US$1:ZAR17.00
(31 December 2021 US$1:ZAR15.99,
30 June 2022: US$1:ZAR16.27).
Notes:
The Group uses several non-GAAP measures above and throughout
this report to focus on actual trading activity by removing certain
non-cash or non-recurring items. These measures include adjusted
mining and processing costs, profit from mining activities,
adjusted EBITDA, adjusted net profit after tax, adjusted earnings
per share, adjusted US$ loan note, 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. Adjusted profit from
mining activities is revenue less adjusted mining and processing
costs plus other direct income.
3. Adjusted corporate
overhead is corporate overhead expenditure less corporate
depreciation, tender offer transaction costs and share-based
expense.
4. Adjusted EBITDA is
stated before depreciation, amortisation of right-of-use asset,
share-based expense, net finance expense, tax expense, impairment
reversal/(charges), expected credit loss release/ (charge),
recovery of fees relating to investigation and settlement of human
rights abuse claims, Williamson tailings facility remediation costs
and accelerated depreciation and unrealised foreign exchange gains
and (losses).
5. Tax expense is the
tax expense for the Period excluding taxation credit on unrealised
foreign exchange gain/(loss) generated during the Period; such
exclusion more accurately reflects resultant adjusted net
profit.
6. Adjusted net profit
after tax is net profit after tax stated before impairment
(charge)/reversal, Williamson tailings facility remediation costs
and accelerated depreciation, recovery of fees relating to
investigation and settlement of human rights abuse claims net
unrealised foreign exchange gains and losses, and excluding
taxation credit on net unrealised foreign exchange gains and losses
and excluding taxation credit on impairment charge.
7. Impairment charge of
US$3.8 million (30 June 2022: US$19.6
million reversal and 31 December
2021: US$0.1 million reversal)
was due to the Group’s impairment review of its operations and
other receivables. Refer to note 15 for further details.
8. Transaction costs and
acceleration of unamortised costs on partial redemption of Notes
comprise transaction costs of US$0.8
million included within Corporate expenditure (refer to note
5) and US$8.2 million in respect of
the redemption premium and acceleration of unamortised costs
included within Finance expense (refer to note 6).
9. Adjusted EPS is
stated before impairment charge, gain on extinguishment of Notes
net of unamortised costs, acceleration of unamortised costs
on Notes, Williamson tailings facility remediation costs and
accelerated depreciation, recovery of fees relating to
investigation and settlement of human rights abuse claims,
and net unrealised foreign exchange gains and losses, and excluding
taxation credit on net unrealised foreign exchange gains and
losses.
10. The 2026 US$336.7 million loan notes, originally issued
following the capital restructuring (the “Restructuring”) completed
during March 2021, have a carrying
value of US$241.7 million
(30 June 2022: US$366.2 million) which represents the
outstanding principal amount of US$210.2
million (after the early participation phase of the debt
tender offers as announced in September and October 2022) plus US$43.0
million of accrued interest and net of unamortised
transaction costs capitalised of US$11.5
million. Refer to Note 8 for further detail.
11. Bank loans and borrowings
represent the Group’s ZAR1 billion
(US$58.8 million) revolving credit
facility which remains undrawn and available.
During the FY2022, the South African banking facilities held
with the Group’s previous consortium of South African lenders were
settled and cancelled, comprising of the revolving credit facility
of ZAR404.6 million (US$24.9 million) (capital plus interest) and the
term loan of ZAR893.2 million
(US$54.9 million) (capital plus
interest).
12. Consolidated Net Debt is bank
loans and borrowings plus loan notes, less cash and less diamond
debtors.
13. Operational free cashflow is
defined as cash generated from operations less cash outflows on the
acquisition of property, plant and equipment.
14. Diamond inventory includes the
71,654.45 carat parcel of diamonds blocked for export during
August 2017, with a carrying value of
US$12.5 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. During February 2023, it has come to our attention that
a portion of the Blocked Parcel has been sold. We are engaging with
GoT to confirm the application of the proceeds.
Revenue
H1 FY 2023 amounted to US$212.1
million (H1 FY 2022: US$264.7
million), comprising revenue from rough diamond sales of
US$210.7 million (H1 FY 2022:
US$264.7 million) and additional
revenue from profit share agreements of US$1.4 million (H1 FY 2022: US$nil).
H1 FY 2023 revenue from rough diamond sales decreased 20% to
US$210.7 million (H1 FY 2022:
US$264.7 million) as result of no
sales of Exceptional Stones during the Period (H1 FY 2022
US$77.9 million), lower volumes sold
largely owing to reduced tonnages at Finsch and lower grades at the
Cullinan Mine, which was partially offset by improved product mix,
largely at the Cullinan Mine, and a 12.6% increase in like-for-like
diamond prices.
Mining and processing costs
The mining and processing costs for H1 FY 2023 comprised on-mine
cash costs as well as other operational expenses. A breakdown of
the total mining and processing costs for the Period is set out
below.
|
On-mine
cash costs1
US$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 |
Williamson tailings facility – remediation costs3
US$m |
Depreciation and amortisation4
US$m |
Total
mining and processing costs (IFRS)
US$m |
H1 FY
2023 |
128.4 |
3.7 |
(8.8) |
7.1 |
130.4 |
5.9 |
42.1 |
178.4 |
H1 FY
2022 |
129.8 |
3.4 |
(29.5) |
6.1 |
109.8 |
— |
43.1 |
152.9 |
FY
2022 |
272.3 |
14.6 |
0.5 |
19.7 |
307.1 |
— |
84.4 |
391.5 |
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. Remediation costs comprise costs
involved in establishing the root cause of the failure,
humanitarian relief to the affected community, livelihood- and
environmental restoration and costs to repair.
4. Includes
US$5.2 million of accelerated
depreciation at Williamson relating to assets damaged in the TSF
failure and amortisation of right-of-use assets under IFRS 16 of
US$1.7 million (H1 FY2022:
US$0.6 million and FY 2022:
US$2.3 million) and excludes
corporate / administration.
On-mine cash costs reduced by US$1.4
million (1.1%) compared to H1 FY 2022 and in line with
expectations, due to:
- The effect of translating ZAR denominated costs at the South
African operations at a weaker ZAR/USD average exchange rate (12.4%
decrease)
- Lower production volumes at South African operations (5.0%
decrease)
- Other cost savings, including reduction in on-mine costs due to
centralisation (3.4% decrease)
Offset by:
- Increase in Williamson cash costs compared to a lower prior
year base, following restart post-care and maintenance in H1 FY22
(12.0% increase)
- Inflationary increases (6.9% increase)
- Above-inflation increases associated with electricity costs
(0.8% increase)
Royalties increased to US$3.7
million (H1 FY 2022: US$3.4
million) driven by increased revenues from Williamson
compared to the prior period.
Adjusted profit from mining
activities
Adjusted profit from mining activities decreased 47% to
US$82.3 million (H1 FY 2022:
US$155.2 million), mainly due to no
sales of Exceptional Stones during the Period, the impact of lower
volumes at the Cullinan and Finsch Mines, and increased costs at
Williamson being in production for a period of almost five months
(prior to the tailings storage facility failure when operations at
the mine ceased) compared to three months in the comparative
period.
Adjusted corporate overhead – general
and administration
Corporate overhead (before depreciation and share based
payments) increased to US$5.4 million
for the Period (H1 FY 2022: US$4.9
million) mainly attributable to the increase in corporate
governance structures and costs associated with the Williamson IGM
process during the Period.
Adjusted EBITDA
Adjusted EBITDA, being profit from mining activities less
adjusted corporate overhead, decreased 49% to US$77.4 million (H1 FY 2022 US$150.9 million), representing an adjusted
EBITDA margin of 36% (H1 FY 2022: 57%) driven by the lower
production, increased mining costs and zero contribution from
Exceptional Stones.
Depreciation and amortisation
Depreciation and amortisation for the Period of US$42.4 million (H1 FY 2022: US$43.1 million), decreased due to lower
production and a weaking ZAR/USD, offset by the inclusion of
accelerated depreciation of US$5.2
million attributable to the assets written down at
Williamson as a result of the tailings storage facility
failure.
Impairment reversal / charge
As a result of the impairment reviews carried out at the Group’s
operating assets and other receivables during the Period, an
overall net impairment charge of US$3.8
million (H1 FY 2022: US$0.1
million impairment reversal) was recognised, comprising:
US$ million |
H1 FY 2023 |
H1 FY 2022 |
Asset class |
|
|
Impairment charge - property, plant
& equipment (Refer note 15) |
(0.3) |
(0.3) |
Impairment (charge)/reversal - other
current receivables (refer note 15) |
(3.5) |
0.4 |
Total |
(3.8) |
0.1 |
Impairment reviews carried out at the Cullinan, Finsch and
Williamson Mines did not result in
an impairment charge or reversal for operational assets during the
Period (H1 FY 2022: US$nil). Asset level impairment at
Koffiefontein amounted to US$0.3
million (H1 FY 2022: US$0.3
million), compared to the Group’s carrying value of
property, plant and equipment of US$615.3
million (H1 FY 2022: US$624.0
million) pre-impairment.
During the Period, an impairment charge of US$3.5 million (H1 FY 2022: US$0.4 million) relating to VAT receivable at
Williamson was recognised in the Consolidated Income Statement.
Net financial expense
Net financial expense of US$27.0
million (H1 FY 2022: US$44.9
million) comprises:
US$ million |
H1 FY 2023 |
H1 FY 2022 |
Net realised foreign exchange gain
on settlement of forward exchange contracts and foreign loans |
— |
8.8 |
Interest received on bank
deposits |
1.7 |
0.5 |
Net interest receivable on the BEE
partner loans and amortisation of lease liabilities in accordance
with IFRS 16 |
0.8 |
1.3 |
Offset by: |
|
|
Net realised foreign exchange loss
on settlement of forward exchange contracts and foreign loans |
(7.7) |
— |
Interest on the Group’s debt and
working capital facilities |
(13.6) |
(23.8) |
Unwinding of the present value
adjustment for Group rehabilitation costs |
(1.6) |
(3.0) |
Acceleration of unamortised bank
facility and Notes transaction costs |
(8.2) |
— |
Net unrealised foreign exchange
gains / (losses) |
1.6 |
(28.7) |
Net financial expense |
(27.0) |
(44.9) |
Tax credit / charge
The tax charge of US$14.2 million
(H1 FY 2022: US$13.6 million)
comprised a deferred tax charge of US$14.0
million (H1 FY 2022: US$24.3
million) and a net current tax charge of US$0.2 million (H1 FY 2022: US$nil). The tax
charge of US$14.2 million (H1 FY
2022: US$13.6 million) comprised a
deferred tax charge of US$14.2
million (H1 FY 2022: US$24.3
million) in respect of the utilisation of capital allowances
at the Cullinan Mine, Finsch and Williamson
Mines and US$0.2 million
deferred tax credit (H1 FY2022: US$11.1
million) relating to unrealised foreign exchange losses
during the Period, which reduced existing deferred tax liabilities,
with an income tax charge of US$0.2
million at Williamson for the Period (H1 FY 2021:
US$0.4 million at Finsch).
The current period effective tax rate is higher than the South
African tax rate of 27% (the Group’s primary tax paying
jurisdiction) primarily due to foreign exchange losses and
permanent differences as a result of the Koffiefontein impairment
and loss making companies (within the Group) where deferred tax
assets on operating losses are not recognised, which when
consolidated reduces the Group’s overall profit before tax
resulting in an increased effective tax rate.
Williamson Tailings Storage Facility
(TSF)
On 7 November 2022, the TSF wall
at the Williamson mine was breached, resulting in flooding away
from the pit which has extended into certain areas outside of the
mine lease area. As a result, remediation costs relating to the
incident have been incurred during the Period and additional costs
will be incurred going forward. The remediation costs comprise
establishing the root cause of the failure, humanitarian relief to
the affected community, livelihood and environmental restoration
and costs to repair.
In H1 FY 2023, US$1.5 million of
costs have been incurred and a further US$4.4 million of costs, comprising management’s
best estimate based on the current information available, has been
provided for ongoing remediation costs.
In addition, US$5.2 million of
accelerated depreciation was recognised in the Period to fully
write down assets damaged in the TSF breach.
