Interim Results
Petra Diamonds Ld
19 February 2008
19 February 2008
AIM: PDL
Petra Diamonds Limited
Interim Results - Profit of US$8.2m
Petra Diamonds Limited ('Petra', 'the Company' or 'the Group') announces its
interim results (unaudited) for the six months to 31 December 2007 ('the
Period'), following its trading update announced on 24 January 2008. These
results record substantial revenue growth with a corresponding turnaround in
profits and cash flows. The Company is pleased to report its first profits
following its successful development from an exploration base into a leading
diamond producer and exploration group.
The Company has, over the past 14 months, successfully grown its base of
production assets through the separate acquisitions of the Cullinan,
Koffiefontein and Kimberley Underground mines, complementing Petra's world class
exploration base in Angola (Alto Cuilo, Luangue), Botswana (Kalahari Diamonds)
and operations in Sierra Leone (Kono).
SUMMARY OF RESULTS (unaudited)
6 months to 31 6 months to 31
December 2007 December 2006
US$ million US$ million
Revenue 32.1 8.2
Rough diamond sales 31.7 8.2
Polished diamond sales 0.4 -
Gross profit / (loss) * 16.1 (1.6)
Exploration expenses * 1.0 0.4
Administration expenses * 5.9 4.1
Net profit / (loss) for the Period 8.2 (9.5)
EPS cents 2.44 (6.33)
Cash at bank 58.9 19.2
Group EBITDA 8.8 (3.2)
* stated before depreciation, amortisation of intangibles, interest paid and
foreign exchange gains
• Group revenue growth of 291% driven largely by Koffiefontein sales
coming on stream in July 2007 and a significant increase in the prices achieved
from production at the South African fissure mines; turnaround in results due to
revenue growth combined with consistent cost control throughout the Group
MAJOR GROUP DEVELOPMENTS
• Petra-led consortium to acquire the Cullinan mine, historically a
producer of spectacular diamonds; expected to add over 1 million carats p.a.
gross production to the Group
• Petra also to acquire the Kimberley Underground mines; expected to add
over 100,000 carats p.a. gross production to the Group
TRADING & PRODUCTION
South Africa
• Production of 101,213 carats for the Period (17% increase on six
months to 31 December 2006: 86,396 carats)
• Sales of 115,918 carats for the Period (79% increase on six months to 31
December 2006: 64,940 carats)
• Strong diamond prices recorded at:
o Koffiefontein: US$408/carat
o Fissure mines - Helam, Star and Sedibeng: US$182/carat (44%
increase on 6 months to 31 December 2006: US$126/carat)
• January 2008 (post Period end): exceptional 50.14 carat diamond recovered
at Sedibeng mine and sold for US$1,312,018, (US$26,167 per carat)
EXPLORATION
Angola
• Alto Cuilo - second large diameter drill rig on site to accelerate mini
bulk sampling campaign; encouraging results received from AC63 and AC98
• Luangue - Joint Venture agreed with BHP Billiton
Botswana
• 57,000 line km gradient array magnetometer survey completed for Kukama;
7,000 line km gradient array magnetic survey completed for majority of
Tswapong area
• Drilling programme (3,000m+) to commence shortly in the Gope East, Gope
West and Kukama project areas
Sierra Leone
• Trial mining continues on two shafts; 8,640 diamonds totalling 760 carats
recovered to date, including a 10.55 carat octahedron
CUTTING & POLISHING ('beneficiation')
• Calibrated Diamonds production build up continues; aiming to cut and polish
2,500 carats of rough by mid 2008; initial sales of US$0.4 million (27.42
carats) of polished diamonds to date
Adonis Pouroulis, Chairman, commented;
'In the period under review Petra agreed two further key acquisitions, Cullinan
and Kimberley Underground, in line with our strategy to introduce high quality
producing assets into the Group. Upon completion of these two acquisitions,
Petra will be the operator of six producing diamond mines in South Africa and
these assets, combined with our strong exploration pipeline, ensure that the
Group is well positioned to become a top tier global diamond producer. With
Group production expected to rise to well over 1 million carats per annum by
2010, against a previous management target of 500,000 carats for the same
period, we have rapidly established strong revenue growth that will in turn
enhance shareholder value.'
For further information, please contact:
Cathy Malins Tel: +44 (0) 20 7493 7671
Petra Diamonds, London
Louise Goodeve / Justine Howarth Tel: +44 (0) 20 7851 7480
Parkgreen Communications, London
Adrian Hadden / Piers Coombs Tel: +44 (0) 20 7523 8000
Collins Stewart, London
About Petra Diamonds
Petra Diamonds is a pan-African diamond mining group with a balanced portfolio
combining major producing mines, world class exploration assets and a cutting
and polishing business.
With operations in South Africa, Angola, Botswana and Sierra Leone, Petra's
objective remains to develop its stature as a leading diamond producer in all of
the countries in which it operates. In South Africa, Petra has four producing
mines and recently reached agreements to acquire a further two mines from De
Beers (Cullinan and Kimberley Underground). The Company is on track to increase
its annual production from 180,000 carats in the year to June 2007 to over
400,000 carats in the year to June 2009 and is targeting annual production of
over 1 million carats thereafter.
Complementing the Group's production is an exploration and development portfolio
spread across some of the world's most prospective diamond fields. In Angola,
Petra is developing its world class Alto Cuilo and neighbouring Luangue projects
in two separate joint ventures with BHP Billiton. In Botswana, Petra has
established the largest exploration holding in the country, where it believes
that modern exploration techniques will hold the key to the discovery of new,
major kimberlites. In Sierra Leone, Petra is developing a fissure operation and
test work to date indicates the potential for economic operations.
The Petra group now employs some 3,000 people in Africa and over the last 10
years, the Company has developed a range of social initiatives which continue to
make a meaningful impact upon the lives of employees and surrounding
communities. Petra's focus remains upon sustainable development, via
educational programmes and skills transfer, to ensure a broad based approach
with a lasting legacy, and all operations are carried out with the highest
regard for the environment according to best practice.
