Petra Diamonds Limited · LSE:PDL
Petra Diamonds — H1 FY2019 Earnings Presentation
48 slides from Petra Diamonds's earnings presentation, Feb 18, 2019
Slide 1: H1 FY 2019 Interim Results
H1 FY 2019 Interim Results Six months to 31 December 2018 18 February 2019
Slide 2: Important Notice
Important Notice • These Presentation Materials are being supplied to you by Petra Diamonds Limited (the “Company”) solely for your information and use at this presentation. These Presentation Materials may contain information that is confidential, legally privileged or otherwise protected by law. T
Slide 3: H1 FY 2019 Operations Overview
H1 FY 2019 Operations Overview
Slide 4: Safety is Our Number One Priority
Safety is Our Number One Priority Zero harm remains our goal • LTIFR of 0.16 recorded for H1 2019 (H1 2018: 0.24), comparing favourably against industry peers • Our mines are certified OHSAS 18001:2007, the international safety management framework • Safety and health are collaborative efforts, requ
Slide 5: H1 FY 2019 – KPIs
H1 FY 2019 – KPIs SAFETY PRODUCTION REVENUE Guidance LTIFR Million carats US$ (million) c.3.8 – 4.0 Mcts 0.25 0.23 4.0 3.8 600 495.3 3.5 500 0.20 3.0 2.0 400 0.15 2.5 303.5 0.23 2.0 300 0.10 1.5 0.16 200 0.05 1.0 1.8 2.0 0.5 100 191.8 207.1 0.00 0.0 0 FY 2018 H1 FY 2019 FY 2018 H1 FY 2019 FY 2018 H1
Slide 6: H1 FY 2019 – KPIs
H1 FY 2019 – KPIs ROM PRODUCTION TAILINGS PRODUCTION Million tonnes Million tonnes • ROM tonnes production up 7% to 6.4Mt (H1 FY 2018: 6.0Mt) 14 mainly due to a 12% increase in 12 12.1 1.8 1.6 1.6 ROM treated at Cullinan, a 30% 10 1.4 6.1 1.2 increase in ROM treated at 8 0.9 Koffiefontein and a 4% i
Slide 7: Entering a New Phase
Entering a New Phase Putting capital programmes to work Future focus on maximising free cashflow • Ever increasing footprint across orebody • Apply learnings from past challenges • Multiple levels at SLCs • Ensure consistent production output • Ratio of blasted tonnes to column tonnes • Efficient op
Slide 8: Finsch Mine
Finsch Mine Highlights • Block 5 SLC production commenced from first tunnels on 70L – FY 2016 • Production on 75L commenced in Q3 FY 2018 all tunnels will be in production in Q3 FY 2019 • Development complete for 70L, 73L, 75L and 78L with 75L Phase 2 development to be completed by Q4 FY2019 • Const
Slide 9: Finsch SLC Schematic and Plan View
Finsch SLC Schematic and Plan View Block 4 63 Level CAVED ORE SLC 70 Level SLC 73 Level SLC 75 Level SLC 78 Level Petra Diamonds Limited: H1 FY 2019 Interim Results Presentation 9
Slide 10: Cullinan Mine
Cullinan Mine Highlights • Blue development commenced – Q4 FY 2014 • Undercut ring blasting commenced – Q4 FY 2015 • Production levels established at 839m and shaft to 934m commissioned – FY 2016 • New plant with throughput capacity of 4.0 Mt ROM and 2.0 Mt tailings – commissioned in Q1 FY 2018 • Gr
Slide 11: C-Cut Progression Over the Footprint
C-Cut Progression Over the Footprint • Historical records and focused sampling compiled over the mine’s +100 year history indicate that high-value Type II 16ha at 830mL white & blue stones occur in the western part of the orebody (C-Cut phase 1) • Draw-bell installations are planned to be completed
Slide 12: Cullinan - Recovery of Type II Diamonds
