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Petra Diamonds Ltd - Preliminary Results for the year ended 30 June 2021

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14 September 2021

LSE: PDL

Petra Diamonds Limited
(“Petra”, “the Company” or “the Group”)

Preliminary Results Announcement for the Year ended 30 June 2021 (unaudited)

Petra Diamonds Limited announces its preliminary results (unaudited) for the year ended 30 June 2021 (“the Year” or “FY 2021”).

Richard Duffy, Chief Executive, commented on the results:

“FY 2021 was a watershed year for Petra. Besides the challenges of the COVID-19 pandemic, we completed a capital restructuring which, together with the sale of a number of exceptional blue and white diamonds from the Cullinan mine, served to reduce consolidated net debt by around two thirds to US$228.2 million. We now have a more stable capital structure, considerably reduced debt obligations and greater liquidity.

“The strong recovery in the diamond market towards the end of the financial year, that has continued into the current quarter, further bolstered our improved financial position. Record production at Cullinan, driven by Project 2022 throughput initiatives, as well as the highest annual contribution to revenue from exceptional diamond sales, resulted in a 65% improvement in revenue to US$402.3 million and contributed to operational free cashflow of US$120.1 million for FY 2021. These record recoveries have continued post Year end with the sale of the magnificent 39.34 carat blue diamond for US$40 million, being the most valuable single diamond ever sold by Petra. The US$1 million per carat realised for this stone is likely the highest per carat price for a rough diamond ever achieved.

“Although Group production for the Year was negatively impacted by production challenges at both Finsch and Koffiefontein, we are confident that the post Year end re-engineering projects currently underway will lead to improved production and margins at both operations during FY 2022.

“We enter FY 2022 with some momentum from a considerably strengthened balance sheet, ongoing optimisation of our asset base and a positive outlook for the diamond market.”

Key Financial Results1

· FY 2021 revenue up 65% to US$402.3 million (FY 2020: US$243.3 million), including US$62.0 million contribution from Exceptional Stones (FY 2020: US$14.9 million).

· Adjusted EBITDA up 101% to US$135.4 million (FY 2020: US$67.3 million); adjusted EBITDA margin of 34% (FY 2020: 28%).

· Operational free cashflow13 of US$120.1 million (FY 2020: operational cash outflow of US$12.3 million).

· Adjusted loss before tax decreased 88% to US$8.9 million (FY2020: US$74.0 million).

· Adjusted net loss after tax of US$16.1 million (FY 2020: US$54.7 million).

· Non-cash impairment charge of US$17.7 million (FY 2020: US$50.5 million)

· Loss on discontinued operations of US$52.1 million (FY 2020: US$58.0 million).

· Net profit after tax of US$196.6 million (FY 2020: net loss after tax: US$223.0 million), including a gain of US$213.3 million on the extinguishment of the Notes following the successful debt Restructuring.

· Consolidated net debt reduced to US$228.2 million at 30 June 2021 from US$693.2 million at 30 June 2020.

· Basic earnings per share from continuing operations: 6.67 US$ cents per share (FY 2020: loss of 15.26 US$ cents per share).

· The Board has decided to review its strategic options at Williamson and the asset has therefore been classified as an asset held for sale for financial reporting purposes.

Operational and ESG Results

· Lost Time Injury Frequency Rate (“LTIFR”) increased to 0.44 (FY 2020: 0.29). Total injuries, including LTIs, in FY 2021 decreased to 42 (FY 2020: 45).

· Production down 2% to 3.24 Mcts (FY 2020: 3.29 Mcts), with record production of 1.94 Mcts at Cullinan offset by lower production at Finsch and Koffiefontein.

· Absolute on-mine cash costs increased 3% to US$197.6 million (FY 2020: US$191.2 million), driven by inflation and a marginally stronger South African Rand.

· The Company’s total carbon footprint decreased 16% in FY 2021, assisted by lower production levels as well as the positive impact of the Company’s energy efficiency initiatives.

· Petra’s commitment to environmental reporting affirmed with the attainment of an A- score for its climate change submission to CDP, placing the Company in the leadership category.

· Continued focus on diversity saw the percentage of women in the Company increase from 19% to 20% in FY 2021 and the percentage of women on the Board increased from 22% to 25%, with a further increase post Year end to 34%.

Post Year End Updates

· The Company announced the sale of an exceptional 39.34ct blue diamond, recovered during April 2021, for US$40.18 million, as well as a 342.92 carat Type IIa white diamond and an 18.30 carat Type IIb blue diamond that were sold for a total of US$13.5 million; the Company has retained a 50% interest in the profit uplift of the polished proceeds of both diamonds, after costs.

· Successful labour negotiations concluded in September 2021, with the agreement of a new three-year wage agreement with NUM covering FY 2022 to FY 2024, which should allow for further workforce stability over this timeframe.

· Re-engineering projects initiated in July 2021 at Finsch and Koffiefontein to comprehensively review and improve the mines’ cost bases and enhance operating efficiencies and margins.

· Although the number of COVID cases have increased as a result of a third wave of infections in South Africa, there has been a limited impact on our production rate. Petra is carrying out vaccination drives at each of the South African mines in order to help protect our workforce.

· Discussions with the Government of Tanzania to reach agreement on various issues at the Williamson mine are ongoing, with an objective of these being concluded during FY 2022.

Outlook

· FY 2022 production guidance of 3.3 to 3.6 Mcts (South African operations: 3.1 to 3.4 Mcts and Williamson: 0.22 to 0.27 Mcts).

· FY 2022 capex guidance of US$78 million to US$92 million (South African operations: US$70 million to US$82 million and Williamson: US$8 million to US$10 million).

· Positive outlook for the market, with the severe supply contraction of CY 2020 expected to continue in CY 2021, while consumer demand is expected to remain robust in the second half of CY 2021, with retailers anticipating continued strong consumer demand moving into the key festive retail period, underpinned by shortages in the polished market.

1Unless stated otherwise, the financial results in this announcement are adjusted to exclude the assets and liabilities of Williamson, which has been reclassified as an asset held for sale as at 30 June 2021, and the operating results of Williamson have been reclassified as a discontinued operation for FY 2020 and FY 2021. An appendix for production results has been included on page 25 to show operational results prior to its reclassification, for reference only.

SUMMARY OF RESULTS (unaudited)

Restated8

Year ended 30 June 2021
(“FY 2021”)

Year ended 30 June 2020
(“FY 2020”)

US$ million

US$ million

Revenue

402.3

243.3

Adjusted mining and processing costs1

(261.2)

(169.3)

Other direct income

1.7

1.0

Profit from mining activity2

142.8

75.0

Exploration expense

(0.5)

Adjusted corporate overhead16

(7.4)

(7.2)

Adjusted EBITDA3

135.4

67.3

Depreciation & Amortisation

(76.8)

(69.8)

Share-based expense

(0.5)

(0.7)

Net finance expense

(67.0)

(70.8)

Adjusted loss before tax

(8.9)

(74.0)

Tax (expense) / credit (excluding taxation credit / charge on impairment charge and unrealised foreign exchange gain / (loss))14

(7.2)

19.3

Adjusted net loss after tax4

(16.1)

(54.7)

Impairment charge – operations and other receivables5

(17.7)

(50.5)

Impairment of BEE loans receivable – expected credit loss release / (charge) 6

5.8

(10.9)

Gain on extinguishment of Notes net of unamortised costs

213.3

Profit on disposal of subsidiary7

14.7

Costs and fees relating to investigation and settlement of human rights abuse claims

(12.7)

Net unrealised foreign exchange gain / (loss)

77.1

(82.1)

Taxation (charge) / credit on unrealised foreign exchange gain / (loss)14

(19.9)

22.2

Taxation credit on impairment charge

4.2

11.0

Profit / (loss) from continuing operations

248.7

(165.0)

Loss on discontinued operations, net of tax7

(52.1)

(58.0)

Net profit / (loss) after tax

196.6

(223.0)

Earnings per share attributable to equity holders of the Company –
US cents

Basic profit / (loss) per share – from continuing and discontinued operations

5.22

(21.96)

Basic profit / (loss) per share – from continuing operations

6.67

(15.26)

Adjusted loss per share – from continuing operations8

(0.46)

(5.04)

Cash at bank – (including restricted amounts)

US$m

163.8

67.6*

Diamond debtors

US$m

38.3

4.8*

Diamond inventories

US$m / Cts

45.1
560,699

84.1*
1,357,584*

US$336.7m loan notes (issued March 2021)15

US$m

327.3

US$650 million loan notes9

US$m

676.9

Bank loans and borrowings10

US$m

103.0

52.1

BEE partner bank facilities11

US$m

40.0

Consolidated Net debt12

US$m

228.2

693.2

Bank facilities undrawn and available10

US$m

7.7

*Including Williamson

The following exchange rates have been used for this announcement: average for FY 2021 US$1:ZAR15.41 (FY 2020: US$1:ZAR15.68); closing rate as at 30 June 2021 US$1:ZAR14.27 (30 June 2020: US$1:ZAR17.32).

