Final Results
Petra Diamonds Ld
02 October 2006
For release 2 October 2006
Petra Diamonds Limited ('Petra', 'the Company' or 'the Group')
Preliminary Results Announcement for the year ended 30 June 2006 (unaudited)
Highlights
Angola
• Project Alto Cuilo ('Alto Cuilo') - exceptional exploration progress
continued with a substantial increase in the number and surface area of
kimberlite discoveries; analysis of drill core revealed exceptional
indicator mineral chemistry, comparative to some of the world's major
economic mines; as at 30 June 2006, funding of US$22.8 million advanced by
BHP Billiton (budget of US$20 million approved for the year to June 2007,
also to be funded by BHP Billiton)
• Petra enters into Strategic Cooperation Agreement with AIM-quoted Xceldiam
Limited ('Xceldiam') with regards to Project Luangue
Botswana
• Acquisition of Kalahari Diamonds Limited in September 2005
• Petra's operations in Botswana fully integrated into the Petra Group
• Petra's technical team put in place a revised Kalahari exploration
programme, with the focus on larger as well as smaller kimberlite
identification
Sierra Leone
• Kono project in Sierra Leone commences small scale production in June
2006, on time and on budget
• Petra has met its funding requirements to earn a 51% interest in the
project
• Work programme to accelerate in order to better determine the grade and
extent of the resource, and to enable increased production
South Africa
• Production of 175,011 carats from the South African mines for the year to
30 June 2006 (2005: 143,673 carats), an increase of 21.8%
• The South African mines generated an operating cash flow of US$677,000
for the year to June 2006
• Diamonds of 76 and 67 carats recovered from the Sedibeng mine, the stones
being sold for US$465,000 and US$704,265 respectively
Post year-end Highlights
Corporate
• Petra issued a US$20 million unsecured, interest free bond, convertible at
130 pence per share, to Al Rajhi Holdings W.L.L., a major Saudi Arabian
based investment group; the financing strengthens Petra's treasury on an
interest free basis, giving Petra the flexibility to act quickly on
potential growth opportunities
Angola
• Project Alto Cuilo - identification of the 50th kimberlite; bulk sample
drill and plant on site, with the bulk sample rig commissioned and drilling
underway
Adonis Pouroulis, Chairman, said; 'I am delighted to report on the progress we
have made over the past year. Petra has continued to grow, strengthening our
position within the market place whilst significantly expanding our prospects on
the ground. We continue to be very encouraged by the favourable prospects for
the diamond industry globally and believe that the diamond fields of Africa
offer some of the most exciting opportunities available. I am confident that
with the range of our portfolio and the depth of the skills base now within the
group, we are positioned to maintain our rate of growth.'
Summary of Results (unaudited)
2006 2005
US$ US$
Revenue * 20,868,757 2,275,245
Gross profit on mine - South African operations ** 3,320,887 768,258
Exploration expenses ** (2,056,395) (6,422,352)
Administration expenses (6,481,669) (3,963,956)
Loss before depreciation, amortisation (5,330,698) (9,954,745)
and foreign exchange movements
Loss for the year (18,864,456) (21,018,778)
CAPEX 8,222,611 2,722,187
Cash at bank 7,019,644 27,591,394
* 2005 Revenue - June only, post Crown merger effective 31
May 2005
** Gross profit and exploration expenses before
depreciation and amortisation
Loss per share (cents) (13.11) (28.43)
Production (carats) *** 175,011 143,673
*** Production for the 12 months to 30 June 2005
For further information, please contact:
Cathy Malins / Annabel Leather Telephone: +44 (0) 20 7493 3713
Parkgreen Communications, London
Chairman's Statement 2006
Dear Shareholder,
It is with great pleasure that I present the 2006 financial statements. The past
financial year has seen your company grow into an established and integrated
diamond miner and explorer and we have continued to develop the various in-house
skills that will enable us to further increase our production base.
These abilities are evident across all our mining operations - through our
production in South Africa, the development of complex diamond exploration
programmes in Botswana, the progress made at Alto Cuilo in Angola and the
establishment of our mining operations in Sierra Leone. We have shown that Petra
also possesses the corporate depth and principals required to develop a solid
working relationship with a major, as is the case with BHP Billiton.
