TIDMPDL
RNS Number : 3632M
Petra Diamonds Limited
16 September 2019
16 September 2019 LSE: PDL
Petra Diamonds Limited
("Petra", "the Company" or "the Group")
Preliminary Results Announcement for the Year ended 30 June 2019
(unaudited)
Petra Diamonds Limited announces its preliminary results
(unaudited) for the year ended 30 June 2019 ("the Year" or "FY
2019").
Financial Highlights
-- Revenue down 6% to US$463.6 million (FY 2018: US$495.3
million), with diamond prices realised by Petra down ca. 5% in line
with the wider market.
-- Adjusted EBITDA(3) down 22% to US$153.0 million (FY 2018:
US$195.4 million); adjusted EBITDA margin of 33% (FY 2018:
39%).
-- Positive operational free cash flow(10) of US$70.5 million
(FY 2018: US$61.3 million outflow) an important milestone for the
Company and reflecting the strong grip on factors under Petra's
control (production, costs and capex).
-- Non-cash impairment charge(5) of US$246.6 million, largely
driven by more conservative rough diamond pricing estimates, based
on prevailing market conditions and a more conservative outlook on
future price growth, impacting the carrying values of all operating
assets (FY 2018: US$66.0 million for Koffiefontein).
-- Net loss after tax of US$258.1 million including non-cash
impairment charge of US$246.6 million (FY 2018 net loss after tax:
US$203.1 million).
-- Adjusted loss per share(6) from continuing operations: 2.63
US$ cents per share (FY 2018: 0.50 US$ cents profit per share).
-- Net debt(11) adjusted for diamond debtors as at 30 June 2019
of US$541.0 million, as compared to US$554.9 million as at 31
December 2018 and US$445.7 million as at 30 June 2018.
Operational Highlights
-- Safety: Group Lost Time Injury Frequency Rate ("LTIFR") improved to 0.21 (FY 2018: 0.23).
-- Full Year production of 3.87 Mcts (FY 2018: 3.84 Mcts), in line with guidance.
-- Run of mine ("ROM") tonnes treated increased 10% to 13.3 Mt (FY 2018: 12.1 Mt).
-- Operational Capex (excluding capitalised borrowing costs)
reduced to US$81.4 million (FY 2018: US$129.6 million), within
budget and in line with the Company's reducing capital expenditure
profile.
-- The Group achieved absolute on mine costs in line with
expectations with a weakening ZAR offsetting most of the
inflationary increases.
Current Trading
-- Total production of ca. 705 Kcts for July and August.
-- Sales of US$61.6 million from the September tender, with
prices down ca. 4% on a like-for-like basis compared with Q4 FY
2019, reflecting weaker market conditions. Demand remained solid
across all assortments although weaker for larger white stones.
-- Current ZAR:USD weakness is partially offsetting some of the weakness in diamond prices.
Corporate
-- As part of the Board's Three Year Succession Plan,
Non-Executive Chairman Adonis Pouroulis intends to step down from
the Board by the end of Q3 FY 2020, once a successor has been
identified and appointed. It is expected that an announcement
regarding the appointment of a new Chairman will be made before the
end of this calendar year.
-- The South African Lenders to the Company's black economic
empowerment ("BEE") partners agreed post Year end to an amended
repayment profile of the ca. US$54.2 million BEE banking debt. The
balance (which was to be settled in two instalments, November 2019
and May 2020) will now be spread over the period to November 2021,
with ca. US$5.0 million payable in November 2019, followed by four
equal bi-annual instalments of US$12.3 million each from May
2020.
Outlook
-- On track to achieve FY 2020 production guidance of ca. 3.8 Mcts.
-- Project 2022 was launched in July 2019, led by a senior
project executive team. The initiative aims to identify and drive
efficiencies and improvement across all aspects of the business,
targeting delivery of US$150 - 200 million cumulative free cash
flow over a three year period, with delivery weighted towards FY
2021 and FY 2022 and dependent on diamond pricing.
-- The diagnostic phase has now been completed at both Finsch
and Cullinan and has identified a number of potential operational
cost saving and throughput enhancement opportunities, scheduled to
be implemented from Q1 FY 2020. In addition, further diagnostics
are being conducted to identify opportunities at Koffiefontein,
Williamson and off-mine expenditure.
-- Focus on operational cost efficiencies; Group FY 2020 total
on-mine cash costs are expected to remain largely flat relative to
FY 2019, with inflationary pressures partially offset by lower
tailings production and a Group-wide focus on streamlining
operations and re-setting the cost base across its portfolio.
-- FY 2020 Capex is guided at ca. US$43 million, continuing the
declining trend since peak Capex was reached in FY 2016. FY 2020
Capex is ca. US$29 million lower than previous guidance, with a
focus to close out the existing expansion programmes.
-- FY 2021 and FY 2022 capex guidance of ca. US$45 - 55 million
and ca. US$60 - 70 million respectively, subject to market
conditions.
-- The recent ZAR:USD weakness has provided favourable hedging
opportunities to both benefit from the weaker Rand and protect
against possible future Rand strength, partially offsetting the
impact of weaker diamond prices.
-- Whilst noting that seasonal weakness is typically experienced
in pricing at the first tender of FY 2020, the Company expects the
diamond market to remain challenging in the near-term. Updated cash
flow projections indicate sufficient headroom from available cash
balances and existing banking facilities. The continued market
weakness and its expected impact on the Company has been discussed
with the South African Lender Group(13) who have confirmed their
ongoing support. Both the ZAR1 billion (ca. US$70 million)
revolving credit facility and the ZAR500 million (ca. US$35
million) working capital facility are currently undrawn and remain
available.
Richard Duffy, Chief Executive, commented on the Results:
"Petra achieved a solid operational performance in FY 2019,
generating operating free cash flow of US$70.5 million, despite a
weaker market, and during the Company's transition from its
expansionary capital expenditure phase towards steady-state
production. Our Board has conducted a thorough strategic review of
the business. In the short term, we remain firmly focused on the
rigorous execution of Project 2022, which is expected to reduce the
Company's high net debt levels, against this backdrop of a
challenging diamond market. Addressing this leverage will enable us
to capture future organic growth opportunities and reposition Petra
as the leading mid-tier diamond producer."
Results Presentation, Webcast and Conference Call
Presentation:
A presentation for analysts will be held at 9:30am BST on 16
September 2019 at the offices of Buchanan, 107 Cheapside, London
EC2V 6DN.
Webcast:
A live webcast of the presentation will be available on Petra's
website at www.petradiamonds.com and on:
https://www.investis-live.com/petra-diamonds/5d6ccc7b9eecb71000f017fc/ommb
A recording will be available from 1:00pm BST on 16 September
2019 on the same link.
A conference call line will also be available to allow
participants to listen to the webcast by dialling one of the
following numbers shortly before 9:30am BST:
From the UK (toll free): 0800 358 9473
From South Africa (toll free): 0800 111 446
From the rest of the world: +44 333 300 0804
Participant passcode: 27379746#
A replay of the conference call will be available on the
following numbers from 12:00pm BST on Monday 16 September:
From the UK (toll free): 0800 358 2049
From South Africa: +27 (21) 672 4123
US (toll free): +1 844 307 9361
From the rest of the world: +44 333 300 0819
Playback passcode: 301296540#
Second Conference Call - 4:00pm BST:
A conference call with management to cater for North American
and other international investors will be held at 4:00pm BST on 16
September 2019. Participants are advised to view the results
presentation webcast in advance of the call, as the full management
commentary on the results will not be repeated.
From the US (toll free): +1 855-85-70686
From the rest of the world: +44 333 300 0804
From the UK (toll free): 0800 358 9473
Participant passcode: 35535875#
SUMMARY OF RESULTS (unaudited)
Year ended
Year ended
30 June 2019 30 June 2018
("FY 2019") ("FY 2018")
US$ million US$ million
---------------------------------------- ---- -------------- --------------
Revenue 463.6 495.3
Adjusted mining and processing
costs(1) (301.7) (291.4)
Other direct (expense) / income (0.8) 1.2
-------------- --------------
Profit from mining activity(2) 161.1 205.1
-------------- --------------
Exploration expense (0.4) (0.6)
Corporate overhead (7.7) (9.1)
-------------- --------------
Adjusted EBITDA(3) 153.0 195.4
-------------- --------------
Depreciation (106.7) (128.0)
Share-based expense (0.2) (0.6)
Net finance expense (57.5) (59.6)
Tax expense (excluding taxation
credit on impairment charge
(FY 2018: tax charge on reduction
of unutilised Capex benefits)) (1.8) (5.6)
-------------- --------------
Adjusted net (loss) / profit
after tax(4) (13.2) 1.6
-------------- --------------
Impairment charge(5) (246.6) (66.0)
Net unrealised foreign exchange
gain / (loss) 4.0 (26.2)
Taxation credit on impairment 47.6 -
charge
Taxation charge on reduction
of unutilised Capex benefits - (8.2)
-------------- --------------
Loss from continuing operations (208.2) (98.8)
Loss on discontinued operations,
net of tax(7) (49.9) (104.3)
-------------- --------------
Net loss after tax (258.1) (203.1)
-------------- --------------
Earnings per share attributable
to equity holders of the Company
- US cents
Basic loss per share - from
continuing and discontinued
operations (26.19) (31.29)
Basic loss per share - from
continuing operations (20.18) (15.85)
Adjusted (loss) / profit per
share - from continuing operations(6) (2.63) 0.50
Unit As at 30 As at 30
June
June 2018
2019 (US$ million)
(US$ million)
Cash at bank - (including
restricted amounts) US$m 85.2 236.0
Diamond debtors US$m 23.8 75.0
Diamond inventories US$m 57.5 54.0
Diamond inventories Carats 666,201 529,054
US$650 million loan
notes (issued April
2017)(8) US$m 650.0 650.0
Bank loans and borrowings(9) US$m - 106.7
Net debt(11) US$m 564.8 520.7
Bank facilities undrawn
and available US$m 106.6 2.6
Consolidated net debt
for covenant measurement
purposes(12) US$m 595.2 531.6
Consolidated net debt
to consolidated EBITDA
ratio X 3.9 2.7
------------------------------ -------------- --------------- ---------------
The following exchange rates have been used for this
announcement: average for FY 2019: US$1:ZAR14.19 (FY 2018:
US$1:ZAR12.86); closing rate as at 30 June 2019 US$1:ZAR14.07 (FY
2018: US$1:ZAR13.73).
Notes:
The Group uses several non-GAAP measures above and throughout
this report to focus on actual trading activity by removing certain
non-cash or non-recurring items and discontinued operations. These
measures include adjusted mining and processing costs, profit from
mining activities, adjusted EBITDA, adjusted net profit after tax,
adjusted earnings per share, adjusted US$ loan note, net debt and
consolidated net debt for covenant measurement purposes. As these
are non-GAAP measures, they should not be considered as
replacements for IFRS measures. The Group's definition of these
non-GAAP measures may not be comparable to other similarly titled
measures reported by other companies. The Board believes that such
alternative measures are useful as they exclude one-off items such
as the impairment charges and non-cash items to provide a clearer
understanding of the underlying trading performance of the
Group.
1. Adjusted mining and processing costs are mining and
processing costs stated before depreciation and share-based
expense.
2. Profit from mining activities is revenue less adjusted mining
and processing costs plus other direct income.
3. Adjusted EBITDA is stated before depreciation, share-based
expense, net finance expense (excluding net unrealised foreign
exchange gains and losses), tax expense (excluding taxation credit
on impairment charge and taxation charge on unutilised Capex
benefits), loss / profit on discontinued operations, impairment
charges and net unrealised foreign exchange gains and losses.
4. Adjusted net (loss) / profit after tax is net loss / profit
after tax stated before losses on discontinued operations,
impairment charge, taxation credit on impairment charge, net
unrealised foreign exchange gains and losses and taxation charge on
reduction of unutilised Capex benefits.
5. Impairment charge of US$246.6 million (30 June 2018: US$66.0
million - Koffiefontein) was due to the Group's impairment review
of its operations and other receivables. Refer to note 15 for
further details.
6. Adjusted EPS from continuing operations is stated before
impairment charge, taxation credit on impairment charge, net
unrealised foreign exchange gains and losses and taxation charge on
reduction of unutilised Capex benefits.
7. The loss on discontinued operations reflect the results of
the KEM JV and Helam operations (net of tax), including impairment
of other receivables from the KEM JV.
8. The US$ loan note represents the gross capital of US$650
million (30 June 2018: US$650 million), excluding transaction
costs.
9. In July 2018, the Company repaid the Revolving Credit
Facility (capital plus interest) of US$73.1 million and Working
Capital Facility (capital plus interest) of US$33.6 million in
full, however the facilities were not cancelled and remain
available.
10. Operational free cash flow is cash generated from operations
less capital expenditure for the year as per the consolidated cash
flow statement.
11. Net debt is the US$ loan notes and bank loans and borrowings
net of cash at bank (including restricted cash).
12. Consolidated Net Debt for covenant measurement purposes is
bank loans and borrowings plus loan notes, less cash, less diamond
debtors and includes the BEE guarantees of ca. US$54.2 million
(ZAR762.5 million) (30 June 2018: US$85.9 million (ZAR1,218
million)) issued by Petra to the lenders as part of the BEE
financing concluded in December 2014 and which are included in the
Group's balance sheet as BEE loans payable. This measure differs to
the 'Net debt' figure in the table above.
13. The South African lender group comprises Absa Bank Limited
(acting through its Corporate and Investment Banking division),
FirstRand Bank Limited (acting through its Rand Merchant Bank
division), Investec Asset Management Proprietary Limited and
Nedbank Limited (acting through its Corporate and Investment
Banking division Trust ("the Lender Group").
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation
596/2014.
For further information, please contact:
Petra Diamonds, London Telephone: +44 20 7494 8203
Cathy Malins
Des Kilalea
Marianna Bowes investorrelations@petradiamonds.com
Buchanan Telephone: +44 20 746 5000
(PR Adviser)
Bobby Morse pdl@buchanan.uk.com
About Petra Diamonds Limited
Petra Diamonds is a leading independent diamond mining group and
a consistent supplier of gem quality rough diamonds to the
international market. The Company has a diversified portfolio
incorporating interests in three underground producing mines in
South Africa (Finsch, Cullinan and Koffiefontein) and one open pit
producing mine in Tanzania (Williamson). Petra also conducts a
limited exploration programme in Botswana and South Africa.
Petra's strategy is to focus on value rather than volume
production by optimising recoveries from its high-quality asset
base in order to maximise their efficiency and profitability. The
Group has a significant resource base of ca. 250 million carats,
which supports the potential for long-life operations.
Petra conducts all operations according to the highest ethical
standards and will only operate in countries which are members of
the Kimberley Process. The Company aims to generate tangible value
for each of its stakeholders, thereby contributing to the
socio-economic development of its host countries and supporting
long-term sustainable operations to the benefit of its employees,
partners and communities.
Petra is quoted with a premium listing on the Main Market of the
London Stock Exchange under the ticker 'PDL' and is a constituent
of the FTSE4Good Index. The Company's US$650 million loan notes due
in 2022 are listed on the Global Exchange market of the Irish Stock
Exchange. For more information, visit www.petradiamonds.com.
CEO'S REVIEW
Whilst FY 2019 saw some challenges in terms of both a relatively
volatile diamond market, as well as the Company's transition from
that of heavy capital expenditure to steady-state production, we
delivered solid operational performance. As operations continue to
stabilise, the Company is well positioned for the next phase of
delivery.
We acknowledge that our people are integral to our success; this
continues to drive the Company's thinking in terms of our focus on
safety, as evidenced by the continued improvement in the LTIFR of
0.21 for the Year, as opposed to 0.23 in FY 2018, and our approach
to labour relations, which remained stable for the Year.
Production of 3.9 Mcts was in line with guidance. Production at
Cullinan and Williamson exceeded guidance, offset by lower than
expected production at Finsch. Run of mine ("ROM") production
increased to 3.8 Mcts - representing ca. 97% of the Group's overall
production profile - with a 40% reduction in lower value tailings
and other diamonds.
Based on production recorded in the first two months of FY 2020,
the Group is on track to achieve its FY 2020 target of ca. 3.8
Mcts.
Revenue decreased 6% to US$463.6 million, largely reflecting the
weaker diamond market and resulting in the Group's EBITDA margin
declining to 33% (FY 2018: 39%). On-mine cash costs were largely in
line with expectations and, looking ahead, one of Project 2022's
key focus areas will include the identification and realisation of
opportunities to improve cost efficiencies to protect operating
margins.
An important turning point for the Company was reached in FY
2019 with the generation of US$70.5 million of operational cash
flow (FY 2018: US$61.3 million outflow), reflecting the positive
benefits of our capital investment and the stabilisation of
production across the operations.
Petra has now effectively completed its significant capital
expenditure programme and recorded lower operational Capex of
US$81.4 million (excluding capitalised borrowing costs) during the
Year (down from US$129.6 million in FY 2018 and below the Company's
FY 2019 guidance of ca. US$95 million).
Following our recent review of our Life of Mine ("LOM") plans,
FY 2020 capex guidance is maintained at ca. US$43 million, while FY
2021 and FY 2022 capex is guided at ca. US$45 - 55 million and ca.
US$60 - 70 million respectively, with ca. US$30 million per annum
relating to sustaining capex and the balance mainly related to
underground development at Cullinan and Finsch. A significant
portion of the FY 2021 and FY 2022 capex is discretionary and can
be curtailed should current market conditions worsen.
Further to the review of the LOM plans mentioned above, the
Company also completed impairment reviews on all the assets in its
portfolio. The changes to the underlying operational plans, costs
and capital expenditure assumptions did not materially change the
valuation of these assets compared to earlier reviews of this
nature and thus did not indicate any impairment on a standalone
basis. However, the revised starting price assumptions, given
recent weakness in the diamond market and a decision to use a lower
real price escalator compared to earlier assumptions, resulted in
each of the four operational assets' carrying values being
partially impaired to reflect the latest assessment of the
recoverable value. An asset-level non-cash impairment charge of
US$223.7 million has therefore been recognised in the financial
results - further detail is provided in the Financial Review
section below.
Compelling opportunities
My first priority at Petra has been to assess the business'
capacity to deliver free cash flow and, as a result of this
exercise, we have launched Project 2022, which will identify
opportunities across the business to drive efficiencies and
facilitate improvements. The areas in focus include throughput at
all operations, cost efficiencies, strategic sourcing and other
initiatives (such as the sale of equipment and the resolution of
the blocked parcel and VAT receivables in Tanzania). Project 2022
targets delivery of US$150 - 200 million free cash flow by the end
of FY 2022, with delivery weighted towards FY 2021 and FY 2022 and
dependent on diamond pricing.