Results Webcasts – 9:30am and 4:00pm BST today

Petra’s Chief Executive Richard Duffy and Finance Director Jacques Breytenbach will host a results webcast at 9:30am BST on 14 September 2021. Participants can join the webcast by registering at:

https://www.petradiamonds.com/go/prelim14sep2021-09h30.

A recording of the webcast will be available later that day on Petra’s website at:

https://www.petradiamonds.com/investors/results-reports/ and on the link above.

There will be a second webcast on 14 September 2021 for international investors at 4:00pm BST. Participants can join the webcast by registering at:

https://www.petradiamonds.com/go/prelim14sep2021-16h00

Investor Meet Company Webcast – 2:00pm BST today

Petra will also be hosting an investor presentation predominantly aimed at retail investors with Investor Meet Company at 2:00pm BST on 14 September 2021. Participants can join the webcast by registering at: https://www.investormeetcompany.com/petra-diamonds-limited/register-investor

Notes to Summary of Results Table:

The Group uses several non-GAAP measures above and throughout this report to focus on actual trading activity by removing certain non-cash or non-recurring items. These measures include adjusted mining and processing costs, profit from mining activities, adjusted EBITDA, adjusted net profit after tax, adjusted earnings per share, US$ loan note and consolidated net debt for covenant measurement purposes. As these are non-GAAP measures, they should not be considered as replacements for IFRS measures. The Group’s definition of these non-GAAP measures may not be comparable to other similarly titled measures reported by other companies. The Board believes that such alternative measures are useful as they exclude one-off items such as the impairment charges and non-cash items to provide a clearer understanding of the underlying trading performance of the Group.

1. Adjusted mining and processing costs are mining and processing costs stated before depreciation and share-based expense.

2. Profit from mining activities is revenue less adjusted mining and processing costs plus other direct income.

3. Adjusted EBITDA is stated before depreciation, amortisation of right-of-use asset, costs and fees relating to investigation and settlement of human rights abuse claims, share-based expense, net finance expense, tax expense, loss on discontinued operations, net of tax, impairment charges, expected credit loss release/ (charge), gain on extinguishment of Notes net of unamortised costs, profit on disposal of subsidiary and net unrealised foreign exchange gains and losses

4. Adjusted net profit/(loss) after tax is net profit/(loss) after tax stated before impairment charge, expected credit release (loss) provision, gain on extinguishment of Notes net of unamortised costs, profit on disposal net unrealised foreign exchange gains and losses, and excluding taxation (charge) credit on net unrealised foreign exchange gains and losses and excluding taxation credit on impairment charge.

5. Impairment charge of US$17.7 million (30 June 2020: US$50.5 million) was due to the Group’s impairment review of its operations and other receivables. Refer to note 16 for further details.

6. Reversal of impairment of BEE loans receivable of US$5.8 million (30 June 2020: US$10.9 million impairment charge) is due to the Group’s expected credit loss assessment of its BEE loans receivable. Refer to note 13 for further details.

7. The profit on disposal of subsidiary of US$14.7 million includes the reclassification of foreign currency translation reserve, net of tax of Sekaka Diamonds (Pty) Ltd.

The loss on discontinued operations reflect the results of the Williamson operation (net of tax), including impairment, of US$52.1 million (FY 2020 results have been amended for comparability) as per the requirements of IFRS 5; refer to Note 17.

8. Adjusted EPS from continuing operations is stated before impairment charge, expected credit release (loss) provision, gain on extinguishment of Notes net of unamortised costs, profit on disposal of subsidiary, costs and fees relating to investigation and settlement of human rights abuse claims, net unrealised foreign exchange gains and losses, and excluding taxation (charge) credit on net unrealised foreign exchange gains and losses and excluding taxation credit on impairment charge.

9. The US$650 million loan note represents the gross capital of US$nil (30 June 2020: US$650 million), including US$nil accrued interest (30 June 2020: US$26.9 million). These loan notes were settled in full following the debt restructuring completed during March 2021. Refer to detailed Debt Restructuring Note 8.

10. Bank loans and borrowings represent amounts drawn under the Group’s refinanced South African bank facilities as part of the Restructuring and comprise the ZAR1.068 billion term loan (US$74.8 million), net of unamortised transaction costs capitalised of US$1.7 million, and ZAR402.1 million (US$28.2 million) drawn (including accrued interest) under the ZAR509.6 million (US$35.7 million) revolving credit facility. Under the revolving credit facility, ZAR109.6 million (US$7.7 million) remains undrawn and available.

11. BEE partner bank facilities represent the BEE guarantees of US$nil (ZARnil) (30 June 2020: US$40.0 million (ZAR693.6 million)). During FY 2021 and as part of the debt restructuring, the BEE partner bank facilities (which comprised the BEE guarantees) were settled by the Group through proceeds of the term loan under the Group’s South African bank facilities. Refer to note 10 above for further detail.

12. Consolidated Net Debt is bank loans and borrowings plus loan notes, less cash, less diamond debtors and includes the Black Economic Empowerment guarantees of ZARnil (US$nil) as at 30 June 2021 (ca. US$40.0 million (ZAR693.6 million) as at 30 June 2020).

13. Operational free cashflow is defined as cash generated from operations less acquisition of property, plant and equipment.

14. Tax expense / credit is the tax (expense) / credit for the Year excluding taxation credit / charge on impairment charge and unrealised foreign exchange gain / (loss) generated during the Year; such exclusion more accurately reflects resultant Adjusted net profit /(loss).

15. The US$336.7 million loan notes have a carrying value of US$ 327.3 million which represents gross capital of US$336.7 million (30 June 2020: US$nil), plus US$11.1 million accrued interest (30 June 2020: US$nil) net of unamortised transaction costs capitalised of US$20.5 million. Refer to note 10 for further detail.

16. Adjusted corporate overheads is corporate overheads net of depreciation, amortisation of right-of-use assets, share based payment expense and costs and fees relating to investigation and settlement of human rights abuse claims.

For further information, please contact:

Petra Diamonds, London Telephone: +44 20 7494 8203

Cathy Malins

Des Kilalea

Marianna Bowes investorrelations@petradiamonds.com

About Petra Diamonds Limited

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

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

Petra strives to conduct all operations according to the highest ethical standards and will only operate in countries which are members of the Kimberley Process. The Company aims to generate tangible value for each of its stakeholders, thereby contributing to the socio-economic development of its host countries and supporting long-term sustainable operations to the benefit of its employees, partners and communities.

Petra is quoted with a premium listing on the Main Market of the London Stock Exchange under the ticker 'PDL'. The Company’s US$336.7 million notes due in 2026 are listed on the Irish Stock Exchange and admitted to trading on the Global Exchange Market. For more information, visit www.petradiamonds.com.