Petra is now a well established mid-tier producer and explorer of diamonds. Our
focus and expertise lie on the African continent, a continent that, although
still mired in poverty, in 2005 produced around 62% by value of the world's
rough diamond output. It is one of our main goals to create sustainable economic
development by investing in projects with long economic lives. The economic
benefit of discovering a large, economic kimberlite is substantial, not only to
a company like Petra but also to the economy of the African countries in which
we operate. The refocusing of international exploration dollars in Africa,
whatever the commodity, makes for an exciting and often vibrant environment in
which to work. It is pleasing to see Africa gaining mining and exploration
momentum and that the investing community worldwide acknowledges Africa's
natural resource wealth. We also welcome the wide reaching reforms currently
sweeping the diamond industry which promise to give more autonomy to Africa's
producer nations and more direct employment down the diamond beneficiation
chain, from mine to market.
Petra is the proud employer of over 2,000 people and actively contributes to the
economic development of the African countries in which it operates. Petra only
operates in countries that are committed to the Kimberley process for the
marketing of diamond production; such sound, environmentally aware and
responsible investment in the African diamond industry will only assist in the
development of countries in which we operate and the continent as a whole.
Petra achieved a great deal during the year and some of the highlights are
covered below.
Angola
Kimberlite Exploration
Alto Cuilo once again delivered excellent exploration results. The number of
kimberlite occurrences discovered surpassed the 50 mark, a significant
milestone. The rate of these discoveries increased as additional core drilling
equipment was commissioned on site.
To date it is estimated that the surface area of kimberlite discovered at Alto
Cuilo is in excess of 1,500 hectares. Furthermore, we have achieved an
exceptional success rate of 83% of magnetic anomalies drilled being confirmed as
kimberlitic. Of the total of 249 magnetic anomalies identified so far, 60 have
now been drilled and a total of 50 have been confirmed as kimberlitic. This
serves as a reminder of the size and extent of the project, together with the
standard of exploration results. There are very few kimberlite projects anywhere
in the world that have had such success in identifying kimberlites, but when the
surface area of the discoveries at Alto Cuilo is taken into account, the results
are even more remarkable.
At the same time, analysis of kimberlite core delivered some highly encouraging
diamond indicator mineral results together with a favourable mantle geotherm
conducive for diamond formation. Diamond indicator mineral chemistry is crucial
in terms of assessing a kimberlite's likelihood of hosting diamonds. The results
at Alto Cuilo are very exciting because they are comparable to other major
economic kimberlite deposits around the world.
The large diameter drill rig has now been commissioned on site in anticipation
of the mini-bulk sample programme scheduled for later this year. The results of
this sampling campaign will give a better understanding of the kimberlite
deposits and will start yielding critical data relating to grade and price per
carat. Accompanying the drill rig is a 10 tonne per hour Dense Media Separation
('DMS') plant that will be used solely for the processing of kimberlite material
retrieved from the large diameter drill rig. This rig will initially stockpile
200 tonne bulk samples and the DMS plant, which is a custom made closed circuit
unit designed specifically for kimberlite bulk sampling, will start treating the
samples. A ranking of priority kimberlite targets for large diameter drilling
has been drawn up and may be revised as more results become available. The
ranking is based on mineral chemistry results, the surface area of the various
kimberlites and the logistics of plant access to the various targets. Initial
bulk sampling results are anticipated by December 2006.
Petra and BHP Billiton are working together at Alto Cuilo, with BHP Billiton
funding the exploration and related costs. As at 30 June 2006, BHP Billiton had
advanced funding of US$22.8 million to the project, and a budget of US$20
million has been approved for the year to June 2007, also to be funded by BHP
Billiton. This is a substantial exploration spend for any mineral commodity, and
we look forward to working with BHP Billiton to further develop Alto Cuilo over
the coming year.