In addition to the implementation of Project 2022, Petra's Board
and Management have conducted a thorough strategic review of the
business. In the short term, we remain firmly focused on the
rigorous execution of Project 2022, which is expected to reduce the
Company's high net debt levels, against the backdrop of a
challenging diamond market. Addressing this leverage will enable us
to capture future organic growth opportunities and reposition Petra
as the leading mid-tier diamond producer.
Finally, I would like to thank my predecessor Johan Dippenaar,
who led Petra through an impressive period of growth whilst also
carrying out substantial and at times challenging capital
programmes. Following the significant investment in the Group's
assets, the business is now well positioned to deliver consistent,
solid and sustainable production from its diversified portfolio of
mines. With a total resource of nearly 250 million carats, Petra
has organic growth opportunities well beyond 2030, and this is
underpinned by a strong and committed team that understands the
business, both in terms of its challenges and opportunities.
I look forward to continuing to build relationships both
internally and externally, with all our stakeholders, and to
leading Petra on this next stage of our journey.
THE DIAMOND MARKET
The diamond market environment was challenging in FY 2019,
driven by a weakening in global markets, trade tensions between the
US and China, higher than normal polished inventories and the
sustained tightening of liquidity in the midstream. More recent
unrest in Hong Kong, escalating trade tensions between the US and
China, and concerns regarding growth in some of the world's leading
economies are further headwinds facing the diamond market in the
short term.
The major producers of rough diamonds have responded to these
difficult market conditions by restricting supply to the market
(both via production cuts and the deferral of rough purchases).
This action, combined with the forthcoming seasonally stronger
jewellery retail season, which includes Thanksgiving in the US,
Christmas, Chinese New Year and Valentine's Day, may assist in
terms of stabilising the market.
In terms of supply and demand, the outlook is more positive in
the medium to longer term, which is expected to be supportive of
rough diamond prices. Global supply fell 2% in 2018 to 148.4 Mcts
valued at US$14.5 billion (2017: 150.9 Mcts valued at US$14.1
billion), according to the Kimberley Process, and a further
tightening of supply is expected over time due to the closure of
older mines (including the Argyle mine in Australia which produced
14 Mcts in 2018 and is scheduled to cease production in late 2020)
and a dearth of new mines coming on stream.
Demand remained relatively stable in 2018, with global diamond
jewellery sales growing ca. 4% to US$85.9 billion, according to
industry reports. The US remained the largest market with an
estimated market share of more than 50%. The slower pace of growth
in sales in the six months to December 2018 (ca. 2%) was largely
due to the impacts of a more uncertain economic situation in South
East Asia, with trade tensions rising, and a strong US dollar a
further headwind. In the medium to long term, marketing spending of
the Diamond Producers Association ("DPA"), which has committed an
investment of over US$70m for generic marketing in 2019, and others
in the sector is expected to stimulate purchases of diamond
jewellery in the leading markets of the US, China and India.
Petra Sales and Prices
Carats sold by Petra in FY 2019 were 2% lower at 3,736,847 Mcts
(FY 2018: 3,793,799 carats), with revenue 6% lower at US$463.6
million (FY 2018: US$495.3 million), reflecting the weaker diamond
market. Petra's average realised diamond prices were ca. 5% lower,
and a softening in demand was noted across the size ranges but
particularly in the lower value, smaller stones. However, it is
worth noting that while rough diamonds smaller than nine sieve size
(smaller than 0.2 carats) account for ca. 44% of our production,
they account for less than 8% of our sales value.
Sales of US$61.6 million from the September tender, with prices
down ca. 4% on a like-for-like basis compared with Q4 FY 2019,
reflecting weaker market conditions. Demand remained solid across
all assortments although weaker for larger white stones.
The table below provides rough diamond prices achieved for FY
2019 and FY 2018.
Mine FY 2019 H2 FY 2019 H1 FY 2019 FY 2018
US$/ct US$/ct US$/ct US$/ct
Finsch 99 94 105 108
------- ---------- ---------- -------
Cullinan 110 120 96 125
------- ---------- ---------- -------
Koffiefontein 480 501 447 525
------- ---------- ---------- -------
Williamson 231 239 223 270
------- ---------- ---------- -------
The average prices achieved at all operations were negatively
impacted by weaker prices in the market for smaller goods, as well
as a product mix containing a lower than expected incidence of gem
quality coarse diamonds in underground ROM material.
FINANCIAL REVIEW
Revenue
FY 2019 revenue decreased 6% to US$463.6 million (FY 2018:
US$495.3 million) due to the number of carats sold for the Year
decreasing 2% to 3,736,847 carats (FY 2018: 3,793,799 carats), as
well as the impact of a weaker diamond market and product mix.
Petra's realised diamond prices reduced by ca. 5% in line with the
market movement in this period.
Mining and processing costs
The mining and processing costs for the Year are comprised of
on-mine cash costs as well as other operational expenses. A
breakdown of the total mining and processing costs for the Year is
set out below.
Diamond Group
inventory technical, Adjusted Total mining
and support and mining and and
On-mine cash Diamond stockpile marketing processing processing
costs(1) royalties movement costs(2) costs Depreciation(3) costs (IFRS)
US$m US$m US$m US$m US$m US$m US$m
FY 2019 266.9 13.2 (2.9) 24.5 301.7 105.9 407.6
------------- -------------- ------------- ------------- ------------- ---------------- -------------
FY 2018 261.4 14.2 (9.5) 25.3 291.4 127.2 418.6
------------- -------------- ------------- ------------- ------------- ---------------- -------------
Notes:
1. Includes all direct cash operating expenditure at operational
level, i.e. labour, contractors, consumables, utilities and on-mine
overheads.
2. Certain technical, support and marketing activities are conducted on a centralised basis.
3. Excludes exploration and corporate / administration.
Absolute on-mine cash costs in FY 2019 rose 2% (in line with
expectations), despite ongoing inflationary pressures, due to:
-- an increase in production / volumes treated (2.0% increase); and
-- inflationary increases, including the impact of electricity and labour costs (7.5% increase);
offset by:
-- the effect of translating ZAR denominated costs at the South
African operations at a weaker ZAR/USD exchange rate (7.5%
decrease).
Profit from mining activities
Profit from mining activities decreased 21% to US$161.1 million
(FY 2018: US$205.1 million), due to lower revenue and increases in
mining and processing costs.
Corporate overhead - General and Administration
Corporate overhead (before depreciation and share based
payments) decreased 15% to US$7.7 million for the Year (FY 2018:
US$9.1 million).
Adjusted EBITDA
Adjusted EBITDA, being profit from mining activities less
exploration and corporate overhead, decreased by 22% to US$153.0
million (FY 2018: US$195.4 million), representing an adjusted
EBITDA margin of 33% (FY 2018: 39%), driven by lower diamond
prices.
Depreciation
Depreciation for the Year decreased to US$106.7 million (FY
2018: US$128.0 million), mainly due to prior year depreciation
reflecting accelerated depreciation associated with the old
Cullinan plant and older mining areas at Finsch and Cullinan; and
the weakening of the Rand against the US Dollar during the
Year.
Impairment charge
As a result of the impairment review carried out at Cullinan,
Finsch, Koffiefontein and Williamson and the Group's other
receivables during the Year, the Board recognised an overall
impairment charge of US$246.6 million (FY 2018: US$66.0 million
relating to Koffiefontein). Further details are provided in Note
15.
Asset level impairments across the mining operations amount to
US$223.7 million (representing some 18% of carrying value of
property, plant and equipment of US$1,187.5 million
pre-impairment), largely driven by reduced starting price
assumptions for rough diamonds, given current rough diamond market
conditions, and a reduction in the forward-looking pricing
escalator from 3% real per annum, in our previous assumptions, to
flat prices in real terms for FY 2021, followed by 2.8% per annum
real growth from FY 2022 to FY 2030, resulting in an effective 2.5%
annual real increase for the ensuing 10 year period from FY 2021 to
FY 2030. The underlying operational assumptions did not materially
change.
Loss on discontinued operations - KEM JV and Helam
The loss on discontinued operations of US$49.9 million (FY 2018:
US$104.3 million reclassification of KEM JV as a discontinued
operation) relates to the Group's disposal during the Year of its
interests in the KEM JV and Helam operations and is made up of:
-- a US$3.6 million disposal consideration for KEM JV; and
-- the recycling of the foreign currency translation reserve of US$2.1 million
offset by:
-- net loss of US$1.5 million attributable to KEM JV and a net
loss of US$0.8 million at Helam for the period 1 July 2018 to
disposal date;
-- net asset disposal of US$8.8 million (US$8.2 million KEM JV and US$0.6 million Helam);
-- US$35.2 million recycling of non-controlling interest
(US$26.1 million KEM JV and US$9.1 million Helam);
-- US$2.0 million transfer of cash from the rehabilitation guarantee cell captive; and
-- US$7.3 million impairment of the KEM JV purchase
consideration and current trade and other receivables.
Refer to note 16 for the detailed breakdown.
Net financial expense
Net financial expense of US$53.5 million (FY 2018: US$85.8
million) comprises:
-- net unrealised foreign exchange gains of US$4.0 million (FY
2018: US$26.2 million loss) representing (i) the unrealised foreign
exchange gains on the foreign currency retranslation of cross
border loans considered to be repayable in the foreseeable future,
(ii) unrealised losses on forward exchange contracts and (iii)
unrealised foreign exchange losses on Rights Issue proceeds (refer
to note 6 for further detail);
-- interest received on bank deposits of US$1.1 million (FY 2018: US$3.5 million); and
-- net realised foreign exchange gains on settlement of forward
exchange contracts of US$1.0 million (FY 2018: US$0.9 million);
offset by:
-- interest on the Group's debt and working capital facilities
of US$47.0 million (FY 2018: US$47.5 million) stated after the
capitalisation of interest of US$4.5 million (FY 2018: US$15.2
million) associated with the funding of assets under development;
the year on year increase is as a result of expansion programmes
transitioning to production phases;
-- net interest payable on the BEE partner loans of US$8.6
million (FY 2018: US$12.4 million); and
-- a charge for the unwinding of the present value adjustment
for Group rehabilitation costs of US$4.0 million (FY 2018: US$4.1
million).
Tax credit / charge
The tax credit of US$45.8 million (FY 2018: US$13.8 million
charge), comprised deferred tax credit of US$52.8 million (FY 2018:
US$3.3 million charge), offset by an income tax charge of US$7.0
million (FY 2018: US$10.5 million charge, included the one-off
settlement with the South African Revenue Service ("SARS") on the
right to claim a deduction on unutilised capital allowances (US$8.2
million)). The income tax charge is due to taxable profits
generated at Finsch.
The current period effective tax rate is lower than the South
African tax rate of 28% (the Group's primary tax paying
jurisdiction) predominantly due to:
-- tax credit specific to the Cullinan, Finsch and Williamson impairment charge;
-- loss making companies where deferred tax assets are not recognised; and
-- loss making companies within the Group based in tax
jurisdictions with a 0% tax rate (which, when consolidated,
increases the Group's overall net loss resulting in an increased
effective tax rate).
The tax credit for FY 2019 arises due to deferred tax (net of
charges and credits), reflecting principally the utilisation of
certain capital allowances and impact of the deferred taxation on
the impairment charge, predominantly at Cullinan and Finsch during
the Year, and South African current taxation payable at Finsch. The
cash taxes paid during the Year amounted to US$13.0 million (FY
2018: US$7.5 million) mainly attributable to Finsch.
Group loss / profit
The Group's net loss after tax is US$258.1 million (FY 2018 net
loss: US$203.1 million).
Earnings per share
Basic loss per share from continuing operations of 20.18 US$
cents was recorded (FY 2018: 15.85 US$ cents).
Adjusted loss per share from continuing operations (adjusted for
impairment charges, taxation credit on impairment charge, taxation
charge on unutilised Capex benefits, net unrealised foreign
exchange gains and losses, and loss on discontinued operations) of
2.63 US$ cents was recorded (FY 2018: 0.50 US$ cents profit).
Operational free cash flow
During the Year, generation of operational free cash flow of
US$70.5 million (FY 2018: US$61.3 million outflow) reflects the
positive benefits of our capital investment and the stabilisation
of production across the operations. This positive cash flow was
offset by:
-- US$43.1 million (FY 2018: US$34.8 million) cash finance
expenses net of finance income and realised foreign exchange
gains;
-- US$46.7 million (FY 2018: US$31.0 million) advances to BEE
partners, largely related to servicing of BEE bank debt in line
with the Group's stated intent of reducing Consolidated net debt
for covenant measurement purposes (which includes BEE banking
facilities), with the advances recoverable against future BEE
partner distributions; and
-- US$5.5 million (FY 2018: US$ nil) net advances and payments
to KEM JV further to the disposal.
Cash and Diamond Debtors
As at 30 June 2019, Petra had cash at bank of US$85.2 million
(30 June 2018: US$236.0 million). Of these cash balances, US$71.7
million was held as unrestricted cash (30 June 2018: US$221.6
million), US$12.6 million was held by Petra's reinsurers as
security deposits on the Group's cell captive insurance structure
(with regards to the Group's environmental guarantees) (30 June
2018: US$13.6 million) and US$0.9 million was held by Petra's
bankers as security for other environmental rehabilitation bonds
lodged with the Department of Mineral Resources in South Africa (30
June 2018: US$0.8 million).
Diamond debtors at 30 June 2019 were US$23.8 million (30 June
2018: US$75.0 million).
Diamond inventory
Diamond inventory at 30 June 2019 increased to 666,201 carats /
US$57.5 million (FY 2018: 529,054 carats / US$54.0 million),
largely due to the South African June 2019 tender closing eight
business days earlier than in the comparative period.
Loans and Borrowings
The Group had loans and borrowings (measured under IFRS) at Year
end of US$650.6 million (30 June 2018: US$754.8 million), comprised
of the loan notes plus accrued interest of US$650.6 million (30
June 2018: US$648.1 million) and bank loans and borrowings of
US$nil (30 June 2018: US$106.7 million). During the Year, the
Company settled (without cancelling) its bank loans and borrowings
(capital plus interest) of US$106.7 million with its lending group.
Bank debt facilities undrawn and available to the Group at 30 June
2019 were US$106.6 million (30 June 2018: US$2.6 million).
Net debt at 30 June 2019 was US$564.8 million (30 June 2018:
US$520.7 million).
Covenant Measurements attached to banking facilities
The Company's EBITDA related covenants associated with its
banking facilities are as outlined below:
12 months 12 months 12 months 12 months 12 months
to 30 Jun to 31 Dec to 30 Jun to 31 Dec to 30 Jun
2019 2019 2020 2020 2021
Consolidated Net Debt to Consolidated EBITDA:
- Current covenant <= 4.5x <= 4.25x <= 3.5x <= 3.25x <= 3.0x
ratio:
----------- ----------- ----------- ----------- -----------
- Previous covenant <= 2.5x <= 2.5x <= 2.5x <= 2.5x <= 2.5x
ratio:
----------- ----------- ----------- ----------- -----------
Consolidated EBITDA to Consolidated Net Finance Charges:
- Current covenant >= 2.5x >= 2.5x >= 2.75x >= 3.0x >= 3.25x
ratio:
----------- ----------- ----------- ----------- -----------
- Previous covenant >=4.0x >=4.0x >=4.0x >=4.0x >=4.0x
ratio:
----------- ----------- ----------- ----------- -----------
Consolidated Net Senior Debt to Book Equity:
- Current covenant <=0.4x <=0.4x <=0.4x <=0.4x <=0.4x
ratio
----------- ----------- ----------- ----------- -----------
The Group closely monitors and manages its liquidity risk, and
cash forecasts are regularly produced and run for different
scenarios, indicating that the Group has sufficient cash reserves
and banking facilities to meet its working capital and capital
development requirements under its forecasts including
sensitivities.
The impact of the recent weakness in the diamond market on the
Group's operating results and cash flow position has been discussed
with the Lender Group, including possible breaches in its
EBITDA-related covenants for the December 2019 and June 2020
reporting periods. The Lender Group has re-affirmed its ongoing
support of the Group and the Company and the South African Lender
Group will further these discussions once the September tender
results have been finalised and processed, and the Company has had
the opportunity to further assess the impact on forward looking
cash flow projections. This may include covenant resets and/or
waivers for the measurement period under review in the Board's
assessment of the business as a going concern, being a period of at
least 18 months from Year end, See 'Basis of preparation including
going concern' section for further information.
BEE loans receivable and payable
BEE loans receivable of US$109.6 million (FY 2018: US$64.7
million) relate to the Group's BEE partners' financing of their
interests in the Koffiefontein mine, advances provided to the BEE
partners to enable the BEE partners to discharge interest and
capital commitments under the BEE Lender facilities (refer to the
information below regarding the guarantee provided by the Company)
and other advances to the BEE partners which have enabled the
Itumeleng Petra Diamonds Employee Trust ("IPDET") to make
distributions to their beneficiaries (Petra Directors and Senior
Managers do not qualify as beneficiaries under the IPDET Trust
Deed). During the Year, Petra advanced US$42.2 million (FY 2018:
US$24.3 million) to facilitate the servicing of capital and
interest payments on behalf of the BEE Partners and US$4.5 million
(FY 2018: US$6.7 million) for distributions to the beneficiaries of
the IPDET and shareholders of Kago.
The BEE loans payable of US$120.5 million (FY 2018: US$110.5
million) relate to the initial acquisition loan funding advanced by
the Group's BEE partners to the operations to acquire their
investments in Finsch and Cullinan. The repayment of these loans by
the mines to the BEE partners will be from future free cash flows
generated by the mining operations.
The South African Lenders to the Company's BEE partners, Absa
Bank, Rand Merchant Bank and Investec, agreed post Year end to an
amended repayment profile of the ca. US$54.2 million BEE banking
debt. The balance, which was to be settled in two instalments,
November 2019 and May 2020, will now be spread over the period to
November 2021, with ca. US$5.0 million payable in November 2019,
followed by four equal biannual instalments of US$12.3 million each
from May 2020.
Refer to note 12 for further detail on BEE loans receivable and
payable.
Other Liabilities
Other than trade and other payables of US$53.4 million
(comprising US$20.9 million trade creditors, US$2.7 million
employee related accruals and US$29.8 million other payables) (FY
2018: US$130.8 million), the remaining liabilities on the balance
sheet mainly comprise provisions for rehabilitation liabilities,
post retirement employee related provisions and deferred tax.
Capex
Total Group Capex for the Year reduced to US$86.9 million (FY
2018: US$145.5 million), comprising:
-- US$56.0 million expansion Capex (FY 2018: US$110.7 million);
-- US$25.4 million sustaining Capex (FY 2018: US$18.9 million);
-- US$3.7 million capitalised borrowing costs with regards to
the expansion Capex (FY 2018: US$15.2 million); and
-- Corporate / exploration Capex of US$1.8 million (FY 2018: US$0.7 million).
