Petra Diamonds Limited · LSE:PDL
Petra Diamonds — Investor Presentation (February 2015)
38 slides from Petra Diamonds's investor presentation, February 2015
Slide 1: Development on track at Finsch
Development on track at Finsch Discover Petra – A Leading Independent Diamond Producer 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 manner
Slide 3: A Mining Company Offering…
A Mining Company Offering… 1. Quality assets & management 2. Growth & margin expansion 3. Strong balance sheet & dividends 5. Attractive market fundamentals LSE: PDL: Constituent of FTSE 250; market capitalisation of ca. £819m / US$1.2bn (as at 29 January 2015) 3
Slide 4: 1. Quality Assets & Management
1. Quality Assets & Management • Petra acquired five diamond mines from De Beers (four in South Africa, one in Tanzania) July 2007 July 2008 February 2009 May 2010 September 2011 Koffiefontein Cullinan Williamson Kimberley UG Finsch 74% Petra¹; 26% BEE 74%¹ Petra; 26% BEE 75% Petra¹; 25% 74% Petra¹;
Slide 5: 2. Growth & Margin Expansion
2. Growth & Margin Expansion • Brownfields expansion programmes expected to lift production ca. 60% by FY 2019 production FY 2019 – all programmes on time and on budget target of ca. 5.0 Mcts 6 1000 5 Carat production (million carats) FY 2015 FY 2014 production production of target of 3.3 Mcts 4 3.1
Slide 6: 2. Growth & Margin Expansion
2. Growth & Margin Expansion • Production guidance for FY 2015 increased from 3.2 Mcts to 3.3 Mcts H1 FY 2015 – Production and Sales Summary Unit H1 FY 2015 H1 FY 2014 Variance FY 2014 Sales Diamonds sold Carats 1,401,575 1,414,818 -1% 3,131,830 Gross revenue US$M 214.8 184.6 +16% 471.8 Production R
Slide 7: 2. Growth & Margin Expansion
2. Growth & Margin Expansion • 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, increa
Slide 8: 2. Growth & Margin Expansion
2. Growth & Margin Expansion Underground development Optimising orehandling Plant refinements 8
Slide 9: 2. Growth & Margin Expansion
2. 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
Slide 10: 3. Strong Balance Sheet & Dividends
3. Strong Balance Sheet & Dividends Debt Facilities1 Operating Cashflow As at 31 December 2014 US$ million (Percentage utilised in brackets) • Operating cashflow has • Cash at bank: 5 grown substantially over US$129.6m (0%) the years • Debt facilities undrawn 43 (46%) and available: US$45.2m2 69 (10
Slide 11: 4. Attractive Market Fundamentals – Current Issues
4. Attractive Market Fundamentals – Current Issues • Rough diamond market currently under short term pressure • Issues related to liquidity in pipeline and polished inventory levels • Impact of strong US Dollar on US Dollar denominated diamond prices Average month by month change in Rough Diamond In
Slide 12: 4. Attractive Market Fundamentals – Supply
4. 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 cu
Slide 13: 4. Attractive Market Fundamentals – Demand
4. 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 UNHWs (+US$30m) Growth in billionaires Number of projected additional middle Global UHNW wealth to reach US$40tn & C
Slide 14: 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 5. Attra
Slide 15: Integrated Approach to Sustainability
Integrated Approach to Sustainability Safety Performance 1.2 • Safety of 1 employees is 0.8 top priority for management 0.6 0.4 • Petra striving for zero harm 0.2 across its 0 operations FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 H1 FY 2015 • Left: Petra’s LTIFR Rate Striving for the highest standards
Slide 16: Appendix
Open pit mining at Williamson Appendix
Slide 17: Capital Structure
Capital Structure Share Price (1 year) High Quality Share Register % ISC (as at January 2015) vs FTSE 250 & FTSE 350 Mining Al Rajhi Holdings W.W.L. 11.9% T. Rowe Price¹ 10.2% JP Morgan Asset Management Holdings Inc. 7.8% BlackRock Investment (UK) Limited 7.3% Prudential plc group of companies² 6.1%
Slide 18: 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 19: 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 19
Slide 20: 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 21: 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$1.
