Petra Diamonds Limited · LSE:PDL
Petra Diamonds — FY2014 Earnings Presentation
42 slides from Petra Diamonds's earnings presentation, Sep 18, 2014
Slide 1: FY 2014 Preliminary Results
Petra Diamonds (LSE:PDL) FY 2014 Preliminary Results 18 September 2014
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: FY 2014 – Consistent Delivery
FY 2014 – Consistent Delivery • Consistent growth • Increasing production, revenues and cashflow • Consistent operational delivery • Major expansion programmes on track to reach ca. 5 Mcts by FY 2019 The 29.6ct Cullinan blue diamond sold in February 2014 for US$25.6 million was unveiled as a perfect
Slide 4: FY 2014 – Key Performance Indicators
FY 2014 – Key Performance Indicators Production Revenue Safety Mcts US$M LTIFR 3.5 500 1.2 3.0 450 400 1 2.5 350 0.8 2.0 300 250 0.6 1.5 200 150 0.4 1.0 100 0.2 0.5 50 0.0 0 0 FY FY FY FY FY FY FY FY FY FY FY FY 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 2014 +17% to 3.1 Mcts +20% to $47
Slide 5: FY 2014 – Key Performance Indicators
FY 2014 – Key Performance Indicators Profit from Mining Activities¹ EBITDA2 Operating Cashflow3 US$M US$M US$M 250 200 200 180 180 200 160 160 140 140 150 120 120 100 100 100 80 80 60 60 50 40 40 20 20 0 0 0 FY FY FY FY FY FY FY FY FY FY FY FY 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 2
Slide 6: FY 2014 – Summary of Results
FY 2014 – Summary of Results FY 2014 FY 2013 (US$m) (US$m) Revenue¹ 471.8 392.5 Adjusted mining and processing costs¹ (277.4) (254.8) Other direct income 6.7 6.1 Profit from mining activities1 201.1 143.8 Exploration expense (2.8) (4.8) Corporate overhead (10.6) (11.4) Adjusted EBITDA1 187.7 127.6 D
Slide 7: Operating Costs
Operating Costs • On-mine cash costs decreased by 1% On-mine cash cost make-up (Petra Group) • South Africa inflationary pressures (electricity and 7% labour: +8%), offset by higher tonnages (+4%), tight 13% cost control, combined with the positive impact of a 38% weaker Rand (-13%) • September 2014
Slide 8: Financial Overview
Financial Overview FY 2014: cash generated by operations of US$196.3 million vs cash capex of US$209.1 million As at 30 June 2014: As at 30 June 2014: • Cash: US$34.0 million, diamond debtors of • Facilities undrawn and available: US$39.9 million US$55.4 million, diamond inventories of US$27.0 • BEE
Slide 9: FY 2014 Petra Production Profile
FY 2014 Petra Production Profile • Kimberlite production profile (diamond quality and size ranges) remains highly constant over time, resulting in accuracy for diamond price forecasting • Ever growing volumes across the full diamond spectrum (from lowest to highest value) • Growing trend for mass lu
Slide 10: Rough Diamond Pricing
Rough Diamond Pricing • Diamond market performed well in FY 2014, reflecting the fundamentals of constrained supply and robust demand from the US and emerging markets • Rough diamond prices up ca. 10% from January 2014 to June 2014 • Petra has guided for higher rough pricing in FY 2015; rough market
Slide 11: Exceptional Diamonds
Exceptional Diamonds • Petra classifies ‘exceptional diamonds’ as stones that sell for +US$5 million each • 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 • Company business model is no
Slide 12: Moving into Undiluted Ore
Moving into Undiluted Ore • Caving is a safe and proven mechanised mining method; provides access to higher volumes of ore than other methods • Current underground mining taking place in diluted, mature caves nearing end of lives • Expansion programmes to take next ‘cut’ by deepening and establishin
Slide 13: Significant Margin Expansion
Significant Margin Expansion Operating margins to gradually rise from ca. 40% to +50% by FY 2019 • ROM grades expected to increase ca. 50% once expansion programmes open up undiluted ore blocks • Higher value ROM carats in production mix expected to increase to ca. 95% • Unit costs to be well manage