Capex Unit FY 2019 FY 2018
Finsch US$M 24.1 54.0
------ -------- --------
Cullinan US$M 46.3 73.9
------ -------- --------
Koffiefontein US$M 6.1 12.3
------ -------- --------
Williamson US$M 8.6 4.6
------ -------- --------
Subtotal - Capex incurred by
operations US$M 85.1 144.8
------ -------- --------
Corporate / exploration US$M 1.8 0.7
------ -------- --------
Total Group Capex(1) US$M 86.9 145.5
------ -------- --------
Notes:
1. Capex for the Year includes US$3.7 million (FY 2018: US$15.2
million) capitalised borrowing costs, which is also included in the
applicable mine-by-mine tables to follow.
2. Petra's annual Capex guidance is cash-based and excludes
capitalised borrowing costs. Given that the majority of Petra's
expansion and development programmes are primarily complete,
Petra's guidance is to assume that all interest and financing fees
will be expensed through the income statement from FY 2020.
OPERATIONAL REVIEW
Safety
Petra's overriding concern is the health and safety of both its
employees and contractors and the Company is committed to achieving
a zero harm work environment. Petra aims to have a deeply-ingrained
safety culture, backed up by effective systems and processes, with
managers through all levels of the business leading by example.
The Group's LTIFR for the Year improved to 0.21 (FY 2018:
0.23).
Combined Operations (excluding KEM JV)
Unit FY 2019 FY 2018 Variance
Sales
-------- ---------- ---------- ---------
Diamonds sold Carats 3,736,847 3,793,799 -2%
-------- ---------- ---------- ---------
Revenue US$M 463.6 495.3 -6%
-------- ---------- ---------- ---------
Production
-------- ---------- ---------- ---------
ROM tonnes Mt 13.3 12.1 10%
-------- ---------- ---------- ---------
Tailings & other(1)
tonnes Mt 1.6 1.6 0%
-------- ---------- ---------- ---------
Total tonnes treated Mt 14.9 13.7 9%
-------- ---------- ---------- ---------
ROM diamonds Carats 3,763,622 3,649,704 3%
-------- ---------- ---------- ---------
Tailings & other(1)
diamonds Carats 111,324 186,132 -40%
-------- ---------- ---------- ---------
Total diamonds Carats 3,874,946 3,835,836 1%
-------- ---------- ---------- ---------
On mine cash costs US$M 266.9 261.4 2%
-------- ---------- ---------- ---------
Capex
-------- ---------- ---------- ---------
Expansion US$M 56.0 110.7 -49%
-------- ---------- ---------- ---------
Sustaining US$M 25.4 18.9 34%
-------- ---------- ---------- ---------
Borrowing Costs Capitalised US$M 3.7 15.2 -76%
-------- ---------- ---------- ---------
Total operational capex US$M 85.1 144.8 -41%
-------- ---------- ---------- ---------
Note:
1. 'Other' represents alluvial diamond mining at Williamson.
FY 2019 production of 3.87 Mcts was largely flat year on year
(FY 2018: 3.84 Mcts), with higher than expected production at
Cullinan and Williamson offset by lower than expected production at
Finsch. ROM carats produced increased 3% to 3,763,622 (FY 2018:
3,649,704 carats), contributing ca. 97% of the Group's production
profile (FY 2018: ca. 95%), in comparison to lower value carats
from surface tailings operations.
ROM tonnes treated increased 10% to 13.3 Mt (FY 2018: 12.1 Mt)
driven by an 11% increase in underground ROM tonnes mined from the
South African operations of 7.6 Mt (FY 2018: 6.9 Mt), a 9% increase
in tonnages mined from the Williamson open pit of 5.1 Mt (FY 2018:
4.7 Mt) whilst the contribution from surface overburden ROM
material at Finsch remained flat at 0.6 Mt.
The commentary below mainly relates to operational results for
the Year and a brief overview of the outlook. Further detailed
operational guidance, as published on 22 July 2019, is available on
the Company's website at:
https://www.petradiamonds.com/investors/analysts/analyst-guidance/.
Guidance for FY 2020 remains as published, including cost
guidance.
Finsch - South Africa
Unit FY 2019 FY 2018 Variance
Sales
-------- ------------------------ ---------- -----------
Revenue US$M 170.2 231.9 -27%
-------- ------------------------ ---------- -----------
Diamonds sold Carats 1,711,311 2,152,786 -21%
-------- ------------------------ ---------- -----------
Average price per carat US$ 99 108 -8%
-------- ------------------------ ---------- -----------
ROM Production
-------- ------------------------ ---------- -----------
Tonnes treated Tonnes 3,073,479 3,084,395 0%
-------- ------------------------ ---------- -----------
Diamonds produced Carats 1,724,265 1,926,467 -10%
-------- ------------------------ ---------- -----------
Grade(1) Cpht 56.1 62.5 -10%
-------- ------------------------ ---------- -----------
Tailings Production
-------- ------------------------ ---------- -----------
Tonnes treated Tonnes 223,568 794,973 -72%
-------- ------------------------ ---------- -----------
Diamonds produced Carats 31,503 147,010 -79%
-------- ------------------------ ---------- -----------
Grade(1) Cpht 14.1 18.5 -24%
-------- ------------------------ ---------- -----------
Total Production
-------- ------------------------ ---------- -----------
Tonnes treated Tonnes 3,297,047 3,879,368 -15%
-------- ------------------------ ---------- -----------
Diamonds produced Carats 1,755,768 2,073,477 -15%
-------- ------------------------ ---------- -----------
Costs
-------- ------------------------ ---------- -----------
On-mine cash cost per
tonne treated ZAR 388 329 18%
-------- ------------------------ ---------- -----------
Capex
-------- ------------------------ ---------- -----------
Expansion Capex US$M 13.6 42.3 -68%
-------- ------------------------ ---------- -----------
Sustaining Capex US$M 9.1 7.7 18%
-------- ------------------------ ---------- -----------
Borrowing Costs Capitalised US$M 1.4 4.0 -65%
-------- ------------------------ ---------- -----------
Total Capex US$M 24.1 54.0 -55%
-------- ------------------------ ---------- -----------
Note:
1. The Company is not able to precisely measure the ROM /
tailings grade split because ore from both sources is processed
through the same plant; the Company therefore back-calculates the
grade with reference to resource grades.
Overall production decreased 15% to 1,755,768 carats (FY 2018:
2,073,477 carats) with ROM carat production decreasing 10% to
1,724,265 carats (FY 2018: 1,926,467 carats) and tailings
production decreasing to 31,503 carats (FY 2018: 147,010 carats) in
line with the mine plan.
The contribution from underground ROM production remained mostly
flat at 1,504,722 carats (FY 2018: 1,507,561 carats) with ore from
the newly established Block 5 SLC replacing ore mined from Block 4
which was depleted during FY 2018. The decrease in overall ROM
production is mainly due to the depletion of surface overburden ROM
stockpiles, which contributed production of 219,544 carats (FY
2018: 418,905 carats).
Overall Finsch managed to maintain a flat ROM tonnes treated
profile at 3,073,479 tonnes (FY 2018: 3,084,395 tonnes). The
tonnage contribution from the Block 5 SLC ramped up to 2.5 Mt (FY
2018: 1.6 Mt), with the remaining ROM ore supplemented from the
surface overburden ROM stockpiles, which came at a much reduced
grade as they were depleted over the Year.
The Block 5 SLC production ramp up delivered 2.5 Mt, compared to
a plan of 2.7 Mt for the Year, impacted by a schedule overrun on
the winder upgrade project conducted in December, a significant
belt tear incurred on one of the main line ground handling conveyor
belts in January and low availabilities of the crusher and ground
handling system in May. The Block 5 SLC remains in a production
build up phase and, barring the months mentioned above, it was
encouraging to see the nameplate capacity of the underground system
being achieved and exceeded at more regular intervals during H2 FY
2019 and continuing into FY 2020. The focus is on maintaining these
production levels at a steady and consistent rate.
The ROM grade of 56.1 cpht (FY 2018: 62.5 cpht) compared to
guidance of 56 - 59 cpht mainly due to the lower grades of the ROM
surface stockpiles (overburden dumps), which are nearing
depletion.
Revenue decreased by 27% to US$170.2 million (FY 2018: US$231.9
million) mainly due to the shortfall in production and the lower
average value per carat, which was negatively impacted by weaker
prices in the market for smaller goods, as well as a product mix
containing a lower than expected incidence of gem quality coarse
diamonds. The variation should reduce with the SLC progressing
across the orebody on the various levels, with more broken ore
reporting to the lower levels.
Costs:
The on-mine cash unit cost increased 18% to ZAR388/t (FY 2018:
ZAR329/t), mainly due to a decrease in low cost tailings tonnes
treated. The total on mine cash cost for FY 2020 is guided at ca.
ZAR1,268 million. As the mine transitions from a capital-intensive
expansion phase into a steady state production phase, the right
sizing and streamlining of the cost structure at Finsch is a
priority focus in FY 2020.
Capex:
FY 2019 Expansion Capex of US$13.6 million was mainly spent on
underground development and infrastructure relating to the Block 5
SLC. Expansion Capex for FY 2020 is guided at ca. US$8.7 million,
primarily relating to the completion of the blue (kimberlite)
tunnel development in the Block 5 SLC and associated
infrastructure.
Outlook:
FY 2020 ROM throughput is planned at 2.9 - 3.0 Mt with tonnage
from the Block 5 SLC planned at ca. 2.8 Mt (FY 2019: 2.5 Mt) and
0.1 - 0.2 Mt to be sourced from the remaining economically viable
ROM surface overburden stockpiles. This is lower than previous
guidance of 3.2 Mt due to a slower than planned ramp up of the SLC,
as well as the depletion of the surface ROM stockpiles.
The Company will continue to assess options to accelerate the
ramp up of production from the SLC to the name plate capacity of
3.2 Mtpa.
Finsch's underground ROM grade is expected to remain within
guidance of 56 - 59 cpht. If the lower grade surface overburden ROM
stockpiles are included, the overall ROM grade will reduce to 54 -
57 cpht.
Negligible tailings production is planned for FY 2020, with the
pre-79 tailings resource coming to an end. Whilst tailings
production post FY 2020 does not form part of the current mine
plan, lower grade post-79 tailings material remains available to
supplement the underground operations in the future.
Cullinan - South Africa
Unit FY 2019 FY 2018 Variance
Sales
-------- ---------- ---------- -----------
Revenue US$M 171.4 167.0 3%
-------- ---------- ---------- -----------
Diamonds sold Carats 1,562,922 1,335,669 17%
-------- ---------- ---------- -----------
Average price per carat US$ 110 125 -12%
-------- ---------- ---------- -----------
ROM Production
Tonnes treated Tonnes 4,119,406 3,741,086 10%
-------- ---------- ---------- -----
Diamonds produced Carats 1,589,707 1,342,020 18%
-------- ---------- ---------- -----
Grade(1) Cpht 38.6 35.9 8%
-------- ---------- ---------- -----
Tailings Production
-------- ---------- ---------- -----
Tonnes treated Tonnes 956,035 412,749 132%
-------- ---------- ---------- -----
Diamonds produced Carats 66,222 26,700 148%
-------- ---------- ---------- -----
Grade(1) Cpht 6.9 6.5 7%
-------- ---------- ---------- -----
Total Production
-------- ---------- ---------- -----
Tonnes treated Tonnes 5,075,441 4,153,835 22%
-------- ---------- ---------- -----
Diamonds produced Carats 1,655,929 1,368,720 21%
-------- ---------- ---------- -----
Costs
-------- ---------- ---------- -----
On-mine cash cost per
tonne treated ZAR 234 239 -2%
-------- ---------- ---------- -----
Capex
-------- ---------- ---------- -----
Expansion Capex US$M 37.2 56.2 -34%
-------- ---------- ---------- -----
Sustaining Capex US$M 6.8 6.5 5%
-------- ---------- ---------- -----
Borrowing Costs Capitalised US$M 2.3 11.2 -79%
-------- ---------- ---------- -----
Total Capex US$M 46.3 73.9 -37%
-------- ---------- ---------- -----
Note:
1. The Company is not able to precisely measure the ROM /
tailings grade split because ore from both sources is processed
through the same plant; the Company therefore back-calculates the
grade with reference to resource grades.
Production increased 21% to 1,655,929 carats (FY 2018: 1,368,720
carats) mainly due to underground throughput increasing from 3.7 Mt
in FY 2018 to 4.1 Mt in FY 2019, further supplemented by an
increase in ROM grades from 35.9 cpht in FY 2018 to 38.6 cpht in FY
2019.
FY 2019 production from the newly established C-Cut and CC1 East
mining areas increased to ca. 3.6 Mt in FY 2019 (FY 2018: ca. 2.46
Mt), with the remaining tonnage being supplemented from older
B-Block mining areas.
A total of 0.9 Mt of tailings were treated with an average grade
of 6.9 cpht.
Cullinan's revenue increased by 3% to US$171.4 million for the
Year (FY 2018: US$167.0 million), due to higher production offset
by the weaker average value per carat, largely driven by a low
incidence of larger, high value goods, specifically in H1 FY 2019
when an average price of US$96 per carat was realised. This
improved during H2 FY 2019 as the C-Cut Phase 1 block cave extended
across a larger part of the footprint, yielding an average sales
price of US$120 per carat in H2 (positively impacted by the sale of
a 425 carat Type II gem quality diamond for US$15 million and a 9.4
carat Type II blue diamond for US$5.4 million), resulting in a full
year average price of US$110 per carat.
Four +100 carat gem quality stones were recovered during the
Year, and post Year end, a 132 carat D colour Type II gem quality
stone was recovered, reflecting the regular occurrence of such
stones within the Cullinan orebody and the ability of the plant to
recover them.
Costs:
The on-mine unit cash cost per total tonne treated decreased to
ZAR234/t (FY 2018: ZAR239/t), mainly due to an increase in tonnes
treated. The total on mine cash cost for FY 2020 is guided at ca.
ZAR1,269 million.
Capex:
FY 2019 expansion Capex of US$37.2 million was mainly spent on
the C-Cut Phase 1, plant related expenditure and CC1E projects.
Based on the re-prioritisation of capital spend, the construction
of the shaft plant interface has been deferred. The current system
proved to be reliable and will be utilised in the interim. FY 2020
expansion Capex for Cullinan is guided at ca. US$10.3 million,
primarily relating to the completion of the C-Cut Phase 1 drawpoint
installations.
Outlook:
The Company is guiding 4.0 - 4.2 Mt of ROM material to be
treated during FY 2020, higher than previous guidance of 4.0 Mtpa,
due to the additional contribution of production from B-Block areas
which remain available to be mined and treated. The C-Cut Phase 1
project is planned to contribute ca. 3.5 Mt and 0.5 - 0.7 Mt will
be sourced predominantly from the CC1E and remnant B-Block areas.
The ROM grade is guided at 38 - 42 cpht for FY 2020.
Tailings production was curtailed for FY 2020 by ca. 0.1 Mcts
compared to previous guidance, due to price pressure on smaller,
lower quality diamonds. ROM production will be prioritised,
supplemented by low volumes of higher grade recovery tailings. The
economic evaluation of Cullinan's substantial tailings resource
will be monitored continuously and could be included in future mine
plans should the market conditions and pricing of smaller diamonds
improve.
Cullinan contains a major diamond resource of 154.88 Mcts
(including 17.2 Mcts in tailings) and the Company will on an
ongoing basis review the mining plan to ensure that the full extent
of the large Cullinan orebody (ca. 16 ha at current production
depths) is utilised.
Koffiefontein - South Africa
Unit FY 2019 FY 2018 Variance
Sales
-------- ---------- ---------- -----------
Revenue US$M 28.9 27.2 6%
-------- ---------- ---------- -----------
Diamonds sold Carats 60,291 51,936 16%
-------- ---------- ---------- -----------
Average price per carat US$ 480 525 -9%
-------- ---------- ---------- -----------
ROM Production
-------- ---------- ---------- -----------
Tonnes treated Tonnes 1,000,726 649,259 54%
-------- ---------- ---------- -----------
Diamonds produced Carats 63,635 52,537 21%
-------- ---------- ---------- -----------
Grade Cpht 6.4 8.1 -21%
-------- ---------- ---------- -----------
Total Production
-------- ---------- ---------- -----------
Tonnes treated Tonnes 1,000,726 649,259 54%
-------- ---------- ---------- -----------
Diamonds produced Carats 63,635 52,537 21%
-------- ---------- ---------- -----------
Costs
-------- ---------- ---------- -----------
On-mine cash cost per
tonne treated ZAR 450 596 -24%
-------- ---------- ---------- -----------
Capex
-------- ---------- ---------- -----------
Expansion Capex US$M 5.2 9.6 -46%
-------- ---------- ---------- -----------
Sustaining Capex US$M 0.9 2.7 -67%
-------- ---------- ---------- -----------
Total Capex US$M 6.1 12.3 -50%
-------- ---------- ---------- -----------
ROM production increased 21% to 63,635 carats (FY 2018: 52,537
carats) further to the ramping up of the SLC to a planned 1.0 Mt,
notwithstanding lower production during Q2 as a result of community
unrest relating to municipal service delivery and operational
challenges experienced relating to plant availability.
A ROM grade of 6.4 cpht was achieved during the Year, lower than
expected due to the delayed ramp up of the higher grade ore facies
on 60 Level (third level of the SLC) which is mainly due to better
than expected tonnages extracted per ring blasted on the first two
levels.
Revenue increased 6% to US$28.9 million (FY 2018: US$27.2
million) for the Year due to increased volumes offset by lower
prices achieved.
Costs:
The on-mine cash unit cost decreased 24% to ZAR450/t (FY 2018:
ZAR 596/t), mainly due to increased throughput. The total on mine
cash cost for FY 2020 is guided at ca. ZAR433 million.
Capex:
Capex of US$6.1 million mainly related to the SLC project. FY
2020 expansion Capex is guided at ca. US$2.9 million, primarily
relating to blue (kimberlite) tunnel development in the SLC.
Outlook:
The SLC is expected to deliver ROM throughput of ca. 1 Mtpa at
an average grade of 8.0 - 8.5 cpht for FY 2020.
