Petra Diamonds Limited · LSE:PDL
Petra Diamonds — H1 FY2023 Earnings Presentation
46 slides from Petra Diamonds's earnings presentation, Feb 21, 2023
Slide 1: H1 FY 2023 Interim Results
H1 FY 2023 Interim Results (unaudited) for the six months to December 2022 21 February 2023
Slide 2: 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 3: Overview
Overview Richard Duffy CEO A necklace from Boodles’ Peace of Mined collection which showcases stones exclusively sourced from Cullinan Mine
Slide 4: Safety remains our number one priority
Safety remains our number one priority H1 FY 23 LTIFR in line with H1 FY 221 1.4 90 80 1.2 70 1 60 0.8 LTIFR 50 LTI 0.6 40 30 0.4 20 0.2 10 0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 H1 2023 LTI's 45 45 44 81 54 27 27 32 35 25 16 19 25 15 7 LTIFR 0.62 0.71 0.67 1.26 0.
Slide 5: Operating and financial highlights vs H1 FY 2022
Operating and financial highlights vs H1 FY 20221 Ore processed (Mt) Diamonds produced (Mcts) Average price2 (US$/ct) Revenue3 (US$m) 5.6 1.8 166 264.7 5.4 160 1.4 210.7 H1 FY22 H1 FY23 H1 FY22 H1 FY23 H1 FY22 H1 FY23 H1 FY22 H1 FY23 Adjusted EBITDA CAPEX (US$m) Operational FCF (US$m) Consolidated n
Slide 6: Sustainability Framework developments: H1 FY 2023
Sustainability Framework developments: H1 FY 2023 Operationalisation of our Sustainability Framework underway, with KPIs embedded into business objectives • New ‘Purpose’ defined and approved by Board Valuing our • Petra Culture Code created in consultation with employees and external advisors, with
Slide 7: Our purpose: creating abundance from rarity
Our purpose: creating abundance from rarity We believe that Earth’s rare and precious legacy can, through responsible mining, create abundant outcomes for our people, communities, investors, customers and all other stakeholders, giving expression to life’s special moments Abundance for our people in
Slide 8: Limited production growth to underpin prices
Limited production growth to underpin prices Natural diamond supply1 (Mcts) Global diamond jewellery retail sales1 (US$bn) 151 128 130 138 120 China 122 China China 126 China China China 107 US US US US US US 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E Su
Slide 9: Pricing stable supported by higher value product mix
Pricing stable supported by higher value product mix Pricing holding up despite economic uncertainties1 Petra’s av. price split by run-of-mine (ROM) and Exceptional Stones1,2 250 $200 US$/ct $180 200 $160 181 $140 150 $120 $100 Index 100 $80 $60 50 $40 $20 0 $- H1 H2 H1 H2 H1 H1 / FY 2021 H2 / FY 20
Slide 10: A diversified portfolio with a resource base offering long term potential
A diversified portfolio with a resource base offering long term potential 2030 2040 2050 Cullinan Mine Approved mine plan to 2033 Future projects: D-Cut / C-Cut Centre / Orebody continues at depth (C-Cut Block Cave / C-Cut Ext / CC1E) CC1E Phase II Resource 147 Mct Finsch Mine Approved mine plan to
Slide 11: A resilient business built on continuous improvement
A resilient business built on continuous improvement Operating model focused on cash generation Embedding sustainability • Mitigating actions underway to address operational • Group sustainability framework being operationalised challenges - on track to meet revised production • Prioritising safety
Slide 12: Our operations
