14 September
2021 |
LSE: PDL |
Petra Diamonds
Limited
(“Petra”, “the Company” or “the Group”)
Preliminary
Results Announcement for the Year ended 30
June 2021 (unaudited)
Petra Diamonds Limited announces its preliminary results
(unaudited) for the year ended 30 June
2021 (“the Year” or “FY 2021”).
Richard
Duffy, Chief Executive, commented on the results:
“FY 2021 was a watershed year for
Petra. Besides the challenges of the COVID-19 pandemic, we
completed a capital restructuring which, together with the sale of
a number of exceptional blue and white diamonds from the Cullinan
mine, served to reduce consolidated net debt by around two thirds
to US$228.2 million. We now have a
more stable capital structure, considerably reduced debt
obligations and greater liquidity.
“The strong recovery in the diamond market towards the end of
the financial year, that has continued into the current quarter,
further bolstered our improved financial position. Record
production at Cullinan, driven by Project 2022 throughput
initiatives, as well as the highest annual contribution to revenue
from exceptional diamond sales, resulted in a 65% improvement in
revenue to US$402.3 million and
contributed to operational free cashflow of US$120.1 million for FY 2021. These record
recoveries have continued post Year end with the sale of the
magnificent 39.34 carat blue diamond for US$40 million, being the most valuable single
diamond ever sold by Petra. The US$1
million per carat realised for this stone is likely the
highest per carat price for a rough diamond ever
achieved.
“Although Group production for the
Year was negatively impacted by production challenges at both
Finsch and Koffiefontein, we are confident that the post Year end
re-engineering projects currently underway will lead to improved
production and margins at both operations during FY 2022.
“We enter FY 2022 with some momentum
from a considerably strengthened balance sheet, ongoing
optimisation of our asset base and a positive outlook for the
diamond market.”
Key Financial Results1
· FY 2021 revenue up 65% to US$402.3 million (FY 2020: US$243.3 million), including US$62.0 million contribution from Exceptional
Stones (FY 2020: US$14.9
million).
· Adjusted EBITDA up 101% to US$135.4 million (FY 2020: US$67.3 million); adjusted EBITDA margin of 34%
(FY 2020: 28%).
· Operational free cashflow13 of
US$120.1 million (FY 2020:
operational cash outflow of US$12.3
million).
· Adjusted loss before tax decreased 88% to
US$8.9 million (FY2020: US$74.0 million).
· Adjusted net loss after tax of US$16.1 million (FY 2020: US$54.7 million).
· Non-cash impairment charge of US$17.7 million (FY 2020: US$50.5 million)
· Loss on discontinued operations of
US$52.1 million (FY 2020:
US$58.0 million).
· Net profit after tax of US$196.6 million (FY 2020: net loss after tax:
US$223.0 million), including a gain
of US$213.3 million on the
extinguishment of the Notes following the successful debt
Restructuring.
· Consolidated net debt reduced to
US$228.2 million at 30 June 2021 from US$693.2
million at 30 June 2020.
· Basic earnings per share from continuing
operations: 6.67 US$ cents per share
(FY 2020: loss of 15.26 US$ cents per
share).
· The Board has decided to review its
strategic options at Williamson and the asset has therefore been
classified as an asset held for sale for financial reporting
purposes.
Operational and ESG Results
· Lost Time Injury Frequency Rate (“LTIFR”)
increased to 0.44 (FY 2020: 0.29). Total injuries, including LTIs,
in FY 2021 decreased to 42 (FY 2020: 45).
· Production down 2% to 3.24 Mcts (FY 2020:
3.29 Mcts), with record production of 1.94 Mcts at Cullinan offset
by lower production at Finsch and Koffiefontein.
· Absolute on-mine cash costs increased 3% to
US$197.6 million (FY 2020:
US$191.2 million), driven by
inflation and a marginally stronger South African Rand.
· The Company’s total carbon footprint
decreased 16% in FY 2021, assisted by lower production levels as
well as the positive impact of the Company’s energy efficiency
initiatives.
· Petra’s commitment to environmental
reporting affirmed with the attainment of an A- score for its
climate change submission to CDP, placing the Company in the
leadership category.
· Continued focus on diversity saw the
percentage of women in the Company increase from 19% to 20% in FY
2021 and the percentage of women on the Board increased from 22% to
25%, with a further increase post Year end to 34%.
Post Year End Updates
· The Company announced the sale of an
exceptional 39.34ct blue diamond, recovered during April 2021, for US$40.18
million, as well as a 342.92 carat Type IIa white diamond
and an 18.30 carat Type IIb blue diamond that were sold for a total
of US$13.5 million; the Company has
retained a 50% interest in the profit uplift of the polished
proceeds of both diamonds, after costs.
· Successful labour negotiations concluded in
September 2021, with the agreement of
a new three-year wage agreement with NUM covering FY 2022 to FY
2024, which should allow for further workforce stability over this
timeframe.
· Re-engineering projects initiated in
July 2021 at Finsch and Koffiefontein
to comprehensively review and improve the mines’ cost bases and
enhance operating efficiencies and margins.
· Although the number of COVID cases have
increased as a result of a third wave of infections in South Africa, there has been a limited impact
on our production rate. Petra is carrying out vaccination drives at
each of the South African mines in order to help protect our
workforce.
· Discussions with the Government of
Tanzania to reach agreement on
various issues at the Williamson mine are ongoing, with an
objective of these being concluded during FY 2022.
Outlook
· FY 2022 production guidance of 3.3 to 3.6
Mcts (South African operations: 3.1 to 3.4 Mcts and Williamson:
0.22 to 0.27 Mcts).
· FY 2022 capex guidance of US$78 million to US$92
million (South African operations: US$70 million to US$82
million and Williamson: US$8
million to US$10 million).
· Positive outlook for the market, with the
severe supply contraction of CY 2020 expected to continue in CY
2021, while consumer demand is expected to remain robust in the
second half of CY 2021, with retailers anticipating continued
strong consumer demand moving into the key festive retail period,
underpinned by shortages in the polished market.
1Unless stated otherwise, the financial
results in this announcement are adjusted to exclude the assets and
liabilities of Williamson, which has been reclassified as an asset
held for sale as at 30 June 2021, and
the operating results of Williamson have been reclassified as a
discontinued operation for FY 2020 and FY 2021. An appendix for
production results has been included on page 25 to show operational
results prior to its reclassification, for reference only.
SUMMARY OF RESULTS
(unaudited)
|
|
Restated8 |
Year
ended 30 June 2021
(“FY 2021”) |
Year
ended 30 June 2020
(“FY 2020”) |
US$
million |
US$
million |
Revenue |
402.3 |
243.3 |
Adjusted
mining and processing costs1 |
(261.2) |
(169.3) |
Other
direct income |
1.7 |
1.0 |
Profit
from mining activity2 |
142.8 |
75.0 |
Exploration expense |
— |
(0.5) |
Adjusted
corporate overhead16 |
(7.4) |
(7.2) |
Adjusted EBITDA3 |
135.4 |
67.3 |
Depreciation & Amortisation |
(76.8) |
(69.8) |
Share-based expense |
(0.5) |
(0.7) |
Net
finance expense |
(67.0) |
(70.8) |
Adjusted loss before tax |
(8.9) |
(74.0) |
Tax
(expense) / credit (excluding taxation credit / charge on
impairment charge and unrealised foreign exchange gain /
(loss))14 |
(7.2) |
19.3 |
Adjusted net loss after tax4 |
(16.1) |
(54.7) |
Impairment charge – operations and other
receivables5 |
(17.7) |
(50.5) |
Impairment of BEE loans receivable – expected credit loss release /
(charge) 6 |
5.8 |
(10.9) |
Gain on
extinguishment of Notes net of unamortised costs |
213.3 |
— |
Profit on
disposal of subsidiary7 |
14.7 |
— |
Costs and
fees relating to investigation and settlement of human rights abuse
claims |
(12.7) |
— |
Net
unrealised foreign exchange gain / (loss) |
77.1 |
(82.1) |
Taxation
(charge) / credit on unrealised foreign exchange gain /
(loss)14 |
(19.9) |
22.2 |
Taxation
credit on impairment charge |
4.2 |
11.0 |
Profit
/ (loss) from continuing operations |
248.7 |
(165.0) |
Loss on
discontinued operations, net of tax7 |
(52.1) |
(58.0) |
Net
profit / (loss) after tax |
196.6 |
(223.0) |
Earnings per share attributable to equity holders of the Company
–
US cents |
|
|
Basic
profit / (loss) per share – from continuing and discontinued
operations |
5.22 |
(21.96) |
Basic
profit / (loss) per share – from continuing operations |
6.67 |
(15.26) |
Adjusted
loss per share – from continuing operations8 |
(0.46) |
(5.04) |
Cash at
bank – (including restricted amounts) |
US$m |
163.8 |
67.6* |
Diamond
debtors |
US$m |
38.3 |
4.8* |
Diamond
inventories |
US$m /
Cts |
45.1
560,699 |
84.1*
1,357,584* |
US$336.7m
loan notes (issued March 2021)15 |
US$m |
327.3 |
— |
US$650
million loan notes9 |
US$m |
— |
676.9 |
Bank
loans and borrowings10 |
US$m |
103.0 |
52.1 |
BEE
partner bank facilities11 |
US$m |
— |
40.0 |
Consolidated Net debt12 |
US$m |
228.2 |
693.2 |
Bank
facilities undrawn and available10 |
US$m |
7.7 |
— |
*Including
Williamson
The following
exchange rates have been used for this announcement: average for FY
2021 US$1:ZAR15.41 (FY 2020: US$1:ZAR15.68);
closing rate as at 30 June 2021
US$1:ZAR14.27 (30 June
2020: US$1:ZAR17.32).
Results Webcasts – 9:30am and 4:00pm
BST today
Petra’s Chief Executive Richard
Duffy and Finance Director Jacques
Breytenbach will host a results webcast at 9:30am BST on 14 September
2021. Participants can join the webcast by registering
at:
https://www.petradiamonds.com/go/prelim14sep2021-09h30.
A recording of the webcast will be available later that
day on Petra’s website at:
https://www.petradiamonds.com/investors/results-reports/ and on
the link above.
There will be a second webcast on 14
September 2021 for international investors at 4:00pm BST. Participants can join the
webcast by registering at:
https://www.petradiamonds.com/go/prelim14sep2021-16h00
Investor Meet Company Webcast –
2:00pm BST today
Petra will also be hosting an investor presentation
predominantly aimed at retail investors with Investor Meet Company
at 2:00pm BST on 14 September 2021. Participants can join the
webcast by registering at:
https://www.investormeetcompany.com/petra-diamonds-limited/register-investor
Notes to Summary of Results
Table:
The Group uses several non-GAAP measures above and throughout
this report to focus on actual trading activity by removing certain
non-cash or non-recurring items. These measures include adjusted
mining and processing costs, profit from mining activities,
adjusted EBITDA, adjusted net profit after tax, adjusted earnings
per share, US$ loan note 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, amortisation of right-of-use asset,
costs and fees relating to investigation and settlement of human
rights abuse claims, share-based expense, net finance expense, tax
expense, loss on discontinued operations, net of
tax, impairment charges, expected credit loss release/
(charge), gain on extinguishment of Notes net of unamortised costs,
profit on disposal of subsidiary and net unrealised foreign
exchange gains and losses
4. Adjusted net
profit/(loss) after tax is net profit/(loss) after tax stated
before impairment charge, expected credit release (loss)
provision, gain on extinguishment of Notes net of
unamortised costs, profit on disposal net unrealised foreign
exchange gains and losses, and excluding taxation (charge) credit
on net unrealised foreign exchange gains and losses and excluding
taxation credit on impairment charge.
5. Impairment charge of
US$17.7 million (30 June 2020: US$50.5
million) was due to the Group’s impairment review of its
operations and other receivables. Refer to note 16 for further
details.
6. Reversal of
impairment of BEE loans receivable of US$5.8
million (30 June 2020:
US$10.9 million impairment charge) is
due to the Group’s expected credit loss assessment of its BEE loans
receivable. Refer to note 13 for further details.
7. The profit on
disposal of subsidiary of US$14.7
million includes the reclassification of foreign currency
translation reserve, net of tax of Sekaka Diamonds (Pty)
Ltd.
The loss on discontinued operations
reflect the results of the Williamson operation (net of tax),
including impairment, of US$52.1
million (FY 2020 results have been amended for
comparability) as per the requirements of IFRS 5; refer to Note
17.
8. Adjusted EPS from
continuing operations is stated before impairment charge, expected
credit release (loss) provision, gain on extinguishment of
Notes net of unamortised costs, profit on disposal of
subsidiary, costs and fees relating to investigation and
settlement of human rights abuse claims, net unrealised foreign
exchange gains and losses, and excluding taxation (charge) credit
on net unrealised foreign exchange gains and losses and excluding
taxation credit on impairment charge.
9. The US$650 million loan note represents the gross
capital of US$nil (30 June 2020:
US$650 million), including US$nil
accrued interest (30 June 2020:
US$26.9 million). These loan notes
were settled in full following the debt restructuring completed
during March 2021. Refer to detailed
Debt Restructuring Note 8.
10. Bank loans and borrowings
represent amounts drawn under the Group’s refinanced South African
bank facilities as part of the Restructuring and comprise the
ZAR1.068 billion term loan
(US$74.8 million), net of unamortised
transaction costs capitalised of US$1.7
million, and ZAR402.1 million
(US$28.2 million) drawn (including
accrued interest) under the ZAR509.6
million (US$35.7 million)
revolving credit facility. Under the revolving credit facility,
ZAR109.6 million (US$7.7 million) remains undrawn and
available.
11. BEE partner bank facilities
represent the BEE guarantees of US$nil (ZARnil) (30 June 2020: US$40.0
million (ZAR693.6
million)). During FY 2021 and as part of the debt
restructuring, the BEE partner bank facilities (which comprised the
BEE guarantees) were settled by the Group through proceeds of the
term loan under the Group’s South African bank facilities. Refer to
note 10 above for further detail.
12. Consolidated Net Debt is bank
loans and borrowings plus loan notes, less cash, less diamond
debtors and includes the Black Economic Empowerment
guarantees of ZARnil (US$nil) as at 30 June
2021 (ca. US$40.0 million
(ZAR693.6 million) as at 30 June 2020).
13. Operational free cashflow is
defined as cash generated from operations less acquisition of
property, plant and equipment.
14. Tax expense / credit is the tax
(expense) / credit for the Year excluding taxation credit / charge
on impairment charge and unrealised foreign exchange gain / (loss)
generated during the Year; such exclusion more accurately reflects
resultant Adjusted net profit /(loss).
15. The US$336.7 million loan notes have a carrying value
of US$ 327.3 million which represents
gross capital of US$336.7 million
(30 June 2020: US$nil), plus
US$11.1 million accrued interest
(30 June 2020: US$nil) net of
unamortised transaction costs capitalised of US$20.5 million. Refer to note 10 for further
detail.
16. Adjusted corporate overheads is
corporate overheads net of depreciation, amortisation of
right-of-use assets, share based payment expense and costs and fees
relating to investigation and settlement of human rights abuse
claims.
For further
information, please contact:
Petra Diamonds,
London
Telephone: +44 20 7494 8203
Cathy Malins
Des Kilalea
Marianna Bowes
investorrelations@petradiamonds.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 mine in Tanzania (Williamson).
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. 230 million carats,
which supports the potential for long-life operations.
Petra strives to conduct 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'. The Company’s
US$336.7 million notes due in 2026
are listed on the Irish Stock Exchange and admitted to trading on
the Global Exchange Market. For more information, visit
www.petradiamonds.com.
CEO’S REVIEW
A resilient business and market
While FY 2021 continued to present a number of challenges, both
internal and external, real progress was made in terms of
stabilising our balance sheet, further to the completion of the
recapitalisation of the Group (the “Restructuring”), and continuing
to optimise production at all our assets, particularly the Cullinan
mine, set against the backdrop of an improving diamond market.
Our most important performance indicator is safety: while the
number of injuries experienced during the Year reduced 7% from 45
to 42, it was disappointing that the number of lost-time injuries
increased from 19 to 25, which led the Group LTIFR to increase from
0.29 in FY 2020 to 0.44 in FY 2021. An evaluation of the incidents
has determined that the majority of these were of low severity and
behavioural related, and our approach is therefore to use
initiatives to drive a change in people’s mindsets and to foster
greater awareness towards achieving an accident-free workplace.
The impact of COVID-19 on individuals and the economy has
increased the levels of stress and impacted on the emotional
wellbeing of all our employees. We believe this has contributed to
the deterioration in safety performance. This is borne out by an
increase in accidents and fatalities across the South African
mining sector as a whole since the outbreak of the COVID-19
pandemic, as measured by the Minerals Council South Africa.
Addressing this issue therefore requires a holistic approach,
including training, mentorship, communication and wellbeing
initiatives.
The COVID-19 pandemic remains an ongoing business challenge. In
South Africa, we are currently
experiencing a third wave of infections and the disruption to
operations is mainly around the necessary quarantine of confirmed
or suspected cases amongst our workforce. However, we have the
systems and processes in place to manage this without materially
impacting production. Our focus now is on assisting the Government
with its vaccination drive and we have vaccination stations and
campaigns to encourage their uptake available at, or near to, each
of our operations. While the vast majority of those who contract
the virus only have mild to moderate symptoms, we have very sadly
lost 14 employees to the disease as at the date of these results.
Our heartfelt condolences go to the loved ones and colleagues of
the deceased.
In terms of production, output for the Year decreased 2% to
3,240,312 carats (FY 2020: 3,291,046 carats), notwithstanding
record annual production from Cullinan of 1.94 Mcts. As previously
announced, production at Finsch was impacted by unexpected levels
of waste ingress during Q2 FY 2021, with subsequent mitigating
measures reducing throughput during the second half of the Year. In
addition, production at both Finsch and Koffiefontein was impacted
by the high level of rainfall during the third quarter. Cullinan’s
record 4.61 Mt ROM production (FY 2020: 3.97 Mt) was partially
offset by these factors, resulting in the Group’s ROM tonnages for
the Year increasing by 3% to 7.7 Mt (FY 2020: 7.5 Mt).
Cullinan performed very well for the Year, benefitting from the
Project 2022 business improvement throughput initiatives. ROM
tonnes increased 16% to 4.61 Mt (FY 2020: 3.97 Mt), and spare
capacity in the plant was utilised with a 73% increase in tailings
tonnes to 0.45 Mt (FY 2020: 0.26 Mt), leading to an overall record
tonnes treated at the operation under Petra stewardship of 5.06 Mt
(FY 2020: 4.23 Mt).
The mine also affirmed its place as a producer of world-class
diamonds, with the recovery of a number of spectacular stones,
namely:
· September
2020: The Letlapa Tala collection of five high quality blue
diamonds totalling 85.6ct were recovered all in the space of one
week’s production at the mine. The collection was sold as a suite
of stones to a partnership between De Beers and Diacore for
US$40.36 million in November 2020.
· January 2021:
A 299ct high quality white diamond was recovered and subsequently
sold to Stargems DMCC for US$12.18
million in March 2021.
· February 2021:
A 11.82ct high quality blue diamond was recovered and subsequently
sold for US$9.53 million in
April 2021.
· April 2021: An
exceptional 39.34ct blue diamond was recovered and sold post Year
end to a partnership between De Beers and Diacore for US$40.18 million in July
2021, representing a remarkable US$1.0 million per carat. This was the most
valuable diamond sold in Petra’s history and is believed to be the
most valuable rough stone per carat ever sold (though since not all
rough diamond sales are publicly disclosed, this cannot be
established with certainty).
The sale of the Letlapa Tala collection, the 299ct white diamond
and the 11.82ct blue diamond contributed US$62.0 million in ‘exceptional diamond sales’ to
revenue for the Year (FY 2020: US$14.9
million), being the highest contribution in Petra’s history.
Post Year end, Petra has also recovered and sold two further
special diamonds from the Cullinan mine, being a 342.92ct white
stone and an 18.30ct blue stone, into a partnership with Stargems
(Pty) Ltd. Petra received an upfront payment of US$10.0 million for the white stone and
US$3.5 million for the blue stone, as
well as retaining a 50% interest in the profit uplift of the
polished proceeds of both diamonds, after costs.
The higher revenue for the Year led to Adjusted EBITDA being up
101% to US$135.4 million (FY 2020:
US$67.3 million) and Operational free
cashflow of US$120.1 million (FY
2020: operational cash outflow of US$12.3
million). However, overall profitability for the Year was
impacted by Depreciation of US$75.9
million (FY 2020: US$69.3
million) and Net finance expenses of US$67.0 million (FY 2020: US$70.8 million) and the Company therefore
recorded an Adjusted loss after tax of US$16.1 million (FY 2020: US$54.7 million).
Outlook for FY 2022
Looking ahead to FY 2022, we are guiding production to increase
to between 3.3 and 3.6 Mcts, with the South African operations
estimated to contribute 3.1 to 3.4 Mcts and Williamson estimated to
contribute 0.22 to 0.27 Mcts.
At Williamson, preparations to resume production in H1 FY 2022
continue with the redeployment of employees and contractors, while
receiving relevant refresher and safety training, and the
recommissioning of plant and equipment. The Board has decided to
review its strategic options at Williamson and the asset has
therefore been classified as an asset held for sale for financial
reporting purposes.
Recapitalisation of the business
In March 2021, Petra completed the
recapitalisation of the Group, thanks to the continued support of
its bondholders, shareholders and its South African Lender Group.
The completion of the Restructuring, along with the aforementioned
sale of Exceptional Stones during the Year, helped the Group’s
Consolidated net debt, excluding Williamson, reduce by nearly two
thirds to US$228.2 million at
30 June 2021, from US$700.3 million at 31
December 2020. The key features of the Restructuring are set
out on page 16 of this announcement.
The Restructuring has provided Petra with a more stable and
sustainable capital structure, significantly reduced financial
burdens and greater liquidity, leaving us in a stronger position to
focus on optimising the value of our diversified asset base and to
deliver growth for all our stakeholders.
ESG performance
The Company remained highly active across all the different
areas of ESG, which are integrated into our strategy and how we
manage the business.