Williamson - Tanzania
Unit FY 2019 FY 2018 Variance
Sales
-------- ---------- ----------- -----------
Revenue US$M 93.0 68.5 36%
-------- ---------- ----------- -----------
Diamonds sold Carats 402,329 253,524(1) 59%
-------- ---------- ----------- -----------
Average price per carat US$ 231 270 -14%
-------- ---------- ----------- -----------
ROM Production
-------- ---------- ----------- -----------
Tonnes treated Tonnes 5,082,319 4,659,563 9%
-------- ---------- ----------- -----------
Diamonds produced Carats 386,016 328,681 17%
-------- ---------- ----------- -----------
Grade Cpht 7.6 7.0 9%
-------- ---------- ----------- -----------
Alluvial Production
-------- ---------- ----------- -----------
Tonnes treated Tonnes 413,151 385,721 7%
-------- ---------- ----------- -----------
Diamonds produced Carats 13,599 12,421 9%
-------- ---------- ----------- -----------
Grade Cpht 3.3 3.2 3%
-------- ---------- ----------- -----------
Total Production
-------- ---------- ----------- -----------
Tonnes treated Tonnes 5,495,470 5,045,284 9%
-------- ---------- ----------- -----------
Diamonds produced Carats 399,615 341,102 17%
-------- ---------- ----------- -----------
Costs
-------- ---------- ----------- -----------
On-mine cash cost per
tonne treated US$ 11.1 10.7 4%
-------- ---------- ----------- -----------
Capex
-------- ---------- ----------- -----------
Expansion Capex US$M 0.0 2.6 -100%
-------- ---------- ----------- -----------
Sustaining Capex US$M 8.6 2.0 328%
-------- ---------- ----------- -----------
Total Capex US$M 8.6 4.6 86%
-------- ---------- ----------- -----------
Note:
1. Negatively impacted by the 71,654 carat parcel blocked for export in FY 2018.
The mine performed well operationally, with production up 17% to
399,615 carats (FY 2018: 341,102 carats), the highest level of
production achieved by the mine in over 40 years. This is despite
operations being impacted by liquidity constraints due to the
parcel of 71,654 carats that remains blocked for export and the
overdue VAT receivables of US$32.9 million (FY 2018: US$24.0
million).
Revenue increased 36% to US$93.0 million (FY 2018: US$68.5
million) due to increased production and resultant higher sales
volumes, offset by lower prices per carat achieved.
Costs:
The on-mine cash cost increased 4% to US$11.1/t (FY 2018:
US$10.7/t). The positive impact on the unit cost of increased
volumes treated was offset by the normalisation of costs, following
the severe cost cutting measures implemented in FY 2018 required
due to the mine's liquidity constraints. The total on mine cash
cost for FY 2020 is guided at ca. US$62 million.
Capex:
FY 2019 Capex of US$8.6 million mainly related to in-pit waste
stripping activities. Total Capex is guided at US$7 million for FY
2020, primarily related to in-pit waste stripping and extending the
tailings disposal facilities. This Capex will be funded from the
mine's own cash flow.
Outlook:
ROM throughput is planned at ca. 5.0 Mt at a grade of ca. 6.5 -
7.0 cpht for FY 2020, supplemented by alluvial production of ca.
0.3 Mt at a grade of ca. 2.5 cpht.
EXPLORATION
As Petra continued to focus on the ramp up of its development
programmes at its producing operations, a limited exploration
programme was continued in South Africa and Botswana in FY 2019,
with a cash budget of US$0.4 million (FY 2018: US$0.6 million).
DIVID
Distribution covenants were not met for the measurement period
to 30 June 2019 and as a result no dividend is declared for FY
2019.
GROSS RESERVES & RESOURCES
Petra manages one of the world's largest diamond resources of
ca. 250 million carats. This major resource implies that the
potential mine lives of Petra's core assets could be considerably
longer than the current mine plans in place at each operation, or
could support higher production rates.
Gross Resources
As at 30 June 2019, the Group's gross Diamond Resources
(inclusive of Reserves) decreased 15% to 248.15 Mcts (30 June 2018:
290.48 Mcts), due to depletion by mining activity at all
operations, changes to Resource estimates for Cullinan, Finsch and
Williamson, and the disposal of Petra's interest in Helam. An
interim Resource estimate for Cullinan has been completed, and will
be updated once the C-Cut bulk sampling programme is completed in
December 2019.
Cullinan's gross Resource at a 1.0mm bottom cut-off decreased
19% to 154.9 Mcts (FY 2018: 190.3 Mcts), in line with an interim
Resource estimate carried out by Z-Star Mineral Resource
Consultants (Pty) Ltd on the Cullinan kimberlite pipe. This was
based upon a new geological model, incorporating data from C-Cut
Phase 1 development tunnels, as well as additional micro-diamond
sampling data and new diamond grade information from the C-Cut bulk
sampling programme. However, there has been no material impact on
the Cullinan Reserve for mine planning purposes as the effect of
the revised Resource estimate was taken into account as part of the
plant recovery factors calculated for the new Cullinan plant on the
previous Resource estimate.
Gross Reserves
The Group's gross Diamond Reserves decreased 1% to 42.51 Mcts
(30 June 2018: 42.92 Mcts) due to depletions, changes to block cave
and sub-level cave designs at Finsch, and a Reserve of 60.5Mt and
4.30Mcts being declared at Williamson.
The following table summarises the gross Reserves and Resources
status of the combined Petra Group operations as at 30 June
2019
Gross
Tonnes Grade Contained Diamonds
Category (millions) (cpht) (Mcts)
------------ ---------------- -------------------
Reserves
------------ ---------------- -------------------
Proved - - -
------------ ---------------- -------------------
Probable 146.6 29.0 42.51
------------ ---------------- -------------------
Sub-total 146.6 29.0 42.51
------------ ---------------- -------------------
Resources
------------ ---------------- -------------------
Measured
------------ ---------------- -------------------
Indicated 376.8 45.1 170.06
------------ ---------------- -------------------
Inferred 1,298.4 6.0 78.10
------------ ---------------- -------------------
Sub-total 1,675.2 14.8 248.15
------------ ---------------- -------------------
Note:
See
https://www.petradiamonds.com/our-operations/reserves-resources/
for mine by mine detail.
CORPORATE
Launch of Project 2022
The Company launched Project 2022 in July 2019 and has
established an internal Project Team to identify and drive
efficiencies to enable the Company to deliver an initial target of
US$150 - 200 million of cumulative free cash flow over a three year
period from FY 2019 to FY 2022, with delivery weighted towards FY
2021 and FY 2022 and dependent on diamond pricing.
Juan Kemp (previously General Manager at Cullinan) has been
appointed Projects Executive and will work closely with the
Company's Executive Committee to drive the delivery of Project 2022
across the Group. A Central Project Team has been established,
together with Project teams at each of the Company's operations to
ensure that opportunities are captured and delivered to the
business. The Company has appointed Partners in Performance, a
global management consulting firm, to support Juan and the Project
Team.
Project 2022 aims to identify and drive efficiencies and
improvements across all aspects of the business. The areas in focus
include throughput at all operations (ca. 75% of the target), cost
efficiencies (ca. 10% of the target), strategic sourcing (ca. 5% of
the target) and other initiatives (ca. 10% of the target), such as
the sale of equipment and the resolution of the blocked parcel and
VAT receivables in Tanzania. The diagnostic phase has now been
completed at both Finsch and Cullinan and has identified a number
of potential operational cost saving and throughput enhancement
opportunities, scheduled to be implemented from Q1 FY 2020. In
addition, further diagnostics are being conducted to identify
opportunities at Koffiefontein, Williamson and off-mine
expenditure.
Project 2022 is a bottom up assessment of the business and is
based on the following assumptions:
-- flat nominal diamond prices (with reference to pricing
achieved in H2 FY 2019, excluding exceptional stones sold for US$5
million or greater) over the three year period; and
-- an exchange rate of ZAR14 to US$1 in FY 2020, devaluing at
3.5% annually to ZAR14.49 in FY 2021 and to ZAR14.99 in FY
2022.
Board Succession Plan
As part of the ongoing Board Succession Plan, Adonis Pouroulis
intends to step down as Chairman of the Group by the end of Q3 FY
2020 once a successor has been identified and appointed. The search
for his successor is underway and is being led by the Nomination
Committee, with assistance from an Executive Search agency. It is
expected that an announcement regarding the appointment of a new
Chairman will be made before the end of this calendar year.
Appointment of Cullinan General Manager
Post Year end, Jaison Rajan was appointed as General Manager of
Cullinan, effective 10 July 2019. Jaison has almost twenty years'
experience in a variety of operational and project leadership roles
across a number of commodities including coal, manganese and
diamonds; his most recent position was that of General Manager at
South 32's Khutala Colliery. He has extensive experience in various
mining methods, including block caving, and has led a number of
significant projects and change management initiatives, which is
particularly relevant to Petra at this current stage.
Update on Tanzania
In Tanzania, Petra is in ongoing dialogue with the Government
and local advisers in relation to recent legislative developments
and overdue VAT receivables. Petra also continues to communicate
with the Government in relation to the blocked parcel of diamonds
from Williamson.
PRINCIPAL BUSINESS RISKS
The Group is exposed to a number of risks and uncertainties
which could have a material impact on its long-term development,
and performance and management of these risks is an integral part
of the management of the Group.
An overview of the key risks which could affect the Group's
operational and financial performance was included in the Company's
2018 Annual Report, which can be accessed at www.petradiamonds.com.
These may impact the Group over the medium to long term; however
the following key risks have been identified which may impact the
Group over the next twelve months.
Short term demand and prices
The stability of financial markets and the corresponding effect
on consumer demand impacts the Group and the diamond industry as a
whole. Whilst the medium to long term fundamentals of the diamond
market remain intact, with demand forecast to significantly outpace
supply, in the short term the prevailing climate of global economic
uncertainty may cause some volatility in rough diamond pricing.
Although diamond prices are influenced by numerous factors
beyond the Company's control, the Group's management closely
monitors developments in the international diamond market (across
the pipeline from the rough market to the retail consumer market)
to be in a position to react in a timely manner to changes in rough
diamond prices and demand.
Product mix variability
Some level of variability in terms of product mix occurs
depending on the mix of ore produced from the current mining areas
at each operation and can also be impacted by the inclusion of
production from surface resources available at some of the mines.
Variability in overall diamond prices realised as a result of this
product mix volatility may have an impact on the Group's financial
performance.
Financing and liquidity
The Group closely monitors and manages its liquidity risk. Cash
forecasts are regularly produced and sensitivities run for
different scenarios including, but not limited to, changes in rough
diamond prices, product mix and foreign exchange rates, different
production rates from the Group's producing assets and delays to
development projects.
The Group's forecast, taking into account the risks described
above and the covenants as discussed in the 'Covenant measurements
attached to banking facilities' section of the Financial Review,
show that the Group will be able to operate within its current debt
facilities and have sufficient liquidity headroom for at least the
next twelve months, although headroom remains sensitive to diamond
prices, foreign exchange rates and production. There remains a
risk, given these factors and the impact on operating cash flows,
that the Group's liquidity position could deteriorate and the
resulting lack of adequate available cash flows, potential breach
of covenants and restricted access to its debt facilities could
impact development work and impact the operations.
Labour relations
The Group's production is dependent on a stable and productive
labour workforce. The mining labour relations environment in South
Africa has been notably volatile over the years, but less so in the
diamond sector, where there is a higher incidence of mechanisation
and skilled workers leading to smaller and more manageable
workforces which do not rely on migrant labour.
Petra remains highly focused on managing labour relations and on
maintaining open and effective communication channels with its
employees and the appropriate trade union representatives at its
operations, as well as local communities.
The Company's three-year wage agreement relating to its South
African operations remains in force and stable labour relations
were experienced throughout the Year. The existing three-year wage
agreement comes to an end by June 2020 and, as we move into the
negotiation phase of the next agreement, there may be some
volatility.
Exchange rates
With Petra's operations mainly in South Africa, but diamond
sales based in US Dollars, the volatility and movement in the Rand
is a significant factor to the Group. Also, the Group undertakes
transactions in a number of different currencies, including
Tanzanian Shillings, GBP and Euro. Fluctuations in these currencies
can have an impact on the Group's performance, albeit less
significant than the impact of fluctuations in the ZAR/USD exchange
rate.
In order to mitigate currency risk, the Group continually
monitors the movement of the Rand against the US Dollar, the
maturity dates and the level of the hedge book and takes expert
advice from its bankers in this regard. It is the Group's policy to
hedge, on a short term basis, linked to the tender calendar, a
portion of US Dollar sales revenue when weakness in the Rand deems
it appropriate.
Country and political risk
Petra's operations are predominantly based in South Africa, with
lesser exposure to Tanzania and Botswana. Emerging market economies
could be subject to greater risks, including legal, regulatory,
taxation, economic, and political risks, and are potentially
subject to rapid change.
Tanzania has introduced a number of legislative changes to the
framework governing the natural resources sector, which have
increased regulatory uncertainty. These changes will be set out in
the Company's 2019 Annual Report.
In addition, there is no certainty with regards to the outcome
for the blocked Williamson parcel, which remains in the custody of
the Government of the United Republic of Tanzania.
OUTLOOK
Petra has delivered solid results in both a difficult market and
during its continued transition from a period of high capital
investment to a steady state operational phase. The focus in the
short term continues to be on driving efficiencies across the
business through Project 2022 to provide a stable, consistent
operating platform. This will be supported by an appropriate
organisational structure and cost base to enhance our cash flow
generation and significantly reduce our net debt, to enable
successful and sustainable operations over the long-term.
Richard Duffy
Chief Executive
16 September 2019
Notes
1. The following exchange rates have been used for this
announcement: average for the Year US$1:ZAR14.19 (FY 2018:
US$1:ZAR12.86); closing rate as at 30 June 2019 US$1:ZAR14.07 (FY
2018: US$1:ZAR13.73).
2. The following definitions have been used in this announcement:
a. ct: carat
b. cpht: carats per hundred tonnes
c. Kcts: thousand carats
d. Mctpa: million carats per annum
e. Mcts: million carats
f. mL: metre level
g. Mt: million tonnes
h. Mtpa: million tonnes per annum
i. ROM: run-of-mine, i.e. relating to production from the primary orebody
j. SLC: sub-level cave, a variation of block caving
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 30 JUNE 2019
US$ million Notes 2019 2018
-------------------------------------- ------ -------- --------
Revenue 463.6 495.3
Mining and processing costs (407.6) (418.6)
Other direct (expense) / income (0.8) 1.2
Exploration expenditure (0.5) (0.7)
Corporate expenditure 5 (8.6) (10.4)
Impairment charge 15 (246.6) (66.0)
Total operating costs (664.1) (494.5)
Financial income 6 12.1 8.5
Financial expense 6 (65.6) (94.3)
-------------------------------------- ------ -------- --------
Loss before tax (254.0) (85.0)
Income tax credit / (charge) 45.8 (13.8)
-------------------------------------- ------ -------- --------
Loss for the year from continuing
operations (208.2) (98.8)
Loss on discontinued operations
including associated impairment
charges (net of tax) 16 (49.9) (104.3)
-------------------------------------- ------ -------- --------
Loss for the Year (258.1) (203.1)
-------------------------------------- ------ -------- --------
Attributable to:
Equity holders of the parent company (226.8) (166.9)
Non-controlling interest (31.3) (36.2)
-------------------------------------- ------ -------- --------
(258.1) (203.1)
-------------------------------------- ------ -------- --------
Loss per share attributable to
the equity holders of the parent
during the Year:
From continuing operations:
Basic loss per share - US cents 13 (20.18) (15.85)
Diluted loss per share - US cents 13 (20.18) (15.85)
From continuing and discontinued
operations:
Basic loss per share - US cents 13 (26.19) (31.29)
Diluted loss per share - US cents 13 (26.19) (31.29)
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 30 JUNE 2019
US$ million 2019 2018
----------------------------------------- -------- --------
Loss for the Year (258.1) (203.1)
Exchange differences on translation
of the share-based payment reserve (0.1) 1.3
Exchange differences on translation
of foreign operations(1) (14.9) (41.3)
Exchange differences on non-controlling
interest(1) (0.7) (5.3)
Total comprehensive expense for the
Year (273.8) (248.4)
-------------------------------------------- -------- --------
Total comprehensive income and expense
attributable to:
Equity holders of the parent company (241.8) (206.9)
Non-controlling interest (32.0) (41.5)
------------------------------------------- -------- --------
(273.8) (248.4)
---------------------------------------- -------- --------
(1) These items will be reclassified to the consolidated income
statement if specific future conditions are met.
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2019
US$ million Notes 2019 2018
-------------------------------------- -------- -------- --------
ASSETS
Non-current assets
Property, plant and equipment 7 967.8 1 244.2
BEE loans and receivables 12 109.6 64.7
Other receivables 10.1 20.3
-------------------------------------- -------- -------- --------
Total non-current assets 1,087.5 1,329.2
-------------------------------------- -------- -------- --------
Current assets
Trade and other receivables 34.4 99.4
Inventories 85.6 78.1
Cash and cash equivalents (including
restricted amounts) 85.2 236.0
-------------------------------------- -------- -------- --------
Total current assets 205.2 413.5
-------------------------------------- -------- -------- --------
Non-current assets classified as
held for sale 16,17 0.6 46.5
-------------------------------------- -------- -------- --------
Total assets 1,293.3 1,789.2
-------------------------------------- -------- -------- --------
EQUITY AND LIABILITIES
Equity
Share capital 8 133.4 133.4
Share premium account 790.2 790.2
Foreign currency translation reserve (361.7) (344.7)
Share-based payment reserve 6.2 7.7
Other reserves (0.8) (0.8)
Accumulated loss (255.6) (30.4)
-------------------------------------- -------- -------- --------
Attributable to equity holders
of the parent company 311.7 555.4
Non-controlling interest 14.4 11.2
-------------------------------------- -------- -------- --------
Total equity 326.1 566.6
-------------------------------------- -------- -------- --------
Liabilities
Non-current liabilities
Loans and borrowings 9 603.5 601.2
BEE loans payable 12 120.5 110.5
Provisions 61.3 59.5
Deferred tax liabilities 81.4 139.2
-------------------------------------- -------- -------- --------
Total non-current liabilities 866.7 910.4
-------------------------------------- -------- -------- --------
Current liabilities
Loans and borrowings 9 47.1 153.6
Trade and other payables 53.4 130.8
-------------------------------------- -------- -------- --------
Total current liabilities 100.5 284.4
-------------------------------------- -------- -------- --------
Liabilities directly associated
with non-current assets classified
as held for sale 16,17 - 27.8
-------------------------------------- -------- -------- --------
Total liabilities 967.2 1,222.6
-------------------------------------- -------- -------- --------
Total equity and liabilities 1,293.3 1,789.2
-------------------------------------- -------- -------- --------
PETRA DIAMONDS LIMITED -PRELIMINARY ANNOUNCEMENT
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 30 JUNE 2019
US$ million Notes 2019 2018
-------------------------------------------- ------ -------- --------
Loss before taxation for the Year
from continuing and discontinued
operation (303.9) (183.2)
Depreciation of property plant
and equipment 106.7 135.7
Impairment charge 15 246.6 66.0
Loss and impairment charge on discontinued
operations 16 49.9 92.7
Movement in provisions 0.7 (3.0)
Financial income 6 (12.1) (8.9)
Financial expense 6 65.6 95.6
Profit on disposal of property,
plant and equipment 1.3 -
Share based payment provision 0.2 0.6
Operating profit before working
capital changes 155.0 195.5
Decrease / (increase) in trade
and other receivables 62.5 (76.8)
(Decrease) / increase in trade
and other payables (54.7) 14.2
Increase in inventories (6.4) (18.8)
-------------------------------------------- ------ -------- --------
Cash generated from operations 156.4 114.1
Net realised gains on foreign exchange
contracts 1.0 0.2
Finance expense (45.4) (38.9)
Income tax paid (13.0) (7.5)
Net cash generated from operating
activities 99.0 67.9
-------------------------------------------- ------ -------- --------
Cash flows from investing activities
Acquisition of property, plant
and equipment (including capitalised
cash interest paid of US$3.7 million
(30 June 2018: US$13.3 million)) (85.9) (175.4)
Proceeds from sale of property,
plant and equipment 0.4 0.6
Loans advanced to BEE partners (46.7) (31.0)
Loans advanced to KEM JV post disposal (9.4) -
Repayments from KEM JV 3.9 -
Disposal of interest in KEM JV
and Helam (net of cash disposed
of) (1.5) -
Finance income 1.3 3.9
Net cash utilised in investing
activities (137.9) (201.9)
-------------------------------------------- ------ -------- --------
Cash flows from financing activities
Proceeds from the issuance of share
capital (net of cash issue costs
paid of US$6.5 million in FY2018) - 166.9
Increase in borrowings 5.8 35.6
Repayment of borrowings (108.5) (32.8)
Net cash generated from financing
activities (102.7) 169.7
-------------------------------------------- ------ -------- --------
Net (decrease) / increase in cash
and cash equivalents (141.6) 35.7
Cash and cash equivalents at beginning
of the Year 223.0 190.2
Effect of exchange rate fluctuations
on cash held (9.7) (2.9)
-------------------------------------------- ------ -------- --------
Cash and cash equivalents at end
of the Year(1) 71.7 223.0
-------------------------------------------- ------ -------- --------
The cash flows specific to the discontinued operation (net of
tax) are included in the amounts above and are disclosed in Note
16.