For further information, please go to www.petradiamonds.com
Chairman's Statement
It is with great pleasure that I present the interim financial statements to
December 2007, a period in which Petra has continued its steady and considered
growth. In particular we recorded two very important achievements in the history
of the Petra Group; the agreement to acquire the Cullinan mine from De Beers and
the Group achieving a milestone in its financial results with substantial
on-mine profits and the generation of the associated operating cash flows.
In the period under review, Petra reached agreements to acquire both the
Kimberley Underground and Cullinan mines and completed the acquisition of the
Koffiefontein mine. With only some 25 kimberlite diamond mines in the world
being actively mined today, a tiny figure in comparison to other commodities,
our strategy has been to capitalise upon this rare window of opportunity to
acquire substantial diamond production.
These deals bear witness to the continued evolution of the diamond market. It is
an industry where a spirit of partnership and forward thinking is essential and
we are proud of the strong relationships we have cultivated. In particular, I
would like to thank De Beers for the work they have done to encourage growth and
development in the industry, helping to facilitate broad ownership and
competition within the South African diamond sector.
The Petra Group portfolio is now well balanced and diversified. We have a world
class diamond exploration portfolio, having gained early entry to Angola
followed by Sierra Leone and Botswana. We await further developments at Alto
Cuilo in Angola, where a second large diameter drill rig will expedite the mini
bulk sampling programme currently underway. Initial results received in the
period under review have been encouraging and we look forward to reporting
further progress in 2008.
The highlights for the Period are set out below:
FINANCIAL RESULTS
A gross profit (before depreciation) of US$16.1 million was reported due to both
the substantial growth in diamond production combined with the excellent average
prices received for Koffiefontein production and the strong average price
increase achieved for the fissure mines production. Further, our most recent
tender, held in January, also saw strong prices being achieved and at this time
we are not seeing a weakening in demand for Petra's production.
The profit after tax for the Period amounted to US$8,235,329 (loss to 6 months
to 31 December 2006: US$9,469,559), stated after foreign exchange gains of
US$5,726,819, of which US$1,375,559 and US$1,266,195 are realised and unrealised
gains from forward exchange contracts on diamond sales and $3,085,065 is an
unrealised gain on Group loan balances (6 months to 31 December 2006: loss of
US$1,747,930), amortisation of intangibles of US$1,982,627 (6 months to 31
December 2006: US$1,995,688), and depreciation of US$3,793,227 (6 months to 31
December 2006: US$2,829,324).
DIAMOND MARKET
Despite the turbulence in world financial markets, we remain upbeat on the
outlook for the diamond market. Whilst there is concern about a consumer
slowdown in the US, it is worth noting that demand for diamonds is rising at a
considerable pace in new emerging markets, such as China, India and the Middle
East. The market is expected to continue to be in deficit for the foreseeable
future (with demand exceeding supply) and indeed De Beers has already raised
prices for rough diamonds by 3.5% in 2008, a key industry indicator. Consistent
with this, we have recorded price increases at our first tenders held this year.
In January 2008 we sold the highest value diamond in Petra's history, a 50.14
carat stone that realised over US$1.3 million, equating to US$26,167 per carat.
TRADING
Koffiefontein - South Africa
In July 2007, Petra completed the acquisition of the Koffiefontein mine and
having conducted care and maintenance activities at the mine in the 12 months
prior to completion, was able to bring the mine on stream immediately. With
modifications made by Petra to the plant and the mining process, the Company is
now achieving an average value per carat of US$408, an exceptional value for a
kimberlite mine and almost double that forecast in Petra's original mine model
(US$240 per carat). A grade of 8.2 carats per hundred tonnes ('cpht') has been
achieved, against an estimate of 7.3 cpht used in the original business plan.
Costs and capital expenditure ('CAPEX') at Koffiefontein were both in line with
management expectations. The cash costs at Koffiefontein ran at approximately
R86 per tonne, a level which (other than inflation based increases) we expect to
maintain going forward. CAPEX for the Period was US$1.7 million, with total
CAPEX spend at the mine for the 12 months to June 2008 expected to be US$5.5
million, which includes the installation at Koffiefontein of electricity
generation capacity.
We are confident that we can replicate our success at Koffiefontein and intend
to follow a similar strategy at both Cullinan and Kimberley Underground.
Koffiefontein production:
Unit 6 months ended 6 months ended
31 December 2007 31 December 2006
Production
Diamonds produced Cts 38,456 14,468
Grade Cpht 8.2 7.7
Sales
Revenue US$m 19.2 -
Diamonds sold Cts 46,937 -
Average price per carat US$ 408 -
Note 1: All production and sales figures are stated gross; 70% is attributable
to the Group.
Note 2: Although production was recorded at Koffiefontein in the year to June
2007 during the care and maintenance period, sales only commenced in July 2007
when the remaining conditions in the Koffiefontein acquisition agreement were
met.
Kimberley Underground - South Africa
In September 2007, Petra reached agreement to acquire the Kimberley Underground
mines ('Kimberley Underground') from De Beers, following a competitive tender
process, for a total consideration of R78.5 million. Kimberley Underground
comprises Wesselton, Du Toitspan and Bultfontein, three historic mines which
were at the heart of South Africa's diamond rush in the late 1800's.
Petra has since been operating the mines on a care and maintenance basis on
behalf of De Beers until all required mining authorisations are received from
the South African authorities (expected mid 2008). Based on historical
production and sales information, we expect annual sales 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.
Cullinan - South Africa
In November 2007, Petra signed a landmark deal to acquire the Cullinan diamond
mine ('Cullinan'), from De Beers, as part of a Petra-led consortium for a total
cash consideration of R1 billion. As with the acquisition of Koffiefontein and
the agreement to acquire Kimberley Underground, this agreement followed a
rigorous and competitive tender process.