In terms of environmental performance, our team continued to
focus on the efficient use of water and energy during the Year, as
well as responsible waste management across the operations. Our
total carbon footprint reduced 16% to 405,807 tCO2-e (FY
2020: 483,431 tCO2-e), mainly due to the lower production with
Williamson being on care and maintenance, and associated reduction
in energy consumption for the Year, positively impacted by our
focus on energy efficiency. Our carbon emitted per carat decreased
7% to 0.125 tCO2-e/ct (FY 2020: 0.134
tCO2-e/ct) due to the combined effect of the overall
decrease in carats produced and associated lower energy use for the
Year.
Significant progress was made in terms of the Group’s
environmental strategy in FY 2021 with the Board approval of the
Group’s Climate Change Adaptation Strategy, which will assist Petra
in staying on top of rapidly changing legislation and in meeting
stakeholder expectations. The Company also improved its CDP climate
change reporting to the A- category, placing Petra in the
leadership category and demonstrating our strong commitment to this
area.
Petra continued to focus on the development of a suitably
diverse workforce. The overall gender diversity of the Group
increased to 20% in FY 2021 (FY 2020: 19%), which remains above
that of the industry average in South
Africa, which ranges from 12%–17% depending on the
commodity. We were also pleased to improve gender diversity at the
higher levels of the business, with an increase in female
representation at Board, senior management and management level,
and our employee development programmes once again focused on the
advancement of women and historically disadvantaged South Africans
(“HDSAs”).
Our community programmes remained very active and the Petra
Hardship Fund continued to supply aid to address some of the most
urgent needs of our local communities in South Africa. We also completed a number of
community projects during the Year, including the refurbishment of
water pump stations and the completion of electrification of
households and informal dwellings in Kgatelopele, near the Finsch
mine. A major drive for improved stakeholder relations also saw the
number of engagements recorded by the Company increase to 658, with
the majority of the increase relating to training sessions for
small, medium and micro enterprises, in order to drive enterprise
development in our local communities.
More detail on our ESG performance for the Year will be reported
in our 2021 Annual and Sustainability Reports, which are due to be
published on 12 October 2021.
Addressing the human rights
allegations at Williamson
In May 2021, Petra announced the
findings of the its independent Board Sub-Committee in relation to
alleged breaches of human rights at the Williamson mine in
Tanzania raised by the UK law
firm, Leigh Day and the independent
NGO, Rights and Accountability In Development (“RAID”). The
mine is operated by Williamson Diamonds Limited (“WDL”), which is
25% owned by the Government of Tanzania and 75% owned by Petra. Petra
acquired its majority interest in WDL in 2009.
Based on the conclusions of the independent Board Sub-Committee,
the Company acknowledged that past incidents have taken place that
regrettably resulted in the loss of life, injury and the
mistreatment of illegal diggers, within the WDL Special Mining
Licence area (“SML”). The incidents in question involved WDL’s
third-party security provider Zenith Security as well as the
Tanzanian Police Force (“TPF”). During the investigation, no
evidence emerged that WDL personnel were directly involved in these
actions.
The Company took immediate precautionary measures to address the
concerns raised, ahead of the findings of the investigation and in
order to mitigate the risks of future incidents, including the
appointment of a new third party security contractor, the training
of all security personnel and internal management at WDL on human
rights and their obligations in terms of the UN’s Voluntary
Principles on Security and Human Rights and the launch of a
Community Grievance Mechanism.
Further to the findings of the independent Board Sub-Committee,
additional measures were put in place to address issues identified,
including the revision of reporting structures to enable the more
timely, accurate and transparent reporting of all incursions and
incidents, the overhaul of stakeholder engagement at the mine, as
well as ongoing work Group-wide, and the establishment of an
independent Tier 2 Operational Grievance Mechanism, which aims to
investigate and resolve complaints following the application of
local legal requirements, including the provision of free and
independent advice from local lawyers.
Having already established the Operational Grievance Mechanism
for complaints and grievances related to operational impacts, the
Company has continued with the process of the design and
implementation of a non-judicial, Independent Grievance Mechanism
(“IGM”) to address allegations of severe human rights impacts. A
series of engagements with Government Ministries and Agencies,
Civil Society and NGOs were conducted in Dodoma and Dar es Salaam,
seeking feedback and support on the proposed design of the IGM. The
company has specialist external support from Synergy Global
Consulting (“Synergy”) in the development of this process. Synergy
is a specialist international consultancy with over twenty years’
experience working with companies, governments and community-based
organisations.
Further detail on all the measures taken by Petra and WDL to
address the findings are set out in the Company’s announcement of
12 May 2021 ‘Findings of the
Independent Board Sub Committee’ which is available to view along
with all other related announcements here:
https://www.petradiamonds.com/our-operations/our-mines/williamson/allegations-of-human-rights-abuses-at-the-williamson-mine/.
Petra also announced on 12 May
2021 that it had reached a settlement, on a no admission of
liability basis, in relation to claims brought in London by Leigh
Day, on behalf of the anonymous claimants, in relation to
alleged breaches of human rights, associated with third-party
security operations, within the SML.
The agreed total settlement figure announced in May 2021 was £4.3 million (US$6.1 million), which includes the sum to be
distributed to the claimants by Leigh
Day, a contribution to the claimants’ legal expenses and
significant funds, which Petra has committed to invest in
programmes dedicated to providing long-term sustainable support to
the communities living around the mine. The Company has also
incurred and provided for additional total costs of US$6.6 million related to this matter in its FY
2021 accounts, the majority of which relate to legal, consultant,
investigation and expert fees.
During the period from 1 July to the end of August 2021, there were a total of 89 incidents
of illegal incursions onto the Williamson mine lease area,
resulting in two security officials (one belonging to the third
party security provider and one belonging to the TPF) suffering
minor injuries, and in four arrests being made. We believe the
contracted security teams and the TPF acted in accordance with the
Voluntary Principles on Security and Human Rights. WDL is
continuing to engage extensively with local stakeholders, including
with surrounding village leaders and community forums, as well as
with local and regional Government and police officials, to get
their support in order to reduce these incursions.
As previously noted, the Board has decided to review its
strategic options at Williamson. However, this does not impact the
Company’s commitment to the community programmes, IGM and other
actions and initiatives detailed in its 12
May 2021 announcement referenced above.
A resilient diamond market
COVID-19 continued to have a significant impact on the diamond
market in FY 2021, with related regulations and other measures to
control the spread of the virus continuing to impose restrictions,
particularly around the movement of people and international
travel.
Petra maintained its flexible sales approach during the Year in
order to maximise client attendance at its sales. This meant that
we continued to hold rough diamond tenders for the South African
goods in Antwerp (having fulfilled
our regulatory obligation to offer a portion of goods for sale to
the State Diamond Trader and local beneficiation groups in
South Africa), rather than in
Johannesburg, where travel
restrictions have severely limited participation by international
diamond buyers. We will continue to review this approach and
reinstate sales in South Africa
when conditions are right.
Despite the ongoing challenges around COVID-19, overall the
market has remained remarkably resilient, which we attribute to a
number of factors:
· control discipline by the majors (De Beers
and ALROSA), both via production cuts and restriction of supply to
the midstream during periods of lower demand;
· the significant contraction of production
supply in 2021, including the winding down of the Argyle mine, has
served to lower inventories in the pipeline generally and restore a
better balance between supply and demand;
· capacity returned to the midstream
manufacturing segment in India;
and
· strong consumer demand was experienced in
the key retail markets, notably the US and China, leading to shortages in certain
polished goods; commentators note that for some there is increased
consumer disposable income due to lack of spend on competing
product categories, such as holidays and experiences, and that
natural diamonds remain highly desirable as a way to forge deeper
human connections and to celebrate our most important life
events.
In 2020, the global diamond market experienced one of the most
severe contractions in supply on record, falling 22% by volume to
107.1 Mcts (2019: 138.2 Mcts). Material reductions in supply came
from Australia (due to the closure
of the Argyle mine), Russia,
Botswana, Canada, the Democratic Republic of Congo and Namibia, due to a combination of production
being slowed due to COVID-19, pending exhaustion of resources, mine
closures, operations transitioning from open pit to underground and
falling alluvial output. Increased volume of output was recorded in
South Africa and Zimbabwe.
For CY 2021, various sources forecast that rough supply will
increase as mines come back into production, though the increase
will be ameliorated by the closure of Argyle which still
contributed 11 Mcts to global output in 2020. Bain & Co’s
“Optimistic” scenario projects that mines which continue to operate
will reach pre-pandemic production levels by 2021-2022 and that
global inventories will gradually sell out in a year. Longer
term, there are forecast to be few material additions to production
over the next decade, with rough diamond supply forecast to remain
“almost flat” at 2021 levels over the next 10 years, according to
Bain & Co, with few new projects coming on line.
In terms of demand, Petra’s participation in the Natural Diamond
Council (“NDC”) remains an important strategy in terms of helping
to positively impact the long-term fundamentals for our market. The
NDC aims to ensure that natural diamonds inspire and excite today’s
consumer and it has secured rising Hollywood actor Ana de
Armas as its global market ambassador. A new global
marketing campaign starring Ms de Armas launched in September 2021 to support the market in advance
of the key festive retail season and can be viewed at
https://www.youtube.com/watch?v=ZAXKavG2vOE.
Petra
Sales and Prices
FY 2021 revenue increased 65% to US$402.3
million (FY 2020: US$243.3
million) driven by sales from Exceptional Stones
contributing US$62.0 million during
the Year (FY 2020: US$14.9 million);
the highest annual contribution to revenues from the sale of
Exceptional Stones. On a like for like basis, realised diamond
prices in Q4 FY 2021 increased ca. 5.7% from those achieved in Q3
FY 2021.
Despite lower production for the Year, the amount of diamonds
sold increased 51% to 3,930,136 carats (FY 2020: 2,598,252 carats)
due to the improvement in market conditions and the easing of
certain COVID-19 related restrictions which allowed for a higher
volume of sales to take place, including the release of inventory
held over from the prior year.
The Company recovered a number of Exceptional Stones from the
Cullinan mine in FY 2021 and to date in FY 2022, as set out already
on pages 6 to 7 of this announcement. These prices are included in
the averages reported for Cullinan in the table below.
Prices on a like-for-like basis increased ca. 9% compared to
prices achieved in FY 2020 and closed the Year at levels above the
prices achieved before the COVID-19 pandemic outbreak.
Diamond prices
achieved per operation
|
FY
2021
US$/ct |
FY
20202
US$/ct |
Cullinan |
1111 |
981 |
Finsch |
77 |
75 |
Koffiefontein |
419 |
387 |
Notes:
1. Prices
include Exceptional Stones. Prices excluding Exceptional Stones
US$83/ct (FY 2020: US$86/ct).
2. Prices
achieved in FY 2020 and FY 2021 do not reflect true run-of-mine
averages as the Company had to withhold certain mostly lower value
goods for sale in Q4 FY 2020 due to the depressed pricing
environment; these goods were sold shortly after Year end, which
negatively impacted unit prices in FY 2021, further exacerbated by
the sale of other low value stock during June 2021.
FINANCIAL REVIEW
Revenue
FY 2021 revenue increased 65% to US$402.3million (FY 2020: US$243.3 million) driven by sales from
Exceptional Stones contributing US$62.0
million during the Year (FY 2020: US$14.9 million); the highest annual contribution
to revenue from the sale of Exceptional Stones in Petra’s history.
Diamonds sold for the Year increased 51% to 3,930,136 carats (FY
2020: 2,598,252 carats), excluding Williamson, while rough diamond
prices realised by Petra increased ca. 9% in FY 2021 on a like for
like basis.
Mining and processing costs
The mining and processing costs for the Year are comprised of
on-mine cash costs as well as other operational expenses. A
breakdown of the total mining and processing costs for the Year is
set out below.
|
On-mine cash
costs1
US$m |
Diamond royalties
US$m |
Diamond inventory and
stockpile movement
US$m |
Group technical,
support and marketing costs2
US$m |
Adjusted mining and
processing costs
US$m |
Depreciation3
US$m |
Total mining and
processing costs (IFRS)
US$m |
FY 2021 |
197.6 |
2.9 |
39.1 |
21.7 |
261.2 |
76.0 |
337.2 |
FY 2020 |
191.2 |
2.6 |
(42.6) |
18.1 |
169.3 |
68.9 |
238.2 |
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. Includes
amortisation of right-of-use assets under IFRS 16 of US$0.6 million (FY 2020: US$0.2 million) and excludes exploration and
corporate/administration.
Absolute on-mine cash costs in FY 2021 increased 3.3%, compared
to FY 2020, due to:
· the effect of
translating ZAR denominated costs at the South African operations
at a stronger ZAR/USD exchange rate (1.7% increase);
· inflationary
increases, including the impact of electricity and labour costs
(6.0% increase);
offset by:
· the variable cost
impact of changing production volumes across the South African
operations (0.8% decrease); and
· net savings,
including Project 2022 initiatives (3.6% decrease).
Diamond inventory and stockpile movements reflect the release of
inventories during FY 2021 resulting in a charge of US$39.1 million, compared to a credit of
US$42.6 million in FY 2020 due to
increased levels of stockholding driven by an inability to hold
tenders due to COVID-19.
Profit from mining activities
Profit from mining activities increased 90% to US$142.8 million (FY 2020: US$75.0 million), mainly due to increased volumes
sold, improved diamond pricing and the contributions from
Exceptional Stones.
Adjusted corporate overhead – general
and administration
Corporate overhead (before costs and fees relating to
investigation and settlement of human rights claims, depreciation
and share-based payments) increased marginally to US$7.4 million for the Year (FY 2020:
US$7.2 million), mainly attributable
to the ZAR strengthening against the USD in addition to cost
curtailment measures introduced during the Year.
During the Year, the Group received payments from the South
African government under the temporary employee relief scheme
(“TERS”) of US$3.5 million (FY 2020:
US$nil). Of the US$3.5 million TERS
payment received, US$0.3 million was
attributable to corporate overheads expenditure and US$3.2 million was attributable to Mining and
processing costs.
Adjusted EBITDA
Adjusted EBITDA, being profit from mining activities less
exploration and corporate overhead, increased 101% to US$135.4 million (FY 2020: US$67.3 million), representing an adjusted EBITDA
margin of 34% (FY 2020: 28%), reflecting better overall pricing,
including proceeds from Exceptional Stones.
Depreciation
Depreciation for the Year increased to US$75.9 million (FY 2020: US$69.3 million), mainly due to the strengthening
of the ZAR against the USD and increased throughput at Cullinan,
partially offset by reduced production at Finsch and
Koffiefontein.
Impairment charge
As a result of the impairment reviews carried out at Cullinan,
Finsch and Koffiefontein, and the Group’s other receivables during
the Year, the Board recognised an overall impairment charge of
US$17.7 million (FY 2020:
US$50.5 million). Further details are
provided in note 16.
Asset level impairments at Finsch and Koffiefontein amount to
US$17.3 million (FY 2020:
US$50.9 million at Cullinan, Finsh
and Koffiefontein) (representing some 2.4% of the Group’s carrying
value of property, plant and equipment of US$711.8 million (FY 2020: US$742.7 million) pre-impairment). There were no
reversals of prior year impairments for Cullinan.
Impairment of BEE loans receivable – expected credit
loss provision
The Group has applied the expected credit loss impairment model
to its BEE loans receivable. In determining the extent to which
expected credit losses may apply, the Group assessed the future
free cashflows to be generated by the mining operations, based on
the current LOM plans and the conclusion during the Year of an
offset agreement with the BEE partners. Based on the assessment,
the Group’s free cashflows generated indicated a net credit loss
reversal totalling US$5.8 million
(30 June 2020: US$10.9 million expected credit loss provision),
comprising of US$6.1 million
provision reversal in respect of Cullinan and Finsch and an
additional US$0.3 million expected
credit loss provision in respect of Koffiefontein (30 June 2020: US$10.9
million provision comprising US$6.1
million in respect of Cullinan and Finsch, and US$4.8 million in respect of Koffiefontein)
(refer to note 13 for further detail).
Net financial income / expense
Net financial income of US$223.4
million (FY 2020: US$152.9
million expense) comprises:
· net gain on extinguishment of the Notes of
US$213.3 million (FY2020: US$nil)
comprising a gain of US$221.0 million
attributable to the debt for equity conversion and a loss of
US$7.7 million on the substantial
modification of the Notes;
· net unrealised foreign exchange gains of
US$77.1 million (FY 2020:
US$82.1 million losses), driven by
significant volatility in the Rand closing the Year at US$1:ZAR14.27
compared to US$1:ZAR17.32 at 30 June
2020, and representing (i) the unrealised foreign exchange
gains on the foreign currency retranslation of cross border loans
considered to be repayable in the foreseeable future, and (ii)
unrealised losses on forward exchange contracts (refer to note 6
for further detail); and
· interest received on bank deposits of
US$0.7 million (FY 2020: US$1.2 million);
offset by:
· the acceleration of unamortised finance
costs attributable to the Notes of US$2.7
million (FY2020: US$nil);
· interest expense on the Group’s debt and
working capital facilities of US$51.5
million (FY 2020: US$52.4
million);
· net interest payable on the BEE Partner
loans and amortisation of lease liabilities in accordance with IFRS
16 of US$3.1 million (FY 2020:
US$6.7 million);
· a charge for the unwinding of the present
value adjustment for Group rehabilitation costs of US$4.3 million (FY 2020: US$4.6 million); and
· net realised foreign exchange losses on
settlement of forward exchange contracts of US$6.1 million (FY 2020: US$8.3 million).
Tax credit/charge
The tax charge of US$23.0 million
(FY 2020: US$52.5 million credit;
reflecting principally the utilisation of certain capital
allowances and the impact of the deferred taxation on the
impairment charge, predominantly at Cullinan and Finsch, which
reduced existing deferred tax liabilities) comprises deferred tax
charges of US$19.9 million relating
to utilisation of tax losses as a result of unrealised foreign
exchange gains at Cullinan during the Year and US$2.7 million in respect of other capital
allowances, with an income tax charge of US$0.3 for the Year (FY 2020: US$0.6 million).
The Group’s current Year effective tax rate of 8.9% (FY 2020:
24.1%) is lower than the South African tax rate of 28% (the Group’s
primary tax paying jurisdiction) due to the recognition of the gain
on extinguishment of the Notes for which no tax consequences are
recognised. During the Year, there was a reversal of deductible
temporary differences relating to the current Year impairments of
property, plant and equipment, reversal of prior year tax losses
recognised at Finsch and Cullinan and other reversing deductible
temporary differences. There were no taxation adjustments arising
from items of other comprehensive income and expense.
Profit on disposal Sekaka Diamonds
(Pty) Ltd (“Sekaka”)
The profit on disposal of subsidiary of US$14.7 million relates to the Group’s disposal
during the Year of its exploration operations in Botswana via the disposal of interests in
Sekaka, and is made up of a US$0.3
million disposal consideration, net profit of US$1.3 million for the Period 1 July 2020 to the 30
November 2020 disposal date, and the recycling of the
foreign currency translation reserve of US$13.3 million, offset by a net asset disposal
amount of US$0.2 million. Refer to
Note 17 for the detailed breakdown.
Loss on discontinued operations –
Williamson
The Board has decided to review its strategic options at
Williamson and the asset has therefore been classified as an asset
held for sale. As a result of the strategic review, the loss on
discontinued operations of US$52.1
million relates to the Board’s decision to reclassify
Williamson mine as a discontinued operation in line with the
criteria under IFRS 5 in meeting the definition of a disposal group
and a discontinued operation for financial reporting
purposes.
In terms of the IFRS requirements to measure the assets of a
disposal group at the lower of carrying amount and fair value less
costs to sell, the determination of the fair value is complex and
subject to considerable judgment. Based on management’s best
estimate of the fair value at the reporting date, the following
amounts have been recognised as a result of that
reclassification:
· an impairment
charge of US$21.4 million in respect
of property, plant and equipment;
· a US$11.2 million charge attributable to
Williamson’s net loss for the Year. For comparative purposes, the
prior period results for Williamson have been restated, which show
a net loss of US$58.0 million
(inclusive of an impairment charge of property, plant and equipment
and certain receivables of US$34.6
million and US$6.8 million
respectively); and
· a US$19.5 million provision for unsettled and
disputed tax claims arising from the ordinary course of
business.
Refer to note 17 for further
detail.
Group loss/profit
The Group’s net profit after tax is US$196.6 million (FY 2020 net loss: US$223.0 million).
Earnings per share
Basic profit per share from continuing operations of
6.67 US$ cents was recorded (FY 2020:
15.26 US$ cents loss per share).
Adjusted loss per share from continuing operations (adjusted for
impairment charge, expected credit release (loss) provision,
gain on extinguishment of Notes net of unamortised costs, profit on
disposal of subsidiary, costs and fees relating to investigation
and settlement of human rights claims, net unrealised foreign
exchange gains and losses, and excluding taxation (charge) credit
on net unrealised foreign exchange gains and losses and excluding
taxation credit on impairment charge) of 0.46 US$ cents was recorded (FY 2020:
5.04 US$ cents loss (adjusted for
impairment charges, taxation credit on impairment charge, net
unrealised foreign exchange gains and losses)).
Operational free cashflow
During the Year, operational free cashflow of US$120.1 million (FY 2020: US$12.3 million outflow) reflects the impact of
stronger diamond prices, the contribution of Exceptional Stones and
lower mining and processing costs derived from the optimisation of
production and cost efficiencies from Project 2022. This positive
cashflow was offset by:
· US$12.1 million (FY 2020: US$33.3 million) cash finance expenses net of
finance income and realised foreign exchange gains/(losses);
· US$7.0 million (FY 2020: US$14.1 million) advances to BEE Partners,
largely related to servicing of BEE bank debt prior to the
Restructure, with the advances recoverable against future BEE
Partner distributions; and
· Restructuring fees
settled during the Year of US$29.9
million (FY 2020: US$3.8
million net advances paid to advisors).
Cash and diamond debtors
As at 30 June 2021 the Company had
cash at bank of US$163.8 million
(30 June 2020: US$67.6 million). Of these cash balances,
US$147.7 million was held as
unrestricted cash (30 June 2020:
US$53.6 million), US$15.3 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 2020: US$13.3 million) and US$0.8 million was held by Petra’s bankers as
security for other environmental rehabilitation bonds lodged with
the Department of Mineral Resources and Energy in South Africa (30 June
2020: US$0.7 million).