Earnings per share
Basic loss per share from continuing operations of USc12.23 was
recorded (H1 FY 2022: USc22.29 profit).
Adjusted loss per share from continuing operations (adjusted for
impairment charges, transaction costs and accelerated unamortised
costs, taxation credit on net unrealised foreign exchange losses
and net unrealised foreign exchange gains and losses) of USc0.91
was recorded (H1 FY 2022: USc29.01 profit (adjusted for impairment
charges, taxation charge on net unrealised foreign exchange gains
and net unrealised foreign exchange gains and losses)).
Operational free cash flow
During the Period, operational free cash flow of US$11.7 million (H1 FY 2022: US$122.4 million) reflects the impact from an
increase in capital expenditure of US$32.4
million and a decrease in revenue from Exceptional Stones of
US$89.1 million. This cash flow
performance was further impacted by:
- US$6.4 million outflow (H1 FY
2022: US$4.8 million inflow) of net
realised foreign exchange gains/(losses) and cash finance expenses
net of finance income;
- US$2.7 million dividend paid to
BEE partners (H1 FY 2022: US$3.5
million).
Cash and Diamond Debtors
As at 31 December 2022, Petra had
cash at bank of US$146.6 million (H1
FY 2022: US$272.3 million). Of these
cash balances, US$130.4 million was
held as unrestricted cash (H1 FY 2022: US$256.7 million), US$15.4
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 2022: US$14.8 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 2022: US$0.8 million).
The decrease in cash balances is attributable to the repayment
to Noteholders, through a debt tender offer during the Period, of
US$144.6 million comprising the
principal amount of US$126.4 million
and PIK interest of US$18.2 million.
The principal amount of Notes outstanding after the repayments to
Noteholders is US$210,190,662. Cash
costs of US$1.4 million attributable
to the debt tender offer have been expensed in the Consolidated
Income Statement under finance expense (refer to Note 6).
Diamond debtors as at 31 December
2022 were US$4.9 million (H1
FY 2022: US$0.4 million).
Loans and Borrowings
The Group had loans and borrowings (measured under IFRS) at
Period end of US$241.7 million (H1 FY
2022: US$425.3 million) comprised of
US$210.2 million of Second Lien Notes
(including US$43.0 million of accrued
interest and unamortised transaction costs of US$11.5 million) and bank loans and borrowings of
US$nil (H1 FY 2022: US$78.6 million).
Bank debt facilities undrawn and available to the Group as at
31 December 2022 were US$58.8 million (H1 FY 2022: US$0.6 million). Refer to note 8 for further
details relating to the movement in loans and borrowings during the
Period.
Consolidated net debt as at 31 December
2022 was US$90.2 million (H1
FY2022: US$152.3 million).
Covenant Measurements attached to
banking facilities
The Company’s EBITDA-related covenants associated with its
banking facilities are as outlined below:
· To maintain a Consolidated Net Debt : Adjusted EBITDA ratio
tested semi-annually on a rolling 12-month basis
· To maintain an Interest Cover Ratio (ICR) tested semi-annually
on a rolling 12-month basis
· To maintain minimum 12 month forward looking liquidity
requirement that consolidated cash and cash equivalents (excluding
diamond debtors) shall not fall below US$20.0 million
The Company’s covenant levels, which have not been breached
during the Period under review, for the respective measurement
periods are outlined below:
|
FY22
H2 |
FY23
H1 |
FY23
H2 |
FY24
H1 |
FY24
H2 |
FY25
H1 |
FY25
H2 |
FY26
H1 |
Consolidated Net Debt
: EBITDA Leverage ratio (maximum) |
4.00 |
4.00 |
3.50 |
3.50 |
3.25 |
3.25 |
3.00 |
3.00 |
Interest Cover Ratio (ICR) (minimum) |
1.85 |
1.85 |
2.50 |
2.50 |
2.75 |
2.75 |
3.00 |
3.00 |
For further detail on the SA Lender facilities refer to Note 8
below.
Going concern considerations
The Board has reviewed the Group’s forecasts with various
sensitivities applied, for the 18 months to June 2024, 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 recognise 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. The
following sensitivities have been performed in assessing the
Group’s ability to operate as a going concern (in addition to the
Base Case) as at the date of this report:
- A 10% decrease in forecast rough diamond prices from
January 2023 to June 2024
- A 10% strengthening in the forecast South African Rand (ZAR)
exchange rate against the US Dollar from January 2023 to June
2024
- A 5% increase in operating costs from January 2023 to June
2024
- A US$15 million reduction in
revenue contribution from the effects of product mix and/or
Exceptional Stones
- Combined sensitivity: prices down 10% and ZAR stronger by 10%,
reduced contribution from Exceptional Stones and operating costs up
5%
Under all the cases, the forecasts indicate that the Group’s
liquidity outlook over the 18-month period to December 2024 remains strong, even when applying
the above sensitivities to the base case forecast.
The forward-looking covenant measurements associated with the
new First Lien (1L) facility do not indicate any breaches during
the 18-month review period for the base case as well as all the
above sensitivities when considered on a stand-alone basis. The
combined sensitivity shows a covenant breach for the required ICR
in the June 2024 measurement period.
While the ICR is projected to be breached in this combined
sensitivity, neither the Consolidated Net Debt : EBITDA covenant
nor the liquidity covenant is projected to be breached, while the
revolving credit facility (RCF) remains undrawn. It is therefore
assumed that the RCF remains available on the expectation that the
1L lender will agree to an ICR covenant waiver given that the Group
does not expect to utilise the RCF for servicing of its Second Lien
(2L) interest obligations. Furthermore, this potential ICR breach
may be cured by means of cost savings and revenue enhancing
opportunities through, for example, entering into partnership
agreements on the sale of high-value or Exceptional stones.
As a result, the Board concluded that there are no material
uncertainties that would cast doubt on the Company continuing as a
going concern. See ‘Basis of preparation including going
concern’ in the Financial Statements for further information.
Capex and Production
Total Group capex for the Period increased to US$51.9 million (H1 FY 2022: US$16.7 million), comprising:
- US$38.2 million expansion capex
(H1 FY 2022: US$11.7 million)
- US$13.7 million sustaining capex
(H1 FY 2022: US$5.0 million)
Capex
(US$m) |
H1 FY
2023 |
H1 FY
2022 |
Cullinan |
23.3 |
12.5 |
Finsch |
23.1 |
2.5 |
Williamson |
3.2 |
0.8 |
Koffiefontein |
0.3 |
0.3 |
|
|
|
Subtotal – capex
incurred by operations |
49.9 |
16.1 |
Corporate |
2.0 |
0.6 |
Total Group
capex |
51.9 |
16.7 |
Group Production Summary
Below is a summary of the Group production for the Period,
further detail can be obtained from the H1 FY2023 Operating update
released on 16 January 2023.
Production |
|
H1 FY
2023 |
H1 FY
2022 |
ROM tonnes |
Tonnes |
5,240,992 |
5,401,532 |
Tailings and other
tonnes |
Tonnes |
198,090 |
238,292 |
Total tonnes
treated |
Tonnes |
5,439,082 |
5,639,824 |
|
|
|
|
ROM diamonds |
Carats |
1,337,931 |
1,649,989 |
Tailings and other
diamonds |
Carats |
61,818 |
127,435 |
Total
diamonds |
Carats |
1,399,749 |
1,777,424 |
|
|
|
|
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 FY 2023:
H1 |
External Risks |
|
|
|
|
1. Rough diamond
price |
High |
Medium |
Long term |
No Change – The
third tender for FY 2023 saw a 2.2% increase in like-for-like
prices compared to the second tender, reversing the trend of the
previous two tenders. An upward movement of prices in the 2ct
to 10ct size ranges, as a likely result of the festive season and
easing of lockdown restrictions in China, more than offset softer
pricing in the 0.75ct to 2ct ranges. While some
volatility is expected in pricing in the short-term given the
ongoing macroeconomic situation, we remain encouraged by the
supportive diamond market resulting from the projected supply
deficit in the medium to longer term. |
2. Currency |
High |
Medium |
Long term |
No change - The
ZAR/USD rate weakened during H1 FY 2023, opening at R16.44 and
ending the six-month period at R17.00 and this provided some
support for Petra. The IMF’s recent positive sentiments on
global growth (as China eases its zero-COVID policies and greater
resilience is shown to impact higher inflation/interest rates
despite the ongoing war in Ukraine) may drive the strength of
emerging market currencies, though this remains to be seen for
South Africa’s Rand. |
3. Country
and political |
High |
Medium |
Long term |
No
change – The risk of political instability remains in South
Africa. In addition, rolling blackouts as a result of
load-shedding (electricity outages), continue due to the inability
of South Africa’s electricity provider to service the population
and businesses.
It has come to our attention that a portion of the c.71kct parcel
seized by the Government of Tanzania (“GoT”) in 2017 has recently
been sold. The proceeds of this parcel are required to be allocated
to WDL under the Framework Agreement with the GoT. We are engaging
with the GoT to confirm the application of the Blocked Parcel
proceeds. |
4. COVID-19 pandemic (operational
impact) |
Medium |
Low |
Short to medium term |
No change –
Despite the emergence of a new, more transmissible sub-variant,
COVID-19 levels at Petra’s operations have remained low during H1
FY 2023. The impact of COVID 19 infections continues to have
no significant effect on our operations or sales processes at this
time. |
Strategic Risks |
|
|
|
|
5. Group Liquidity |
Medium |
Medium |
Short to long term |
Higher - Whilst the Group’s balance sheet was strengthened
through the repurchase of the Company’s loan notes totalling
US$145m, resulting in annual interest savings of c. US$14 million,
the Group has experienced operational challenges, including lower
grades experienced at the Cullinan Mine which are now expected to
continue through FY 2024 and lower tonnes mined at Finsch in H1 FY
2023, which impact Petra’s liquidity position.
A number of ongoing mitigating actions are being taken to address
these challenges. Halting operations at Koffiefontein and
placing the mine on care and maintenance will have a positive
impact on liquidity for the Group. |
6. Licence to operate: regulatory
and social impact & community relations |
Medium |
High |
Long term |
Higher – In light of operations at Koffiefontein having
ceased and consultations taking place regarding placing the mine on
care and maintenance, increasing community tensions have led to
disagreements on the viability and delivery of certain projects
that are required to be implemented under Social and Labour Plans.
Management has conducted extensive engagements between local
communities, the DMRE and the local municipality to resolve these
issues.
At Williamson, the IGM became operational at the end of November
2022 with the commencement of the pilot scheme.
Whilst no fatalities or serious injuries were reported after the
TSF breach at Williamson, the livelihoods of a number of community
members were affected. An assessment of the impact on the
surrounding communities and potential remediation is currently
nearing completion. The TSF breach has resulted in WDL providing
immediate humanitarian relief to those affected and work is
underway to develop an Entitlement Framework that will enable
community members who have been impacted by the TSF breach to be
appropriately compensated. |
Operating Risks |
|
|
|
|
7. Mining; production
(including ROM grade and product mix volatility) |
Medium |
High |
Long term |
Higher – Lower
grades at the Cullinan Mine are now expected to continue through FY
2024. This is attributable to the C-Cut cave maturity as the cave
progresses from SW to NE and the earlier than anticipated waste
ingress from the overlying depleted mining blocks. Several
mitigating actions are underway to address these grade issues,
including:
• Tailings treatment has been optimised but
is not in isolation sufficient to address the grade
reduction.
• The re-opening of Tunnels 36 (which
has already commenced) and 41 and the establishment of Tunnels 46
and 50 (the development of which have recently been approved by the
Board) will provide additional volume from FY 2025 and more than
offset the impact of lower grades in FY 2023/24.
• Production from the CC1E project will
contribute meaningfully from FY 2025 and is expected to see grades
move back towards 40cpht.
Finsch’s production target fell short of guidance largely
attributable to low machine availability owing to an ageing
underground fleet, challenges with the centralised blasting system
and emulsion quality and an extended rock-winder breakdown.
As noted above, production at Williamson has been suspended for the
remainder of FY 2023 due to the TSF breach and a restart is reliant
on the implementation of an interim TSF, with operations
anticipated to restart in Q1 FY 2024.
Operations at Koffiefontein have ceased in light of consultations
to place the mine on care and maintenance.