CEO’S REVIEW

A resilient business and market

While FY 2021 continued to present a number of challenges, both internal and external, real progress was made in terms of stabilising our balance sheet, further to the completion of the recapitalisation of the Group (the “Restructuring”), and continuing to optimise production at all our assets, particularly the Cullinan mine, set against the backdrop of an improving diamond market.

Our most important performance indicator is safety: while the number of injuries experienced during the Year reduced 7% from 45 to 42, it was disappointing that the number of lost-time injuries increased from 19 to 25, which led the Group LTIFR to increase from 0.29 in FY 2020 to 0.44 in FY 2021. An evaluation of the incidents has determined that the majority of these were of low severity and behavioural related, and our approach is therefore to use initiatives to drive a change in people’s mindsets and to foster greater awareness towards achieving an accident-free workplace.

The impact of COVID-19 on individuals and the economy has increased the levels of stress and impacted on the emotional wellbeing of all our employees. We believe this has contributed to the deterioration in safety performance. This is borne out by an increase in accidents and fatalities across the South African mining sector as a whole since the outbreak of the COVID-19 pandemic, as measured by the Minerals Council South Africa. Addressing this issue therefore requires a holistic approach, including training, mentorship, communication and wellbeing initiatives.

The COVID-19 pandemic remains an ongoing business challenge. In South Africa, we are currently experiencing a third wave of infections and the disruption to operations is mainly around the necessary quarantine of confirmed or suspected cases amongst our workforce. However, we have the systems and processes in place to manage this without materially impacting production. Our focus now is on assisting the Government with its vaccination drive and we have vaccination stations and campaigns to encourage their uptake available at, or near to, each of our operations. While the vast majority of those who contract the virus only have mild to moderate symptoms, we have very sadly lost 14 employees to the disease as at the date of these results. Our heartfelt condolences go to the loved ones and colleagues of the deceased.

In terms of production, output for the Year decreased 2% to 3,240,312 carats (FY 2020: 3,291,046 carats), notwithstanding record annual production from Cullinan of 1.94 Mcts. As previously announced, production at Finsch was impacted by unexpected levels of waste ingress during Q2 FY 2021, with subsequent mitigating measures reducing throughput during the second half of the Year. In addition, production at both Finsch and Koffiefontein was impacted by the high level of rainfall during the third quarter. Cullinan’s record 4.61 Mt ROM production (FY 2020: 3.97 Mt) was partially offset by these factors, resulting in the Group’s ROM tonnages for the Year increasing by 3% to 7.7 Mt (FY 2020: 7.5 Mt).

Cullinan performed very well for the Year, benefitting from the Project 2022 business improvement throughput initiatives. ROM tonnes increased 16% to 4.61 Mt (FY 2020: 3.97 Mt), and spare capacity in the plant was utilised with a 73% increase in tailings tonnes to 0.45 Mt (FY 2020: 0.26 Mt), leading to an overall record tonnes treated at the operation under Petra stewardship of 5.06 Mt (FY 2020: 4.23 Mt).

The mine also affirmed its place as a producer of world-class diamonds, with the recovery of a number of spectacular stones, namely:

· September 2020: The Letlapa Tala collection of five high quality blue diamonds totalling 85.6ct were recovered all in the space of one week’s production at the mine. The collection was sold as a suite of stones to a partnership between De Beers and Diacore for US$40.36 million in November 2020.

· January 2021: A 299ct high quality white diamond was recovered and subsequently sold to Stargems DMCC for US$12.18 million in March 2021.

· February 2021: A 11.82ct high quality blue diamond was recovered and subsequently sold for US$9.53 million in April 2021.

· April 2021: An exceptional 39.34ct blue diamond was recovered and sold post Year end to a partnership between De Beers and Diacore for US$40.18 million in July 2021, representing a remarkable US$1.0 million per carat. This was the most valuable diamond sold in Petra’s history and is believed to be the most valuable rough stone per carat ever sold (though since not all rough diamond sales are publicly disclosed, this cannot be established with certainty).

The sale of the Letlapa Tala collection, the 299ct white diamond and the 11.82ct blue diamond contributed US$62.0 million in ‘exceptional diamond sales’ to revenue for the Year (FY 2020: US$14.9 million), being the highest contribution in Petra’s history. Post Year end, Petra has also recovered and sold two further special diamonds from the Cullinan mine, being a 342.92ct white stone and an 18.30ct blue stone, into a partnership with Stargems (Pty) Ltd. Petra received an upfront payment of US$10.0 million for the white stone and US$3.5 million for the blue stone, as well as retaining a 50% interest in the profit uplift of the polished proceeds of both diamonds, after costs.

The higher revenue for the Year led to Adjusted EBITDA being up 101% to US$135.4 million (FY 2020: US$67.3 million) and Operational free cashflow of US$120.1 million (FY 2020: operational cash outflow of US$12.3 million). However, overall profitability for the Year was impacted by Depreciation of US$75.9 million (FY 2020: US$69.3 million) and Net finance expenses of US$67.0 million (FY 2020: US$70.8 million) and the Company therefore recorded an Adjusted loss after tax of US$16.1 million (FY 2020: US$54.7 million).

Outlook for FY 2022

Looking ahead to FY 2022, we are guiding production to increase to between 3.3 and 3.6 Mcts, with the South African operations estimated to contribute 3.1 to 3.4 Mcts and Williamson estimated to contribute 0.22 to 0.27 Mcts.

At Williamson, preparations to resume production in H1 FY 2022 continue with the redeployment of employees and contractors, while receiving relevant refresher and safety training, and the recommissioning of plant and equipment. The Board has decided to review its strategic options at Williamson and the asset has therefore been classified as an asset held for sale for financial reporting purposes.

Recapitalisation of the business

In March 2021, Petra completed the recapitalisation of the Group, thanks to the continued support of its bondholders, shareholders and its South African Lender Group. The completion of the Restructuring, along with the aforementioned sale of Exceptional Stones during the Year, helped the Group’s Consolidated net debt, excluding Williamson, reduce by nearly two thirds to US$228.2 million at 30 June 2021, from US$700.3 million at 31 December 2020. The key features of the Restructuring are set out on page 16 of this announcement.

The Restructuring has provided Petra with a more stable and sustainable capital structure, significantly reduced financial burdens and greater liquidity, leaving us in a stronger position to focus on optimising the value of our diversified asset base and to deliver growth for all our stakeholders.

ESG performance

The Company remained highly active across all the different areas of ESG, which are integrated into our strategy and how we manage the business.

In terms of environmental performance, our team continued to focus on the efficient use of water and energy during the Year, as well as responsible waste management across the operations. Our total carbon footprint reduced 16% to 405,807 tCO2-e (FY 2020: 483,431 tCO2-e), mainly due to the lower production with Williamson being on care and maintenance, and associated reduction in energy consumption for the Year, positively impacted by our focus on energy efficiency. Our carbon emitted per carat decreased 7% to 0.125 tCO2-e/ct (FY 2020: 0.134 tCO2-e/ct) due to the combined effect of the overall decrease in carats produced and associated lower energy use for the Year.

Significant progress was made in terms of the Group’s environmental strategy in FY 2021 with the Board approval of the Group’s Climate Change Adaptation Strategy, which will assist Petra in staying on top of rapidly changing legislation and in meeting stakeholder expectations. The Company also improved its CDP climate change reporting to the A- category, placing Petra in the leadership category and demonstrating our strong commitment to this area.

Petra continued to focus on the development of a suitably diverse workforce. The overall gender diversity of the Group increased to 20% in FY 2021 (FY 2020: 19%), which remains above that of the industry average in South Africa, which ranges from 12%–17% depending on the commodity. We were also pleased to improve gender diversity at the higher levels of the business, with an increase in female representation at Board, senior management and management level, and our employee development programmes once again focused on the advancement of women and historically disadvantaged South Africans (“HDSAs”).