The Petra Diamonds Cullinan Consortium ('PDCC') comprises Petra Diamonds Limited
(37% initial interest), Al Rajhi Holdings W.L.L. ('Al Rajhi') (37% initial
interest) and PDCC's Black Economic Empowerment partners (26% interest). Petra
can increase its interest in PDCC (from Al Rajhi) to 60% based on performance of
the mine and pre-agreed option payments.
Cullinan (known as the Premier Mine until 2003) is renowned for producing many
of the world's largest and most famous diamonds, including the largest ever gem
diamond, the Cullinan diamond at 3,106 carats rough, as well as more than a
quarter of all diamonds weighing more than 400 carats. It also frequently
yields diamonds larger than ten carats.
The prices of high end diamonds remain strong and price growth buoyant, despite
the current economic uncertainty, and record sales have recently been noted at
auction houses. Fancy colours, and in particular blue diamonds, are highly
sought after and the world's highest value diamond by carat, a 6.04 carat
internally flawless, emerald cut, fancy blue diamond, was sold in October 2007
for US$7.98 million at a Sotheby's auction in Hong Kong - achieving an all time
high price of US$1.32 million per carat. This bodes well for Cullinan, the
world's only significant source of blue diamonds.
In the year to December 2006, De Beers produced 1.15 million carats at the mine,
with a market value of R504.9 million (US$75.2million). We believe that there
are reserves and resources in place at the existing mine (excluding the
Centenary-Cut resource) to support an additional mine life in excess of 20
years, yielding annual rough diamond production of in excess of 1 million
carats.
Underneath the existing mining operations lies the Centenary Cut, or 'C-Cut'
resource. Estimated at 133.1 million carats in-situ, the C-Cut is the world's
second largest diamond indicated resource. Whilst previous studies have
indicated a high capital cost required to develop the C-Cut, we intend to
consider new alternatives, such as a phased approach to development. There are
also substantial tailings resources at Cullinan, incorporating both dumps and
the higher grade optical sort tailings.
In December 2007, the South African Department of Minerals and Energy converted
the old order mining right in respect of Cullinan into a new order mining right,
and in February 2008 the South African Competition Commission gave its approval
of the acquisition. We now expect the remaining conditions precedent to the
acquisition to be met between May and July 2008.
Fissure mines
At the fissure mines, our attention has shifted from volume of carats produced
to optimisation of revenues by focus on grade and final recovery, resulting in
average value per carat achieved increasing from $126 per carat for the period
ending 31 December 2006 to $182 per carat. Cash costs per tonne ran at
approximately R530 per tonne overall for the three fissure mines, a level which
management is confident can be substantially improved upon. CAPEX for the period
was US$2 million, with a total expenditure for the full year to June 2008 of
US$3.8 million expected.
The current skill shortages and interruptions to power supply being experienced
in South Africa have meant that the Company is redirecting management attention
to continue improving efficiencies via further mechanisation and other
initiatives.
Helam
Power outages have had an impact on production at Helam but steps have been
taken to address this, such as using lower energy pumps and overall focus on
best use of power supplies. We have continued to make great strides towards the
semi-mechanisation of the mine, which will lead to future cost reductions in the
medium term. The deepening of shafts and addition of new levels are progressing
according to plan.
Star
The main shaft sinking programme has been successfully completed to 14 level and
the deepening to 15 level is well underway. When the main shaft reaches 15
level the current sub-shaft system will be decommissioned. It is anticipated
that the main shaft (with ore passes and loading arrangements) will have been
deepened to 16 level by the end of 2008. This will be a major step forward
toward the semi-mechanisation of Star mine and is expected to lead to
significant cost reductions.
Sedibeng
The mechanisation process at Sedibeng is the most advanced of all of Petra's
fissure mining operations. Raise boring is now being undertaken to deepen the
Dancarl shaft to beyond 20 level and this should be completed by the end of
2008, opening up a block of ground in excess of half a million tonnes for
mining access. This is a considerable tonnage, given that approximately 150,000
tonnes is currently mined each year at Sedibeng.
The recently commissioned diamond recovery plant is operating well and has a
positive impact on both costs and diamond security. The stockpile built up
during the commissioning phase was virtually depleted by the Period end.
Sedibeng regularly produces exceptional diamonds, including a 99.43 carat
diamond sold in the Period for US$1,305,009 (equivalent to US$13,125 per carat).
Since the Period end, a further exceptional diamond of 50.14 carats was
recovered in January 2008 and sold for US$1,312,018, (US$26,167 per carat),
being the most valuable diamond to be sold in Group history.
Fissures mines (Helam, Star, Sedibeng) combined production:
Unit 6 months ended 6 months ended
31 December 2007 31 December 2006
Production
Diamonds produced Cts 62,757 71,928
Grade Cpht 47.5 41.6
Sales
Revenue US$m 12.5 8.2
Diamonds sold Cts 68,981 64,940
Average price per carat US$ 182 126
Note 1: All production and sales figures are stated gross
Power shortages - South Africa
The current issue of power shortages in South Africa is well documented and a
number of our mining operations have been temporarily impacted. Over the last
month, Petra has experienced occasional load-shedding at each of our four
producing mines in South Africa, however we have back-up generator facilities in
place at all operations which ensure the safety of our employees, as well as
ensuring that conditions in our underground mining areas are kept in good
working order. The recent outages have not caused us to adjust our overall
expectations of production levels and, should Eskom maintain supply of power at
90%, we remain on track to reach our internal forecasts for the year to June
2008.
EXPLORATION
Angola - Alto Cuilo
The development of Alto Cuilo, a project with some 77 kimberlites confirmed,
remains a priority for Petra. As previously reported, the first mini bulk sample
('MBS') results were a major milestone in the development of Alto Cuilo and we
were very encouraged by the high grade zones encountered at kimberlites AC63 and
AC98.
Sadly operations at Alto Cuilo were temporarily disrupted following the tragic
helicopter accident in Angola in November 2007. Whilst this incident was
unrelated to Alto Cuilo, all BHP Billiton operations in Angola were temporarily
suspended.