Diamond debtors at 30 June 2021
were US$38.3 million (30 June 2020: US$4.8
million), with the June 2021
tender closing at Year-end, and debtors settling shortly
thereafter. Both Diamond Debtors and Diamond Inventory for FY 2020
were significantly impacted by the inability to host tenders during
Q4 FY 2020 following the initial COVID-19 outbreak.
Diamond inventory
Diamond inventory at 30 June 2021
decreased to US$45.1 million
(30 June 2020: US$84.1m) reflecting the release of inventory
during the Year.
Loans and borrowings
The Group had loans and borrowings (measured under IFRS) at Year
end of US$430.3 million (30 June 2020: US$769.0
million), comprised of the US$327.3
million Notes (includes US$11.3
million accrued interest and unamortised transaction costs
of US$20.7 million) (30 June 2020: US$676.9
million), bank loans and borrowings of US$103.0 million (includes interest of
US$0.1 million and unamortised
transaction costs of US$1.7 million)
(30 June 2020: US$52.1 million) following the Restructuring
completed in March 2021, the
Company’s guarantees related to the BEE Partner debt facilities
were US$nil (30 June 2020:
US$40.0 million); refer to ‘The
Restructuring’ section on page 16 for further detail. Bank debt
facilities undrawn and available to the Group at 30 June 2021 were US$7.7
million (30 June 2020:
US$nil).
Consolidated net debt at 30 June
2021 was US$228.2 million
(30 June 2020: US$693.2 million).
Covenant measurements attached to
banking facilities
The Company’s EBITDA-related covenants associated with its
banking facilities during the Year were as outlined below:
· to maintain a 1.3x
debt service cover ratio tested semi-annually on a rolling 12-month
basis; and
· to maintain
liquidity requirements, being the aggregate of the undrawn amounts
available under the RCF and consolidated cash and cash equivalents
(excluding diamond debtors) not falling below ZAR200 million (US$14.0
million).
Going concern considerations
During FY 2020 the going concern consideration was dependent on
the successful completion of the Restructuring. In March 2021, the Restructuring was successfully
completed which resulted in solid progress towards stabilising the
balance sheet and cash reserves.
The Group closely monitors and manages its liquidity risk, and
cash forecasts are regularly produced and run for different
scenarios. Careful consideration was given to potential risks to
the forecasts under the review period. The Board carefully
considered risks associated with COVID-19 which were considered to
focus primarily on the potential for further production disruption,
deferral of tenders due to travel restrictions and adverse impacts
on diamond pricing.
In light of both normal trading risks and elevated risks
associated with the potential impact of the COVID-19 pandemic, 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:
· an unforeseen
disruption to operations at its South African mines due to either
COVID-19 restrictions or otherwise;
· an unforeseen
deferral of a rough diamond tender, due to COVID-19 restrictions,
coupled with a significant price decline at an assumed subsequent
private sale (in line with a similar process followed in FY
2020);
· a sustained 5%
decrease in forecast rough diamond prices throughout the forecast
period; and
· an increase in
forecast operating cost.
Under the base case, the forecasts indicate that the Company
will be able to operate within covenants set out in the financing
agreements and maintain sufficient liquidity.
However, as detailed above, the first lien covenants were set
with limited headroom to the Company’s base case. As such, results
of the Company’s stress testing indicate that in the event of a
combination of all tested scenarios, possible covenant breaches
associated with the South African banking facilities may occur at
June 2022, while a breach is also
projected in December 2022 on an
individual stress test basis. At the time of possible covenant
breaches under these scenarios, projected cash balances exceed
outstanding debt under these facilities, which would allow the
Group to fully pay down the drawn facilities prior to the breach
occurring while maintaining adequate liquidity. The forecasts
indicate that under the stress-tested scenarios, the Group is not
reliant on the facilities.
The Board is of the view that the longer-term fundamentals of
the diamond market remain sound and that the Group will continue to
benefit from Project 2022 (which includes increased production and
reduced spend) throughout the review period and beyond.
Based on its assessment of the forecasts, principal risks and
uncertainties and mitigating actions considered available to the
Group in the event of downside scenarios, the Board confirms that
it is satisfied that the Group will be able to continue to operate
and meet its liabilities as they fall due over the review period.
Accordingly, the Board has concluded that the going concern basis
in the preparation of the financial statements is appropriate and
that there are no material uncertainties that would cast doubt on
that basis of preparation.
BEE loans receivable
BEE loans receivable of US$46.6
million (FY 2020: US$137.0
million) relate to advances provided to the Group’s BEE
Partners to enable them to discharge interest and capital
commitments under the BEE Lender facilities, advances to the BEE
Partners to enable trickle payment distributions to both Kago
Diamonds (Pty) Ltd’s (“Kago Diamonds”) shareholders and to the
beneficiaries of the Itumeleng Petra Diamonds Employee Trust
(“IPDET”) (Petra Directors and Senior Managers do not qualify as
beneficiaries under the IPDET Trust Deed), and financing of their
interests in the Koffiefontein mine. As part of the Restructuring,
an offset agreement was entered into between the Company and its
BEE Partners allowing for the offsetting of the BEE loan receivable
against the BEE loan payable, thus resulting in a net BEE loan
receivable due from the BEE Partners. The repayment of these loans
by the mines to the BEE Partners will be from future free cashflows
generated by the mining operations.
As detailed in the section “Impairment of BEE loans receivable –
expected credit loss provision”, an IFRS 9 estimated credit loss
assessment was conducted at the end of the Year which resulted in a
partial net reversal of the expected credit loss provision of
US$5.8 million, following a
US$10.9 million expected credit loss
provision being raised against the BEE loans receivable at
30 June 2020. Refer to note 13 for
further detail.
During the Year, Petra advanced US$4.7
million (FY 2020: US$12.2
million) to facilitate the servicing of capital and interest
payments on behalf of the BEE Partners and US$2.3 million (FY 2020: US$1.9 million) for distributions to the
beneficiaries of the IPDET and shareholders of Kago Diamonds.
Refer to note 13 further detail on BEE loans receivable.
The Restructuring
In March 2020, Petra launched a
strategic review, in conjunction with a set of independent
advisers, in order to evaluate an optimal long-term capital
structure for the Group. The key focus of this review was to bring
down the Company’s leverage to a manageable level and it therefore
involved extensive consultations with the ad hoc group (“AHG”) of
the Company’s US$650 million 7.25%
senior secured second lien notes due in May
2022, as well as with the South African Lender Group. The
review also aimed to assess all strategic options available to
maximise value to stakeholders and included a formal sale process,
whereby interested parties could submit bids either for Petra or
for any parts of the business or assets of the Group.
In October 2020, the Company
announced that it had reached agreement in principle with the AHG
and the South African Lender Group on a common set of commercial
terms with respect to the Restructuring. Petra signed a Lock-Up
Agreement on 17 November 2020 with
the parties to the Restructuring, which binds each party into
supporting the Restructuring on the proposed terms. The Company’s
shareholders subsequently approved the scheme at a Special General
Meeting on 13 January 2021. On
10 March 2021 the Company announced
that it had completed the implementation of the Restructuring.
The key features of the Restructuring were as follows:
1. Partial reinstatement of the Notes debt and the
contribution by holders of the existing Notes of US$30.0 million in New Money, each to take the
form of new senior secured second lien notes ("New Notes"). The New
Notes of US$336.7 million (including
the New Money and fees paid as part of the transaction in New
Notes) have a maturity date of five years from completion. The New
Notes are subject to an interest rate of 10.50% Payment in Kind for
the first 24 months, reverting to a cash interest rate of 9.75%
thereafter. Those Noteholders that contributed to the New Money
were entitled to a greater portion of the New Notes.
2. Conversion of the remainder of the Notes debt into
equity, which resulted in the Noteholder group holding 91% of the
enlarged share capital of Petra Diamonds Limited, with the existing
shareholders holding the remaining 9%. Those Noteholders that
contributed to the New Money were entitled to a greater portion of
the equity.
3. The restructuring of the first lien facilities provided
by the South African Lender Group, with a new term loan of
ZAR1.2 billion in order to refinance
the existing drawn ZAR500 million WCF
and the BEE Facilities (approximately ZAR683
million), and a new RCF of ZAR560
million, constituted by the rollover of the existing RCF but
upsized by ZAR160 million. Both
facilities have a maturity date of three years from completion and
a first lien debt service cover ratio of 1.3x tested semi-annually
on a rolling 12-month basis which, if breached, will give rise to
an event of default under the new bank facilities. Both facilities
have an interest rate of JIBAR + 5.25% per annum.
4. New governance arrangements, whereby up to four of the
largest Noteholders as determined by the Restructuring Lock-Up
Agreement and who individually hold at least 5% of the shares in
Petra at the closing of the Restructuring, shall have a ‘Nomination
Right’ to nominate a person for appointment to the Board as a
non-independent Non-Executive Director, as well as the right to
appoint an observer to the Board (who will not have voting rights
at Board meetings). Any Board appointments must comply with the UK
Listing Rules and the Corporate Governance Code.
5. Certain cashflow controls will be introduced.
The full terms of the Restructuring are listed in the prospectus
released on 22 December 2020 and
further details are provided in note 8.
Other liabilities
Other than trade and other payables of US$49.1 million (comprising US$16.8 million trade creditors, US$5.8 million employee-related accruals and
US$26.5 million other payables) (FY
2020: US$52.5 million), the remaining
liabilities on the balance sheet mainly comprise provisions for
rehabilitation liabilities, post-retirement employee-related
provisions, provisions for costs and fees relating to investigation
and settlement of human rights claims, lease liabilities and
deferred tax.
During the Year, the Group’s rehabilitation provision increased
from US$45.3 million to US$57.9 million, mainly attributable to
Cullinan’s estimated period to decommissioning reducing from 45
years to 25 years, reflecting updated scoping studies for future
development outside of its current approved LOM, resulting in an
increase of US$5.8 million in the
provision as expected timing of the rehabilitation costs are
brought forward and the effect of foreign exchange movements of
US$9.0 million.
Capex
Total Group Capex for the Year reduced to US$23.5 million (FY 2020: US$28.4 million), comprising:
· US$16.9 million expansion Capex (FY 2020:
US$21.8 million);
· US$5.6 million sustaining Capex (FY 2020:
US$6.8 million); and
·
corporate/exploration Capex of US$1.0
million (FY 2020: (US$0.2
million) net recoupment).
Capex |
Unit |
FY 2021 |
FY 2020 |
Cullinan |
US$m |
16.8 |
16.4 |
Finsch |
US$m |
4.0 |
8.4 |
Koffiefontein |
US$m |
1.7 |
3.8 |
Subtotal – Capex
incurred by operations |
US$m |
22.5 |
28.6 |
Corporate/exploration1 |
US$m |
1.0 |
(0.2) |
Total Group
Capex |
US$m |
23.5 |
28.4 |
Note:
1. Petra operates an internal
projects / construction division and, although this division's
spend is reported in the Group's total Capex, it is policy not to
account for it on a specific mine's Capex until the work completed
is invoiced to the relevant operation.
Dividend
Distribution covenants were not met for the measurement period
to 30 June 2021 and as a result no
dividend is declared for FY 2021 (30 June
2020: US$nil).
OPERATIONAL REVIEW
Combined Operations (Excluding Williamson)¹
|
Unit |
FY
2021 |
FY
2020 |
Variance |
Sales |
|
|
|
|
Diamonds
sold |
Carats |
3,930,136 |
2,598,252 |
51% |
Revenue |
US$M |
402.3 |
243.3 |
65% |
|
|
|
|
|
Production |
|
|
|
|
ROM
diamonds |
Carats |
3,057,860 |
3,155,237 |
-3% |
Tailings
diamonds |
Carats |
182,452 |
135,809 |
+34% |
Total
diamonds |
Carats |
3,240,312 |
3,291,046 |
-2% |
|
|
|
|
|
Tonnages |
|
|
|
|
ROM
tonnes |
Mt |
7.7 |
7.5 |
+3% |
Tailings
& other1 tonnes |
Mt |
0.4 |
0.5 |
-20% |
Total
tonnes |
Mt |
8.1 |
8.0 |
+1% |
|
|
|
|
|
On
mine cash costs |
US$M |
197.6 |
191.2 |
3% |
|
|
|
|
|
Capex |
|
|
|
|
Expansion |
US$M |
16.9 |
21.8 |
-23% |
Sustaining |
US$M |
6.6 |
6.6 |
0% |
Total |
US$M |
23.5 |
28.4 |
-17% |
1. Williamson results are shown
separately below.
FY 2021 production decreased 2% to 3,240,312 carats (FY 2020:
3,291,046 carats), notwithstanding record annual production from
Cullinan, of 1.94 Mcts. As previously announced, production at
Finsch was impacted by unexpected levels of waste ingress during Q2
FY 2021, with subsequent mitigating measures reducing throughput
during the second half of the Year. In addition, production at both
Finsch and Koffiefontein was impacted by the high level of rainfall
during the third quarter. Despite these factors, the Group’s ROM
tonnages for the Year increased by 3% to 7.7 Mt (FY 2020: 7.5
Mt).
Cullinan –
South Africa
|
Unit |
FY 2021 |
FY 2020 |
Variance |
Sales |
|
|
|
|
Revenue |
US$M |
250.6 |
116.5 |
+115% |
Diamonds sold |
Carats |
2,261,058 |
1,183,745 |
+91% |
Average price per
carat |
US$ |
111 |
98 |
+13% |
|
|
|
|
|
ROM Production |
|
|
|
|
Tonnes treated |
Tonnes |
4,614,802 |
3,972,682 |
+16% |
Diamonds produced |
Carats |
1,761,490 |
1,482,482 |
+19% |
Grade1 |
Cpht |
38.2 |
37.3 |
+2% |
|
|
|
|
|
Tailings Production |
|
|
|
|
Tonnes treated |
Tonnes |
445,538 |
257,549 |
+73% |
Diamonds produced |
Carats |
182,452 |
95,918 |
+90% |
Grade1 |
Cpht |
41.0 |
37.2 |
+10% |
|
|
|
|
|
Total Production |
|
|
|
|
Tonnes treated |
Tonnes |
5,060,339 |
4,230,231 |
+20% |
Diamonds produced |
Carats |
1,943,942 |
1,578,400 |
+23% |
|
|
|
|
|
Costs |
|
|
|
|
On-mine cash cost per tonne
treated |
ZAR |
260 |
270 |
-4% |
|
|
|
|
|
Capex |
|
|
|
|
Expansion Capex |
US$M |
14.5 |
13.0 |
+12% |
Sustaining Capex |
US$M |
2.3 |
3.4 |
-32% |
Total Capex |
US$M |
16.8 |
16.4 |
+2% |
Notes:
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.
Cullinan achieved record production in FY 2021 of 1,943,942
carats (FY 2020: 1,578,400 carats), with underground throughput of
4.6 Mt and an average ROM grade of 38.2 cpht (FY 2020: 37.3 cpht).
A total of 0.4 Mt of recovery tailings were treated with an average
grade of 41.0 cpht.
Cullinan’s revenue increased by 32% to US$250.6 million for the Year (FY 2020:
US$116.5 million), due to a
combination of a 91% increase in diamonds sold and a 13% increase
in the average price per carat for the Period.
The full range of diamonds was recovered at the Cullinan mine in
FY 2021, including a number of exceptional stones, as set out on
pages 6 to 7 of this announcement.
Costs
The on-mine unit cash cost per total tonne treated decreased to
ZAR260/t (FY 2020: ZAR270/t), mainly due to increased tonnages
offset by inflationary increases.
Capex
FY 2021 Capex of US$16.8 million
was mainly spent on underground development in the CC1E SLC area,
as well as continued construction of the North Crusher 2 servicing
the C-Cut Phase 1 production area.
FY 2022 Capex for Cullinan is guided at ca. US$48 – 54 million, primarily relating to
underground development of the CC1E Phase 2 production areas and
certain feasibility studies to be conducted related to shaft
infrastructure, as well as fines residue deposit facilities and
Stay in Business Capex.
Finsch –
South Africa
|
Unit |
FY 2021 |
FY 2020 |
Variance |
Sales |
|
|
|
|
Revenue |
US$M |
123.5 |
101.1 |
+22% |
Diamonds sold |
Carats |
1,602,312 |
1,348,181 |
+19% |
Average price per
carat |
US$ |
77 |
75 |
+3% |
|
|
|
|
|
ROM Production |
|
|
|
|
Tonnes treated |
Tonnes |
2,311,195 |
2,719,389 |
-15% |
Diamonds produced |
Carats |
1,237,219 |
1,603,678 |
-23% |
Grade1 |
Cpht |
53.5 |
59.0 |
-9% |
|
|
|
|
|
Tailings Production |
|
|
|
|
Tonnes treated |
Tonnes |
0 |
211,541 |
-100% |
Diamonds produced |
Carats |
0 |
39,890 |
-100% |
Grade1 |
Cpht |
0 |
18.9 |
-100% |
|
|
|
|
|
Total Production |
|
|
|
|
Tonnes treated |
Tonnes |
2,311,195 |
2,930,930 |
-21% |
Diamonds produced |
Carats |
1,237,219 |
1,643,568 |
-25% |
|
|
|
|
|
Costs |
|
|
|
|
On-mine cash cost per tonne
treated |
ZAR |
536 |
477 |
12% |
|
|
|
|
|
Capex |
|
|
|
|
Expansion Capex |
US$M |
1.7 |
6.1 |
-72% |
Sustaining Capex |
US$M |
2.3 |
2.3 |
0% |
Total Capex |
US$M |
4.0 |
8.4 |
-52% |
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 totalled 1,237,219 carats (FY 2020: 1,643,568
carats), with ROM carat production of 1,237,219 carats (FY 2020:
1,603,678 carats) and an average ROM grade of 53.5 cpht (FY 2020:
59.0 cpht).
The contribution from underground ROM production decreased to
1,237,219 carats (FY 2020: 1,603,678 carats). In H1 FY 2021, ROM
volumes mined were impacted by the expiry of the temporary
continuous operations arrangement during September 2020, subsequently reinstated during
October 2020 that remained in place
until June 2021. In addition, the
Finsch mine experienced higher than expected levels of waste
ingress in a number of the upper levels of the Block 5 Sub Level
Cave, which negatively impacted the recovered grade. The Company
conducted a detailed exercise to better understand this issue and
has put a plan in place to mitigate the impact. This has included a
revision to the draw strategy to limit planned draw tonnage, a
build-up of inventory rings to allow for increased blasting from
March 2021, and a change to the drill
and blast designs to optimise ore extraction. In the longer term,
the Company will also investigate ore mixing programmes to better
assist with the prediction of waste ingress. Furthermore,
production at the Finsch mine in Q3 FY 2021 was impacted by
significantly high rainfall.
Revenue increased by 22% to US$123.5
million (FY 2020: US$101.1
million) due to a combination of slightly higher sales and a
slightly higher average value per carat.
Costs
The on-mine cash unit cost increased to ZAR536/t (FY 2020: ZAR477/t), mainly due to the reduced
throughput.
Capex
FY 2021 Capex of US$4.0 million
was mainly spent on underground development and infrastructure
relating to the Block 5 SLC.
FY 2022 Capex is guided at ca. US$21 – 25 million, primarily relating to the
exploration drilling and feasibility studies associated with the
new 3-Level SLC, underground development in 78 Level SLC Phase 2
and Stay in Business Capex.
Koffiefontein – South Africa
|
Unit |
FY 2021 |
FY 2020 |
Variance |
Sales |
|
|
|
|
Revenue |
US$M |
28.0 |
25.7 |
+9% |
Diamonds sold |
Carats |
66,650 |
66,326 |
0% |
Average price per
carat |
US$ |
419 |
387 |
+8% |
|
|
|
|
|
ROM Production |
|
|
|
|
Tonnes treated |
Tonnes |
754,369 |
891,705 |
-15% |
Diamonds produced |
Carats |
59,151 |
69,077 |
-14% |
Grade |
Cpht |
7.8 |
7.7 |
+1% |
|
|
|
|
|
Total Production |
|
|
|
|
Tonnes treated |
Tonnes |
754,369 |
891,705 |
-15% |
Diamonds produced |
Carats |
59,151 |
69,077 |
-14% |
|
|
|
|
|
Costs |
|
|
|
|
On-mine cash cost per tonne
treated |
ZAR |
651 |
510 |
28% |
|
|
|
|
|
Capex |
|
|
|
|
Expansion Capex |
US$M |
0.6 |
2.7 |
-78% |
Sustaining Capex |
US$M |
1.1 |
1.1 |
0% |
Total Capex |
US$M |
1.7 |
3.8 |
-55% |
ROM production totalled 59,151 carats (FY 2020: 69,077 carats),
with ROM tonnage throughput down 15% on FY 2020 impacted by the
significant rainfall experienced in Q3 FY 2021; overall carat
produced decreased by 14%, with the average ROM grade remaining
broadly flat at 7.8 cpht (FY 2020: 7.7 cpht).
Revenue increased 9% to US$28.0
million (FY 2020: US$25.7
million) for the Year, with an 8% increase in the average
price per carat.
Costs
The on-mine cash unit cost increased to ZAR651/t (FY 2020: ZAR510/t), mainly due to decreased tonnages.
Capex
FY 2021 Capex of US$1.7 million
was mainly spent on Stay in Business Capex.
FY 2022 Capex is guided at ca. US$1 – 3 million primarily relating Stay in
Business Capex.
Williamson – Tanzania (held for sale at 30 June 2021)
|
Unit |
FY 2021 |
FY 2020 |
Variance |
Sales |
|
|
|
|
Revenue |
US$M |
4.6 |
52.5 |
-91% |
Diamonds sold |
Carats |
30,339 |
297,245 |
-90% |
Average price per carat |
US$ |
150 |
177 |
-15% |
|
|
|
|
|
ROM Production |
|
|
|
|
Tonnes treated |
Tonnes |
0 |
3,980,438 |
-100% |
Diamonds produced |
Carats |
0 |
287,356 |
-100% |
Grade |
Cpht |
0 |
7.2 |
-100% |
|
|
|
|
|
Alluvial Production |
|
|
|
|
Tonnes treated |
Tonnes |
0 |
302,567 |
-100% |
Diamonds produced |
Carats |
0 |
10,774 |
-100% |
Grade |
Cpht |
0 |
3.6 |
-100% |
|
|
|
|
|
Total Production |
|
|
|
|
Tonnes treated |
Tonnes |
0 |
4,283,005 |
-100% |
Diamonds produced |
Carats |
0 |
298,130 |
-100% |
|
|
|
|
|
Costs |
|
|
|
|
On-mine cash cost per tonne
treated |
USD |
n/a |
10.2 |
n/a |
|
|
|
|
|
Capex |
|
|
|
|
Expansion Capex |
US$M |
0.0 |
0.0 |
0% |
Sustaining Capex |
US$M |
0.3 |
8.0 |
-96% |
Total Capex |
US$M |
0.3 |
8.0 |
-96% |
The Williamson mine was placed on care and maintenance during
April 2020 and remained on care and
maintenance throughout FY 2021 (FY 2020 production: 298,130
carats).