Our community programmes remained very active and the Petra Hardship Fund continued to supply aid to address some of the most urgent needs of our local communities in South Africa. We also completed a number of community projects during the Year, including the refurbishment of water pump stations and the completion of electrification of households and informal dwellings in Kgatelopele, near the Finsch mine. A major drive for improved stakeholder relations also saw the number of engagements recorded by the Company increase to 658, with the majority of the increase relating to training sessions for small, medium and micro enterprises, in order to drive enterprise development in our local communities.

More detail on our ESG performance for the Year will be reported in our 2021 Annual and Sustainability Reports, which are due to be published on 12 October 2021.

Addressing the human rights allegations at Williamson

In May 2021, Petra announced the findings of the its independent Board Sub-Committee in relation to alleged breaches of human rights at the Williamson mine in Tanzania raised by the UK law firm, Leigh Day and the independent NGO, Rights and Accountability In Development (“RAID”). The mine is operated by Williamson Diamonds Limited (“WDL”), which is 25% owned by the Government of Tanzania and 75% owned by Petra. Petra acquired its majority interest in WDL in 2009.

Based on the conclusions of the independent Board Sub-Committee, the Company acknowledged that past incidents have taken place that regrettably resulted in the loss of life, injury and the mistreatment of illegal diggers, within the WDL Special Mining Licence area (“SML”). The incidents in question involved WDL’s third-party security provider Zenith Security as well as the Tanzanian Police Force (“TPF”). During the investigation, no evidence emerged that WDL personnel were directly involved in these actions.

The Company took immediate precautionary measures to address the concerns raised, ahead of the findings of the investigation and in order to mitigate the risks of future incidents, including the appointment of a new third party security contractor, the training of all security personnel and internal management at WDL on human rights and their obligations in terms of the UN’s Voluntary Principles on Security and Human Rights and the launch of a Community Grievance Mechanism.

Further to the findings of the independent Board Sub-Committee, additional measures were put in place to address issues identified, including the revision of reporting structures to enable the more timely, accurate and transparent reporting of all incursions and incidents, the overhaul of stakeholder engagement at the mine, as well as ongoing work Group-wide, and the establishment of an independent Tier 2 Operational Grievance Mechanism, which aims to investigate and resolve complaints following the application of local legal requirements, including the provision of free and independent advice from local lawyers.

Having already established the Operational Grievance Mechanism for complaints and grievances related to operational impacts, the Company has continued with the process of the design and implementation of a non-judicial, Independent Grievance Mechanism (“IGM”) to address allegations of severe human rights impacts. A series of engagements with Government Ministries and Agencies, Civil Society and NGOs were conducted in Dodoma and Dar es Salaam, seeking feedback and support on the proposed design of the IGM. The company has specialist external support from Synergy Global Consulting (“Synergy”) in the development of this process. Synergy is a specialist international consultancy with over twenty years’ experience working with companies, governments and community-based organisations.

Further detail on all the measures taken by Petra and WDL to address the findings are set out in the Company’s announcement of 12 May 2021 ‘Findings of the Independent Board Sub Committee’ which is available to view along with all other related announcements here: https://www.petradiamonds.com/our-operations/our-mines/williamson/allegations-of-human-rights-abuses-at-the-williamson-mine/.

Petra also announced on 12 May 2021 that it had reached a settlement, on a no admission of liability basis, in relation to claims brought in London by Leigh Day, on behalf of the anonymous claimants, in relation to alleged breaches of human rights, associated with third-party security operations, within the SML.

The agreed total settlement figure announced in May 2021 was £4.3 million (US$6.1 million), which includes the sum to be distributed to the claimants by Leigh Day, a contribution to the claimants’ legal expenses and significant funds, which Petra has committed to invest in programmes dedicated to providing long-term sustainable support to the communities living around the mine. The Company has also incurred and provided for additional total costs of US$6.6 million related to this matter in its FY 2021 accounts, the majority of which relate to legal, consultant, investigation and expert fees.

During the period from 1 July to the end of August 2021, there were a total of 89 incidents of illegal incursions onto the Williamson mine lease area, resulting in two security officials (one belonging to the third party security provider and one belonging to the TPF) suffering minor injuries, and in four arrests being made. We believe the contracted security teams and the TPF acted in accordance with the Voluntary Principles on Security and Human Rights. WDL is continuing to engage extensively with local stakeholders, including with surrounding village leaders and community forums, as well as with local and regional Government and police officials, to get their support in order to reduce these incursions.

As previously noted, the Board has decided to review its strategic options at Williamson. However, this does not impact the Company’s commitment to the community programmes, IGM and other actions and initiatives detailed in its 12 May 2021 announcement referenced above.

A resilient diamond market

COVID-19 continued to have a significant impact on the diamond market in FY 2021, with related regulations and other measures to control the spread of the virus continuing to impose restrictions, particularly around the movement of people and international travel.

Petra maintained its flexible sales approach during the Year in order to maximise client attendance at its sales. This meant that we continued to hold rough diamond tenders for the South African goods in Antwerp (having fulfilled our regulatory obligation to offer a portion of goods for sale to the State Diamond Trader and local beneficiation groups in South Africa), rather than in Johannesburg, where travel restrictions have severely limited participation by international diamond buyers. We will continue to review this approach and reinstate sales in South Africa when conditions are right.

Despite the ongoing challenges around COVID-19, overall the market has remained remarkably resilient, which we attribute to a number of factors:

· control discipline by the majors (De Beers and ALROSA), both via production cuts and restriction of supply to the midstream during periods of lower demand;

· the significant contraction of production supply in 2021, including the winding down of the Argyle mine, has served to lower inventories in the pipeline generally and restore a better balance between supply and demand;

· capacity returned to the midstream manufacturing segment in India; and

· strong consumer demand was experienced in the key retail markets, notably the US and China, leading to shortages in certain polished goods; commentators note that for some there is increased consumer disposable income due to lack of spend on competing product categories, such as holidays and experiences, and that natural diamonds remain highly desirable as a way to forge deeper human connections and to celebrate our most important life events.

In 2020, the global diamond market experienced one of the most severe contractions in supply on record, falling 22% by volume to 107.1 Mcts (2019: 138.2 Mcts). Material reductions in supply came from Australia (due to the closure of the Argyle mine), Russia, Botswana, Canada, the Democratic Republic of Congo and Namibia, due to a combination of production being slowed due to COVID-19, pending exhaustion of resources, mine closures, operations transitioning from open pit to underground and falling alluvial output. Increased volume of output was recorded in South Africa and Zimbabwe.

For CY 2021, various sources forecast that rough supply will increase as mines come back into production, though the increase will be ameliorated by the closure of Argyle which still contributed 11 Mcts to global output in 2020. Bain & Co’s “Optimistic” scenario projects that mines which continue to operate will reach pre-pandemic production levels by 2021-2022 and that global inventories will gradually sell out in a year. Longer term, there are forecast to be few material additions to production over the next decade, with rough diamond supply forecast to remain “almost flat” at 2021 levels over the next 10 years, according to Bain & Co, with few new projects coming on line.

In terms of demand, Petra’s participation in the Natural Diamond Council (“NDC”) remains an important strategy in terms of helping to positively impact the long-term fundamentals for our market. The NDC aims to ensure that natural diamonds inspire and excite today’s consumer and it has secured rising Hollywood actor Ana de Armas as its global market ambassador. A new global marketing campaign starring Ms de Armas launched in September 2021 to support the market in advance of the key festive retail season and can be viewed at

https://www.youtube.com/watch?v=ZAXKavG2vOE.

Petra Sales and Prices

FY 2021 revenue increased 65% to US$402.3 million (FY 2020: US$243.3 million) driven by sales from Exceptional Stones contributing US$62.0 million during the Year (FY 2020: US$14.9 million); the highest annual contribution to revenues from the sale of Exceptional Stones. On a like for like basis, realised diamond prices in Q4 FY 2021 increased ca. 5.7% from those achieved in Q3 FY 2021.

