Petra Diamonds Limited · LSE:PDL
Petra Diamonds — H1 FY2015 Earnings Presentation
40 slides from Petra Diamonds's earnings presentation, Feb 19, 2015
Slide 1: Development on track at Finsch – Interim Results
Development on track at Finsch Interim Results (Six Months to 31 December 2014) 19 February 2015
Slide 2: Important Notice
Important Notice • These Presentation Materials do not constitute or form part of any invitation, offer for sale or subscription or any solicitation for any offer to buy or subscribe for any securities in the Company nor shall they or any part of them form the basis of or be relied upon in any manne
Slide 3: H1 FY 2015 – KPIs
H1 FY 2015 – KPIs Production Revenue Safety Guidance Mcts 3.1 c.3.3 US$m 471.8 LTIFR 3.5 500 0.30 3.0 450 400 0.25 2.5 350 1.5 287.2 0.20 2.0 300 250 0.15 0.28 0.28 1.5 200 150 0.10 1.0 1.6 1.6 100 184.6 214.8 0.5 0.05 50 0.0 0 0.00 FY 2014 FY 2015 FY 2014 FY2015 H1 FY 2014 H1 FY 2015 -2% to 1.6 Mct
Slide 4: H1 FY 2015 – KPIs
H1 FY 2015 – KPIs Profit from Mining Activities¹ Adj. Operating Cashflow2 Capex US$m 201.1 US$m 181.2 US$m 211.2 250 200 250 180 200 160 200 140 150 120 150 125.9 124.1 100 162 100 80 100 60 50 40 50 125.2 77 92.9 85.3 20 50.4 0 0 19.2 0 FY 2014 FY 2015 FY 2014 FY 2015 FY 2014 FY 2015 +21% to $92.9m
Slide 5: Robust Financial Position
Robust Financial Position Cash Net debt Bank facilities undrawn US$m US$m US$m 140.0 140 50 120.0 120 45 40 100.0 100 35 80.0 80 30 25 60.0 129.6 60 124.9 45.2 20 37.5 40.0 40 15 10 20.0 34 20 45.8 5 0.0 0 0 30/06/14 31/12/14 30/06/14 31/12/14 30/06/14 31/12/14 +281% to $129.6 -63% to $45.8m +21% to
Slide 6: Summary Results
Summary Results H1 FY 2015 H1 FY 20141 FY 2014 Revenue 214.8 184.6 471.8 Adjusted mining and processing costs2 (122.9) (109.7) (277.4) Other direct income 1.0 2.1 6.7 Profit from mining activity2 92.9 77.0 201.1 Exploration expense (2.4) (1.4) (2.8) Corporate overhead (5.6) (6.2) (10.6) Adjusted EBI
Slide 7: H1 vs H2
H1 vs H2 • Petra revenue weighted to H2 due to seasonal timing of sales tenders Petra Typical Tender Sales Cycle H1 H2 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 1 2 3 4 5 6 7 7
Slide 8: Operating Costs
Operating Costs • On-mine cash costs increased by 12% in US$ On-mine cash cost make-up (Petra Group) terms, mainly due to 10% increase in total tonnes treated to 8.5 Mt (H1 FY 2014: 7.7 Mt) 7% 14% • SA operating costs increased in ZAR terms by ca. 37% 12%, due to higher tonnes treated as well as exp
Slide 9: Diamond Market – Current Issues
Diamond Market – Current Issues • Rough diamond market currently under short term pressure • Issues related to liquidity in pipeline, polished inventory levels and impact of strong US Dollar on US Dollar denominated diamond prices • Petra 1st tender of H2 saw good demand and slightly firmer pricing
Slide 10: Attractive Market Fundamentals – Supply
Attractive Market Fundamentals – Supply Limited Supply – less than 30 significant kimberlite mines • It is possible the world has seen peak diamond production (177 Mcts in 2005) • Exploration success rate in diamonds less than 1% • No major finds since the early 1990’s; exploration expenditure cut w
Slide 11: Attractive Market Fundamentals – Demand
Attractive Market Fundamentals – Demand • Expected growth in demand across all diamond ranges Mass market goods High end goods Ultra collectables Growth in middle classes Growth in UHNWs (+US$30m) Growth in billionaires Number of projected additional middle Global UHNW wealth to reach US$40tn & Cons
Slide 12: Accessing Undiluted Ore