Revenue decreased 91% to US$4.6
million (FY 2020: US$52.5
million), with sales limited to the final parcel recovered
prior to the commencement of care and maintenance. Cash on-mine
costs, mainly associated with care and maintenance expenses,
totalled around US$12.7 million for
the Year.
Capex
FY 2021 Capex of US$0.3 million
mainly related to Stay in Business Capex.
Project 2022 Update
Project 2022 commenced in July
2019 with the aim of identifying opportunities to increase
throughput across the business, drive efficiencies and facilitate
continuous improvement. A key objective of this project was to
target delivery of significant free cashflow over three years,
though this has been impeded primarily by the weakness in the
diamond market, compounded further by precautionary measures
imposed at the operations related to the COVID-19 pandemic.
Project 2022 is not only now fully operational across the Group,
but its principles of focused and continuous improvement are being
entrenched in the operating model and are becoming part of the
culture of the Company.
Weekly Project 2022 Results Action Review meetings (“RARs”) are
held within the first four structural layers of the organisation,
starting with the CEO, to monitor progress, provide support and
resourcing where required and ensure we are on track to deliver on
our targets. In addition, we are in the process of aligning our
various incentive and production bonus schemes to support and
reward delivery of our Project 2022 targets across the Group.
The implementation of throughput ideas remains the largest
contributor to improving operational cash flow, led by Cullinan’s
record recovery of 1.94 Mcts in FY 2021. Due to reduced pricing
coupled with lower throughput at Finsch, Koffiefontein and
Williamson, expectations on the annualised contribution from
throughput initiatives were reduced to around US$50 million in the Company’s Q3 FY 2021 Trading
Update released in April 2021 and the
Company remains confident that it will achieve the annualised
contribution of US$50 million,
supported by measures taken to curtail the waste ingress at
Finsch.
Initiatives undertaken to drive cost efficiencies are expected
to contribute an annualised US$20
million going into FY 2022, which remains unchanged from
previous guidance.
The Project 2022 Organisational Design Review Phase 1 was
completed during FY 2021 and will result in updated role
descriptions providing for clearer line of site and improved
accountability.
Gross Reserves and Resources
Petra manages one of the world’s largest diamond resources of
230 Mcts and this major resource implies that the potential mine
lives of our core assets could be considerably longer than the
current mine plans in place at each operation or could support
higher production rates.
As at 30 June 2021, the Group’s
gross diamond resources (inclusive of reserves) decreased 5% to
230.64 Mcts (30 June 2020: 243.51
Mcts), predominantly due to depletions at all mining assets further
to ore mined in FY 2021 and the sale of Petra’s exploration assets
in Botswana to Botswana Diamonds
PLC, which has removed the KX36 kimberlite pipe (Resource of 8.73
Mcts) from the Resource Statement.
The Group’s gross diamond reserves decreased 14% to 33.33 Mcts
(30 June 2020: 38.86 Mcts) primarily
due to mining depletions, the impact of increased pit scaling and
waste ingress on the remaining reserves in the current SLC at
Finsch, changes to the mine plan and mining method for the future
block at Finsch, and Williamson remaining on care and maintenance
with an associated reduction in reserve estimate given the
remaining tenure of the Special Mining License.
The following table summarises the gross Reserves and Resources
status of the combined Petra Group operations as at 30 June 2021 and includes the Williamson
operation.
Category |
Gross |
Tonnes
(millions) |
Grade
(cpht) |
Contained Diamonds
(Mcts) |
Reserves |
|
|
|
Proved |
- |
- |
- |
Probable |
116.3 |
28.7 |
33.33 |
Sub-total |
116.3 |
28.7 |
33.33 |
Resources |
|
|
|
Measured |
- |
- |
- |
Indicated |
329.1 |
47.2 |
155.38 |
Inferred |
1,292.3 |
5.8 |
75.27 |
Sub-total |
1,621.3 |
14.2 |
230.64 |
The full 2021 Resource Statement can be accessed at
https://www.petradiamonds.com/our-operations/reserves-resources/.
Labour relations
Stable labour relations are essential to our productivity and
the delivery of our strategy. We therefore remain highly focused on
managing labour relations and on maintaining open and effective
communication channels with our employees and the appropriate union
representatives at our operations.
Petra did not experience any industrial action during the Year
and has seen largely stable labour relations over the last four
years. Post Year end, the Company announced that it had reached
agreement on a new three-year wage agreement with NUM for employees
in the Paterson A and B Bands at the South African operations
covering FY 2022 to FY 2024, which should allow for further
stability over this timeframe.
GOVERNANCE
Board Succession
Dr Pat Bartlett, Non-Executive
Director, retired from the Board after nearly nine years’ service,
on 30 June 2020, and Mr Tony Lowrie, Senior Independent Director,
retired from the Board in November
2020, after more than eight years’ service. Ms Varda Shine subsequently assumed the role of
Senior Independent Non-Executive Director in November 2020.
As previously announced, Mr Gordon
Hamilton, Independent Non-Executive Director, will retire
from the Board and as Chair of the Audit and Risk Committee at the
conclusion of the FY 2021 Annual General Meeting on 19 November 2021. On 1 July 2021, the Company announced the
appointment of Ms Deborah Gudgeon as
an Independent Non-Executive Director and Chair-designate of the
Audit and Risk Committee.
Following completion of the Restructuring in March 2021, the appointment of Mr. Matthew Glowasky as a Non-Independent
Non-Executive Director of the Company became effective, further to
his nomination by Monarch Master Funding 2 (Luxembourg) S.a.r.l. (“Monarch”). In addition,
on 1 July 2021 Ms Alexandra Watson and Mr Johannes Bhatt were both appointed as
Non-Independent Non-Executive Directors, having been nominated by
Franklin Templeton and Monarch
respectively. Monarch also exercised their right under the
Nomination Agreement to appoint Mr. Marius
Kraemer as their Board Observer with effect from
1 July 2021.
The Company welcomes the new Directors, as well as Mr Kraemer as
Board Observer; together they bring a wealth of experience,
complementing that of our existing Directors, and their
appointments leave the Board well placed to take the Company
forward.
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.
A summary of the risks identified as the Group’s principal
external, operating and strategic risks (in no order of priority),
which may impact the Group over the next twelve months, is listed
below.
Risk |
Risk appetite |
Risk rating |
Nature of risk |
Change in
FY 2021 |
1. Country
and political |
High |
High |
Long term |
No
change – risk of political instability remains in South Africa,
illustrated by civil unrest shortly after Year end, and certain
components of the new Mining Charter remain under review. In
Tanzania, the risk of political instability remains high further to
the death of the Tanzanian President. Petra is in ongoing dialogue
with the Government of Tanzania and local advisers in relation to
legislative developments, overdue VAT receivables and the blocked
parcel of diamonds from Williamson. |
2.
COVID-19 pandemic (operational impact) |
Medium |
High |
Short to
medium term |
No change – the impact of COVID-19 is ongoing, but
the mitigating processes Petra has put in place are enabling the
Company to manage the pandemic without a significant impact on
production and sales. |
3. Currency |
High |
Medium |
Long term |
No
change - the ZAR/USD exchange rate continues to be volatile.
The short-term strengthening in the Rand has the capacity to offset
some of the improvement in Petra’s realised diamond prices. |
4. Diamond
price |
High |
Medium |
Long term |
Lower - diamond prices recovered during H2 FY 2021 and
overall increased ca. 9% during the Year, following the major
disruption of the diamond pipeline in FY 2020 caused by the COVID
19 pandemic. |
5.
Financing |
Medium |
Medium |
Short to medium
term |
Lower – progress
with Project 2022 initiatives led to an improvement in operational
free cashflow supported by stronger diamond markets during H1
CY’21, despite the negative impact of COVID-19 pandemic.
Following shareholder, noteholder and regulatory approvals, the
capital and debt restructure project which was a key focus area for
management was completed. |
|
6. Labour
relations |
Medium |
Medium |
Short to medium
term |
Lower - stable
labour relations were experienced during the Year. Post Year end,
the Company reached agreement on a new three-year wage agreement
with NUM for employees in the Paterson A and B Bands at the South
African operations covering FY 2022 to FY 2024. |
|
7. Licence to
operate |
Medium |
Medium |
Long term |
No change -
continued compliance in all material aspects with relevant laws,
regulations and standards. Incorporated in Petra’s licence to
operate is its continued focus on safety, as well as its impacts on
the environment and communities. In May 2021, Petra announced the
findings of the independent Board Sub-Committee into the alleged
human rights breaches in Tanzania, as well as setting out the
mitigating and preventative actions the Company had taken or was
putting place to address the findings. The Company also reached a
settlement, on a no admission of liability basis, in relation to
claims of alleged human rights breaches. The risk of illegal mining
at Williamson is ongoing. |
|
8. Mining and
production |
Medium |
Medium |
Long term |
Higher -
positive throughput improvements driven by Project 2022 led to a
strong operational performance at Cullinan during FY 2021, offset
by work to curtail waste ingress and pit sidewall instability at
Finsch, and rainfall impacting production at Finsch and
Koffiefontein in Q3 FY 2021. With Williamson in care and
maintenance, low production levels at Koffiefontein and lower
production at Finsch, there is greater dependency on production at
Cullinan. |
|
9. ROM grade and
product mix volatility |
Medium |
Medium |
Short term |
No change –
Cullinan ROM grades were in line and slightly above expectations,
whilst both Finsch and Koffiefontein were below expectations.
Finsch’s production was impacted by waste ingress and the medium to
long term impact on the mine’s LOM planning is being reviewed. The
mines recovered the full range of diamonds in FY 2020, with a
higher recovery of specials at Cullinan. |
|
OUTLOOK
The medium to long-term outlook for our market and for our
business remains positive. The completion of the Company’s
financial restructuring in FY 2021 showed that we retain
significant support from the investment market and has provided
enhanced stability for the Company to deliver on its operational
plans.
I believe that Petra has high quality assets, a skilled and
motivated workforce, a refreshed company culture, ongoing
optimisation plans and support from our stakeholders. This, set
against an improving diamond market, positions the Company well for
the years to come.
Richard
Duffy
Chief Executive
14 September
2021
Notes
1. The
following exchange rates have been used for this announcement:
average for the Year US$1:ZAR15.41 (FY 2020: US$1:ZAR15.68); closing rate as at 30 June 2021 US$1:ZAR14.27 (30 June
2020: US$1:ZAR17.32).
2. The following definitions have been used
in this announcement:
a. ct: carat
b. cpht: carats per hundred tonnes
c. CY: calendar year
d. FY: financial year
e. Kcts: thousand carats
f. Mctpa: million carats per
annum
g. Mcts: million carats
h. mL: metre level
i. Mt: million tonnes
j. Mtpa: million tonnes per annum
k. ROM: run-of-mine, i.e. relating to
production from the primary orebody
l.
SLC: sub-level cave, a variation of block caving
APPENDIX
The below
operational results include Williamson and are provided for
reference only:
Combined Operations
(Including Williamson)
|
Unit |
FY
2021 |
FY
2020 |
Variance |
Sales |
|
|
|
|
Diamonds
sold |
Carats |
3,960,475 |
2,895,497 |
37% |
Revenue |
US$M |
406.9 |
295.8 |
38% |
|
|
|
|
|
Production |
|
|
|
|
ROM
diamonds |
Carats |
3,057,860 |
3,442,593 |
-11% |
Tailings
& other1 diamonds |
Carats |
182,452 |
146,583 |
+24% |
Total
diamonds |
Carats |
3,240,312 |
3,589,176 |
-10% |
|
|
|
|
|
Tonnages |
|
|
|
|
ROM
tonnes |
Mt |
7.7 |
11.5 |
-33% |
Tailings
& other1 tonnes |
Mt |
0.4 |
0.8 |
-50% |
Total
tonnes |
Mt |
8.1 |
12.3 |
-34% |
|
|
|
|
|
On
mine cash costs |
US$M |
276.1 |
225.3 |
23% |
|
|
|
|
|
Capex |
|
|
|
|
Expansion |
US$M |
16.9 |
21.8 |
-23% |
Sustaining |
US$M |
6.9 |
14.6 |
-53% |
Total |
US$M |
23.8 |
36.4 |
-35% |
Notes:
1. 'Other' represents alluvial diamond
mining at Williamson.
PETRA DIAMONDS
LIMITED – PRELIMINARY ANNOUNCEMENT
UNAUDITED
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2021
US$ million |
Notes |
2021 |
|
20201 |
Revenue |
4 |
402.3 |
|
243.3 |
|
|
|
|
|
Mining and
processing |
|
(337.2) |
|
(238.2) |
Other direct
income |
|
1.7 |
|
1.0 |
Exploration
expenditure |
17 |
— |
|
(0.6) |
Corporate expenditure
including settlement costs |
5 |
(21.3) |
|
(8.7) |
Impairment of
non-financial assets |
16 |
(17.7) |
|
(50.5) |
Impairment of BEE loans
receivable – expected credit loss reversal / (charge) |
13 |
5.8 |
|
(10.9) |
Total operating
costs |
|
(368.7) |
|
(307.9) |
|
|
|
|
|
Profit on disposal of
subsidiary |
17 |
14.7 |
|
— |
Financial income |
6 |
84.1 |
|
7.9 |
Financial expense |
6 |
(74.0) |
|
(160.8) |
Gain on extinguishment
of Notes net of unamortised costs |
6,8 |
213.3 |
|
— |
Profit / (loss)
before tax |
|
271.7 |
|
(217.5) |
Income tax (charge) /
credit |
|
(23.0) |
|
52.5 |
Profit / (loss) for
the year from continuing operations |
|
248.7 |
|
(165.0) |
Loss on discontinued
operations including associated impairment charges (net of
tax) |
17 |
(52.1) |
|
(58.0) |
Profit /
(loss) for the Year |
|
196.6 |
|
(223.0) |
|
|
|
|
|
Attributable to: |
|
|
|
|
Equity holders of the
parent company |
|
187.1 |
|
(190.0) |
Non-controlling
interest |
|
9.5 |
|
(33.0) |
|
|
196.6 |
|
(223.0) |
|
|
|
|
|
Earnings / (loss)
per share attributable to the equity holders of the parent during
the Year: |
|
|
|
|
Continuing
operations: |
|
|
|
|
Basic earnings / (loss)
per share – US cents |
14 |
6.67 |
|
(15.26) |
Diluted earnings /
(loss) per share – US cents |
14 |
6.67 |
|
(15.26) |
|
|
|
|
|
From continuing and
discontinued operations: |
|
|
|
|
Basic earnings / (loss)
per share – US cents |
14 |
5.22 |
|
(21.96) |
Diluted earnings /
(loss) per share – US cents |
14 |
5.22 |
|
(21.96) |
|
|
|
|
|
1. Comparative results have been
restated to reflect the results of Williamson within loss on
discontinued operations including associated impairment charges
(net of tax) as per the requirements of IFRS 5 (refer to note
xx).
PETRA DIAMONDS
LIMITED - PRELIMINARY ANNOUNCEMENT
UNAUDITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2021
US$ million |
|
2021 |
|
2020 |
Profit / (loss) for the
Year |
|
196.6 |
|
(223.0) |
Exchange differences on
translation of the share-based payment reserve |
|
0.2 |
|
(0.2) |
Exchange differences on
translation of foreign operations1,2 |
|
64.2 |
|
(91.3) |
Exchange differences on
non-controlling interest1 |
|
(1.2) |
|
(0.6) |
Total comprehensive
income / (expense) for the Year |
|
259.8 |
|
(315.1) |
Total comprehensive
income and expense attributable to: |
|
|
|
|
Equity
holders of the parent company |
|
251.5 |
|
(281.5) |
Non-controlling
interest |
|
8.3 |
|
(33.6) |
|
|
259.8 |
|
(315.1) |
¹ These items will be reclassified to
the consolidated income statement if specific future conditions are
met.
² The Company has disclosed the net
assets of the Williamson mine under non-current assets held for
sale and liabilities directly associated with non-current assets
held for sale in the Statement of Financial Position.
PETRA DIAMONDS
LIMITED – PRELIMINARY ANNOUNCEMENT
UNAUDITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 JUNE
2021
US$ million |
Notes |
2021 |
|
2020 |
ASSETS |
|
|
|
|
Non-current
assets |
|
|
|
|
Property, plant and
equipment |
7 |
696.8 |
|
675.8 |
Right-of-use
assets |
|
1.2 |
|
4.9 |
BEE loans and
receivables |
13 |
46.6 |
|
137.0 |
Other receivables |
|
— |
|
10.3 |
Deferred tax
assets |
|
— |
|
23.3 |
Total non-current
assets |
|
744.6 |
|
851.3 |
Current
assets |
|
|
|
|
Trade and other
receivables |
|
50.7 |
|
20.0 |
Inventories |
|
59.9 |
|
103.5 |
Cash and cash
equivalents (including restricted amounts) |
|
163.8 |
|
67.6 |
Total current
assets |
|
274.4 |
|
191.1 |
Non-current assets
classified as held for sale |
17 |
59.6 |
|
0.3 |
Total
assets |
|
1,078.6 |
|
1,042.7 |
EQUITY AND
LIABILITIES |
|
|
|
|
Equity |
|
|
|
|
Share capital |
8,9 |
145.7 |
|
133.4 |
Share premium
account |
8,9 |
959.5 |
|
790.2 |
Foreign currency
translation reserve |
|
(402.1) |
|
(453.0) |
Share-based payment
reserve |
|
1.8 |
|
1.1 |
Other reserves |
|
(0.8) |
|
(0.8) |
Accumulated losses |
|
(253.3) |
|
(440.4) |
Attributable to
equity holders of the parent company |
|
450.8 |
|
30.5 |
Non-controlling
interest |
|
(10.5) |
|
(18.8) |
Total
equity |
|
440.3 |
|
11.7 |
Liabilities |
|
|
|
|
Non-current
liabilities |
|
|
|
|
Loans and
borrowings |
10 |
400.0 |
|
— |
Lease liabilities |
|
0.5 |
|
1.1 |
BEE loans payable |
13 |
— |
|
108.6 |
Provisions |
|
71.3 |
|
55.6 |
Deferred tax
liabilities |
|
48.9 |
|
40.5 |
Total non-current
liabilities |
|
520.7 |
|
205.8 |
Current
liabilities |
|
|
|
|
Loans and
borrowings |
10 |
30.3 |
|
769.0 |
Lease liabilities |
|
0.5 |
|
3.6 |
Trade and other
payables |
|
49.1 |
|
52.5 |
Provisions |
|
4.2 |
|
— |
Total current
liabilities |
|
84.1 |
|
825.1 |
Liabilities directly
associated with non-current assets classified as held for sale |
17 |
33.5 |
|
0.1 |
Total
liabilities |
|
638.3 |
|
1,031.0 |
Total equity and
liabilities |
|
1,078.6 |
|
1,042.7 |
PETRA DIAMONDS
LIMITED –PRELIMINARY ANNOUNCEMENT
UNAUDITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2021
US$ million |
Notes |
2021 |
|
2020 |
Profit / (loss)
before taxation for the Year from continuing and discontinued
operation |
|
219.6 |
|
(275.3) |
Depreciation of
property plant and equipment |
|
75.9 |
|
78.3 |
Amortisation of
right-of-use asset |
|
0.9 |
|
5.2 |
Unrealised gain on
lease liability |
|
— |
|
(0.8) |
Impairment charge – non
financial assets |
16 |
17.7 |
|
92.3 |
Impairment
charge/(reversal) – other receivables |
16 |
— |
|
(0.4) |
Impairment of BEE loans
receivable – expected credit loss (release) / charge |
13 |
(5.8) |
|
10.9 |
Gain on extinguishment
of Notes net of unamortised costs |
6,8 |
(213.3) |
|
— |
Loss and impairment
charge on discontinued operations |
17 |
43.2 |
|
— |
Profit on disposal of
subsidiary |
17 |
(14.7) |
|
— |
Movement in
provisions |
|
4.8 |
|
(0.1) |
Financial income |
6 |
(84.1) |
|
(7.9) |
Financial expense |
6 |
74.0 |
|
161.0 |
Profit on disposal of
property, plant and equipment |
|
(0.6) |
|
(0.1) |
Share based payment
provision |
|
0.5 |
|
0.7 |
Operating profit
before working capital changes |
|
118.1 |
|
63.8 |
(Increase) / decrease
in trade and other receivables |
|
(26.9) |
|
11.4 |
Increase / (decrease)
in trade and other payables |
|
5.5 |
|
(15.5) |
Decrease / (Increase)
in inventories |
|
42.8 |
|
(32.7) |
Cash generated from
operations |
|
139.5 |
|
27.0 |
Net realised losses on
foreign exchange contracts |
|
(6.1) |
|
(8.3) |
Finance expense
paid |
|
(6.7) |
|
(26.2) |
Income tax received /
(paid) |
|
0.3 |
|
(0.6) |
Net cash generated
from / (utilised by) operating activities |
|
127.0 |
|
(8.1) |
Cash flows from investing activities |
|
|
|
|
Acquisition of
property, plant and equipment |
|
(19.4) |
|
(39.3) |
Proceeds from sale of
property, plant and equipment |
|
0.3 |
|
0.8 |
Loans advanced to BEE
partners |
|
(7.0) |
|
(14.1) |
Repayments from KEM
JV |
|
— |
|
0.4 |
Finance income
received |
|
0.7 |
|
1.2 |
Net cash utilised in
investing activities |
|
(25.4) |
|
(51.0) |
|
|
|
|
|
Cash flows from
financing activities |
|
|
|
|
Cash transaction costs
settled – Debt Restructuring |
8 |
(29.9) |
|
— |
Cash paid on lease
liabilities |
|
(0.7) |
|
(5.0) |
Increase in
borrowings |
8,18 |
30.0 |
|
100.9 |
Repayment of
borrowings |
18 |
(7.4) |
|
(43.5) |
Net cash (utilized)
/ generated from financing activities |
|
(8.0) |
|
52.4 |
|
|
|
|
|
Net increase /
(decrease) in cash and cash equivalents |
|
93.6 |
|
(6.7) |
Cash and cash
equivalents at beginning of the Year |
|
53.6 |
|
71.7 |
Effect of exchange rate
fluctuations on cash held |
|
9.7 |
|
(11.4) |
Cash and cash
equivalents at end of the Year1 |
|
156.9 |
|
53.6 |
The cashflows specific to the
discontinued operation net of associated impairments (net of tax)
are included in the amounts above and are disclosed in note 17.