On 30 May 2006 the Company also announced a strategic cooperation alliance with
Xceldiam Limited, an AIM listed diamond explorer with exploration rights at
Project Luangue just north of Alto Cuilo. The projects share a common border and
Petra notes with interest the early drilling success at Project Luangue as
announced on 25 July 2006. Core drilling at Project Luangue returned excellent
first results, with drilling on the first target intersecting kimberlite. This
news supports Petra's belief that Project Luangue may host kimberlite geology
similar to that of Alto Cuilo and Petra looks forward to further developments
from Project Luangue. The agreement with Xceldiam puts Petra in a position to
significantly increase its exploration interests in the area, should it choose
to do so.
Alluvial Exploration
The alluvial programme continues in order to further evaluate the potential for
economically viable alluvial deposits. A feasibility study has been commissioned
on a small alluvial block of ground adjacent to the existing 65 tonne per hour
DMS plant. Petra's initial investment in plant and earth moving equipment will
serve as the infrastructure to process and mine these alluvial deposits.
Alluvial exploration also continues elsewhere in the project area.
As shareholders may be aware, to date over 1500 carats of kimberlite and
alluvial diamonds have been recovered from the sampling operations. It is
believed that apart from production of diamonds, invaluable exploration
information will also be gleaned from these alluvial programmes.
I wish to acknowledge the important role BHP Billiton has played in the
evolution of Alto Cuilo. We have found their work to be of the highest standard
and their spirit of partnership to be one where all partners benefit. At the
same time our Angolan partners have also been of the utmost assistance in taking
Alto Cuilo to the next level and I thank both Endiama and Moyoweno for their
ongoing support.
South Africa
The South African operations increased production by 21.8% from 143,673 carats
for the year to June 2005 to 175,011 carats for the year to June 2006. The
Company is targeting to increase production from its existing operations again
this year.
The year also saw some exceptionally large and beautiful stones being mined.
Diamonds of 76 and 67 carats were recovered from the Sedibeng mining complex and
the stones sold for US$465,000 and US$704,265 respectively.
Tight costs and increased efficiencies were achieved on the operations as
further investments in mining mechanisation were made which will result in
increased efficiencies for the coming year.
Although two of the three mines operated well, technical difficulties were
experienced at the Star mine. These problems, mainly the construction of the new
ventilation shaft, will be overcome in the coming year and it is anticipated
that Star will achieve its production target and contribute to group results.
Botswana
Kalahari Diamonds Limited, which was acquired effective 30 September 2005, is
now a fully integrated part of the Petra group giving your company a prime
position in Botswana, the world's largest diamond producer by value. The
Kalahari ground is situated in what we believe to be highly prospective diamond
territory and the period under review has seen encouraging exploration results.
Field exploration in Botswana gained momentum whilst a shift was made in
philosophy to include the search for those kimberlites less than 20 hectares in
size. Anomalies were identified in the Gope, Orapa and Mabutsane/Thswaane
blocks. The coming year will see follow up ground work including drilling of
various anomalies in these areas. Concurrently, existing kimberlite deposits on
our ground will be further examined for possible economic viability.
Sierra Leone
Developments on the Kono project moved ahead apace during the year. In just
under a year of establishing a foothold in Sierra Leone, Petra commenced trial
mining operations. This entailed the construction in-house of a 75 tonne per
hour DMS as well as the sinking of shafts to access the diamond bearing
kimberlite fissures. All of this was done within budget and on time. Kono
produced its first diamonds from the project on schedule in June of this year.
In terms of Petra's joint venture agreement with Mano River Resources, Petra has
met the requirement to spend US$3million on the project to earn a 51% interest,
and the parties are now funding project expenditure on a 51/49 basis.
The coming year will see an increased rate in shaft sinking which will allow
increased access to different kimberlite dyke faces. This will in turn enable
a better determination of grade and quality and ultimately lead to an increase
in diamond production. The aggressive rolling exploration and trenching method
has proven to be both very effective and cost efficient and it is envisaged that
six additional trenches will be opened, the fissure penetrated and the results
evaluated by December 2006. This approach will provide Petra with a better
understanding of the diamondiferous fissures available, their potential and the
project strategy ahead.
