Final Results to June 2007
Petra Diamonds Ld
08 October 2007
For release 8 October 2007 AIM: PDL
Petra Diamonds Limited
('Petra', 'the Company' or 'the Group')
Preliminary Results Announcement for the year ended 30 June 2007 (unaudited)
Highlights and Trading Update
Results
• Revenue to 30 June 2007: US$17.0 million (June 2006: US$20.9 million);
revenue post year end for 3 months to 30 September 2007: US$15.9 million,
substantial growth and only US$1.1 million short of entire revenue for year to
June 2007; revenue jump in 3 months to September 2007 due to Koffiefontein
coming on stream in this period
• Group revenue and cash flows expected to be substantially higher in
year to June 2008 as Petra has sound foundations for growth in place
• Group cash balances at 30 June 2007: US$44 million (30 June 2006: US$7
million); cash balances 30 September 2007: US$65 million
South Africa
• Resource update - increase of 101% to 9.33 million carats attributable
(last statement May 2005: 4.64 million carats); in-situ value of US$1.5
billion attributable
• Production of 180,474 carats for the year to 30 June 2007 (June 2006:
175,011 carats); 250,000 carats expected to June 2008; in excess of 400,000
carats expected to June 2009
• First sales from Koffiefontein - 28,246 carats sold for US$11.7 million in
quarter to 30 September 2007, average of US$414 per carat, excellent
values for a kimberlite mine; Koffiefontein expected to add 90,000 carats to
annual production
• Petra to acquire Kimberley Underground Mines from De Beers which will
add in excess of 100,000 carats to annual production in the year to June 2009
Angola
Alto Cuilo
• Next phase of exploration underway with mini bulk sampling programme;
kimberlite AC63 records intersections of 22.7 cpht over 90 metres, peaking at
35.5 cpht over 30 metres; other high grade zones identified
• October 2007: kimberlite AC98 records further high grade areas,
including intersections of 33.13 cpht over 33 metres
• As at 30 September 2007, BHP Billiton, Petra's joint venture partner,
had spent US$52.2 million on exploration development at Alto Cuilo
Luangue
• February 2007: Petra acquired an interest in Luangue, a highly prospective
project bordering Alto Cuilo in north eastern Angola, consolidating
the Group's position in the diamond belt of Angola; Petra subsequently (August
2007) entered into a joint venture with BHP Billiton to develop Luangue; the
deal will effectively fast track project development, with the BHP Billiton
earn-in requiring funding to a BHP Billiton pre-feasibility
Botswana
• Positive results from Kalahari drilling programme; discovery of a new
kimberlite using Xcalibur magnetics; identification of 20 prospective targets
in the Orapa North licence block
• Kukama Project; geophysical indications that diamondiferous kimberlite
173S could be 25 hectares in size
• Discovery of kimberlite X25 in the Gope area - highly significant
development as area has been explored thoroughly by other exploration
companies in the past; vindicates Petra's belief that new exploration
technologies and methodologies can identify significant new kimberlites in
Botswana
• New exploration licences granted to Petra over 2 known diamondiferous
kimberlites in the Jwaneng locality
Sierra Leone
• Development programme making solid progress at the Kono project, with test
shafts delivering highly encouraging results due to consistent kimberlite
fissure and good fissure widths encountered
• Trial mining commenced on three shafts, where in-situ grades of between 50
and 80 carats per hundred tonnes have been achieved
• Petra believes that the test shafts have a high likelihood of developing
into producing operations; appropriate infrastructure and equipment already
in place to make seamless transition to full production
Beneficiation
• Acquisition of Calibrated Diamonds gives Petra the ability to cut and
polish its own production, transforming Petra into a vertically integrated
group and enabling the Company to add value to its rough production
• Production build up underway; expected that 2,500 carats per month of
rough will be processed by mid 2008
Adonis Pouroulis, Chairman, said; 'This last year has been the most gratifying
in the Company's history as we have developed the critical mass, the in-house
capabilities and, most importantly, the credibility to take the business to the
next level. We have delivered, with Koffiefontein and Kimberley Underground, on
our promise to shareholders to introduce assets to the Group which will
substantially increase our current production and return significant cash flows.
We have also seen exciting developments with our major exploration assets in
Angola. Bulk sampling and drilling at Alto Cuilo is returning very encouraging
results and our second joint venture in Angola with BHP Billiton at neighbouring
Luangue consolidates our position in this highly prospective diamond region.
Calibrated Diamonds is on track and we expect to cut and polish 2,500 carats of
rough per month by mid-2008.'
'The development of the Group over the past year has been quite outstanding and
I look forward to further building on this success in 2008.'
Summary of Results (unaudited)
12 months to 12 months to
30 June 2007 30 June 2006
US$ million US$ million
Revenue (note 1) 17.0 20.9
Production (carats) (note 1) 180,474 175,011
Gross profit on mine - South African operations (note 2) 1.3 3.3
Loss before depreciation, amortisation and foreign exchange 7.8 5.3
movements
Loss for the year 20.9 18.8
Cash at bank (note 3) 44.1 7.0
Notes:
1. The Koffiefontein acquisition was expected to have been completed (with
all conditions being met) by June 2007, but completion only occurred in July
2007, post year end. Had this occurred pre 30 June, Petra would have been able
to (in accordance with the conditions of the Koffiefontein purchase agreement)
sell diamonds from the processed ore and Group revenue to June 2007 would have
been $9.9 million higher. Although Petra was maintaining the cave for many
months and processing ore from May 2007, diamonds could not be sold until all
conditions were met, therefore Koffiefontein production of 44,423 carats to June
2007 (Group accounting policy is that diamonds in ore mined but not processed
are included in closing stock) has been included in diamond inventory at a cost
of US$3.5 million; the corresponding gross profit of US$6.4 million (being sales
revenue less US$3.5 million and associated plant recovery costs) was recorded in
the 3 months to September 2007 when the diamonds were sold and will be
accordingly realised in the financial year ending 30 June 2008.
2. Gross profit stated before depreciation and amortisation.
3. In August 2007 Petra received US$22.35 million from BHP Billiton
relating to the disposal of 25% of Frannor Investments and Finance Limited.