¹ Cash and cash equivalents in the Consolidated Statement of
Financial Position includes restricted cash of US$16.1 million (30 June
2020: US$14.0 million) and
unrestricted cash of US$147.7 million
(30 June 2020: US$53.6 million) and excludes unrestricted cash
attributable to Williamson of US$9.2
million.
PETRA DIAMONDS
LIMITED – PRELIMINARY ANNOUNCEMENT
UNAUDITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2021
|
|
|
|
|
|
(Unaudited)
US$ million |
Share
capital |
Share
premium
account |
Foreign
currency
translation
reserve |
Share-based
payment
reserve |
Hedging and other
reserves |
|
|
|
|
|
|
At 1 July 2020 |
133.4 |
790.2 |
(453.0) |
1.1 |
(0.8) |
Profit for the
Year |
— |
— |
— |
— |
— |
Other comprehensive
income / (expense) |
— |
— |
64.2 |
0.2 |
— |
Recycling of foreign
currency translation reserve on disposal of Sekaka (refer note
17) |
— |
— |
(13.3) |
— |
— |
Equity settled share
based payments |
— |
— |
— |
0.5 |
— |
Allotments during the
Year: |
|
|
|
|
|
- Ordinary shares –
Debt for equity issue (net of US$12.3 million issue costs) – refer
to note 8 |
12.3 |
169.3 |
— |
— |
— |
At 30 June 2021 |
145.7 |
959.5 |
(402.1) |
1.8 |
(0.8) |
|
|
|
|
|
(Unaudited)
US$ million |
Accumulated losses |
Attributable
to the
parent |
Non-controlling
interest |
Total
equity |
|
|
|
|
|
At 1 July 2020 |
(440.4) |
30.5 |
(18.8) |
11.7 |
Profit for the
Year |
187.1 |
187.1 |
9.5 |
196.6 |
Other comprehensive
income / (expense) |
— |
64.4 |
(1.2) |
63.2 |
Recycling of foreign
currency translation reserve on disposal of Sekaka (refer note
17) |
— |
(13.3) |
— |
(13.3) |
Equity settled share
based payments |
— |
0.5 |
— |
0.5 |
Allotments during the
Year: |
|
|
|
|
- Ordinary shares –
Debt for equity issue (net of US$12.3 million issue costs) – refer
to note 8 |
— |
181.6 |
— |
181.6 |
At 30 June 2021 |
(253.3) |
450.8 |
(10.5) |
440.3 |
PETRA DIAMONDS
LIMITED – PRELIMINARY ANNOUNCEMENT
UNAUDITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2021
|
|
|
|
|
|
(Unaudited)
US$ million |
Share
capital |
Share
premium
account |
Foreign
currency
translation
reserve |
Share-based
payment
reserve |
Hedging and other
reserves |
12 month Period ended
20 June 2020: |
|
|
|
|
|
At 1 July 2019 |
133.4 |
790.2 |
(361.7) |
6.2 |
(0.8) |
Loss for the Year |
— |
— |
— |
— |
— |
Other comprehensive
expense |
— |
— |
(91.3) |
(0.2) |
— |
Transfer between
reserves - Williamson non-controlling interest. |
— |
— |
— |
— |
— |
Transfer between
reserves for lapsed employee options |
— |
— |
— |
(5.6) |
— |
Equity settled share
based payments |
— |
— |
— |
0.7 |
— |
At 30 June 2020 |
133.4 |
790.2 |
(453.0) |
1.1 |
(0.8) |
|
|
|
|
|
(Unaudited)
US$ million |
Accumulated losses |
Attributable
to the
parent |
Non-controlling
interest |
Total
equity |
12 month Period ended
20 June 2020: |
|
|
|
|
At 1 July 2019 |
(255.6) |
311.7 |
14.4 |
326.1 |
Loss for the Year |
(190.0) |
(190.0) |
(33.0) |
(223.0) |
Other comprehensive
expense |
— |
(91.5) |
(0.6) |
(92.1) |
Transfer between
reserves - Williamson non-controlling interest. |
(0.4) |
(0.4) |
0.4 |
— |
Transfer between
reserves for lapsed employee options |
5.6 |
— |
— |
— |
Equity settled share
based payments |
— |
0.7 |
— |
0.7 |
At 30 June 2020 |
(440.4) |
30.5 |
(18.8) |
11.7 |
NOTES TO THE CONDENSED CONSOLIDATED
PRELIMINARY FINANCIAL STATEMENTS
FOR THE YEAR
30 JUNE 2021
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 2021 comprise the Company and its
subsidiaries, joint operations and associates (together referred to
as the “Group”).
2. ACCOUNTING
POLICIES
This unaudited preliminary report does not include all the notes
of the type normally included in an annual financial report. This
condensed report is to be read in conjunction with the Annual
Report for the year ended 30 June
2020, and any public announcements made by the Group during
the reporting period. The annual financial report for the year
ended 30 June 2020 was prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (“IFRS’s”) and the accounting
policies applied in this condensed preliminary report are
consistent with the polices applied in the annual financial report
for the year ended 30 June 2020
unless otherwise noted. The preliminary report has been prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union.
Accounting policy for Non-current
assets held for sale and discontinued operations
Where an operation within the Group is separately identified or
forms part of a separate reporting structure, the Group will
classify the asset as held for sale, in accordance with IFRS 5, if
management has committed to a plan to sell, the operation is
available for sale, an active search for a buyer is in place, or if
any transaction is highly probable within 12 months of classifying
as held for sale. The Williamson operation met the criteria
mentioned above and as such has been classified as held for sale as
at 30 June 2021. The assets held for
sale are measured at the lower of their carrying amount and fair
value less costs to sell. An impairment loss is recognised for any
initial or subsequent write-down of the asset to fair value less
costs to sell. A gain is recognised for any subsequent increases in
fair value less costs to sell of an asset but not in excess of any
cumulative impairment loss previously recognised. A gain or loss
not previously recognised by the date of the sale of the
non-current asset is recognised at the date of derecognition.
Non-current assets classified as held for sale and the assets of an
operation classified as held for sale are presented separately from
the other assets in the statement of financial position. The
liabilities of an identified operation classified as held for sale
are presented separately from other liabilities in the statement of
financial position.
A discontinued operation is a component of the entity that has
been disposed of or is classified as held for sale and that
represents a separate major line of business or geographical area
of operations, is part of a single co-ordinated plan to dispose of
such a line of business or area of operations, or is a subsidiary
acquired exclusively with a view to resell. The results of
discontinued operations are presented separately in the statement
of profit or loss.
Unrealised foreign exchange gains and losses on historic
retranslation of the subsidiaries results into US Dollars are
recycled to the consolidated income statement upon completion of
the disposal. The Group designates the results of discontinued
activities, including those of disposed subsidiaries, separately in
accordance with IFRS and reclassifies the results of the operation
in the comparative period from continuing to discontinued
operations.
Debt for Equity
conversion
When the Group issues equity to settle outstanding debt, the
value attributed to the ordinary shares issued is based on the fair
value of the equity at the date of settlement to extinguish the
debt. The fair value is derived by reference to the closing share
price at the date of the conversion, it is considered to be a Level
1 fair value measurement. Costs identified as being directly
associated with the debt for equity conversion are taken directly
to share premium.
Accounting policy
for substantial modification of financial liabilities
When the Group’s borrowings are refinanced, and the refinancing
is considered to be a substantial modification, the difference
between the carrying amount of a financial liability (or part of a
financial liability) extinguished or transferred to another party
and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised as a charge in
the income statement.
Basis of preparation
including going concern
GOING CONCERN
Despite facing many challenges during FY 2021, improvements in
market conditions and the easing of certain COVID-19 restrictions
resulted in an increase in demand for rough diamonds, specifically
during H2. This allowed for a higher volume of diamond sales to be
generated by the Group, which further benefitted from a ca. 9%
increase in diamond prices on a like-for-like basis when compared
to FY 2020. In addition, the Company recovered and sold a number of
Exceptional Stones during FY 2021 from Cullinan, yielding a total
of US$62.0 million in sales revenues.
Post Year-end, another three Exceptional Stones were sold, being a
39.3ct blue diamond yielding US$40.18
million in July 2021, and a
342.9ct white diamond and an 18.3ct blue diamond which collectively
sold for US$13.5 million, while the
Company retained a fifty percent interest in the profits, after
costs, of both these stones.
These factors, coupled with the successful completion of the
Capital Restructuring, resulted in solid progress towards
stabilising the Group’s balance sheet and strengthening cash
reserves to the date of this report.
The Group’s liquidity outlook over the 18-month period to
December 2022 remains strong, even
when applying sensitivities to the base case forecast. However,
since covenants were set tightly in the base case at the time of
the Restructuring, the debt service cover ratio (“DSCR”) covenant,
which does not factor in available liquidity nor consider leverage
levels, remains sensitive to trading conditions during this period.
Under certain stressed-case scenarios, projections indicate that
the DSCR covenant may be breached; however, the Company is forecast
to have adequate liquidity to fully pay down the drawn facilities
prior to any potential breach occurring and retain adequate
liquidity and is, therefore, not reliant on the facilities. The
Company has also commenced with steps towards renegotiating
available banking facilities and associated covenants to address
the risk of a breach occurring. The Board considers that the
going concern basis in the preparation of the financial statements
is appropriate and that there are no material uncertainties that
would cast doubt on that basis of preparation.
Capital
Restructuring
The Restructuring completed in March
2021 and significantly reduced the Company’s gross debt from
US$817.5 million directly before the
Restructuring to US$450.1 million
thereafter, with some US$10.3 million
(ZAR160 million) remaining undrawn
and available to the Group.
Loan Notes reduced from US$713.7
million (US$650 million
capital plus accrued interest of ca. US$63.7
million to date of settlement) to US$336.7 million, while debt owed under the
Group’s banking facilities saw an additional US$10.3 million (ZAR160
million) revolving credit facility being made available to
the Group, increasing these facilities to ZAR560 million, while the previous ZAR500 million working capital facility and the
ZAR683 million BEE guarantee
facilities were refinanced and replaced by a ZAR1,200 billion amortising Term Loan.
South African
Operations
Cullinan performed well during FY 2021, delivering record
throughput supported by Project 2022 initiatives. It is expected
that Cullinan will continue to perform at these levels in future.
Finsch was impacted by unexpected levels of waste ingress, reducing
both throughput and grades recovered at the mine. The longer-term
impact of the waste ingress has been assessed through geological
simulations, with results informing revised LOM planning models, as
well as resultant cashflow projections. Short term disruptions were
also experienced after unusually heavy rainfalls hampered
operations at both Finsch and Koffiefontein during Q3 FY 2021.
COVID-19
Some uncertainty still exists around the ongoing impact of
COVID-19 on the Group. South
Africa is currently experiencing a third wave of
infections and the disruption to Petra’s operations mainly concerns
the necessary quarantining of confirmed or suspected cases amongst
our workforce. However, the Company has the systems and processes
in place to manage this without materially impacting production.
Petra’s focus now is on assisting the Government with its
vaccination drive and the Company has vaccination stations and
campaigns to encourage their uptake available at, or near to, each
of our operations.
The Group continues to sell its product through a dual tender
system – first via the mandatory tender held in South Africa, with the bulk of the goods then
exported to be sold in Antwerp.
This approach ensures maximum exposure to potential bidders and, in
turn, stronger competition and improved pricing. Further waves of
outbreak and repeat restrictions on international travel may
negatively impact the Group’s short and medium-term liquidity
profile due to the potential impact on production, ability to hold
tenders and/or demand for rough diamonds and, consequently, diamond
prices.
Williamson mine, Tanzania
The Board took the decision to dispose of the Williamson
operation as at 30 June 2021. The
Williamson mine remained on care and maintenance; however, the
Company is currently taking steps towards the recommencement of
production given improving market conditions over the last number
of months. The mine’s own liquidity position, bolstered by
US$10 million in VAT refunds during
Q4 FY 2021, coupled with support from the local mining contractor
in the form of deferred payment terms, should see it reach
commercial production levels during H1 FY 2022, with first sale of
goods projected to be in Q2 FY 2022, with working capital funding
from Petra limited to US$6 million
during this start-up period.
In addition, the Group remains in discussions with the
Government of Tanzania (“GoT”)
around various issues including, inter alia, the sharing of
economic benefit, the recoverability of VAT receivables, and the
potential release of the blocked diamond parcel. Williamson’s
liquidity position is reliant on its ability to generate cash
through operations; and/or its ability to reach agreement with the
GoT allowing it to sell the blocked diamond parcel and around
potential recoupment of the balance of VAT receivables; and/or its
ability to procure funding via borrowings from local financial
institutions.
Notwithstanding receiving approval from the GoT to proceed with
arranging a US$25 million working
capital facility from a local Tanzanian bank, while pledging its
own assets as security, the mine has not yet been able to secure
such funding. Earlier discussions with a local bank for a possible
working capital facility were not successful given the mine is
still in care and maintenance. The Tanzanian banks suggested that
they may consider advancing a facility post restart of operations,
although this remains uncertain. Under the terms of the
in-principle agreements with the South African Lender Group, any
additional funding by Petra would require its approval and if not
provided may result in Williamson’s insolvent liquidation.
Forecast liquidity
and covenants
The Board has reviewed the Group’s forecasts and sensitivities
for the 18 months to December 2022,
including both forecast liquidity and covenants. Careful
consideration was given to potential risks to the forecasts under
the review period. The Board carefully considered risks associated
with COVID-19 which were considered to focus primarily on the
potential for further production disruption, deferral of tenders
due to travel restrictions and adverse impacts on diamond
pricing.
In light of both normal trading risks and elevated risks
associated with the potential impact of the COVID-19 pandemic, 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:
· an unforeseen disruption to
operations at its South African mines due to either COVID-19
restrictions or otherwise, including adverse weather
conditions;
· a sustained 5% decrease in
forecast rough diamond prices throughout the forecast period;
· an unforeseen deferral of a
rough diamond tender, due to COVID-19 restrictions, coupled with a
significant price decline at an assumed subsequent private sale (in
line with a similar process followed in FY 2020); and
· an increase in forecast
operating cost.
Under the base case, the forecasts indicate that the Company
will be able to operate within the covenants set out in the
financing agreements and maintain sufficient liquidity.
However, as detailed above, the first lien covenants were set
with limited headroom to the Company’s base case. As such, results
of the stress testing indicate that in the event of a combination
of all tested scenarios, possible covenant breaches associated with
the South African banking facilities may occur at June 2022, while a breach is also projected in
December 2022 on an individual stress
test basis. At the time of any covenant breach in June 2022 and December
2022 under such scenarios, projected cash balances exceed
outstanding debt under these facilities, which would allow the
Group to fully pay down the drawn facilities prior to the breach
occurring and maintain adequate liquidity. The forecasts indicate
that under the sensitivity scenarios, the Group is not reliant on
the facilities.
Conclusion
The Board is of the view that the longer-term fundamentals of
the diamond market remain sound and that the Group will continue to
benefit from Project 2022 (which includes increased production and
reduced spend) throughout the review period and beyond.
Based on its assessment of the forecasts, principal risks and
uncertainties and mitigating actions considered available to the
Group in the event of downside scenarios, the Board confirms that
it is satisfied that the Group will be able to continue to operate
and meet its liabilities as they fall due over the review period.
Accordingly, the Board has concluded that the going concern basis
in the preparation of the financial statements is 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 and interpretations to existing with an effective date
on or before 1 July 2020, these new
standards are not considered to have a material impact on the Group
during the Year under review.
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 2021 or later periods. The only standard which is
anticipated to be significant or relevant to the Group is:
Amendments to IAS 1: Classification
of Liabilities as Current or Non-current
Amendments to IAS 1, which are intended to clarify the
requirements that an entity applies in determining whether a
liability is classified as current or non-current. The amendments
are intended to be narrow scope in nature and are meant to clarify
the requirements in IAS 1 rather than modify the underlying
principles. The amendments include clarifications relating to:
· how events after the end of the
reporting period affect liability classification;
· what the rights of an entity
must be in order to classify a liability as non-current;
· how an entity assesses
compliance with conditions of a liability (e.g. bank covenants);
and
· how conversion features in
liabilities affect their classification.
The amendments were originally effective for periods beginning
on or after 1 January 2022 which was
deferred to 1 January 2023 by the
IASB in July 2020.
Significant
assumptions and judgements:
The preparation of the condensed consolidated preliminary
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 preliminary 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 or reversals of previous impairments. 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
and Koffiefontein
The impairment tests for Cullinan, Finsch and Koffiefontein
resulted in an impairment charge of US$17.3
million (30 June 2020:
US$50.9 million) to be recognised, on
a carrying value of the Group’s property, plant and equipment of
US$711.8 million (30 June 2020: US$844.0
million). The impairment was directly attributable to the
Finsch amounting US$15.5 million
(30 June2020: US$11.6 million) and Koffiefontein amounting
US$2.2 million (30 June2020: US$11.7
million) related to property, plant and equipment of
US$213.9 million (30 June 2020: US$17.4
million). For further details of the inputs, assumptions and
sensitivities in the impairment model, refer to note 16.
Recoverability of
diamond parcel in Tanzania
The Group holds diamond inventory valued at lower of cost and
net realisable value of US$10.6
million (30 June 2020:
US$9.2 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
requires significant judgement. In making such a judgement, the
Group considered their ongoing discussions with the GoT. The Group
received confirmation from the GoT in FY 2018 that they held the
diamond parcel of 71,654.45 carats. The Group has received verbal
re-confirmation during the Year in the course of the ongoing
discussions held with the GoT. The Group has made an assessment of
the internal process used for the sale and export of diamonds and
has confirmed that in the event that the parcel is recovered, a
sale would be possible to execute in full compliance with
legislation in Tanzania and the
Kimberley Process with certain rectification steps. The Group has
obtained legal advice from the Group’s in-country attorneys which
supports management’s position that the Group retains the legal
right to the parcel.
The Company is aware of media reports during the Year suggesting
that the blocked parcel of 71,654 carats of diamonds from the
Williamson mine in Tanzania has
been nationalised by GoT. The Company remains in discussions
discussions with the GoT on this matter.
While a resolution has not yet been reached with regards to the
blocked parcel, 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 by the
Williamson operation. The funds are expected to flow to the
Williamson mine and to be used as part of its future working
capital requirements.
Recoverability of
VAT in Tanzania
The Group has VAT receivable of US$0.7
million (30 June 2020:
US$10.3 million) in respect of the
Williamson mine, all of which are past due and have therefore been
classified, after after provision including amounts related to
providing for a time-value of money inclusive of risk adjustments
for various factors, as non-current given the potential delays in
receipt. Williamson’s non-current assets have been classified as
assets held for sale in FY 2021.
The VAT receivable can be split into three identifiable
component time periods as set out below:
US$ million |
VAT Receivable |
Provision |
Carrying value |
Pre July 2017 |
1.8 |
(1.3) |
0.5 |
July 2017 to June 2020 |
26.9 |
(26.9) |
— |
Post June 2020 |
0.8 |
(0.6) |
0.2 |
|
29.5 |
(28.8) |
0.7 |
Pre July
2017
Of the total VAT receivables, US$1.8
million (30 June 2020:
US$13.0 million) relates to historic
VAT pre July 2017. During the Year
the Group received US$10.0 million in
VAT refunds from the Tanzanian Revenue Authority in respect of the
pre July 2017 period and US$1.2 million was disallowed subsequent to a VAT
audit performed by the Tanzanian Revenue Authority. A provision of
US$1.3 million, given the uncertainty
around the timing of receipts of the amount outstanding, has been
provided for against the US$1.8
million receivable resulting in a carrying value of
US$0.5 million.
July
2017 to June 2020
A further US$26.9.million
(30 June 2020: US$26.9 million) of VAT is receivable which
relates to VAT under the legislation, effective from July 2017 to 30 June
2020. Under that legislation, costs incurred in the
production and sale of raw minerals were not eligible for VAT and
judgement was required in determining whether rough diamonds
qualified as raw minerals. The assessment of the carrying value of
the VAT receivable under the VAT legislation effective in this
period required significant judgement considering ongoing
discussions with the relevant authorities in Tanzania, legal advice, a formal rejection
letter received from the Tanzania Revenue Authority (“TRA”) and the
Company’s legal objection thereto and the wider operating
environment. In addition to judgement regarding the eligibility for
VAT, judgement was required over the timing of future payments.
Management has considered the amendment to the VAT legislation
for the period July 2017 to
July 2020 and based on legal advice,
considers that input VAT is valid and legally recoverable..
However, the TRA maintains that this amount is disputed and not
recoverable. Given that there have been no favourable developments
from the TRA, management has written down the full disputed balance
of US$26.9 million as there has been
no indication from the TRA that these amounts will be reimbursed,
regardless of the June 2020 revision
of legislation.
As noted above, the VAT legislation was again revised to remove
any reference to raw minerals with effect from 1 July 2020. The amendment to the legislation is
to be applied prospectively and this therefore supports
management’s view that VAT related to periods post July 2020 are recoverable.
Post June
2020
An amount of US$0.8 million of VAT
is receivable for the period subsequent to 1
July 2020. The Group is considering various alternatives in
pursuing payment in accordance with legislation. A provision of
US$0.6 million, given the uncertainty
around the timing of receipts of the amount outstanding, has been
provided for against the US$0.8
million receivable resulting in a carrying value of
US$0.2 million.
While the remaining pre July 2017
and post 1 July 2020 VAT balance is
considered receivable, significant uncertainty exists regarding the
timing of receipt. A discount rate of 16.25% 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$0.05 million and a
one year delay would increase the provision by US$0.1 million.