The relationship between Petra management and the various relevant authorities
in Sierra Leone, in particular in the Kono district, remains strong and we thank
the Sierra Leonean authorities for being openly accommodative of foreign
investment. Also, our joint venture partner, Mano River Resources Inc, has been
very supportive in our efforts and I thank them for their valuable assistance.
Results
As the principal functional currency of the Group's business transactions in
Angola, Botswana and Sierra Leone is US Dollars and in South Africa diamond
sales are made in US Dollars, the Group has decided to adopt US Dollars as its
reporting currency with effect from 1 July 2005.
The gross profit on mine from the South African mines operations for the year to
30 June 2006 was US$3,320,887 (2005: US$768,258). After exploration expenses,
Group administration expenses and financing costs, the loss before depreciation,
amortisation and foreign exchange movements for the year was US$5,330,698 (2005:
US$9,954,745). After unrealised foreign exchange losses on intercompany loans of
US$6,114,780 (2005: US$892,065), amortisation of intangibles of US$2,832,355
(2005: US$8,186) and depreciation of US$5,706,977 (2005: US$1,125,260), the loss
after tax for the year to 30 June 2006 was US$18,864,456 (2005: US$21,018,778).
Group net cash outflow for the year is stated after taking account of the
investment in Xceldiam Limited of US$1,271,410 (2005: Nil), repayment of all
outstanding convertible loan notes of US$1,239,403, cash inflow from the
acquisition of Kalahari Diamonds of US$5,560,464 as well as the settlement in
July 2005 of the Helam mine acquisition costs and various term loans.
A charge of US$2,832,355 has been recognised in respect of the amortisation of
licences during the year, being the write down in accordance with IFRS of
intangible assets of US$17,620,258, which were brought into the balance sheet
following the acquisition of Kalahari Diamonds Limited in September 2005.
The results from the Crown South African production operations acquired were
consolidated into the Petra Group results from 1 June 2005. Therefore, the
comparative period to June 2005 includes results of the South African operations
acquired for one month and the period to 30 June 2006 includes a full 12 months
results.
The results for the year to 30 June 2005 have been restated, as with effect from
1 July 2005 the Company has complied with IRFS 2, Share Based Payments, in
respect of share options granted to management.
Funding
On 18 September 2006, Petra announced the issue of a US$20 million unsecured,
interest free convertible bond, convertible at 130 pence per share, to Al Rajhi
Holdings W.L.L., a major Saudi Arabian based investment group. This financing
strengthens Petra's treasury on an interest free basis, without dilution to
existing shareholders, and gives Petra the ability to actively consider revenue
and production growth opportunities that have the potential to fast-track
Petra's development and further entrench the Company as a mid-tier diamond
producer. The financing will also serve to underpin our funding should we decide
to expand our exploration interests by exercising our warrants as part of the
Xceldiam cooperation agreement.
Nabera
Both Petra and Nabera continue to work with Alexkor and the South African
Government with regards to the 'value add' and management fees that are due to
the Nabera consortium, in which Petra is a 29.5% shareholder. Whilst, for
reasons outside of Petra's control, progress has been disappointing, the Board
remains focused on an acceptable resolution to the outstanding claims.
Objectives and Strategy
Petra's objective is to become an independent world class gemstone diamond
producer. This will be achieved by holding a highly prospective exploration
portfolio ensuring future growth, organically expanding the Group's production
profile and by geographically diversifying the country spread and risk. Our
focus however will remain on the African continent.
Our strategy is therefore to explore and develop our projects in Angola,
Botswana and Sierra Leone whilst increasing production from the South African
operations. Production is expected to slowly build-up from Sierra Leone as
greater knowledge is gained from the various kimberlite fissures. We will also
continue to analyse other opportunities, which meet our strict acquisition
criteria, for future inclusion to enhance the growth of the business.
The diamond industry remains robust on the fundamentals of supply and demand.
With an increase in demand and without the commensurate increase in global
production the outlook for any new diamond mine is good. Whilst operating on the
African continent key partnerships are vital and we as a group will foster our
existing partnerships further and seek to strengthen new ones.