As a result of the above events, Group production guidance has been
lowered to c. 2.8 Mcts for FY 2023 and 3.0 to 3.3 Mcts for FY
2024. |
|
8. Labour relations |
Medium |
Medium |
Short to medium term |
No Change –
Stable labour relations were experienced at all operations
throughout H1 FY23. For FY 2023, the Group has introduced a
quarterly production bonus scheme for lower band employees to
ensure alignment with other incentive structures across the
Group.
A Collective Bargaining Agreement with TAMICO, the majority union
at Williamson, was signed in November 2022.
A statutory consultation process is underway with employees
regarding placing Koffiefontein in care and maintenance which would
result in the retrenchment of the mine’s workforce. |
|
9. Safety |
Medium |
Medium |
Short to medium term |
Higher – LTIFR
and LTIs marginally increased to 0.19 and 7 respectively in
comparison to H1 FY 2022. FY 2023 YTD safety indicators show a
declining trend. Remedial actions and behaviour intervention
programmes with various focus areas have been launched to address
this trend. |
10. Environment |
Medium |
Medium |
Long term |
Higher – Following the TSF breach at Williamson on 7
November 2022, significant work has been undertaken to contain the
breach, determine the extent of the environmental impact and
commence environmental remediation. An investigation is being
conducted to determine the root cause of the TSF breach. WDL
continues to engage with Tanzania’s environmental regulator
(National Environment Management Council) regarding the breach.
No significant changes in terms of environmental impacts were
observed for the SA operations in H1 FY2023. |
11. Climate Change |
High |
Medium |
Long term |
No
Change – Management continues to monitor progress against
annual climate change targets set for on-mine water and electricity
consumption and efficiency.
Petra is looking to formulate and implement a renewables strategy
that will be key in enabling Petra to reach its 2030 interim
target of a 35-40% reduction in Scope 1 & 2 emissions (against
Petra’s 2019 baseline). |
12. Supply Chain
Governance |
Medium |
High |
Short to medium term |
Higher – Progress was made in the Supply Chain function to
address various gaps which included: (1) reviewing the Group’s
Supply Chain policy to improve compliance, governance and risk
management, (2) improving procurement, tender and supplier
registration procedures and (3) filling critical roles in the
function. An online due diligence platform, administered by an
external third party, went live in December 2022 to improve the
vetting and screening of suppliers.
An independent external expert was engaged to conduct a gap
analysis of existing Supply Chain processes and systems and this
has resulted in management formulating action plans to address
areas that require improvement. |
13. Capital Projects |
Medium |
High |
Short to medium term |
Higher – For the
CC1E Project at the Cullinan Mine and the Lower Block 5 3 Levels
SLC at Finsch, management have initiated various mitigating actions
led by intensive safety inventions and expediting Trackless Mining
Machinery and drill rig availability to address the risk of both
projects falling behind project plans. Alternate labour sourcing
strategies are also being considered. |
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE 6 MONTH PERIOD ENDED 31 DECEMBER
2022
US$ million |
Notes |
(Unaudited)
1 July 2022- 31
December 2022 |
|
(Unaudited)
1 July 2021- 31
December 2021 |
|
(Audited)
Year ended
30 June
2022 |
Revenue |
|
212.1 |
|
264.7 |
|
585.2 |
|
|
|
|
|
|
|
Mining and processing costs |
|
(178.4) |
|
(152.9) |
|
(391.5) |
Other direct income / expense |
|
0.6 |
|
0.3 |
|
(0.8) |
Corporate expenditure including
settlement costs |
5 |
(7.4) |
|
(5.2) |
|
(14.1) |
Other corporate income |
|
0.5 |
|
0.6 |
|
0.6 |
Impairment (charge) / reversal of
non-financial assets |
15 |
(0.3) |
|
(0.3) |
|
21.1 |
Impairment (charge) / reversal of
other receivables |
15 |
(3.5) |
|
0.4 |
|
(1.5) |
Total operating costs |
|
(188.5) |
|
(157.1) |
|
(386.2) |
|
|
|
|
|
|
|
Financial income |
6 |
25.8 |
|
11.4 |
|
19.0 |
Financial expense |
6 |
(52.8) |
|
(56.3) |
|
(92.1) |
(Loss) / profit before
tax |
|
(3.4) |
|
62.7 |
|
125.9 |
Income tax charge |
|
(14.2) |
|
(13.6) |
|
(37.8) |
(Loss) / profit for the
Period |
|
(17.6) |
|
49.1 |
|
88.1 |
|
|
|
|
|
|
|
Attributable to: |
|
|
|
|
|
|
Equity holders of the parent
company |
|
(23.7) |
|
43.2 |
|
69.0 |
Non-controlling interest |
|
6.1 |
|
5.9 |
|
19.1 |
|
|
(17.6) |
|
49.1 |
|
88.1 |
|
|
|
|
|
|
|
Profit per share attributable to
the equity holders of the parent during the Period: |
|
|
|
|
|
|
Continuing operations: |
|
|
|
|
|
|
Basic (loss) / earnings per
share – US cents |
13 |
(12.23) |
|
22.29 |
|
35.53 |
Diluted (loss) / earnings per
share – US cents |
13 |
(12.23) |
|
22.29 |
|
35.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 6 MONTH PERIOD ENDED 31 DECEMBER
2022
US$ million |
|
(Unaudited)
1 July 2022- 31
December 2022 |
|
(Unaudited)
1 July 2021- 31
December 2021 |
|
(Audited)
Year ended
30 June
2022 |
(Loss) / profit for the Period |
|
(17.6) |
|
49.1 |
|
88.1 |
Exchange differences on translation
of the share-based payment reserve |
|
— |
|
— |
|
(0.3) |
Exchange differences on other
reserves |
|
— |
|
— |
|
— |
Exchange differences on translation
of foreign operations1 |
|
(18.1) |
|
(44.6) |
|
(46.8) |
Exchange differences on
non-controlling interest1 |
|
(0.5) |
|
0.3 |
|
(0.4) |
Total comprehensive (loss) / income
for the Period |
|
(36.2) |
|
4.8 |
|
40.6 |
Total comprehensive income and
expense attributable to: |
|
|
|
|
|
|
Equity holders of the
parent company |
|
(41.8) |
|
(1.4) |
|
21.9 |
Non-controlling interest |
|
5.6 |
|
6.2 |
|
18.7 |
|
|
(36.2) |
|
4.8 |
|
40.6 |
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 2022
US$ million |
Notes |
(Unaudited)
31 December 2022 |
|
(Unaudited)
31 December 2021 |
|
(Audited)
30 June
2022 |
ASSETS |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
Property, plant and equipment |
7 |
620.2 |
|
626.6 |
|
633.2 |
Right-of-use assets |
|
20.0 |
|
26.8 |
|
21.9 |
BEE loans and receivables |
11 |
38.2 |
|
43.1 |
|
44.6 |
Other receivables |
2 |
5.1 |
|
1.8 |
|
2.6 |
Total non-current assets |
|
683.5 |
|
698.3 |
|
702.3 |
Current assets |
|
|
|
|
|
|
Trade and other receivables |
|
24.7 |
|
26.2 |
|
49.8 |
Inventories |
|
81.7 |
|
97.5 |
|
70.6 |
Cash and cash equivalents (including
restricted amounts) |
|
146.6 |
|
272.3 |
|
288.2 |
Total current assets |
|
253.0 |
|
396.0 |
|
408.6 |
Total assets |
|
936.5 |
|
1,094.3 |
|
1,110.9 |
EQUITY AND LIABILITIES |
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
Share capital |
12 |
145.7 |
|
145.7 |
|
145.7 |
Share premium account |
12 |
609.5 |
|
959.5 |
|
959.5 |
Foreign currency translation
reserve |
|
(467.0) |
|
(446.7) |
|
(448.9) |
Share-based payment reserve |
|
2.8 |
|
1.9 |
|
1.9 |
Other reserves |
|
(0.8) |
|
(0.8) |
|
(0.8) |
Accumulated reserves / (losses) |
12 |
142.7 |
|
(210.1) |
|
(183.6) |
Attributable to equity holders of
the parent company |
|
432.9 |
|
449.5 |
|
473.8 |
Non-controlling interest |
|
0.5 |
|
(7.8) |
|
4.7 |
Total equity |
|
433.4 |
|
441.7 |
|
478.5 |
Liabilities |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
Loans and borrowings |
8 |
221.1 |
|
398.0 |
|
353.9 |
Provisions |
|
97.3 |
|
96.0 |
|
97.7 |
Lease liabilities |
|
17.8 |
|
23.6 |
|
19.2 |
Deferred tax liabilities |
|
82.4 |
|
55.3 |
|
71.3 |
Total non-current
liabilities |
|
418.6 |
|
572.9 |
|
542.1 |
Current liabilities |
|
|
|
|
|
|
Loans and borrowings |
8 |
20.6 |
|
27.3 |
|
12.3 |
Lease liabilities |
|
3.0 |
|
3.2 |
|
3.2 |
Trade and other payables |
|
56.5 |
|
49.2 |
|
74.8 |
Provisions |
2 |
4.4 |
|
— |
|
— |
Total current
liabilities |
|
84.5 |
|
79.7 |
|
90.3 |
Total liabilities |
|
503.1 |
|
652.6 |
|
632.4 |
Total equity and
liabilities |
|
936.5 |
|
1,094.3 |
|
1,110.9 |
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER
2022
US$ million |
Notes |
(Unaudited)
1 July 2022- 31
December 2022 |
|
(Unaudited)
1 July 2021- 31
December 2021 |
|
(Audited)
Year ended
30 June
2022 |
(Loss) / profit before taxation
for the Period |
|
(3.4) |
|
62.7 |
|
125.9 |
Depreciation of property plant and
equipment |
|
40.5 |
|
42.9 |
|
82.8 |
Amortisation of right-of-use
asset |
|
1.9 |
|
0.6 |
|
2.5 |
Impairment charge – non financial
assets |
15 |
0.3 |
|
0.3 |
|
(21.1) |
Impairment charge / (reversal) –
other receivables |
15 |
3.5 |
|
(0.4) |
|
1.5 |
Movement in provisions |
|
4.3 |
|
(3.3) |
|
1.6 |
Dividend received from BEE
partner |
|
(0.5) |
|
(0.6) |
|
(0.6) |
Financial income |
6 |
(25.8) |
|
(11.4) |
|
(19.0) |
Financial expense |
6 |
52.8 |
|
56.3 |
|
92.1 |
Profit on disposal of property,
plant and equipment |
|
— |
|
0.1 |
|
1.5 |
Share based payment provision |
|
0.9 |
|
0.1 |
|
1.1 |
Operating profit before working
capital changes |
|
74.5 |
|
147.3 |
|
268.3 |
Decrease / (increase) in trade and
other receivables |
|
15.7 |
|
25.3 |
|
(7.1) |
(Decrease) / increase in trade and
other payables |
|
(15.0) |
|
(2.2) |
|
24.5 |
Increase in inventories |
|
(12.6) |
|
(29.5) |
|
(1.7) |
Cash generated from
operations |
|
62.6 |
|
140.9 |
|
284.0 |
Net realised gains on foreign
exchange contracts |
|
4.1 |
|
8.7 |
|
12.6 |
Finance expense |
|
(0.4) |
|
(4.4) |
|
(6.3) |
Income tax received / (paid) |
|
0.3 |
|
(0.4) |
|
(7.8) |
Net cash generated from operating
activities |
|
66.6 |
|
144.8 |
|
282.5 |
Cash flows from investing activities |
|
|
|
|
|
|
Acquisition of
property, plant and equipment |
|
(50.9) |
|
(18.5) |
|
(54.0) |
Proceeds from sale of property,
plant and equipment |
|
— |
|
0.1 |
|
— |
Loan repayment from BEE
partners |
|
— |
|
0.4 |
|
0.2 |
Dividend paid to BEE partners |
|
(2.7) |
|
(3.5) |
|
(3.5) |
Dividend received from BEE
partners |
|
0.5 |
|
0.6 |
|
0.6 |
Repayment from KEMJV |
|
0.3 |
|
1.9 |
|
2.5 |
Finance income |
|
1.7 |
|
0.5 |
|
1.3 |
Net cash utilised in investing
activities |
|
(51.1) |
|
(18.5) |
|
(52.9) |
Cash flows from financing
activities |
|
|
|
|
|
|
Cash paid on lease liabilities |
|
(2.4) |
|
(0.8) |
|
(3.2) |
Net realised foreign exchange loss
on settlement of foreign currency loans |
|
(11.8) |
|
— |
|
— |
Repayment of borrowings (including
Notes redemption premium of US$1.4 million; 31 December 2021:
US$nil; 30 June 2022: US$nil) |
8 |
(146.1) |
|
(14.4) |
|
(98.2) |
Net cash utilised by financing
activities |
|
(160.3) |
|
(15.2) |
|
(101.4) |
|
|
|
|
|
|
|
Net (decrease) / increase in cash
and cash equivalents |
|
(144.8) |
|
111.1 |
|
128.2 |
Cash and cash equivalents at
beginning of the Period |
|
271.9 |
|
156.9 |
|
156.9 |
Effect of exchange rate fluctuations
on cash held |
|
3.3 |
|
(11.3) |
|
(13.2) |
Cash and cash equivalents at end
of the Period1 |
|
130.4 |
|
256.7 |
|
271.9 |
1. Cash and cash equivalents in the
Consolidated Statement of Financial Position includes restricted
cash of US$16.2 million (30 June 2022: US$16.3
million and 31 December 2021:
US$15.6 million) and unrestricted
cash of US$130.4 million
(30 June 2022: US$271.9 million and 31
December 2021: US$256.7
million).