Cullinan - Recovery of Type II Diamonds • FY 2018 – recovery of 40.5 carat type II blue stone sold for US$24m • FY 2019 YTD - recovery of a number of type II blue stones varying from two to ten carats per stone • FY 2019 YTD – recovery of various Type II white stones of smaller size as well as a 111
Slide 13: Koffiefontein Mine
Koffiefontein Mine Highlights • Production commenced from first tunnels of SLC on 560 mL – FY 2015 • Ground handling system commissioned – Q3 FY 2018 • Production from 60L commenced – Q2 FY 2019 • Steady state production from SLC – Q1 FY 2019 (ca. 260Kt ROM mined for Q1) • Community unrest and plant
Slide 14: Williamson Mine
Williamson Mine Highlights • New mill plant commissioned H2 FY 2017 • FY 2018 production – 341 Kcts (best production since 1977) • FY 2019 ROM throughput of ca. 4.7 Mt supplemented by alluvial production of ca. 0.4 Mt • Recovery of high value pink stones • Discussions ongoing with Government of Tanz
Slide 15: Operations Outlook
Operations Outlook Health and Safety • Targeting zero harm • Full commitment to health and safety pledge Driving operational efficiency • Full year production guidance of ca. 3.8 – 4.0 Mcts maintained • Close focus on costs, productivity and achieving steady state production • Increasing access acro
Slide 16: Financial Overview
” PetraDiamonds Financial Overview
Slide 17: H1 FY 2019 – KPIs
H1 FY 2019 – KPIs ADJUSTED EBITDA1 CASH GENERATED FROM OPERATIONS CAPEX2 US$ (million) US$ (million) US$ (million) 250 195.4 120 114.1 140 130.3 100 120 200 80 100 60.9 150 75.2 80 114.6 60 100 60 40 40 62.8 69.4 50 80.8 20 38.9 75.6 20 40.6 0 0 0 FY 2018 H1 FY 2019 FY 2018 H1 FY 2019 FY 2018 H1 FY
Slide 18: H1 FY 2019 (six months to 31 December 2018)
H1 FY 2019 (six months to 31 December 2018) H1 FY 2019 H1 FY 2018 Variance FY 2018 Sales Diamonds sold Carats 1,736,357 1,510,361 +15% 3,793,799 Revenue US$m 207.1 191.8 +8% 495.3 Production ROM tonnes Mt 6.4 6.0 +7% 12.1 Tailings & other2 tonnes Mt 1.0 0.7 +43% 1.6 Total tonnes treated Mt 7.4 6.8 +
Slide 19: H1 FY 2019 Summary of Results (unaudited)
H1 FY 2019 Summary of Results (unaudited) 6 months to 31 6 months to 31 Year ended 30 December 2018 December 2017 June 2018 (“H1 FY 2019”) (“H1 FY 2018”) (“FY 2018”) US$ million US$ million US$ million Revenue 207.1 191.8 495.3 Adjusted mining and processing costs (127.2) (105.8) (291.4) Other direc
Slide 20: Operating Costs
Operating Costs H1 FY 2019 On-mine cash cost breakdown • Future focus on the optimisation of asset portfolio to (South Africa operations) drive cost efficiencies • Absolute on-mine cash costs in line with expectations despite inflationary pressures 5% • Group on-mine US$ cash costs +9% due to: 15% •
Slide 21: Cullinan Pricing and Cost Per Carat
Cullinan Pricing and Cost Per Carat Actual Sales Results: Half-Yearly Full Year • Price variability similar to other mines US$ per Carat averages Averages producing high value single stones H1 H2 FY • Frequency of high value stones can not FY 2010 87 193 139 be predicted FY 2011 120 177 148 • Only 2
Slide 22: Financial Position
Financial Position • SA bank debt settled after Year end and remains undrawn and available as at the date of this presentation. Unit 31 December 2018 30 September 2018 Closing exchange rate used for conversion R14.35:US$1 R14.14:US$1 Cash at bank US$m 90.7 111.1 Diamond debtors US$m 4.4 14.4 Carats