Social development
Petra believes it important to improve the lives of the communities in the areas
in which we operate. For example, at Alto Cuilo we have assisted in the
introduction of primary and secondary health care, education, sustainable job
creation, health and safety training and social awareness programmes. The local
population has access to a fully funded and well equipped clinic where all first
line consultations are available, the clinic being staffed by Angolan doctors
and nurses as well as expatriate trauma paramedics. A local primary school has
been built and currently there are around 100 learners from the community
attending. Local farmers have also been assisted to produce agricultural
products using more modern methods and then giving them a market in terms of the
project's consumption and requirements.
Such development is not only applicable to our Angolan operations and there are
similar examples of other similar social development projects in other countries
in which the Group operates.
Staff
I wish to thank our staff for their continued dedication and hard work. The core
team of your company (both Petra and Crown pre-merger) has remained intact and I
am grateful for this. It is with this staff continuity that we have managed to
grow the business and withstand the ups and downs of the resources sector. We
all share the same goal of seeing Petra become an independent, strong voice and
contributor to the diamond industry. Without the employees of Petra this is not
possible. Some of our people work in difficult situations, as often deposits are
found in remote parts of the world. They do this with an enthusiasm and pride in
their work and I am extremely proud to be a part of this flourishing and dynamic
business.
I would like to thank two directors who left the Company during the past year.
Charles Finkelstein made a significant contribution over the years as a
non-executive director; he not only assisted your company through difficult
times in its formative stages but was also a window into the ever changing
diamond world. I would also like to thank Kevin Dabinett for the dedication and
support he gave to your Company and wish him every success for the future.
Adonis Pouroulis
Chairman
2 October 2006
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2006
(Unaudited)
Notes Restated
2006 2005
US$ US$
Revenue 20,868,757 2,275,245
Cost of Sales 4 (23,178,587) (1,970,087)
Gross (loss) / profit (2,309,830) 305,158
Exploration expenditure 5 (4,924,437) (7,063,678)
Operating expenditure - other 6 (12,596,449) (4,856,021)
Impairment of goodwill - (8,972,587)
Financial income 411,107 36,462
Financial expense (565,201) (402,177)
Net financing costs 7 (154,094) (365,715)
Loss before tax (19,984,810) (20,952,843)
Income tax expense 1,120,354 (65,935)
Loss for the year (18,864,456) (21,018,778)
Basic and diluted loss per share - US cents 8 (13.11) (28.43)
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE YEAR ENDED 30 JUNE 2006
Restated
2006 2005
US$ US$
Loss for the year (18,864,456) (21,018,778)
Exchange adjustments on translation of subsidiary and branch
undertakings recognised directly in equity 1,561,653 1,161,255
Total recognised income and expense relating to the year (17,302,803) (19,857,523)
CONSOLIDATED BALANCE SHEET
FOR THE YEAR ENDED 30 JUNE 2006
(Unaudited)
Notes Restated
2006 2005
US$ US$
ASSETS
Property, plant and equipment 66,045,627 73,467,724
Intangible assets 13,105,561 335,947
Investment in associates - -
Investments - listed 1,271,410 -
Investments - unlisted 4,785,697 -
Trade and other receivables 164,402 161,442
Total non-current assets 85,372,697 73,965,113
Inventories 2,197,605 1,405,165
Trade and other receivables 2,760,378 2,806,105
Cash and cash equivalents 7,019,644 27,591,394
Total current assets 11,977,627 31,802,664
Total assets 97,350,324 105,767,777
EQUITY AND LIABILITIES
Equity
Issued capital 27,031,103 23,500,190
Share premium account 9 123,189,903 101,775,127
Foreign currency translation reserve 9 2,541,087 4,102,740
Share based payment reserve 9 972,962 354,670
Accumulated loss 9 (81,608,667) (62,748,364)