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER
2022
|
|
|
|
|
|
|
|
|
|
(Unaudited)
US$ million |
Share
capital |
Share
premium
account |
Foreign
currency
translation
reserve |
Share-based
payment
reserve |
Other
reserves |
Accumulated reserves /
(losses) |
Attributable
to the
parent |
Non-controlling
interest |
Total
equity |
Six month Period ending 31 December
2022: |
|
|
|
|
|
|
|
|
|
At 1 July 2022 |
145.7 |
959.5 |
(448.9) |
1.9 |
(0.8) |
(183.6) |
473.8 |
4.7 |
478.5 |
(Loss) / profit for the Period |
— |
— |
— |
— |
— |
(23.7) |
(23.7) |
6.1 |
(17.6) |
Other comprehensive (expense) /
income |
— |
— |
(18.1) |
— |
— |
— |
(18.1) |
(0.5) |
(18.6) |
Conversion of share premium (refer
note 12) |
— |
(350.0) |
— |
— |
— |
350.0 |
— |
— |
— |
Dividend paid to Non-controlling
interest shareholders |
— |
— |
— |
— |
— |
— |
— |
(9.8) |
(9.8) |
Equity settled share based
payments |
— |
— |
— |
0.9 |
— |
— |
0.9 |
— |
0.9 |
At 31 December 2022 |
145.7 |
609.5 |
(467.0) |
2.8 |
(0.8) |
142.7 |
432.9 |
0.5 |
433.4 |
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER
2022
|
|
|
|
|
|
|
|
|
|
(Unaudited)
US$ million |
Share
capital |
Share
premium
account |
Foreign
currency
translation
reserve |
Share-based
payment
reserve |
Other
reserves |
Accumulated losses |
Attributable
to the
parent |
Non-controlling
interest |
Total
equity |
Six month Period ending 31 December
2021: |
|
|
|
|
|
|
|
|
|
At 1 July 2021 |
145.7 |
959.5 |
(402.1) |
1.8 |
(0.8) |
(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) |
— |
— |
— |
(44.6) |
0.3 |
(44.3) |
Dividend paid to Non-controlling
interest shareholders |
— |
— |
— |
— |
— |
— |
— |
(3.5) |
(3.5) |
Equity settled share based
payments |
— |
— |
— |
0.1 |
— |
— |
0.1 |
— |
0.1 |
At 31 December 2021 |
145.7 |
959.5 |
(446.7) |
1.9 |
(0.8) |
(210.1) |
449.5 |
(7.8) |
441.7 |
|
|
|
|
|
|
|
|
|
|
PETRA DIAMONDS LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER
2022
|
|
|
|
|
|
|
|
|
|
(Unaudited)
US$ million |
Share
capital |
Share
premium
account |
Foreign
currency
translation
reserve |
Share-based
payment
reserve |
Other
reserves |
Accumulated losses |
Attributable
to the
parent |
Non-controlling
interest |
Total
equity |
Year ended 30 June 2022: |
|
|
|
|
|
|
|
|
|
At 1 July 2021 |
145.7 |
959.5 |
(402.1) |
1.8 |
(0.8) |
(253.3) |
450.8 |
(10.5) |
440.3 |
Profit for the Year |
— |
— |
— |
— |
— |
69.0 |
69.0 |
19.1 |
88.1 |
Other comprehensive expense |
— |
— |
(46.8) |
(0.3) |
— |
— |
(47.1) |
(0.4) |
(47.5) |
Dividend paid to Non-controlling
interest shareholders |
— |
— |
— |
— |
— |
— |
— |
(3.5) |
(3.5) |
Equity settled share based
payments |
— |
— |
— |
1.1 |
— |
— |
1.1 |
— |
1.1 |
Transfer between reserves: |
— |
— |
— |
(0.7) |
— |
0.7 |
— |
— |
— |
At 30 June 2022 |
145.7 |
959.5 |
(448.9) |
1.9 |
(0.8) |
(183.6) |
473.8 |
4.7 |
478.5 |
NOTES TO THE CONDENSED CONSOLIDATED
INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED
31 DECEMBER 2022
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 2022 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
2022, and any public announcements made by the Group during
the interim reporting period. The annual financial report for the
year ended 30 June 2022 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 2022 unless
otherwise noted.
Basis of preparation including going
concern
Going concern
The six-month period to 31 December
2022 delivered US$77.4 million
in adjusted EBITDA and US$11.7
million in operational free cash flow for the Group, while
Consolidated Net Debt reduced from $40.6
million as at 30 June 2022 to
US$90.2 million at 31 December 2022.
Production
The first half of FY23 saw all of the Petra operations deal with
operational challenges. The Cullinan Mine experienced lower grades
in the block cave on account of accelerated waste ingress,
resulting in lower ROM carats being recovered, while also lowering
the ROM carats production for the remainder of FY23 and FY24.
Several mitigation steps are currently being investigated to
minimise the impact of the lower grade. These include re-opening of
T36 & T41, while also evaluating the addition of two more
tunnels (T46&T50) adjacent to the current C-Cut centre.
Finsch experienced production challenges as a result of machine
availability owing to an aging underground fleet, challenges with
the centralised blasting system and emulsion quality and an
extended rock-winder breakdown. Several mitigation steps were
implemented at Finsch, such as new underground equipment being
delivered and commissioned, coupled with positive changes to the
blasting process, the introduction of new long hole drill rigs and
Load Haul Dump (LHDs) loaders as well as the appointment of
individuals to a number of key positions. Furthermore, the 3-Level
SLC project scope was amended to 90L, which adds additional
production tonnes to the Life of Mine plan. The mitigation steps
undertaken are expected to limit the lower production to FY23, with
FY24 expected to deliver as per previous guidance, while the new
project is expected to add value beyond this Going Concern
assessment period.
Williamson performed well throughout FY2023 until the Tailings
Storage Facility incident in the first week of November 2022. Production has been suspended
until the new tailings storage facility is completed. It is assumed
that production will only commence in July
2023. Progress is also being made in closing out the
Framework Agreement with the Government of Tanzania and the MoU with Caspian).
Following the unsuccessful sales process during the Period,
production at Koffiefontein was stopped in November 2022 and the operation has subsequently
been placed on care and maintenance.
Diamond prices and diamonds market
Diamond prices continued their upward trend, with a 12.7%
increase on a like-for-like basis compared H1 FY22. While the
Cullinan Mine did not contribute revenue from exceptional stones
(>US$5.0 million), it has
generated a robust $/ct price on account of a strong product mix,
including several high value single stones that did not
individually breach the US$5.0
million threshold.
Diamond prices are now the highest since the peaks experienced
in 2011/2012. In general, the market continues to be supported by a
fundamental supply deficit, with robust demand recovery experienced
post COVID-19. From a demand perspective, the Chinese lockdown had
potentially moderated demand for certain categories of polished
goods, while the rising inflation and interest rate cycles may
impact disposable income and therefore further moderate/reduce
short-term demand for diamonds. This may lead to some short-term
price volatility, but the medium-long term supply/demand
fundamentals are expected to support the diamond price outlook.
Williamson framework agreement and MoU
The Group announced that it had entered into a framework
agreement with the Government of Tanzania in December
2021, which sets out key principles on the economic benefit
sharing amongst WDL shareholders, treatment of outstanding VAT
balances, the allocation of proceeds of 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 will become effective upon completion of
certain suspensive conditions. At the same time, Petra also
announced entering into a non-binding Memorandum of Understanding
(MoU) with Caspian Ltd to sell 50% (less 1 share) of Petra’s
indirect stake in WDL for a purchase consideration of US$15 million.
Bond tender offer and South African banking facilities
During the Period, the Group carried out a successful tender
offer to its Noteholders, repaying the Noteholders US$144.6 million (principal plus interest),
utilising existing cash reserves at the time, resulting in the
deleveraging of the gross debt balances within the Group.
The Group’s ZAR 1 billion senior
Revolving Credit Facility (RCF) facility remains undrawn at
31 December 2022, with the Group
having access to the full ZAR 1
billion (US$58.8 million).
The factors above, coupled with the further significant progress
towards stabilising the Group’s balance sheet positions the Group
well for this Going Concern period.
Forecast liquidity and covenants
The Board has reviewed the Group’s forecasts with various
sensitivities applied for the 18 months to June 2024, 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. The
following sensitivities have been performed in assessing the
Group’s ability to operate as a going concern (in addition to the
Base Case) at the date of this report:
- a 10% decrease in forecast rough diamond prices from
January 2023 to June 2024
- a 10% strengthening in the forecast South African Rand (ZAR)
exchange rate from January 2023 to
June 2024
- a 5% increase in Operating Costs from July 2022 to Dec
2023
- a US$15 million reduction in
revenue contribution from the effects of product mix and/or from
Exceptional Stones
- Combined sensitivity: Prices down 10% and ZAR stronger by
10% and Exceptional Stones contributions reduced by US$15 million and Operating Costs up 5%
Under all the cases, the forecasts indicate the Group’s
liquidity outlook over the 18-month period to June 2024 remains strong, even when applying the
above 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 for the base case as well as all the above
sensitivities, except for the worse case combined sensitivity,
which shows a covenant breach for the required interest cover ratio
in the June 2024. While the ICR is
projected to be breached in this combined sensitivity, both the Net
Debt : EBITDA covenant and the liquidity covenant remain healthy,
while the RCF remains undrawn. It is therefore assumed that the RCF
remains available, with the 1L lender assumed to agree to an ICR
covenant waiver, given that the Group does not expect to utilise
the RCF for servicing of its 2L interest obligations. Furthermore,
this potential ICR breach may be cured by means of cost savings and
revenue enhancing opportunities through entering into partnership
agreements on the sale of Exceptional stones.
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 2022 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 2022 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
Mines
The impairment tests for the Cullinan, Finsch and Williamson Mines indicated no further impairment
charges or reversals 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$615.3
million (pre-impairment). This follows US$21.1 million impairment reversal recognised at
30 June 2022 (comprising
Koffiefontein impairment charge of US$0.3
million and a Group level impairment reversal relating to
Williamson, previously recognised under IFRS 5, of US$21.4 million as Williamson was no longer
considered an asset held for sale.) on a carrying value of the
Group’s property, plant and equipment of US$608.2 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$12.5 million (30 June
2022: US$12.5 million and
31 December 2021: US$10.6 million) in the Statement of Financial
Position in respect of the Williamson mine’s confiscated diamond
parcel. The diamond inventory parcel was written up from the net
realisable value of prior periods to historical cost during FY2022.