Need to replace since employee has left Our operations Employees at Cullinan Mine
Slide 13: Annual production on track to increase by c.1 Mcts in FY 2025
Annual production on track to increase by c.1 Mcts in FY 2025 Production Guidance1, Mcts Expected Group production FY 23 to FY 25 4.0 4.0 Cullinan Mine 3.90 3.8 3.8 • Projects underway to optimise orebody and mitigate impact of 3.6 3.6 C-Cut waste ingress 3.4 3.60 3.4 Finsch 3.30 c. 1 Mcts • Steps u
Slide 14: Cullinan Mine
Cullinan Mine LOM grade and tonnage profile – including C-Cut extension Production 5 100 • Run of Mine tonnes produced in line with revised mine plan Tonnes Treated (Mt) 4 80 • ROM grade expected to be between 30cpht and 32cpht for FY23 and FY24 Grade (cpht) 3 60 • DMS section optimised to accommoda
Slide 15: Cullinan Mine: long-term resource
Cullinan Mine: long-term resource Dumps Plant Shaft C-Cut Centre - initiated via the recently approved Tunnels 46 & 50 (C-Cut extension) - 2.3Mcts incremental production from FY 2025 to FY 2033 New Shaft D-Cut and material below CC1E; potential to beyond 2040 The western part of the orebody at deepe
Slide 16: Finsch Mine
Finsch Mine Production • H1 FY23 impacted by low machine availability owing to an aging underground fleet, challenges with the centralised blasting system and emulsion quality and an extended rock-winder breakdown Operational turnaround underway • Tunnel availability issues being addressed through:
Slide 17: Finsch: further extension opportunities
Finsch: further extension opportunities Finsch presents opportunities for mine plan extensions beyond 2031 (c. 21 Mt to 100 level) • Mining of Block 6 • Mining of the upper and lower precursor on the western side of the orebody (SWPC) SWPC • Further resource delineation work required to improve reso
Slide 18: Williamson – production anticipated to resume in Q1 FY 24
Williamson – production anticipated to resume in Q1 FY 24 Remediation Precautionary measures taken to date • Impacted community members accommodated • Breached wall now secured to prevent further outflow • Evaluation of impacted livelihoods completed • Buttresses constructed to prevent further movem
Slide 19: Financial performance
Financial performance Jacques Breytenbach, CFO The plant at Cullinan Mine
Slide 20: H1 FY 2023 financial highlights
H1 FY 2023 financial highlights US$m H1 FY 2023 H1 FY 2022 Revenue Revenue 212.1 264.7 • Revenue of US$212.1 million, including US$1.4 million from Petra’s realised profit Contribution from Exceptional Stones 0.0 77.9 share from partnership stones Contribution from profit share agreement 1.4 0.0 • N
Slide 21: Mine contribution split
Mine contribution split H1 FY23 Production H1 FY23 Revenue H1 FY23 Operating Profit/(Loss)1,2 US$m 1,000,000 Carats 120 60 US$m 100 750,000 40 80 500,000 60 20 40 250,000 0 20 0 0 -20 Cullinan Mine Finsch Williamson Koffiefontein Cullinan Mine Finsch Williamson Koffiefontein Cullinan Mine Finsch Wil
Slide 22: On-mine costs in line with expectations
On-mine costs in line with expectations Group Diamond technical, Adjusted Williamson inventory and support and mining and tailings facility – Total mining On-mine cash Diamond stockpile marketing processing remediation and processing costs1 royalties movement costs2 costs costs3 Depreciation4 costs
Slide 23: Balance sheet snapshot