(1) Cash and cash equivalents in the Consolidated Statement of
Financial Position includes restricted cash of US$13.5 million (30
June 2018: US$14.4 million) and unrestricted cash of US$71.7
million (30 June 2018: US$221.6 million) and excludes unrestricted
cash attributable to KEM JV of US$nil (30 June 2018: US$1.4
million).
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2019
(Unaudited) Share Share Foreign Share-based Hedging Retained Attributable Non-controlling Total
capital premium currency payment and earnings to the interest equity
account translation reserve other parent
US$ million reserve reserves
----------------- -------- -------- ------------ ------------ --------- --------- ------------- ---------------- --------
At 1 July 2018 133.4 790.2 (344.7) 7.7 (0.8) (30.4) 555.4 11.2 566.6
Loss for the
Year - - - - - (226.8) (226.8) (31.3) (258.1)
Other
comprehensive
expense - - (14.9) (0.1) - - (15.0) (0.7) (15.7)
Recycling of
foreign
currency
translation
reserve on
disposal of KEM
JV and Helam(1) - - (2.1) - - - (2.1) - (2.1)
Transfer between
reserves for
lapsed employee
options - - - (1.6) - 1.6 - - -
Non-controlling
interest
disposed - - - - - - - 35.2 35.2
Equity settled
share based
payments - - - 0.2 - - 0.2 - 0.2
At 30 June 2019 133.4 790.2 (361.7) 6.2 (0.8) (255.6) 311.7 14.4 326.1
----------------- -------- -------- ------------ ------------ --------- --------- ------------- ---------------- --------
(1) During the Year, the Company disposed of the KEM JV and
Helam operations and recognised a foreign currency translation gain
of US$2.1 million which has been recycled through the consolidated
income statement as part of loss on discontinued operations (refer
to note 16).
PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 30 JUNE 2019
(Unaudited) Share Share Foreign Share-based Hedging Retained Attributable Non-controlling Total
capital premium currency payment and earnings to the interest equity
account translation reserve other parent
US$ million reserve reserves
------------------------------- -------- -------- ------------ ------------ --------- --------- ------------- ---------------- --------
At 1 July 2017 89.6 666.0 (303.4) 12.8 (0.8) 129.5 593.7 52.7 646.4
Loss for the Year - - - - - (166.9) (166.9) (36.2) (203.1)
Other comprehensive income /
(expense) - - (41.3) 1.3 - - (40.0) (5.3) (45.3)
Transfer between reserves for
exercise of employee options
and warrants - - - (7.0) - 7.0 - - -
Equity settled share based
payments - - - 0.6 - - 0.6 - 0.6
Allotments during the Year:
- Ordinary shares - Rights
issue (net of US$7.4 million
issue costs) 43.7 124.1 - - - - 167.8 - 167.8
* Share options exercised 0.1 0.1 - - - - 0.2 - 0.2
At 30 June 2018 133.4 790.2 (344.7) 7.7 (0.8) (30.4) 555.4 11.2 566.6
------------------------------- -------- -------- ------------ ------------ --------- --------- ------------- ---------------- --------
NOTES TO THE CONDENSED CONSOLIDATED PRELIMINARY FINANCIAL
STATEMENTS
FOR THE YEAR 30 JUNE 2019
1. GENERAL INFORMATION
Petra Diamonds Limited (the "Company"), a limited liability
company listed on the Main Market of the London Stock Exchange, is
registered in Bermuda with its Group management office domiciled in
the United Kingdom. The Consolidated Preliminary Financial
Statements of the Company for the year ended 30 June 2019 comprise
the Company and its subsidiaries, joint operations and associates
(together referred to as the "Group").
2. ACCOUNTING POLICIES
The preliminary results, which are unaudited, do not include all
the notes of the type normally included in an annual financial
report. Accordingly, this unaudited preliminary report is to be
read in conjunction with the Annual Report for the year ended 30
June 2018, and any public announcements made by the Group during
the reporting period. The annual financial report for the year
ended 30 June 2018 was prepared in accordance with International
Financial Reporting Standards as adopted by the European Union
("IFRS's") and the accounting policies applied in this preliminary
report are consistent with the polices applied in the annual
financial report for the year ended 30 June 2018 unless otherwise
noted.
The company has adopted IFRS 9 'Financial Instruments' and IFRS
15 'Revenue from Customers' in the Year, following the standards
becoming effective for accounting periods commencing on or after 1
January 2018.
IFRS 9 Financial Instruments
IFRS 9 'Financial instruments' addresses the classification and
measurement of financial assets and financial liabilities and
replaces the guidance in IAS 39 that relates to the classification
and measurement of financial instruments. IFRS 9 retains but
simplifies the mixed measurement model and establishes three
primary measurement categories for financial assets: amortised
cost, fair value through other comprehensive income (OCI) and fair
value through profit or loss. The basis of classification depends
on the entity's business model and the contractual cash flow
characteristics of the financial asset. There is now a new expected
credit loss model that replaces the incurred loss impairment model
used in IAS 39. The adoption of IFRS 9 did not result in any
material change to the consolidated results of the Group from the
beginning of the earliest period presented. Following an assessment
of the consolidated financial assets no changes to classification
of those financial assets was required. The Group has applied the
expected credit loss impairment model to its financial assets,
focused in particular on its KEM JV receivables in respect of the
purchase consideration, working capital and equipment facility
advances and non current BEE receivables. The expected credit loss
for KEM JV was US$7.3 million. No material credit losses are
considered to apply to the non current BEE receivables. As per note
12, the Group provided a guarantee to the BEE Lenders over the
repayment of loans advanced to the Group's BEE Partners. The BEE
Partners will settle their loan obligations with the BEE Lenders
from their share of future operational cash flows, either through
repayment of the amounts owing to the BEE Partners by Petra or
through recoverable advances provided by Petra from Group treasury.
The adoption of IFRS 9 has not had any material impact on the
accounting treatment of the BEE guarantee.
The Group's VAT receivables are excluded from the scope of IFRS
9.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 introduced a single framework for revenue recognition
and clarify principles of revenue recognition. This standard
modifies the determination of when to recognise revenue and how
much revenue to recognise. The core principle is that an entity
recognises revenue to depict the transfer of promised goods and
services to the customer of an amount that reflects the
consideration to which the entity expects to be entitled in
exchange for those goods or services. The adoption of IFRS 15 did
not result in any material change to the Group's revenue
recognition. The Group recognises revenue to depict the transfer of
promised diamond sales to customers in an amount that reflects the
consideration to which the Group expects to be entitled in exchange
for the diamond sales. Diamond sales are made through a competitive
tender process.
The Group's performance obligations are considered to be
satisfied and control of the rough diamonds transferred at the
point the tender is awarded.
Where the Group makes rough diamond sales to customers and
retains a vested right in the future sale of a polished diamond,
the Group will record such revenue only at the date when the
polished diamond is sold (and only its interest therein).
Basis of preparation including going concern
Background
The Group entered the Year with cash and cash equivalents of
US$236 million on the back of a US$170 million Rights Issue in June
2018, used shortly thereafter to settle ca. US$103 million drawn
under the ZAR1 billion (ca. US$70 million) Revolving Credit and
ZAR500 million (ca. US$35 million) Working Capital facilities from
the Group's Lender Group; both these facilities remain available to
the Group.
Production for the Year was largely delivered according to
management expectations. However, rough diamond market conditions
and product mix negatively impacted rough diamond pricing and, as a
result, revenue and cash flow results. Product mix results are
discussed in more detail in the mine-by-mine commentary in the
Operational Review section, while the rough diamond market is
discussed in the Diamond Market section. As a result of the above,
revenue in FY 2019 decreased 6%.
During April 2019, Petra and its Lender Group reached agreement
to reset the forward looking EBITDA-related maintenance covenants
associated with its banking facilities to more appropriate levels;
the Company announced the following amendments to the market at the
end of April 2019:
12 months 12 months 12 months 12 months 12 months
to 30 Jun to 31 Dec to 30 Jun to 31 Dec to 30 Jun
2019 2019 2020 2020 2021
Consolidated Net Debt to Consolidated EBITDA:
- New covenant ratio: <= 4.5x <= 4.25x <= 3.5x <= 3.25x <= 3.0x
- Previous covenant ratio: <= 2.5x <= 2.5x <= 2.5x <= 2.5x <= 2.5x
Consolidated EBITDA to Consolidated Net Finance Charges:
- New covenant ratio: >= 2.5x >= 2.5x >= 2.75x >= 3.0x >= 3.25x
- Previous covenant ratio: >=4.0x >=4.0x >=4.0x >=4.0x >=4.0x
Further to the appointment of new CEO Richard Duffy on 1 April
2019, Project 2022 was initiated and subsequently announced to the
market in July 2019. This project aims to identify and drive
efficiencies and improvements across all aspects of the business
with the objective of delivering an initial target of US$150 - 200
million free cash flow over a three year period, with delivery
weighted towards FY 2021 and FY 2022 and dependent on diamond
pricing. Project 2022's focus is on enhancing cash flow generation
and reducing net debt.
Forecasts and associated risks
In light of the above, coupled with continued weakness in the
diamond market, the following have been key considerations for the
Board in assessing the Group's ability to operate as a going
concern at the date of this Report:
-- risks of further market weakness reducing diamond prices;
-- the impact on pricing due to product mix volatility;
-- risks of general production disruptions;
-- risks of increased operating costs;
-- volatility in the South African Rand; and
-- the impact of reduced revenue on earnings, cash flow
projections and associated covenant measurements.
Base case forecasts (which incorporate current diamond market
conditions) assume an average exchange rate of ZAR14.50:US$1 for
the period to June 2020 and ZAR14.00:US$1 thereafter, continued
advances to BEE partners to enable them to meet their loan
obligations to the BEE Lenders, and specifically excludes the
proceeds from the sale of exceptional stones, the sale of the
blocked Williamson parcel and the recovery of historical and
current VAT during the forecast period.
The Board has reviewed the Group's forecasts and sensitivities
for a period of at least 18 months from Year end, including both
forecast liquidity and covenants. In doing so, careful
consideration was given to potential risks to the forecasts as
listed above.
Under the base case, and considering the above sensitivities on
an individual basis, the Company's forecast liquidity will require
temporary utilisation of the South African banking facilities,
should the ongoing weakness in the diamond market persist during
the period under review. The impact of the recent weakness in the
diamond market on the Group's operating results and cash flow
position has been discussed with the Lender Group, including
possible breaches in its EBITDA-related covenants for the December
2019 and June 2020 reporting periods. The Lender Group has
re-affirmed its ongoing support of the Group and the Company;
discussions with the Lender Group will continue once the September
tender results have been finalised and processed, and the Company
has had the opportunity to further assess the impact on forward
looking cash flow projections. This may include covenant resets
and/or waivers for the measurement periods as mentioned.
Conclusion
The Board is of the view that the longer term fundamentals of
the diamond market remain sound. The forecast benefits of Project
2022 (increased production/ reduced spend) are expected to
materialise in FY 2020 and beyond, and having the third largest
diamond resource globally will continue to provide further organic
growth opportunities well beyond 2030.
The Board recognises the significant debt levels within the
Group and despite the operations now performing in line with
guidance, with all major capital expansion programmes having been
delivered on, the current weakness in the diamond market has
heightened the need to continue to optimise production across all
operations and focus on key deliverables as currently envisaged to
be addressed via Project 2022.
Ongoing engagement with the Lender Group is key to ensuring
facilities remain available to the Group. Cash management and
preservation will continue to be of the highest importance by
maintaining very tight control over costs and overheads and by
deferring certain elements of its capital expenditure.
Considering the recent positive engagements with the Lender
Group, alongside the Group's existing cash resources and the
continuing availability of current facilities, the Board assessed
the liquidity headroom to be adequate under the Group's current
base case and reasonable sensitivities.
Accordingly, the Board has concluded that the going concern
basis in the preparation of the unaudited preliminary financial
statements remains appropriate and that there are no material
uncertainties that would cast doubt on that basis of
preparation.
New standards and interpretations applied
The IASB has issued new standards, amendments to published
standards and interpretations to existing standards with effective
dates on or prior to 1 July 2018 which have an impact on the Group
are:
- IFRS 9 Financial Instruments and
- IFRS 15 Revenue from Contracts with Customers
Refer to Accounting Polices above.
New standards and interpretations not yet effective
Certain new standards, amendments and interpretations to
existing standards have been published that are mandatory for the
Group's accounting periods beginning after 1 July 2019 or later
periods, which the Group has decided not to adopt early or which
are yet to be European Union endorsed.
The only standard which is anticipated to be significant or
relevant to the Group is:
IFRS 16 Leases
IFRS 16 introduces a single lease accounting model. This
standard requires lessees to account for all leases under a single
on-balance sheet model. Under the new standard, a lessee is
required to recognise all lease assets and liabilities on the
balance sheet; recognise amortisation of leased assets and interest
on lease liabilities over the lease term; and separately present
the principal amount of cash paid and interest in the cash flow
statement. The requirements of IFRS 16 extend to certain service
contracts, such as mining contractors in which the contractor
provides services and the use of assets, which may impact the
Group. The Company will apply the modified retrospective approach
where the cumulative effect of initially applying IFRS 16 is
recognised at the date of initial application in FY 2020. Below is
a summary of the impact upon adoption of IFRS 16 leases.
US$ million
Right-of-use asset - 30 June 2019 9.1
-----------------
Lease liability - 30 June 2019 (9.5)
-----------------
Effect on retained earnings - 30 June 2019 -
-----------------
30 June 2020
-----------------
Variable non-discounted lease payments 5.8
-----------------
Amortisation of right-of-use asset 4.7
-----------------
Finance charges on lease liability 0.8
-----------------
Significant assumptions and judgements:
The preparation of the condensed consolidated interim financial
statements requires management to make estimates and judgements and
form assumptions that affect the reported amounts of the assets and
liabilities, reported revenue and costs during the periods
presented therein, and the disclosure of contingent liabilities at
the date of the interim financial statements. Estimates and
judgements are continually evaluated and based on management's
historical experience and other factors, including future
expectations and events that are believed to be reasonable. The
estimates and assumptions that have a significant risk of causing a
material adjustment to the financial results of the Group in future
reporting periods are discussed below.
Key estimates and judgements:
Impairment reviews
The Group prepares impairment models and assesses mining assets
for impairment. While conducting an impairment test of its assets
using recoverable values using the current life of mine plans, the
Group exercised judgement in making assumptions about future rough
diamond prices, foreign exchange rates, volumes of production, ore
reserves and resources included in the current life of mine plans,
future development and production costs and factors such as
inflation and discount rates. Changes in estimates used can result
in significant changes to the 'Consolidated Income Statement' and
'Statement of Financial Position'.
Cullinan, Finsch, Koffiefontein and Williamson
The impairment tests for Cullinan, Finsch, Koffiefontein and
Williamson resulted in the recognition of an impairment charge of
US$223.7 million (30 June 2018: US$66.0 million Koffiefontein
impairment) on a carrying value of property, plant and equipment of
US$1,187.5 million (30 June 2018: US$118.2 million Koffiefontein
carrying value). For further details of the inputs, assumptions and
sensitivities in the impairment model, refer to note 15.
KEM JV
Refer to note 16 for impairment reviews in the prior periods and
disposal of KEMJV in the Year.
Recoverability of diamond parcel in Tanzania
The Group holds diamond inventory valued at lower of cost and
net realisable value of US$12.4 million (30 June 2018: US$12.4
million) in the Statement of Financial Position in respect of the
Williamson mine's confiscated diamond parcel. During FY 2018, an
investigation into the Tanzanian diamond sector by a parliamentary
committee in Tanzania was undertaken to determine if diamond
royalty payments were being understated. In connection with this,
Petra announced on 11 September 2017 that a parcel of diamonds
(71,654.45 carats) from the Williamson mine in Tanzania (owned 75%
by Petra and 25% by the Government of the United Republic of
Tanzania ("GoT")) had been blocked for export to Petra's marketing
office in Antwerp.
The assessment of the recoverability of the diamond parcel
required significant judgement. In making such a judgement, the
Group considered their ongoing discussions with the GoT,
confirmation was received from the GoT in FY 2018 that they held
the diamond parcel of 71,654.45 carats, verbal re-confirmation has
been given this year in the course of the ongoing discussions held
with the GoT this year, an assessment of the internal process used
for the sale and export of diamonds confirming such process is in
full compliance with legislation in Tanzania and the Kimberley
Process, and legal advice received from the Group's in-country
attorneys which supports the Group's position.