Petra's cash at bank as at 30 September was US$65 million.
For further information, please contact:
Louise Goodeve / Justine Howarth Telephone: +44 (0) 20 7851 7480
Parkgreen Communications, London
Adrian Hadden Telephone: +44 (0) 20 7523 8000
Collins Stewart, London
Chairman's Statement 2007
Dear Shareholder,
It is with great pleasure that I present the results for 2007, a period which
marks Petra's 10th anniversary on AIM. Over the past year, we have developed
the critical mass, the in-house capabilities and, most importantly, the
credibility to take the business to the next level.
We started the period under review with a portfolio combining the producing
fissure mines in South Africa with the 'blue sky' potential of our operations in
Angola and Botswana, and advanced stage exploration in Sierra Leone. Our
objectives for the year were to deliver solid exploration results at Alto Cuilo
and, at the same time, to add significant production to the Group. We have
delivered on these stated objectives with the mini-bulk sampling programme
underway at Alto Cuilo, the acquisition of a world class diamond mine,
Koffiefontein, and the on-going development of the existing fissure mines.
In addition to these achievements, we acquired an interest in the Luangue
diamond project in Angola, entered into our second joint venture with BHP
Billiton, and brought into the Group cutting and polishing capabilites with the
acquisition of Calibrated Diamonds. Post year end, we entered into an agreement
to acquire the Kimberley Underground mines from De Beers.
The formal completion of the acquisition of Koffiefontein took longer than we
expected and occurred after the end of our 2006/07 financial year, but as
reported below, since the announcement of successful completion on 18 July 2007
we have been very pleased with the progress made and the results from our first
two tenders.
The compelling investment case for diamonds continues, with the market widely
predicted by analysts to slip into a major supply deficit within the next five
years, due to the lack of significant new production coming on stream. At our
recent tenders diamond prices recovered from the weaker prices recorded during
the financial year and, despite the turbulent events in the financial markets,
many market participants believe that an increase in diamond prices is overdue.
The highlights of a very productive year, set out by division, are outlined
below.
Results
The loss for the year amounted to US$20.9 million (30 June 2006: US$18.8m) after
amortisation of intangibles of US$3.7m (30 June 2006: US$2.8m), exchange losses
of US$4.8m (30 June 2006: US$6.1m), and depreciation of US$6.5m (30 June 2006:
US$5.7m).
Revenue generated by the South African mines decreased from $20.9 million in the
previous year to $16.7 million for the 2007 financial year (the balance of
revenue for the year of US$300,000 being non-beneficiation revenue at Calibrated
Diamonds). Revenue from the fissure mines was negatively impacted due to delays
in the commissioning of the processing plant at Sedibeng. However, these
stockpiled carats will be released in the current period as the plant is now
fully operational. Skills shortages at Helam resulted in its production targets
not being reached; this skills shortage has now been largely addressed and Helam
production is back on track.
The Koffiefontein acquisition was expected to be completed in all respects
before June 2007, but the last administrative conditions were met in July 2007,
post year end; had this occurred pre 30 June as expected, revenue to June 2007
would have been $9.9 million higher. Although Petra extracted ore as part of the
cave maintenance and plant testing programme and processing of the ore commenced
in May, diamond sales could not be made until all conditions were met.
Therefore Koffiefontein production of 44,423 carats to June 2007 has been
included in diamond inventory at a cost of $3.5 million and a gross profit of
US$6.4 million will be realised in the financial year ending 30 June 2008.
On-mine gross profit for the year would have significantly surpassed the
previous year's achievement of $3.3 million had Koffiefontein's sales been
realised, with an estimated $6.4 million being added to the current year's gross
profit on-mine of $1.3 million.
The Group prides itself in its low operational cost culture and the benefits
were evident at all operations in the current period.
A charge of US$3.7 million (30 June 2006: US$2.8m) for amortisation of
intangibles, is in respect of the amortisation of prospecting licences held by
Sekaka Diamonds (Pty) Limited, the Group's Botswana operating company. IFRS
requires that the cost of the licences be written off over their estimated life,
which the Board has estimated to be four years.
Group net cash inflow for the period is stated after taking account of
capitalised mining development cash outflows in Sierra Leone of US$3.8 million
(30 June 2006: US$4.1m), other capital expenditure (mainly in respect of the
South African operations) for the period of US$5.0 million (30 June 2006:
US$4.2m), acquisitions of new operations for US$1.9 million, cash inflows from
the US$20 million Al Rajhi Holdings convertible bond and US$36.1 million from
the issue of new shares, mainly due to a US$34.3 million (£17.5 million) placing
with Saad Investments.
At June 2007, our cash position was US$44.1 million. This was further bolstered
in August 2007 by the sale to BHP Billiton of 25% of Frannor Investments and
Finance Limited ('Frannor') for US$22.35m. As at 30 September 2007, Petra had
cash balances of US$65 million.
South Africa
The South African operations increased production by 3.1% from 175,011 carats
(June 2006) to 180,474 carats for the year to 30 June 2007. Second half
production (108,546 carats) saw a substantial increase on the first half (71,928
carats), due largely to the production contribution from Koffiefontein (44,423
carats) in closing inventory. The capacity and engineering improvements put in
place at our fissure mines, including the commissioning of the refurbished plant
at Star towards the end of December 2006 and the construction of the new plant
at Sedibeng, completed in May 2007, will deliver upside in the year to June
2008.
With the acquisition of Koffiefontein and the conditional agreement to acquire
Kimberley Underground, we are now on track to increase Group production from our
South African operations to 400,000 carats per annum by FY 2008/9. Increasing
our production will not only add to the upside of the major exploration projects
within the Group, it will also deliver steady earnings growth.
The Company today announced a substantial increase in reserves and resources, an
important development as, just like other mining companies, diamonds 'in the
ground' is a key contributor to company value and potential.
