SUMMARY
Lost Time Injury Frequency Rate ('LTIFR') of 0.50 (H1 FY 2020: 0.22 and FY 2020: 0.29) improved from 0.65 during Q1 FY 2021 due to the behaviour-based intervention campaign in place to address this LTI trend and reinforce safe workplace practices. The total number of injuries during the Period, which includes LTIs, reduced to 19 (H1 FY 2020: 24).
H1 production down 16% to 1,740,862 carats (H1 FY 2020: 2,070,240 carats), mainly as a result of the Williamson mine in
H1 revenue down 8% to
The Cullinan mine produced a 299 carat Type IIa white gem-quality diamond in
Diamond inventory of 1,385,402 carats valued at
Consolidated net debt at
Unrestricted cash of
ZAR/USD exchange rate volatility continued during the Period, averaging R16.27/
Capital Restructuring
A number of milestones have now been passed with regards to the successful implementation of the Company's proposed capital restructuring and associated debt for equity swap, including the approval of the Scheme by 100% of votes cast at the Scheme Meeting on
Outlook
The diamond market has continued to show improved demand for rough diamonds, as evidenced by the recent strong sales from the majors De Beers and ALROSA, further to continued robust demand from the midstream, following positive consumer sales during the holiday retail season. There are expectations that this improved demand will continue throughout Q1 CY 2021. However, the current resurgence of COVID-19 in many countries poses a significant risk to the logistics and timing of sales in H2 FY 2021.
Due to the ongoing uncertainty around the impact of COVID-19, production guidance for FY 2021 remains suspended. Furthermore, the Williamson mine remains on care and maintenance, as has been the case since
Project 2022 throughput targets have been impacted by reduced grade at Finsch as a result of the increased waste ingress and reduced volumes to manage the dilution, as mentioned above, and Williamson remaining on care and maintenance for longer than initially planned. Although Cullinan remains on track to deliver on its throughput stretch target for FY 2021, the impact of reduced throughput at Finsch and Williamson is expected to lower the annualised contribution of the throughput initiatives from some
The Company is aware of media reports suggesting that the parcel of 71,654 carats of diamonds from the Williamson mine in
The Company's Tunajali Committee, comprised entirely of independent Non-Executive Directors, will undertake a review of the output of the external investigation into the alleged breaches of human rights at the Williamson mine and will make recommendations to address any findings. The Company intends to make a further announcement on these issues by the end of
'We are living through a time of great uncertainty as a result of COVID-19, which has put considerable pressure on the business and all of our employees. I am grateful for the continued fortitude and resilience of our entire Petra team in the face of this challenge and extend our sincerest condolences to the families and friends of the four employees who have tragically lost their lives to COVID-19.
I am delighted that we have now secured the support of our noteholders, lenders and shareholders for the proposed restructuring of the Group's balance sheet, which will formally complete in the coming weeks following the receipt of the requisite regulatory approval. This marks a significant milestone in putting the Company on a sustainable footing going forward. The improvement in the market, with prices from our January sale now back at pre-COVID levels, is very encouraging and will provide some support as we look to optimise the value of our asset base.
Our operations in
COMMENTARY
Health and safety
Group LTIFR of 0.50 (H1 FY 2020: 0.22 and FY 2020: 0.29), improving from 0.65 for Q1 FY 2021. The majority of the accidents in H1 FY 2021 continued to be behavioural in nature. Considerable focus is being placed on reinforcing safe behaviour and continuous improvement in striving for a zero harm working environment. The total number of injuries during the Period, which includes LTIs, reduced to 19 (H1 FY 2020: 24).
The COVID-19 pandemic poses a significant risk to the health and safety of the Group's workforce. Whilst the majority of those who contract the virus may be asymptomatic or may only experience mild symptoms, a number of people (especially those with comorbidities) may become seriously ill or the virus may prove fatal. Whilst Petra has implemented systems and strategies aiming to prevent and/or contain the spread of the virus at its operations, the widespread prevalence and highly infectious nature of the virus has meant that 290 employees to date have been confirmed COVID-19 positive at the South African operations as at
More information about the Company's response to the pandemic can be accessed here: https://www.petradiamonds.com/sustainability/health-and-safety/our-response-to-covid-19/.
There have been no cases of COVID-19 confirmed at the Williamson mine in
Production
Overall carat production decreased 16% to 1,740,862 carats (H1 FY 2020: 2,070,240 carats), with Cullinan's outperformance offsetting lower production at Finsch, lower production from Koffiefontein and no contribution from Williamson (H1 FY 2020: 222,351 carats), which remains on care and maintenance.
Cullinan's overall carat production increased by 13% to 1,009,642 carats (H1 FY 2020: 889,787 carats) due to ROM production increasing by 7% to 913,626 carats (H1 FY 2020: 855,371 carats) in line with Project 2022 throughput targets. Tailings production increased by 179% to 96,016 carats in line with the mine plan (H1 FY 2020: 34,416 carats). The higher ROM carat production was largely driven by an increased volume treated of 2,339,473 tonnes (H1 FY 2020: 2,295,197 tonnes) at a ROM grade of 39.1 cpht (H1 FY 2020: 37.3 cpht).