Slide 23: Diamond Market & Pricing Overview
Diamond Market & Pricing Overview 18 February 2019
Slide 24: Diamond Market and Prices
Diamond Market and Prices Petra Sales Timing H1 FY 2019 Market Performance • Demand for higher value stones remained strong in H1 FY 2019 • Demand for lower value small diamonds softened in Sept and Oct driven by a weakening in global markets and seasonal • Rough diamond market is seasonally stronge
Slide 25: Diamond Market Fundamentals
Diamond Market Fundamentals Supply Demand • Supply constraints: Global rough diamond production • Global market: rose 2% to record high of $82bn in 2017 increased 19% to 150.9 Mcts in 2017 • Demand growth expected to be driven by: • Continuing overall declining trend: Increase in • Growth in major U
Slide 26: Conclusion
” Conclusion
Slide 27: Outlook
Outlook Reduction in net debt / gearing levels • Reduction in net debt is a priority • Net debt expected to be largely flat during H2 FY 2019 should prices remain at H1 FY 2019 levels – assuming BEE debt repayments are maintained as per existing amortization schedule and Williamson issues remain unr
Slide 28: Appendix
V4 Appendix
Slide 29: Diamonds are rare…and getting rarer
Diamonds are rare…and getting rarer Only 30 significant kimberlite mines in production today 29 Petra Diamonds Limited: H1 FY 2019 Interim Results Presentation
Slide 30: Focus on Africa
Focus on Africa • Four producing mines (three in South Africa and one in Tanzania) • Diversified portfolio key to managing production risk across the Group Petra Diamonds Limited: H1 FY 2019 Interim Results Presentation 30
Slide 31: Nearing End of +10 Year Heavy Capital Investment Phase
Nearing End of +10 Year Heavy Capital Investment Phase 1 1 Disposal of KEM JV completed in December 2018 FY 2006 to FY 2018 FY 2006 FY 20181 • Acquisition costs: $330 million Delivering growth in • Total production: 27.4 Mcts 0.175 Mcts Production 4.6 Mcts • Total revenue: $3.6 billion $21 million R
Slide 32: Petra Board of Directors
Petra Board of Directors Adonis Pouroulis Johan Dippenaar Jacques Breytenbach Tony Lowrie Dr Patrick Bartlett Non-Executive Chairman CEO Finance Director Senior Independent Non- Independent Non-Executive Executive Director Director Mining entrepreneur whose Over 25 years’ experience in Assumed role
Slide 33: Capital Structure
Capital Structure Share Price (1 year to 14 February 2019) As at 6 February 2019 % voting rights Standard Life Aberdeen plc 11.6% BlackRock, Inc. 11.5% Prudential plc 5.3% T. Rowe Price 5.0% Cobas Asset Management 5.0% Directors 3.8% Listing LSE: PDL Average daily trading volume (shares) – (LTM) 2.9
Slide 34: Debt Facilities
Debt Facilities • Bank facilities (excl. FX lines) as at 31 Dec 2018: ca. $104.5 million • Bank debt facilities undrawn and available to the Group as at 31 Dec 2018: $104.5 million, in addition to cash at bank of $90.7 million • South African bank debt was settled shortly after Year end; remaining a
Slide 35: Bank Debt Facilities – Covenants
Bank Debt Facilities – Covenants Maintenance Covenants Distribution Covenants 12 months to 12 months to Covenant 31 Dec 2018 30 June 2019 All periods and thereafter Required ratio Required ratio Required ratio Consolidated Net Debt1 to ≤3.5x ≤2.5x ≤2.0x Consolidated EBITDA Consolidated EBITDA to ≥3.