Petra announced an updated JORC compliant statement of the Group's South African
reserves and resources in respect of the Koffiefontein, Helam, Sedibeng and Star
mines. The total carat base increased 101% to 9.3 million carats attributable,
compared to that last reported in May 2005 of 4.6 million carats. The
corresponding in-situ value is calculated to be US$1.5 billion. This increase in
total carat base was largely due to the acquisition of Koffiefontein as well as
a review of the fissure mines.
Koffiefontein
We were selected by De Beers as the successful purchasers of Koffiefontein
(December 2006) and Kimberley Underground (September 2007) following rigorous
selection processes. Koffiefontein brought a world class diamond mine to the
Group, in line with our strategy of growing production.
The Company had been, with permission from the South African Department of
Minerals and Energy ('DME'), maintaining the cave at Koffiefontein since July
2006. This was a very valuable period as it enabled the Petra team to gain a
thorough working knowledge of the mine, optimise and test the plant and
streamline operations. As the conditions within the purchase agreement meant
that diamonds could not be sold until all conditions had been met, which
occurred in July, extracted ore is included in June's closing stock.
Since the financial year end, Petra has commenced sales of diamonds recovered
from the ore extracted during this preparatory period. Whilst Koffiefontein is
renowned for the exceptional quality and value of its diamonds, the results of
both tenders held since June exceeded management expectations. Based on
historical production and sales information, Petra had assumed an average of
US$245 per carat for Koffiefontein underground production (excluding tailings).
The first tender achieved an average of US$410 per carat and the second a
similar average of US$420 per carat. Two exceptional stones of 74.7 and 60.25
carats were sold for US$1,012,636 and US$735,885 respectively. Excluding these
stones from average values, we recorded an average of $367 and $334 per carat
for the first and second tenders respectively.
The acquisition of Koffiefontein was important to Petra, but bringing the mine
back into production was critical to the local community. Since we have
recommenced operations, we have created approximately 400 new jobs which,
combined with the multiplier effect of mining, will provide a crucial boost to
the local economy. We would like to extend our thanks to both the DME and De
Beers for their support in ensuring a successful outcome for all stakeholders.
Kimberley Underground
The acquisition and integration of Koffiefontein served as the blueprint for our
second deal with De Beers, when on 14 September 2007 we entered into a
conditional agreement to buy the Kimberley Underground mines (together the
Wesselton, Du Toitspan and Bultfontein mines) ('Kimberley Underground') in South
Africa.
Based on historical production and sales information, Petra expects annual sales
from Kimberley Underground in excess of 100,000 carats at an average of US$160
per carat once full production is recommenced, giving gross annual revenues in
excess of US$16 million and a life of mine of at least 12 years.
The consideration of R78.5 million (US$11 million) is to be settled by Petra
assuming De Beers' rehabilitation obligations with regards to Kimberley
Underground of R63.5 million (US$8.9 million), and the payment in cash by Petra
to De Beers of R15 million (US$2.1 million).
Angola
Angola is undoubtedly one of the most prospective countries in Africa for
diamond exploration, expected by many to yield the world's next large kimberlite
diamond mine. Petra has interests in both Project Alto Cuilo and Project
Luangue, situated in the Kasai Craton diamond belt of the country.
Project Alto Cuilo
Exploration at Alto Cuilo entered the next phase in January 2007 with the
commencement of the Large Diameter Drilling ('LDD') and Mini Bulk Sampling ('MBS
') campaigns. The MBS programme is of particular importance as it is the next
step in estimating the economic viability of the many kimberlites at Alto Cuilo
and their potential to be developed into mines.
The first mini bulk sample results were a major milestone in the development of
Alto Cuilo. The first priority kimberlite to be tested was AC63 and we were
pleased to report intersections of 22.7 cpht over 90 metres, peaking at a grade
of 35.5 cpht over 30 metres, along with other high grade zones. These results
mean that AC63 is likely to be further investigated by geophysical techniques
and sampled again at a later stage of the MBS campaign. The second kimberlite to
be sampled, AC98, recorded similarly encouraging results, including
intersections of 33.13 cpht over 33 metres, 12.1 cpht over 137 metres and 10.8
cpht over 90 metres.
We continue to be pleased with the unusually high discovery rate for kimberlites
at Alto Cuilo and there are now 77 confirmed kimberlites (July 2006: 50
confirmed kimberlites) out of a total of 99 targets drilled, a success rate of
78%. Micro diamond analysis has been carried out to date on 15 kimberlites of
which 13 have proved diamondiferous; these success rates are very high by world
diamond exploration standards. Following micro diamond analysis, we are then in
a position to target further kimberlites for the MBS campaign.
Given the volume, size and complex internal morphology of these kimberlites, we
have embarked on a ground geophysical programme of Natural Source Audio Magneto
Tellurics (NSAMT) and gravity in order to get a better understanding of the ore
bodies. This strategy is proving to be very effective in assisting with the
placement of the LDD holes and the core drilling programme continues apace, with
three drill rigs now working round the clock at Alto Cuilo, taking core samples
from kimberlite bodies for mineral chemistry analysis.
The MBS programme has importantly served to vindicate Petra's exploration model
as prospective areas can be identified using initial Heavy Mineral Analysis
before selection for drilling. In order to accelerate the pace of the mini bulk
sampling, a second LDD rig has been secured and is currently en route to Alto
Cuilo. We anticipate regular news flow with regards to results from the next
drill targets.
Alto Cuilo is a 'major' project in all senses of the word, with a large
footprint (in excess of 1,500 hectares) and a much higher number of prospective
kimberlites to be investigated than are found in most other diamond exploration
projects. It is for this reason that we welcome the technical, financial and
strategic input of our joint venture partner BHP Billiton. This partnership is
ensuring that Alto Cuilo is developed in as fast a timeframe as possible, and as
at September 2007 BHP Billiton had provided funding of US$52.2 million (June
2006: US$ 22.8 million), a very significant exploration spend.
I would like to extend our gratitude to the Angolan state diamond body, Endiama,
for their continued support.
Project Luangue
In March 2007, Petra announced the acquisition of Frannor in an all share
transaction from AIM quoted Xceldiam Limited. Frannor holds interests in the
Luangue concession which borders the northern side of Alto Cuilo, and has both
kimberlite and alluvial potential.