Finsch's overall carat production decreased by 24% to 695,308 carats (H1 FY 2020: 913,557 carats) due to ROM carat production decreasing by 21% to 695,308 carats (H1 FY 2020: 880,707 carats) further to a 14% decrease in the volume treated of 1,323,000 tonnes (H1 FY 2020: 1,534,256 tonnes) and an 8% decrease in the ROM grade to 52.6 cpht (H1 FY 2020: 57.4 cpht). ROM volumes mined in H1 were impacted by the expiry of the temporary continuous operations arrangement, which was reinstated during
As announced on
During H1 FY 2021, the areas surrounding the Finsch mine experienced above average rainfall. Due to the excessive amount of rainfall and an influx of water into the pit, pit wall failures were experienced on the northern side of the pit. These failures have not impacted production to date, but they may have a future impact on the stability of the decline from surface which also serves as the second escape route from the underground operations. Measures to mitigate the impact on the second escape route are being put in place and include the re-commissioning of a temporary hoisting facility from surface down to the 70 level.
Koffiefontein's production decreased 19% to 35,912 carats (H1 FY 2020: 44,545 carats), with treatment from underground ore mined during the Period supplemented by some 76,000 tonnes of ROM material stockpiled during Q4 FY 2020 further to the COVID-19 lockdowns; the ROM stockpile was largely depleted during H1 FY 2021.
The Williamson mine in
Project 2022 Update
Project 2022 throughput ideas continue to remain the largest contributor towards the operational cash flow benefits and Cullinan is on track to deliver on its throughput stretch target for FY 2021, having met the H1 recovered carats stretch target of 1 million carats. However, the higher than expected levels of waste ingress at Finsch is having a detrimental impact on throughput benefits due to both lower grade and volume. The extended state of care and maintenance at Williamson is also inhibiting throughput ideas, with operations being suspended. The expected impact of the reduced throughput at Finsch and Williamson indicates a reduction in the annualised contribution of the throughput initiatives from some
The targeted contribution from cost efficiencies remains at an annualised
The Organisational Design ('OD') project progressed to implementation, with the adoption of a top-down phased approach starting with Group functions through to the roles at operations. Alignment of the organisational structures to support the operating model and a total review of role titles and role profiles are nearing completion. The grading committee is at an advanced stage with the grading of Group function roles and aims to have the subsequent layers completed by
Diamond market and sales
The diamond market has continued to show improved demand for rough diamonds, as evidenced by the recent strong sales from the majors De Beers and ALROSA, further to continued robust demand from the midstream, following positive consumer sales during the holiday retail season. There are expectations that this improved demand will continue throughout Q1 CY 2021. However, the current resurgence of COVID-19 in many countries poses a significant risk to the logistics and timing of sales in H2 FY 2021.
In the retail market, whilst western markets were subdued, leading jewellers experienced strong sales in
Supply discipline by the major diamond producers in 2020 has played an important role in moving towards more balance between supply and demand in the midstream and remains a key factor in terms of the health of the market in 2021.
Due to the impact of COVID-19 and the closure of the Argyle mine in
H1 revenue was down 2% to
Like-for-like diamond prices at this tender increased by a further 8% and have therefore largely recovered to pricing levels before the COVID-19 outbreak, barring the finer (smaller) goods, which only account for a small portion of overall revenues.
Despite the Williamson mine being on care and maintenance, it was possible to include ca. 30,000 carats for sale in Q1 due to these diamonds being withheld for sale in Q4 FY 2020.
Corporate and Financial
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014. Upon the publication of this announcement via a
Notes:
1. The production and financial results in this announcement are adjusted to exclude the results of KEM JV, which has been reclassified as a discontinued operation following the proposed disposal, announced in
2. The following definitions have been used in this announcement:
a. cpht: carats per hundred tonnes
b. CY: calendar year
c. Kcts: thousand carats
d. Kt: thousand tonnes
e. Mcts: million carats
f. Mt: million tonnes
g. FY: financial year
h. Q: quarter of the financial year
i. ROM: run-of-mine (i.e. production from the primary orebody)
j. SLC: sub level cave
For further information, please contact:
Petra Diamonds
Telephone: +44 20 7494 8203
investorrelations@petradiamonds.com
About
Petra Diamonds is a leading independent diamond mining group and a consistent supplier of gem quality rough diamonds to the international market. The Company has a diversified portfolio incorporating interests in three underground producing mines in
Petra's strategy is to focus on value rather than volume production by optimising recoveries from its high-quality asset base in order to maximise their efficiency and profitability. The Group has a significant resource base of ca. 243 million carats, which supports the potential for long-life operations.
Petra conducts all operations according to the highest ethical standards and will only operate in countries which are members of the Kimberley Process. The Company aims to generate tangible value for each of its stakeholders, thereby contributing to the socio-economic development of its host countries and supporting long-term sustainable operations to the benefit of its employees, partners and communities.
Petra is quoted with a premium listing on the Main Market of the
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