A second large diameter drill rig is now at site and we expect this to
accelerate our MBS programme. Bulk samples are now scheduled on surface outcrops
of AC16 and AC98 and further high priority targets have been identified. In
order to increase our understanding of the complex morphology of the kimberlitic
clusters at Alto Cuilo, several NSAMT (Natural Source Audio Magneto Tellurics)
surveys are planned for 2008.
As at 31 December 2007, BHP Billiton's spend at Alto Cuilo totalled US$57.8
million, with the result that our partner is close to its earn-in threshold of
US$60 million, upon which it will hold a 75% share of our interest in Alto
Cuilo. Once this US$60 million threshold is met, the agreement in place between
Petra and BHP Billiton requires that both parties fund further development of
Alto Cuilo in proportion to their shareholdings.
Angola - Luangue
In July, Petra entered into a second joint venture agreement with BHP Billiton
to develop the Luangue diamond project, the contiguous concession to the north
of Alto Cuilo. Exploration work carried out to date at Luangue supports the
presence of kimberlitic clusters in the area. As detailed information on diamond
content emerges on the Alto Cuilo kimberlitic occurrences, the selection and
prioritisation of bulk sample targets at Luangue is enhanced. This is expected
to fast-track exploration developments at Luangue, accelerating progress towards
a pre-feasibility study.
In December 2007, a low level aero magnetic survey was completed over the
Luangue concession. Targets will be prioritised for the narrow diameter drilling
(NDD) programme and three core drill rigs are currently en route to site to
commence the kimberlite verification programme.
Botswana - Kalahari
In Botswana, where we have an on-craton area of some 52,000km(2) under
investigation, Petra continues to carry out a highly focused exploration
programme. In addition to the ground geophysical follow up of anomalies in
preparation for drilling, a 57,000 line kilometre low level gradient array
magnetometer survey was completed for the Kukama area and target selection is
expected to be completed by March 2008. A 7,000 line kilometre gradient array
magnetic survey was also completed in the Tswapong area, investigating
kimberlite indicator mineral anomalies detected during our sampling programmes.
The next phase of the exploration programme is a 3,000 to 5,000 metre drilling
programme which will commence shortly in the Gope East, Gope West and Kukama
project areas. This programme will target new anomalies as well as definition
drilling on known kimberlites such as kimberlite 173S in the Kukama area that is
now, on new data, interpreted to be 25 hectares in surface area.
We have completed ground geophysical follow up of the two diamondiferous
kimberlites, DK4 and DK6, in the Jwaneng locality and gravity data suggests that
these kimberlites are both larger than originally suspected. We now aim to test
the indicated grades of approximately 8 cpht as recorded by previous operators
and Petra plans to commence underground test shafts towards the end of 2008.
Sierra Leone - Kono
Trial mining operations at the Kono project, a joint venture with Stellar
Diamonds, continue with highly encouraging results at the Pol K and Bardu test
shafts. A total of 8,640 diamonds (760 carats) have now been recovered at Kono
(bottom cut 1 mm). A parcel of 581 carats has been shipped to South Africa and
these are being cleaned, awaiting valuation.
At Pol K shaft, a total of 757.5 tonnes of in-situ fissure has now been
extracted. Ore processing has yielded 5,603 diamonds totalling 479.5 carats,
rendering a very satisfactory in-situ grade of 63 cpht, with the ten largest
diamonds ranging in size from 1.1 carats to 10.55 carats. At the extraction
depth of 32 metres, satisfactory mining conditions have been experienced. Shaft
sinking will now be extended to a depth of 60 metres, at which point stope
panels will be established to increase ore extraction.
At Bardu shaft, trial mining started in early December 2007. The limited amount
of in-situ fissure tonnes extracted so far at a depth of 30 metres below surface
yielded encouraging in-situ grades, however Petra is of the opinion that the
scale of the work conducted is presently too limited to arrive at any
representative in-situ grade. Test work will continue in order to obtain an
in-situ grade and evaluate the quality of the diamonds. As previously stated,
we expect to be in a position to make a development decision at Kono by mid
2008.
It is also worth noting the considerable exploration potential at Kono and Petra
has, subject to successful contract negotiations, awarded a contract to Fugro
Airborne Surveys to conduct a survey in the Kono area to prospect for potential
kimberlite pipes and blows.
CUTTING & POLISHING
Calibrated Diamonds, Petra's cutting and polishing business, continues to build
capacity. Calibrated Diamonds' proprietary technology produces brilliant cut
diamonds of a high and consistent standard, and test work to date has delivered
excellent results. Revenue from the polished diamonds sold in the period was
US$0.4 million (27.42 carats); the stock of diamonds on hand at 31 December will
be completed over the next few weeks and then the polished diamonds sold in the
period to 30 June 2008.
CONCLUSION
Throughout 2007 Petra continued to grow its production base through
acquisitions, culminating with the agreement to acquire Cullinan. Petra's
profile as a low cost producer and our innovative mining approach has turned the
Koffiefontein mine into a profitable operation, and demonstrated our ability to
successfully operate major underground diamond mines. We have plans in place to
achieve similar results at both Kimberley Underground and Cullinan.
Today we are able to offer our shareholders an integrated diamond group
comprising rapidly rising production, substantial reserves and resources and the
significant upside potential of major exploration assets. Set against a market
of limited supply and rising diamond prices, these attributes will ensure a
bright future for the Company and all its stakeholders as we further establish
ourselves as a world class diamond group.