The total impairment on the total VAT balance is therefore
US$28.7 million (FY 2020:
US$29.6 million) During the Year, a
reversal of previous impairments of US$0.7
million (30 June 2020: US$nil)
was recognised in loss on discontinued operations.
BEE receivables –
expected credit loss provision
The Group has applied the expected credit loss impairment model
to its BEE loans receivable. In determining the extent to which
expected credit losses may apply, the Group assessed the
probability of agreeing an offset of the gross receivable and
payable balances and the future free cashflows to be generated by
the mining operations, based on the current LOM plans. In assessing
the future cashflows, the Group considered the diamond price
outlook and the conclusion during the Year of an offset agreement.
Based on the assessment, the analysis generated an expected net
credit loss reversal totalling US$5.8
million (30 June 2020:
US$10.9 million expected credit loss
provision), comprising of US$6.1
million provision reversal in respect of Cullinan and Finsch
and US$0.3 million expected credit
loss provision in respect of Koffiefontein (30 June 2020: US$10.9
million provision comprising US$6.1
million in respect of Cullinan and Finsch and US$4.8 million in respect of Koffiefontein).
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 Resource 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, outside the current
mine plan further impact the estimated date of decommissioning and
rehabilitation.
Restructuring
Transaction costs associated with the
restructuring exercise were apportioned to the listed debt, equity
issued and ZAR banking facilities based on the value of each
element at the date of restructuring. Refer to Note 8 (c) for
further details.
Williamson Diamond Mine (30 June 2021)
The Group needs to apply judgment when determining whether an
asset should be classified as held for sale. For this to be the
case, the asset must be available for immediate sale in its present
condition and its sale must be highly probable. The following
factors are considered by management in determining whether a sale
is highly probable: Management must be committed to a plan to sell
the asset; an active programme to locate a buyer and complete the
plan must have been initiated; the asset must be actively marketed
for sale at a reasonable price and any transaction should be
expected to be completed within 12 months of classification of the
asset as held for sale. Based on the above factors, management
considered that the Williamson mine was an asset held for sale at
30 June 2021. Judgement is required
when determining whether a component of an entity classifies as a
discontinued operation. A component of the Group should be
classified as a discontinued operation when it has been disposed
of, or if it is classified as held for sale, and represents a
separate major line of business or geographical area of operations,
is part of a single co-ordinated plan to dispose of a separate
major line of business or geographical area of operations, or is a
subsidiary acquired exclusively with a view to resale. Judgement is
required when determining whether the component represents a
separate major line of business or geographical area of operations.
This was applied to the classification of the Williamson mine as a
discontinued operation. The Williamson mine is considered a major
geographical area of operations which has been reported as a
separate segment in the past, and as such we have determined the
classification of a discontinued operation to be appropriate. In
terms of the measurement requirements of IFRS 5, once classified as
held for sale, the assets are required to be measured at the lower
of their carrying amount and fair value less costs to sell.
Judgment is required in order to determine the fair value of the
disposal group. In determining the fair value used to
calculate the appropriate write down, management took into
consideration, current discussions with vendors, the latest LOM
plan assessment and the best available information at the present
time. Refer to note 17 for further details.
Taxation
The Group operates in South
Africa and Tanzania, and
accordingly it is subject to, and pays annual income taxes under
the various income tax regimes in the countries in which it
operates. From time to time the Group is subject to a review of its
income tax filings and in connection with such reviews, disputes
can arise with the taxing authorities over the interpretation or
application of certain rules to the Group's business conducted
within the country involved. Management evaluates each of the
assessments and recognises a provision based on its best estimate
of the ultimate resolution of the assessment, through either
negotiation or through a legal process.
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 2020 Annual Report and will
be discussed in further detail in the FY 2021 Annual Report:
- Provision for
rehabilitation
- Inventory and
inventory stockpile
-
Depreciation
- Pension and
post-retirement medical fund schemes
- Net
investments in foreign operations
3. DIVIDENDS
No dividends have been declared in
respect of the current Period under review (30 June 2020: 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. As at 30 June 2021, the Tanzania segment constitutes a discontinued
operation and is classified as held for sale per IFRS 5.
Exploration – exploration activities in Botswana (The exploration assets in
Botswana were disposed of via the
sale of the Group’s interest in Sekaka Diamonds Exploration (Pty)
Ltd).
Corporate – administrative activities in the United Kingdom.
Beneficiation – beneficiation activities in South Africa.
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 segments |
South Africa – Mining activities |
Tanzania -Mining activities |
Botswana |
US$ million |
Cullinan |
Finsch |
Koffiefontein |
Williamson5 |
Exploration4 |
|
2021 |
2021 |
2021 |
2021 |
2021 |
Revenue |
250.6 |
123.5 |
27.9 |
— |
— |
Segment
result¹ |
76.8 |
(0.5) |
(8.1) |
— |
— |
Impairment charge – operations |
— |
(15.1) |
(2.2) |
— |
— |
Impairment charge – other receivables |
— |
— |
— |
— |
— |
Impairment of BEE loans receivable – expected credit loss release /
(charge) |
— |
— |
— |
— |
— |
Other
direct income |
0.6 |
1.0 |
0.1 |
— |
— |
Operating
profit / (loss)² |
77.4 |
(14.6) |
(10.2) |
— |
— |
Gain on
extinguishment of Notes and unamortised costs |
|
|
|
|
|
Profit on
disposal of subsidiary |
|
|
|
|
|
Financial
income |
|
|
|
|
|
Financial
expense |
|
|
|
|
|
Income
tax charge |
|
|
|
|
|
Loss on
discontinued operation (net of tax)5 |
|
|
|
|
|
Non-controlling interest |
|
|
|
|
|
Profit
attributable to equity holders of the parent company |
|
|
|
|
|
Segment
assets |
559.0 |
249.9 |
6.9 |
59.6 |
— |
Segment
liabilities |
559.2 |
119.7 |
22.1 |
33.5 |
— |
Capital
expenditure |
16.8 |
4.0 |
1.7 |
0.3 |
— |
Operating segments |
United
Kingdom |
South
Africa |
|
|
US$ million |
Corporate and treasury |
Beneficiation3 |
Inter-segment |
Consolidated |
|
2021 |
2021 |
2021 |
|
Revenue |
— |
0.3 |
— |
402.3 |
Segment
result¹ |
(21.2) |
(1.6) |
(1.6) |
43.8 |
Impairment charge – operations |
— |
— |
— |
(17.3) |
Impairment charge – other receivables |
(0.4) |
— |
— |
(0.4) |
Impairment of BEE loans receivable – expected credit loss release /
(charge) |
5.8 |
— |
— |
5.8 |
Other
direct income |
— |
— |
— |
1.7 |
Operating
profit / (loss)² |
(15.8) |
(1.6) |
(1.6) |
33.6 |
Gain on
extinguishment of Notes and unamortised costs |
|
|
|
213.3 |
Profit on
disposal of subsidiary |
|
|
|
14.7 |
Financial
income |
|
|
|
84.1 |
Financial
expense |
|
|
|
(74.0) |
Income
tax charge |
|
|
|
(23.0) |
Loss on
discontinued operation (net of tax)5 |
|
|
|
(52.1) |
Non-controlling interest |
|
|
|
(9.5) |
Profit
attributable to equity holders of the parent company |
|
|
|
187.1 |
Segment
assets |
3,488.7 |
4.5 |
(3,290.0) |
1,078.6 |
Segment
liabilities |
2,134.7 |
5.5 |
(2,236.4) |
638.3 |
Capital
expenditure |
1.0 |
— |
— |
23.8 |
¹ Total depreciation of US$75.9 million included in the segmental result
comprises depreciation incurred at Cullinan of US$52.2 million, Finsch of US$23.0 million, Koffiefontein US$ 0.1 million and Corporate and treasury of
US$0.6 million.
² Operating profit is equivalent to
revenue of US$402.3 million less
total costs of US$368.7 million as
disclosed in the Consolidated Income Statement.
3 The beneficiation segment
represents Tarorite, a cutting and polishing business in
South Africa, which on occasion
cuts and polishes select rough diamonds.
4 The operating results in
respect of Botswana have been
reflected in note 17. In FY 2021, Petra sold its exploration assets
in Botswana to Botswana Diamonds
PLC via the sale of its interest in Sekaka Diamonds Exploration
(Pty) Ltd.
5 The operating results in
respect of Williamson have been reflected within loss on
discontinued operation and the assets and liabilities classified as
held for sale (refer to note 17).
4.
SEGMENTAL INFORMATION (continued)
Operating segments |
South Africa – Mining activities |
Tanzania -Mining activities |
Botswana |
US$ million |
Cullinan |
Finsch |
Koffiefontein |
Williamson5 |
Exploration |
|
2020 |
2020 |
2020 |
2020 |
2020 |
Revenue |
116.5 |
101.1 |
25.7 |
— |
— |
Segment
result¹ |
21.6 |
(5.1) |
(6.2) |
— |
(0.6) |
Impairment charge – operations |
(11.6) |
(27.6) |
(11.7) |
— |
— |
Impairment charge – other receivables |
— |
— |
— |
— |
— |
Impairment of BEE loans receivable – expected credit loss
provision |
— |
— |
— |
— |
— |
Other direct
income |
— |
0.7 |
0.3 |
— |
— |
Operating
loss² |
10.0 |
(32.0) |
(17.6) |
— |
(0.6) |
Financial
income |
|
|
|
|
|
Financial
expense |
|
|
|
|
|
Income
tax credit |
|
|
|
|
|
Loss on
discontinued operation (net of tax)4 |
|
|
|
|
|
Non-controlling interest |
|
|
|
|
|
Loss
attributable to equity holders of the parent company |
|
|
|
|
|
Segment
assets |
494.0 |
303.5 |
135.9 |
94.5 |
— |
Segment
liabilities |
566.7 |
176.6 |
266.2 |
297.8 |
— |
Capital
expenditure |
16.4 |
8.4 |
3.8 |
8.0 |
— |
Operating segments |
United
Kingdom |
South
Africa |
|
|
US$ million |
Corporate and treasury |
Beneficiation3 |
Inter-segment |
Consolidated |
|
2020 |
2020 |
2020 |
2020 |
Revenue |
— |
— |
— |
243.3 |
Segment
result¹ |
(8.7) |
(0.7) |
(4.5) |
(4.2) |
Impairment charge – operations |
— |
— |
— |
(50.9) |
Impairment charge – other receivables |
0.4 |
— |
— |
0.4 |
Impairment of BEE loans receivable – expected credit loss
provision |
(10.9) |
— |
— |
(10.9) |
Other
direct income |
— |
— |
— |
1.0 |
Operating
loss² |
(19.2) |
(0.7) |
(4.5) |
(64.6) |
Financial
income |
|
|
|
7.9 |
Financial
expense |
|
|
|
(160.8) |
Income
tax credit |
|
|
|
52.5 |
Loss on
discontinued operation (net of tax)4 |
|
|
|
(58.0) |
Non-controlling interest |
|
|
|
33.0 |
Loss
attributable to equity holders of the parent company |
|
|
|
(190.0) |
Segment
assets |
2,876.6 |
4.1 |
(2,865.9) |
1,042.7 |
Segment
liabilities |
2,018.9 |
4.8 |
(2,300.0) |
1,031.0 |
Capital
expenditure |
1.0 |
— |
(1.2) |
36.4 |
¹ Total depreciation of US$69.9 million included in the segmental result
comprises depreciation incurred at Finsch of US$25.8 million, Cullinan of US$40.4 million, Koffiefontein of US$2.5 million, , Exploration of US$0.1 million and Corporate administration of
US$0.8 million.
² Operating loss is equivalent to
revenue of US$243.3 million less
total costs of US$307.9 million as
disclosed in the Consolidated Income Statement.
3 The beneficiation segment
represents Tarorite, a cutting and polishing business in
South Africa, which on occasion
cuts and polishes select rough diamonds.
4 The operating results in
respect of Williamson have been reflected within loss on
discontinued operation (refer to note 17).
US$ million |
|
2021² |
|
2020 |
5.
CORPORATE EXPENDITURE |
|
|
|
|
|
|
|
|
|
Corporate expenditure
includes: |
|
|
|
|
Depreciation of
property, plant and equipment |
|
0.6 |
|
0.5 |
Amortisation of
right-of-use asset |
|
0.3 |
|
0.3 |
London Stock Exchange
and other regulatory expenses |
|
1.5 |
|
1.4 |
Settlement costs and
fees – human rights claims at Williamson¹ |
|
12.7 |
|
— |
Share-based expense -
Directors |
|
0.5 |
|
0.7 |
Other staff costs |
|
2.3 |
|
2.0 |
Total staff costs |
|
2.8 |
|
2.7 |
¹ The settlement costs for the human
rights claims at Williamson comprise US$4.8
million for the part settlement of the claimant’s legal
costs and for distribution to the claimants and US$1.3 million to invest in programmes dedicated
to providing long-term sustainable support to the communities
living around the Williamson mine as a condition of the Settlement.
The Company has incurred and provided for additional total costs of
US$6.6 million relating to this
matter, the bulk of which relate to legal, consultant,
investigation and expert fees.
² During the Year, the Group received
payments from the South African Government under the temporary
employee relief scheme (“TERS”) of US$3.5
million. Of the US$3.5 million
TERS payment received, US$0.3 million
relates to Corporate expenditure and US$3.2
million relates to Mining and processing costs.
6.
FINANCING INCOME / (EXPENSE)
US$ million |
|
2021 |
|
2020 |
|
|
|
|
|
Net unrealised foreign
exchange gains1 |
|
77.1 |
|
— |
Interest received on
BEE loans and other receivables |
|
5.4 |
|
6.7 |
Interest received bank
deposits |
|
0.7 |
|
1.2 |
Realised foreign
exchange gains on the settlement of foreign loans and forward
exchange contracts |
|
0.9 |
|
— |
Financial income |
|
84.1 |
|
7.9 |
Interest on senior
secured second lien notes, bank loans and overdrafts |
|
(51.5) |
|
(52.4) |
Other debt finance
costs, including BEE loan interest, facility fees and IFRS 16
charges |
|
(8.5) |
|
(13.4) |
Acceleration of
unamortised Notes costs |
|
(2.7) |
|
— |
Unwinding of present
value adjustment for rehabilitation costs |
|
(4.3) |
|
(4.6) |
Net unrealised foreign
exchange losses1 |
|
— |
|
(82.1) |
Realised foreign
exchange losses on the settlement of foreign loans and forward
exchange contracts |
|
(7.0) |
|
(8.3) |
Financial expense |
|
(74.0) |
|
(160.8) |
Loss on substantial
modification of Notes2 |
|
(7.7) |
|
— |
Gain on extinguishment
of Notes – debt for equity conversion2 |
|
221.0 |
|
— |
Net gain on
extinguishment of Notes |
|
213.3 |
|
— |
Net finance income /
(expense) |
|
223.4 |
|
(152.9) |
1 .The Group predominantly enters into hedge
contracts where the risk being hedged is the volatility in the
South African Rand, Pound Sterling and US Dollar exchange rates
affecting the proceeds in South African Rand of the Group’s US
Dollar denominated diamond tenders. 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. A significant strengthening of
the South African Rand against the US Dollar from ZAR17.32 (30 June
2020) to ZAR14.27
(30 June 2021) resulted in an
unrealised gain of US$77.1 million
(30 June 2020: US$82.1 million loss) comprising foreign exchange
contracts held at Year end of US$12.4
million (30 June 2020:
US$12.8 million loss) and inter-group
foreign denominated loans of US$64.7
million (30 June 2020:
US$68.7 million loss); and a net
realised foreign exchange loss of US$6.1
million (30 June 2020:
US$8.3 million loss) in respect of
foreign exchange contracts closed during the Year is included in
the net finance and expense amount.
2 The loss on substantial
modification and gain on extinguishment of Notes in the Year arose
from the Restructuring completed by the Group on 10 March 2021. Refer to note 8 for further
detail.
7. PROPERTY, PLANT AND EQUIPMENT
The net movement in property, plant and equipment for the Year
is an increase of US$21.0 million
(30 June 2020: US$292.0 million decrease). This is primarily as
a result of:
- the
movement in the US$/ZAR foreign exchange rate resulting in a
foreign exchange increase on Rand based assets of US$136.8 million (30 June
2020: US$163.8 million
decrease);
- an
increase in property, plant and equipment from capital expenditure
of US$23.8 million (30 June 2020: US$36.4
million), which includes US$0.3
million (30 June 2020:
US$8.0 million) additions
attributable to Williamson; and
- an
increase in the rehabilitation asset of US$6.4 million (30 June
2020: US$0.1 million) due to
Cullinan’s estimated period to decommissioning reducing from 45
years to 25 years reflecting updated scoping studies for future
development outside of its current approved LOM;
offset by:
-
depreciation of US$75.9 million
(30 June 2020: US$78.3 million);
- the
impairment of the Finsch and Koffiefontein assets of US$17.3 million (30 June
2020: US$50.9 million);
- the
impairment of the Williamson assets of US$21.4 million (30 June
2020: US$34.6 million);
- the
transfer of the remaining Williamson assets to non-current assets
held for sale of US$31.3 million
(30 June 2020: US$nil); and
- assets
of US$0.1 million (30 June 2020: US$0.7
million) disposed of during the Year.
8. Restructuring of
the US$650 million Loan Notes
On 10 March 2021, the Company
announced it had completed the implementation of the debt
Restructuring project with the Noteholders and the South African
Lender Group. The key features of the Restructuring of the
US$650 million Notes and the Senior
secured lender debt facilities of ZAR1.6
billion are as follows:
- conversion of Notes debt valued
at US$415.0 million into equity,
which resulted in the Noteholder group holding 91% of the enlarged
share capital of the Company (refer (a) below);
- the remainder of the Notes
exchanged for the issue of US$295.0
million new Notes and the contribution by holders of the
existing Notes of US$30.0 million in
new money, each to take the form of New Notes (refer (a) below);
and
- restructuring of the first lien
facilities to provide for a Term Loan of ZAR1.2 billion and a Revolving Credit Facility
(“RCF”) of ZAR560 million provided by
the South African Lender Group (refer (b) below).
a) Debt for Equity
conversion and the issue of New Notes
i) Debt for Equity
swap
The Company completed a debt for equity conversion consisting of
the partial repayment of the US$650
million Loan Notes by issuing 8,844,657,929 new Ordinary
Shares with a nominal value of 0.001
pence per share in the Company to the existing Noteholders.
The fair value of the shares at the date of the conversion was
1.58 pence per share, giving a total
consideration of U$194.0 million. As the fair value was derived by
reference to the closing share price at the date of the conversion,
it is considered to be a Level 1 fair value measurement. The
carrying value of the liability at the date of the conversion was
US$415.0 million, after
capitalisation of the May 2020 and
November 2020 coupons and adjusting
for the issue of new Notes. The resulting gain, before
restructuring costs, of US$221.0
million has been recognised in the Income Statement as part
of the gain on extinguishment of the Notes. Restructuring costs
identified as being directly associated with the debt for equity
conversion, of US$12.4 million have
been taken directly to share premium. The Debt for Equity
Conversion resulted in the Noteholders holding 91% of the enlarged
share capital of the Company.
US$ million |
2021 |
|
|
Ordinary shares issued
– nominal value per share |
12.3 |
Share premium |
169.3 |
Share premium on debt
for equity conversion |
181.6 |
Costs directly
associated with issue of shares |
(12.3) |
Attributable to
parent |
181.6 |
|
|
Gain on extinguishment
of Notes – debt for equity conversion |
221.0 |
ii) Issue of New
Notes
The New Notes of
US$336.7 million were issued and
allocated as follows:
· US$30.0 million allocated
only to those Noteholders that subscribed, and funded that
subscription, to the New Money, pro rata to their New Money
contribution (the “New Money Noteholders”);
· US$150.0 million allocated
only to those New Money Noteholders, pro rata to each holder's
contribution to the New Money;
· US$145.0 million allocated
to all Noteholders (including the New Money Noteholders), pro rata
to their holdings of existing Notes at the close of the
Restructuring; and
· a further amount of New Notes as consideration to
certain Noteholders, in remuneration for the commercial risks and
other commercial considerations borne by those Noteholders whilst
restricted for the purposes of negotiations with other stakeholders
and work performed in connection with the Restructuring. The
quantum of New Notes issued for this purpose was US$11.7 million, which has been capitalised as
part of the Notes liability and will be amortised over the term of
the Notes.
iii) Substantial
modification
The Group performed an assessment under its accounting policies
and the requirements of IFRS 9 as to whether the restructuring of
the terms of the Loan Notes represented a substantial modification.
As the net present value of the cash flows under the original terms
and the modified terms was greater than 10% different, the
modification was accounted for as a substantial modification.
As a result, on completion of the Restructuring, the carrying
value of the Loan Notes of US$299.0
million was de-recognised and the amended new Notes with a
nominal value of US306.7 million were recognised on the balance
sheet at the date of modification. The loss arising on substantial
modification of the Loan Notes of US$7.7
million has been recognised in the Income Statement as part
of the gain on extinguishment of the Notes. The acceleration of
unamortised costs associated with the substantial modification were
expensed and included within net finance income (refer to note
6).
US$ million |
2021 |
|
|
New Money
Noteholders |
150.0 |
New Notes allocated to
all Noteholders |
145.0 |
New Notes for
consideration of costs |
11.7 |
New Notes nominal
value |
306.7 |
|
|
Carrying value of Notes
derecognized |
299.0 |
New Notes nominal
value |
(306.7) |
Loss on substantial
modification of Notes |
(7.7) |
b) First lien
facilities
The previous facilities held with the South African Lender
Group, included the ZAR500.0 million
working capital facility (the "WCF"), the ZAR400.0 million RCF, the financing arrangements
in respect of the Group's BEE partners (the "BEE Facilities") of
ZAR683.1 million and the Group's
general banking facilities were restructured through the
extinguishment of the existing facilities and the replacement of
such facilities with a new Term Loan and RCF, as part of the
Restructuring.
A new Term Loan was made available to
the Group for a principal amount of ZAR1.2
billion, in order to refinance the previous drawn
ZAR500.0 million WCF and the
outstanding principal amounts of the BEE Facilities (ZAR683.1 million). Transaction costs of
ZAR17.4 million (US$1.7 million) and cash transaction costs of
US$0.7 million directly associated
with the Term loan were capitalised to the liability to be
amortised over the period of the loan. The Term Loan is fully
drawn.
