Petra Diamonds Limited · LSE:PDL
Petra Diamonds — FY2019 Earnings Presentation
45 slides from Petra Diamonds's earnings presentation, Sep 16, 2019
Slide 1: Foundations for the future
Foundations for the future Petra Diamonds Limited Preliminary Results 12 months to 30 June 2019
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: Stabilising and optimising our portfolio
Our Strategy Stabilising and optimising our portfolio Work Responsibly • Strive for a zero harm workplace • Leverage strong relationships with our stakeholders to support our licence to operate • Protect and enhance our environment • Uphold the high value placed on diamonds Consistent Delivery • Pro
Slide 5: Driving the optimisation of our asset base
Project 2022 Driving the optimisation of our asset base Project 2022 launched to deliver free cash flow • Initial target of $150-200 million¹ free cash flow over three year period² • Diagnostic phase completed at Finsch and Cullinan; programme management office (PMO) established and strategic sourci
Slide 6: Petra delivered solid results in FY 2019 in a difficult market
FY 2019 KPIs Petra delivered solid results in FY 2019 in a difficult market ROUGH DIAMOND PRODUCTION REVENUE SAFETY Million carats US dollars (millions) LTIFR 3.87 463.6 0.21 3.8 3.9 495.3 463.6 3.3 425 0.29 0.29 0.27 3.2 3.2 396.8 394.8 0.23 0.21 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 • Produ
Slide 7: Generation of operational free cash flow an important milestone
FY 2019 KPIs continued Generation of operational free cash flow an important milestone Adjusted EBITDA1 OPERATIONAL FREE CASH FLOW1 OPERATIONAL CAPEX2 US dollars (millions) US dollars (millions) US dollars (millions) 153.0 70.5 81.4 70.5 195.4 -61.3 274.1 288.4 139.3 151.4 142.6 153.0 226.2 -134.7 -
Slide 8: FY 2019 Sustainability Highlights
FY 2019 Sustainability Highlights People Material Topic Objectives Outcomes for FY 2019 Employee retention • Ensure employee development needs are met √ US$6.6 million invested in training and development and development Diversity • Launch ‘Women in Leadership Programme’ √ 13 women participated in i
Slide 9: Short term headwinds affecting pricing
Diamond Market Short term headwinds affecting pricing FY 2019 FY 2018 FY 2019 Market Performance Rough Diamond Prices US$/ct US$/ct • Challenging conditions driven by a weakening in global Finsch 99 108 markets, trade tensions between the US and China, higher than normal polished inventories and the
Slide 10: The supply side outlook continues to contract
Our Market 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: $14.1bn) • Projected to fall to 115 Mcts by 2030 Mcts Global rough diamond production (Mcts) 180 160 140 120 100 80 60 40 20 0 Source: Company reports, Kim
Slide 11: Only 30 significant kimberlite mines in production today
Global Production Only 30 significant kimberlite mines in production today • Market downturn could lead to an acceleration of closures or cancellation of expansion plans Petra Diamonds Limited: FY 2019 Prelims Presentation 11
Slide 12: The unique heritage of our assets imbues our diamonds with character
Our Heritage The unique heritage of our assets imbues our diamonds with character • Petra’s mines have a long and envied history in the market and are a continued source of some of the world’s most celebrated gems • Their rich history imbues each diamond with a unique story and character • Focus on
Slide 13: Financial Update
7 PetraDiamonds Financial Update
Slide 14: Strong operating performance offset by lower pricing