The recommencing of operations and the sales tenders at Williamson
during the FY 2022 provided additional information for management
to assess the value of the diamond parcel and was the basis used to
revalue the diamond parcel to the lower of cost or net realisable
value. 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
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 GoT agrees to
allocate proceeds from the sale of the Parcel to Williamson
Diamonds Limited (“WDL”). Post period end, the Company was informed
that a portion of the Parcel was sold and the Company is engaging
with the GoT to confirm the application of the proceeds. For
further details refer to note 18.
While these engagements between the Company and the GoT are
ongoing, 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, WDL will derive future economic benefit from
the sale proceeds of the parcel (both the portion already sold and
any portion that is yet to be sold).
Recoverability of VAT in Tanzania
The Group has VAT receivable of US$5.1
million (30 June 2022:
US$2.6 million and 31 December 2021: US$1.8
million) in respect of the Williamson mine, all of which are
past due and have therefore been classified, after provision
including amounts related to providing for a time-value of money
inclusive of risk adjustments for various factors, as non-current
given the potential delays in receipt.
The VAT receivable as at 31 December
2022, can be split into two identifiable component time
periods as set out below:
31 December 2022
US$ million |
VAT Receivable |
Provision |
Carrying value |
Pre July 2017 and Post June
2020 |
14.6 |
(9.5) |
5.1 |
|
14.6 |
(9.5) |
5.1 |
31 December 2021
US$ million |
VAT Receivable |
Provision |
Written off |
Carrying value |
July 2017 to June 2020 |
26.9 |
— |
(26.9) |
— |
Pre July 2017 and Post June
2020 |
4.4 |
(2.6) |
— |
1.8 |
|
31.3 |
(2.6) |
(26.9) |
1.8 |
30 June 2022
US$ million |
VAT Receivable |
Provision |
Written off |
Carrying value |
July 2017 to June 2020 |
26.9 |
— |
(26.9) |
— |
Pre July 2017 and Post June
2020 |
8.6 |
(6.0) |
— |
2.6 |
|
35.5 |
(6.0) |
(26.9) |
2.6 |
Pre July
2017 and Post June 2020
An amount of US$14.6 million
(30 June 2022: US$8.6 million and 31
December 2021: US$4.4 million)
of VAT is receivable for the period for the period pre July 2017 and subsequent to 1 July 2020. The Group is considering various
alternatives in pursuing payment in accordance with legislation. A
provision of US$9.5 million
(30 June 2022: US$6.0 million and 31
December 2021: US$2.6
million), given the uncertainty around the timing of
receipts of the amount outstanding, has been provided for against
the US$14.6 million (30 June 2022: US$8.6
million and 31 December 2021:
US$4.4 million) receivable resulting
in a carrying value of US$5.1 million
(30 June 2022: US$2.6 million and 31
December 2021: US$1.8
million).
While the remaining pre July 2017
and post 1 July 2020 VAT balance is
considered recoverable, significant uncertainty exists regarding
the timing of receipt. A discount rate of 14.00% inclusive of
estimated country credit risk has been applied to the expected cash
receipts. A 1% increase in the discount rate would increase the
provision by US$0.3 million and a one
year delay would increase the provision by US$0.6 million.
During the Period, an impairment charge of US$3.5 million (30 June
2022: US$4.1 million and
31 December 2021: US$0.7 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, no expected
credit loss reversal was recognised in the respective periods. For
further detail refer to note 11.
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. Refer to note 15 for further detail on the
assumptions.
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.
Williamson Tailings Storage
Facility
On 7 November 2022, the tailings
storage facility at the Williamson mine was breached, resulting in
flooding away from the pit which has extended into certain areas
outside of the mine lease area. As a result, remediation costs
relating to the incident have been incurred during the Period and
additional costs will be incurred going forward. The remediation
costs comprise establishing the root cause of the failure,
humanitarian relief to the affected community, livelihood and
environmental restoration and costs to repair. Judgement has been
applied by Management in assessing the future remediation costs.
Management have considered the current work streams, the estimated
time of completion and appropriate information received from
suppliers and contractors involved in the remediation
process.
In H1 FY2023, US$4.4 million of
costs, comprising management’s best estimate based on the current
information available, has been provided for in respect of ongoing
remediation costs.
Other key estimates and judgements
In addition to the key estimates and judgements disclosed above,
the following estimates and judgements have not significantly
changed from those disclosed in the FY 2022 Annual Report and will
be discussed in further detail in the FY 2023 Annual Report:
- Provision for rehabilitation
- Inventory and inventory stockpile
- Depreciation
- Pension and post-retirement medical fund schemes
- Net investments in foreign operations
- Taxation
3.
DIVIDENDS
No dividends have been declared in respect of the current Period
under review (30 June 2022: US$nil
and 31 December 2021: US$nil).
4. SEGMENTAL
INFORMATION
Segment information is presented in respect of the Group’s
operating and geographical segments:
Mining – the extraction and sale of rough diamonds from mining
operations in South Africa and
Tanzania.
Corporate – administrative activities in the United Kingdom.
Beneficiation – beneficiation activities in South Africa.
Segments are based on the Group’s management and internal
reporting structure. Management reviews the Group’s performance by
reviewing the results of the mining activities in South Africa, Tanzania and reviewing the results of
reviewing the corporate administration expenses in the United Kingdom. Each segment derives, or aims
to derive, its revenue from diamond mining and diamond sales,
except for the corporate and administration cost centre.
Segment results, assets and liabilities include items directly
attributable to a segment, as well as those that can be allocated
on a reasonable basis. Segment results are calculated after
charging direct mining costs, depreciation and other income and
expenses. Unallocated items comprise mainly interest-earning assets
and revenue, interest-bearing borrowings and expenses and corporate
assets and expenses. Segment capital expenditure is the total cost
incurred during the year to acquire segment assets that are
expected to be used for more than one period. Eliminations comprise
transactions between Group companies that are cancelled on
consolidation. The results are not materially affected by seasonal
variations. Revenues are generated from tenders held in
South Africa and Antwerp for external customers from various
countries, the ultimate customers of which are not known to the
Group.
4.
SEGMENTAL INFORMATION (continued)
Operating
segments |
South Africa – Mining activities |
Tanzania -Mining activities |
United
Kingdom |
South
Africa |
|
|
US$ million |
Cullinan Mine |
Finsch |
Koffiefontein |
Williamson |
Corporate and treasury |
Beneficiation3 |
Inter-segment |
Consolidated |
(6 month period ended
31 December 2022) |
1 July
2022 -
31 December
2022 |
1 July
2022 -
31 December
2022 |
1 July
2022 -
31 December
2022 |
1 July
2022 -
31 December
2022 |
1 July
2022 -
31 December
2022 |
1 July
2022 -
31 December
2022 |
1 July
2022 -
31 December
2022 |
1 July
2022 -
31 December
2022 |
Revenue |
104.1 |
55.4 |
3.6 |
49.1 |
— |
0.5 |
(0.6) |
212.1 |
Segment result¹ |
42.8 |
10.1 |
(8.4) |
(9.4) |
(7.6) |
0.5 |
(1.7) |
26.3 |
Impairment charge –
operations |
— |
— |
(0.3) |
— |
— |
— |
— |
(0.3) |
Impairment charge –
other receivables |
— |
— |
— |
(3.5) |
— |
— |
— |
(3.5) |
Other direct
income |
— |
0.5 |
— |
0.1 |
0.5 |
— |
— |
1.1 |
Operating profit /
(loss)² |
42.8 |
10.6 |
(8.7) |
(12.8) |
(7.1) |
0.5 |
(1.7) |
23.6 |
Financial income |
|
|
|
|
|
|
|
25.8 |
Financial expense |
|
|
|
|
|
|
|
(52.8) |
Income tax charge |
|
|
|
|
|
|
|
(14.2) |
Non-controlling
interest |
|
|
|
|
|
|
|
(6.1) |
Profit attributable to
equity holders of the parent company |
|
|
|
|
|
|
|
(23.7) |
Segment assets |
446.7 |
203.2 |
4.7 |
124.5 |
3,189.5 |
5.7 |
(3,037.8) |
936.5 |
Segment
liabilities |
343.3 |
117.4 |
22.6 |
64.4 |
2,097.5 |
6.5 |
(2,148.6) |
503.1 |
Capital
expenditure |
23.3 |
23.1 |
0.3 |
3.2 |
2.0 |
— |
— |
51.9 |
¹ Total depreciation of US$40.5
million included in the segmental result comprises
depreciation incurred at the Cullinan Mine US$23.0 million, Finsch US$9.1 million, Koffiefontein US$0.1 million, Williamson US$8.0 million and Corporate and treasury
US$0.3 million.
² Operating profit is equivalent to revenue of US$212.1 million less total costs of US$188.5 million as disclosed in the Consolidated
Income Statement.
3 The beneficiation segment represents Tarorite, a
cutting and polishing business in South
Africa, which can on occasion cut and polish select rough
diamonds.
SEGMENTAL INFORMATION (continued)
Operating
segments |
South Africa – Mining activities |
Tanzania -Mining activities |
United
Kingdom |
South
Africa |
|
|
US$ million |
Cullinan Mine |
Finsch |
Koffiefontein |
Williamson |
Corporate and treasury |
Beneficiation3 |
Inter-segment |
Consolidated |
(6 month period ended
31 December 2021) |
1 July
2021 -
31 December
2021 |
1 July
2021 -
31 December
2021 |
1 July
2021 -
31 December
2021 |
1 July
2021 -
31 December
2021 |
1 July
2021 -
31 December
2021 |
1 July
2021 -
31 December
2021 |
1 July
2021 -
31 December
2021 |
1 July
2021 -
31 December
2021 |
Revenue |
167.7 |
65.7 |
11.1 |
20.2 |
— |
— |
— |
264.7 |
Segment result¹ |
97.2 |
10.9 |
(4.8) |
10.1 |
(5.2) |
(1.0) |
(0.6) |
106.6 |
Impairment charge –
operations |
— |
— |
(0.3) |
— |
— |
— |
— |
(0.3) |
Impairment reversal /
(charge) – other receivables |
— |
— |
— |
(0.7) |
1.1 |
— |
— |
0.4 |
Other direct income /
(loss) |
(0.1) |
0.1 |
0.2 |
0.1 |
0.6 |
— |
— |
0.9 |
Operating profit /
(loss)² |
97.1 |
11.0 |
(4.9) |
9.5 |
(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 of the parent company |
|
|
|
|
|
|
|
43.2 |
Segment assets |
509.2 |
221.3 |
12.1 |
93.3 |
3,373.5 |
4.1 |
(3,119.2) |
1,094.3 |
Segment
liabilities |
483.5 |
114.7 |
31.1 |
52.5 |
2,137.5 |
4.9 |
(2,171.6) |
652.6 |
Capital
expenditure |
12.5 |
2.5 |
0.3 |
0.8 |
0.6 |
— |
— |
16.7 |
¹ Total depreciation of US$42.9
million included in the segmental result comprises
depreciation incurred at the Cullinan Mine 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$157.1 million as disclosed in the Consolidated
Income Statement.
3 The beneficiation segment represents Tarorite, a
cutting and polishing business in South
Africa, which can on occasion cut and polish select rough
diamonds.
4.
SEGMENTAL INFORMATION (continued)
Operating
segments |
South Africa – Mining activities |
Tanzania -Mining activities |
United
Kingdom |
South
Africa |
|
|
US$ million |
Cullinan Mine |
Finsch |
Koffiefontein |
Williamson |
Corporate and treasury |
Beneficiation3 |
Inter-segment |
Consolidated |
(12 month period ended
30 June 2022) |
2022 |
2022 |
2022 |
2022 |
2022 |
2022 |
2022 |
2022 |
Revenue¹ |
322.4 |
165.7 |
21.5 |
75.9 |
— |
2.2 |
(2.5) |
585.2 |
Segment
result2 |
154.4 |
34.8 |
(13.8) |
22.2 |
(14.1) |
0.4 |
(4.3) |
179.6 |
Impairment charge –
operations |
— |
— |
(0.3) |
21.4 |
— |
— |
— |
21.1 |
Impairment reversal /
(charge) – other receivables |
— |
— |
— |
(4.1) |
2.6 |
— |
— |
(1.5) |
Other direct
income |
(0.7) |
(0.4) |
0.2 |
0.1 |
0.6 |
— |
— |
(0.2) |
Operating profit /
(loss)² |
153.7 |
34.4 |
(13.9) |
39.6 |
(10.9) |
0.4 |
(4.3) |
199.0 |
Financial income |
|
|
|
|
|
|
|
19.0 |
Financial expense |
|
|
|
|
|
|
|
(92.1) |
Income tax charge |
|
|
|
|
|
|
|
(37.8) |
Non-controlling
interest |
|
|
|
|
|
|
|
(19.1) |
Profit attributable to
equity holders of the parent company |
|
|
|
|
|
|
|
69.0 |
Segment assets |
463.9 |
229.8 |
6.0 |
123.2 |
3,575.2 |
5.1 |
(3,292.3) |
1,110.9 |
Segment
liabilities |
384.0 |
111.2 |
17.1 |
75.1 |
2,430.1 |
5.9 |
(2,391.0) |
632.4 |
Capital
expenditure |
35.0 |
12.0 |
0.6 |
3.3 |
1.6 |
— |
(0.3) |
52.2 |
¹ The Group’s revenue comprises the sale of rough diamonds and
polished stones. The sale of rough diamonds contributed
US$581.9 million with polished stones
contributing US$3.3 million. Included
within the US$3.3 million polished
stones contribution is US$1.1 million
from a profit share agreement.