Despite lower production for the Year, the amount of diamonds sold increased 51% to 3,930,136 carats (FY 2020: 2,598,252 carats) due to the improvement in market conditions and the easing of certain COVID-19 related restrictions which allowed for a higher volume of sales to take place, including the release of inventory held over from the prior year.

The Company recovered a number of Exceptional Stones from the Cullinan mine in FY 2021 and to date in FY 2022, as set out already on pages 6 to 7 of this announcement. These prices are included in the averages reported for Cullinan in the table below.

Prices on a like-for-like basis increased ca. 9% compared to prices achieved in FY 2020 and closed the Year at levels above the prices achieved before the COVID-19 pandemic outbreak.

Diamond prices achieved per operation

FY 2021
US$/ct

FY 20202
US$/ct

Cullinan

1111

981

Finsch

77

75

Koffiefontein

419

387

Notes:

1. Prices include Exceptional Stones. Prices excluding Exceptional Stones US$83/ct (FY 2020: US$86/ct).

2. Prices achieved in FY 2020 and FY 2021 do not reflect true run-of-mine averages as the Company had to withhold certain mostly lower value goods for sale in Q4 FY 2020 due to the depressed pricing environment; these goods were sold shortly after Year end, which negatively impacted unit prices in FY 2021, further exacerbated by the sale of other low value stock during June 2021.

FINANCIAL REVIEW

Revenue

FY 2021 revenue increased 65% to US$402.3million (FY 2020: US$243.3 million) driven by sales from Exceptional Stones contributing US$62.0 million during the Year (FY 2020: US$14.9 million); the highest annual contribution to revenue from the sale of Exceptional Stones in Petra’s history. Diamonds sold for the Year increased 51% to 3,930,136 carats (FY 2020: 2,598,252 carats), excluding Williamson, while rough diamond prices realised by Petra increased ca. 9% in FY 2021 on a like for like basis.

Mining and processing costs

The mining and processing costs for the Year are comprised of on-mine cash costs as well as other operational expenses. A breakdown of the total mining and processing costs for the Year is set out below.

On-mine cash costs1
US$m

Diamond royalties
US$m

Diamond inventory and stockpile movement
US$m

Group technical, support and marketing costs2
US$m

Adjusted mining and processing costs
US$m

Depreciation3
US$m

Total mining and processing costs (IFRS)
US$m

FY 2021

197.6

2.9

39.1

21.7

261.2

76.0

337.2

FY 2020

191.2

2.6

(42.6)

18.1

169.3

68.9

238.2

Notes:

1. Includes all direct cash operating expenditure at operational level, i.e. labour, contractors, consumables, utilities and on-mine overheads.

2. Certain technical, support and marketing activities are conducted on a centralised basis.

3. Includes amortisation of right-of-use assets under IFRS 16 of US$0.6 million (FY 2020: US$0.2 million) and excludes exploration and corporate/administration.

Absolute on-mine cash costs in FY 2021 increased 3.3%, compared to FY 2020, due to:

· the effect of translating ZAR denominated costs at the South African operations at a stronger ZAR/USD exchange rate (1.7% increase);

· inflationary increases, including the impact of electricity and labour costs (6.0% increase);

offset by:

· the variable cost impact of changing production volumes across the South African operations (0.8% decrease); and

· net savings, including Project 2022 initiatives (3.6% decrease).

Diamond inventory and stockpile movements reflect the release of inventories during FY 2021 resulting in a charge of US$39.1 million, compared to a credit of US$42.6 million in FY 2020 due to increased levels of stockholding driven by an inability to hold tenders due to COVID-19.

Profit from mining activities

Profit from mining activities increased 90% to US$142.8 million (FY 2020: US$75.0 million), mainly due to increased volumes sold, improved diamond pricing and the contributions from Exceptional Stones.

Adjusted corporate overhead – general and administration

Corporate overhead (before costs and fees relating to investigation and settlement of human rights claims, depreciation and share-based payments) increased marginally to US$7.4 million for the Year (FY 2020: US$7.2 million), mainly attributable to the ZAR strengthening against the USD in addition to cost curtailment measures introduced during the Year.

During the Year, the Group received payments from the South African government under the temporary employee relief scheme (“TERS”) of US$3.5 million (FY 2020: US$nil). Of the US$3.5 million TERS payment received, US$0.3 million was attributable to corporate overheads expenditure and US$3.2 million was attributable to Mining and processing costs.

Adjusted EBITDA

Adjusted EBITDA, being profit from mining activities less exploration and corporate overhead, increased 101% to US$135.4 million (FY 2020: US$67.3 million), representing an adjusted EBITDA margin of 34% (FY 2020: 28%), reflecting better overall pricing, including proceeds from Exceptional Stones.

Depreciation

Depreciation for the Year increased to US$75.9 million (FY 2020: US$69.3 million), mainly due to the strengthening of the ZAR against the USD and increased throughput at Cullinan, partially offset by reduced production at Finsch and Koffiefontein.

Impairment charge

As a result of the impairment reviews carried out at Cullinan, Finsch and Koffiefontein, and the Group’s other receivables during the Year, the Board recognised an overall impairment charge of US$17.7 million (FY 2020: US$50.5 million). Further details are provided in note 16.

Asset level impairments at Finsch and Koffiefontein amount to US$17.3 million (FY 2020: US$50.9 million at Cullinan, Finsh and Koffiefontein) (representing some 2.4% of the Group’s carrying value of property, plant and equipment of US$711.8 million (FY 2020: US$742.7 million) pre-impairment). There were no reversals of prior year impairments for Cullinan.

Impairment of BEE loans receivable – expected credit loss provision

The Group has applied the expected credit loss impairment model to its BEE loans receivable. In determining the extent to which expected credit losses may apply, the Group assessed the future free cashflows to be generated by the mining operations, based on the current LOM plans and the conclusion during the Year of an offset agreement with the BEE partners. Based on the assessment, the Group’s free cashflows generated indicated a net credit loss reversal totalling US$5.8 million (30 June 2020: US$10.9 million expected credit loss provision), comprising of US$6.1 million provision reversal in respect of Cullinan and Finsch and an additional US$0.3 million expected credit loss provision in respect of Koffiefontein (30 June 2020: US$10.9 million provision comprising US$6.1 million in respect of Cullinan and Finsch, and US$4.8 million in respect of Koffiefontein) (refer to note 13 for further detail).

Net financial income / expense

Net financial income of US$223.4 million (FY 2020: US$152.9 million expense) comprises:

· net gain on extinguishment of the Notes of US$213.3 million (FY2020: US$nil) comprising a gain of US$221.0 million attributable to the debt for equity conversion and a loss of US$7.7 million on the substantial modification of the Notes;

· net unrealised foreign exchange gains of US$77.1 million (FY 2020: US$82.1 million losses), driven by significant volatility in the Rand closing the Year at US$1:ZAR14.27 compared to US$1:ZAR17.32 at 30 June 2020, and representing (i) the unrealised foreign exchange gains on the foreign currency retranslation of cross border loans considered to be repayable in the foreseeable future, and (ii) unrealised losses on forward exchange contracts (refer to note 6 for further detail); and

· interest received on bank deposits of US$0.7 million (FY 2020: US$1.2 million);

offset by:

· the acceleration of unamortised finance costs attributable to the Notes of US$2.7 million (FY2020: US$nil);

· interest expense on the Group’s debt and working capital facilities of US$51.5 million (FY 2020: US$52.4 million);

· net interest payable on the BEE Partner loans and amortisation of lease liabilities in accordance with IFRS 16 of US$3.1 million (FY 2020: US$6.7 million);

· a charge for the unwinding of the present value adjustment for Group rehabilitation costs of US$4.3 million (FY 2020: US$4.6 million); and

· net realised foreign exchange losses on settlement of forward exchange contracts of US$6.1 million (FY 2020: US$8.3 million).