The acquisition is very significant as it entrenches the Company's position in
the diamond belt of north east Angola, an area widely believed to host major
diamond deposits. Furthermore it is Petra's belief that Luangue is as
prospective as Alto Cuilo, sharing as it does the same geology which pays no
heed to licence boundaries.
This view was further substantiated by the entry of BHP Billiton into Frannor in
August 2007. Through a new joint venture agreement with Petra, BHP Billiton
acquired a 25% stake in Frannor from Petra for a cash consideration of US$22.35
million and agreed, in order to earn-in to 75% of the joint venture, to sole
fund the exploration programme to the later of the completion of a BHP Billiton
standard pre-feasibility study and a minimum expenditure commitment of three
times Petra's net investment cost at Luangue.
Petra and BHP Billiton will now jointly manage and develop Luangue with the
objective of accelerating the pace of exploration. Of key importance is the
extensive experience and knowledge gained from the exploration programme at Alto
Cuilo, which will be applied to develop Luangue's considerable potential.
The next step in the Luangue exploration programme is the analysis of a 'towed
bird' helicopter borne, low level, gradient array aeromagnetic survey. This
survey should generate a substantial amount of new anomalies with high data
quality in addition to the 106 magnetic anomalies previously identified.
From alluvial operations carried out to date, 2,004 carats have been recovered,
with the largest stone being 18.29 carats. It is worth noting that the alluvial
potential at Luangue is significantly higher than at Alto Cuilo. There are many
advantages to alluvial mining, particularly the prospect of lower capital costs
combined with a faster route to production, and Angola's alluvials are regarded
as some of the best quality gem diamonds in the world.
Botswana
There are now more than 20 international mining companies carrying out
exploration programmes in Botswana, and with sound reason. Botswana is already
the world's largest diamond producer by value but we believe, as do our
competitors, that modern exploration techniques hold the key to the discovery of
new, large kimberlite mines.
Petra has the largest area under diamond prospecting licence in Botswana, of
approximately 52,000km(2), all of which is 'on craton'. We are particularly
excited by the potential of prospecting licences granted in the vicinity of the
major Jwaneng diamond mine, which hold two previously identified kimberlites,
DK4 and DK6, both of which are diamondiferous.
The Kalahari exploration programme has progressed well and our first drilling
programme commenced in the period under review. Results from the 600 metre
diameter gravity negative anomaly have confirmed that the surface area of the
kimberlite with the anomaly is likely to be significantly larger than previously
accepted. Likewise, at the Kukama project, our initial drilling campaign,
supported by geophysical interpretation, has established that diamondiferous
kimberlite 173S could be 25 hectares in size. This kimberlite has the potential
to be a substantial deposit, although the grade over the majority of it is at
this stage untested.
One of the most exciting developments in our Botswana exploration programme was
the discovery of a new kimberlite, X25, in an area which has previously been
intensively explored by other reputable exploration companies since the early
1980's. This is very significant as it demonstrates the opportunities presented
in Botswana when using modern exploration techniques. The next stage of our
programme is to complete a detailed ground geophysical programme in the area
showing the most promising kimberlite indicator minerals, to be followed up by a
drilling programme towards the end of the year.
We have an array of highly prospective targets to be further investigated and we
will continue to run a focused exploration programme. A 55,000 line kilometre
low level, gradient array magnetic survey has been commissioned over the Kukama
project and a 5,000 metre drilling programme has been commissioned to test
anomalies detected in our Orapa North, Gope, Kukama and Mabutsane project areas.
Additional drilling will be scheduled to test the kimberlites in the Jwaneng and
Kukama areas, as well as the largest kimberlite in the Kikao field, which is 700
metres in diameter.
Sierra Leone
Great strides have been made in the development of the Kono Project in Sierra
Leone, where test work has moved into the final phase. Petra has developed a
series of exploration shafts and trial mining has now commenced, with the aim of
better understanding the grade and structure of the fissures.
This year will be critical to establishing whether we have an economic mine at
Kono and the results from our development work to date are very encouraging. By
September 2007, we established trial mining on three shafts and had recovered
some 2,809 diamonds totaling 241.7 carats. Crucially, our operations had also
started to encounter much better, consistent widths of kimberlite, along with
excellent in-situ kimberlite grades of between 50 and 80 cpht. These results,
combined with the rapid advance gained in our understanding the fissures at
Kono, all serve to increase our confidence in the positive potential of this
project.
Petra now plans to extract a 1,000 tonne bulk sample from each of the three
shafts with the aim of establishing possible run-of-mine grades, diamond values
and the other parameters required for a scoping study. Given the nature of our
development work, the Company now has the plant and related infrastructure in
place to fast track the project towards production, possibly within 12 to 18
months.
Petra's interest in Kono is 51%, with its joint venture partner Stellar Diamonds
Limited, a 68.5% owned subsidiary of Mano River Resources Inc, holding the
remaining 49%, and each party funds the project as per its percentage holding.
Move into cutting and polishing - Calibrated Diamonds
In November 2006, Petra made a strategic move into the cutting and polishing
('beneficiation') of diamonds with the acquisition of Calibrated Diamonds
Investments Holding ('Calibrated Diamonds'). This acquisition gives Petra the
in-house capability to cut and polish its own rough diamond production, which in
turn will directly impact Petra's bottom line given the value uplift in a
polished stone compared to the rough form.
Petra acquired Calibrated Diamonds as it saw an important opportunity to take a
step further down the diamond pipeline value chain. Petra will not enter the
retailing business, but will add significant value for shareholders by taking a
proportion of our production to the cutting and polishing stage.
Calibrated Diamonds' proprietary laser cutting process has significant
advantages over traditional cutting and polishing methodology, producing stones
to a very high and consistent standard. Calibrated Diamonds' cut and polished
stones are a premium product, producing the highly sought after 'hearts and
arrows' quality which is rarely achieved by conventional means. As such, given
the scarcity in the global market for this product, we believe there will be
strong demand.
Calibrated Diamonds' transition from focused research and development and pilot
production to full scale, commercial production facilities is progressing well.
