Petra Diamonds Limited · LSE:PDL
Petra Diamonds — FY2022 Earnings Presentation
48 slides from Petra Diamonds's earnings presentation, Sep 13, 2022
Slide 1: Preliminary Results FY 2022
Preliminary Results FY 2022 The 39.34 carat blue diamond from the Cullinan mine sold for US$40.2m (US$1m per carat) in July 2021 – believed to be the highest price per carat on record for a rough diamond
Slide 2: A tribute to Her Majesty Queen Elizabeth II 1926 - 2022
A tribute to Her Majesty Queen Elizabeth II 1926 - 2022 2
Slide 3: Disclaimer
Disclaimer • This presentation contains certain forward-looking statements, which are subject to the risk factors and uncertainties associated with the diamond mining industry. • Whilst Petra believes the expectations set out in this presentation are reasonable in light of the information currently
Slide 4: Headlines
Headlines Richard Duffy, CEO Career Day, Cullinan Mine, 2022 – to highlight opportunities available for employees to acquire an additional level of schooling or add mathematics
Slide 5: Petra today
Petra today Transformation led by proven management team Resilient, cash generative operations Enhancing stakeholder returns Third largest global resource supports further growth potential Diversified portfolio with delivery of high-value blue, Strong operational cash pink and large white diamonds g
Slide 6: Record FY 2022 results
Record FY 2022 results Strong financial and operating performance Platform significantly strengthened • Improved safety performance • Williamson fully ramped-up • LTIFR improved 48% • Responsive engagement on IGM and RJPs • Record results enabling Petra to maximise benefit • Self-funding mine expans
Slide 7: FY 2022 – excellent results across the board
FY 2022 – excellent results across the board1 Safety (LTIFR) Ore processed (Mt) Diamonds produced Revenue (US$m) improves 48% up 44% (Mcts) up 3% up 44% 1.50 585.2 0.44 3.35 11.7 406.9 0.23 8.1 3.24 FY21 FY22 FY21 FY22 FY21 FY22 FY21 FY22 Adjusted EBITDA Adjusted EPS (USc) Operational FCF Consolidat
Slide 8: Reduction in gross debt and new dividend policy
Reduction in gross debt and new dividend policy Tender offer launched for US$150 million of our 2L 2026 Loan Notes • If successful, the tender would: • Reduce gross debt by US$150m to cUS$226m and strengthen our capital structure • Reduce interest payments by US$15m p.a. New dividend policy announce
Slide 9: Financial performance
Financial performance Jacques Breytenbach, CFO Investor site visit, Cullinan Mine, 2022
Slide 10: FY 2022 financial highlights
FY 2022 financial highlights US$m FY 2022 FY 2021 Revenue up 44% Revenue 585.2 406.9 • US$584.1m from rough diamond sales plus US$1.1m for profit share agreement Contribution from Exceptional Stones 89.1 62.0 for polished stone Contribution from profit share agreement 1.1 0.0 • 41.5% increase in lik
Slide 11: Mining and processing costs
Mining and processing costs Diamond Group technical, Adjusted inventory and support and mining and Total mining On-mine cash Diamond stockpile marketing processing and processing costs1 royalties movement costs2 costs Depreciation3 costs (IFRS) US$m US$m US$m US$m US$m US$m US$m FY 2022 272.3 14.6 0
Slide 12: Balance sheet snapshot
Balance sheet snapshot US$m 30 June 2022 31 December 2021 30 June 2021 Cash at bank (including restricted amounts) 288.2 272.3 173.0 Diamond debtors 37.4 0.4 38.3 Diamond inventories (US$m) 52.7 79.6 56.5 (Mcts) 0.45 0.82 0.64 US$336.7 million loan notes (net of unamortised costs) 366.2 346.4 327.3
Slide 13: Consolidated net debt movement