A new RCF was made available comprising a rollover of the
previous ZAR400.0 million RCF but
increased by a further ZAR160.0
million. An amount of ZAR400.0
million remains drawn at Year end under the RCF with the RCF
reducing at Year end to ZAR509.6
million in line with the amortisation profile, with
ZAR109.6 million still available for
drawdown. For the terms of the new First lien facilities refer to
note 10.
c) Transaction costs
A total of US$33.7 million
(FY2020: US$3.8 million included
under prepayments) were incurred during the Year for the
Restructuring. The transaction costs have been apportioned to
Equity, the Notes and bank facilities based on each components
contribution to the total Restructuring. Cash costs incurred in the
Year amounted to US$29.9 million (FY
2020: US$3.8 million included under
prepayments). A summary of the cash transaction costs are presented
in the table below:
US$ million |
|
|
|
Transaction costs attributable to
equity |
|
Transaction costs attributable to
Notes |
|
Transaction costs attributable to
First lien facilities |
|
|
|
d) Taxation
The current and deferred taxation consequences of the
Restructuring have been considered and based on adviser opinions
received during the Restructuring project, Management are of the
opinion there are no material tax events anticipated.
9. SHARES
ISSUED
As part of the Restructuring and subsequent to the approval by
shareholders at a special general meeting held on 13 January 2021, the Company allotted
8,844,657,929 Ordinary Shares to the Noteholders valued at
US$194.0 million (comprising Ordinary
shares valued at US$12.3 million and
share premium of US$181.7 million
before capitalised costs), based on the share price at 9 March 2021 (the date upon which all
implementation steps for the Debt Restructuring were met). The
allotment was pursuant to the Debt for Equity Conversion, announced
on 22 December 2020, which resulted
in the Noteholders holding 91% of the enlarged share capital of the
Company in the following proportions:
- 56.0% of the enlarged share
capital was issued to all Noteholders, including the New Money
Noteholders, pro rata to their holdings of existing Notes at the
close of the Restructuring (to the extent any Noteholder did not
take up their equity entitlement, such entitlement was allocated to
the remaining Noteholders who did not opt out of their equity
entitlement, on a pro rata basis); and
- 35.0% of the enlarged share
capital was issued to the New Money Noteholders only, pro rata to
their contribution of the New Money (to the extent any such
Noteholders did not take up their equity entitlement, such
entitlement was allocated to the remaining Noteholders who
contributed to the New Money and who did not opt out of their
equity entitlements, on a pro rata basis).
As a consequence of the Debt for Equity Conversion, 9% of the
Company’s enlarged share capital remains with the previous
shareholders (subject to dilution as a result of standard
management equity incentive arrangements). The costs associated
with the allotment of the new ordinary shares of US$12.3 million were capitalised against share
premium. For additional information regarding the Restructuring
refer to note 8.
Allotments during FY 2020 were in respect of the award of 94,858
Ordinary Shares to Mr Dippenaar and Mr Davidson (previous Group
Executive Directors) granted under the 2012 Performance Share Plan
in receipt of performance measured over the period 1 July 2016 to 30 June
2019.
10.
LOANS AND BORROWINGS
US$ million |
|
2021 |
|
2020 |
|
|
|
|
|
Non-current
liabilities |
|
|
|
|
Loans and borrowings –
Senior secured second lien notes |
|
327.3 |
|
— |
Loans and borrowings –
Senior secured lender debt facilities |
|
72.7 |
|
— |
|
|
400.0 |
|
— |
Current
liabilities |
|
|
|
|
Loans and borrowings –
BEE Partner debt facilities |
|
— |
|
40.0 |
Loans and borrowings –
senior secured lender debt facilities |
|
30.3 |
|
52.1 |
Loans and borrowings –
senior secured second lien notes¹ |
|
— |
|
676.9 |
|
|
30.3 |
|
769.0 |
Total loans and
borrowings - bank facilities |
|
430.3 |
|
769.0 |
¹ Prior to the Debt Restructuring the
Company had US$650 million Notes
which had been issued by a wholly owned subsidiary, Petra Diamonds
US$ Treasury Plc. In terms of the requirements of IFRS, the Notes
were classified as a current liability as at 30 June 2020, as at that date the company did not
have an unconditional right to defer settlement for at least 12
months.These Notes were restructured during the Year with the
existing Notes being extinguished through a debt for equity
conversion (US$415.0 million), the
issue of new Notes via a cash injection of US$30.0 million and additional new Notes issued
for US$306.7 million (including costs
of US$11.7 million). Refer to note 8
for further detail.
a) US$336.7 million Senior Secured Second Lien
Notes
A wholly owned subsidiary of the Company, Petra Diamonds US$
Treasury Plc, issued debt securities consisting of US$336.7 million five-year senior secured second
lien loan notes (“Notes”), with a maturity date of 8 March 2026. The 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. The Notes carry a coupon from:
- 9 March
2021 to 31 December 2022 of
10.50% per annum, which is capitalised to the outstanding principal
amount semi-annually in arrears on 31 December and 30 June of each
year;
- 1 January
2023 to 30 June 2023 of 10.50%
per annum on 37.7778% of the aggregate principal amount
outstanding, which is capitalised to the outstanding principal
amount semi-annually in arrears on 31 December and 30 June of each
year and 9.75% per annum on 62.2222% of the aggregate principal
amount outstanding which is payable in cash semi-annually in
arrears on 31 December and 30 June of each year;
- 1 July
2023 to 31 December 2025 of
9.75% per annum on the aggregate principal amount outstanding which
is payable in cash semi-annually in arrears on 31 December and 30
June of each year; and
- 1 January
2026 to 8 March 2026 (final
coupon payment) of 9.75% per annum on the aggregate principal
amount outstanding which is payable in cash
The costs associated with issuing the Notes of US$20.7 million have been capitalised against the
principal amount and US$19.4 million
remains unamortised as at 30 June
2021. Interest of US$11.1
million has been accrued as at 30
June 2021.
Further details about the Notes
(including security) will be included in the Group’s FY 2021 Annual
Report.
b) 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.
As part of the Restructuring, the existing banking facilities
were amended on a first lien basis and on the following terms, the
creation of a new Term Loan of ZAR1.2
billion (US$76.6 million)
comprising ZAR500.0 million
(US$35.0 million) under the existing
WCF and ZAR683.1 (US$41.6 million) million relating to the BEE
Partner debt facilities; and the rollover of the existing RCF
increasing by ZAR160.0 million
(US$11.2 million) to ZAR560 million (US$39.2
million). The revised terms and conditions are set out in
the table below. The costs associated with restructuring of the
banking facilities of US$1.7 million
and US$0.7 million cash transaction
costs allocated based on the total Restructuring costs have been
capitalised against the principal amount.
The Group performed an assessment under its accounting policies
and the requirements of IFRS 9 as to whether the restructuring of
the Senior Secured Lender Facilities represented a substantial
modification. As the net present value of the cashflows under the
original terms and the modified terms was less than 10% different,
the modification did not represent a substantial modification.
The new terms under the Term loan are:
- maturity date 8 March 2024;
- scheduled amortisation of 9% of
principal per quarter (starting in June
2021) with a final 10% of principal repayment at
maturity,
- 1.3x
debt service cover ratio tested semi-annually on a rolling 12-month
basis, which if breached will give rise to an event of default
under the new bank facilities; and
-
interest rate of SA JIBAR + 5.25% per annum (with an upfront fee of
1% of the term loan amount capitalised).
The revised terms under the RCF
are:
- maturity date 8 March 2024;
- scheduled amortisation of 9% of
principal per quarter (starting in June
2021) with a final 10% of principal repayment at
maturity;
- 1.3x
debt service cover ratio tested semi-annually on a rolling 12-month
basis, which if breached will give rise to an event of default
under the new bank facilities; and
-
interest rate of SA JIBAR + 5.25% per annum (with an upfront fee of
1% of the RCF amount capitalised and a commitment fee based on
undrawn balances).
The Group's debt and hedging facilities
are detailed in the table below:
Senior Lender Debt
Facilities |
|
2021 |
|
2020 |
|
|
Facility
amount |
|
Facility amount |
|
|
|
|
|
ZAR Debt
Facilities: |
|
|
|
|
ZAR Lenders RCF |
|
ZAR560
million |
|
ZAR400 million |
ZAR Lenders Term
loan |
|
ZAR1.2
billion |
|
ZARnil |
ZAR Lenders WCF |
|
ZARnil |
|
ZAR500 million |
Absa/RMB – FX Hedging
facilities |
|
ZAR150
million |
|
ZAR300 million |
|
|
|
|
|
The terms and conditions of the Group’s
facilities will be detailed in the Group’s FY 2021 Annual
Report.
The facilities are secured on the
Group’s interests in Cullinan, Finsch, and Koffiefontein.
As at date of this report, the Term
loan was fully drawn while the RCF had available capacity of
ZAR109.6 million (US$7.7 million).
Covenant ratios
As part of the revised Term loan and
RCF facilities entered into with the South African Lender Group,
the Company is required:
- to
maintain a 1.3x debt service cover ratio tested semi-annually on a
rolling 12-month basis; and
- to
maintain liquidity requirements being the aggregate of the undrawn
amounts available under the RCF and consolidated cash and cash
equivalents (excluding diamond debtors) not falling below
ZAR200 million (US$14.0 million).
Refer to the Financial Review for
further commentary with regards to covenants.
c) BEE Partner debt facilities
The BEE Partner debt facilities have been restructured and now
form part of the new Term Loan (refer to (b) above).
11.
COMMITMENTS
As at 30 June 2021, the Company
had committed to future capital expenditure totalling US$10.2 million (30 June
2020: US$4.4 million), mainly
comprising Cullinan US$8.1 million
(30 June 2020: US$2.0 million), Finsch US$1.5 million (30 June
2020: US$1.4 million),
Koffiefontein US$0.6 million (
(30 June 2020: US$0.3 million) and Williamson US$nil
(30 June 2020: US$0.7 million).
12.
RELATED PARTY TRANSACTIONS
The Group’s related party BEE partner, Kago Diamonds (Pty) Ltd
(“Kago Diamonds”) and its gross interests in the mining operations
of the Group are disclosed in the table below.
|
|
|
Mine |
Partner
and respective interest
as at 30 June 2021 (%) |
Partner
and respective interest
as at 30 June 2020 (%) |
Cullinan |
Kago
Diamonds (14%) |
Kago
Diamonds (14%) |
Finsch |
Kago
Diamonds (14%) |
Kago
Diamonds (14%) |
Koffiefontein |
Kago
Diamonds (14%) |
Kago
Diamonds (14%) |
|
|
|
The Itumeleng Petra Diamonds Employee Trust (“IPDET”) holds a
12% interest in each of the Group’s South African operations, with
Petra’s commercial BEE Partners holding the remaining 14% interest
through their respective shareholdings in Kago Diamonds, in which
Petra has a 31.46% interest. The effective interest percentages
attributable to the remaining operations for the Group’s
shareholders is 78.4%.
The non-current loans receivable,
non-current loans payable, finance income and finance expense due
from and due to the related party BEE partners and other related
parties are disclosed in the table below:
US$
million |
|
1
July 2020 -
30 June 2021 |
|
1 July
2019 -
30 June 2020 |
|
|
|
|
|
Non-current
receivable |
|
|
|
|
Kago
Diamonds1 |
|
33.5 |
|
72.1 |
|
|
33.5 |
|
72.1 |
Non-current
payable |
|
|
|
|
Kago Diamonds |
|
— |
|
58.5 |
|
|
— |
|
58.5 |
Current trade and
other receivables |
|
|
|
|
KEM JV2 |
|
9.7 |
|
8.0 |
Impairment
provision2 |
|
(8.4) |
|
(6.9) |
|
|
1.3 |
|
1.1 |
Finance
income |
|
|
|
|
Kago Diamonds |
|
3.7 |
|
5.1 |
|
|
3.7 |
|
5.1 |
Finance
expense |
|
|
|
|
Kago Diamonds |
|
3.8 |
|
6.4 |
|
|
3.8 |
|
6.4 |
|
|
|
|
|
¹ The decrease in the Kago Diamonds receivable of US$38.6 million is mainly attributable to amounts
advanced to Kago Diamonds during the Year totalling US$3.8 million (30 June
2020: US$7.7 million), a
foreign exchange increase of US$15.4
million (30 June 2020:
US$7.7 million decrease), the
reversal of prior period expected credit loss provision of
US$4.2 million (30 June 2020: US$5.4
million impairment) and offset by the loan payable of
US$62.1 million (including foreign
exchange movements on the loan payable) by the Group to Kago
against the Kago loan receivable.
2 Included in current trade and other receivables are
amounts advanced to KEM JV in respect of a working capital facility
and equipment finance facility of US$nil (30
June 2020: US$nil) and the balance of the KEM JV purchase
consideration of US$1.3 million
(30 June 2020: US$1.1 million). During FY2021 the Group received
payments of US$nil (FY 2020 US$0.4
million) from the KEM JV as part settlement of the
outstanding purchase consideration. 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$8.4 million
(30 June 2020: US$6.9 million). The increase in the expected
credit loss is attributable to the movement in the foreign exchange
rates during the Year.
Kago Diamonds is one of the BEE partners which obtained bank
financing from ABSA, RMB and Ninety-One (the “BEE Lenders”) to
acquire its interests in Cullinan and Finsch. During FY2020, the
Group had provided a guarantee to the BEE Lenders for repayment of
loans advanced to the Group’s BEE Partners, however during FY2021
as part of the Debt Restructuring, the BEE Partner debt facilities
were restructured and now form part of the Group’s new Term Loan
(refer to note 9 for further detail).
Rental income
receivable
The Group received US$0.1 million
(30 June 2020: US$0.1 million) from Alufer Mining Ltd. The Group
has US$nil (30 June 2020:
US$0.1 million) receivable from
Alufer Mining Ltd. Mr Pryor is a director of Alufer Mining Ltd.
13. BEE
LOANS RECEIVABLE AND PAYABLE
US$ million |
|
30 June
2021 |
|
30 June 2020 |
|
|
|
|
|
Non-current
assets |
|
|
|
|
Loans and other
receivables |
|
46.6 |
|
137.0 |
|
|
|
|
|
Non-current
liabilities |
|
|
|
|
Trade and other
payables |
|
— |
|
108.6 |
|
|
|
|
|
BEE Loans
Receivable
The non-current BEE loans receivable represents those amounts
receivable from the Group’s BEE Partners (Kago Diamonds and the
IPDET) in respect of advances historically provided to the Group’s
BEE Partners to enable them to discharge interest and capital
commitments under the BEE Lender facilities, advances to the BEE
Partners to enable trickle payment distributions to both Kago
Diamonds shareholders and to the beneficiaries of the IPDET (Petra
Directors and Senior Managers do not qualify as beneficiaries under
the IPDET Trust Deed), and financing of their interests in the
Koffiefontein mine. In addition, US$47.9
million (30 June 2020:
US$40.0 million) has been recorded as
part of the gross receivable (before expected credit loss
provisions) in respect of amounts to be reimbursed to the Group in
respect of the guarantee under the BEE Lender facilities. Judgment
was required in determining the extent to which reimbursement is
applicable based on the terms of the agreements, South African
legislation, future cashflow generation of the operations and
discussions with the BEE partners.
As a result of historical delays in the Cullinan plant ramp-up
and the Finsch SLC ramp-up, the Group has historically and through
the Period elected to advance the BEE Partners’ funds using Group
treasury to enable the BEE Partners to service their interest and
capital commitments under the BEE Lender facilities (refer below).
These BEE receivables, including interest raised, will be
recoverable from the BEE Partners’ share of future cashflows from
the underlying mining operations.
As part of the Debt Restructuring, Petra has assumed the BEE
Lender facility obligations under the terms outlined in notes 9 and
10.
For detail on expected credit loss provision and reversal
associated with the BEE loans receivable refer to note 2.
US$ million |
|
1 July 2020
-
30 June 2021 |
|
1 July 2019 -
30 June 2020 |
|
|
|
|
|
As at 1 July |
|
137.0 |
|
109.6 |
Foreign exchange
movement on opening balance |
|
30.7 |
|
(22.5) |
Discretionary advance –
capital and interest commitment (BEE Lender facility) |
|
4.7 |
|
12.2 |
Discretionary advance –
distributions to beneficiaries |
|
2.0 |
|
1.9 |
Interest
receivable |
|
5.2 |
|
6.7 |
Group guarantee
provided to BEE Lenders – default event under Notes (refer
below) |
|
— |
|
40.0 |
Reversal / (impairment)
of BEE loans receivable – expected credit loss provision |
|
5.8 |
|
(10.9) |
BEE payable
restructuring – offset against BEE receivable |
|
(138.8) |
|
— |
As at 30 June |
|
46.6 |
|
137.0 |
BEE loans
payable
BEE loans payable represent those loans advanced by the BEE
partners to the Group to acquire their interest in Cullinan and
Finsch. Details of the movements are set out below.
US$ million |
|
1 July 2020
-
30 June 2021 |
|
1 July 2019 -
30 June 2020 |
|
|
|
|
|
As at 1 July |
|
108.6 |
|
120.5 |
Foreign exchange
movement on opening balance |
|
23.2 |
|
(23.8) |
Interest payable |
|
7.0 |
|
11.9 |
BEE payable
restructuring – offset against BEE receivable |
|
(138.8) |
|
— |
As at 30 June |
|
— |
|
108.6 |
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 Cullinan and Finsch.
As part of historical refinancing arrangements, the Group provided
a guarantee to the BEE Lenders over the repayment of loans advanced
to the Group’s BEE Partners. The BEE Partners were expected to
settle their loan obligations with the BEE Lenders from their share
of future operational cashflows from the South African operations,
either through repayment of the amounts owing to the BEE Partners
by Petra or through recoverable advances provided by Petra from
Group treasury.
In March 2021, the Group completed
its Restructuring, the BEE Lender facility was included as part of
the Group’s new banking facilities and the guarantee provided by
the Group on behalf of the BEE Partners was extinguished (refer to
note 10 for further detail).
14.
EARNINGS PER SHARE
|
Continuing
operations
30 June 2021
US$ |
Discontinued
operations
30 June 2021
US$ |
Total
30 June 2021
US$ |
Numerator |
|
|
|
|
|
|
|
Profit / (loss)
for the Year |
239,085,494 |
(52,063,601) |
187,021,893 |
|
|
|
|
Denominator |
|
|
|
|
Shares |
Shares |
Shares |
Weighted average number
of ordinary shares used in basic EPS |
|
|
|
Brought forward |
865,431,343 |
865,431,343 |
865,431,343 |
Effect of shares issued
during the Year |
2,721,433,209 |
2,721,433,209 |
2,721,433,209 |
Carried forward |
3,586,864,552 |
3,586,864,552 |
3,586,864,552 |
|
|
|
|
|
Shares |
Shares |
Shares |
Dilutive effect
of potential ordinary shares |
— |
— |
— |
Weighted average number
of ordinary shares in issue used in diluted EPS |
3,586,864,552 |
3,586,864,552 |
3,586,864,552 |
|
|
|
|
|
US cents |
US cents |
US cents |
Basic profit / (loss)
per share – US cents |
6.67 |
(1.45) |
5.22 |
Diluted profit / (loss)
per share – US cents |
6.67 |
(1.45) |
5.22 |
|
Continuing
operations
30 June 2020
US$ |
Discontinued
operations
30 June 2020
US$ |
Total
30 June 2020
US$ |
Numerator |
|
|
|
|
|
|
|
Profit / (loss)
for the Year |
(132,012,863) |
(58,008,824) |
(190,021,687) |
|
|
|
|
Denominator |
|
|
|
|
Shares |
Shares |
Shares |
Weighted average number
of ordinary shares used in basic EPS |
|
|
|
Brought forward |
865,336,485 |
865,336,485 |
865,336,485 |
Effect of shares issued
during the Year |
63,152 |
63,152 |
63,152 |
Carried forward |
865,399,637 |
865,399,637 |
865,399,637 |
|
|
|
|
|
Shares |
Shares |
Shares |
Dilutive effect
of potential ordinary shares |
— |
— |
— |
Weighted average number
of ordinary shares in issue used in diluted EPS |
865,399,637 |
865,399,637 |
865,399,637 |
|
|
|
|
|
US cents |
US cents |
US cents |
Basic profit / (loss)
per share – US cents |
(15.26) |
(6.70) |
(21.96) |
Diluted profit / (loss)
per share – US cents |
(15.26) |
(6.70) |
(21.96) |
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 2020: nil).