Tax credit/charge

The tax charge of US$23.0 million (FY 2020: US$52.5 million credit; reflecting principally the utilisation of certain capital allowances and the impact of the deferred taxation on the impairment charge, predominantly at Cullinan and Finsch, which reduced existing deferred tax liabilities) comprises deferred tax charges of US$19.9 million relating to utilisation of tax losses as a result of unrealised foreign exchange gains at Cullinan during the Year and US$2.7 million in respect of other capital allowances, with an income tax charge of US$0.3 for the Year (FY 2020: US$0.6 million).

The Group’s current Year effective tax rate of 8.9% (FY 2020: 24.1%) is lower than the South African tax rate of 28% (the Group’s primary tax paying jurisdiction) due to the recognition of the gain on extinguishment of the Notes for which no tax consequences are recognised. During the Year, there was a reversal of deductible temporary differences relating to the current Year impairments of property, plant and equipment, reversal of prior year tax losses recognised at Finsch and Cullinan and other reversing deductible temporary differences. There were no taxation adjustments arising from items of other comprehensive income and expense.

Profit on disposal Sekaka Diamonds (Pty) Ltd (“Sekaka”)

The profit on disposal of subsidiary of US$14.7 million relates to the Group’s disposal during the Year of its exploration operations in Botswana via the disposal of interests in Sekaka, and is made up of a US$0.3 million disposal consideration, net profit of US$1.3 million for the Period 1 July 2020 to the 30 November 2020 disposal date, and the recycling of the foreign currency translation reserve of US$13.3 million, offset by a net asset disposal amount of US$0.2 million. Refer to Note 17 for the detailed breakdown.

Loss on discontinued operations – Williamson

The Board has decided to review its strategic options at Williamson and the asset has therefore been classified as an asset held for sale. As a result of the strategic review, the loss on discontinued operations of US$52.1 million relates to the Board’s decision to reclassify Williamson mine as a discontinued operation in line with the criteria under IFRS 5 in meeting the definition of a disposal group and a discontinued operation for financial reporting purposes.

In terms of the IFRS requirements to measure the assets of a disposal group at the lower of carrying amount and fair value less costs to sell, the determination of the fair value is complex and subject to considerable judgment. Based on management’s best estimate of the fair value at the reporting date, the following amounts have been recognised as a result of that reclassification:

· an impairment charge of US$21.4 million in respect of property, plant and equipment;

· a US$11.2 million charge attributable to Williamson’s net loss for the Year. For comparative purposes, the prior period results for Williamson have been restated, which show a net loss of US$58.0 million (inclusive of an impairment charge of property, plant and equipment and certain receivables of US$34.6 million and US$6.8 million respectively); and

· a US$19.5 million provision for unsettled and disputed tax claims arising from the ordinary course of business.

Refer to note 17 for further detail.

Group loss/profit

The Group’s net profit after tax is US$196.6 million (FY 2020 net loss: US$223.0 million).

Earnings per share

Basic profit per share from continuing operations of 6.67 US$ cents was recorded (FY 2020: 15.26 US$ cents loss per share).

Adjusted loss per share from continuing operations (adjusted for impairment charge, expected credit release (loss) provision, gain on extinguishment of Notes net of unamortised costs, profit on disposal of subsidiary, costs and fees relating to investigation and settlement of human rights claims, net unrealised foreign exchange gains and losses, and excluding taxation (charge) credit on net unrealised foreign exchange gains and losses and excluding taxation credit on impairment charge) of 0.46 US$ cents was recorded (FY 2020: 5.04 US$ cents loss (adjusted for impairment charges, taxation credit on impairment charge, net unrealised foreign exchange gains and losses)).

Operational free cashflow

During the Year, operational free cashflow of US$120.1 million (FY 2020: US$12.3 million outflow) reflects the impact of stronger diamond prices, the contribution of Exceptional Stones and lower mining and processing costs derived from the optimisation of production and cost efficiencies from Project 2022. This positive cashflow was offset by:

· US$12.1 million (FY 2020: US$33.3 million) cash finance expenses net of finance income and realised foreign exchange gains/(losses);

· US$7.0 million (FY 2020: US$14.1 million) advances to BEE Partners, largely related to servicing of BEE bank debt prior to the Restructure, with the advances recoverable against future BEE Partner distributions; and

· Restructuring fees settled during the Year of US$29.9 million (FY 2020: US$3.8 million net advances paid to advisors).

Cash and diamond debtors

As at 30 June 2021 the Company had cash at bank of US$163.8 million (30 June 2020: US$67.6 million). Of these cash balances, US$147.7 million was held as unrestricted cash (30 June 2020: US$53.6 million), US$15.3 million was held by Petra’s reinsurers as security deposits on the Group’s cell captive insurance structure (with regards to the Group’s environmental guarantees) (30 June 2020: US$13.3 million) and US$0.8 million was held by Petra’s bankers as security for other environmental rehabilitation bonds lodged with the Department of Mineral Resources and Energy in South Africa (30 June 2020: US$0.7 million).

Diamond debtors at 30 June 2021 were US$38.3 million (30 June 2020: US$4.8 million), with the June 2021 tender closing at Year-end, and debtors settling shortly thereafter. Both Diamond Debtors and Diamond Inventory for FY 2020 were significantly impacted by the inability to host tenders during Q4 FY 2020 following the initial COVID-19 outbreak.

Diamond inventory

Diamond inventory at 30 June 2021 decreased to US$45.1 million (30 June 2020: US$84.1m) reflecting the release of inventory during the Year.

Loans and borrowings

The Group had loans and borrowings (measured under IFRS) at Year end of US$430.3 million (30 June 2020: US$769.0 million), comprised of the US$327.3 million Notes (includes US$11.3 million accrued interest and unamortised transaction costs of US$20.7 million) (30 June 2020: US$676.9 million), bank loans and borrowings of US$103.0 million (includes interest of US$0.1 million and unamortised transaction costs of US$1.7 million) (30 June 2020: US$52.1 million) following the Restructuring completed in March 2021, the Company’s guarantees related to the BEE Partner debt facilities were US$nil (30 June 2020: US$40.0 million); refer to ‘The Restructuring’ section on page 16 for further detail. Bank debt facilities undrawn and available to the Group at 30 June 2021 were US$7.7 million (30 June 2020: US$nil).

Consolidated net debt at 30 June 2021 was US$228.2 million (30 June 2020: US$693.2 million).

Covenant measurements attached to banking facilities

The Company’s EBITDA-related covenants associated with its banking facilities during the Year were as outlined below:

· to maintain a 1.3x debt service cover ratio tested semi-annually on a rolling 12-month basis; and

· to maintain liquidity requirements, being the aggregate of the undrawn amounts available under the RCF and consolidated cash and cash equivalents (excluding diamond debtors) not falling below ZAR200 million (US$14.0 million).

Going concern considerations

During FY 2020 the going concern consideration was dependent on the successful completion of the Restructuring. In March 2021, the Restructuring was successfully completed which resulted in solid progress towards stabilising the balance sheet and cash reserves.

The Group closely monitors and manages its liquidity risk, and cash forecasts are regularly produced and run for different scenarios. Careful consideration was given to potential risks to the forecasts under the review period. The Board carefully considered risks associated with COVID-19 which were considered to focus primarily on the potential for further production disruption, deferral of tenders due to travel restrictions and adverse impacts on diamond pricing.

In light of both normal trading risks and elevated risks associated with the potential impact of the COVID-19 pandemic, the following have been key considerations for the Board in assessing the Group’s ability to operate as a going concern at the date of this report:

· an unforeseen disruption to operations at its South African mines due to either COVID-19 restrictions or otherwise;

· an unforeseen deferral of a rough diamond tender, due to COVID-19 restrictions, coupled with a significant price decline at an assumed subsequent private sale (in line with a similar process followed in FY 2020);

· a sustained 5% decrease in forecast rough diamond prices throughout the forecast period; and

· an increase in forecast operating cost.

Under the base case, the forecasts indicate that the Company will be able to operate within covenants set out in the financing agreements and maintain sufficient liquidity.