FY 2019 Summary of Results Strong operating performance offset by lower pricing FY 2019 FY 2018 (US$m) (US$m) Revenue 463.6 495.3 Adjusted mining and processing costs1 (301.7) (291.4) Other direct (expense) / income (0.8) 1.2 Profit from mining activity1 161.1 205.1 Exploration expense (0.4) (0.6) C
Slide 15: Impacting on net debt position
Financial Position Impacting on net debt position Unit 30 June 2019 30 June 2018 Closing exchange rate used for conversion R14.07:US$1 R13.73:US$1 Cash at bank (incl. restricted amounts) US$m 85.2 236.0 Diamond inventories US$m 57.5 54.0 Carats 666,201 529,054 Diamond debtors US$m 23.8 75.0 US$650 m
Slide 16: Costs in line with expectations
Operating Costs Costs in line with expectations FY 2019 On-mine cash cost breakdown Focus on costs (South Africa operations) • Absolute on-mine cash costs in FY 2019 +2% (in line with expectations), despite ongoing inflationary pressures, due 8% Labour to: 16% Contractors and consumables – increased
Slide 17: Operations Update
V7 PetraDiamonds Operations Update
Slide 18: Petra delivered solid operational results in FY 2019
FY 2019 KPIs Petra delivered solid operational results in FY 2019 ROUGH DIAMOND PRODUCTION REVENUE SAFETY Million carats US dollars (millions) LTIFR 3.87 463.6 0.21 3.8 3.9 495.3 463.6 3.3 425 0.29 0.29 0.27 3.2 3.2 396.8 394.8 0.23 0.21 15 16 17 18 19 15 16 17 18 19 15 16 17 18 19 • Production in l
Slide 19: Improving Operational Performance
Improving Operational Performance Building up to steady state production 16 5 14 4 12 10 3 Mtpa Mcts 8 6 2 4 1 2 - 0 FY2017 FY2018 FY2019 U/G ROM (Newly established blocks) U/G ROM (Historic blocks) Surface ROM FDM Surface ROM WDL Tailings Total Carats Recovered Petra Diamonds Limited: FY 2019 Preli
Slide 20: Finsch: steady state production from Block 5 SLC in H2 FY 2020
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 in Q3 FY 2019 • Construction of ground handling infrastructure completed in Q1 FY
Slide 21: Block 5 SLC Progression
Finsch continued Block 5 SLC Progression 70 Level 73 Level 70 Level 75 Level 78 Level 73 Level 75 Level 78 Level Petra Diamonds Limited: FY 2019 Prelims Presentation 21
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 in Q
Slide 23: C-Cut Progression
Cullinan continued C-Cut Progression At 30 Jun 2019, 91 draw bells completed out of 107 scheduled 16 ha at 830 mL • Draw-bell installations planned to be completed in H1 FY 2020; draw points will be maturing over a 12 month period • Cave was started in SW area due to geotechnical considerations to e
Slide 24: Cullinan is delivering high value stones
Cullinan continued Cullinan is delivering high value stones FY 2018 – 40.5 carat Type II blue stone sold for $24 million FY 2019 – recovery of a number of Type II blue stones varying from 2 to 10 carats per stone, including a 9.4ct blue diamond sold for $5.4 million in Q4 FY 2019 – recovery of vario
Slide 25: Koffiefontein: steady state production from SLC reached in FY 2019
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 26: SLC Progression
Koffiefontein continued SLC Progression 56 Level 58 Level 56 Level 60 Level 58 Level 60 Level Petra Diamonds Limited: FY 2019 Prelims Presentation 26
Slide 27: Williamson: steady state production achieved in FY 2018
Williamson Steady state production achieved in FY 2018 • New mill plant commissioned H2 FY 2017 • FY 2018 production – 341 Kcts • FY 2019 production of 399 Kcts (best production since 1977) and sales revenue of $93.0m • FY 2019 ROM throughput of ca. 5.0 Mt supplemented by alluvial production of ca.