Adonis Pouroulis
Chairman
19 February 2008
PETRA DIAMONDS LIMITED
CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2007
Notes (Unaudited) (Restated) (Restated)
1 July 2007- (Unaudited) 1 July 2006 -
31 December 2007 1 July 2006 - 30 June 2007
31 December 2006
US$ US$ US$
Revenue 32,185,814 8,268,611 17,048,794
Cost of Sales (19,642,512) (9,831,860) (21,003,936)
Gross profit / (loss) 12,543,302 (1,563,249) (3,955,142)
Exploration expenditure (3,552,815) (2,440,798) (6,091,669)
Administration expenditure 7 (5,936,879) (4,092,533) (6,431,315)
Financial income 6,965,169 113,814 654,151
Financial expense (1,653,044) (2,351,474) (7,034,185)
Net financing income / (costs) 8 5,312,125 (2,237,660) (6,380,034)
Profit / (loss) before tax 8,365,733 (10,334,240) (22,858,160)
Income tax (expense) (130,404) 864,681 1,909,234
Profit / (loss) for the period 8,235,329 (9,469,559) (20,948,926)
Attributable to:
Equity holders of the holding company 4,450,693 (9,469,559) (20,948,926)
Minority shareholders 3,784,636 - -
8,235,329 (9,469,559) (20,948,926)
Basic earnings / (loss) per share - cents 11 2.44 (6.33) (13.60)
Diluted earnings / (loss) per share - cents 11 2.37 (6.33) (13.60)
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2007
(Unaudited) (Restated) (Restated)
1 July 2007- (Unaudited) 1 July 2006 -
31 December 2007 1 July 2006- 30 June 2007
31 December 2006
US$ US$ US$
Exchange differences on translation of foreign 960,858 8,283,906 8,677,941
operations
Net income recognised directly in equity 960,858 8,283,906 8,677,941
Profit / (loss) for the period 8,235,329 (9,469,559) (20,948,926)
Total recognised income and expenses 9,196,187 (1,185,653) (12,270,985)
Attributable to:
Equity holders of the holding company 5,411,551 (1,185,653) (12,270,985)
Minority shareholders 3,784,636 - -
9,196,187 (1,185,653) (12,270,985)
CONSOLIDATED BALANCE SHEET
AT 31 DECEMBER 2007
Notes (Unaudited) (Restated)
31 December (Unaudited)
2007 31 December 2006 30 June 2007
US$ US$ US$
ASSETS
Non-current assets
Property, plant and equipment 95,119,713 73,429,878 84,872,711
Intangible assets 45,992,598 14,308,597 72,816,432
Available for sale financial assets 69,905 1,371,372 70,136
Investment in associate 5 6,241,671 - -
Other receivables 157,591 200,576 151,987
Total non-current assets 147,581,478 89,310,423 157,911,266
Current assets
Inventories 11,243,742 4,653,190 8,900,532
Trade and other receivables 14,708,962 4,030,737 14,822,729
Derivative financial assets 1,266,195 - -
Cash and cash equivalents 58,989,948 19,215,929 44,124,829
Total current assets 86,208,847 27,899,856 67,848,090
Total assets 233,790,325 117,210,279 225,759,356
EQUITY AND LIABILITIES
Equity
Share capital 9 36,742,769 29,522,189 36,360,403
Share premium account 10 229,024,305 134,654,784 227,366,888
Foreign currency translation reserve 10 (7,097,712) (5,742,819) (6,136,854)
Share-based payment reserve 10 2,256,205 1,196,715 1,527,000
Other reserves 10 4,003,682 4,003,682 4,003,682
Accumulated loss 10 (98,106,900) (91,078,226) (102,557,593)
Equity attributable to equity holders of the 166,822,349 72,556,325 160,563,526
holding company
Minority interest 3,784,636 - -
Total equity 170,606,985 72,556,325 160,563,526
Non-current liabilities
Liabilities
Loans and borrowings 2,548,588 3,115,295 3,103,252
Trade and other payables 3,377,585 2,021,556 2,800,506
Provisions 14,198,526 1,824,427 9,852,535
Deferred tax liabilities 9,289,370 9,713,898 9,551,924
Total non-current liabilities 29,414,069 16,675,176 25,308,217
Current liabilities
Loans and borrowings 19,337,527 19,563,472 27,755,710
Other payables 12,308,723 6,560,671 9,821,436
Provisions 2,123,021 1,854,635 2,310,467
Total current liabilities 33,769,271 27,978,778 39,887,613
Total liabilities 63,183,340 44,653,954 65,195,830
Total equity and liabilities 233,790,325 117,210,279 225,759,356
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2007
Notes (Unaudited) (Restated) (Restated)
1 July 2007- (Unaudited) 1 July 2006 -
31 December 2007 1 July 2006- 30 June 2007
31 December 2006
US$ US$ US$
Profit / (loss) before taxation for the period 8,365,733 (10,334,240) (22,858,160)
Depreciation of property plant and equipment - 567,533 28,807 1,115,782
exploration
Depreciation of property plant and equipment - 3,168,364 2,784,064 5,274,209
mining
Depreciation of property plant and equipment - 57,330 16,453 113,283
other
Amortisation of intangible assets 1,982,627 1,995,688 3,740,928
Loss / (profit) on sale of property plant and 2,999 - (81,852)
equipment
Finance income (1,238,350) (113,814) (654,151)
Finance expense 938,540 603,544 1,307,715
Unrealised foreign exchange (gain) / loss (4,351,260) 1,747,930 4,811,205
Share based payment provision 729,205 223,753 749,406
Present value adjustment on rehabilitation 86,770 73,857 186,121
provision
Operating profit / (loss) before working capital 10,309,491 (2,973,958) (6,295,514)
changes
(Increase) / decrease in trade and other (1,152,149) (1,334,699) (12,031,562)
receivables
Increase / (decrease) in trade and other payables 2,372,171 1,294,367 4,111,526
(Increase) in inventories (2,912,549) (2,801,123) (6,133,588)
Cash generated from / (utilised) in operations 8,616,964 (5,815,413) (20,349,138)
Interest paid (938,540) (300,784) (1,307,715)
Net cash generated from / (utilised) by operating 7,678,424 (6,116,197) (21,656,853)
activities
Cash flows from investing activities
Proceeds from sale of property, plant and - - 568
equipment
Proceeds from sale of intangibles 22,354,768 - -
Acquisition of subsidiary net of cash acquired - (2,334,665) 1,934,936
Interest received 1,238,350 113,814 654,151
Acquisition of investment in associate (3,000,000) (99,960) -
Acquisition of property, plant and equipment (3,876,701) (1,971,552) (5,086,569)
Development expenditure (1,939,261) (1,522,980) (3,847,301)
Net cash from investing activities 14,777,156 (5,815,343) (6,344,215)
Cash flows from financing activities
Net proceeds from the issue of share capital 2,788,633 2,075,106 36,087,171
(Decrease) / increase in short-term borrowings (7,855,968) - 9,635,689
Increase / (decrease) in long-term borrowings (2,431,324) 22,293,600 19,424,564
Net cash (utilised) / generated from financing (7,498,659) 24,368,706 65,147,424
activities
Net increase in cash and cash equivalents 14,956,921 12,437,166 37,146,356
Cash and cash equivalents at beginning of the 44,124,829 7,019,644 7,019,644
period
Effect of exchange rate fluctuations on cash held (91,802) (240,881) (41,171)
Cash and cash equivalents at end of the period 58,989,948 19,215,929 44,124,829
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2007
1. ACCOUNTING POLICIES
The interim results, which are unaudited, have been prepared in accordance with
International Financial Reporting Standards (IFRS) adopted by the International
Accounting Standards Board (IASB). The interim financial statements have been
prepared in accordance with the requirements of International Accounting
Standard 34. This interim report does not include all the notes of the type
normally included in an annual financial report. Accordingly, this report is to
be read in conjunction with the Annual Report for the year ended 30 June 2007
and any public announcements made by the Company during the interim reporting
period.