The company is currently in the build up phase, cutting around 120 carats per
month of Petra rough and building up capacity by bringing more machines on line.
We expect to be cutting approximately 2,500 carats of rough production per month
by mid 2008.
Objectives and Strategy
Petra's objective remains to grow our stature as a world class diamond producer.
By offering investors exposure to a mid-tier diamond group with production
cash flows and major exploration projects, we believe we can deliver superior
returns to our shareholders.
Though Petra established its position on AIM before the mining boom took hold
and is AIM's leading diamond group, we are now in the midst of a 'diamond rush',
as characterised by the many diamond companies which have recently sought to
raise money and acquire a public listing in London. This is due to the shift of
power in the diamond industry, which has seen the field open up to new players,
and the dramatic restructuring of the diamond pipeline. Improving conditions in
many of the most promising African countries, such as Angola, the DRC and Sierra
Leone, have also precipitated a wealth of opportunities.
Our focus going forward remains Africa, where we have built up 10 years
expertise, and where a spirit of partnership, agility and entrepreneurial flair
have been the building blocks of our success.
Social and Environmental Responsibility
Petra believes that social and environmental stewardship is of the utmost
importance when developing mining projects, particularly in Africa where a
resources project might be the primary economic contributor to the local
community. This is the case with many of our projects, which are located in
remote areas with few opportunities for employment.
We believe that it is our responsibility to help improve the lives of the
communities in the areas in which we operate and we have a range of social
initiatives in place to continue making a meaningful impact on the lives of our
employees and the surrounding communities.
With regards to all of our projects, we are very concerned with environmental
protection and rehabilitation, and ensure that all operations are conducted in
line with international best practice.
Staff
The development of the Group over the past year has been quite exceptional and I
thank everyone at Petra for their individual contributions to this success.
Petra is a vibrant group, reflecting the countries in which we operate, and I
continue to be grateful for the hard work and energy that drives the Company
forward.
Outlook
There have been significant developments for Petra since the end of our
financial year, not least the formal completion of the acquisition of
Koffiefontein and more recently our successful selection as the acquirer of
Kimberley Underground. Revenues for the three months to 30 September 2007 have
already reached US$15.9m, only US$1.1m less than that for the full year to June
2007.
With expected production of 250,000 carats for the year to 30 June 2008, an
increase in our South African reserves and resources (not including Kimberley
Underground) to 9.3 million carats, a strong background for diamond prices and
encouraging progress across our development projects in Angola, Botswana and
Sierra Leone, Petra's prospects for the current financial year and beyond are
extremely encouraging.
Adonis Pouroulis
Chairman
8 October 2007
PETRA DIAMONDS LIMITED - PRELIMINARY RESULTS
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2007
(Unaudited)
Notes
2007 2006
US$ US$
Revenue 17,048,794 20,868,757
Cost of sales 4 (21,003,936) (23,178,587)
Gross loss (3,955,142) (2,309,830)
Exploration expenditure 5 (6,091,669) (4,924,437)
Operating expenditure 6 (11,242,520) (12,596,449)
Financial income 654,151 411,107
Financial expense (2,222,980) (565,201)
Net financing costs 7 (1,568,829) (154,094)
Loss before tax (22,858,160) (19,984,810)
Income tax expense 1,909,234 1,120,354
Loss for the year (20,948,926) (18,864,456)
Basic and diluted loss per share - US cents 8 (13.60) (13.11)
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE YEAR ENDED 30 JUNE 2007
2007 2006
US$ US$
Exchange differences on translation of foreign operations 8,677,941 1,561,653
Net income recognised directly in equity 8,677,941 1,561,653
Loss for the year (20,948,926) (18,864,456)
Total recognised income and expense for the year (12,270,985) (17,302,803)
PETRA DIAMONDS LIMITED - PRELIMINARY RESULTS
CONSOLIDATED BALANCE SHEET
FOR THE YEAR ENDED 30 JUNE 2007
(UNAUDITED)
Notes 2007 2006
US$ US$
ASSETS
Non current assets
Property, plant and equipment 84,872,711 70,831,324
Intangible assets 72,816,432 13,105,561
Investment in associates - -
Available for sale assets - listed 70,136 1,271,410
Other receivables 151, 987 164,402
Total non-current assets 157,911,266 85,372,697
Current assets
Inventories 8,900,532 2,197,605
Trade and other receivables 14,822,729 2,760,378
Cash and cash equivalents 44,124,829 7,019,644
Total current assets 67,848,090 11,977,627
Total assets 225,759,356 97,350,324
EQUITY AND LIABILITIES
Equity
Share capital 9 36,360,403 27,031,103
Share premium account 9 227,366,888 123,189,903
Foreign currency translation reserve 9 (6,136,854) 2,541,087
Share based payment reserve 9 1,527,000 972,962
Other reserves 9 4,003,682 -
Accumulated loss 9 (102,557,593) (81,608,667)
Total equity 160,563,526 72,126,388
Non current liabilities
Loans and borrowings 3,103,252 2,914,960
Trade and other payables 2,800,506 867,823
Provisions 9,852,535 1,697,756
Deferred tax liabilities 9,551,924 9,932,634
Total non-current liabilities 25,308,217 15,413,173
Current liabilities
Loans and borrowings 27,755,710 1,149,646
Trade and other payables 9,821,436 6,658,735
Provisions 2,310,467 2,002,382
Total current liabilities 39,887,613 9,810,763
Total liabilities 65,195,830 25,223,936
Total equity and liabilities 225,759,356 97,350,324
PETRA DIAMONDS LIMITED - PRELIMINARY RESULTS
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2007
(UNAUDITED)
2007 2006
US$ US$
Loss before taxation for the year (22,858,160) (19,984,810)
Depreciation of property plant and equipment - exploration 1,115,782 35,687
Depreciation of property plant and equipment - mining 5,274,209 5,630,717
Depreciation of property plant and equipment - other 113,283 40,573
Amortisation of intangible assets 3,740,928 2,832,355
(Profit)/loss on sale of property plant and equipment (81,852) 26,717
Interest received (654,151) (411,107)
Interest paid 1,307,715 565,201
Present value adjustment on rehabilitation provision 186,121 140,783
Share based payment reserve 749,406 -
Foreign exchange loss 4,811,205 6,114,780
Operating loss before working capital changes (6,295,514) (5,009,104)
(Increase) / decrease in trade and other receivables (12,031,562) 140,515
Increase / (decrease) in trade and other payables 13,747,215 (3,604,742)
(Increase) in inventories (6,133,588) (792,440)
Cash utilised in operations (10,713,449) (9,265,771)
Interest paid (1,307,715) (565,201)