Slide 14: Organic Growth Path to FY 2019
Organic Growth Path to 5 Million Carats pa • Operating cashflow to cover capital programme from FY 2015 onwards FY 2019 • Significant free cashflow generation to come – dividend policy to be announced in FY 2015 production target of ca. 5.0 Mcts; revenue of ca. US$1.2bn 6 FY 2014 Carat production (m
Slide 15: FY 2014 Development Snapshot
FY 2014 Development Snapshot Underground development Optimising orehandling Plant refinements 15
Slide 16: 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 17: 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 18: 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 19: Outlook
Outlook Rising Production Rising Prices Rising Margins • Organic growth to ca. 5 million • Petra expects firmer market • Total tonnage profile to remain carats based on existing portfolio conditions, underpinned by relatively flat FY 2015 to FY 2019, constrained supply and robust but production to g
Slide 20: Sustainability Highlights
Sustainability Highlights Education Training Koffiefontein supports local Reikaeletse Secondary School Carpentry skills training taking place at Cullinan Environmental Initiatives Community Health Biogas project in Tanzania A nurse does her ward rounds at the Mwadui Hospital, owned and operated by W
Slide 21: Appendix
Dump Truck at Williamson Appendix
Slide 22: Capital Structure
Capital Structure Share Price (1 year) High Quality Share Register % ISC (as at 1 September 2014) vs FTSE 250 & FTSE 350 Mining Al Rajhi Holdings W.W.L. 12.9% T. Rowe Price¹ 10.2% JP Morgan Asset Management Holdings Inc. 7.8% BlackRock Investment (UK) Limited 7.3% Prudential plc group of companies²
Slide 23: FY 2014: Safety and Environmental Performance
FY 2014: Safety and Environmental Performance • Group LTIFR of 0.32 14 (FY 2013: 0.67) – good LTIFR achievement in comparison to industry average (particularly for underground operations) 1.5 1 • Regrettably Petra experienced a fatality in January 2014 at Cullinan due to an accident at an electricit
Slide 24: FY 2014 – Operations Results
FY 2014 – Operations Results Operation Finsch Cullinan Koffiefontein Kimberley UG Williamson (74%¹ Petra; 26% BEE) (74%¹ Petra; 26% BEE) (74%¹ & 2 Petra; 26% BEE) (74%¹ Petra; 26% BEE) (75% Petra; 25% Government of Tanzania) ROM Production Tonnes treated (t) 2,910,195 2,609,935 2,546,383 2,595,004 2
Slide 25: Focus on Africa
Focus on Africa • Six producing mines (five in South Africa and one in Tanzania), plus exploration in Botswana • Diversified portfolio is key to managing production risk across the Group Africa is source of ca. 60% of world’s diamonds by value 25
Slide 26: An Exceptional Growth Path
An Exceptional Growth Path Petra acquired five non-core 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% Pet
Slide 27: 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 28: Diamond Market – Constrained Supply
Diamond Market – Constrained Supply • Limited supply: only ~30 significant kimberlite mines in production; no major discoveries since 1990’s • Major mines maturing: past production peak; moving underground = lower tonnages + higher operating costs • Poor exploration success: chance of finding an eco
Slide 29: Diamond Market – Growing Demand
Diamond Market – Growing Demand • US recovery: very strong diamond buying culture; market grew +7% in 2013 (source: De Beers) • Late cycle credentials: demand also driven by urbanisation trend and rising wealth in emerging markets • Growing middle classes: ca. 3 billion people to join middle classes
Slide 30: The Diamond Market in 2013