15. 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.
|
Continuing
operations
30 June 2021
US$ |
Discontinued
operations
30 June 2021
US$ |
Total
30 June 2021
US$ |
Numerator |
|
|
|
|
|
|
|
Profit / (loss) for the
Year |
239,085,494 |
(52,063,601) |
187,021,893 |
Net unrealised foreign
exchange loss / (gain) |
(62,242,188) |
2,
,422,257 |
(59,819,931) |
Present value discount
– Williamson VAT receivable |
— |
(763,537) |
(763,537) |
Profit on disposal of
subsidiary |
(14,696,171) |
— |
(14,696,171) |
Impairment charge -
operations* |
13,551,364 |
21,438,352 |
34,989,716 |
Impairment/(reversal)
charge – other receivables |
439,236 |
— |
439,236 |
(Reversal) / impairment
charge of BEE loans receivable – expected credit loss
provision |
(5,824,201) |
— |
(5,824,201) |
Taxation charge /
(credit) on unrealised foreign exchange (gain) / loss |
17,228,580 |
— |
17,228,580 |
Taxation credit on
impairment charge* |
(3,308,166) |
— |
(3,308,166) |
Gain on extinguishment
of Notes |
(213,349,503) |
— |
(213,349,503) |
Transaction costs –
Human rights settlement agreement and provisions for unsettled and
disputed tax claims |
12,651,014 |
19,459,877 |
31,
110,891 |
Adjusted loss for the
Year attributable to parent |
(16,464,541) |
(9,506,652) |
(25,971,193) |
*Portion attributable
to equity shareholders of the Company |
|
|
|
|
|
|
|
Denominator |
|
|
|
|
Shares |
Shares |
Shares |
Weighted average number
of ordinary shares used in basic EPS |
|
|
|
As at 1 July |
865,431,343 |
865,431,343 |
865,431,343 |
Effect of shares issued
during the Year |
2,721,433,209 |
2,721,433,209 |
2,721,433,209 |
Carried forward |
3,586,864,552 |
3,586,864,552 |
3,586,864,552 |
|
|
|
|
|
Shares |
Shares |
Shares |
Dilutive effect of
potential ordinary shares |
— |
— |
— |
Weighted average number
of ordinary shares in issue used in diluted EPS |
3,586,864,552 |
3,586,864,552 |
3,586,864,552 |
|
|
|
|
|
US cents |
US cents |
US cents |
Adjusted basic profit /
(loss) per share – US cents |
(0.46) |
(0.27) |
(0.73) |
Adjusted
diluted profit/(loss) per share – US cents |
(0.46) |
(0.27) |
(0.73) |
|
Continuing
operations
30 June 2020
US$ |
Discontinued
operations
30 June 2020
US$ |
Total
30 June 2020
US$ |
Numerator |
|
|
|
|
|
|
|
Profit / (loss) for the
Year |
(132,012,863) |
(58,008,824) |
(190,021,687) |
Net unrealised foreign
exchange loss / (gain) |
64,036,456 |
(650,203) |
63,386,253 |
Present value discount
– Williamson VAT receivable |
— |
6,816,715 |
6,816,715 |
Profit on disposal of
subsidiary |
— |
— |
— |
Impairment charge -
operations* |
39,879,861 |
34,644,929 |
74,524,790 |
Impairment/(reversal)
charge – other receivables |
(382,713) |
— |
(382,713) |
(Reversal) / impairment
charge of BEE loans receivable – expected credit loss
provision |
10,887,714 |
— |
10,887,714 |
Taxation charge /
(credit) on unrealised foreign exchange (gain) / loss |
(17,396,618) |
— |
(17,396,618) |
Taxation credit on
impairment charge* |
(8,595,566) |
— |
(8,595,566) |
Gain on extinguishment
of Notes |
— |
— |
— |
Transaction costs –
Human rights settlement agreement and provisions for unsettled and
disputed tax claims |
— |
— |
— |
Adjusted loss for the
Year attributable to parent |
(43,583,729) |
(17,197,382) |
(60,781,111) |
*Portion attributable
to equity shareholders of the Company |
|
|
|
|
|
|
|
Denominator |
|
|
|
|
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 |
Effect of shares issued
during the Year |
63,152 |
63,152 |
63,152 |
Carried forward |
865,399,637 |
865,399,637 |
865,399,637 |
|
|
|
|
|
Shares |
Shares |
Shares |
Dilutive effect of
potential ordinary shares |
— |
— |
— |
Weighted average number
of ordinary shares in issue used in diluted EPS |
865,399,637 |
865,399,637 |
865,399,637 |
|
|
|
|
|
US cents |
US cents |
US cents |
Adjusted basic profit /
(loss) per share – US cents |
(5.04) |
(1.99) |
(7.02) |
Adjusted
diluted profit/(loss) per share – US cents |
(5.04) |
(1.99) |
(7.02) |
16.
IMPAIRMENT CHARGE
The current market conditions in the global rough diamond
market, the ongoing impact of the COVID-19 pandemic, volatility of
and variability in product mix are all factors impacting the rough
diamond prices achieved by Petra during the Year, 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 further impaired or an impairment reversal may apply,
its recoverable amount is estimated. The recoverable amount is
determined on a fair value less cost to develop basis.
The operations of Cullinan, Finsch and Koffiefontein were held
at recoverable value as a result of FY 2020 impairments. 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 was considered appropriate for Finsch and
Koffiefontein. No impairment was considered necessary for Cullinan,
nor was any impairment reversal considered appropriate in the
current year. The Group recognised a consolidated income statement
charge of US$17.3 million being the
amount required to write down management’s estimate of recoverable
value of the Finsch and Koffiefontein assets. Williamson has been
classified as Held for Sale as at 30 June
2021. For impairment considerations of Williamson, refer to
note 17.
.
Impairment
(US$ million) |
Asset
class |
Carrying value pre
impairment |
Impairment |
Carrying value
post impairment |
|
|
|
|
|
Impairment operations: |
|
|
|
|
Cullinan |
Property,
plant & equipment |
497.9 |
— |
497.9 |
Finsch |
Property, plant &
equipment |
210.6 |
(15.1) |
195.5 |
Koffiefontein |
Property, plant &
equipment |
3.3 |
(2.2) |
1.1 |
Sub-total |
|
711.8 |
(17.3) |
694.5 |
|
|
|
|
|
Impairment –
non-financial receivables: |
|
|
|
|
Other – current |
Other receivables |
0.6 |
(0.4) |
0.2 |
Sub-total |
|
0.6 |
(0.4) |
0.2 |
Total |
|
712.4 |
(17.7) |
694.7 |
30 June 2020
During FY 2020, 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$85.5 million, being management’s estimate of
recoverable value of the Cullinan, Finsch, Koffiefontein and
Williamson assets. For impairment considerations of Williamson,
refer to note 16.
Impairment
(US$ million) |
Asset
class |
Carrying value pre
impairment |
Impairment |
Carrying value
post impairment |
|
|
|
|
|
Impairment operations: |
|
|
|
|
Cullinan |
Property,
plant & equipment |
250.1 |
(27.6) |
222.5 |
Finsch |
Property, plant &
equipment |
475.2 |
(11.6) |
463.6 |
Koffiefontein |
Property, plant &
equipment |
17.4 |
(11.7) |
5.7 |
Sub-total |
|
742.7 |
(50.9) |
691.8 |
Williamson (refer note
16) |
Property, plant &
equipment |
101.3 |
(34.6) |
66.7 |
Sub-total |
|
844.0 |
(85.5) |
758.5 |
|
|
|
|
|
Impairment –
non-financial receivables: |
|
|
|
|
Other – reversal
current |
Other receivables |
— |
0.4 |
0.4 |
Sub-total |
|
— |
0.4 |
0.4 |
Total |
|
844.0 |
(85.1) |
758.9 |
Cullinan, Finsch,
and Koffiefontein 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
Koffiefontein and Finsch assets (30 June
2020: Cullinan, Finsch, Koffiefontein and Williamson). 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
for 30 June 2021 and 30 June 2020:
Key
assumptions |
Explanation |
LOM and
recoverable value of reserves and resources |
Economically recoverable reserves and resources are based on
management’s expectations based on the availability 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 2031 (FY 2020: FY 2029)
Finsch: FY 2030 (FY 2020: FY 2030)
Koffiefontein: FY 2023 ( (FY 2020: FY 2023)
Williamson: FY 2030
Resources remaining after the current LOM plans have not been
included in impairment testing for the operations. |
LOM
reserves and resources |
Finsch: LOM plan over
the next nine years; total resource processed 26.8 Mt (FY 2020: LOM
plan over the next 10 years; total resource processed 33.0
Mt). |
|
Cullinan: LOM plan over
the next nine years; total resource processed 38.6 Mt (FY 2020: LOM
plan over the next nine years; total resource processed 37.8
Mt). |
|
Koffiefontein: LOM plan
over the next two years; total resource processed 2.2 Mt (FY 2020:
LOM plan over the next three years; total resource processed 2.9
Mt). |
|
FY2020: Williamson: LOM
plan over the next nine years; total resource processed 49.3
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. |
Residual
Value |
Cullinan:
Management included a residual value of property, plant and
equipment to be used beyond the current LOM, given the significant
resource base estimated to be available at the end of the current
LOM.
No residual values were included in the impairment assessments of
the other mining operations. |
Diamond
prices |
The
diamond prices used in the impairment test have been set with
reference to recently achieved pricing and market trends, and
long-term diamond price escalators are informed by industry views
of long-term market supply/demand fundamentals. Given the current
market uncertainty, the assessment of short-term diamond prices and
the rate and extent of pricing recovery, together with the
longer-term pricing escalators, represented a critical
judgement.
The 30 June 2021 impairment testing models starting price
assumptions have been updated to reflect the improved pricing
achieved during the Year when compared to the 30 June 2020
impairment models. Diamond prices have been assumed to increase
from FY 2022 and then 4% from FY 2024, returning to pricing levels
achieved before the impact of COVID-19, representing an increase of
25-30% from pricing achieved at the lowest point during FY2020. The
long-term models incorporate normalised diamond price escalation of
1.9% above a long-term US inflation rate of 2.5% per annum from FY
2025 to FY 2030. Estimates for the contribution of Exceptional
Diamonds sold for more than US$5.0 million each are determined with
reference to historical trends.
30 June 2020 impairment testing models incorporated diamond prices
impacted by the COVID-19 pandemic with expected diamond prices
returning to the pre-COVID-19 adjusted long-term average by FY
2024. The long-term models incorporate normalised diamond price
escalation of 1.8% above a long-term US inflation rate of 2.5% per
annum from FY 2024 to FY 2030. Estimates for the contribution of
Exceptional Diamonds sold for more than US$5.0 million each are
determined with reference to historical trends. |
Discount
rate |
A ZAR discount rate of
12.0% (30 June 2020: 11.25%) was used for the South African
operations in FY 2020 and a USD discount rate of 13.75% (30 June
2020: 13.5%) for Williamson. Discount rates calculated based on a
nominal weighted average cost of capital including the effect of
factors such as market risk and country risk as at the Year end.
USD and ZAR discount rates are applied based on respective
functional currency of the cash generating unit. |
Cost
inflation rate |
Long-term inflation
rates of 3.5–7.8% (30 June 2020: 6.0–9.8%) above the long-term US$
inflation rate were used for Opex and Capex escalators. |
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 ZAR14.50 (30 June 2020:
ZAR16.00), reflecting the volatility experienced during Year,
before further devaluing at 5.5% (30 June 2020: 3.5% from FY 2023)
per annum until FY 2027 and thereafter devaluing at 3.5% per annum.
Given the volatility in the USD/ZAR exchange rate and the current
levels of economic uncertainty, the determination of the exchange
rate assumptions required significant judgement. |
Valuation
basis |
Discounted present
value of future cash flows. |
Williamson |
During
FY2020, Williamson was placed on care and maintenance. For
impairment testing at Williamson, for FY2020 management assumed
that operations would recommence from 1 July 2021 at normal monthly
costs. However if the recommencement of operations had been delayed
by six months, the impact would be to increase the impairment by an
additional US$9.4 million.
During the current Year, Williamson was classified as an asset held
for sale, for further detail refer to note 17. |
Sensitivity
analysis
The impact of applying reasonable sensitivities on the key
inputs based on management’s assumptions at 30 June 2021 is noted below:
|
Additional impairment charge |
(US$ million) |
|
Cullinan |
Finsch |
Koffiefontein |
Base case |
|
|
|
|
Increase in discount
rate by 2% |
|
32.1 |
37.0 |
1.1 |
Reduction in pricing by
5% over Life of Mine |
|
46.1 |
54.8 |
1.1 |
Reduction in short-term
production by 10% |
|
22.4 |
33.0 |
1.1 |
Increase in Opex by
5% |
|
22.9 |
36.3 |
1.1 |
Strengthening of the
ZAR from US$/ZAR14.50 to US$/ZAR14.00 |
|
35.4 |
42.0 |
1.1 |
|
|
|
|
|
17.
DISPOSAL OF OPERATIONS
a)
Disposal of Botswana
(exploration)
On 20 July 2020 the Company
announced that it had entered into an agreement to dispose of its
exploration assets in Botswana via
the sale of 100% of its holding in Sekaka Diamonds Exploration
(Pty) Limited (previously known as Petra Diamonds Botswana (Pty)
Limited) (“Sekaka”) to Botswana Diamonds PLC for a total
consideration of US$300,000 and a 5%
royalty on future diamond revenues should any of the prospects
within the exploration licences be brought into production.
The assets of Sekaka include the Company’s three existing
Prospecting Licenses in Botswana,
which includes the KX36 project, a 3.5 hectare kimberlite that was
a new discovery by Petra in 2010, as well as a bulk sampling
plant. These assets have been classified as 'Assets held for
sale' since 30 June 2018 following a
decision by the Board to dispose of its Botswana exploration assets; the disposal of
Sekaka was not a result of the recent sales process, as announced
on 26 June 2020, undertaken by the
Group with respect to the Restructuring.
The purchase price of US$300,000
will be payable in two equal instalments of US$150,000 each, on or before 31 August 2021 and 31
August 2022 respectively. Petra is also entitled to a 5%
royalty on the sale of diamonds commercially produced from any
kimberlite which falls within the licence areas covered in the
sale. Botswana Diamonds has the option to buy-out the royalty for a
cash payment of US$2.0 million.
The disposal completed during November
2020.
Effect of the
transaction
The transaction had the following
effect on the Group’s assets and liabilities:
i) Net assets
of Sekaka:
US$ million |
As at 30 November
2020 |
Mining property, plant
and equipment |
0.2 |
Trade and other
receivables |
— |
Non-current assets
held for sale |
0.2 |
|
|
Trade and other
payables |
— |
Non-current
liabilities associated with non-current assets held for
sale |
— |
Net assets
disposed |
0.2 |
ii) Post tax profit
on disposal of Sekaka at:
US$ million |
Period ended 30
November 2020 |
Fair value
consideration receivable on disposal |
0.3¹ |
Less: net assets
disposed of |
(0.2) |
Add: foreign currency
translation recycled on disposal |
13.3 |
Profit on disposal |
13.4 |
Add: net profit for the
Period² |
1.3 |
Profit on disposal of
subsidiary |
14.7 |
|
|
¹ The Company has attributed US$nil
fair value to the 5% royalty given the uncertainty and time taken
to convert an exploration project to a commercially viable
mine.
² The Company incurred US$0.1 million in cash costs during the Year.
b) Asset
Held for Sale
Williamson
The Board has decided to review its strategic options at
Williamson and the asset has therefore been classified as an asset
held for sale.. As a result, the assets and liabilities of the
Williamson mining operation (being Petra’s 75.0% interest) have
been classified as held for sale in the Statement of Financial
Position at 30 June 2021, in
accordance with IFRS 5. The financial results of the Williamson
operation for the Year have been disclosed in the Consolidated
Income Statement in Loss on discontinued operation. The Williamson
mining operation is a separate operating segment for the purposes
of the Group’s segmental reporting.
i)
Net assets of Williamson:
US$ million |
Book value prior to
reclassification of as held for sale |
Impairment |
30 June
2021 |
Mining property, plant
and equipment |
52.7 |
(21.4)¹ |
31.3 |
Non-current trade and other
receivables |
0.7 |
— |
0.7 |
Trade and other receivables |
2.9 |
— |
2.9 |
Inventory |
15.5 |
— |
15.5 |
Cash and cash equivalents |
9.2 |
— |
9.2 |
Non-current assets
held for sale |
81.0 |
(21.4) |
59.6 |
|
|
|
|
Environmental liabilities,
provisions and other non-current trade and other payables |
(22.9) |
— |
(22.9) |
Trade and other
payables and provisions |
(10.6) |
— |
(10.6) |
Non-current
liabilities associated with non-current assets held for
sale |
(33.5) |
— |
(33.5) |
Net assets |
47.5 |
(21.4) |
26.1 |
ii)
Result of Williamson:
US$ million |
1 July 2020 – 30
June 2021 |
|
1 July 2019 – 30 June
2020 |
Revenue |
4.6 |
|
52.5 |
Cost of sales |
(13.8) |
|
(68.7) |
Gross loss |
(9.2) |
|
(16.2) |
Impairment charge –
operations |
— |
|
(34.6) |
Impairment reversal /
(charge) - other receivables |
0.7 |
|
(6.8) |
Provisions for
unsettled and disputed tax claims
|
(19.5) |
|
— |
Financial income |
— |
|
0.6 |
Financial expense |
(2.7) |
|
(0.8) |
Loss before
tax |
(30.7) |
|
(57.8) |
Income tax charge |
— |
|
(0.2) |
Loss after tax
before impairment charge |
(30.7) |
|
(58.0) |
Impairment
charge1 |
(21.4) |
|
— |
Net loss for the
Year |
(52.1) |
|
(58.0) |
|
|
|
|
Attributable to: |
|
|
|
- Equity holders of the parent |
(52.1) |
|
(58.0) |
- Non-controlling interest |
— |
|
— |
|
(52.1) |
|
(58.0) |
|
|
|
|
1. The US$21.4 million impairment
loss recorded on the Williamson assets represents the difference
between the assets measured at the lower of their carrying amount
and fair value less costs to sell. In determining the fair
value used to calculate the appropriate write down, management took
into consideration the best available information at the present
time with reference to ongoing discussions with a potential
investor. The impairment charge of US$21.4
million is recognised to reduce assets of Williamson to
equal the fair value less costs to sell.
iii) The
consolidated cash flow statement includes the following amounts
relating to Williamson:
US$ million |
1 July 2020 – 30
June 2021 |
|
1 July 2019 – 30 June
2020 |
Operating activities |
(5.2) |
|
7.9 |
Investing activities |
(0.3) |
|
(7.9) |
Net cash utilised in discontinued
operations |
0.6 |
|
(4.2) |
|
|
|
|
18.
SIGNIFICANT NON CASH TRANSACTIONS
(a) Operating and investing
activities
US$
million |
2021 |
2020 |
Operating activities |
|
|
Depreciation of property, plant and equipment |
75.9 |
78.6 |
Amortisation of right-of-use asset |
0.9 |
4.9 |
Unrealised
gain on lease liability |
— |
(0.8) |
Impairment
charge |
17.3 |
92.3 |
Impairment
charge reversal for other receivables |
0.4 |
(0.4) |
Impairment
of BEE loans receivable – expected credit loss (reversal) / charge
provision |
(5.8) |
10.9 |
Loss and
impairment charge on discontinued operations |
43.2 |
0.1 |
Profit on
disposal of subsidiary |
(14.7) |
— |
Movement
in provisions |
4.8 |
(0.1) |
Other
finance expense – unwinding of present value adjustment for
rehabilitation costs |
4.3 |
4.6 |
Other
finance expense – post-retirement medical fund |
0.9 |
0.9 |
Net
unrealised foreign exchange (gains)/losses |
(77.1) |
82.1 |
(Profit)/loss on sale of property, plant and equipment |
(0.6) |
(0.1) |
Share-based payment provision |
0.5 |
0.7 |
|
50.0 |
273.7 |
Investing activities |
|
|
Non-cash
rehabilitation asset adjustment – change in estimate |
(5.8) |
(0.1) |
Non-cash
rehabilitation provision adjustment |
(0.1) |
(0.8) |
Non-cash
pension and post-retirement fund adjustment – change in
estimate |
0.8 |
0.8 |
Non-cash
interest receivable from BEE loans on investing activity |
5.2 |
6.7 |
|
(0.1) |
6.6 |
Financing activities |
|
|
Non-cash
transaction costs on Notes unamortised at time of Restructure |
2.7 |
— |
Non-cash
interest payable on BEE loans on investing activity |
7.0 |
11.9 |
|
9.7 |
11.9 |
(b) Financing activities – change in
loans and borrowings
US$ million |
Senior
secured
second lien
notes
2021 |
Senior
secured
lender debt
facilities
2021 |
BEE Lenders
guarantee recognised |
Lease liability |
Total
2021 |
Loans and
borrowings |
|
|
|
|
|
At 1 July |
676.9 |
52.1 |
40.0 |
4.7 |
773.7 |
Cash draw-downs |
30.0 |
— |
— |
— |
30.0 |
Cash repayments
(capital and interest) |
— |
(14.0) |
(4.7) |
— |
(18.7) |
Lease payments |
— |
— |
— |
(0.7) |
(0.7) |
Non-cash |
|
|
|
|
|
– Initial recognition
of lease liability |
— |
— |
— |
0.7 |
0.7 |
– Gain on lease
liability |
— |
— |
— |
— |
— |
– lease
terminations |
— |
— |
— |
(0.4) |
(0.4) |
– loss on discontinued
operation |
— |
— |
— |
(3.6) |
(3.6) |
– Debt for equity
conversion |
(415.0) |
— |
— |
— |
(415.0) |
- Extinguishment of remaining
Notes |
(299.2) |
— |
— |
— |
(299.2) |
- Issue of new Notes |
306.7 |
— |
— |
— |
306.7 |
- Transaction costs |
(20.8) |
(1.7) |
— |
— |
(22.5) |
- Unamortised transaction costs |
2.7 |
— |
— |
— |
2.7 |
– Guarantee obligation
recognised (refer to note 10) |
— |
45.4 |
(45.4) |
— |
— |
– Interest accruing
during the Year |
46.0 |
6.8 |
4.7 |
0.1 |
57.6 |
– Effect of foreign
exchange |
— |
14.3 |
5.4 |
0.2 |
19.9 |
At 30 June |
327.3 |
102.9 |
— |
1.0 |
431.2 |
|
|
|
|
|
|
US$ million |
Senior
secured
second lien
notes
2020 |
Senior
secured
lender debt
facilities
2020 |
BEE Lenders
guarantee recognised |
Lease liability |
Total
2020 |
Loans and borrowings |
|
|
|
|
|
At 1 July |
650.6 |
— |
— |
— |
650.6 |
Cash draw-downs |
— |
100.9 |
— |
— |
100.9 |
Cash repayments (capital and
interest) |
(23.6) |
(46.1) |
— |
— |
(69.7) |
Lease payments |
— |
— |
— |
(5.0) |
(5.0) |
Non-cash |
|
|
|
|
|
– Initial recognition of lease
liability |
— |
— |
— |
10.0 |
10.0 |
– Gain on lease liability |
— |
— |
— |
(0.8) |
(0.8) |
– lease terminations |
— |
— |
— |
— |
— |
– loss on discontinued
operation |
— |
— |
— |
— |
— |
– Debt for equity conversion |
— |
— |
— |
— |
— |
-
Extinguishment of remaining Notes |
— |
— |
— |
— |
— |
-
Issue of new Notes |
— |
— |
— |
— |
— |
-
Transaction costs |
— |
— |
— |
— |
— |
-
Unamortised transaction costs |
— |
— |
— |
— |
— |
– Guarantee obligation recognised
(refer to note 10) |
— |
— |
40.0 |
— |
40.0 |
– Interest accruing during the
Year |
49.9 |
0.2 |
— |
0.5 |
50.6 |
– Effect of foreign exchange |
— |
(2.9) |
— |
— |
(2.9) |
At 30 June |
676.9 |
52.1 |
40.0 |
4.7 |
773.7 |
|
|
|
|
|
|
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
14 September 2021