RNS Number : 2615N
Petra Diamonds Limited
24 October 2016
 

 

 

 

This announcement contains inside information

 

24 October 2016

 

 

LSE: PDL

 

Petra Diamonds Limited

("Petra" or "the Company" or "the Group")

 

Trading Update - Q1 FY 2017 Production and Sales Report

 

 

Petra Diamonds Limited announces the following trading update (unaudited) for the period from
1 July 2016 to 21 October 2016, covering production and sales from 1 July 2016 to 30 September 2016 ("Q1 FY 2017" or "Q1" or the "Period").

 

 

SUMMARY

 

·     Q1 production up 30% to 1,097,523 carats (Q1 FY 2016: 842,796 carats), due to increased contribution from undiluted ROM ore, improving ROM grades and additional tailings production from Kimberley Ekapa Mining.

·     Q1 revenue US$94.7 million from 745,447 carats sold (Q1 FY 2016: no tender held).

·     Following the Period end, Petra closed its second tender of FY 2017 yielding ca. US$66.4 million (ca. 574 kcts sold), with a third and final tender for H1 FY 2017 scheduled for early December 2016. Prices achieved during the second tender held firm with year-to-date rough diamond prices remaining flat on a like for like basis in comparison to H2 FY 2016.

·     Expansion programmes, including the Cullinan plant project, remain on track and in line with expectations. The new caves being installed at Cullinan and Finsch are both starting to deliver undiluted ore and will result in a continued increasing ROM grade profile and improved product mix.

·     Net debt at Period end of US$463.9 million (30 June 2016: US$384.8 million) within expected levels and excludes cash from the October diamond tender. The Company has undrawn bank facilities of US$70.0 million (30 June 2016: US$110.0 million), with an additional unrestricted cash balance of US$30 million (30 June 2016: US$36.7 million) available at Period end. Petra remains on track to become free cash flow positive from H2 FY 2017 onwards.

·     Tragically, despite historically having an exceptional safety record, it is with deep regret that the Company announces that three unrelated incidents lead to four Petra employees being fatally injured during the Period.

 

 

 

 

 

 

 

Production and Sales - Summary

 


Unit

Q1 FY 20171

Q1 FY 2016

Variance

FY 20161

Sales






Diamonds sold

Carats

745,447

n/a

n/a

3,448,084

Gross revenue

US$M

94.7

n/a

n/a

430.9







Production






ROM tonnes

Mt

2,796,670

2,593,336

+8%

11.3

Tailings & other tonnes

Mt

2,577,792

1,262,822

+104%

7.7

Total tonnes treated

Mt

5,374,462

3,856,158

+39%

19.0







ROM diamonds

Carats

720,475

646,051

+12%

2,582,135

Tailings & other2 diamonds

Carats

377,048

196,745

+92%

1,119,270

Total diamonds

Carats

1,097,523

842,796

+30%

3,701,405

 

1.     Production and sales includes 75.9% of Kimberley Ekapa Mining from 18 January 2016.

2.     'Other' includes mining of the Ebenhaezer satellite kimberlite pipe at Koffiefontein and alluvial diamond mining at Williamson.

 

 

Johan Dippenaar, Chief Executive Officer, commented:

"Operationally, the Group has made a strong start to FY 2017 delivering close to 1.1 Mcts for Q1 and we continue to expect full year production of 4.4 to 4.6 Mcts, in line with earlier guidance. The newly established caves at both Finsch and Cullinan, accessing higher grade undiluted areas, are starting to meaningfully contribute to ROM production, which is continuing to ramp-up in line with expectations.

 

The diamond market is holding firm with prices on a like for like basis matching those realised in the period January to June 2016 (our H2 FY 2016).

 

Petra has always taken pride in excellent safety results posted by its operations. It is therefore with deep regret that we report fatal injuries suffered by four of our employees. Across the Group, we have embarked upon renewed safety drives to reiterate our zero-tolerance approach to unsafe acts and working conditions with an aim of zero harm to our workforce and contractors.

 

"Petra's focus remains on the health and safety of our workforce, maintenance of a healthy balance sheet, the tight control of costs and the successful roll-out of our expansion plans, which will continue to deliver increased contributions from higher quality production areas."