Total equity 72,126,388 66,984,363
Liabilities
Interest-bearing loans and borrowings 2,914,960 429,753
Trade and other payables 867,823 2,000,507
Provisions 1,697,756 1,716,998
Deferred tax liabilities 9,932,634 11,930,797
Total non-current liabilities 15,413,173 16,078,055
Interest-bearing loans and borrowings 1,149,646 11,600,585
Trade and other payables 6,658,735 9,061,468
Provisions 2,002,382 2,043,306
Total current liabilities 9,810,763 22,705,539
Total liabilities 25,223,936 38,783,414
Total equity and liabilities 97,350,324 105,767,777
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2006
(Unaudited)
Restated
2006 2005
US$ US$
Loss after taxation for the year (18,864,456) (21,018,778)
Depreciation of property plant and equipment - 35,687 633,140
exploration
Depreciation of property plant and equipment - mining 5,630,717 463,100
Depreciation of property plant and equipment - other 40,573 29,020
Amortisation of intangible assets 2,832,355 8,186
Loss/(profit) on sale of property plant and equipment 26,717 (1,607)
Impairment of intangible assets - 136,872
Impairment of goodwill - 8,972,587
Interest received (411,107) (36,462)
Interest paid 565,201 402,177
Present value adjustment on rehabilitation provision 140,783 -
Foreign exchange loss 6,114,780 892,065
Operating loss before working capital changes (3,888,750) (9,519,700)
Decrease / (increase) in trade and other receivables 140,515 (1,011,327)
(Decrease) / increase in trade and other payables (3,604,742) 1,953,312
(Increase) in inventories (792,440) (51,792)
Cash utilised in operations (8,145,417) (8,629,507)
Interest paid (565,201) (402,177)
Taxation movement (1,120,354) -
Net cash utilised by operating activities (9,830,972) (9,031,684)
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 41,447 1,607
Acquisition of subsidiary net of cash acquired 5,560,464 103,527
Interest received 411,107 36,462
Increase in investments (1,271,410) -
Acquisition of property, plant and equipment (4,152,748) (2,538,654)
Development expenditure (4,069,863) (183,533)
Net cash from investing activities (3,481,003) (2,580,591)
Cash flows from financing activities
Net proceeds from the issue of share capital 469,404 32,494,444
(Decrease) in long term borrowings (7,605,319) (392,723)
Net cash from financing activities (7,135,915) 32,101,721
Net (decrease) / increase in cash and cash equivalents (20,447,890) 20,489,446
Cash and cash equivalents at beginning of the year 27,591,394 6,808,208
Effect of exchange rate fluctuations on cash held (123,860) 293,740
Cash and cash equivalents at end of the year 7,019,644 27,591,394
NOTES TO THE ANNUAL FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2006
(Unaudited)
1. BASIS OF PREPARATION
The Group financial statements are prepared on the historical cost basis and are
presented in US Dollars. For the year to 30 June 2005 the Group reported in
Pounds Sterling and during the current year the Group adopted the US Dollar as
its functional currency. The principal functional currency of the Group's
business transactions in Angola, Botswana and Sierra Leone is US Dollars; in
South Africa diamond sales are made in US Dollars. In order to provide
comparatives in US Dollars the audited financial statements as at 30 June 2005
were translated at a rate of US$1.79 to £1 for balance sheet items and an
average rate of US$ 1.86 to £1 for income statement items.
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.
The accounting policies set out below have been applied consistently to all
periods presented in these financial statements by all Group entities.
During the period the Company adopted IFRS 2 with respect to the treatment of
employee share options. In order to comply with IFRS 2, the Company now expenses
the fair value of share-based employee options with a corresponding increase in
equity. The fair value is measured at grant date and spread over the period
during which the employees become unconditionally entitled to the options. The
comparative numbers have been appropriately restated.
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.
