Petra Diamonds Limited · LSE:PDL
Petra Diamonds — H1 FY2020 Earnings Presentation
52 slides from Petra Diamonds's earnings presentation, Feb 17, 2020
Slide 1: Interim Results Presentation
Interim Results Presentation Petra Diamonds Limited 17 February 2020
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. The
Slide 3: CEO Overview
7 PetraDiamonds CEO Overview
Slide 4: Relentless Focus on Zero Harm
Relentless Focus on Zero Harm Improving trend in safety performance over +10 year period • Safety is our most important personal and organisational value • From FY 2009 to H1 FY 2020: LTIFR -65% and LTIs -82% MILLION MANHOURS WORKED / NUMBER OF ACCIDENTS 81 81.0 1.4 71.0 1.2 61.0 54 1.0 51.0 45 45 4
Slide 5: H1 FY 2020 KPIs: Delivery of solid operational results in challenging market
H1 FY 2020 KPIs Delivery of solid operational results in challenging market PRODUCTION REVENUE CAPEX¹ Million carats US$ million US$ million 2.07 +3% 193.9 -6% 25.6 -35% 463.6 3.87 81.4 256.5 1.85 42.1 2.02 2.07 207.1 193.9 39.3 25.6 FY 2019 H1 FY 2020 FY 2019 H1 FY 2020 FY 2019 H1 FY 2020 • All min
Slide 6: Strong operational performance supported by Project 2022 across all sites
H1 FY 2020 saw the highest ROM tonnes and carats in Petra’s history Strong operational performance supported by Project 2022 across all sites ROM tonnes treated 8000 000 7000 000 6000 000 5000 000 Q4 Q2 4000 000 Q4 Q2 Q2 3000 000 Q3 Q1 2000 000 Q3 Q1 Q1 1000 000 - H1 2018 H2 2018 H1 2019 H2 2019 H1
Slide 7: Profitability impacted by weaker diamond prices
H1 FY 2020 KPIs Profitability impacted by weaker diamond prices ADJUSTED EBITDA¹ OPERATIONAL FREE CASH FLOW US$ million US$ million ADJUSTED NET LOSS AFTER TAX¹ 67.2 -11% 13.7 -26% US$ million 11.1 H1 FY 2019: (4.5) 70.5 153.0 77.4 52.0 NET LOSS AFTER TAX 75.6 67.2 US$ million 18.5 13.7 FY 2019 H1 F
Slide 8: Responsible Mining in H1 FY 2020 – Playing a Positive Role within our Communities
Responsible Mining in H1 FY 2020 – Playing a Positive Role within our Communities Petra constructed the Lethabong Day Centre within Cullinan celebrated the accomplishments of the top Launch of the artisanal mining initiative at the Onverwacht school grounds, with 3 classrooms achievers at the 2020 M
Slide 9: Diamond Market Overview
Y PetraDiamonds Diamond Market Overview
Slide 10: Global Production: Only 30 significant kimberlite mines in production today
Global Production Only 30 significant kimberlite mines in production today 10
Slide 11: The supply side outlook continues to contract
Favourable Long-term Market Fundamentals The supply side outlook continues to contract • Rough diamond production fell 2% to 148.4 Mcts in 2018 with a value of $14.5bn (2017: $14.1bn) • Argyle mine to close in 2020; produced around 10% of world supply by volume in 2018 and only major source of pink
Slide 12: Rough Diamond Prices: Short term headwinds affecting pricing
Rough Diamond Prices Short term headwinds affecting pricing Rough diamond market performance H1 FY 2020 FY 2019 H1 FY 2019 Rough Diamond Prices US$/ct US$/ct US$/ct • The first tender in H1 FY 2020 saw like-for-like prices down ca. 4% over Q4 FY 2019, with October seeing some Cullinan1 112 110 96 st
Slide 13: Financial Results
Y PetraDiamonds Financial Results
Slide 14: H1 FY 2020 Summary of Results
H1 FY 2020 Summary of Results H1 FY 2020 H1 FY 2019 FY 2019 (US$m) (US$m) (US$m) Revenue 193.9 207.1 463.6 Adjusted mining and processing costs1 (123.6) (127.2) (301.7) Other direct income / (expense) 0.3 0.2 (0.8) Profit from mining activity1 70.6 80.1 161.1 Exploration expense (0.2) (0.2) (0.4) Co
Slide 15: Balance Sheet Snapshot