 

 

CONFERENCE CALL

Petra's CEO, Johan Dippenaar, and Chief Financial Officer, Jacques Breytenbach, will host a conference call at 9:30am BST today to discuss the Trading Update with investors and analysts. Participants may join the call by dialling one of the following numbers shortly before the call:

 

From the UK (toll free): 0808 237 0040

From South Africa (toll free): 0800 222 290

From South Africa (toll): 021 672 4008

From the rest of the world: +44 203 428 1542

Participant passcode: 47970202#

 

A replay of the conference call will be available on the following numbers from 12:00pm BST today:

 

From UK (toll free): 0808 237 0026

From South Africa and the rest of the world: +44 203 426 2807

Playback passcode: 678166#

 

An additional conference call to cater for North American and other international investors will be held at 4:00pm BST today.

 

Participants are advised to listen to the replay of the first conference call in advance of this call, as the main management commentary on the results will not be repeated.

 

From the United States (toll free): 1866 928 7517

From the rest of the world: +44 203 428 1542

From the UK (toll free): 0808 237 0040

From South Africa (toll free): 0800 222 290

Participant passcode: 54443386#

 

 

 

COMMENTARY

 

Production

·     Q1 production increased 30% to 1,097,523 carats (Q1 FY 2016: 842,796 carats) primarily due to initial production from undiluted areas improving ROM grades at both Cullinan and Finsch, coupled with increased tailings production from Kimberley Ekapa Mining.

·     Finsch ROM carat production increased by 9% to 458,396 carats (Q1 FY 2016: 419,451 carats) following improved ROM grades of 52.4 cpht (Q1 FY 2016: 46.6 cpht) further to the pillar mining in Block 4 and the gradual increase from production from the Block 5 SLC. Overall production decreased by 2% to 582,127 carats (Q1 FY 2016: 590,799 carats) as the planned decline in tailings production more than offset the ROM increase; however, the increased contribution from undiluted ore from the Block 5 SLC will further improve overall product mix and resultant diamond prices.

·     Cullinan's production increased 44% to 208,974 carats (Q1 FY 2016: 145,385 carats) with ROM grades benefiting from initial production from the newly established C-Cut phase 1 production area and pillar and reclamation mining. As a result, ROM grades for the Period measured 33.2cpht (Q1 FY 2016: 23.6 cpht), in line with guidance of 33 to 35 cpht for H1 FY 2017, which were approximately 10% higher than ROM grades in H2 FY 2016. As guided, Cullinan's planned FY 2017 production is weighted towards H2 as the commissioning of the new plant is on schedule to commence during Q3 FY 2017.

·     Koffiefontein's ROM tonnage throughput increased 59% to 227,387 tonnes (Q1 FY 2016: 143,198 tonnes), while rough diamond production increased 8% to 15,481 carats (Q1 FY 2016: 14,350 carats); ROM grades for the Period were negatively impacted by production from the lower-grade 52 Level as production from the SLC were hampered by various issues encountered in the SLC ore handling infrastructure; these issues will be addressed during Q2 FY 2017, however, production for the second quarter will be impacted as a result. Koffiefontein's ROM production is expected to return to planned levels from H2 FY 2017 onwards.

·     Kimberley Ekapa Mining's attributable production increased to 237,906 carats (Q1 FY 2016: 49,107), further to the acquisition of the Kimberley Mines in January 2016 and the subsequent formation of the Kimberley Ekapa Mining JV effective 1 July 2016. As planned, ROM treatment was restricted during the Period with commissioning of a temporary ROM crushing circuit towards the end of the Period. This modification was required to enable the treatment of ROM tonnes though the CTP plant. ROM stockpiles of ca. 150 Kt built up since June 2016 will be treated during the remainder of FY 2017. Tailings treatment yielded grades exceeding guidance with 12.4 cpht achieved during Q1 FY 2017 versus 9-10 cpht guided for the full year. Management maintains its guidance for the remainder of FY 2017.