During FY 2018, Petra received authorisation from the GoT to
resume diamond exports and sales from Williamson and all subsequent
parcels of diamonds have been exported from Tanzania for sale at
the Company's marketing office in Antwerp. While a resolution has
not yet been reached with regards to the parcel of diamonds that
was blocked from export, based on the above judgements and
assessment thereof, management remain confident that the diamond
parcel will be released by the GoT and will be available for future
sale.
Recoverability of VAT in Tanzania
The Group has gross VAT receivables of US$32.9 million (30 June
2018: US$24.2 million) in respect of the Williamson mine, all of
which are past due and have therefore been classified, after
providing for a time-value of money provision inclusive of risk
adjustments for various factors, as non-current given the potential
delays in receipt. Of the total VAT receivables, US$13.8 million
(30 June 2018: US$15.1 million) relates to historic VAT pre July
2017. The assessment of the carrying value of the VAT receivables
under the historic VAT legislation required significant judgement
over the timing of future payments, progress and finalisation of
VAT audits, ongoing discussions with the relevant authorities in
Tanzania and the wider operating environment.
A further US$19.1 million (30 June 2018: US$9.1 million) of VAT
is receivable which relates to VAT under the current legislation,
effective from July 2017. The assessment of the carrying value of
the VAT receivable under the current VAT legislation required
significant judgement over the timing of future payments, the
definition of raw minerals under the new VAT legislation, ongoing
discussions with the relevant authorities in Tanzania, legal
advice, a formal rejection letter received from the Tanzania
Revenue Authority and the Company's legal objection thereto and the
wider operating environment. Management have considered the current
legislation and consider that input VAT can continue to be
recovered in relation to the export of rough diamonds, however note
that the current legislation is unclear. As such, Management
consider the VAT receivables under the new VAT legislation to be
valid. Accordingly, the Group is considering various alternatives
in pursuing payment in accordance with legislation.
While the total VAT balance is considered receivable,
significant uncertainty exists regarding the timing of receipt.
Accordingly, the receivable has been discounted by US$22.8 million
(30 June 2018: US$3.9 million), which required estimates as to the
timing of future receipts and determination of a risk adjusted
discount rate. The carrying value of the non-current receivable
after adjusting for the time-value of money provision is US$10.1
million (30 June 2018: US$20.3 million). A discount rate of 14% has
been applied to the expected cash receipts inclusive of estimated
country credit risk. A 1% increase in the discount rate would
increase the provision by US$0.8 million and a one year delay would
increase the provision by US$1.2 million.
Kimberley Ekapa Mining Joint Venture (30 June 2018)
At 30 June 2018, in line with IFRS 5 and the Group's accounting
policy for assets held for sale and discontinued operations, the
Kimberley Ekapa Mining Joint Venture ("KEM JV") was classified as
held for sale. Judgement was required in determining the fair value
adjustment on reclassification of the KEM JV to non-current assets
held for sale, with regards to the purchase offer, received from
Ekapa Mining, for the Company's and its black economic empowerment
("BEE") partners' 75.9% interest. The fair value adjustment to
property, plant and equipment, non-current trade and other
receivables and trade and other receivables was to ensure the asset
values of the KEM JV were reflected at fair value based on the
consideration receivable under the purchase offer if the
transaction completed. The fair value was less than the book value.
The accounting treatment involved consideration of the structure of
the arrangement, the legal form and the contractual agreements
between the parties. During the Year, the Company disposed of the
KEM JV operation (refer to note 16 for further details, including
the judgement and estimate regarding the fair value of
consideration receivable).
BEE guarantee
The BEE partners obtained bank financing from ABSA, RMB and
Investec (the "BEE Lenders") to refinance amounts owing by the BEE
partners to Petra, which had provided funding to the BEE partners
to enable them to acquire their interests in Finsch and Cullinan.
As part of the refinancing, the Group provided a guarantee to the
BEE Lenders over the repayment of loans advanced to the Group's BEE
partners. The BEE partners will settle their loan obligations with
the BEE Lenders from their share of future operational cash flows,
either through repayment of the amounts owing to the BEE partners
by Petra or through recoverable advances provided by Petra from
Group treasury.
Judgement has been applied by management in assessing the risk
of the BEE partners defaulting under their obligations to the BEE
Lenders, including any acceleration of repayments due to future
covenant positions. Management have considered the Group's future
cash flows forecasts, the likelihood of settlement lender
facilities remaining available given the possible covenant breaches
and its ability to meet planned forecast BEE partner distributions.
Accordingly management are of the opinion that the risk of default
by the BEE partners to the BEE Lenders is remote (refer to going
concern note above and note 12 for further details).
Life of mine and ore reserves and resources
There are numerous risks inherent in estimating ore reserves and
resources and the associated current life of mine plan. The life of
mine plan is the current approved management plan for ore
extraction that considers specific resources and associated capital
expenditure. The life of mine plan frequently includes less tonnes
than the total reserves and resources that are set out in the
Group's Reserves and Resources Statement and which management may
consider to be economically viable and capable of future
extraction.
Management must make a number of assumptions when making
estimates of reserves and resources, including assumptions as to
exchange rates, rough diamond and other commodity prices,
extraction costs, recovery and production rates. Any such estimates
and assumptions may change as new information becomes available.
Changes in exchange rates, commodity prices, extraction costs,
recovery and production rates may change the economic viability of
ore reserves and resources and may ultimately result in the
restatement of the ore reserves and resources and potential
impairment to the carrying value of the mining assets and life of
mine plans.
The current life of mine plans are used to determine the ore
tonnes and capital expenditure in the impairment tests. Ore
reserves and resources, both those included in the life of mine and
certain additional tonnes which form part of reserves and resources
considered to be sufficiently certain and economically viable, also
impact the depreciation of mining assets depreciated on a unit of
production basis. Ore reserves and resources further impact the
estimated date of decommissioning and rehabilitation.
Other key estimates and judgements
In addition to the key estimates and judgements disclosed above,
the following estimates and judgements have not significantly
changed from those disclosed in the FY 2018 Annual Report and will
be discussed in further detail in the FY 2019 Annual Report:
- Capitalisation of borrowing costs
- Provision for rehabilitation
- Inventory and inventory stockpile
- Depreciation
- Pension and post-retirement medical fund schemes
- Net investments in foreign operations
3. DIVIDS
No dividends have been declared in respect of the current Year
under review (30 June 2018: US$nil).
4. SEGMENTAL INFORMATION
Segment information is presented in respect of the Group's
operating and geographical segments:
Mining - the extraction and sale of rough diamonds from mining
operations in South Africa and Tanzania.
Exploration - exploration activities in Botswana.
Corporate - administrative activities in the United Kingdom.
Segments are based on the Group's management and internal
reporting structure. Management reviews the Group's performance by
reviewing the results of the mining activities in South Africa and
Tanzania, reviewing the results of exploration activities in
Botswana and reviewing the corporate administration expenses in the
United Kingdom. Each segment derives, or aims to derive, its
revenue from diamond mining and diamond sales, except for the
corporate and administration cost centre.
Segment results, assets and liabilities include items directly
attributable to a segment, as well as those that can be allocated
on a reasonable basis. Segment results are calculated after
charging direct mining costs, depreciation and other income and
expenses. Unallocated items comprise mainly interest-earning assets
and revenue, interest-bearing borrowings and expenses and corporate
assets and expenses. Segment capital expenditure is the total cost
incurred during the year to acquire segment assets that are
expected to be used for more than one period. Eliminations comprise
transactions between Group companies that are cancelled on
consolidation. The results are not materially affected by seasonal
variations. Revenues are generated from tenders held in South
Africa and Antwerp for external customers from various countries,
the ultimate customers of which are not known to the Group.
4. SEGMENTAL INFORMATION (continued)
Operating South Africa - Mining activities Tanzania Botswana United South Africa
segments -Mining Kingdom
activities
Corporate
US$ million and
Cullinan Finsch Koffiefontein Williamson Exploration(4) treasury Beneficiation(3) Inter-segment Consolidated
----------------- --------- ------- -------------- ----------- --------------- ---------- ----------------- -------------- -------------
2019 2019 2019 2019 2019 2019 2019 2019 2019
----------------- --------- ------- -------------- ----------- --------------- ---------- ----------------- -------------- -------------
Revenue 171.4 170.2 28.9 93.0 - - 0.1 - 463.6
Segment
result(1) 26.2 32.2 (9.6) 9.9 (0.5) (8.6) (1.2) (1.5) 46.9
Impairment
charge -
operations (63.9) (85.4) (33.2) (41.2) - - - - (223.7)
Impairment
charge - other
receivables - - - (18.9) - (4.0) - - (22.9)
Other direct
(expense)
/ income (0.1) (0.5) (0.4) 0.2 - - - - (0.8)
--------- ------- -------------- ----------- --------------- ---------- ----------------- -------------- -------------
Operating
loss(2) (37.8) (53.7) (43.2) (50.0) (0.5) (12.6) (1.2) (1.5) (200.5)
Financial income 12.1
Financial
expense (65.6)
Income tax
credit 45.8
Loss on
discontinued
operation
(net of tax)(5) (49.9)
Non-controlling
interest 31.3
----------------- --------- ------- -------------- ----------- --------------- ---------- ----------------- -------------- -------------
Loss
attributable to
equity
holders of the
parent company (226.8)
----------------- --------- ------- -------------- ----------- --------------- ---------- ----------------- -------------- -------------
Segment assets 609.7 396.6 168.7 182.5 - 3 146.8 13.0 (3 224.0) 1 293.3
Segment
liabilities 607.0 184.3 303.4 300.6 - 2 306.9 13.8 (2 748.8) 967.2
Capital
expenditure 46.3 24.1 6.1 8.6 - 1.8 - - 86.9
----------------- --------- ------- -------------- ----------- --------------- ---------- ----------------- -------------- -------------
(1) Total depreciation of US$106.7 million included in the
segmental result comprises depreciation incurred at Finsch US$32.7
million, Cullinan US$56.1 million, Koffiefontein US$6.9 million,
Williamson US$10.2 million, Exploration US$0.1 million and
Corporate and treasury US$0.7 million.
(2) Operating loss is equivalent to revenue of US$463.6 million
less total costs of US$664.1 million as disclosed in the
Consolidated Income Statement.
(3) The beneficiation segment represents Tarorite, a cutting and
polishing business in South Africa, which can on occasion cut and
polish select rough diamonds.
(4) Assets of US$0.6 million and liabilities of US$nil in
respect of the exploration assets in Botswana have been classified
as non-current assets held for sale (refer to note 17).
(5) The operating results in respect of KEM JV and Helam have
been reflected within loss on discontinued operation (refer to note
16).
4. SEGMENTAL INFORMATION (continued)
Operating South Africa - Mining activities Care and Tanzania Botswana United South Africa
segments maintenance -Mining Kingdom
activities
Corporate
US$ million KEM and
Cullinan Finsch Koffiefontein JV(4,5) Helam(5) Williamson Exploration(4) treasury Beneficiation(3) Inter-segment Consolidated
----------------- --------- ------- -------------- ----------- ------------ ----------- --------------- ---------- ----------------- -------------- -------------
2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018
----------------- --------- ------- -------------- ----------- ------------ ----------- --------------- ---------- ----------------- -------------- -------------
Revenue 167.0 231.9 27.2 - - 68.5 - - 25.5 (24.8) 495.3
Segment
result(1) 14.2 67.7 (12.5) - (1.7) 13.0 (0.7) (10.4) (1.0) (3.0) 65.6
Impairment
charge - - (66.0) - - - - - - - (66.0)
Other direct
income (0.2) 0.3 - - (0.4) 0.4 - - - 1.1 1.2
--------- ------- -------------- ----------- ------------ ----------- --------------- ---------- ----------------- -------------- -------------
Operating profit
/ (loss)(2) 14.0 68.0 (78.5) - (2.1) 13.4 (0.7) (10.4) (1.0) (1.9) 0.8
Financial income 8.5
Financial
expense (94.3)
Income tax
expense (13.8)
Loss on
discontinued
operation (net
of tax) (5) (104.3)
Non-controlling
interest 36.2
----------------- --------- ------- -------------- ----------- ------------ ----------- --------------- ---------- ----------------- -------------- -------------
Loss
attributable
to equity
holders
of the parent
company (166.9)
----------------- --------- ------- -------------- ----------- ------------ ----------- --------------- ---------- ----------------- -------------- -------------
Segment assets 727.3 557.4 135.8 - 7.2 211.3 - 3 323.8 13.0 (3 186.6) 1 789.2
Segment
liabilities 653.3 281.8 291.0 - 50.1 302.5 - 2 304.5 14.1 (2 674.7) 1 222.6
Capital
expenditure 73.9 54.0 12.3 - - 4.6 - 0.7 - - 145.5
----------------- --------- ------- -------------- ----------- ------------ ----------- --------------- ---------- ----------------- -------------- -------------
(1) Total depreciation of US$128.0 million included in the
segmental result, comprises depreciation incurred at Finsch US$41.7
million, Cullinan US$66.1 million, Koffiefontein US$9.1 million,
Williamson US$9.5 million, Helam US$0.7 million, Exploration US$0.1
million and Corporate and treasury US$0.8 million.
(2) Operating profit is equivalent to revenue of US$495.3
million less total costs of US$494.5 million as disclosed in the
Consolidated Income Statement.
(3) The beneficiation segment represents Tarorite, a cutting and
polishing business in South Africa, which can on occasion cut and
polish select rough diamonds.
(4) Assets of US$46.5 million and liabilities of US$27.8 million
in respect of KEM JV and the exploration assets in Botswana were
classified as non-current assets held for sale (refer to notes 16
and 17).
(5) The operating results in respect of KEM JV have been
reflected within loss on discontinued operation and the assets and
liabilities classified as held for sale (refer to note 16). The
Helam prior period results are insignificant and as such have not
been restated.
US$ million 2019 2018
------------------------------------ ------- -------
5. CORPORATE EXPITURE
Corporate expenditure includes:
Depreciation of property, plant
and equipment 0.7 0.7
London Stock Exchange and other
regulatory expenses 1.3 1.4
Share-based expense - Directors 0.2 0.6
Other staff costs 2.6 3.6
------------------------------------ ------- -------
Total staff costs 2.8 4.2
------------------------------------ ------- -------
6. FINANCING EXPENSE
US$ million 2019 2018
------------------------------------------ -------- -------
Net unrealised foreign exchange
gains 4.0 -
Interest received on BEE loans
and other receivables 5.8 4.1
Interest received bank deposits 1.1 3.5
Realised foreign exchange gains
on the settlement of foreign loans
and forward exchange contracts 1.2 0.9
Financial income 12.1 8.5
--------
Gross interest on senior secured
second lien notes, bank loans and
overdrafts (50.7) (62.7)
Interest on bank loans and overdrafts
capitalised 3.7 15.2
-------- -------
Net interest expense on bank loans
and overdrafts (47.0) (47.5)
Other debt finance costs, including
BEE loan interest and facility
fees (14.4) (16.5)
Unwinding of present value adjustment
for rehabilitation costs (4.0) (4.1)
Net unrealised foreign exchange
losses(1) - (26.2)
Realised foreign exchange losses
on the settlement of foreign loans (0.2)
and forward exchange contracts -
------------------------------------------ -------- -------
Financial expense (65.6) (94.3)
------------------------------------------ -------- -------
Net financial expense (53.5) (85.8)
------------------------------------------ -------- -------
(1) The Group predominantly enters into hedge contracts where
the risk being hedged is the volatility in the South African Rand
and US Dollar exchange rates affecting the proceeds in South
African Rand of the Group's US Dollar denominated diamond tenders.
In the event of a capital raising, as was the case with the Rights
Issue in FY 2018, the Group may also enter into short dated hedges
to facilitate the conversion between functional currencies across
the Group as was the case with the settlement of the South African
lender facilities out of the Pound Sterling Rights Issue proceeds
in July 2018. The fair value of the Group's hedges as at the end of
the Year are based on Level 2 mark-to-market valuations performed
by the counterparty financial institutions. The contracts are all
short dated in nature and mature within the next 12 months. An
unrealised gain of US$4.0 million (30 June 2018: US$26.2 million
loss) in respect of foreign exchange contracts and inter-group
loans held at Year end and a net realised foreign exchange gain of
US$1.0 million (30 June 2018: US$0.9 million gain) in respect of
foreign exchange contracts closed during the Year is included in
the net finance and expense amount.
7. PROPERTY, PLANT AND EQUIPMENT
The net movement in property, plant and equipment for the Year
is a decrease of US$276.4 million (30 June 2018: US$197.1 million).
This is primarily as a result of:
- an increase in property, plant and equipment from capital
expenditure of US$86.9 million (30 June 2018: US$159.3 million),
which includes US$nil million (30 June 2018: US$13.8 million)
additions attributable to KEM JV; and
- an increase in the rehabilitation asset of US$nil million (30 June 2018: US$2.7 million)
offset by:
- the movement in the US$/ZAR foreign exchange rate resulting in
a foreign exchange decrease on Rand based assets of US$28.4 million
(30 June 2018: US$62.5 million decrease);
- depreciation of US$106.7 million (30 June 2018: US$128.0 million);
- the impairment of the Cullinan, Finsch, Koffiefontein and
Williamson assets of US$223.7 (30 June 2018: US$66.0 million
Koffiefontein);
- the impairment of the KEM JV assets of US$nil (30 June 2018: US$77.0 million);
- the transfer of the remaining KEM JV assets to non-current
assets held for sale of US$nil (30 June 2018: US$19.8 million);
- the disposal of the Helam assets of US$1.5 million (30 June 2018: US$nil);
- the transfer of the exploration assets of US$nil (30 June
2018: US$0.7 million) to non-current assets held for sale; and
- assets of US$3.0 million (30 June 2018: US$5.1 million) disposed of during the Year.
8. SHARES ISSUED
There were no allotments by the Company during the Year under
review.
In the prior year, a Rights Issue by the Company raised gross
proceeds of US$175.2 million (GBP133.1 million), comprising share
capital of US$43.7 million (GBP33.3 million) and share premium of
US$131.5 million (GBP99.8 million). The costs of US$7.4 million
associated with the Rights Issue were capitalised against share
premium. The proceeds from the Rights Issue were used to settle
costs of US$7.4 million in respect of the Rights Issue, the
Revolving Credit Facility ("RCF") (capital plus interest) of
US$73.1 million and the Working Capital Facility ("WCF") (capital
plus interest) of US$33.6 million held with the Group's Lenders
(refer note 9).
Further details with regards to the Group's share plans will be
provided in the Group's 2019 Annual Report.