Balance sheet snapshot US$m (unless otherwise stated) As at As at As at 31 December 2022 31 December 2021 30 June 2022 Cash at bank (including restricted amounts) 146.6 272.3 288.2 Diamond debtors 4.9 0.4 37.4 Diamond inventories1 (US$m) 59.9 79.6 52.7 (Carats) 540,153 819,252 453,380 Loan notes (is
Slide 24: FY 2023-25 cost guidance largely unchanged
FY 2023-25 cost guidance largely unchanged1,2 US$m H1 FY23a H2 FY23e FY23E FY24E FY25E Total carats recovered, 1.4 1.35-1.45 2.75 – 2.85 3.0 – 3.3 3.6 – 3.9 Mcts Cash on-mine costs and 140.9 140 - 160 280 – 300 280 – 300 280 – 300 G&A2,3 Expansion capex2 38.2 59 – 62 92 – 104 117 – 129 11
Slide 25: Concluding remarks
Concluding remarks Richard Duffy CEO The Finsch mine in South Africa
Slide 26: Focus for remainder of FY 2023
Focus for remainder of FY 2023 Cullinan CullinanMine Mine Finsch Finsch • Continued opening of Tunnel 36 • Continued focus on improving tunnel availability to increase production • Assessing re-opening of Tunnel 41 • Progress development of 78 Level Phase 2 and 90L 3-Level SLC • Progressing with CC1
Slide 27: A resilient business with long term opportunity
A resilient business with long term opportunity A robust operating base for continued value creation Resilient, cash generative operations Enhancing stakeholder returns Third largest global resource supports further growth potential Diversified portfolio with delivery of high-value blue, Annual prod
Slide 28: Q&A
Q&A One of our community education projects, My Maths Buddy – a dictionary of mathematical terms for teachers and pupils
Slide 29: Appendix
Appendix Tunnel in Cullinan Mine
Slide 30: 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 • H1 FY 2023 closing exchange rate (USD:ZAR 17:00) ca. 6% weaker co
Slide 31: Group Cost breakdown – fixed (77%) and variable (23%)
Group Cost breakdown – fixed (77%) and variable (23%) Note 1: Based on FY 23 operating cost budget H1 FY23 interims 31
Slide 32: FY 2023 – Cost breakdown
FY 2023 – Cost breakdown Note 1: Based on FY 23 operating cost budget H1 FY23 interims 32
Slide 33: Consolidated net debt movement (1 Jul 2022 - 31 Dec 2022)
Consolidated net debt movement (1 Jul 2022 - 31 Dec 2022) Operational 90.2 FCF US$11.7 million H1 FY23 interims 33
Slide 34: Focused on right-sizing the balance sheet
Focused on right-sizing the balance sheet Evolution of gross debt Pre-restructuring September 2021 December 2021 June 2022 December 2022 (Dec. 2020) Total cash balance: Total cash balance: Total cash balance: Total cash balance: Total cash balance: US$106m US$226m US$272m US$288.2m US$146.6m Chart T
Slide 35: Balanced deployment of our available capital
Balanced deployment of our available capital Gross debt reduced through successful tender offer for 2L 2026 Loan Notes • Tender offer repurchased US$144.6m of loan notes in Sept/Oct 2022 • Reduced gross debt to US$241.7m (December 2022) and strengthened capital structure • Reduced interest payments
Slide 36: H1 FY 2023 summary P&L
H1 FY 2023 summary P&L US$m H1 FY 23 H1 FY 22 Revenue 212.1 264.7 Adjusted mining and processing costs (130.4) (109.8) Other direct income 0.6 0.3 Profit from mining activity 82.3 155.2 Other corporate income 0.5 0.6 Adjusted corporate overhead (5.4) (4.9) Adjusted EBITDA 77.4 150.9 Depreciation & A
Slide 37: Total production per mine