·     Williamson's production increased 23% to 53,034 carats (Q1 FY 2016: 43,155 carats), with increased ROM tonnes treated. Construction of the new mill section was largely completed during the Period with commissioning due to commence during Q2 FY 2017. Upon commissioning, both throughput and grades will improve to achieve guided levels of production for FY 2017.

 

Diamond market and sales

·     Petra continued to witness strong signs of a stabilising diamond market, with prices for the Period remaining flat when compared to H2 FY 2016.

·     The Diamond Producers Association, of which Petra is a founding member, launched its first advertising campaign, "Real is Rare. Real is a Diamond", in the US in October 2016, with the plan to target consumers ahead of the prime festive selling period. Future campaigns will be planned to target important new markets, such as China and India in due course.

 

Diamond Sales and Prices

·     Revenue for Q1 FY 2017 was US$94.7 million (Q1 FY 2016: nil) and included the sale of a 138.57 carat white stone from Cullinan which sold for US$6.5 million, and a 10.64 carat pink stone from Williamson which sold for US$5.2 million.

·     Diamond inventory as at 30 September 2016 was 902,211 carats (30 September 2015: 1,181,822 carats, with no tenders held in Q1 FY 2016).

·     Diamond prices achieved in our first tender for FY 2017 maintained levels comparable to those realised during Petra's H2 FY 2016 on a like for like basis. Product mix is expected to further improve average diamond prices as the contribution from undiluted areas increases.

 

 

Mine

Actual

Q1 FY 2017

(US$/ct)

Guidance

FY 2017

(US$/ct)

Actual

FY 2016

(US$/ct)

Finsch

95

100-105

89

Cullinan

1641

105-115

1261

Koffiefontein

483

520-550

462

Kimberley Ekapa Mining

872

125-130

132

Williamson

3603

220-230

3843

 

Notes:

1.     Excluding exceptional diamonds, the average value for Q1 FY 2017 was US$108 per carat and for FY 2016 US$109 per carat.

2.     The average value for Kimberley Ekapa Mining for Q1 FY 2017 represents tailings carats only with no ROM contribution in this sales cycle due to the planned plant modifications as mentioned earlier in this report; tailings prices below guidance more than offset by over performance in grades.

3.     Excluding exceptional diamonds, the average value for Q1 FY 2017 was US$249 per carat and for FY 2016 was US$238 per carat.

 

 

Corporate and Financial:

·     A summary of the Group's current cash, diamond inventories, debtors, borrowings and net debt is set out below.


Unit

30 September 2016

30 June 2016

30 September 2015

Closing exchange rate used for conversion


R13.71:US$1

R14.68:US$1

R13.84/US$1

Cash at bank

US$m

42.2

48.7

57.2

Diamond inventories1

US$m

Carats

69.0

902,211

43.6

549,620

103.4

1,181,822

Diamond debtors

US$m

0.7

63.4

0.0

US$ loan notes (including accrued interest)

US$m

308.3

302.0

309.5

Bank loans and borrowings

US$m

197.8

131.5

53.9

Net debt2

US$m

463.9

384.8

306.2

Bank facilities undrawn and available

US$m

70.0

110.0

208.4

 

Notes:

1.     Recorded at the lower of cost and net realisable value.

2.     Net debt is the US$ loan notes and bank loans and borrowing net of cash at bank; it excludes diamond debtors and diamond inventories.

 

·     Net debt at Period end of US$463.9 million (30 June 2016: US$384.8 million) is within expected levels and excludes cash from the October diamond tender of ca. US$66.4 million. Net debt increased over the Period with the expected increase in diamond inventories, due to the timing of our tenders, as well as the capital spend profiles weighted towards H1 FY 2017, as guided. Capital expenditure during Q1 included finalising all major equipment purchases associated with the new Cullinan plant to meet the Q3 FY 2017 commissioning target.

·     The Company has undrawn bank facilities of US$70.0 million (30 June 2016: US$110.0 million), with an additional unrestricted cash balance of US$30 million (30 June 2016: US$36.7 million) available at Period end.

·     Petra remains on track to become free cash flow positive from H2 FY 2017 onwards, as Capex requirements will reduce from Q3 FY 2017, due to the advanced nature of the expansion projects.