Slide 28: Outlook
7 PetraDiamonds Outlook
Slide 29: Evolution of Board and Management to drive next phase of the business
Our Team Evolution of Board and Management to drive next phase of the business Nomination Committee is in the third year of its three year Succession Plan: 1 Jan 2019: new independent NEDs appointed Non- • Varda Shine – renowned diamond industry expert, Executive previously CEO of De Beers Trading C
Slide 30: Focus on execution of Project 2022 to reduce leverage
Outlook Focus on the execution of Project 2022 to reduce leverage against the backdrop of a challenging diamond market Production on track to achieve guidance Project 22 targeting delivery of $150-200m of ca. 3.8 Mcts for FY 2020 free cash flow over three year period • Total production of 705 Kcts f
Slide 31: Appendix
7 PetraDiamonds Appendix
Slide 32: Mine Contribution Split
Mine Contribution Split Production at Cullinan and Williamson exceeded guidance, offset by lower than expected production at Finsch Production by mine Revenue by mine FY2019 FY2019 2% 10% 20% 37% 45% 6% 43% Finsch 37% Cullinan Koffiefontein FY2018 Williamson FY2018 1% 9% 14% 5% 47% 36% 54% 34% Petra
Slide 33: 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 34: Capital Structure
Capital Structure Share Price (1 year to 12 September 2019) Major Shareholders as at 12 September 2019 % Voting rights Standard Life Aberdeen plc 15.2% Prudential plc (incorporating M&G Group Ltd) 5.3% Cobas Asset Management 5.0% T. Rowe Price Associates Inc. 4.9% Lazard Asset Management 4.9% Direct
Slide 35: Board of Directors
Board of Directors Petra is headed by an effective Board to drive the next phase of the business Adonis Pouroulis Richard Duffy Jacques Breytenbach Tony Lowrie Dr Patrick Bartlett Non-Executive Chairman CEO, effective 1 April 2019 Finance Director Senior Independent Independent Non-Executive Mining
Slide 36: 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 37: Impact of ZAR/USD Movement on Petra
Impact of ZAR/USD Movement on Petra • US$1:ZAR14.60 on 12 September 2019 70 – 80% of operating costs are ZAR denominated • Increase / decrease of ZAR1 equates to: – ca. $15 – 18m on EBITDA USD – ca. $25m on FCF USD • Short term hedging strategy to manage volatility 70-80% • Collar style hedge on USD
Slide 38: FY 2019 vs. FY 2018 Operational Results
FY 2019 vs. FY 2018 Operational Results Finsch Cullinan Koffiefontein Williamson FY FY FY FY FY FY FY FY Unit 2019 2018 2019 2018 2019 2018 2019 2018 ROM PRODUCTION Tonnes treated Tonnes 3,073,479 3,084,395 4,119,406 3,741,086 1,000,726 649,259 5,082,319 4,659,563 Grade cpht 56.1 62.5 38.6 35.9 6.4
Slide 39: Demand and the Role of the Diamond Producers Association
Demand and the Role of the Diamond Producers Association The DPA aims to maintain and enhance consumer demand for diamonds Demand for diamond jewellery reported to grow ca. 4% to $85.9 billion in 2018 The DPA seeks to actively influence sustainable consumer demand via a number of methods, including:
Slide 40: Diamond Producer's Association – Total Clarity Report
Diamond Producer’s Association – Total Clarity Report Petra Diamonds Limited: FY 2019 Prelims Presentation 40
Slide 41: The Case for Diamonds
The Case for Diamonds With the correct identification and classification Natural Diamonds and Lab Grown Diamonds (“LGDs”) can coexist • Millennials and Gen Z bigger than previous two generations; potentially more spending power • Millennials spending power to soar: World Bank forecast annual income
Slide 42: Bank Debt Facilities – Covenants
Bank Debt Facilities – Covenants Bank debt facilities undrawn and available to the Group as at 30 June 2019 of R1.5 billion (ca. $106.6 million), in addition to cash at bank of $85.2 million Maintenance Covenants Distribution Covenants 12 months to 12 months to 12 months to 12 months to 12 months to
Slide 43: Debt Facilities
Debt Facilities Utilised at Commitment fee Size Size US$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 44: 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 Petra Diamonds Limited: FY 2019 Prelims Presentation 44
Slide 45: Thank you
Thank you Further enquiries: investorrelations@petradiamonds.com +44 20 74948203 www.petradiamonds.com