However, as detailed above, the first lien covenants were set with limited headroom to the Company’s base case. As such, results of the Company’s stress testing indicate that in the event of a combination of all tested scenarios, possible covenant breaches associated with the South African banking facilities may occur at June 2022, while a breach is also projected in December 2022 on an individual stress test basis. At the time of possible covenant breaches under these scenarios, projected cash balances exceed outstanding debt under these facilities, which would allow the Group to fully pay down the drawn facilities prior to the breach occurring while maintaining adequate liquidity. The forecasts indicate that under the stress-tested scenarios, the Group is not reliant on the facilities.

The Board is of the view that the longer-term fundamentals of the diamond market remain sound and that the Group will continue to benefit from Project 2022 (which includes increased production and reduced spend) throughout the review period and beyond.

Based on its assessment of the forecasts, principal risks and uncertainties and mitigating actions considered available to the Group in the event of downside scenarios, the Board confirms that it is satisfied that the Group will be able to continue to operate and meet its liabilities as they fall due over the review period. Accordingly, the Board has concluded that the going concern basis in the preparation of the financial statements is appropriate and that there are no material uncertainties that would cast doubt on that basis of preparation.

BEE loans receivable

BEE loans receivable of US$46.6 million (FY 2020: US$137.0 million) relate to advances provided to the Group’s BEE Partners to enable them to discharge interest and capital commitments under the BEE Lender facilities, advances to the BEE Partners to enable trickle payment distributions to both Kago Diamonds (Pty) Ltd’s (“Kago Diamonds”) shareholders and to the beneficiaries of the Itumeleng Petra Diamonds Employee Trust (“IPDET”) (Petra Directors and Senior Managers do not qualify as beneficiaries under the IPDET Trust Deed), and financing of their interests in the Koffiefontein mine. As part of the Restructuring, an offset agreement was entered into between the Company and its BEE Partners allowing for the offsetting of the BEE loan receivable against the BEE loan payable, thus resulting in a net BEE loan receivable due from the BEE Partners. The repayment of these loans by the mines to the BEE Partners will be from future free cashflows generated by the mining operations.

As detailed in the section “Impairment of BEE loans receivable – expected credit loss provision”, an IFRS 9 estimated credit loss assessment was conducted at the end of the Year which resulted in a partial net reversal of the expected credit loss provision of US$5.8 million, following a US$10.9 million expected credit loss provision being raised against the BEE loans receivable at 30 June 2020. Refer to note 13 for further detail.

During the Year, Petra advanced US$4.7 million (FY 2020: US$12.2 million) to facilitate the servicing of capital and interest payments on behalf of the BEE Partners and US$2.3 million (FY 2020: US$1.9 million) for distributions to the beneficiaries of the IPDET and shareholders of Kago Diamonds.

Refer to note 13 further detail on BEE loans receivable.

The Restructuring

In March 2020, Petra launched a strategic review, in conjunction with a set of independent advisers, in order to evaluate an optimal long-term capital structure for the Group. The key focus of this review was to bring down the Company’s leverage to a manageable level and it therefore involved extensive consultations with the ad hoc group (“AHG”) of the Company’s US$650 million 7.25% senior secured second lien notes due in May 2022, as well as with the South African Lender Group. The review also aimed to assess all strategic options available to maximise value to stakeholders and included a formal sale process, whereby interested parties could submit bids either for Petra or for any parts of the business or assets of the Group.

In October 2020, the Company announced that it had reached agreement in principle with the AHG and the South African Lender Group on a common set of commercial terms with respect to the Restructuring. Petra signed a Lock-Up Agreement on 17 November 2020 with the parties to the Restructuring, which binds each party into supporting the Restructuring on the proposed terms. The Company’s shareholders subsequently approved the scheme at a Special General Meeting on 13 January 2021. On 10 March 2021 the Company announced that it had completed the implementation of the Restructuring.

The key features of the Restructuring were as follows:

1. Partial reinstatement of the Notes debt and the contribution by holders of the existing Notes of US$30.0 million in New Money, each to take the form of new senior secured second lien notes ("New Notes"). The New Notes of US$336.7 million (including the New Money and fees paid as part of the transaction in New Notes) have a maturity date of five years from completion. The New Notes are subject to an interest rate of 10.50% Payment in Kind for the first 24 months, reverting to a cash interest rate of 9.75% thereafter. Those Noteholders that contributed to the New Money were entitled to a greater portion of the New Notes.

2. Conversion of the remainder of the Notes debt into equity, which resulted in the Noteholder group holding 91% of the enlarged share capital of Petra Diamonds Limited, with the existing shareholders holding the remaining 9%. Those Noteholders that contributed to the New Money were entitled to a greater portion of the equity.

3. The restructuring of the first lien facilities provided by the South African Lender Group, with a new term loan of ZAR1.2 billion in order to refinance the existing drawn ZAR500 million WCF and the BEE Facilities (approximately ZAR683 million), and a new RCF of ZAR560 million, constituted by the rollover of the existing RCF but upsized by ZAR160 million. Both facilities have a maturity date of three years from completion and a first lien debt service cover ratio of 1.3x tested semi-annually on a rolling 12-month basis which, if breached, will give rise to an event of default under the new bank facilities. Both facilities have an interest rate of JIBAR + 5.25% per annum.

4. New governance arrangements, whereby up to four of the largest Noteholders as determined by the Restructuring Lock-Up Agreement and who individually hold at least 5% of the shares in Petra at the closing of the Restructuring, shall have a ‘Nomination Right’ to nominate a person for appointment to the Board as a non-independent Non-Executive Director, as well as the right to appoint an observer to the Board (who will not have voting rights at Board meetings). Any Board appointments must comply with the UK Listing Rules and the Corporate Governance Code.

5. Certain cashflow controls will be introduced.

The full terms of the Restructuring are listed in the prospectus released on 22 December 2020 and further details are provided in note 8.

Other liabilities

Other than trade and other payables of US$49.1 million (comprising US$16.8 million trade creditors, US$5.8 million employee-related accruals and US$26.5 million other payables) (FY 2020: US$52.5 million), the remaining liabilities on the balance sheet mainly comprise provisions for rehabilitation liabilities, post-retirement employee-related provisions, provisions for costs and fees relating to investigation and settlement of human rights claims, lease liabilities and deferred tax.

During the Year, the Group’s rehabilitation provision increased from US$45.3 million to US$57.9 million, mainly attributable to Cullinan’s estimated period to decommissioning reducing from 45 years to 25 years, reflecting updated scoping studies for future development outside of its current approved LOM, resulting in an increase of US$5.8 million in the provision as expected timing of the rehabilitation costs are brought forward and the effect of foreign exchange movements of US$9.0 million.

Capex

Total Group Capex for the Year reduced to US$23.5 million (FY 2020: US$28.4 million), comprising:

· US$16.9 million expansion Capex (FY 2020: US$21.8 million);

· US$5.6 million sustaining Capex (FY 2020: US$6.8 million); and

· corporate/exploration Capex of US$1.0 million (FY 2020: (US$0.2 million) net recoupment).

Capex

Unit

FY 2021

FY 2020

Cullinan

US$m

16.8

16.4

Finsch

US$m

4.0

8.4

Koffiefontein

US$m

1.7

3.8

Subtotal – Capex incurred by operations

US$m

22.5

28.6

Corporate/exploration1

US$m

1.0

(0.2)

Total Group Capex

US$m

23.5

28.4

Note:

1. Petra operates an internal projects / construction division and, although this division's spend is reported in the Group's total Capex, it is policy not to account for it on a specific mine's Capex until the work completed is invoiced to the relevant operation.

Dividend

Distribution covenants were not met for the measurement period to 30 June 2021 and as a result no dividend is declared for FY 2021 (30 June 2020: US$nil).