Consolidated net debt movement Operational FCF US$230 million FY22 prelims 13
Slide 14: Guidance maintained for FY 2023 – FY 2025
Guidance maintained for FY 2023 – FY 2025 Group guidance FY 23E FY 24E FY 25E Total carats recovered (Mcts) 3.3 – 3.6 3.3 – 3.6 3.6 – 3.9 Cash on-mine costs and G&A1 (US$m) 300 – 320 300 – 320 300 – 320 Expansion capex1 (US$m) 115 – 125 125 – 135 115 – 120 Sustaining capex1 (US$m) 33 – 36 30 – 32 26
Slide 15: Tender offer to purchase US$150m of 2L 2026 Loan Notes
Tender offer to purchase US$150m of 2L 2026 Loan Notes • Aligned to Petra’s intention to reduce gross debt and interest expense, optimising the capital structure • Potential reduction of interest payments of cUS$15m p.a. (assuming full Indicative timetable US$150m reduction in gross debt) Commenceme
Slide 16: Right-sizing the balance sheet
Right-sizing the balance sheet Evolution of gross debt Pre-restructuring September 2021 December 2021 June 2022 September 2022 (Dec. 2020) pro forma1 Total cash balance: Total cash balance: Total cash balance: Total cash balance: Potential reduction in US$106m US$226m US$272m US$288.2m gross debt Ch
Slide 17: Results overview
Results overview Richard Duffy CEO A Peace of Mined collection from Boodles, 2022
Slide 18: Safety remains our number one priority
Safety remains our number one priority LTI (down 40%) and LTIFR1 (down 48%) 1.4 81 90 80 1.2 70 1 54 60 45 45 LTI LTIFR 0.8 44 50 35 0.6 32 40 27 27 25 25 30 0.4 19 16 14 20 0.2 10 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 LTI's 45 45 44 81 54 27 27 32 35 25 16 19 25
Slide 19: ESG metrics
ESG metrics Women in the workforce flat Staff turnover +2% Training spend +5% % % US$m 9.5 92% (FY 21: 100%) 10.8 Of full-time bursaries held by HDSA3 9.6 9.8 20.0 20.0 students 8.1 8.1 6.6 5.8 5.8 6.1 19.0 19.0 44% (FY 21: 44%) Female mining Leadership 18.0 Development Candidates 18 19 20 21 22 18
Slide 20: The supply deficit in the diamond market continues
The supply deficit in the diamond market continues Demand outstripping structural decline in supply Pricing holding up despite economic uncertainties 250 Supply Demand (conservative scenario) 200 151 145 150 128 130 138 120 100 126 113 50 107 0 Q1 2008 Q3 2008 Q1 2009 Q3 2009 Q1 2010 Q3 2010 Q1 2011
Slide 21: Record Exceptional Stones recovery
Record Exceptional Stones recovery From Cullinan Mine FY 2022 Exceptional Stones1 vs averages (US$m) 39.34ct Type IIb blue - sold for US$40.2m 342.92ct Type IIa white - sold for US$10m (+50% share of polished proceeds after costs) 89.1 295.79ct Type IIa white - sold for US$13.9m 157.88ct Type IIa wh
Slide 22: Realised prices up on product mix
Realised prices up on product mix in Tender 1 FY 2023 Average price per carat split by run-of-mine (ROM) and Exceptional Stones1,2 FY 2022 $200 US$/ct • 41.5% higher than FY 2021 on like-for-like up basis $180 • Pricing support across our product mix $160 $140 Tender 1 FY 2023 $120 • Strong sales re
Slide 23: Our operations
Our operations Finsch conveyor belt
Slide 24: Mine contribution split
Mine contribution split FY 22 Production1 FY 22 Revenue1 FY 22 Segment result1,2 US$m 2,000,000 Carats 350 200 US$m 300 160 1,500,000 250 120 200 1,000,000 150 80 500,000 100 40 50 0 0 0 Cullinan Mine Finsch Williamson Koffiefontein Cullinan Mine Finsch Williamson Koffiefontein Cullinan Mine Finsch
Slide 25: Cullinan Mine – strong performance, expansion under way