Balance Sheet Snapshot • Bank facilities of R1.5 billion undrawn and available (FX movement causes USD value to fluctuate) • South African Lender Group consented to a waiver of the EBITDA related covenant ratios associated with Petra’s banking facilities for the December 2019 measurement period Unit
Slide 16: Net Debt Movement in H1 FY 2020
Net Debt Movement in H1 FY 2020 Operational FCF US$13.7 million $600 $550 US$ million $500 $450 $400 $564.8 $2.9 $67.3 $23.7 $3.1 $26.8 $24.4 $11.3 $3.4 $2.8 $0.6 $0.1 $596.4 Opening Net FX Operating H1 Receivables Capex Net Finance BEE Realised FX Lease Tax KEM Net Debt Debt restatement CF pre Inve
Slide 17: Operating Costs: Costs in line with expectations
Operating Costs Costs in line with expectations H1 FY 2020 On-mine cash cost breakdown Focus on costs (South Africa operations) • Absolute on-mine cash costs in H1 FY 2020 largely flat vs. H1 FY 2019 despite ongoing inflationary pressures, 8% Labour due to: Contractors and consumables – inflationary
Slide 18: Impact of ZAR/USD Movement on Petra
Impact of ZAR/USD Movement on Petra • US$1:ZAR14.86 on 11 February 2020 70 – 80% of operating costs are ZAR denominated • Increase / decrease of ZAR1 equates to: USD – ca. $15 – 18 million on EBITDA USD – ca. $25 million on operational FCF 70-80% • Short term hedging strategy to manage volatility •
Slide 19: Operations Update
WW PetraDiamonds Operations Update
Slide 20: Transitioning to Steady State Operations
Transitioning to Steady State Operations Completion of heavy capital intensive phase 10 year capital investment programme and 3 year outlook US$ 350 300 250 200 150 100 50 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 • Petra has completed major capital expansion programmes acro
Slide 21: Mine Contribution Split
Mine Contribution Split Cullinan became key revenue contributor to Group in H1 FY 2020 Production by mine Revenue by mine 2% 11% 20% 32% H1 FY 2020 H1 FY 2020¹ 44% 2.1 million carats $193.9 million 8% 43% Finsch 42% Cullinan Koffiefontein Williamson 2% 10% 20% FY 2019 FY 2019 37% 45% 3.9 million car
Slide 22: Cullinan: Steady state production from C-Cut Phase 1 and CC1E
Cullinan Steady state production from C-Cut Phase 1 and CC1E to be reached in FY 2020 • Undercut ring blasting commenced – 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 Q1
Slide 23: Cullinan – C-Cut Progression
Cullinan – C-Cut Progression C-Cut CC1E 16 ha at 839 mL The last 3 draw-bells of 107 were slotted in December 2019 • Draw-bell installation completed at the end of January 2020, with a total of 107 draw-bells • Cave maturity will follow the draw-bell opening sequence with draw-bells requiring roughl
Slide 24: Finsch: Steady state production from Block 5 SLC
Finsch Steady state production from Block 5 SLC to be reached in H2 FY 2020 • Block 5 SLC production commenced from first tunnels on 70L – FY 2016 • Production on 75L commenced in Q3 FY 2018; all tunnels in production - Q3 FY 2019 • Construction of ground handling infrastructure completed – Q1 FY 20
Slide 25: Finsch – Block 5 SLC Progression
Finsch – Block 5 SLC Progression 70 Level 73 Level 70 Level 75 Level 78 Level 73 Level 75 Level 78 Level 25
Slide 26: Koffiefontein: Steady state production from SLC
Koffiefontein Steady state production from SLC was reached in FY 2019 • Production commenced from 56 Level SLC – FY 2015 • Ground handling system commissioned – Q3 FY 2018 • Production from 60L commenced – Q2 FY 2019 • SLC Production Ramp Up – FY 2017 – 0.6 Mt – FY 2018 – 0.7 Mt – FY 2019 – 1.0 Mt –
Slide 27: Williamson: Steady state production achieved in FY 2018