Accessing Undiluted Ore • Kimberlite pipes lend themselves to mechanised cave mining method • FY 2015 is last year so reliant on old mining areas • Expansion programmes to deliver significant and growing input of undiluted ore from FY 2016 onwards • Grades expected to rise significantly, increasing
Slide 13: Growth & Margin Expansion
Growth & Margin Expansion Operating margins expected to rise from ca. 40% to +50% by FY 2019 • Group tonnage throughput to remain flat, but increase in ROM grades to lead to ca. 60% growth in production • Lower value tailings provided 1 in 3 carats in FY 2014 – will decrease to 1 in 20 by FY 2019 Sp
Slide 14: Development Snapshot
Development Snapshot Underground development Optimising orehandling Plant refinements 14
Slide 15: Organic Growth Path to 5 Million Carats pa
Organic Growth Path to 5 Million Carats pa • Brownfields expansion programmes expected to lift production ca. 60% by FY 2019 production FY 2019 – all programmes on time and on budget target of ca. 5.0 Mcts 6 1000 5 Carat production (million carats) FY 2015 FY 2014 production production of target of
Slide 16: Outlook
Outlook 1. Quality assets & management Risk mitigation to deliver on plans Expansion programmes on track; 2. Growth & margin expansion margins to rise to +50% by FY 2019 Capex fully funded; maiden dividend 3. Strong balance sheet & dividends for FY 2015 of 2p Favourable medium- to long-term 4. Attra
Slide 17: Sustainability Highlights
Sustainability Highlights Community Support Volunteer work for Mandela Day Striving for the highest standards Community Health Finsch safety award The Mwadui Hospital at Williamson Education Teacher Support Programme Environmental Management at Koffiefontein Solar powered changehouses at Cullinan
Slide 18: Appendix
The Cullinan mine in South Africa Appendix
Slide 19: Capital Structure
Capital Structure Share Price (1 year) High Quality Share Register % ISC (as at 18 February 2015) vs FTSE 250 & FTSE 350 Mining Al Rajhi Holdings W.W.L. 10.9% T. Rowe Price¹ 10.2% JP Morgan Asset Management Holdings Inc. 7.8% BlackRock Investment (UK) Limited 7.3% Prudential plc group of companies²
Slide 20: The Petra Board
The Petra Board Adonis Pouroulis Johan Dippenaar David Abery Jim Davidson Non-Executive Chairman CEO Finance Director Technical Director Successful mining entrepreneur One of South Africa’s most successful Extensive experience as Chief Financial Acknowledged world authority on Founded Petra Diamonds
Slide 21: An Exceptional Growth Path
An Exceptional Growth Path Petra has acquired five non-core diamond mines from De Beers (four in South Africa, one in Tanzania): July 2007 July 2008 February 2009 May 2010 September 2011 Koffiefontein Cullinan Williamson Kimberley UG Finsch 74% Petra¹; 26% BEE 74%¹ Petra; 26% BEE 75% Petra¹; 25% 74%
Slide 22: Focus on Africa
Focus on Africa Diversified portfolio: four producing mines in South Africa, one in Tanzania, exploration in Botswana Africa is source of ca. 60% of world’s diamonds by value 22
Slide 23: 2014 Resource Statement (30 June 2014)
2014 Resource Statement (30 June 2014) • World-class Resource base of 301.1 million carats worth ca. US$58.3 billion Gross Resources (Mcts) 100 199.6 51.3 50 33.1 6.7 6.4 4.1 - Cullinan Finsch Williamson Koffiefontein Kimberley Underground Helam Gross In Situ Value (US$bn)¹ 31.6 10.2 5.1 3.6 1.9 0.6
Slide 24: Production and Revenue – FY 2014 vs FY 2019
Production and Revenue – FY 2014 vs FY 2019 Gross Production Gross Revenue FY 2014 actual: 3.1 million carats1 FY 2014 actual: US$471.8 million1 26% Finsch 35% 39% Cullinan 61% 6% Williamson 2% Koffiefontein 11% 1% 4% 8% 6% Kimberley 1% Underground Helam FY 2019: c.5 million carats2 FY 2019: c.US$1.