Cullinan Mine – strong performance, expansion under way Revenue growth of 29% • 52% increase in average price per carat • Offset the 16% reduction in volumes (strong FY 2021 comparator) • Exceptional Stones generated US$75.2m Profitability • Segment result up 101% to US$154.4m reflecting positive op
Slide 26: Finsch – benefiting from an improved cost base
Finsch – benefiting from an improved cost base Revenue growth of 34% • 53% increase in average price per carat • Offset the 12% reduction in volumes sold due to strong FY 2021 comparator following the release of inventory build-up during COVID-19 Profitability • Segment result increased to US$34.8m,
Slide 27: Williamson – production ramped up
Williamson – production ramped up Strong performance post 17 month period on care and Progress on the Independent Grievance Mechanism (IGM) maintenance • Revenue supported by strong average price and 32.3ct pink • Remedial programmes implemented and IGM to be established in CY Exceptional Stone 2022
Slide 28: Koffiefontein
Koffiefontein Performance below guidance • Labour reduction has resulted in new shift configuration in FY 2023 • On-mine cash unit cost up significantly reflecting reduced production • Capex of US$0.6m on underground workshop • Petra exploring options for a responsible exit • Evaluating non-binding
Slide 29: Focus for FY 2023
Focus for FY 2023 Across all mines • Production, cost and capex guidance remains unchanged • Sustainability Framework being integrated • Continuous improvement on cost efficiency and cash generation Cullinan CullinanMine Mine Finsch Finsch • Analysis of ore composition and potential grade impact in
Slide 30: Outlook
Outlook Investor site visit, Cullinan Mine, 2022
Slide 31: Outlook reinforced by our stronger platform
Outlook reinforced by our stronger platform A more stable and resilient operating platform Balance sheet strength combined with with sustainability at the core disciplined capital allocation Supportive diamond market fundamentals Self-funded expansion projects at Cullinan Mine and Finsch underway FY
Slide 32: Q&A
Q&A One of our community education projects, My Maths Buddy – a dictionary of mathematical terms for teachers and pupils
Slide 33: Appendix
Appendix Tunnel in Cullinan Mine
Slide 34: Petra is a mid-tier, multi-asset diamond producer
Petra is a mid-tier, multi-asset diamond producer with strong sustainability credentials 3.4 Mcts US$585.2m US$264.9m US$40.6m Production Revenue Adjusted EBITDA Consolidated net debt • Proven leadership and new operating Cullinan Finsch model transforming performance Stake acquired 2008 Stake acqui
Slide 35: FY 2022 summary P&L
FY 2022 summary P&L Restated US$m FY 2022 FY 2021 Revenue 585.2 406.9 Adjusted mining and processing costs¹ (307.1) (276.1) Other direct income (0.8) 6.8 Profit from mining activity¹ 277.3 137.6 Other corporate income 0.6 - Adjusted corporate overhead¹ (13.0) (7.4) Adjusted EBITDA¹ 264.9 130.2 Depre
Slide 36: South African cost splits: fixed (77%) and variable (23%)
South African cost splits: fixed (77%) and variable (23%) • In aggregate, the split between fixed and variable costs are 77% and 23% respectively • Percentage of costs incurred in South African Rand • 80 – 90% of opex • 90 – 95% of capex FY22 prelims 36
Slide 37: Impact of ZAR/USD movement on Petra
Impact of ZAR/USD movement on Petra Exchange rate volatility over the past 30 months: USD • ZAR weakness in FY2022 impacted by global sentiment and inflationary fears • ZAR strength / USD weakness experienced over the past 30 months • FY 2022 closing exchange rate (US$1:ZAR16.27) ca. 14% weaker comp
Slide 38: Cullinan Mine performance