Williamson Steady state production achieved in FY 2018 MUDSTONE • New mill plant commissioned – H2 FY 2017 GB2 • FY 2019 – best production results since 1977 SIL_GB – FY 2019 – 5.0 Mt ROM / 0.4 Mt alluvial NF_RVK RVK – FY 2020 – 5.0 Mt ROM EST BVK – H1 FY 2020 – 2.6 Mt ROM BVK – H1 FY 2020 ROM grade
Slide 28: Project 2022
Project 2022 Petra Diamonds Limited: FY 2019 Prelims Presentation 28
Slide 29: Generation of Free Cash Flow to reduce Leverage
Generation of Free Cash Flow to reduce Leverage Project 2022 to maximise cash flow against a challenging diamond market • Project 2022 remains on track to deliver significant cash flow generation, reaching an annualised rate of US$50 – 80 million • However, the operational cash flow benefits are bei
Slide 30: Project 2022 – Updated Projections
Project 2022 – Updated Projections Net cash flow evolution to achieve annualised cash flow generation of US$50 – 80 million 200 150 US$ million 100 50 0 FY 2020 FY 2021 FY 2022 3 Year FY 2020 FY 2021 FY 2022 3 Year Target Stretch Target Stretch Base Throughput Costs Eff. Sourcing Other 30
Slide 31: Project 2022 in Action at Cullinan
Project 2022 in Action at Cullinan Project 2022 Initiatives Delivering at Cullinan aim at increasing production The ore is milled Simplified Cullinan process flow diagram 5 to liberate the diamonds 6 Rough diamonds are separated out from the ore 1 4 Draw point from the The ore is then block cave hoi
Slide 32: Improvements focused on addressing the bottlenecks on site
Project 2022 in Action at Cullinan Improvements are mainly focused on addressing the bottlenecks on site The ore is milled to liberate the Simplified Cullinan process flow diagram 5 diamonds 6 Rough diamonds are separated out from the ore 1 4 Draw point from the The ore is then block cave hoisted to
Slide 33: Specific ideas within mining are being implemented
Project 2022 in Action at Cullinan Specific ideas within mining are being implemented Area Idea Shrink shift change: Increase the number of productive hours on the Loading loaders by changing the blasting time and ensuring that shift handovers happen efficiently Weekend loading: Appoint a contractor
Slide 34: The mining ideas are complemented by a set of ideas in the plant
Project 2022 in Action at Cullinan The mining ideas are complemented by a set of ideas in the plant Area Idea Optimisation and redesign of high-pressure grinding roll crushers: Recycle Refurbish and redesign the rolls so that they crush recycled material crushing more effectively and reduce the recy
Slide 35: P22 is working to change the behaviours of all employees
Project 2022 in Action P22 is working to change the behaviours of all employees across site 35
Slide 36: Outlook
PetraDiamonds
Slide 37: Outlook
Outlook • Production on track to meet guidance of ca. 3.8 Mcts • Despite tracking to exceed guidance in H1, Petra has had a slower start to the calendar year, particularly at Cullinan and on the back of the recent pit slump at Williamson • H2 production is therefore weighted towards Q4 • The extent
Slide 38: Appendix
V7 PetraDiamonds Appendix
Slide 39: Capital Structure
Capital Structure Share Price (1 year to 11 February 2020) Major Shareholders as at 11 February 2020 % Voting rights Standard Life Aberdeen plc 15.2% M&G Plc 10.2% Cobas Asset Management 5.0% Lazard Asset Management 4.9% Directors 2.0% Listing LSE: PDL Petra Diamonds Corporate Bond Average daily tra
Slide 40: Board of Directors
Board of Directors Adonis Pouroulis Richard Duffy Jacques Breytenbach Tony Lowrie Dr Patrick Bartlett Non-Executive Chairman Chief Executive Finance Director Senior Independent Independent Non-Executive Appointed April 2019 Non-Executive Director Director Nomination Committee Audit & Risk Committee