Net cash utilised by operating activities (12,021,164) (9,830,972)
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 568 41,447
Acquisition of subsidiary net of cash acquired 1,934,936 5,560,464
Interest received 654,151 411,107
Acquisition of investments - (1,271,410)
Acquisition of property, plant and equipment (5,086,569) (4,152,748)
Development expenditure (3,847,301) (4,069,863)
Net cash from investing activities (6,344,215) (3,481,003)
Cash flows from financing activities
Net proceeds from the issue of share capital 36,087,171 469,404
Increase / (decrease) in long term borrowings 19,424,564 (7,605,319)
Net cash from financing activities 55,511,735 (7,135,915)
Net increase / (decrease) in cash and cash equivalents 37,146,356 (20,447,890)
Cash and cash equivalents at beginning of the year 7,019,644 27,591,394
Effect of exchange rate fluctuations on cash held (41,171) (123,860)
Cash and cash equivalents at end of the year 44,124,829 7,019,644
PETRA DIAMONDS LIMITED - PRELIMINARY RESULTS
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
(UNAUDITED)
1. BASIS OF PREPARATION
The Group financial statements are prepared in accordance with International
Financial Reporting Standards, as adopted by the European Union (IFRS) and
interpretations issued by the International Financial Reporting Interpretations
Committee of the International Accounting Standards Board. The functional
currency of the Group's business transactions in Angola, Botswana, and Sierra
Leone and South African diamond sales are US Dollars. References to
transactions in South African Rand (ZAR) are denoted by an R. The reporting
currency of the group is US Dollars
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on historical
experience and factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making judgements about
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision only affects that period or in the period of
revision and future periods if the revision affects both current and future
periods. Areas where management have made judgments, estimates and assumptions
relate to decommissioning, mine closure, environmental rehabilitation, compound
financial instruments and share based payments.
The accounting policies set out below have been applied consistently to all
periods presented in these financial statements by all Group entities.
2. SEGMENT INFORMATION
Segment information is presented in respect of the Group's business and
geographical segments. The primary format is based on the Group's management and
internal reporting structure.
Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
Unallocated items comprise mainly income earning assets and revenue,
interest-bearing borrowings and expenses and corporate assets and expenses.
Segment capital expenditure is the total cost incurred during the period to
acquire segment assets that are expected to be used for more than one period.
Eliminations comprise of those inter-group transactions associated with
acquisitions of business combinations.
Business and Geographical segments
The Group comprises the following business segments:
Mining - the extraction and sale of rough diamonds from mining operations in
South Africa.
Exploration - exploration activities in Angola, Botswana, Sierra Leone and South
Africa.
Beneficiation - cutting and polishing of rough diamonds.
Business segments Mining Exploration Beneficiation Consolidated
2007 2007 2007 2007
US$ US$ US$ US$
Revenue from external customers 16,712,146 336,648 - 17,048,794
Segment result (5,851,790) (3,495,749) (84,877) (9,432,416)
Operating loss (8,852,808) (11,837,295) (599,228) (21,289,331)
Financial income - 647,767 2,384 644,151
Financial expense (1,140,030) (1,082,950) - (2,222,980)
Income tax 1,909,234 - - 1,909,234
Loss for year (8,083,604) (12,268,478) (596,844) (20,948,926)
Segment assets 87,227,690 137,374,026 1,157,640 225,759,356
Total assets 87,227,690 137,374,026 1,157,640 225,759,356
Segment liabilities 32,165,070 32,108,430 922,330 65,195,830
Total liabilities 32,165,070 32,108,430 922,330 65,195,830
Cash flows from operations (10,053,291) (954,401) (1,013,472) (12,021,164)
Cash flows from investing (5,212,480) (1,134,119) 2,384 (6,344,215)
Cash flows from financing (3,514,530) 57,698,000 1,328,265 55,511,735
Capital expenditure 4,818,397 4,115,473 - 8,933,870
Depreciation and amortisation 5,274,209 4,885,117 84,876 10,244,202
Impairment losses - - - -
Geographical segments Angola Botswana South Africa Sierra Leone Jersey Consolidated
2007 2007 2007 2007 2007 2007
US$ US$ US$ US$ US$ US$
Revenue from external
customers - - 16,712,146 - 336,648 17,048,794
Segment assets 52,318,248 9,318,811 106,890,457 8,369,539 48,862,301 225,759,356
Segment liabilities 12,988 54,787 40,439,879 3,165,035 21,523,141 65,195,830
Cash flows from
operations (19,864) 1,638,195 (8,757,883) (687,205) (4,194,407) (12,021,164)
Cash flows from
investing 4,684 (149,153) (4,727,703) (3,847,301) 2,375,258 (6,344,215)
Cash flows from 101,158 3,093,099 (2,447,727) 3,847,301 50,917,904 55,511,735
financing
Capital expenditure - (155,132) (4,818,397) (3,847,301) (113,040) (8,933,870)
Impairment losses - - - - - -
Business segments Mining Exploration Eliminations Consolidated
2006 2006 2006 2006
US$ US$ US$ US$
Revenue from external customers 20,868,757 - - 20,868,757
Segment result (2,309,829) (14,968,544) - (17,278,373)
Operating profit/(loss) (4,862,172) (14,968,544) - (19,830,716)
Net financing income/(costs) (1,178,884) 1,024,790 - (154,094)
Income tax expense 1,120,354 - - 1,120,354
Profit/(loss) for year (4,920,702) (13,943,754) - (18,864,456)
Segment assets 64,677,253 32,673,071 - 97,350,324
Total assets 64,677,253 32,673,071 - 97,350,324
Segment liabilities 19,436,688 5,787,248 25,223,936
Total liabilities 19,436,688 5,787,248 25,223,936
Cash flows from operations 677,480 (10,508,452) - (9,830,972)
Cash flows from investing (3,529,914) 1,544,211 (1,495,300) (3,481,003)
Cash flows from financing (712,276) (6,423,639) - (7,135,915)
Capital expenditure 8,118,313 104,298 - 8,222,611
Depreciation and amortisation 5,630,717 2,908,615 - 8,539,332
Impairment losses - - - -
Geographical segments Angola Botswana South Sierra Jersey Consolidated
Africa Leone
2006 2006 2006 2006 2006 2006
US$ US$ US$ US$ US$ US$
Revenue from external - - 20,868,757 - - 20,868,757
customers
Segment assets 4,785,697 13,380,911 74,777,905 4,405,811 - 97,350,324
Segment Liabilities - 1,712,936 23,511,000 - - 25,223,936
Cash flows from operations - (357,262) (9,473,710) - - (9,830,972)
Cash flows from investing - - (3,529,914) (4,069,864) 4,118,775 (3,481,003)
Cash flows from financing - 357,254 (712,276) 4,069,864 (10,850,757) (7,135,915)
Capital expenditure - 60,472 4,092,276 4,069,863 - 8,222,611
Impairment losses - - - - - -
The Group commenced beneficiation activities effective 27 November 2006 on the
acquisition of Calibrated Diamonds Investment Holdings (Pty) Limited. Therefore
there are no comparative numbers for the year to 30 June 2006.