Cullinan Mine performance Cullinan Mine – South Africa FY 22 FY 21 Variance Sales Revenue (US$m) 322.4 250.6 +29% Diamonds sold (carats) 1,899,011 2,261,058 -16% Average price per carat (US$) 169 111 +52% ROM production Tonnes treated (tonnes) 4,451,515 4,614,802 -4% Grade (cpht) 36.2 38.2 -5% Diamo
Slide 39: Finsch performance
Finsch performance Finsch – South Africa FY 22 FY 21 Variance Sales Revenue (US$m) 165.7 123.4 +34% Diamonds sold (carats) 1,402,654 1,602,312 -12% Average price per carat (US$) 118 77 +53% ROM production Tonnes treated (tonnes) 2,730,197 2,311,195 +18% Grade (cpht) 46.7 53.5 -13% Diamonds produced
Slide 40: Williamson performance
Williamson performance Williamson – Tanzania FY 22 FY 21 Sales Revenue (US$m) 75.9 4.6 Diamonds sold (carats) 197,756 30,339 Average price per carat (US$) 384 150 ROM production Tonnes treated (tonnes) 3,591,099 0 Grade 6.4 0 Diamonds produced (carats) 228,070 0 Segment result (US$m) 22.2 (14.3) Cos
Slide 41: Koffiefontein performance
Koffiefontein performance Koffiefontein – South Africa FY 22 FY 21 Variance Sales Revenue (US$m) 21.5 27.9 -23% Diamonds sold (carats) 36,950 66,650 -45% Average price per carat (US$) 581 419 +39% ROM production Tonnes treated (tonnes) 466,957 754,369 -38% Grade (cpht) 7.6 7.8 -3% Diamonds produced
Slide 42: Cullinan Mine expansion plan
Cullinan Mine expansion plan Dumps Plant Shaft C-Cut Block (western side) • Sole source of ROM tonnes until CC1E contributes from FY 2024 Open pit to 189 metres below surface • Known to contain high value Type II 1903-1932 stones • Convergence in southern part of Tunnel 41 in September 2021 largely
Slide 43: Finsch ore supplied from Upper Block 5 SLC since 2019
Finsch ore supplied from Upper Block 5 SLC since 2019 Current mine plan production from 4- level Upper Block 5 SLC; steady state since FY 2019 1961 - 1990 Open pit to 423m below surface Unexpected waste ingress occurred in FY 2021, now continually monitored • Mitigation steps taken to improve 61 Lev
Slide 44: Cullinan Mine guidance unchanged
Cullinan Mine guidance unchanged Guidance notes 1. Real amounts stated in FY 2022 money terms 2. US$ amounts converted at exchange rate of USD1:ZAR15 3. Remaining tax shield @ 31 Dec 2021 = ZAR 5.6 billion 4. Environmental closure liability = ZAR 268 million FY 22 prelims 44
Slide 45: Finsch guidance unchanged
Finsch guidance unchanged Guidance notes 1. Real amounts stated in FY 2022 money terms 2. US$ amounts converted at exchange rate of USD1=ZAR15 3. Tax shield @ 31 Dec 2021 = ZAR300 million 4. Environmental closure liability = ZAR312 million FY 22 prelims 45
Slide 46: Williamson guidance unchanged
Williamson guidance unchanged Guidance notes 1. Real amounts stated in FY 2022 money terms 2. Tax shield @ 31 Dec 2021 = USD 100 million 3. Environmental closure liability = USD 5.7 million 4. 71,654 carat blocked diamond parcel still to be sold FY22 prelims 46
Slide 47: Koffiefontein guidance unchanged
Koffiefontein guidance unchanged Guidance notes 1. Real amounts stated in FY 2022 money terms 2. US$ amounts converted at exchange rate of USD1:ZAR15 3. Tax shield @ 31 Dec 2021 = ZAR2 billion 4. Environmental closure liability = ZAR104.4 million FY22 prelims 47
Slide 48: Debt structure and ratings
Debt structure and ratings Petra Diamonds Corporate Bond 1L RCF Facility Issue date 09 March 2021 Facility R1000m RCF Issue size US$337million Coupon 10.5% – 9.75% Maturity Date December 2025 Maturity 08 March 2026 Lender Absa Petra’s credit and bond upgrades Margin JIBAR + 415 bps Commitment Fee 12