Slide 36: Consolidated Net Debt (US$m)
….Targeting Leverage Reduction of ≤ 2x ND:EBITDA1 by FY 2020 2 Leverage ratio1 BEE debt Petra Net Debt 1000.0 2.7 3.3 Consolidated Net Debt (US$m) 5.0 3.6 2.8 3.9 500.0 633.7 615.7 510.5 554.9 445.7 375.8 88.8 104.9 109.3 85.9 85.9 72.5 0.0 FY 2016 FY 2017 H1 FY 2018 FY 2018 FY 2018 H1 FY 2019 Pre-R
Slide 37: Impact of ZAR/USD Movement on Petra
Impact of ZAR/USD Movement on Petra • US$1:ZAR14.15 on 14 February 2019 • Increase / decrease of ZAR1 equates to: • ca. US$20m on EBITDA USD • ca. US$35m on FCF • Short term hedging strategy to manage volatility 70-80% • Collar style hedges on USD revenue converted to ZAR ZAR covering up to 50% of F
Slide 38: Capex Profile – FY 2019 & FY 2020
Capex Profile – FY 2019 & FY 2020 1. All Capex numbers stated in FY 2019 money terms (ZAR12.75/US$1 where applicable) 2. Depreciation on mining assets for FY 2019 guided at ca. US$90 million. 38 Petra Diamonds Limited: H1 FY 2019 Interim Results Presentation
Slide 39: H1 FY 2019 vs FY 2018 Operational Results
H1 FY 2019 vs FY 2018 Operational Results Finsch Cullinan Koffiefontein Williamson H1 FY FY H1 FY FY H1 FY FY H1 FY FY 2019 2018 2019 2018 2019 2018 2019 2018 ROM PRODUCTION Tonnes Treated (t) 1,503,335 3,084,395 1,996,624 3,741,086 377,391 649,259 2,510,451 4,659,563 Grade (cpht) 61.7 62.5 39.3 35.
Slide 40: Sustainability – Providing Stable Employment
Sustainability – Providing Stable Employment • By investing its resources in its mines, Petra has put in place long-term, sustainable mine plans • When Petra acquired mines: +/- 2,500 employees • Today Petra employs more than 3,600 employees • And several thousand contractors during expansion progra
Slide 41: Sustainability
Sustainability Training and Development • Leadership Development Programme to encourage career progression • Ca. $9.5m spent on training & development programmes in FY 2018 Labour Relations • Labour relations are currently stable and three year agreement bodes well for a more stable environment duri
Slide 42: Focus on Developing our People
Focus on Developing our People • Petra increased its training spend to US$9.5 million in FY 2018 • Efforts start at grassroots level – improving education standards in local schools • Bursaries, scholarships and training offered to community members • Numerous Company programmes to develop our emplo
Slide 43: Focus on the Development of Women
Focus on the Development of Women Diversity is proven to result in improved decision making and better results • Petra has a number of Company initiatives aimed at encouraging and developing women at all levels of the business; in FY 2018 women represented: • 33% of engineering learnerships • 40% of
Slide 44: Minimising our Environmental Footprint
Minimising our Environmental Footprint • Diamond mining is energy and water intensive but it does not use any harmful chemicals – vegetation grows freely on our tailings dumps • Ongoing initiatives to reduce energy usage, including continual investigation of renewable energy sources • Continual redu
Slide 45: Tailings Residue Deposit Management
Tailings Residue Deposit Management • Risk based Mandatory Codes of Practice (MCOP)1 documents for all residue deposits are drawn up in South Africa as required by the Department of Mineral Resources, Mine Health and Safety Inspectorate, according to set guidelines • The Williamson diamond mine does
Slide 46: Producing the Full Spectrum of Diamonds
Producing the Full Spectrum of Diamonds Mass market goods High end goods Ultra collectables Growth in middle classes Growth in HNWIs (+$5m) Exceptional diamonds The global middle class comprised ca. 3.2bn 3,617,550 people at the end of 2016 Brookings Forecasts 2,535,480 2,108,530 3.8 4.0 3.5 3.7 3.2
Slide 47: The DPA - Sustaining Consumer Demand
The DPA - Sustaining Consumer Demand Diamond Producers Association comprises De Beers, ALROSA, Rio Tinto, Dominion, Petra, Lucara, Murowa – together ca. 72% of world supply by value The DPA seeks to actively influence sustainable consumer demand by: • Promoting the integrity of the diamond industry
Slide 48: Thank You
Thank You Further enquiries: Petra Diamonds investorrelations@petradiamonds.com +44 20 74948203 www.petradiamonds.com