9. LOANS AND BORROWINGS
US$ million 2019 2018
--------------------------------- ------ ------
Non-current liabilities
Loans and borrowings - Senior
secured second lien notes 603.5 601.2
------------------------------------ ------ ------
603.5 601.2
Current liabilities
Loans and borrowings - Senior
secured lender debt facilities - 106.7
Loans and borrowings - Senior
secured second lien notes 47.1 46.9
------------------------------------ ------ ------
47.1 153.6
Total loans and borrowings -
bank facilities 650.6 754.8
------------------------------------ ------ ------
a) Senior Secured Lender Debt Facilities
The Group's South African Lender Group (Absa Corporate and
Investment Banking ("Absa"), FirstRand Bank Limited (acting through
its Rand Merchant Bank division) ("RMB"), and Nedbank Limited) and
lending facilities are detailed in the table below. There have been
no amendments to the facilities during the period under review.
The Group's debt and hedging facilities are detailed in the
table below:
Senior Lender Debt Facilities 2019 2018
Facility Facility
amount amount
--------------------------------- --------------- ---------------
ZAR Debt Facilities:
ZAR Lenders RCF ZAR1,000 ZAR1,000
million million
ZAR Lenders WCF ZAR500 million ZAR500 million
Absa/RMB - FX Hedging facilities ZAR300 million ZAR300 million
The repayment terms remain unchanged, however due to the
covenant amendments (refer below) there was a change in the
interest rate and commitment fee ratchet mechanisms to the ZAR RCF
contingent on the Consolidated Net Debt: Consolidated EBITDA
covenant levels at each measurement date. The revised interest rate
and commitment fee ratchet mechanisms are as follows:
Additional Additional commitment
Consolidated Net Debt to Consolidated EBITDA interest rate fee ratchet
ratchet
<= to 2.5:1 0.0% 0.0%
--------------- ---------------------
> 2.5:1 but <= 3.0:1 +1.0% 0.0%
--------------- ---------------------
> 3.0:1 but <= 3.5:1 +2.0% +0.225%
--------------- ---------------------
> 3.5:1 but <= 4.0:1 +3.0% +0.450%
--------------- ---------------------
> 4.0:1 +4.0% +0.675%
--------------- ---------------------
The terms and conditions of the Group facilities will be
detailed in the Group's FY 2019 Annual Report.
The facilities are secured on the Group's interests in Finsch,
Cullinan, Koffiefontein and Williamson.
On 9 July 2018, the Company settled the RCF loan (capital plus
interest) of US$73.1 million with its Lender Group.
On 13 July 2018, the Company settled the WCF loan (capital plus
interest) of US$33.6 million with its Lender Group.
The RCF and WCF have not been cancelled and still remain
available to the Group.
As at date of this Report, both the RCF and WCF remain
undrawn.
Covenant ratios
On 26 April 2019, agreement was reached with Petra's Lender
Group to amend the EBITDA-related maintenance covenant levels for
the respective measurement periods as follows:
12 months 12 months 12 months 12 months 12 months
to 30 Jun to 31 Dec to 30 Jun to 31 Dec to 30 Jun
2019 2019 2020 2020 2021
Consolidated Net Debt to Consolidated EBITDA:
- New covenant ratio: <= 4.5x <= 4.25x <= 3.5x <= 3.25x <= 3.0x
----------- ----------- ----------- ----------- -----------
- Previous covenant <= 2.5x <= 2.5x <= 2.5x <= 2.5x <= 2.5x
ratio:
----------- ----------- ----------- ----------- -----------
Consolidated EBITDA to Consolidated Net Finance Charges:
- New covenant ratio: >= 2.5x >= 2.5x >= 2.75x >= 3.0x >= 3.25x
----------- ----------- ----------- ----------- -----------
- Previous covenant >=4.0x >=4.0x >=4.0x >=4.0x >=4.0x
ratio:
----------- ----------- ----------- ----------- -----------
Refer to the Covenant measurements attached to banking
facilities section within the Financial Review for further
commentary with regards to covenants.
b) US$650 million Senior Secured Second Lien Notes
A wholly owned subsidiary of the Company, Petra Diamonds US$
Treasury Plc, issued debt securities consisting of US$650 million
five-year senior secured second lien notes with a maturity date of
01 May 2022 (the "2022 Notes"). The 2022 Notes carried a coupon of
7.25% per annum, which is payable semi-annually in arrears on 1 May
and 1 November of each year. The 2022 Notes are guaranteed by the
Company and by the Group's material subsidiaries and are secured on
a second lien basis on the assets of the Group's material
subsidiaries.
Further details about the 2022 Notes (including security) will
be included in the Group's FY 2019 Annual Report.
10. COMMITMENTS
As at 30 June 2019, the Company had committed to future capital
expenditure totalling US$6.6 million (30 June 2018: US$24.4
million), mainly comprising Cullinan US$3.1 million (30 June 2018:
US$16.9 million), Finsch US$1.9 million (30 June 2018: US$6.3
million), Koffiefontein US$0.5 million (30 June 2018: US$1.2
million), KEM JV US$nil (30 June 2018: US$nil) and Williamson
US$1.1 million (30 June 2018: US$nil).
11. RELATED PARTY TRANSACTIONS
The Group's related party BEE partners, Kago Diamonds (Pty) Ltd
("Kago Diamonds") and Sedibeng Mining (Pty) Ltd ("Sedibeng
Mining"), and their gross interests in the mining operations of the
Group are disclosed in the table and 'Group restructuring'
paragraph below.
Mine Partner and respective Partner and respective
interest interest
as at 30 June 2019 as at 30 June 2018
(%) (%)
-------------- ----------------------- -----------------------
Finsch Kago Diamonds (14%) Kago Diamonds (14%)
Cullinan Kago Diamonds (14%) Kago Diamonds (14%)
Koffiefontein Kago Diamonds (14%) Kago Diamonds (14%)
KEM JV(1) Kago Diamonds (0.0%) Kago Diamonds (8.4%)
Ekapa Mining (0.0%) Ekapa Mining (24.1%)
Helam(1) Sedibeng Mining Sedibeng Mining
(0.0%) (26%)
(1) During the Year, the Company and its BEE Partners disposed
of their interests in KEM JV and Helam (refer to note 16).
A prior restructuring of the Group and its BEE Partner
structures allowing for a simplified Group structure resulted in
the IPDET acquiring a 12% interest in each of the Group's South
African operations, with Petra's commercial BEE Partners holding
the remaining 14% interest through their respective shareholdings
in Kago Diamonds, in which Petra has a 31.46% interest. The
effective interest percentages attributable to the remaining
operations for the Group's shareholders, as a result of the
restructuring, are disclosed in the table below:
Resultant Group's
effective interest
Mine % - Post restructuring
-------------- -----------------------
Finsch 78.4
Cullinan 78.4
Koffiefontein 78.4
The non-current loans receivable, non-current loans payable,
finance income and finance expense due from and due to the related
party BEE partners and other related parties are disclosed in the
table below:
US$ million 1 July 2018 1 July 2017
- -
30 June 30 June
2019(3) 2018
------------------------------------- -------------- --------------
Non-current receivable
Sedibeng Mining - 0.9
Kago Diamonds(1, 2) 54.6 26.2
54.6 27.1
------------------------------------- -------------- --------------
Non-current payable
Kago Diamonds(1) 64.9 59.5
64.9 59.5
------------------------------------- -------------- --------------
Current trade and other receivables
KEM JV(3) 8.6 -
Impairment provision(3) (7.3) -
------------------------------------- -------------- --------------
1.3 -
------------------------------------- -------------- --------------
Finance income
Kago Diamonds(1) 3.5 1.8
Ekapa Mining - 0.2
---------------------------------------- -------------- --------------
3.5 2.0
------------------------------------- -------------- --------------
Finance expense
Kago Diamonds 6.8 6.7
Ekapa Mining - 0.2
---------------------------------------- -------------- --------------
6.8 6.9
------------------------------------- -------------- --------------
(1) Umnotho weSizwe Group (Pty) Ltd ("Umnotho"), holds a 16.34%
interest in Kago Diamonds. Mr Dippenaar (the former Group CEO) is
directly or indirectly a beneficiary of a trust that is a
shareholder in Umnotho.
(2) Included in non-current receivables are amounts advanced
during the Year of US$26.8 million (30 June 2018: US$14.3
million).
(3) Included in current trade and other receivables are amounts
advanced of US$9.4 million to KEM JV in the form of a working
capital facility and equipment finance facility (of which the
Company has received repayments of US$3.9 million during the Year)
and the balance of the KEM JV purchase consideration of US$3.1
million. The Group has applied the expected credit loss impairment
model to the KEM JV receivables, taking into account various
factors and the expected credit loss was deemed to be US$7.3
million.
Kago Diamonds is one of the BEE partners which obtained bank
financing from ABSA, RMB and Investec (the "BEE Lenders") to
acquire its interests in Finsch and Cullinan. The Group has
provided a guarantee to the BEE Lenders for repayment of loans
advanced to the Group's BEE Partners (refer to note 12 for further
detail).
Helam disposal (refer to note 16)
Mr Jim Davidson, former Technical Director of Petra who retired
from the Company on 30 June 2018, was approached by the existing
owners of Lindleys Mining to be a co-shareholder in this venture
given his extensive experience with Helam and to maximise their
chances of success. Mr Davidson agreed to subscribe for 49% of the
shares in Lindleys Mining. As such, Mr Davidson is considered to be
a related party of the Company under Listing Rule 11.1.4R. Lindleys
Mining purchased the Helam mine on 6 December 2018.
As disclosed in the Company's FY 2012 Annual Report, Mr Johan
Dippenaar, (former Group CEO), and Mr Jim Davidson, former
Technical Director, exercised an option to acquire the Helam game
farm from the Company for ZAR2.5 million (ca. US$0.3 million at the
prevailing exchange rate) granted in 2004. Although Mr Dippenaar
and Mr Davidson duly paid the option price, the transfer of the
properties has to date not been effected. In the interest of the
Helam disposal (refer to note 16), and to ensure the surface rights
(including the mining right area and the Helam game farm) are
transferred without any encumbrance to the new owners, Helam
entered into a cancellation agreement with Mr Dippenaar and Mr
Davidson prior to the Helam disposal as disclosed above, to unwind
the exercise of the original option through the repayment of the
original option price of ZAR2.5 million (US$0.2 million at current
exchange rates), the "Option Cancelation". The Option Cancelation
is classified as a small transaction as defined in Listing Rule 11
Annex 1.
Rental income receivable
The Group received US$nil (30 June 2018: US$nil) of rental
income from Pella Resources Ltd and US$0.1 million (30 June 2018:
US$0.4 million) from Alufer Mining Ltd. The Group has US$0.3
million (30 June 2018: US$0.3 million) receivable from Pella
Resources Ltd and US$0.1 million (30 June 2018: US$0.4 million)
receivable from Alufer Mining Ltd, both companies of which Mr
Pouroulis is a director.
12. BEE LOANS RECEIVABLE AND PAYABLE
US$ million 1 July 2018 1 July 2017
- -
30 June 30 June 2018
2019
----------------------------- ------------ --------------
Non-current assets
Loans and other receivables 109.6 64.7
Non-current liabilities
Trade and other payables 120.5 110.5
BEE Loans Receivable
The non-current BEE loans receivable represents those amounts
receivable from the Group's BEE partners (Kago Diamonds, Sedibeng
Mining and the IPDET) in respect of financing their interest in the
Koffiefontein mine, advances provided to the BEE partners to enable
the BEE partners to discharge interest and capital commitments
under the BEE Lender facilities (refer below guarantee provided by
the Company) and other advances to the BEE partners which have
enabled them to make distributions to their beneficiaries (Petra
directors do not qualify as beneficiaries under the IPDET Trust
Deed).
As a result of prior period delays in the Cullinan plant ramp-up
and the Finsch SLC ramp-up, the Group has elected to advance the
BEE partners funds using Group treasury to enable the BEE partners
to service their interest and capital commitments under the BEE
Lender facilities (refer below). As a result, the BEE loans
receivable due to Petra have increased. The BEE partners are also
required to settle future interest and capital repayments under the
BEE Lender facilities and Petra may, at its discretion, elect to
advance the BEE partners funds to enable the BEE partners to
service those future interest and capital commitments. These loan
advances will be recoverable from the BEE's share of future cash
flows from the underlying mining operations.
1 July 2018 1 July 2017
- -
30 June 30 June
US$ million 2019 2018
--------------------------------------- ------------ ------------
As at 1 July 64.7 35.0
Foreign exchange movement on
opening balance (1.2) (3.7)
Discretionary advance - capital
and interest commitment (BEE
Lender facility) 42.2 24.3
Discretionary advance - distributions
to beneficiaries 4.5 6.7
Interest receivable 4.9 2.4
BEE partner receivables written
off - KEM JV disposal (5.5) -
As at 30 June 109.6 64.7
------------------------------------------ ------------ ------------
BEE loans payable
BEE loans payable represent those loans advanced by the BEE
partners to the Group to acquire their interest in Finsch and
Cullinan. Details of the movements are set out below.
1 July 2018 1 July 2017
- -
30 June 30 June
US$ million 2019 2018
------------------------------ ------------ ------------
As at 1 July 110.5 99.5
Foreign exchange movement on
opening balance (2.6) (1.5)
Interest payable 12.6 12.5
As at 30 June 120.5 110.5
--------------------------------- ------------ ------------
Group guarantee provided to BEE Lenders
The BEE partners obtained bank financing from ABSA, RMB and
Investec (the "BEE Lenders") to refinance amounts owing by the BEE
partners to Petra, which had provided funding to the BEE partners
to enable them to acquire their interests in Finsch and Cullinan.
As part of the refinancing, the Group provided a guarantee to the
BEE Lenders over the repayment of loans advanced to the Group's BEE
partners. The BEE partners will settle their loan obligations with
the BEE Lenders from their share of future operational cash flows,
either through repayment of the amounts owing to the BEE partners
by Petra or through recoverable advances provided by Petra from
Group treasury.
As at 30 June 2019, the BEE lender facility for which Petra
stands surety was US$54.2 million (30 June 2018: US$88.8 million)
with interest and capital commitments as detailed below:
US$ million Interest repayments Capital repayments Balance
------------------------ -------------------- ------------------- --------
BEE Lender facility as
at 30 June 2019 54.2
Due and payable within
12 months (6.0) (17.0) (23.0)
------------------------- -------------------- ------------------- --------
Due and payable in 1 -
2 years 31.2
------------------------- -------------------- ------------------- --------
The BEE Lender facility forms part of Petra's Consolidated Net
Debt for Petra's covenant measurement purposes and is subject to
the same covenant requirements (refer to note 9 for further
detail).
The BEE Lender facility was amended post Year end, with an
amendment to the interest rate and margin (same interest rate
ratchet terms as disclosed in note 9) and an extension to the
repayment profile. The BEE Lender facility bears interest at SA
JIBAR plus 6.5%, is repayable in bi-annual instalments (capital
plus interest) in November and May, with a final repayment date in
May 2021. The probability of repayment default by the BEE Partners
to Absa, Investec and RMB and any subsequent call by the Lender
Group on the guarantee provided by Petra is considered remote.
13. EARNINGS PER SHARE
Continuing Discontinued
Continuing Discontinued operations operations Total
operations operations Total 30 June 30 June 30 June
30 June 2019 30 June 2019 30 June 2019 2018 2018 2018
US$ US$ US$ US$ US$ US$
Numerator
Loss for the Year (174,622,904) (52,015,046) (226,637,950) (84,562,428) (82,312,465) (166,874,893)
--------------------- -------------- -------------- --------------- ------------- --------------- --------------
Denominator
Shares Shares Shares Shares Shares Shares
Weighted average
number of ordinary
shares
used in basic EPS
Brought forward 865,336,485 865,336,485 865,336,485 531,986,218 531,986,218 531,986,218
Effect of shares
issued during the
Year - - - 1,248,794 1,248,794 1,248,794
Carried forward 865,336,485 865,336,485 865,336,485 533,235,012 533,235,012 533,235,012
-------------- -------------- --------------- ------------- --------------- --------------
Shares Shares Shares Shares Shares Shares
Dilutive effect of
potential ordinary
shares - - - 2,011,279 - 2,011,279
--------------------- -------------- -------------- --------------- ------------- --------------- --------------
Weighted average
number of ordinary
shares
in issue used in
diluted EPS 865,336,485 865,336,485 865,336,485 535,246,291 533,235,012 535,246,291
--------------------- -------------- -------------- --------------- ------------- --------------- --------------
US cents US cents US cents US cents US cents US cents
-------------- -------------- --------------- ------------- --------------- --------------
Basic loss per share
- US cents (20.18) (6.01) (26.19) (15.85) (15.44) (31.29)
Diluted loss per
share - US cents (20.18) (6.01) (26.19) (15.85) (15.44) (31.29)
Due to the loss for the Year, the diluted loss per share is the
same as the basic loss per share. The number of potentially
dilutive ordinary shares, in respect of employee share options,
Executive Director and Senior Management share award schemes is nil
(30 June 2018: 2,011,279). These potentially dilutive ordinary
shares may have a dilutive effect on future earnings per share.
14. ADJUSTED EARNINGS PER SHARE (non-GAAP measure)
In order to show earnings per share from operating activities on
a consistent basis, an adjusted earnings per share is presented
which excludes certain items as set out below. It is emphasised
that the adjusted earnings per share is a non-GAAP measure. The
Petra Board considers the adjusted earnings per share to better
reflect the underlying performance of the Group. The Company's
definition of adjusted earnings per share may not be comparable to
other similarly titled measures reported by other companies.
Discontinued Continuing Discontinued
Continuing operations operations operations Total
operations 30 June Total 30 June 30 June 30 June
30 June 2019 2019 30 June 2019 2018 2018 2018
US$ US$ US$ US$ US$ US$
Numerator
Loss for the Year (174,622,904) (52,015,046) (226,637,950) (84,562,428) (82,312,465) (166,874,893)
-------------- -------------- --------------- ------------- --------------- --------------
Net unrealised
foreign exchange
loss
/ (gain) (4,022,483) - (4,022,483) 26,233,603 - 26,233,603
Present value
discount -
Williamson VAT
receivable* 14,212,444 - 14,212,444 1,805,365 - 1,805,365
Impairment charge -
operations* 174,009,126 - 174,009,126 54,232,200 67,306,108 121,538,308
Impairment charge -
other receivables 3,941,305 - 3,941,305 - - -
Taxation credit on
impairment charge* (36,279,098) - (36,279,098) - - -
Taxation charge on
reduction of
unutilised
Capex benefits* - - - 6,736,719 - 6,736,719
Adjusted (loss) /
profit for the Year
attributable to
parent (22,761,610) (52,015,046) (74,776,656) 4,445,459 (15,006,357) (10,560,898)
--------------------- -------------- -------------- --------------- ------------- --------------- --------------
*Portion
attributable to
equity shareholders
of the Company
Denominator
Shares Shares Shares Shares Shares Shares
Weighted average
number of ordinary
shares
used in basic EPS
As at 1 July 865,336,485 865,336,485 865,336,485 531,986,218 531,986,218 531,986,218
Effect of shares
issued during the
Year - - - 1,248,794 1,248,794 1,248,794
Carried forward 865,336,485 865,336,485 865,336,485 533,235,012 533,235,012 533,235,012
Shares Shares Shares Shares Shares Shares
Dilutive effect of
potential ordinary
shares - - - 2,011,279 - 2,011,279
--------------------- -------------- -------------- --------------- ------------- --------------- --------------
Weighted average
number of ordinary
shares
in issue used in
diluted EPS 865,336,485 865,336,485 865,336,485 535,246,291 533,235,012 535,246,291
--------------------- -------------- -------------- --------------- ------------- --------------- --------------
US cents US cents US cents US cents US cents US cents
-------------- -------------- --------------- ------------- --------------- --------------
Adjusted basic
(loss) / profit per
share
- US cents (2.63) (6.01) (8.64) 0.83(1) (2.81) (1.98)
Adjusted diluted
(loss) / profit per
share - US cents (2.63) (6.01) (8.64) 0.83(1) (2.81) (1.98)
(1) 30 June 2018 adjusted to include present value discount
adjustment of the Williamson VAT receivable.