2 Total depreciation of US$82.8 million included in the segmental result
comprises depreciation incurred at the Cullinan Mine US$52.5 million, Finsch US$24.4 million, Koffiefontein US$0.3 million, Williamson US$5.0 million and Corporate and treasury
US$0.6 million.
3 Operating profit is equivalent to revenue of
US$585.2 million less total costs of
US$386.2 million as disclosed in the
Consolidated Income Statement.
4 The beneficiation segment represents Tarorite, a
cutting and polishing business in South
Africa, which can on occasion cut and polish select rough
diamonds.
US$ million |
|
1 July 2022 -
31 December
2022 |
|
1 July 2021 -
31 December
2021 |
|
1 July 2021 - 30 June
2022 |
5. CORPORATE
EXPENDITURE |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate expenditure includes: |
|
|
|
|
|
|
Depreciation of property, plant and
equipment |
|
0.3 |
|
0.3 |
|
0.6 |
Amortisation of
right-of-use asset |
|
0.1 |
|
0.1 |
|
0.2 |
London Stock Exchange and other
regulatory expenses |
|
0.6 |
|
0.8 |
|
1.5 |
Transaction costs – redemption of
Notes |
|
0.8 |
|
— |
|
— |
Settlement (reversal) / costs –
human rights claims at Williamson |
|
— |
|
(0.2) |
|
(0.8) |
Share-based expense - Directors |
|
0.9 |
|
0.1 |
|
1.1 |
Other staff costs |
|
2.4 |
|
1.4 |
|
5.1 |
Total staff costs |
|
3.3 |
|
1.5 |
|
6.2 |
6. FINANCING EXPENSE
US$ million |
|
1 July 2022 -
31 December
2022 |
|
1 July 2021 -
31 December
2021 |
|
1 July 2021 - 30 June
2022 |
|
|
|
|
|
|
|
Net unrealised foreign exchange
gains |
|
1.6 |
|
— |
|
— |
Interest received on BEE loans and
other receivables |
|
2.1 |
|
2.1 |
|
4.1 |
Interest received bank deposits |
|
1.7 |
|
0.5 |
|
1.3 |
Realised foreign exchange gains on
the settlement of foreign loans and forward exchange contracts |
|
20.4 |
|
8.8 |
|
13.6 |
Financial income |
|
25.8 |
|
11.4 |
|
19.0 |
Gross interest on senior secured
second lien notes, bank loans and overdrafts |
|
(13.6) |
|
(23.8) |
|
(45.3) |
Other debt finance costs,
including facility fees and IFRS 16 charges |
|
(1.3) |
|
(0.8) |
|
(2.3) |
Unwinding of present value
adjustment for rehabilitation costs |
|
(1.6) |
|
(3.0) |
|
(5.4) |
Net unrealised foreign exchange
losses1 |
|
— |
|
(28.7) |
|
(36.5) |
Notes redemption premium and
acceleration of unamortised bank facility and Notes
costs2 |
|
(8.2) |
|
— |
|
(1.6) |
Realised foreign exchange losses on
the settlement of foreign loans and forward exchange contracts |
|
(28.1) |
|
— |
|
(1.0) |
Financial expense |
|
(52.8) |
|
(56.3) |
|
(92.1) |
Net financial expense |
|
(27.0) |
|
(44.9) |
|
(73.1) |
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 ZAR16.27 (30 June
2022) to ZAR17.00
(31 December 2022) resulted in an
unrealised gain of US$1.6 million
(30 June 2022: US$36.5 million unrealised loss and 31 December 2021: US$28.7
million unrealised loss) comprising an unrealised gain on
foreign exchange contracts held at Period end of US$1.9 million (30 June
2022: US$0.7 million and
31 December 2021: US$0.1 million) and losses on inter-group foreign
denominated loans of US$0.3 million
(30 June 2022: US$37.2 million and 31
December 2021: US$28.8
million); and a net realised foreign exchange loss of
US$7.7 million (30 June 2022: US$12.6
million realised gain and 31 December
2021: US$8.8 million realised
gain) comprising US$20.4 million
(30 June 2022: US$13.6 million and 31
December 2021: US$8.8 million)
in respect of foreign exchange contracts closed during the Period
and US$28.1 million in respect of
realised foreign exchange losses on settlement of foreign loans, is
included in the net finance and expense amount.
2 The Notes redemption premium and acceleration of
unamortised bank facility and Notes costs of US$8.2 million relate to the costs associated
with the tender offer to Noteholders during the Period
(30 June 2022: early settlement of
RCF), comprising unamortised upfront costs of US$6.8 million (31
December 2021: US$nil and 30 June
2022: US$1.6 million)
previously capitalised and the make-whole premium of US$1.4 million.
7. PROPERTY,
PLANT AND EQUIPMENT
The net movement in property, plant and equipment for the Period
is a decrease of US$13.0 million
(30 June 2022: US$63.6 million decrease and 31 December 2021: US$70.2
million decrease). This is primarily as a result of:
US$ million |
|
1 July 2022
-
31 December 2022 |
|
1 July 2021 -
31 December 2021 |
|
1 July 2021 -
30 June 2022 |
|
|
|
|
|
|
|
As at 1 July |
|
633.2 |
|
696.8 |
|
696.8 |
Foreign exchange movement |
|
(24.8) |
|
(75.4) |
|
(83.4) |
Additions |
|
51.9 |
|
16.7 |
|
52.2 |
Reconsolidation of non-current
assets held for sale (including reversal of IFRS 5 impairment)
relating to Williamson |
|
— |
|
31.2 |
|
52.6 |
Change in rehabilitation assets |
|
0.7 |
|
0.8 |
|
— |
Depreciation |
|
(40.5) |
|
(42.9) |
|
(82.8) |
Impairments |
|
(0.3) |
|
(0.3) |
|
(0.3) |
Disposals |
|
— |
|
(0.3) |
|
(1.9) |
As at 30 June |
|
620.2 |
|
626.6 |
|
633.2 |
8. LOANS AND
BORROWINGS
US$ million |
|
31 December
2022 |
|
31 December
2021 |
|
30 June
2022 |
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
Loans and borrowings – Senior
secured second lien notes |
|
221.1 |
|
346.4 |
|
353.9 |
Loans and borrowings – Senior
secured lender debt facilities |
|
— |
|
51.6 |
|
— |
|
|
221.1 |
|
398.0 |
|
353.9 |
Current liabilities |
|
|
|
|
|
|
Loans and borrowings – senior
secured lender debt facilities |
|
20.6 |
|
27.0 |
|
12.3 |
Loans and borrowings – premium
financing |
|
— |
|
0.3 |
|
— |
|
|
20.6 |
|
27.3 |
|
12.3 |
Total loans and borrowings - bank
facilities |
|
241.7 |
|
425.3 |
|
366.2 |
Significant non-cash transactions
US$ million |
|
1 July 2022
-
31 December 2022 |
|
1 July 2021
-
31 December 2021 |
|
1 July 2021
-
30 June 2022 |
|
|
|
|
|
|
|
Senior secured second lien notes
and secured debt facilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 1 July |
|
366.2 |
|
430.2 |
|
430.2 |
Cash payments |
|
(144.6) |
|
(18.7) |
|
(103.7) |
Non-cash: |
|
|
|
|
|
|
Acceleration of unamortised
transaction costs |
|
6.8 |
|
— |
|
(1.6) |
Interest accrued during the
period |
|
13.3 |
|
25.0 |
|
44.4 |
Effect of foreign exchange |
|
— |
|
(11.2) |
|
(3.1) |
|
|
241.7 |
|
425.3 |
|
366.2 |
a) US$336.7
million Senior Secured Second Lien Notes
A wholly owned subsidiary of the Company, Petra Diamonds US$
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
On 27 September 2022, the Group
repaid, through a debt tender offer to Noteholders, an amount of
US$143,627,622, comprising the
principal amount of US$125,590,338
and PIK interest of US$18,037,284. On
12 October 2022 a further
US$1,000,667 was repaid to
Noteholders comprising the principal amount of US$875,000 and PIK interest of US$125,667. The principal amount of Notes
outstanding after the repayments to Noteholders is US$210,190,662. Cash costs of US$1,446,283 relating to the repayment of
Noteholders have been expensed in the Consolidated Income Statement
under finance expense (refer to Note 6).
The Group performed an assessment under its accounting policies
and the requirements of IFRS 9 as to whether the debt tender offer
to the Noteholders represented a substantial modification. A
qualitative test was performed which determined the terms of the
Notes, repayment profile and interest rate were not amended or
modified as part of the tender offer process therefore, no
substantial modification was relevant.
The remaining costs associated with issuing the Notes of
US$13.9 million, after adjusting for
the acceleration of US$6.8 million of
unamortised costs associated with the debt tender offer to
Noteholders which have been expensed through profit and loss within
net finance expense (refer to note 6) have been capitalised against
the principal amount and US$11.5
million remains unamortised as at 31
December 2022 (30 June 2022:
US$18.5 million and 31 December 2021: US$19.4
million). Interest of US$43.0
million has been accrued as at 31
December 2022.
Further details about the Notes (including security) have been
included in the Group’s FY 2022 Annual Report.
b) Senior Secured Lender Debt
Facilities
In June 2022, the Group
restructured its existing banking facilities providing for more
favourable terms than the Group’s current first lien facilities and
resulting in Absa Corporate and Investment Banking (“Absa”)
becoming the Group’s banking partner under the new banking
facilities.
A new Revolving Credit Facility (“RCF”) of ZAR1 billion (US$58.8
million) with Absa replaced the previous RCF and term
lending arrangements with the previous South African lender
syndicate comprising Absa, Nedbank, RMB and NinetyOne.
The terms under the RCF are:
- maturity date December 2025 with
a 60 day buffer between the redemption of the Notes and the
maturity of the RCF:
- interest rate of SA JIBAR + 4.15% per annum (with the margin to
be reconsidered annually based on Petra’s credit metrics with a
view of further optimising the margin to be achieved) and
- certain covenant ratios as mentioned below.
.
The Group's debt and hedging facilities are detailed in the
table below:
Senior Lender Debt
Facilities |
|
31 December
2022 |
|
31 December
2021 |
|
30 June
2022 |
|
|
Facility
amount |
|
Facility amount |
|
Facility amount |
|
|
|
|
|
|
|
ZAR Debt Facilities: |
|
|
|
|
|
|
ZAR Lenders RCF |
|
ZAR1.0
billion |
|
ZAR408.8 million |
|
ZAR1.0 billion |
ZAR Lenders Term loan |
|
ZAR nil |
|
ZAR876.4 million |
|
ZAR nil |
Absa/RMB – FX Hedging
facilities |
|
ZAR300
million |
|
ZAR150 million |
|
ZAR300 million |
|
|
|
|
|
|
|
The terms and conditions of the Group facilities are detailed in
the Group’s FY 2022 Annual Report.
The facilities are secured on the Group’s interests in the
Cullinan, Finsch and Koffiefontein Mines.
