Petra Diamonds Limited · LSE:PDL
Petra Diamonds — FY2018 Earnings Presentation
43 slides from Petra Diamonds's earnings presentation, Sep 17, 2018
Slide 1: FY 2018 Preliminary Results: Entering a new phase
FY 2018 Preliminary Results 12 months to 30 June 2018 Entering a new phase 17 September 2018
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: Nearing End of +10 Year Heavy Capital Investment Phase
Nearing End of +10 Year Heavy Capital Investment Phase 1. Binding Head of Agreement reached re. disposal of KEM JV in July 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: $3.
Slide 4: Entering a New Phase
Entering a New Phase Putting capital programmes to work Future focus on maximising free cashflow • Ever increasing footprint across orebody • Apply learnings from past challenges • Multiple levels at SLCs • Ensure consistent production output • Ratio of blasted tonnes to column tonnes • Efficient op
Slide 5: Safety is Our Number One Priority
Safety is Our Number One Priority Zero harm remains our goal • The health and safety of our workforce is our top priority • Our mines are certified OHSAS 18001:2007, the international safety management framework • Continuous risk assessment and management; all staff are trained in safety • LTIFR of
Slide 6: FY 2018 – KPIs: Solid Operational Performance
FY 2018 – KPIs: Solid Operational Performance NB: FY 16, 17 & 18 blue bars have been adjusted for the pending disposal of KEM JV; grey indicates KEM JV ROUGH DIAMOND PRODUCTION REVENUE SAFETY Million carats US dollars (millions) LTIFR 3.8 +19% 495.3 +25% 0.23 -15% 0.32 0.29 0.29 3.8 495.3 0.27 3.1 3
Slide 7: FY 2018 – KPIs
FY 2018 – KPIs NB: FY 16, 17 & 18 blue bars have been adjusted for the pending disposal of KEM JV; grey indicates KEM JV Adjusted EBITDA1 ADJUSTED OPERATING CASHFLOW CAPEX2 US dollars (millions) US dollars (millions) US dollars (millions) 195.4 +37% 157.0 +7% 129.6 -43% 184.0 172.5 134.6 147.0 157.0
Slide 8: Current Trading in FY 2019
Current Trading in FY 2019 On track to achieve stated guidance of 3.8 – 4.0 Mcts for FY 2019 • 718,635 carats produced in July and August ROM grades in FY 2019 in line with expectations • Cullinan has recorded a ROM grade of 40.6 cpht YTD Previously reported turnaround at Koffiefontein being maintai
Slide 9: FY 2018 – Summary of Results
FY 2018 – Summary of Results All results are shown adjusted for the pending disposal of KEM JV Restated FY 2018 FY 2017 (US$m) (US$m) Revenue 495.3 394.8 Adjusted mining and processing costs1 (291.4) (242.6) Other direct income 1.2 1.7 Profit from mining activities1 205.1 153.9 Exploration expense (
Slide 10: Strengthened Financial Position…
Strengthened Financial Position… • SA bank debt settled after Year end as per one of the core objectives of the Rights Issue; remains available • No covenant measurement for June ‘18 Unit 30 June 2018 30 June 2017 Restated Closing exchange rate used for conversion R13.73:US$1 R13.05:US$1 Cash at ban
Slide 11: Consolidated Net Debt (US$m)
….Targeting Leverage Reduction of ≤ 2x ND:EBITDA1 by FY 2020 2 Leverage ratio1 BEE debt Petra Net Debt 1000.0 Consolidated Net Debt (US$m) 2.8 3.9 5.0 3.6 2.7 500.0 633.7 615.7 510.5 445.7 375.8 88.8 104.9 109.3 85.9 85.9 0.0 FY 2016 FY 2017 H1 FY 2018 FY 2018 FY 2018 Pre-Rights Issue Post-Rights Is
Slide 12: Operating Costs
Operating Costs FY 2018 On-mine cash cost breakdown • Future focus on the optimisation of asset portfolio to (South Africa operations) drive cost efficiencies • Absolute on-mine cash costs in line with expectations despite inflationary pressures 14% 5% • Group on-mine US$ cash costs +20% due to: • i
Slide 13: Impact of ZAR/USD Movement on Petra
Impact of ZAR/USD Movement on Petra • US$1:ZAR15.03 on 12 September 2018 • 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 hedge on USD revenue converted to ZAR ZAR covering up to 50% of F
Slide 14: Finsch – Development Programme
Finsch – Development Programme Highlights • SLC ramp up: • FY 2017 – 0.75 Mt • FY 2018 – 1.65 Mt • FY 2019 – 2.7 Mt • Total ROM throughput (from SLC and overburden) of 3.2 Mt – FY 2019 • Pre 79 Tailings treated – end FY 2019 Petra Diamonds Limited: FY 2018 Prelims Presentation 14
Slide 15: 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: FY 2018 Prelims Presentation 15