The unaudited interim financial statements for the six months ended 31 December
2007 do not constitute statutory accounts and have been drawn up using
accounting policies and presentation consistent with those applied in the
audited accounts for the year ended 30 June 2007 as adjusted for the adoption of
any new IFRS's which are applicable to the group for the year ended 30 June 2008
and as adjusted for the following restatements:
Analysis of foreign exchange gains and losses
In the financial statements for the year ended 30 June 2007 and for the interim
period ended 31 December 2006 all foreign exchange gains and losses were
included within administration expenditure. These foreign exchange gains and
losses have now been re-allocated to finance income or finance costs, as
appropriate. The amounts re-allocated are deemed to be more closely aligned to
financing than operating costs. The re-allocation of costs has no impact on the
results for the year ended 30 June 2007. Foreign exchange losses of US$4,811,205
and US$1,747,930 were restated for the year ended 30 June 2007 and the period
ending 31 December 2006 respectively.
Cash flow statement - analysis of short term borrowings
In the financial statements for the year ended 30 June 2007 an increase of
US$9,635,689 in short term borrowings was included within the movement in trade
payables. This has now been restated as an increase in short term borrowings
under financing activities. This restatement has no impact on the net increase
in cash and cash equivalents for the year ended 30 June 2007.
The financial information for the year ended 30 June 2007 has been extracted
from the statutory accounts for that period. The auditors report for the year
ended 30 June 2007 was unqualified.
The financial information for the 6 months ended 31 December 2006 has been
extracted from the interim results released to 31 December 2006.
2. DIVIDENDS
No dividends were proposed or paid during the period.
3. SEGMENTAL INFORMATION
The Group comprises the following business segments:
Mining - extraction and sale of rough diamonds from mining operations in South
Africa.
Exploration - exploration activities in Angola, Botswana, Sierra Leone and South
Africa.
Beneficiation - cutting and polishing of rough diamonds.
Business segments Mining Exploration Beneficiation Consolidated
1 July 2007 - 1 July 2007 - 1 July 2007 - 1 July 2007 -
31 December 2007 31 December 2007 31 December 2007 31 December 2007
US$ US$ US$ US$
Revenue 31,668,533 - 517,281 32,185,814
Segment result 16,147,606 (3,617,687) 13,383 12,543,302
Operating profit / (loss) 11,034,490 (7,409,925) (570,957) 3,053,608
Financial income 1,919,537 5,058,139 (12,507) 6,965,169
Financial expense (396,759) (1,256,239) (46) (1,653,044)
Income tax expense (130,404) - - (130,404)
Outside shareholders Interest (3,784,636) - - (3,784,636)
Profit / (loss) for the period 8,642,228 (3,608,025) (583,510) 4,450,693
Segment assets 99,475,679 130,541,539 3,773,107 233,790,325
Segment liabilities 34,994,805 25,671,846 2,516,689 63,183,340
Geographical segments Angola Botswana Sierra Leone South Africa Jersey Consolidated
1 July 2007 - 31 1 July 2007 - 1 July 2007 - 1 July 2007 - 1 July 2007 - 1 July 2007 -
December 31 December 31 December 31 December 31 December 31 December
2007 2007 2007 2007 2007 2007
US$ US$ US$ US$ US$ US$
Revenue - - - 32,185,814 - 32,185,814
Segment assets 43,422,262 7,641,074 10,360,225 115,422,720 56,944,044 233,790,325
Segment liabilities - 43,332 3,754,736 37,689,647 21,695,625 63,183,340
Capital expenditure - 101,976 1,939,261 3,774,725 - 5,815,962
Business segments Mining Exploration Beneficiation Consolidated
1 July 2006 - 1 July 2006 - 1 July 2006 - 1 July 2006 -
31 December 31 December 31 December 31 December
2006 2006 2006 2006
US$ US$ US$ US$
Revenue 8,268,611 - - 8,268,611
Segment result (1,563,249) - - (1,563,249)
Operating loss (2,261,505) (5,750,200) (84,875) (8,096,580)
Financial income 1,154 112,653 7 113,814
Financial expense (1,349,757) (1,001,717) - (2,351,474)
Income tax 864,681 - - 864,681
Loss for the period (2,745,427) (6,639,264) (84,868) (9,469,559)
Segment assets 68,788,111 47,362,117 1,060,051 117,210,279
Segment liabilities 20,194,232 23,955,923 503,799 44,653,954
Geographical segments Angola Botswana Sierra Leone South Africa Jersey Consolidated
1 July 2006 - 31 1 July 2006 - 1 July 2006 - 1 July 2006 - 1 July 2006 - 1 July 2006 -
December 31 December 31 December 31 December 31 December 31 December
2006 2006 2006 2006 2006 2006
US$ US$ US$ US$ US$ US$
Revenue - - - 8,268,611 - 8,268,611
Segment assets 4,785,697 11,776,609 5,928,791 69,500,761 25,218,421 117,210,279
Segment liabilities - 98,634 1,232,812 23,026,679 20,295,829 44,653,954
Capital expenditure - 157,735 1,522,980 1,813,817 - 3,494,532
Business segments Mining Exploration Beneficiation Consolidated
1 July 2006 - 1 July 2006 - 1 July 2006 - 1 July 2006 -
30 June 30 June 30 June 30 June
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) 1,981,525 (84,877) (3,955,142)
Operating loss (6,333,466) (9,545,432) (599,228) (16,478,126)
Financial income - 651,767 2,384 654,151