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 loss (4,862,172) (14,968,544) - (19,830,716)
Net financing income/(costs) (1,178,884) 1,024,790 - (154,094)
Income tax 1,120,354 - - 1,120,354
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 Africa Sierra Leone Jersey Consolidated
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
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 - - - - - -
2. SEGMENTAL INFORMATION (continued)
Business segments Mining Exploration Eliminations Consolidated
2005 2005 2005 2005
US$ US$ US$ US$
Revenue from external customers 2,275,245 - - 2,275,245
Segment result 305,158 (20,440,219) - (20,135,061)
Operating profit/(loss) 69,459 (20,656,587) - (20,587,128)
Net financing income/(costs) 133,804 (499,519) (365,715)
Income tax expense (65,935) - (65,935)
Profit/(loss) for year 137,328 (21,156,106) - (21,018,778)
Segment assets 80,873,782 80,501,594 (55,607,599) 105,767,777
Total assets 80,873,782 80,501,594 (55,607,599) 105,767,777
Segment liabilities 33,296,165 5,848,510 (361,261) 38,783,414
Total liabilities 33,296,165 5,848,510 (361,261) 38,783,414
Cash flows from operations 630,346 (9,662,028) - (9,031,684)
Cash flows from investing (43,388) (2,537,203) - (2,580,591)
Cash flows from financing (381,066) 32,482,787 - 32,101,721
Capital expenditure 350,939 2,187,715 - 2,538,654
Depreciation and amortisation 463,100 670,346 - 1,133,446
Impairment losses (8,972,587) (136,872) - (9,109,459)
Geographical segments Angola Botswana South Africa Sierra Leone Jersey Consolidated
2005 2005 2005 2005 2005 2005
US$ US$ US$ US$ US$ US$
Revenue from external
customers - - 2,275,245 - 2,275,245
Segment assets 5,167,883 - 100,263,947 335,947 105,767,777
Cash flows from operations (5,704,479) - (3,327,205) - (9,031,684)
Cash flows from investing (2,168,720) - (325,493) (189,905) 103,527 (2,580,591)
Cash flows from financing 8,716,035 - (9,789,503) 183,536 32,991,653 32,101,721
Capital expenditure 2,187,715 - 350,939 - 2,538,654
Impairment losses - - (9,109,459) - (9,109,459)
The Group commenced activities in Botswana effective 1 October 2005 on the
acquisition of Kalahari Diamonds Limited. Therefore there are no comparative
numbers for the year to 30 June 2005.
3. ACQUISITION OF SUBSIDIARY
The Company acquired the issued share capital of Kalahari Diamonds Limited ('
Kalahari') for US$ 21,997,991 effective 30 September 2005. The consideration was
satisfied by the issue of 16,166,529 Petra shares. Kalahari, through its
wholly-owned Botswana subsidiary, Sekaka Diamonds (Pty) Limited, is the holder
of a substantial numbers of diamond prospecting licences in Botswana. In the
nine months to 30 June 2006, Kalahari recorded an exploration loss, before
foreign exchange losses, depreciation and amortisation, of US$ 2,177,756.
Effect of the acquisition
The acquisition had the following effect on the Group's assets and liabilities.
Kalahari's net assets at acquisition date: Book Values Fair Value Carrying Values
Adjustments
US$ US$ US$
Consolidated fair value of net assets of entity
acquired:
Plant and equipment 176,384 176,384
Prospecting licences 1,283,470 16,336,788 17,620,258
Cash assets 5,560,464 5,560,464
Receivables 95,394 95,394
Accruals and payables (1,454,509) (1,454,509)
Consideration amount satisfied in shares 5,661,203 16,336,788 21,997,991
The fair value adjustment of US$16,336,788 arose as a result of the revaluation
of the Prospecting licences purchased from Sekaka Diamonds (Pty) Limited.