Slide 16: Cullinan C-Cut Block Cave Plan View
Cullinan C-Cut Block Cave Plan View 16 ha at 830 mL • Access to larger footprint over time • More productive draw points • Extent of ore body provides further potential opportunities Draw bells completed by end of FY 2018 Petra Diamonds Limited: FY 2018 Prelims Presentation 16
Slide 17: Cullinan – Development Programme
Cullinan – Development Programme Highlights • C-Cut phase 1 & CC1E ramp up: • FY 2017 – 1.2 Mt • FY 2018 – 2.46 Mt • FY 2019 – 3.7 - 4 Mt (including 0.7 – 1 Mt sourced from CC1E & B Block) • Completion of shaft / plant interface – FY 2019 • Steady state production of 4 Mtpa from C-Cut Phase 1 and CC
Slide 18: Price Variability at Cullinan
Price Variability at Cullinan • Cullinan exhibits pricing variability - average of US$144/ct from FY 2010 to 2018; 7,883,301 carats sold: • on an annual basis: high of US$185/ct and low of US$120/ct (FY 2018: US$125 per carat); • on a half yearly basis: high of US$247/ct and low of US$87/ct (FY 2018
Slide 19: Cullinan’s Diamond Profile
Cullinan’s Diamond Profile FY 2018 • Source of the Cullinan, the largest gem diamond ever recovered (3,106 carats) • Record of producing Type II diamonds, including high value blue stones • All -55mm material only exposed to autogenous milling (comminution via attrition, not crushing) and all furthe
Slide 20: 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: Rise in production • Growth in
Slide 21: Stable Diamond Market and Prices
Stable Diamond Market and Prices Petra Sales Timing FY 2018 Market Performance • Pricing saw usual seasonal weakness in July to October (down ca. 5%) and recovered ca. 1.5% in December 2017 • Positive momentum around the festive sellingseason led to pricing ca. +5% in Q3 FY 2018 • Rough diamond mark
Slide 22: Sustaining Consumer Demand – Today and Tomorrow
Sustaining Consumer Demand – Today and Tomorrow 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 diamon
Slide 23: Strategic Priorities
Strategic Priorities Health and Safety 1 • Targeting zero harm Driving operational efficiency with emphasis on value-over-volume 2 • Close focus on operational costs, productivity and ongoing plant optimisation (particularly at Cullinan) • Beneficial impact on production as new caves ramp up to full
Slide 24: 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 25: Generating Value for all Stakeholders
Generating Value for all Stakeholders Development of our People Contributing to our communities Local Economic Development Petra took part in the 9th Annual ITC Annual The Petra Foundation launched a new science Kimberley handover of artisanal mining permits Leadership for Women in Mining Conference
Slide 26: Appendix
” Appendix
Slide 27: Capital Structure
Capital Structure Share Price (1 year to 13 September 2018) As at 13 September 2018 % voting rights BlackRock, Inc. 13.6% Standard Life Aberdeen plc 10.8% Prudential plc 7.7% T. Rowe Price 5.0% Cobas Asset Management 5.0% Van Eck Associates 4.1% Directors 3.8% Listing LSE: PDL Average daily trading
Slide 28: Petra Board of Directors
Petra Board of Directors Adonis Pouroulis Johan Dippenaar Jacques Breytenbach Non-Executive Chairman CEO Finance Director Mining entrepreneur whose expertise Over 25 years’ experience in the Assumed role in February 2018. Mr leadership and management of Breytenbach first joined Petra in 2006 as lies
Slide 29: Diamonds are rare…and getting rarer
Diamonds are rare…and getting rarer Only 30 significant kimberlite mines in production today Petra Diamonds Limited: FY 2018 Prelims Presentation 29
Slide 30: 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 31: Petra Production Profile
Petra Production Profile • Production profile of a kimberlite is highly consistent when the mine is in steady state production Petra Diamonds Limited: FY 2018 Prelims Presentation 31
Slide 32: The Most Highly Concentrated Form of Wealth
The Most Highly Concentrated Form of Wealth Examples of recent polished coloured diamond sales at auction The 14.62ct The 12.03ct Blue Oppenheimer Moon of Blue diamond Josephine diamond Sold for $57.7m $3.9m per carat, Sold for $48.4m 18 May 2016 $4.0m per carat, 12 November 2015 The 24.18ct The 59.