Financial expense (3,659,372) (3,374,813) - (7,034,185)
Income tax 1,909,234 - - 1,909,234
Loss for the period (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
Segment liabilities 32,165,070 32,108,430 922,330 65,195,830
Geographical segments Angola Botswana Sierra Leone South Africa Jersey Consolidated
1 July 2006 - 1 July 2006 - 1 July 2006 - 1 July 2006 - 1 July 2006 - 1 July 2006 -
30 June 30 June 30 June 30 June 30 June 30 June
2007 2007 2007 2007 2007 2007
US$ US$ US$ US$ US$ US$
Revenue - - - 16,712,146 336,648 17,048,794
Segment assets 52,318,248 9,318,811 8,369,539 106,890,457 48,862,301 225,759,356
Segment liabilities 12,988 54,787 3,165,035 40,439,879 21,523,141 65,195,830
Capital expenditure - (155,132) (3,847,301) (4,818,397) (113,040) (8,933,870)
4. ACQUISITIONS
4(a) Acquisition of Kimberley Underground Mines assets
On 14 September 2007, the Company entered into a conditional agreement with De
Beers Consolidated Mines Limited ('De Beers') to acquire the mining and
associated assets previously used by De Beers in the operation of the Kimberley
Underground diamond mines ('Kimberley Underground'), which are situated near
Kimberley, South Africa.
The consideration payable is R78.5 million (US$11.1 million). The consideration
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$2.2 million).
The acquisition is not reflected in the financial statements as at 31 December 2007 as the agreement is conditional upon
the following:
(i) the DME converting the old order mining right in respect of Kimberley Underground held by De Beers into a new
order mining right;
(ii) the amendment of the new order mining right to subdivide the Kimberley Underground mines from other rights to be
retained by De Beers;
(iii) DME consenting to the cession to Petra of the new order mining right in respect of Kimberley Underground;
(iv) the DME consenting to the cession, transfer and delegation of the rehabilitation obligations and liabilities in
respect of Kimberley Underground from De Beers to Petra;
(v) other related sale assets being sub-divided as required, and all regulatory approvals or consents being obtained in
that regard;
(vi) issue of appropriate guarantees to De Beers; and
(vii) all other regulatory approvals as may be required.
No pro-forma financial information as at 19 February 2008 is available in
respect of the Kimberley Underground operations as no mining activity occurred
during the period. Fair values of the assets and liabilities have not been
disclosed as the conditions above have not yet been met. For the six months
ending 31 December 2007, care and maintenance costs of US$591,098 and capital
expenditure of US$1,320,040 have been incurred.
4(b) Acquisition of Cullinan Diamond Mine assets
On 22 November 2007, the Company announced that it had, as a member of the Petra
Diamonds Cullinan Consortium ('PDCC'), entered into an agreement with De Beers
to acquire the Cullinan Diamond Mine ('Cullinan') in South Africa.
Salient features of the transaction are:
(i) PDCC will acquire Cullinan from De Beers for a total cash consideration
of R1 billion (US$149.0 million); Petra's share of the consideration is R325
million (US$48.4 million);
(ii) the members of PDCC are Petra Diamonds Limited (37% initial interest), Al
Rajhi Holdings W.L.L. ('Al Rajhi') (37% initial interest) and PDCC's Black
Economic Empowerment ('BEE') partners (26% interest). The Company can at its
option increase its interest in PDCC (from Al Rajhi) based on performance of the
mine and pre-agreed option payments. PDCC will be funded by Petra US$50 million
and Al Rajhi US$150 million; the total funding of US$200 million will be applied
to the purchase consideration of Cullinan of R1 billion (US$149.0m), with the
balance for the mine's working capital and Capex requirements;
(iii) the BEE partners will pay for their interests from their share of future
cash flows from the mine, after servicing interest at appropriate interest
rates, or they can arrange independent financing; and
iv) the BEE partners are represented by Thembinkosi Mining Investments (Pty)
Ltd, a consortium of BEE mining companies with a 14% interest, and a broad based
Petra employee share trust with a 12% interest that will ensure that all Petra
employees can benefit in the mine's success.
The acquisition is not reflected in the financial statements as 31 December 2007
as the agreement is conditional on upon the following conditions:
(i) approval by the South African Competition Authority (approval received 18 February 2008);
(ii) Ministerial consent to the cession to PDCC of the new order mining right in respect of Cullinan;
(iii) the DME consenting to the cession, transfer and delegation of the rehabilitation obligations and
liabilities in respect of Cullinan from De Beers to PDCC; and
(iv) all regulatory and other approvals as may be required.
5. INVESTMENT IN ASSOCIATE
In August 2007 the Company acquired a 40% equity interest in
Organizacoes Moyoweno - Comercio Geral, Lda.('Moyoweno'), an Angolan registered
company, for US$6 million. Moyoweno's sole asset is an interest in the Alto
Cuilo kimberlite and alluvial exploration contracts.