As at date of this report, the RCF was undrawn and ZAR1.0 billion (US$58.8
million) remained available for drawdown. During FY2022, the
Company paid ZAR404.6 million
(US$24.9 million) (capital plus
interest) to settle the old RCF and ZAR893.2
million (US$54.9 million)
(capital plus interest) to settle the previous Term Loan.
Covenant ratios
As part of the revised RCF facility entered into with ABSA in
FY2022, the Company is required:
- to maintain a Net Debt : Adjusted EBITDA ratio tested
semi-annually on a rolling 12-month basis;
- to maintain an Interest Cover Ratio tested semi-annually on a
rolling 12-month basis and
- to maintain minimum 12 month forward looking liquidity
requirement that consolidated cash and cash equivalents (excluding
diamond debtors) shall not fall below US$20.0 million.
The Company’s new covenant levels for the respective measurement
periods are outlined below:
|
FY22
H2 |
FY23
H1 |
FY23
H2 |
FY24
H1 |
FY24
H2 |
FY25
H1 |
FY25
H2 |
FY26
H1 |
Consolidated net debt
: EBITDA Leverage ratio (maximum) |
4.00 |
4.00 |
3.50 |
3.50 |
3.25 |
3.25 |
3.00 |
3.00 |
Interest Cover Ratio (minimum) |
1.85 |
1.85 |
2.50 |
2.50 |
2.75 |
2.75 |
3.00 |
3.00 |
The covenants were not in breach at the measurement date.
9.
COMMITMENTS
As at 31 December 2022, the
Company had committed to future capital expenditure totalling
US$55.1 million (30 June 2022: US$49.5
million and 31 December 2021:
US$33.8 million), mainly comprising
the Cullinan Mine US$30.1 million
(30 June 2022: US$25.2 million 31
December 2021: US$25.3
million), Finsch US$24.8
million (30 June 2022:
US$23.7 million 31 December 2021: US$8.3
million), Koffiefontein US$nil (30
June 2022: US$0.3 million
31 December 2021: US$0.2 million) and Williamson US$0.2 million (30 June
2022: US$0.3 million and
31 December 2021: US$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 interest
as at 31 December 2022 (%) |
Partner
and respective interest
as at 31 December 2021 (%) |
Partner
and respective interest
as at 30 June 2022 (%) |
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 2022 |
|
31
December 2021 |
|
30 June
2022 |
|
|
|
|
|
|
|
Non-current receivable |
|
|
|
|
|
|
Kago Diamonds1 |
|
21.8 |
|
27.1 |
|
26.6 |
|
|
|
|
27.1 |
|
26.6 |
Current trade and other
receivables |
|
|
|
|
|
|
KEM JV2 |
|
3.3 |
|
5.5 |
|
3.7 |
Impairment
provision2 |
|
(2.0) |
|
(4.9) |
|
(2.0) |
|
|
1.3 |
|
0.6 |
|
1.7 |
|
|
1 July 2022 -
31 December 2022 |
|
1 July 2021 -
31 December 2021 |
|
1 July 2021 -
30 June 2022 |
Finance income |
|
|
|
|
|
|
Kago Diamonds |
|
1.0 |
|
1.0 |
|
2.1 |
|
|
1.0 |
|
1.0 |
|
2.1 |
Dividend paid |
|
|
|
|
|
|
Kago Diamonds3 |
|
1.2 |
|
1.3 |
|
1.3 |
|
|
1.2 |
|
1.3 |
|
1.3 |
|
|
|
|
|
|
|
¹ The movement in the Kago Diamonds receivable of US$4.8 million (30 June
2022: US$6.9 million and
31 December 2021: US$6.4 million) is mainly attributable to
repayments received from Kago Diamonds during the Period totalling
US$3.6 million (30 June 2022: US$nil and 31 December 2021: US$nil) and a foreign exchange
decrease of US$1.2 million
(30 June 2022: US$4.1 million decrease and 31 December 2021: US$3.6
million decrease).
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$1.3
million (30 June 2022:
US$1.7 million and 31 December 2021: US$0.6
million) and the balance of the KEM JV purchase
consideration of US$nil (30 June
2022: US$nil and 31 December
2021: US$nil). During H1 FY 2023 the Group received payments
of US$0.3 million (FY 2022:
US$2.5 million and FY H1 2022:
US$1.2 million) from the KEM JV as
settlement of the outstanding purchase consideration this did not
result in any further expected credit loss reversal during the
Period as the full reversal was accounted for in prior periods (FY
2022: US$2.9 million and H1 FY2022:
US$1.1 million). 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$2.0
million (30 June 2022:
US$2.0 million and 31 December 2021: US$4.9
million).
3 During the Period, Finsch declared and paid a
dividend out of profits generated in FY2022 to its shareholders.
The BEE partners received a gross dividend of US$9.8 million (30 June
2022: US$2.5 million). An
amount of US$6.3 million
(30 June 2022: US$0.2 million) was used by BEE partners to repay
a portion of their loans owing to the Group and a net cash payment
of US$2.2 million (30 June 2022: US$2.5
million) was received by the BEE partners, comprising Kago
US$1.2 million (30 June 2022: US$1.3
million) and IPDET US$1.0
million (30 June 2022:
US$1.2 million).
11. BEE LOANS RECEIVABLE
US$ million |
|
31 December
2022 |
|
31 December 2021 |
|
30 June 2022 |
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
Loans and other receivables |
|
38.2 |
|
43.1 |
|
44.6 |
|
|
|
|
|
|
|
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$40.2
million (30 June 2022:
US$42.0 million and 31 December 2021: US$48.6
million) has been recorded as part of the gross receivable
(before expected credit loss provisions) in respect of amounts to
be reimbursed to the Group in respect of the guarantee under the
BEE Lender facilities. Judgement was required in determining the
extent to which reimbursement is applicable based on the terms of
the agreements, South African legislation and discussions with the
BEE partners.
As a result of historical delays in the Cullinan Mine plant
ramp-up and the Finsch SLC ramp-up, the Group has historically and
through the Period elected to advance the BEE Partners’ funds using
Group treasury to enable the BEE Partners to service their interest
and capital commitments under the BEE Lender facilities (refer
below). These BEE receivables, including interest raised, will be
recoverable from the BEE Partners’ share of future cashflows from
the underlying mining operations. As part of a previous Debt
Restructuring in FY2021, Petra has assumed the BEE Lender facility
obligations
For detail on expected credit loss provision and reversal
associated with the BEE loans receivable refer to note 2.
US$ million |
|
1 July 2022
-
31 December 2022 |
|
1 July 2021 -
31 December 2021 |
|
1 July 2021 -
30 June 2022 |
|
|
|
|
|
|
|
As at 1 July |
|
44.6 |
|
46.6 |
|
46.6 |
Foreign exchange movement on opening
balance |
|
(2.0) |
|
(5.1) |
|
(5.9) |
Interest receivable |
|
1.9 |
|
2.0 |
|
4.1 |
Reversal of BEE loans receivable –
expected credit loss provision |
|
— |
|
— |
|
— |
Repayment of loan from BEE
partner |
|
(6.3) |
|
(0.4) |
|
(0.2) |
As at 30 June |
|
38.2 |
|
43.1 |
|
44.6 |
12. SHARES ISSUED AND
SHARE PREMIUM
During the Period, there were no new shares issued by the
Company.
On 16 November 2022, at the FY
2022 Annual General Meeting, the Company’s shareholders approved
the Company’s share premium account be reduced by US$350 million with such amount being credited
against accumulated losses with the balance being credited to the
Company’s other distributable reserves.
US$ million |
|
Share
premium |
|
Accumulated reserves /
(losses) |
|
|
|
|
|
As at 1 July 2022 |
|
959.5 |
|
(183.6) |
Conversion of share premium to
distributable reserves |
|
(350.0) |
|
350.0 |
Movement during period |
|
— |
|
(23.7) |
As at 31 December |
|
609.5 |
|
142.7 |
In FY 2022, at the FY 2021 Annual General Meeting the Company’s
shareholders approved 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.
13. EARNINGS PER SHARE
|
Total
1 July 2022 - 31 December 2022
US$ |
Total
1 July 2021 - 31 December 2021
US$ |
Total
1 July 2021 - 30 June 2022
US$ |
Numerator |
|
|
|
|
|
|
|
(Loss) / profit for the Period |
(23,752,879) |
43,288,096 |
68,995,537 |
|
|
|
|
Denominator |
|
|
|
|
Shares |
Shares |
Shares |
Weighted average number of ordinary
shares used in basic EPS |
|
|
|
Brought forward |
194,201,785 |
9,710,089,272 |
9,710,089,272 |
Effect of shares issued during the
Period |
— |
— |
— |
Effect of 50 for 1 share
consolidation November 2021 |
— |
(9,515,887,487) |
(9,515,887,487) |
Carried forward |
194,201,785 |
194,201,785 |
194,201,785 |
|
|
|
|
|
Shares |
Shares |
Shares |
Dilutive effect of potential
ordinary shares |
— |
— |
— |
Weighted average number of ordinary
shares in issue used in diluted EPS |
194,201,785 |
194,201,785 |
194,201,785 |
|
|
|
|
|
US cents |
US cents |
US cents |
Basic (loss) / profit per share – US
cents |
(12.23) |
22.29 |
35.53 |
Diluted (loss) / profit per share –
US cents |
(12.23) |
22.29 |
35.53 |
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
2022: nil and 31 December
2021: nil).
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
1 July 2022 - 31 December 2022
US$ |
Total
1 July 2021 - 31 December 2021
US$ |
Total
1 July 2021 - 30 June 2022
US$ |
Numerator |
|
|
|
|
|
|
|
(Loss) / profit for the Period |
(23,752,879) |
43,288,096 |
68,995,537 |
Net unrealised foreign exchange
(gain) / loss |
(1,695,466) |
22,015,553 |
34,851,735 |
Present value discount – Williamson
VAT receivable |
3,473,980 |
663,803 |
4,076,760 |
Impairment (reversal) / charge -
operations* |
216,437 |
227,304 |
(21,206,735) |
Impairment (reversal) / charge –
other receivables |
1,176 |
(1,118,250) |
(2,544,704) |
Taxation (credit) / charge on
unrealised foreign exchange (gain) / loss |
(138,605) |
(8,507,107) |
(1,618,908) |
Taxation credit on impairment
charge* |
— |
— |
— |
Transaction costs and acceleration
of unamortised costs on Notes and restructured bank facilities |
9,015,171 |
— |
1,628,757 |
Williamson tailings
facility - remediation costs |
5,897,182 |
— |
— |
Williamson tailings facility -
accelerated depreciation |
5,220,536 |
— |
— |
Transaction costs (reversal) /
expense – Human rights settlement agreement and provisions for
unsettled and disputed tax claims |
— |
(239,494) |
(816,270) |
Adjusted loss for the Period
attributable to parent |
(1,762,468) |
56,329,905 |
83,366,172 |
*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 |
194,201,785 |
9,710,089,272 |
9,710,089,272 |
Effect of shares issued during the
Period |
— |
— |
— |
Effect of 50 for 1 share
consolidation November 2021 |
— |
(9,515,887,487) |
(9,515,887,487) |
Carried forward |
194,201,785 |
194,201,785 |
194,201,785 |
|
|
|
|
|
Shares |
Shares |
Shares |
Dilutive effect of potential
ordinary shares |
— |
— |
— |
Weighted average number of ordinary
shares in issue used in diluted EPS |
194,201,785 |
194,201,785 |
194,201,785 |
|
|
|
|
|
US cents |
US cents |
US cents |
Adjusted basic profit / (loss) per
share – US cents |
(0.91) |
29.01 |
42.93 |
Adjusted diluted
profit / (loss) per share – US cents |
(0.91) |
29.01 |
42.93 |
15. IMPAIRMENT CHARGE
The current market conditions in the global rough diamond
market, volatility of and variability in product mix are all
factors impacting the rough diamond prices achieved by Petra during
the Period, and the tailings facility failure at Williamson which
have resulted 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.
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 the Cullinan, Finsch and Williamson Mines, 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 also
recognised a non-financial receivables charge of US$3.5 million, being management’s estimate of
the impact on the recoverability of the Tanzania VAT
receivable.