 

Health and safety:

·     Despite an improving lost time injury frequency rate ("LTIFR") of 0.28 for Q1 FY 2017 (Q1 FY 2016: 0.40), the Company had a tragic start to 2016 with four fatalities in Q1 FY 2017. At Williamson, two unrelated incidents resulted in three employees being fatally injured, with another fatality occurring at the Cullinan Diamond mine.

·     Throughout the Group, we have increased our safety initiatives, involving all levels of employees, serving to reiterate our zero-tolerance approach to unsafe acts and working conditions and to reinforce safety as the single most important personal and organisational value.

 

 

 

Notes:

1.     The following definitions have been used in this announcement:

a.     cpht: carats per hundred tonnes

b.     exceptional diamonds: stones that sell for +US$5 million each

c.     Kcts: thousand carats

d.     Kt: thousand tonnes

e.     Mcts: million carats

f.      Mt: million tonnes

g.     Q: quarter of the financial year

h.     ROM: run-of-mine (i.e. production from the primary orebody)

i.      SLC: sub level cave

 

~ Ends ~

 

 

 

 

 

 

For further information, please contact:

 

Petra Diamonds, London                                         Telephone: +44 20 7494 8203

Salisha Ilyas                                                                salisha.ilyas@petradiamonds.com 

 

Buchanan                                                                  Telephone: +44 20 7466 5000

(PR Adviser)

Bobby Morse                                                               bobbym@buchanan.uk.com

Anna Michniewicz                                                       annam@buchanan.uk.com

 

RBC Capital Markets                                               Telephone: +44 20 7653 4000

(Joint Broker)

Matthew Coakes                                                         matthew.coakes@rbccm.com

Jonathan Hardy                                                           jonathan.hardy@rbccm.com

 

Barclays                                                                     Telephone: +44 20 7623 2323

(Joint Broker)

Bertie Whitehead                                                        bertie.whitehead@barclays.com

Philip Drake                                                                 philip.e.drake@barclays.com

 

BMO Capital Markets                                               Telephone : +44 20 7236 1010

(Joint Broker)

Jeffery Couch                                                              jeffery.couch@bmo.com

Neil Haycock                                                               neil.haycock@bmo.com

 

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About Petra Diamonds Limited

Petra Diamonds is a leading independent diamond mining group and an increasingly important supplier of rough diamonds to the international market. The Company has interests in five producing operations: three underground mines in South Africa (Finsch, Cullinan and Koffiefontein), the Kimberley Operations (including the Kimberley Underground mine and extensive tailings retreatment operations) and one open pit mine in Tanzania (Williamson).  It also maintains an exploration programme in Botswana.

 

Petra has a core objective to steadily increase annual production to ca. 5.3 million carats by FY 2019. The Group has a significant resource base in excess of 300 million carats.

 

Petra conducts all operations according to the highest ethical standards and will only operate in countries which are members of the Kimberley Process. Petra is quoted with a premium listing on the Main Market of the London Stock Exchange under the ticker 'PDL' and is a constituent of the FTSE4Good Index. For more information, visit the Company's website at www.petradiamonds.com.

 



 

APPENDIX A - MINE BY MINE PRODUCTION TABLES

 

Finsch - South Africa

 


Unit

Q1 FY 2017

Q1 FY 2016

Variance

FY 2016

Sales






Diamonds sold

Carats

422,230

n/a

n/a

2,085,123

Average price per carat

US$

95

n/a

n/a

89

Revenue

US$M

40.3

n/a

n/a

186.4

ROM Production






Tonnes treated

Tonnes

875,116

900,560

-3%

3,547,798

Diamonds produced

Carats

458,396

419,451

+9%

1,572,725

Grade1

cpht

52.4

46.6

+12%

44.3

Tailings Production






Tonnes treated

Tonnes

539,864

560,477

-4%

2,295,918

Diamonds produced

Carats

123,731

171,349

-28%

641,339

Grade1

cpht

22.9

30.6

-25%

27.9

Total Production






Tonnes treated

Tonnes

1,414,980

1,461,037

-3%

5,843,716

Diamonds produced

Carats

582,127

590,799

-2%

2,214,064

 

Note:

1.     The ROM / tailings grade split is theoretical and based on the resource grades as ore from both sources is processed through the same plant.