15. IMPAIRMENT CHARGE
The recent downturn in the global rough diamond market and
variability in product mix have severely impacted rough diamond
prices, resulting in management taking a critical review of the
Group's business models and operational assets. The carrying
amounts of the Group's assets are reviewed at each reporting date
to determine whether there is any indication of impairment. If
there is any indication that an asset may be impaired, its
recoverable amount is estimated. The recoverable amount is
determined on a fair value less cost to develop basis.
During the Year under review, the Group reviewed the carrying
value of its investments, loan receivables and operational assets
for indicators of impairment. Following the assessment, impairment
of property, plant and equipment were considered appropriate for
Cullinan, Finsch, Koffiefontein and Williamson. The Group
recognised a consolidated income statement charge of US$246.6
million comprising of US$223.7 million, being management's estimate
of recoverable value of the Cullinan, Finsch, Koffiefontein and
Williamson assets, and US$22.9 million, being management's estimate
of the recoverability of other receivables due from external
parties. For impairment considerations of Helam and KEM JV, refer
to note 16.
Details of the impairment assessment are shown below:
Impairment Asset class Carrying Impairment Carrying
(US$ million) value pre value post
impairment impairment
------------------------ ----------------------------- ------------ ----------- ------------
Impairment operations:
Cullinan Property, plant & equipment 637.2 (63.9) 573.3
Finsch Property, plant & equipment 374.0 (85.4) 288.6
Koffiefontein Property, plant & equipment 46.5 (33.2) 13.3
Williamson Property, plant & equipment 129.8 (41.2) 88.6
------------------------ ----------------------------- ------------ ----------- ------------
Sub-total 1,187.5 (223.7) 963.8
Impairment other
receivables:
Other Other receivables 4.0 (4.0) -
Tanzania VAT receivable
Other (refer note 2) 29.0 (18.9) 10.1
------------------------ ----------------------------- ------------ ----------- ------------
Sub-total 33.0 (22.9) 10.1
Total 1,220.5 (246.6) 973.9
------------------------------------------------------- ------------ ----------- ------------
30 June 2018
Impairment Asset class Carrying Impairment Carrying
(US$ million) value pre value post
impairment impairment
---------------- ----------------------------- ------------ ----------- ------------
Koffiefontein Property, plant & equipment 118.2 (66.0) 52.2
---------------- ----------------------------- ------------ ----------- ------------
Cullinan, Finsch, Koffiefontein and Williamson impairment
considerations and assumptions
The Group performs impairment testing on an annual basis of all
operations and when there are potential indicators of impairment.
The impairment testing performed resulted in impairments of the
Cullinan, Finsch, Koffiefontein and Williamson assets. The key
assumptions used in determining the recoverable value calculations,
determined on fair value less cost to develop basis, are listed in
the table below:
Group assumptions:
Key assumptions Explanation
--------------------------- --------------------------------------------------------------
LOM and recoverable Economically recoverable reserves and resources are
value of reserves and based on management's expectations based on the availability
resources of reserves and resources at mine sites and technical
studies undertaken in house and by third party specialists.
The LOM for the operations are as follows:
Cullinan: FY 2029
Finsch: FY 2030
Koffiefontein: FY 2024 (FY 2018: FY 2032)
Williamson: FY 2032
Resources remaining after the current LOM plans have
not been included in impairment testing for the operations.
--------------------------- --------------------------------------------------------------
LOM reserves and resources Cullinan - Life of mine over the next 10 years; total
resource processed 40.5 Mt.
--------------------------- --------------------------------------------------------------
Finsch - Life of mine over the next 11 years; total
resource processed 35.8 Mt
--------------------------- --------------------------------------------------------------
Koffiefontein - 5 years life of mine plan; total
resource processed 4.8 Mt ROM
--------------------------- --------------------------------------------------------------
Williamson - 13 years life of mine plan: total resource
processed 64.1 Mt.
--------------------------- --------------------------------------------------------------
LOM - capital expenditure Management has estimated the timing and quantum of
the capital expenditure based on the Group's current
LOM plans for each operation. There is no inclusion
of capital expenditure to enhance the asset beyond
exploitation of the LOM plan orebody.
--------------------------- --------------------------------------------------------------
Diamond prices The diamond prices used in the impairment test have
been set with reference to recent achieved pricing
and market trends, and long-term diamond price escalators
are informed by industry views of long-term market
supply / demand fundamentals.
30 June 2019 impairment testing models incorporated
diamond price escalation of 2.8% above a long-term
US inflation rate of 2.5% per annum from FY 2022
to FY 2030. This equates to a 2.5% real CAGR for
the ten year period from FY 2021 to FY 2030. Estimates
for the contribution of exceptional diamonds sold
for more than US$5 million each are determined with
reference to historical trends.
30 June 2018 impairment testing models incorporated
diamond price escalation of 3.0% above a long-term
US inflation rate of 2.5% per annum. Estimates for
the contribution of exceptional diamonds sold for
more than US$5 million each are determined with reference
to historical trends.
--------------------------- --------------------------------------------------------------
Discount rate A discount rate of 8.5% (30 June 2018: 8.5%) was
used for the South African operations and 9.0% (30
June 2018: 9.0%) for Williamson. Discount rates calculated
based on a nominal weighted cost of capital including
the effect of factors such as market risk and country
risk as at the Year end.
--------------------------- --------------------------------------------------------------
Cost inflation rate Long-term inflation rates of 3.5%-7.5% (30 June 2018:
3.5%-7.5%) above the long-term US$ inflation rate
were used for Opex and Capex escalators. Opex savings
of 5% per annum have been applied from FY 2020 onwards
in line with the Project 2022 strategy implemented
by the Group.
--------------------------- --------------------------------------------------------------
Exchange rates Exchange rates are estimated based on an assessment
of current market fundamentals and long-term expectations.
The US$/ZAR exchange rate range used for all South
African operations commenced at ZAR14.00 (30 June
2018: ZAR12.75), further devaluing at 3.9% (30 June
2018: 3.9%) per annum over a period of three years,
reverting to 3.4% per annum thereafter.
--------------------------- --------------------------------------------------------------
Valuation basis Discounted present value of future cash flows.
--------------------------- --------------------------------------------------------------
Williamson At Williamson, the key judgement is around the recoverability
of the VAT receivable under the new legislation effective
20 July 2018. As detailed in note 2, Management consider
the future VAT to be fully recoverable. However,
if the VAT were not to be recoverable the impact
would be to increase the impairment by an additional
US$80.9 million.
--------------------------- --------------------------------------------------------------
Sensitivity analysis
The impairment impact of applying sensitivities on the key
inputs is noted below:
Additional impairment charge
-------------------------------------------- -----------------------------------------------
(US$ million) Williamson Koffiefontein Finsch Cullinan
-------------------------------------------- ----------- -------------- ------- ---------
Base case
Increase in discount rate by 2% 12.3 0.4 33.9 47.4
Reduction in pricing by 5% over Life
of Mine 28.5 8.8 48.4 57.6
Reduction in short-term production
by 10% 11.4 7.3 17.5 41.7
Increase in Opex by 5% 46.8 7.2 23.9 26.8
Strengthening of the ZAR from US$/ZAR14.00
to US$/ZAR13.00 n/a 12.6 71.6 85.1
16. DISPOSAL OF OPERATIONS
a) Disposal of KEM JV
On 5 December 2018, the Group and its BEE partners disposed of
their 75.9% interest in the KEM JV operation to the Company's joint
venture partner Ekapa Mining (Pty) Ltd ("Ekapa Mining") for a gross
cash consideration of ZAR300 million (US$18.6 million) (the
"Disposal") comprising deferred and contingent elements.
The Disposal was on a going concern basis, with Ekapa Mining
taking on all of the Company's financial, employee, environmental,
health, safety and social obligations with regards to the KEM JV
operation. The rationale for the Disposal is to ensure a
sustainable future for KEM JV by placing the operation under the
sole stewardship of an operator best suited to maximise its value.
Ekapa Mining's extensive experience of operating specifically
within Kimberley and its ability to solely focus on these assets is
expected to provide the right fit for the operation, thereby
ensuring continuation of diamond mining employment and related
economic activity in this renowned diamond centre.
The terms of repayment of the ZAR300 million purchase
consideration, originally to be payable in 24 monthly instalments
starting in January 2019, were amended prior to completion to allow
Ekapa Mining to maximise the prospects of the financial viability
of the operation. According to the terms, the purchase
consideration will be settled as follows:
- ZAR60 million payable in 24 monthly instalments starting on 1 April 2019;
- the balance, ZAR 240 million, of the purchase consideration
will be repayable from a 50% share of future operating cash flows
above set benchmark thresholds, including proceeds from the sale of
assets adjusted for sustaining capital of between ZAR110 million
and ZAR130 million per annum, for a period of five years to 30 June
2024; and possible proceeds from a pending insurance claim, that is
subject to ongoing discussions, in relation to the mud-rush
incident at Bultfontein, as previously announced. The Company has
fair valued the balance of the purchase consideration and deemed it
to be US$nil, having considered the historical trading performance
of the asset, knowledge of the mine and risks and
uncertainties.
On initial reclassification of the assets and liabilities of the
KEM JV mining operation (being Petra's effective 75.9% interest) as
held for sale in the Statement of Financial Position at 30 June
2018, in accordance with IFRS 5, the Group recognised a US$92.7
million impairment loss. The financial results of KEM JV have been
disclosed in the Consolidated Income Statement in Loss on
discontinued operation. The KEM JV mining operation was a separate
operating segment for the purposes of the Group's segmental
reporting.
Effect of the transaction
The transaction had the following effect on the Group's assets
and liabilities:
i) Net assets of KEM JV:
As at 30 November As at 30
US$ million 2018 June 2018
----------------------------------------------------- ------------------ -----------
Mining property, plant and equipment 19.8 19.8
Non-current trade and other receivables - -
Trade and other receivables 3.0 12.0
Inventory 10.0 12.6
Cash and cash equivalents 0.7 1.4
------------------------------------------------------ ------------------ -----------
Non-current assets held for sale 33.5 45.8
------------------------------------------------------ ------------------ -----------
Environmental liabilities and other non-current
trade and other payables (13.8) (14.2)
Trade and other payables (11.5) (13.0)
------------------------------------------------------ ------------------ -----------
Non-current liabilities associated with non-current
assets held for sale (25.3) (27.2)
------------------------------------------------------ ------------------ -----------
Net assets disposed 8.2 18.6
------------------------------------------------------ ------------------ -----------
ii) Result of KEM JV:
Period ended 1 July 2017
US$ million 30 November - 30 June
2018 2018
----------------------------------------- ------------- ------------
Revenue 31.3 81.6
Cost of sales (32.2) (86.1)
----------------------------------------- ------------- ------------
Gross loss (0.9) (4.5)
Financial income 0.1 0.4
Financial expense (0.7) (1.3)
----------------------------------------- ------------- ------------
Loss before tax (1.5) (5.4)
Income tax charge - (6.2)
----------------------------------------- ------------- ------------
Loss after tax before impairment charge (1.5) (11.6)
Impairment charge - (92.7)(1)
----------------------------------------- ------------- ------------
Net loss for the Period (1.5) (104.3)
----------------------------------------- ------------- ------------
Attributable to:
* Equity holders of the parent 0.5 (85.6)
* Non-controlling interest (2.0) (18.7)
----------------------------------------- ------------- ------------
(1.5) (104.3)
----------------------------------------- ------------- ------------
Basic loss per share (US cents) (0.17) (15.44)
Dilutive loss per share (US cents) (0.17) (15.44)
1. The US$92.7 million impairment loss recorded on the KEM JV
assets represents the difference between the fair value of the
assets and liabilities and the consideration receivable upon the
completion of the transaction. An impairment charge of US$56.2
million was recognised in respect of assets written down to
carrying values in accordance with IAS 36 Impairment of assets.
This includes US$52.0 million impairment recognised in respect of
the carrying value of the assets and US$4.2 million impairment of
assets damaged in the mudrush. In addition, a further impairment
charge of US$36.5 million was recognised to reduce assets of the
KEM JV to equal the fair value less costs to sell, being the fair
value of the consideration receivable.
iii) Post tax loss on disposal of KEM JV at:
Period ended
US$ million 30 November
2018
----------------------------------------------------------- -------------
Fair value consideration receivable on disposal 3.6
Less: net assets disposed of (8.2)
Less: cash transferred from rehabilitation guarantee Cell
captive (2.0)
Less: foreign currency translation recycled on disposal (1.3)
Less: non-controlling interest (26.1)
----------------------------------------------------------- -------------
Loss on disposal of discontinued operation (34.0)
Add: net loss for the Period (1.5)
----------------------------------------------------------- -------------
Loss on discontinued operation (35.5)
Less: impairment of purchase consideration (3.1)
Less: impairment of group other receivables (4.2)
----------------------------------------------------------- -------------
(42.8)
----------------------------------------------------------- -------------
During the Year, the Company advanced US$9.4 million funding to
the KEM JV; of this amount, US$3.9 million has been recovered.
Management have assessed the recoverability of the remaining US$5.5
million and as a result of the assessment an impairment charge of
US$4.2 million was recognised in the Consolidated Income Statement.
In assessing the recoverability, management considered the
historical trading performance of the KEM JV, the current downturn
in the diamond market, current economic climate, payment history
and recent press coverage involving the KEM JV operation. The
remaining balance has been included under current trade and other
receivables.
As a result of the above assessment by management of the loan
receivable, management have also impaired the remaining balance of
the purchase consideration, reducing it to US$nil, and an
impairment charge of US$3.1 million was recognised in the
Consolidated Income Statement.
iv) The consolidated cash flow statement includes the following amounts relating to KEM JV:
Period ending 1 July 2017
US$ million 30 November - 30 June
2018 2018
---------------------------------------------- -------------- ------------
Operating activities 3.4 (0.5)
Investing activities (2.1) (23.4)
Net cash utilised in discontinued operations (16.1) (0.6)
b) Helam
On 6 December 2018, the Company and its BEE partners disposed of
their interest in Helam Mining (Pty) Ltd ("Helam") to Lindleys
Mining (Pty) Ltd ("Lindleys Mining") for a nominal consideration of
ZAR200 with immediate effect.
The Helam mine was put on care and maintenance by the Company
during FY 2015, following previous attempts to source a suitable
purchaser, and no mining activities have been conducted by Petra
since. The rationale for the disposal is to support the South
African Government's intention to prolong the lives of mines facing
closure by facilitating opportunities for emerging miners to the
benefit of entrepreneurs, host communities and local employment.
The disposal is also in line with Petra's strategic priorities,
which include that the Board continues, on an ongoing basis, to
review the asset portfolio of the business with a view to
maximising return on capital and to ensure that all assets are in a
position to contribute positive cash flow to the business.
The disposal shall have the following benefits:
- an owner-manager approach will ensure sole focus on the optimisation of the Helam assets;
- it will reduce Group cash outflow (with existing care and
maintenance expenditure amounting to ca. US$2 million per annum);
and
- Lindleys Mining will take on all of the Company's
environmental obligations with regards to Helam, currently
estimated at ca. ZAR23 million excluding VAT (ca. US$1.7
million).
As part of the disposal, agreement has been reached for the
joint use of the processing plant at Helam, which has historically
been utilised to conduct resource and production sampling and
analyses for the Petra Group. Lindleys Mining have agreed to
continue with such sampling and analyses for a period of up to two
years. Petra intends to establish appropriate sampling facilities
elsewhere in the Group which, once commissioned, will replace the
need to continue with this arrangement.
Helam generated a net loss of US$0.8 million for the Year, which
is disclosed in the Consolidated Income Statement in Loss on
discontinued operation, and the net assets disposed of amounted to
US$1.0 million.
i) Post tax profit / (loss) on disposal of Helam at:
Period ended
US$ million 30 November
2018
-------------------------------------------------------- -------------
Fair value consideration receivable on disposal 0.0
Less: net assets disposed of (0.6)
Add: foreign currency translation recycled on disposal 3.4
Less: non-controlling interest (9.1)
-------------------------------------------------------- -------------
Loss on disposal of discontinued operation (6.3)
Less: net loss for the Period (0.8)
-------------------------------------------------------- -------------
Loss on discontinued operation (7.1)
-------------------------------------------------------- -------------
17. ASSETS HELD FOR SALE
Botswana (exploration)
During FY 2018, the Company took the decision to sell its
exploration assets held in Botswana and considered offers to
purchase these assets from potential purchasers. The offers to
purchase were not accepted, however the Company is still actively
seeking potential purchasers for the exploration assets. The assets
and liabilities of the Botswana exploration operation have been
classified as held for sale in the Statement of Financial Position,
in accordance with IFRS 5.
US$ million 30 June 2019 30 June 2018
----------------------------------------------------- -------------- -------------
Mining property, plant and equipment 0.6 0.6
Trade and other receivables - 0.1
----------------------------------------------------- -------------- -------------
Non-current assets held for sale 0.6 0.7
----------------------------------------------------- -------------- -------------
Trade and other payables - (0.6)
----------------------------------------------------- -------------- -------------
Non-current liabilities associated with non-current
assets held for sale - (0.6)
----------------------------------------------------- -------------- -------------
Net assets 0.6 0.1
----------------------------------------------------- -------------- -------------
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
(a) the preliminary financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union, and give a true and fair view of the
assets, liabilities, financial position and profit of the Group for
the Year; and
(b) the preliminary management report for the Year includes a
fair review of the information required by the FCA's Disclosure and
Transparency Rules (DTR 4.1.8 R and 4.1.9 R).
By order of the Board
Richard Duffy
Chief Executive Officer
16 September 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SFMESIFUSESU
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