6. SALE OF INTEREST IN SUBSIDIARY
On 1 August 2007, the Company entered into an agreement ('Luangue Agreement')
with BHP Billiton to develop the Luangue diamond project ('Project Luangue') in
north eastern Angola.
Under the terms of the Luangue Agreement:
(i) BHP Billiton acquired 25% of the issued share capital of Frannor
Investments and Finance Limited ('Frannor'), from Petra for a cash consideration
of US$22.35 million; the consideration has been treated as a disposal of 25% of
the prospecting licences acquired at the date of acquisition;
(ii) BHP Billiton's shareholding in Frannor will remain at 25% until
BHP Billiton's earn-in date ('BHP Billiton Earn-in Date'), defined as the
earlier of (i) the formation of a kimberlite mining company or (ii) 180 days
following the submission of a Technical and Economic Viability Study in
accordance with the Luangue kimberlite concession contract, provided that in
either case a BHP Billiton pre-feasibility study is completed beforehand. At the
BHP Billiton Earn-in Date, BHP Billiton's shareholding in Frannor will increase
to 75%, with Petra holding the remaining 25% of Frannor; and
(iii) BHP Billiton will sole fund the development of Project
Luangue up to the BHP Billiton Earn-in Date; and
(iv) BHP Billiton refunded Petra's Project Luangue operating
expenditure, of circa US$3.5 million.
As at 31 December 2007 the Company maintained its 75% shareholding in Frannor
and consolidated 100% of Frannor's assets, liabilities and operational results.
1 July 2007 - 1 July 2006 - 1 July 2006
31 December 31 December - 30 June
2007 2006 2007
$ $ $
7. ADMINISTRATION EXPENDITURE
Auditors' remuneration
- audit services 289,460 - 195,437
- other services - - 19,394
Depreciation of property, plant and equipment 57,330 16,453 113,283
Operating lease rentals - buildings 78,628 62,524 153,739
Staff costs 2,146,888 852,640 1,881,271
Bid and project expenditure 133,013 26,458 55,293
Loss / (profit) on disposal of property, plant and 2,999 - (81,852)
equipment
Administration expenses - mining operations 1,512,698 858,709 1,794,312
Care and maintenance 591,098 1,240,040 -
Other charges 395,560 593,415 1,863,098
Share-based payments
- directors 347,660 200,997 253,656
- senior management 381,545 241,297 183,684
5,936,879 4,092,533 6,431,315
1 July 2007 - 1 July 2006 - 1 July 2006
31 December 31 December - 30 June
2007 2006 2007
$ $ $
8. NET FINANCING INCOME/(COSTS)
On bank loans and overdrafts (938,540) (263,795) (813,377)
Other debt finance costs (714,504) (339,749) (1,409,603)
Unrealised foreign exchange losses - (1,747,930) (4,811,205)
Financial expense (1,653,044) (2,351,474) (7,034,185)
Interest received 1,238,350 113,814 654,151
Realised foreign exchange gains on the settlement 1,375,559 - -
of forward exchange contracts
Unrealised foreign exchange gains on forward 1,266,195 - -
exchange contracts
Other unrealised foreign exchange gains 3,085,065 - -
Financial income 6,965,169 113,814 654,151
5,312,125 (2,237,660) (6,380,034)
9. ISSUED CAPITAL
Number of shares 31 December Number of shares 31 December
2007 2006
US$ US$
Authorised - ordinary shares of 10p each
As at 31 December 2006 and 31 300,000,000 60,117,000 200,000,000 35,982,000
December 2007
Issued and fully paid
At 1 July 181,448,191 36,360,403 148,825,098 27,031,103
Allotments during the period 2,514,000 382,366 1,867,509 2,491,086
At 31 December 183,962,191 36,742,769 150,692,607 29,522,189
10. 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$
6 Month period ending
31 December 2006:
At 1 July 2006 27,031,103 123,189,903 2,541,087 972,962 - (81,608,667) 72,126,388
Loss for the period - - - - - (9,469,559) (9,469,559)
Equity portion of - - - - 4,003,682 - 4,003,682
convertible bond
Equity based share - - - 223,753 - - 223,753
options
Exchange differences - 9,685,360 (8,283,906) - - - 1,401,454
Allotments during the 2,491,086 - - - - - 2,491,086
period
Premium allotments - 1,792,182 - - - - 1,792,182
during the year
Share issue costs - (12,661) - - - - (12,661)
At 31 December 2006 29,522,189 134,654,784 (5,742,819) 1,196,715 4,003,682 (91,078,226) 72,556,325
6 Month period ending
31 December 2007:
At 1 July 2007 36,360,403 227,366,888 (6,136,854) 1,527,000 4,003,682 (102,557,593) 160,563,526
Profit for the period - - - - - 4,450,693 4,450,693
Equity based share - - - 729,205 - - 729,205
payments
Exchange differences - (748,850) (960,858) (1,709,708)
Allotments during the 382,366 - - - - - 382,366
period
Premium allotments - 2,406,267 - - - - 2,406,267
during the year
At 31 December 2007 36,742,769 229,024,305 (7,097,712) 2,256,205 4,003,682 (98,106,900) 166,822,349
11. EARNINGS PER SHARE
The calculation of basic earnings per share is based on earnings for the interim
period of US$4,450,693 (31 December 2006: loss for the period US$9,469,559) and
on a weighted average of 182,684,584 (31 December 2006: 149,679,152) ordinary
shares of 10p each in issue during the period.
The calculation of diluted earnings per share is based on earnings for the
interim period of US$4,450,693 (31 December 2006: loss for the period
US$9,469,559) and on a diluted number of 188,073,841 (31 December 2006:
170,591,152) ordinary shares of 10p each in issue during the period.
12. HEDGING INSTRUMENTS
From time to time the Company may acquire forward contracts to fix the
exchange rate on future transactions. At the period end such forward contracts
with an unrealised foreign exchange gain of US$1,266,195 was credited to the
income statement within net financing income. A corresponding asset is included
within derivative financial assets.
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