 

 

Cullinan - South Africa

 


Unit

Q1 FY 2017

Q1 FY 2016

Variance

FY 2016

Sales






Diamonds sold

Carats

116,805

n/a

n/a

663,175

Average price per carat

US$

1641

n/a

n/a

1262

Revenue

US$M

19.2

n/a

n/a

83.3

ROM Production






Tonnes treated

Tonnes

557,540

555,748

0%

2,302,892

Diamonds produced

Carats

184,897

131,153

+41%

643,724

Grade

cpht

33.2

23.6

+41%

28.0

Tailings Production






Tonnes treated

Tonnes

111,565

355,492

-69%

886,289

Diamonds produced

Carats

24,077

14,232

+69%

37,089

Grade

cpht

21.6

4.0

+440%

4.2

Total Production






Tonnes treated

Tonnes

669,105

911,240

-27%

3,189,181

Diamonds produced

Carats

208,974

145,385

+44%

680,813

 

Notes:

1.     Excluding exceptional diamonds, the average value was US$108 per carat.

2.     Excluding exceptional diamonds, the average value was US$109 per carat.

 

 

Koffiefontein - South Africa

 


Unit

Q1 FY 2017

Q1 FY 2016

Variance

FY 2016

Sales






Diamonds sold

Carats

11,497

n/a

n/a

55,500

Average price per carat

US$

483

n/a

n/a

462

Revenue

US$M

5.6

n/a

n/a

25.7

ROM Production






Tonnes treated

Tonnes

227,387

143,198

+59%

681,344

Diamonds produced

Carats

15,481

10,920

+42%

50,825

Grade

cpht

6.8

7.6

-11%

7.5

Tailings / Ebenhaezer Production






Tonnes treated

Tonnes

-

137,380

n/a

446,854

Diamonds produced

Carats

-

3,430

n/a

11,365

Grade

cpht

-

2.5

n/a

2.5

Total Production






Tonnes treated

Tonnes

227,387

280,578

-19%

1,128,198

Diamonds produced

Carats

15,481

14,350

+8%

62,190

 

 

Kimberley Operations - South Africa

 


Unit

Q1 FY 20171

Q1 FY 2016

Variance

FY 20161

Sales






Diamonds sold

Carats

148,213

n/a

n/a

438,680

Average price per carat

US$

87

n/a

n/a

132

Revenue

US$M

13.0

n/a

n/a

57.7

ROM Production






Tonnes treated

Tonnes

77,836

241,867

n/a

721,513

Diamonds produced

Carats

11,334

44,425

n/a

88,572

Grade

cpht

14.6

18.4

n/a

12.3

Tailings Production






Tonnes treated

Tonnes

1,829,590

115,366

n/a

3,583,758

Diamonds produced

Carats

226,572

4,682

n/a

442,897

Grade

cpht

12.4

4.1

n/a

12.4

Total Production






Tonnes treated

Tonnes

1,907,426

357,233

n/a

4,305,271

Diamonds produced

Carats

237,906

49,107

n/a

531,469

 

Note:

1.     Stated on a 75.9% attributable basis from 18 January 2016.

 

 

Williamson - Tanzania

 


Unit

Q1 FY 2017

Q1 FY 2016

Variance

FY 2016

Sales






Diamonds sold1

Carats

46,703

n/a

n/a

205,548

Average price per carat

US$

360

n/a

n/a

384

Revenue

US$M

17.0

n/a

n/a

78.9

ROM Production






Tonnes treated

Tonnes

1,058,792

751,963

+41%

4,003,180

Diamonds produced

Carats

50,368

40,102

+26%

199,796

Grade

cpht

4.8

5.3

-9%

5.0

Alluvial Production






Tonnes treated

Tonnes

96,773

94,107

+3%

417,452

Diamonds produced

Carats

2,667

3,052

-13%

13,073

Grade

cpht

2.8

3.2

-13%

3.1

Total Production






Tonnes treated

Tonnes

1,155,565

846,070

+37%

4,420,632

Diamonds produced

Carats

53,034

43,155

+23%

212,869

 


This information is provided by RNS
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