Comment Regarding Recent Share Price Performance

RNS Number : 1557H

Petra Diamonds Limited

30 July 2019

 

30 July 2019

LSE: PDL

Petra Diamonds Limited

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

Comment Regarding Recent Share Price Performance

Petra Diamonds Limited provides the following comment in response to the recent share price performance following the release of the Company's FY 2019 Trading Update and FY 2020 Guidance on 22 July 2019.   

The FY 2019 Trading Update highlighted that Petra delivered a solid set of operational results for FY2019 with improved safety (LTIFR improved from 0.23 to 0.21), production of 3.87 Mcts, in line with guidance, and lower capital expenditure of US$81.7m (down from US$129.6 million in FY2018) and below the Company's FY2019 guidance of US$100 million.

Petra generated $17 million of free cashflow (after adjusting for diamond debtors) in the second half of FY 2019, after paying the interest on the bond ($23.6 million) and repaying $20 million against the BEE loan. In other words, operating free cashflow for the second half of FY 2019 was over $60 million. This is a significant achievement given the current challenging market conditions in rough diamonds.

The Trading Update introduced Project 2022, an initiative that will identify and drive efficiencies and improvements across all aspects of the business to enable the Company to deliver an initial target of $150-200 million free cashflow over a three year period. Project 2022 will focus on enhancing cashflow generation and reducing net debt to provide optionality to address the refinancing of the bond. The Company is not considering raising equity to refinance the bond.  

Project 2022 is a bottom up assessment of the business and is based on the following prudent assumptions:

·     flat nominal diamond prices over the three year period;

·     the exclusion of any exceptional stones (defined as having a value of US$5 million or greater) from our Cullinan Diamond Mine; and

·     an exchange rate of ZAR14 to US$1 in FY 2020, devaluing at 3.5% annually to ZAR14.49 in FY 2021 and to ZAR14.99 in FY 2022.

.

Therefore the initial target of $150-$200 million of net free cashflow in the years 2020-2022 has potential upside in additional cash generation from improved rough diamond prices, a weakening in the Rand beyond the assumptions above and the continued recovery of exceptional diamonds from Cullinan.

Some third party commentary in relation to the capex guidance published in the FY 2019 Trading Update has raised concerns around potential increases in capex spend beyond FY 2020.  We have been able to lower our capex budget for FY 2020 by bringing forward some spend to FY 2019 as well as re-prioritising all projects across the Group's operations. The reduction in the FY 2020 capex guidance nevertheless provides for the ongoing sustainability of the business. Moreover, now that Petra has effectively completed its significant capital expenditure programme across the Group's diversified asset portfolio, there is no requirement to invest any significant expansionary capital between FY 2020 and FY 2022. We are in the process of updating our Life of Mine plans taking into account current diamond prices, which will be presented to the Board in September and will publish capex guidance for FY 2021 and FY 2022 with our Preliminary Results on 16 September.

Our business remains robust as evidenced by our FY 2019 results. We have cash resources of $90 million together with ZAR1 billion (US$70.4[1] million) revolving credit facility and ZAR0.5 billion (US$35.2¹ million) in working capital facilities. Furthermore, Petra has the third largest global diamond resource (in excess of 250 Mcts as at 30 June 2018), providing organic growth opportunities well beyond 2030.

Richard Duffy, CEO of Petra Diamonds said "We are executing our plans and delivering to budget as we launch Project 2022. We expect that this will deliver significant incremental cashflow over the next three years, further improve our net debt position and provide us with future growth options".

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For further information, please contact:

Petra Diamonds, London                                         Telephone: [phone]

Marianna Bowes                                                         [e-mail]  

Des Kilalea                                                     

Buchanan                                                                  Telephone: [phone]

(PR Adviser)                                                               [e-mail] 

Bobby Morse                                                              

About Petra Diamonds Limited

Petra Diamonds is a leading independent diamond mining group and a consistent supplier of gem quality rough diamonds to the international market. The Company has a diversified portfolio incorporating interests in three underground producing mines in South Africa (Finsch, Cullinan and Koffiefontein) and one open pit producing mine in Tanzania (Williamson). Petra also conducts a limited exploration programme in Botswana and South Africa, which is currently under review.

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. 290 million carats, which supports the potential for long-life operations.

Petra conducts all operations according to the highest ethical standards and will only operate in countries which are members of the Kimberley Process. The Company aims to generate tangible value for each of its stakeholders, thereby contributing to the socio-economic development of its host countries and supporting long-term sustainable operations to the benefit of its employees, partners and communities. Petra is quoted with a premium listing on the Main Market of the London Stock Exchange under the ticker 'PDL' and is a constituent of the FTSE4Good Index. For more information, visit www.petradiamonds.com 

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[1] US$ exchange rate of ZAR14.22/US$1 applied as at 29 July for conversion purposes.

 

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