3. ACQUISITIONS OF SUBSIDIARIES
3 (a) Acquisition of subsidiaries
Calibrated Diamonds Investment Holdings (Pty) Limited
On 27 November 2006, the Company acquired the issued share capital in Calibrated
Diamonds Investment Holdings (Pty) Limited ('CDIH'), for $2,334,665, satisfied
by a cash payment. CDIH is focused on the cutting and polishing
('beneficiation') of rough diamonds utilising a unique process developed by the
CDIH Group, which enables CDIH to produce polished diamonds of a very high and
consistent standard. In the seven months to 30 June 2007, CDIH made a loss of
$596,844. If the acquisition had occurred on 1 July 2006, the Group's loss for
the period ending 30 June 2007 would have increased by $982,534.
Effect of the acquisition
The acquisition had the following effect on the Group's assets and liabilities.
Calibrated Diamonds Investment Holdings net assets Book Values Fair Value Carrying Values
at acquisition date: Adjustments
US$ US$ US$
Fair value of net assets of entity acquired
Intellectual property 362,689 3,157,017 3,519,706
Plant & Equipment 283,985 - 283,985
Cash assets 9,185 - 9,185
Receivables 30,446 - 30,446
Inventory 345,537 - 345,537
Deferred tax liability - (709,717) (709,717)
Accruals and payables (62,079) - (62,079)
Non interest bearing non-current liabilities (1,082,398) - (1,082,398)
Consideration amount satisfied in cash (112,635) 2,447,300 2,334,665
Total fair value of assets acquired 2,334,665
Consideration (amount settled in cash) 2,334,665
Goodwill -
The fair value adjustment of $2,447,300 arose as a result of the premium
attributable to the Intellectual Property purchased from Calibrated Diamonds
Investment Holdings (Pty) Limited. The allocation of the premium to intellectual
property is deemed to be provisional.
3 (b) Acquisition of assets
Frannor Investments & Finance Limited
The Company acquired the issued share capital in Frannor Investments & Finance
Ltd ('FBVI'), for US$60,684,720, effective 1 March 2007. The consideration was
satisfied by the issue of 19,674,584 Petra shares. FBVI, through its wholly
owned subsidiary, Frannor Investments and Financing (Pty) Limited ('FRSA'),
holds a 40% and 39% interest in the Luangue alluvial and kimberlite prospecting
licences respectively in Angola together with its Angolan partners. In the three
months to 30 June 2007, FBVI recorded an exploration loss of US$85. If the
acquisition had occurred on 1 July 2006, the Group's loss for the period ending
30 June 2007 would have decreased by $9,229.
Effect of the acquisition
The acquisition had the following effect on the Group's assets and liabilities.
Frannor Investments & Finance Limited net assets at Book Values Fair Value Carrying Values
acquisition date: Adjustments
US$ US$ US$
Fair value of net assets of entity acquired
Plant & Equipment 1,456,368 - 1,456,368
Prospecting licences 14,962,850 42,341,130 57,303,980
Cash 1,925,751 - 1,925,751
Accruals and payables (1,379) - (1,379)
Consideration amount satisfied in cash 18,343,590 42,341,130 60,684,720
The fair value adjustment of $42,341,130 arose as a result of the revaluation of
the Prospecting licences purchased from Frannor Investments & Finance Limited.
The allocation of the premium to prospecting licences is deemed to be
provisional.. Deferred taxation has not been provided on the acquisition of the
companies as the transaction was not deemed to be a business combination in
accordance with IFRS 3.
Acquisition of Koffiefontein Diamond Mine Assets
In December 2006 Petra entered into a conditional agreement with De Beers
Consolidated Mines Limited ('De beers') to acquire the mining and associated
capital assets ('the Assets') previously used by De Beers in the operation of
the Koffiefontein diamond mine ('Koffiefontein') in South Africa. The
consideration for the Assets was R81,921,585 ($11,612,506), settled by way of
Petra assuming De Beers' rehabilitation obligations at Koffiefontein amounting
to R80,021,583 ($11,343,178), plus the payment in cash by Blue Diamond Mines
(Petra's operating subsidiary in South Africa) to De Beers of R1,900,000
($269,328). Deferred taxation has not been provided on the acquisition of the
assets as the transaction was not deemed to be a business combination in
accordance with IFRS 3.
Effect of the acquisition
The acquisition had the following effect on the Group's assets and liabilities.