Slide 41: Our Assets
Our Assets The heritage of our assets imbues our diamonds with unique character Koffiefontein Cullinan Williamson Finsch 74% Petra; 26% BEE 74% Petra; 26% BEE 75% Petra; 25% Gov of Tanzania 74% Petra; 26% BEE Sub-level cave Block cave / Sub-level cave Open Pit Sub-level cave / Block cave Mine Plan t
Slide 42: A Unique Portfolio
A Unique Portfolio Consistent producers of world-class diamonds with exceptional heritage The Star of Josephine The Cullinan Heritage 25.5ct blue diamond The Blue Moon of Josephine 26.6ct rough, 7.0ct polished 507.5ct rough, 104ct polished sold for $16.9m ($663k/ct) 29.6ct rough, 12.0ct polished sol
Slide 43: Our Heritage
Our Heritage The heritage of our assets imbues our diamonds with character • Petra’s mines have a long and envied history in the market and are a continued source of some of the world’s most celebrated gems • Their rich history imbues each diamond with a unique story and character • Focus on provena
Slide 44: Support of Diamond Market via DPA
Support of Diamond Market via DPA The DPA aims to actively influence consumer demand for diamonds Global consumer demand grew 2% in 2018 to $76bn¹ Dispelling myths about our industry • China (+4.7%) and the US (+4.5%) were the fastest growing regions Generic marketing • Budget of +$70m for 2019; pri
Slide 45: Positive Outlook for Luxury Jewellery Branded Market
Positive Outlook for Luxury Jewellery Branded Market LVMH acquisition of Tiffany signals confidence in jewellery sales potential • LVMH acquires Tiffany for $16.2bn – largest deal ever in Luxury Goods Sales Growth in 2019 - ex currency movement the luxury goods space Jewellery +9.0 • Personal luxury
Slide 46: Diamond Producer’s Association – Total Clarity Report
Diamond Producer’s Association – Total Clarity Report 46
Slide 47: H1 FY 2020 vs. H1 FY 2019 Operational Results
H1 FY 2020 vs. H1 FY 2019 Operational Results Cullinan Finsch Koffiefontein Williamson H1 FY H1 FY H1 FY H1 FY H1 FY H1 FY H1 FY H1 FY Unit 2020 2019 2020 2019 2020 2019 2020 2019 ROM PRODUCTION Tonnes treated Tonnes 2,295,197 1,996,624 1,534,256 1,503,335 561,296 377,391 2,654,906 2,510,451 Grade c
Slide 48: Bank Debt Facilities – Covenants
Bank Debt Facilities – Covenants Bank debt facilities undrawn and available to the Group as at 31 December 2019 of R1.5 billion (ca. $107.2 million), in addition to diamond debtors of $12.8 million and cash at bank of $53.6 million Maintenance Covenants Distribution Covenants 12 months to 12 months
Slide 49: Debt Facilities
Debt Facilities Utilised at Commitment fee Size Size US$M1 Interest Rate Lender Type 30 June 2019 on undrawn Repayment ZARM facilities US$M1 ZAR Revolving 1M JIBAR + Absa & Nedbank 1,000 71 0 1.35%2 October 2021 credit facility 5.0%2 Absa & RMB ZAR Working SA Prime – Subject to 500 36 0 0.85% (FNB)
Slide 50: Analyst Guidance FY 2020 – Group Capex Profile
Analyst Guidance FY 2020 – Group Capex Profile 1 All Capex numbers stated in FY 2020 money terms (ZAR14.0/US$1 where applicable) 2 Depreciation on mining assets for FY 2020 guided at ca. US$85-90 million at R14.0/US$1 50
Slide 51: Tailings Residue Deposit Management in line with Best Practice
Tailings Residue Deposit Management in line with Best Practice • In South Africa risk-based mandatory Codes of Practices (“COP”)1 are available for all residue deposits at our mines as required by, and according to set guidelines from the Department of Mineral Resources (DMR), Mine Health and Safety
Slide 52: Thank you
Thank you Further enquiries: investorrelations@petradiamonds.com +44 20 74948203 www.petradiamonds.com