Impairment
(US$ million) |
Asset
class |
Carrying value pre
impairment |
Impairment |
Carrying value
post impairment |
|
|
|
|
|
Impairment operations: |
|
|
|
|
Cullinan Mine |
Property, plant & equipment |
402.3 |
— |
402.3 |
Finsch |
Property, plant & equipment |
165.4 |
— |
165.4 |
Koffiefontein |
Property, plant & equipment |
1.0 |
(0.3) |
0.7 |
Williamson |
Property, plant & equipment |
46.6 |
— |
46.6 |
Sub-total |
|
615.3 |
(0.3) |
615.0 |
|
|
|
|
|
Impairment – non-financial
receivables: |
|
|
|
|
Other – non-current |
Tanzania VAT receivable (refer to
note 2) |
8.6 |
(3.5) |
5.1 |
Sub-total |
|
8.6 |
(3.5) |
5.1 |
Total |
|
623.9 |
(3.8) |
620.1 |
31 December
2021
During the 6 month period ending 31
December 2021, 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 the Cullinan,
Finsch, and Williamson Mines, nor
was any impairment reversal considered appropriate in the 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 also recognised a non-financial receivables impairment
reversal of US$0.4 million,
comprising US$0.7 million impairment
charge being management’s estimate of the recoverability of the
Tanzania VAT receivable and an impairment reversal of US$1.1 million of the KEM JV receivable.
Details of the impairment assessment are shown below:
Impairment
(US$ million) |
Asset
class |
Carrying value pre
impairment |
Impairment |
Carrying value
post impairment |
|
|
|
|
|
Impairment operations: |
|
|
|
|
Cullinan Mine |
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 receivable |
KEM JV receivable |
1.5 |
1.1 |
2.6 |
Other – non-current |
Tanzania VAT receivable |
2.5 |
(0.7) |
1.8 |
Sub-total |
|
4.0 |
0.4 |
4.4 |
Total |
|
628.0 |
0.1 |
628.1 |
30 June
2022
The operations of the Cullinan, Finsch, Koffiefontein and
Williamson Mines are held at
recoverable value as a result of FY 2021 impairments. During FY
2022, 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 the
Cullinan, Finsch and Williamson
Mines, nor was any impairment reversal considered
appropriate in the current Year. 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 also reversed a Group
level impairment charge relating to Williamson, previously
recognised under IFRS 5, of US$21.4
million as Williamson is no longer considered an asset held
for sale. The Group recognised a non-financial receivables charge
of US$1.5 million comprising an
impairment charge of US$4.1 million
being management’s estimate of the recoverability of the Tanzania
VAT receivable, an impairment charge of US$0.3 million related to other receivables and
an impairment reversal of US$2.9
million of the KEM JV receivable.
Impairment
(US$ million) |
Asset
class |
Carrying value pre
impairment |
Impairment |
Carrying value
post impairment |
|
|
|
|
|
Impairment
operations: |
|
|
|
|
Cullinan Mine |
Property, plant &
equipment |
419.9 |
— |
419.9 |
Finsch |
Property, plant & equipment |
157.9 |
— |
157.9 |
Koffiefontein |
Property, plant & equipment |
1.1 |
(0.3) |
0.8 |
Williamson |
Property, plant & equipment |
29.3 |
21.4 |
50.7 |
Sub-total |
|
608.2 |
21.1 |
629.3 |
|
|
|
|
|
Impairment – non-financial
receivables: |
|
|
|
|
Other – current receivable |
KEM JV receivable |
(1.2) |
2.9 |
1.7 |
Other – current receivable |
Other receivables |
0.3 |
(0.3) |
— |
Other – non-current |
Tanzania VAT receivable |
6.8 |
(4.1) |
2.7 |
Sub-total |
|
5.9 |
(1.5) |
4.4 |
Total |
|
614.1 |
19.6 |
633.7 |
Cullinan, Finsch, Koffiefontein and
Williamson Mine 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 Mine, 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 2022 and 30
June 2022:
Key assumptions |
Explanation |
Current mine plan and
recoverable value of reserves and resources |
Economically recoverable reserves and resources are based on
management’s expectations based on the availability of reserves and
resources at mine sites and technical studies undertaken in house
and by third party specialists.
The end of life of mine based on current mine plans for the
operations are as follows:
Cullinan Mine: FY 2033 (FY 2022: FY 2031)
Finsch: FY 2031 (FY 2022: FY 2030)
Koffiefontein: FY 2025 (FY 2022: FY 2025) – current production has
ceased and the operation has been placed on care and
maintenance
Williamson: FY 2030
Resources remaining after the current mine plans have not been
included in impairment testing for the operations. |
Current mine plan
reserves and resources |
Cullinan Mine: Current
mine plan over the next ten years; total resource processed 37.6 Mt
(FY 2022: Current mine plan over the next nine years; total
resource processed 36.4 Mt). Cullinan Mine is implementing a
project for 2 additional tunnels (46 and 50) resulting in an
increase in reserves and mine plan. |
|
Finsch: Current mine
plan over the next nine years; total resource processed 23.7 Mt (FY
2022: Current mine plan over the next nine years; total resource
processed 23.2 Mt). Additional SLC project approved taking mining
to 90L approved during H1 FY 2023. |
|
Koffiefontein has been
put on care and maintenance and has ceased production. |
|
Williamson: Current
mine plan over the next eight years, total resource processed 38.0
Mt (FY2022: Current mine plan over the next eight years,
total resource processed 43.3 Mt). |
Current mine plans –
capital expenditure |
Management has
estimated the timing and quantum of the capital 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
Mine: 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 due to the mine plan aligning with the
resource base estimated to be available at the end of the current
mine plan. |
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 2022 impairment testing models starting price
assumptions have been adjusted to reflect the improved pricing
achieved during the FY2022. Diamond prices (excluding Exceptional
Stones) have been assumed to remain unchanged during FY2023, then
increase by 3.9% from FY2024 onwards. The long-term models
incorporate normalised diamond price escalation of 1.9% above a
long-term US inflation rate of 2.0% per annum from FY 2024 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
retained the contribution from Exceptional Stones at the Cullinan
Mine at US$35.0 million per annum.
The 30 June 2022 impairment testing models starting price
assumptions have been adjusted to reflect the improved pricing
achieved during the Year when compared to the 30 June 2021
impairment models. Diamond prices (excluding Exceptional Stones)
have been assumed to remain unchanged during FY2023, then increase
by 3.9% from FY2024 onwards. The long-term models incorporate
normalised diamond price escalation of 1.9% above a long-term US
inflation rate of 2.0% per annum from FY 2024 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 the Cullinan Mine from
US$25.0 million to US$35.0 million per annum. |
Discount rate |
A ZAR discount rate of
13.0% (30 June 2022: 13.0%) was used for the South African
operations and a USD discount rate of 14.0% (30 June 2022: 14.00%)
for Williamson. Discount rates calculated based on a nominal
weighted average cost of capital including the effect of factors
such as market risk and country risk as at the Year end. USD and
ZAR discount rates are applied based on respective functional
currency of the cash generating unit. |
Cost inflation
rate |
Long-term inflation
rates of 3.5%–8.0% (30 June 2022: 3.5%–7.5%) above the long-term
US$ inflation rate were used for Opex and Capex escalators.
Management have taken into account the current short-term pressures
in the inflation environment and the impact on Opex and capex
costs, allowing for the inflation rate to normalise over the
longer-term. |
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 ZAR17.00 (30 June 2022:
ZAR16.04) for H2 FY2023 reflecting the current volatility,
inflationary pressures and quantitative tightening by Central
banks, and ZAR16.75 for FY2024 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 |
For
impairment testing at Williamson, management used the above
assumptions, noting that no sales were forecast for H2 FY2023
following the TSF breach in November 2022. Accelerated depreciation
of US$5.2 million attributable to the TSF assets has been included
in the depreciation charge in mining and processing costs. During
the FY2022, Williamson recommenced production. |
Sensitivity analysis
The impact of applying reasonable downside sensitivities on the
key inputs based on management’s assumptions at 31 December 2022 is noted below:
|
Additional Impairment charge |
(US$ million) |
Cullinan
Mine |
Finsch¹ |
Koffiefontein² |
Williamson |
Base case |
|
|
|
|
Increase in discount rate by 2% |
32.7 |
— |
n/a |
4.8 |
Reduction in pricing by 5% over Life
of Mine |
40.5 |
— |
n/a |
19.8 |
Reduction in short-term production
by 10% |
25.8 |
23.1 |
n/a |
13.6 |
Increase in Opex by 5% |
20.5 |
— |
n/a |
9.6 |
Reduction in Exceptional Stones
contribution by US$10.0 million per annum |
43.6 |
n/a |
n/a |
n/a |
Strengthening of the ZAR from
US$/ZAR17.00 to US$/ZAR16.15 |
47.3 |
— |
n/a |
n/a |
|
|
|
|
|
- Additional impairments will occur at Finsch if the discount
rate is increased by 4%, or a reduction in pricing by 6.5% over
Life of Mine, or an increase in Opex of 13.5% and or a
strengthening of the US$/ZAR from R17.00 to US$/ZAR 15.81.
- Production at Koffiefontein has ceased and the operation has
been placed on care and maintenance.
16.
WILLIAMSON (30 June 2022)
- 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). Petra have registered Mwadui Mining Holdings Ltd, a
subsidiary registered in the United
Kingdom, for this purpose.
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.
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. For further information on the confiscated
diamond parcel refer to note 18.
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 is therefore not yet
effective as at 31 December 2022.
Certain conditions precedent remain outstanding awaiting resolution
from GoT.
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 with Petra retaining a controlling interest in
Williamson.
Caspian’s purchase will be funded through the settlement of
US$15 million of past technical
services payments owed by WDL to Caspian.
The sale of the 50% less 1 share stake in the entity that holds
Petra’s shares in WDL is subject to the parties first entering into
definitive transaction agreements and once such agreements are
entered into, then 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.
17.
CONTINGENCIES
Williamson – Independent Grievance Mechanism (“IGM”)
The IGM is a non-judicial process that has the capacity to
investigate and resolve complaints alleging severe human rights
impacts in connection with security operations at the Williamson
mine. It will be overseen by an Independent Panel of Tanzanian
experts taking an approach informed by Tanzanian law, and with
complainants having access to free and independent advice from
local lawyers. The overall aim of the IGM is to promote
reconciliation between the Williamson Diamond Mine, directly
affected parties and the broader community by providing remedy to
those individuals who have suffered severe human rights impacts.
The Group has agreed to fund the remedies determined by the
IGM.
On 28 November 2022, the IGM
became operational with the commencement of the IGM’s pilot phase.
The pilot phase, which is expected to continue until the end of
March 2023, will allow for the IGM’s
systems and procedures to be further developed. Where appropriate,
the design of the IGM will then be adjusted to take into account
the learnings of the pilot phase.
Whilst the IGM was still being established, a mechanism was set
up to enable community members to confidentially and securely
register alleged historical human rights grievances. This mechanism
continued to receive grievances, with a significant amount of
grievances having been registered to date. As the IGM is currently
in its pilot phase, it is too early to evaluate the merits of these
grievances.
Judgement has been applied by management in assessing the merits
and outcome of the grievances. Consideration was given, amongst
other things, to the fact that the IGM remains in the pilot phase
and is yet to assess the merits of the grievances registered.
Accordingly, management is of the opinion that the estimated costs
and outcome of the grievance remains uncertain and have therefore
not raised a provision at Period end.
18.
EVENTS AFTER
THE REPORTING PERIOD
Williamson Blocked Parcel
Subsequent to Period end, it has come to the attention of the
Company that a portion of the blocked diamond parcel of 71,654.45
carats that was confiscated by the Government of Tanzania (“GoT”) in 2017 has recently been
sold. Under the Framework Agreement entered into by the GoT, the
Company and WDL in December 2021, the
GoT agreed to allocate the proceeds of this blocked diamond parcel
to WDL. The Company is engaging with GoT to confirm the application
of the proceeds.
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
b) 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
20 February 2023
INDEPENDENT REVIEW REPORT ON THE
UNAUDITED FINANCIAL STATEMENTS OF PETRA DIAMONDS LIMITED
Conclusion
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 2022 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.
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 2022
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 Notes to the Condensed
Consolidated Interim Financial Statements.
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
20 February 2023
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127)