Koffiefontein diamond mine net assets at date of Book Values Fair Value Carrying Values
acquisition: Adjustments
US$ US$ US$
Fair value of net assets of entity acquired
Land 508,723 - 508,723
Plant and residential houses 1,769,018 - 1,769,018
Mining property, plant and equipment 8,478,821 - 8,478,821
Underground development 611,332 - 611,332
Non-mining property, plant and equipment 20,810 - 20,810
Inventory 223,802 - 223,802
Environmental liabilities (11,343,178) - (11,343,178)
Consideration amount satisfied in cash 269,328 - 269,328
4. COST OF SALES
2007 2006
US$ US$
Raw materials and consumables used 8,109,941 6,292,071
Employee expenses 13,020,423 12,214,540
Depreciation of mining assets 5,274,209 5,630,717
Changes in inventory of finished goods (5,400,637) (958,741)
21,003,936 23,178,587
5. EXPLORATION EXPENDITURE
Employee expenses 323,107 313,182
Depreciation of exploration assets 1,115,782 35,687
Amortisation of intangible assets 3,740,928 2,832,355
Drilling costs 243,717 1,277,973
Equipment hire 6,722 207,689
Other exploration costs 661,413 257,551
6,091,669 4,924,437
6. OTHER OPERATING EXPENDITURE
Auditors' remuneration
- Current auditors
- audit services 195,437 -
- other services 19,394 -
- Previous auditors
- audit services - 368,132
Depreciation of property plant and equipment 113,283 40,573
Foreign exchange losses 4,811,205 6,114,780
Operating lease rentals 153,739 222,257
Employee expenses 1,888,271 1,804,326
Corporate activity expenditure 55,293 359,743
Loss/(profit) on disposal of property plant and equipment (81,852) 26,717
Administration expenses - mining operations 1,794,312 1,421,192
Other charges 1,856,098 1,620,437
Share based options
- directors 253,656 349,303
- senior management 183,684 268,989
11,242,520 12,596,449
7. NET FINANCING COSTS
2007 2006
US$ US$
On bank loans and overdrafts (813,377) (412,485)
Other debt finance costs (1,409,603) (152,716)
Financial expense (2,222,980) (565,201)
Interest received 654,151 411,107
(1,568,829) (154,094)
8. LOSS PER SHARE
2007 2006
US$ US$
Loss for the year 20,948,926 18,864,456
Weighted average number of ordinary shares
As at 1 July 143,916,416 73,937,847
Effect of shares issued during the period 10,103,075 69,978,569
As at 30 June 154,019,491 143,916,416
Shares Shares
Basic weighted average number of ordinary shares in issue 154,019,491 143,916,416
US cents US cents
Basic loss per share - cents (13.60) (13.11)
Due to the Group's loss for the year, the diluted loss per share is the
same as the basic loss per share. The number of potentially dilutive
ordinary shares, in respect of employee share options and warrants is
22,231,000. These potentially dilutive ordinary shares may have a
dilutionary effect on future earnings per share.
9. RESERVES
Share Share Foreign Share based Other Accumulated Total
capital premium currency payment reserves loss
account translation reserve
reserve
US$ US$ US$ US$ US$ US$ US$
At 1 July 2005 23,500,190 101,775,127 4,102,740 - - (62,393,694) 66,984,363
Implementation of - - - 354,670 - (354,670) -
IFRS 2
Restated balance 23,500,190 101,775,127 4,102,740 354,670 - (62,748,364) 66,984,363
at 1 July 2005
Loss for the - - - - - (18,864,456) (18,864,456)
period
Equity settled - - - 618,292 - - 618,282
based share
payments
Exchange - - (1,561,653) - - 4,153 (1,557,500)
differences
Premium allotments 3,347,105 20,550,930 - - - - 23,898,035
during the year
Share issue costs - (57,472) - - - - (57,472)
Convertible notes 183,808 921,318 - - - - 1,105,126
issued
At 30 June 2006 27,031,103 123,189,903 2,541,087 972,962 - (81,608,667) 72,126,388
27,031,103 123,189,903 2,541,087 972,962 - (81,608,667) 72,126,388
At 1 July 2006
Loss for the year - - - - - (20,948,926) (20,948,926)
Equity settled - - - 554,038 - - 554,038
share based
payments
Equity portion of - - - - 4,003,682 - 4,003,682
convertible bond
Exchange - 14,706,573 (8,677,941) - - - 6,028,632
differences
Premium allotments 9,329,300 90,200,058 - - - - 99,529,358
during the year
Share issue costs - (729,646) - - - - (729,646)
At 30 June 2007 36,360,403 227,366,888 (6,136,854) 1,527,000 4,003,682 (102,557,593) 160,563,526
10. CONVERTIBLE NOTE - UNSECURED
On 19 September 2006 the Company issued a US$20 million unsecured interest free
convertible bond ('the Convertible').The Convertible is convertible at an
exercise price of 130 pence per Petra share at the election of the holder. If
not converted, the Convertible is repayable in full on 18 September 2009. On 29
September 2006 the Company drew down on the Convertible.
30 June 30 June 30 June 30 June
2007 2006 2007 2006
Movements in convertible notes and bond Number Number US$ US$
Balance at beginning of year - 16,078,191 - 2,206,678
Issue of convertible bond 7,677,337 - 20,000,000 -
Equity portion - - (4,003,682) -
Interest accreted for the year - - 915,265 -
Exchange differences - - - (94,399)
Redeemed during the period - (9,417,761) - (1,239,403)
Converted to ordinary Shares - (6,660,430) - (872,876)
Balance at the end of year 7,677,337 - 16,911,583 -
11. ANNUAL REPORT AND ACCOUNTS
The results for the year ended 30 June 2007 are unaudited and do not constitute
statutory accounts. The Report and Accounts for the year ended 30 June 2006,
which includes an unqualified Audit Report, are available from the Company's
headquarters at Elizabeth House, 9 Castle Street, St. Helier, Jersey, JE4 2QP.
Copies of the audited Report and Accounts for the year ended 30 June 2007 will
be posted to shareholders in November 2007.
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