The Diamond Market in 2013 • Global diamond jewellery sales +3%: US$79 billion Share of World Polished Diamond Consumption in Value (US$ PWP) Diamond Jewellery Value, Growth by Geography (US$bn) Rest of world 23% United States 40% Japan 6% Gulf Region 8% India China, HK, 8% Macau 15% Source: De Beer
Slide 31: Diamond Market – US (+7% Growth in 2013)
Diamond Market – US (+7% Growth in 2013) • Total US retail sales of diamond jewellery reached Most desired fine jewellery to receive (% of all women), 2013 pre-2009 downturn levels in 2013 39% • Polished diamond content in jewellery increased 20% from 2008 US bridal market (De Beers research): 14% •
Slide 32: Diamond Market – China (+14% Growth in 2013)
Diamond Market – China (+14% Growth in 2013) Penetration of bridal diamond jewellery (%) Chinese Demand (De Beers research) • Share of diamonds sold in jewellery to Chinese consumers grew from 3% in 2003 to 21% in 2013 • Average prices jumped 32% from 2003 to 2013 to +RMB8,000 (ca. US$1,300); averag
Slide 33: Rare Diamonds Continue to Break Records
Rare Diamonds Continue to Break Records 14 May 2014: 10 June 2014: The pear-shaped fancy blue A 5.5ct oval pink diamond 13.2ct diamond, renamed sold for US$9.5 million, or 'The Winston Blue‘, sold for ca. US$1.7 million per ca. US$23.8 million, or ca. carat, at Christie’s New US$1.8 million per cara
Slide 34: Iconic Gems from Iconic Mines
Iconic Gems from Iconic Mines The Greater Star of The Williamson Pink Africa 55ct rough; 24ct polished; Largest polished yield gifted to Princess Elizabeth from the Cullinan at on her engagement 530ct; sits in the Royal Williamson, 1947 Sceptre Cullinan, 1905 The Cullinan Heritage 507.55 carats roug
Slide 35: Cullinan – Historical Large Diamond Records
35 Date of acquisition 2013 2011 by Petra 2009 2007 2005 2003 2001 1999 1997 1995 1993 1991 +100 and +200 carat stones recovered at Cullinan 1989 Cullinan – Historical Large Diamond Records 1987 1985 1983 1981 1979 1977 1975 1973 1971 +200 1968 1966 +100 1964 1962 1960 1958 1956 1954 1952 1950 1931
Slide 36: Koffiefontein – Development Programme
Koffiefontein – Development Programme Expansion Plan – to take Koffiefontein Kimberlite Pipe Schematic production to c. 100,000 ctpa by FY 2017 • ROM production supplemented by ore from Ebenhaezer open pit (~5ha) – FY 2015 to FY 2016 • Installation of SLC from 560m to 600m – FY 2014 to FY 2016 SCOPE
Slide 37: Kimberley Underground – Development Programme
Kimberley Underground – Development Programme Expansion Plan – planned Kimberley Underground Kimberlite Pipes Schematic production of ca. 170,000 ctpa from FY 2015 • Construction and commissioning of plants at both Joint Shaft and Wesselton Shaft – completed in FY 2013 • ROM stockpile of ca. 244 Kt
Slide 38: Williamson – Development Programme
Williamson – Development Programme Expansion Plan – to take Williamson Kimberlite Pipe Schematic production to c. 300,000 ctpa by FY 2017 1km • Re-crush circuit in plant, N plus other plant design efficiencies, allowing for increased throughput – from FY 2014 LOM Pit Shell • Successful ramp-up of pr
Slide 39: Debt Facilities
Debt Facilities Debt Facilities1 Lender Type Size Interest Rate Repayment US$ million US$M (Percentage utilised in brackets) Absa & 5 semi-annual Amortising RMB 76.0 JIBAR + 4.0% payments from Mar 48 term facility (FNB) 16 (50%) 76 5 semi-annual (100%) Amortising IFC 35.0 LIBOR + 4.0% payments from
Slide 40: 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 41: South Africa and Tanzania
South Africa and Tanzania South Africa Tanzania Corporate tax 28% 30% Diamond royalty Formula based on profitability of 5% of turnover mining operation; 0.5% up to 7% of turnover Rough diamond export levy 5%, certain exemptions apply; n/a Petra sells all SA goods in Joburg State Diamond Trader Petra
Slide 42: 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