4. COST OF SALES
2006 2005
US$ US$
Raw materials and consumables used 6,292,071 735,256
Employee expenses 12,214,540 873,419
Depreciation of mining assets 5,630,717 463,100
Changes in inventory of finished goods (958,741) (101,688)
23,178,587 1,970,087
5. EXPLORATION EXPENDITURE
Employee expenses 313,182 1,846,344
Depreciation of exploration assets 35,687 633,140
Amortisation of intangible assets 2,832,355 8,186
Drilling costs 1,277,973 1,770,286
Equipment hire 207,689 1,058,999
Other exploration costs 257,551 1,746,723
4,924,437 7,063,678
6. OTHER OPERATING EXPENDITURE
Auditors' remuneration
- Current auditors
- audit services - -
- Previous auditors
- audit services 368,132 218,735
- non audit services - -
Depreciation of property plant and equipment 40,573 29,020
Foreign exchange losses 6,114,780 892,065
Operating lease rentals 222,257 348,767
Employee expenses 1,804,326 1,796,198
Corporate activity expenditure 359,743 -
Impairment of intangible assets - 136,872
Loss/(profit) on disposal of property plant and equipment 26,717 (1,608)
Administration expenses - mining operations 1,421,192 90,778
Other charges 2,238,729 1,345,194
12,596,449 4,856,021
In addition to the above, the 2006 audit fees payable by the Group to
its newly appointed auditors is $172,549
7. NET FINANCING COSTS
On bank loans and overdrafts (412,485) (54,584)
Other debt finance costs (152,716) (347,593)
Financial expense (565,201) (402,177)
Interest received 411,107 36,462
(154,094) (365,715)
8. LOSS PER SHARE
2006 2005
US$ US$
Loss for the year 18,864,456 21,018,778
Shares Shares
Basic weighted average number of ordinary shares in issue 143,916,416 73,937,847
US cents US cents
Basic loss per share - cents (13.11) (28.43)
Due to the Group's loss for the year, the diluted loss per share is
the same as the basic loss per share
Weighted average number of ordinary shares
As at 1 July 2005 73,937,847 67,849,976
Effect of shares issued during the period 69,978,569 6,087,871
Weighted number at 30 June 2006 143,916,416 73,937,847
9. RESERVES
Share Foreign Share based Accumulated
premium currency payment loss
account translation reserve
reserve
US$ US$ US$ US$
At 1 July 2004 34,041,633 2,962,470 - (42,615,103)
Implementation of IFRS 2 (refer note 11) - - 140,833 (140,833)
Restated balance at 1 July 2004 34,041,633 2,962,470 140,833 (42,755,936)
Loss for the period - - - (21,018,778)
Transfer from reserves of subsidiary - - - 233,194
Equity based share options - - 213,837 (213,837)
Exchange differences - adoption of US$
reporting currency
(241,084) (20,985) - 1,006,993
Exchange differences - 1,161,255 - -
Premium allotments during the year 70,888,365 - - -
Share issue costs (2,923,175) - - -
Convertible notes issued 9,388 - - -
At 30 June 2005 101,775,127 4,102,740 354,670 (62,748,364)
9. RESERVES (continued)
Share Foreign Share based Accumulated
premium currency payment loss
account translation reserve
reserve
US$ US$ US$ US$
At 1 July 2005 101,775,127 4,102,740 - (62,393,694)
Implementation of IFRS 2 (refer note 11) - - 354,670 (354,670)
Restated balance at 1 July 2005 101,775,127 4,102,740 354,670 (62,748,364)
Loss for the period - - - (18,864,456)
Equity based share options - - 618,292 -
Exchange differences - (1,561,653) - 4,153
Premium allotments during the year 20,550,930 - - -
Share issue costs (57,472) - - -
Convertible notes issued 921,318 - - -
At 30 June 2006 123,189,903 2,541,087 972,962 (81,608,667)
10. DIVIDENDS
The Directors do not recommend the payment of a dividend for the year.
11. ADOPTION OF IFRS 2 (EMPLOYEE SHARE OPTIONS)
During the period, the Company adopted IFRS 2 with respect to the treatment of
employee share options. In order to comply with IFRS 2, the Company now expenses
the fair value of share-based employee options with a corresponding increase in
equity. The fair value is measured at grant date and spread over the period
during which the employees become unconditionally entitled to the options. The
comparative numbers have been appropriately restated. The effect of the change
is as follows:
Gross Taxation Net
US$ US$ US$
Increase in net loss due to share-based option charge to personnel
costs:
- 30 June 2004 (140,833) - (140,833)
- 30 June 2005 (213,837) - (213,837)
Restatement of opening accumulated losses in respect of prior year
adjustment (354,670) - (354,670)
12. ANNUAL REPORT AND ACCOUNTS
The results for the year ended 30 June 2006 are unaudited and do not constitute
statutory accounts. The Report and Accounts for the year ended 30 June 2005,
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 2006 will
be posted to shareholders in October 2006.
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