Total production per mine H1 FY 2023 H1 FY 2022 Mine Description Unit Q2 Q1 Total Q2 Q1 Total Tonnes treated Tonnes 1,182,460 1,188,484 2,370,944 1 222,343 1,322,936 2,545,279 CDM Diamonds produced Carats 356,348 395,586 751,934 472,605 498,032 970,637 Tonnes treated Tonnes 552,775 590,281 1,143,056
Slide 38: FY 2023-25 Detailed Analyst Guidance – Cullinan Mine
FY 2023-25 Detailed Analyst Guidance – Cullinan Mine Description Unit H1 FY 23a H2 FY 23e FY 2023E FY 2024E FY 2025E Guidance notes ROM tonnes Treated (Mt) 2.2 2.1 – 2.2 4.3 - 4.4 4.3 - 4.5 4.3 - 4.5 1. Real amounts stated in FY 2023 ROM Grade (cpht) 31.2 29 – 33 30.0 - 32.0 30.0 - 32.0 40.4 - 42.7
Slide 39: FY 2023-25 Detailed Analyst Guidance - Finsch
FY 2023-25 Detailed Analyst Guidance - Finsch Description Unit H1 FY 23a H2 FY 23e FY 2023E FY 2024E FY 2025E Guidance notes ROM tonnes Treated (Mt) 1.1 1.45 - 1.55 2.55 - 2.65 2.9 - 3.0 3.0 - 3.1 1. Real amounts stated in FY 2023 ROM Grade (cpht) 45.1 43 – 46 43.6 - 46.0 43.4 - 45.6 43.0 - 5.2 mone
Slide 40: FY 2023-25 Detailed Analyst Guidance - Williamson
FY 2023-25 Detailed Analyst Guidance - Williamson Guidance notes Description Unit H1 FY 23a H2 FY 23e FY 2023E FY 2024E FY 2025E 1. Real amounts stated in FY 2023 money terms using ROM tonnes Treated (Mt) 1.8 0 1.8 5.2 - 5.5 5.2 - 5.5 2.5% CPI 2. Tax shield @ 31 Dec 2022 ROM Grade (cpht) 7.7 0 7.7 5
Slide 41: FY 2023-25 Detailed Analyst Guidance - Koffiefontein
FY 2023-25 Detailed Analyst Guidance - Koffiefontein Guidance notes 1. Real amounts stated in FY 2023 Description Unit H1 FY 23a H2 FY 23e1 FY 2023E FY 2024E FY 2025E money terms using 6% CPI 2. US$ amounts converted at ROM tonnes Treated (Mt) 0.085 0 0.085 - - exchange rate of USD1:ZAR17 ROM Grade
Slide 42: H1 FY 2023 Operating Cost Reconciliation
H1 FY 2023 Operating Cost Reconciliation Petra Diamonds Cost of Sales reconciliation - H1 FY 2023 31-Dec-22 Guidance notes Average R/$ rate: 1. The US$1.4m (1.1%) net reduction in 17.32 cash on-mine cost is due to : Total on-mine Diamond Group technical, Total Mining and 1. A weaker ZAR exchange rat
Slide 43: FY 2023-25 Analyst Guidance Explanatory Notes
FY 2023-25 Analyst Guidance Explanatory Notes Cost of Sales G2.1 G 2.1 Cost of Sales breakdown =(A)+(B)+(C)+(D) (A) (B) (C) (D) (E) Total on-mine Total on-mine Diamond cash cost cash cost Diamond inventory and Total Mining and (million) ($m) royalties Diamond sorting stockpile processing costs (Refe
Slide 44: FY 2023-25 Analyst Guidance Explanatory Notes
FY 2023-25 Analyst Guidance Explanatory Notes Income Tax Calculation G2.2 Break-down of high-level income tax calculation for PDL Group Operations: FY2021 FY2022 FY2023 Indicative example on treatment of capital allowances/tax losses (using Cullinan as an example): ZARm ZARm ZARm (A) Profit before t
Slide 45: FY 2023-25 Analyst Guidance Explanatory Notes
FY 2023-25 Analyst Guidance Explanatory Notes Diamond Royalties G2.3 Diamond royalties in South Africa The royalty payable is derived from a formula based on the profitability of an operation, as follows: · Royalty payable = gross sales x royalty rate · Royalty rate = 0.5% + EBIT / (gross sales x 9)
Slide 46: Lab Grown vs. Natural Diamond Supply
Lab Grown vs. Natural Diamond Supply Lab grown diamond supply is expected to accelerate, but not at the expense of natural diamonds Lab grown vs. natural supply forecasts, 2020A – 2025E Commentary Lab grown vs. natural supply 2020A – 2025E CAGR ▪ Lab grown diamonds have continued to diverge into a s