Slide 33: Iconic Diamonds From Iconic Mines
Iconic Diamonds From Iconic Mines The Greater Star of The Williamson Pink Africa 55ct rough; 24ct polished; Largest polished yield gifted to Princess Elizabeth from the Cullinan at on her engagement 530ct; sits in the Royal Williamson,1947 Sceptre Cullinan,1905 The Golden Jubilee The Oppenheimer 755
Slide 34: FY 2018 vs FY 2017 Operational Results
FY 2018 vs FY 2017 Operational Results Finsch Cullinan Koffiefontein Williamson KEM JV FY FY FY FY FY FY FY FY FY FY 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 ROM PRODUCTION Tonnes Treated (t) 3,084,395 3,212,169 3,741,086 1,882,911 649,259 667,821 4,659,563 3,667,781 768,776 597,025 Grade (
Slide 35: New Cullinan Plant – Process Flow Diagram
New Cullinan Plant – Process Flow Diagram -55m +12mm +9mm Key points 1) Maximum value extraction from ore ($/t) 2) Maximum $/hr revenue – -9mm Large stones & Type IIs 3) Reduced cost Key levers 1) Top cut-off size 2) Recirculating load 3) Bottom cut-off size 4) Discard size 5) Non aggressive milling
Slide 36: New Cullinan Plant – Simplified Process Flow Diagram
New Cullinan Plant – Simplified Process Flow Diagram Key levers Annual capacity of 6 Mtpa: B 1) Top cut-off size 4 Mtpa ROM and 2 Mtpa Tailings 2) Recirculating load 150 tonne 3) Bottom cut-off size 4) Discard size Jaw crusher 5) Non aggressive milling XRL 6) DMS yield 7) Increased cost to process F
Slide 37: Koffiefontein – Development Programme
Koffiefontein – Development Programme Highlights • Production commenced from first tunnels of SLC on 560 mL – FY 2015 • New ground handling system commissioned – Q3 FY 2018 Petra Diamonds Limited: FY 2018 Prelims Presentation 37
Slide 38: Williamson – Development Programme
Williamson – Development Programme Highlights • New mill plant commissioned H2 FY 2017 • FY 2018 production – 341 kct (best production since 1977) • FY 2019 ROM throughput of ca. 4.7 Mt supplemented by alluvial production of ca. 0.4 Mt Open pit Mill plant Petra Diamonds Limited: FY 2018 Prelims Pres
Slide 39: Debt Facilities
Debt Facilities • Bank facilities (excl. FX lines) as at 30 June 2018: ca. $109.0 million • Bank debt facilities undrawn and available to the Group as at 30 June 2018: $2.3 million, in addition to cash at bank of $236.0 million • South African bank debt was settled shortly after Year end; remaining
Slide 40: Bank Debt Facilities – Covenants
Bank Debt Facilities – Covenants Maintenance Covenants Distribution Covenants 12 months to 12 months to 12 months to Covenant 30 June 2018 31 Dec 2018 30 June 2019 All periods Required ratio Required ratio Required ratio Required ratio Consolidated Net Debt2 to ≤3.5x ≤3.5x ≤2.5x ≤2.0x Consolidated E
Slide 41: Leverage Ratios
Leverage Ratios 30 June 2018 30 June 2017 IFRS net debt¹ USDM 520.7 555.3 Consolidated net debt (for bank debt covenant measurement) USDM 531.6 618.5 Gearing² % 92 86 Adjusted EBITDA³ USDM 195.4 142.6 EBITDA margin4 % 39 36 Consolidated net debt: EBITDA5 x 2.7 3.9 EBITDA net interest cover6 x 2.7 2.
Slide 42: 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. Petra Diamonds Limited: FY 2018 Prelims Presentation 42
Slide 43: Thank You
Thank You Further enquiries: Petra Diamonds investorrelations@petradiamonds.com +44 20 74948203 www.petradiamonds.com