Slide 25: Diamond Market - Falling Supply
Diamond Market - Falling Supply • Global production fell 27% from 2005 (177 Mcts) to 2013 (130 Mcts) • No Tier 1 discoveries for 20 years, despite US$ billions spent on exploration in 1990s • Long lead times from discovery to production (7 – 14 years) and development can be costly Global diamond sup
Slide 26: Diamond Market – Growing Demand
Diamond Market – Growing Demand Per capita consumption of key commodities: China relative to the US “steady state” • Demand growth driven by ‘mass luxury’ – affordable diamond jewellery for the middle classes ($200 to +$2,000) • Ca. 3 billion people to join the middle classes over the next 20 years
Slide 27: Consistent Production Profile
Consistent Production Profile • Kimberlite production profile (diamond quality & size ranges) remains highly constant over time • Ever growing volumes across the full diamond spectrum (from lowest to highest value) • Growing trend for mass luxury supported by strong pricing performance in smaller /
Slide 28: H1 FY 2015 – Operations Results
H1 FY 2015 – Operations Results Operation Finsch Cullinan Koffiefontein Kimberley UG Williamson (74%¹ Petra; 26% BEE) (74%¹ Petra; 26% BEE) (74%¹ & 2 Petra; 26% BEE) (74%¹ Petra; 26% BEE) (75% Petra; 25% Government of Tanzania) ROM Production Tonnes treated (t) 1,530,455 1,505,356 1,292,895 1,291,20
Slide 29: Finsch – Development Programme
Finsch – Development Programme Expansion Plan – to take 2,777m waste development, 230m raiseboring & 151m kimberlite development production to c.2.0 Mctpa (ROM) by FY 2018 • Mining currently taking place in Block 4 at 630m – FY 2014 • Development of SLC over 4 levels from 700m to 780m; first product
Slide 30: Finsch – Production Plan
Finsch – Production Plan • ROM tonnages to rise 17%, but ROM carat production to rise 58% due to higher grade • Positive impact on average value per carat as tailings production winds down Tonnes treated and grades Carat production and average diamond values¹ 2.5 160 6.0 70 Million carats $/ct cpht
Slide 31: Cullinan – Development Programme
Cullinan – Development Programme Expansion Plan – to take 2,361m waste development, 389m raiseboring & 967m kimberlite development production to c. 2.2 Mctpa by FY 2019 (2.0 Mctpa ROM & 0.2 Mctpa tailings) • Commenced rehabilitation of BA5 areas at 645m to create access to undiluted ore – FY 2013 •
Slide 32: Cullinan – Production Plan
Cullinan – Production Plan • ROM tonnages to rise 48%, but ROM carat production to rise 180% Tonnes treated and grades Carat production and average diamond values 2.5 200 8.0 60 Million carats $/ct cpht Million tonnes 180 7.0 50 2.0 160 6.0 140 40 5.0 1.5 120 4.0 30 100 3.0 1.0 80 20 60 2.0 10 0.5 4
Slide 33: Cullinan – History of Large Diamond Recoveries
Cullinan – History of Large Diamond Recoveries Acquisition by Petra: July 2008 33
Slide 34: Koffiefontein – Development Programme
Koffiefontein – Development Programme Expansion Plan – to take Koffiefontein Kimberlite Pipe Schematic production to c. 100,000 ctpa by FY 2017 • ROM production supplemented by ore from Ebenhaezer open pit (~5ha) – FY 2015 to FY 2016 • Installation of SLC from 560m to 600m – FY 2014 to FY 2016 SCOPE
Slide 35: Kimberley Underground – Development Programme
Kimberley Underground – Development Programme Expansion Plan – planned Kimberley Underground Kimberlite Pipes Schematic production of ca. 170,000 ctpa from FY 2015 • Construction and commissioning of plants at both Joint Shaft and Wesselton Shaft – completed in FY 2013 • ROM stockpile of ca. 244 Kt
Slide 36: Williamson – Development Programme
Williamson – Development Programme Expansion Plan – to take Williamson Kimberlite Pipe Schematic production to c. 300,000 ctpa by FY 2017 1km • Re-crush circuit in plant, N plus other plant design efficiencies, allowing for increased throughput – from FY 2014 LOM Pit Shell • Successful ramp-up of pr
Slide 37: H1 Loans & Borrowings Movement
H1 Loans & Borrowings Movement Debt Facilities1 Loans and Borrowings Movement (US$ million) US$ million (Percentage utilised in brackets) 5 - (0%) 43 -20 (46%) 69 -40 (100%) 221 -60 25 (79%) (100%) -80 43 35 -100 (46%) (100%) -120 -140 ABSA and RMB: Amortising term -160 IFC: Amortising term ABSA and
Slide 38: Debt Facilities
Debt Facilities Bank loans and borrowing (excl FX lines) Lender Type Size Interest Rate Repayment US$M Absa & RMB Amortising term facility 69 JIBAR + 3.5% 5 semi-annual payments from Mar 2016 (FNB) IFC Amortising term facility 35 LIBOR + 4.0% 5 semi-annual payments from Mar 2016 Absa & RMB Revolving
Slide 39: Capex Profile
Capex Profile 1. All Capex numbers are stated in FY 2015 money terms (except for FY 2014 actuals) 2. Depreciation on mining assets for FY 2014 guided at c. US$40 million (at a R10.3/US$1 exchange rate) 3. As in prior guidance, capital estimates above do not include any capitalised borrowing costs; g
Slide 40: Further enquiries
Open pit mining at Williamson Further enquiries: Petra Diamonds Cathy Malins cathy.malins@petradiamonds.com +44 20 7494 8203 www.petradiamonds.com