Slide 22: Rough Diamond Pricing
Rough Diamond Pricing • Petra adjusted FY 2015 pricing guidance due to weaker market in H1 Original Updated Average price Management Updated Guidance Guidance Mine (US$/ct)¹ guidance (US$/ct) (US$/ct) H1 FY 2015 (US$/ct) H2 FY 2015 FY 2015 FY 2015 Finsch 85 108 93 90 247 Cullinan (124 excluding 152²
Slide 23: 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 24: Exceptional Diamonds (+US$5 million Stones)
Exceptional Diamonds (+US$5 million Stones) • Exceptional diamonds contributed on average US$18 million pa from FY 2008 to FY 2014 • Higher average in last two years: US$26 million pa from FY 2013 to FY 2014 • US$38.7 million in H1 FY 2015 • Company business model is not reliant on exceptional diamo
Slide 25: Diamond Market - Falling Supply
Diamond Market - Falling Supply • Global production fell 27% from 2005 (177 Mcts) to 2013 (130 Mcts) • No Tier 1 discoveries for 20 years, despite US$ 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: Finsch – Development Programme
Finsch – Development Programme Expansion Plan – to take production to c.2.0 Mctpa by FY 4,055 development metres and 302 raiseboring metres in FY 2014 2017 • Mining currently taking place in Block 4 at 630m – FY 2014 • Development of SLC over 4 levels from 700m to 780m; first production – from FY 20
Slide 28: 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 29: Cullinan – Development Programme
Cullinan – Development Programme Expansion Plan – to take 5,669 development metres and 854 raiseboring metres in FY 2014 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 • Developmen
Slide 30: 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 $/ct cpht Million tonnes 180 7.0 50 2.0 160 6.0 140 40 5.0 1.5 120 4.0 30 100 3.0 1.0 80 20 60 2.0 10 0.5 4
Slide 31: Consistent Production of Large Diamonds
Consistent Production of Large Diamonds Date of acquisition 31
Slide 32: Koffiefontein – Development Programme
Koffiefontein – Development Programme Expansion Plan – to take Koffiefontein Kimberlite Pipe Schematic production to c. 100,000 ctpa by FY 2017 • ROM production supplemented by ore from Ebenhaezer open pit (~5ha) – FY 2015 to FY 2016 • Installation of SLC from 560m to 600m – FY 2014 to FY 2016 SCOPE
Slide 33: Kimberley Underground – Development Programme
Kimberley Underground – Development Programme Expansion Plan – planned Kimberley Underground Kimberlite Pipes Schematic production of ca. 170,000 ctpa from FY 2015 • Construction and commissioning of plants at both Joint Shaft and Wesselton Shaft – completed in FY 2013 • ROM stockpile of ca. 244 Kt
Slide 34: Williamson – Development Programme
Williamson – Development Programme Expansion Plan – to take Williamson Kimberlite Pipe Schematic production to c. 300,000 ctpa by FY 2017 1km • Re-crush circuit in plant, N plus other plant design efficiencies, allowing for increased throughput – from FY 2014 LOM Pit Shell • Successful ramp-up of pr
Slide 35: FY 2014 – Operating Costs
FY 2014 – Operating Costs • On-mine cash costs decreased by 1% On-mine cash cost make-up (Petra Group) 7% • South Africa inflationary pressures (electricity and labour: +8%), offset by higher tonnages 13% 38% (+4%), tight cost control, combined with the positive impact of a weaker Rand (-13%) • Sept
Slide 36: Debt Facilities
Debt Facilities Bank loans and borrowing (excl FX lines) Lender Type Size Interest Rate Repayment US$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 37: 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.
Slide 38: Further enquiries: Petra Diamonds
Open pit mining at Williamson Further enquiries: Petra Diamonds Cathy Malins cathy.malins@petradiamonds.com +44 20 7494 8203 www.petradiamonds.com
Petra Diamonds — Investor Presentation (February 2015) on 6ix