OPERATIONAL REVIEW

Combined Operations (Excluding Williamson)¹

Unit

FY 2021

FY 2020

Variance

Sales

Diamonds sold

Carats

3,930,136

2,598,252

51%

Revenue

US$M

402.3

243.3

65%

Production

ROM diamonds

Carats

3,057,860

3,155,237

-3%

Tailings diamonds

Carats

182,452

135,809

+34%

Total diamonds

Carats

3,240,312

3,291,046

-2%

Tonnages

ROM tonnes

Mt

7.7

7.5

+3%

Tailings & other1 tonnes

Mt

0.4

0.5

-20%

Total tonnes

Mt

8.1

8.0

+1%

On mine cash costs

US$M

197.6

191.2

3%

Capex

Expansion

US$M

16.9

21.8

-23%

Sustaining

US$M

6.6

6.6

0%

Total

US$M

23.5

28.4

-17%

1. Williamson results are shown separately below.

FY 2021 production decreased 2% to 3,240,312 carats (FY 2020: 3,291,046 carats), notwithstanding record annual production from Cullinan, of 1.94 Mcts. As previously announced, production at Finsch was impacted by unexpected levels of waste ingress during Q2 FY 2021, with subsequent mitigating measures reducing throughput during the second half of the Year. In addition, production at both Finsch and Koffiefontein was impacted by the high level of rainfall during the third quarter. Despite these factors, the Group’s ROM tonnages for the Year increased by 3% to 7.7 Mt (FY 2020: 7.5 Mt).

Cullinan – South Africa


Unit


FY 2021


FY 2020


Variance

Sales

Revenue

US$M

250.6

116.5

+115%

Diamonds sold

Carats

2,261,058

1,183,745

+91%

Average price per carat

US$

111

98

+13%

ROM Production

Tonnes treated

Tonnes

4,614,802

3,972,682

+16%

Diamonds produced

Carats

1,761,490

1,482,482

+19%

Grade1

Cpht

38.2

37.3

+2%

Tailings Production

Tonnes treated

Tonnes

445,538

257,549

+73%

Diamonds produced

Carats

182,452

95,918

+90%

Grade1

Cpht

41.0

37.2

+10%

Total Production

Tonnes treated

Tonnes

5,060,339

4,230,231

+20%

Diamonds produced

Carats

1,943,942

1,578,400

+23%

Costs

On-mine cash cost per tonne treated

ZAR

260

270

-4%

Capex

Expansion Capex

US$M

14.5

13.0

+12%

Sustaining Capex

US$M

2.3

3.4

-32%

Total Capex

US$M

16.8

16.4

+2%

Notes:

1. The Company is not able to precisely measure the ROM / tailings grade split because ore from both sources is processed through the same plant; the Company therefore back-calculates the grade with reference to resource grades.

Cullinan achieved record production in FY 2021 of 1,943,942 carats (FY 2020: 1,578,400 carats), with underground throughput of 4.6 Mt and an average ROM grade of 38.2 cpht (FY 2020: 37.3 cpht). A total of 0.4 Mt of recovery tailings were treated with an average grade of 41.0 cpht.

Cullinan’s revenue increased by 32% to US$250.6 million for the Year (FY 2020: US$116.5 million), due to a combination of a 91% increase in diamonds sold and a 13% increase in the average price per carat for the Period.

The full range of diamonds was recovered at the Cullinan mine in FY 2021, including a number of exceptional stones, as set out on pages 6 to 7 of this announcement.

Costs

The on-mine unit cash cost per total tonne treated decreased to ZAR260/t (FY 2020: ZAR270/t), mainly due to increased tonnages offset by inflationary increases.

Capex

FY 2021 Capex of US$16.8 million was mainly spent on underground development in the CC1E SLC area, as well as continued construction of the North Crusher 2 servicing the C-Cut Phase 1 production area.

FY 2022 Capex for Cullinan is guided at ca. US$48 – 54 million, primarily relating to underground development of the CC1E Phase 2 production areas and certain feasibility studies to be conducted related to shaft infrastructure, as well as fines residue deposit facilities and Stay in Business Capex.

Finsch – South Africa


Unit


FY 2021


FY 2020


Variance

Sales

Revenue

US$M

123.5

101.1

+22%

Diamonds sold

Carats

1,602,312

1,348,181

+19%

Average price per carat

US$

77

75

+3%

ROM Production

Tonnes treated

Tonnes

2,311,195

2,719,389

-15%

Diamonds produced

Carats

1,237,219

1,603,678

-23%

Grade1

Cpht

53.5

59.0

-9%

Tailings Production

Tonnes treated

Tonnes

0

211,541

-100%

Diamonds produced

Carats

0

39,890

-100%

Grade1

Cpht

0

18.9

-100%

Total Production

Tonnes treated

Tonnes

2,311,195

2,930,930

-21%

Diamonds produced

Carats

1,237,219

1,643,568

-25%

Costs

On-mine cash cost per tonne treated

ZAR

536

477

12%

Capex

Expansion Capex

US$M

1.7

6.1

-72%

Sustaining Capex

US$M

2.3

2.3

0%

Total Capex

US$M

4.0

8.4

-52%

Note:

1. The Company is not able to precisely measure the ROM / tailings grade split because ore from both sources is processed through the same plant; the Company therefore back-calculates the grade with reference to resource grades.

Overall production totalled 1,237,219 carats (FY 2020: 1,643,568 carats), with ROM carat production of 1,237,219 carats (FY 2020: 1,603,678 carats) and an average ROM grade of 53.5 cpht (FY 2020: 59.0 cpht).

The contribution from underground ROM production decreased to 1,237,219 carats (FY 2020: 1,603,678 carats). In H1 FY 2021, ROM volumes mined were impacted by the expiry of the temporary continuous operations arrangement during September 2020, subsequently reinstated during October 2020 that remained in place until June 2021. In addition, the Finsch mine experienced higher than expected levels of waste ingress in a number of the upper levels of the Block 5 Sub Level Cave, which negatively impacted the recovered grade. The Company conducted a detailed exercise to better understand this issue and has put a plan in place to mitigate the impact. This has included a revision to the draw strategy to limit planned draw tonnage, a build-up of inventory rings to allow for increased blasting from March 2021, and a change to the drill and blast designs to optimise ore extraction. In the longer term, the Company will also investigate ore mixing programmes to better assist with the prediction of waste ingress. Furthermore, production at the Finsch mine in Q3 FY 2021 was impacted by significantly high rainfall.

Revenue increased by 22% to US$123.5 million (FY 2020: US$101.1 million) due to a combination of slightly higher sales and a slightly higher average value per carat.

Costs

The on-mine cash unit cost increased to ZAR536/t (FY 2020: ZAR477/t), mainly due to the reduced throughput.

Capex

FY 2021 Capex of US$4.0 million was mainly spent on underground development and infrastructure relating to the Block 5 SLC.

FY 2022 Capex is guided at ca. US$21 – 25 million, primarily relating to the exploration drilling and feasibility studies associated with the new 3-Level SLC, underground development in 78 Level SLC Phase 2 and Stay in Business Capex.

Koffiefontein – South Africa


Unit


FY 2021


FY 2020


Variance

Sales

Revenue

US$M

28.0

25.7

+9%

Diamonds sold

Carats

66,650

66,326

0%

Average price per carat

US$

419

387

+8%

ROM Production

Tonnes treated

Tonnes

754,369

891,705

-15%

Diamonds produced

Carats

59,151

69,077

-14%

Grade

Cpht

7.8

7.7

+1%

Total Production

Tonnes treated

Tonnes

754,369

891,705

-15%

Diamonds produced

Carats

59,151

69,077

-14%

Costs

On-mine cash cost per tonne treated

ZAR

651

510

28%

Capex

Expansion Capex

US$M

0.6

2.7

-78%

Sustaining Capex

US$M

1.1

1.1

0%

Total Capex

US$M

1.7

3.8

-55%

ROM production totalled 59,151 carats (FY 2020: 69,077 carats), with ROM tonnage throughput down 15% on FY 2020 impacted by the significant rainfall experienced in Q3 FY 2021; overall carat produced decreased by 14%, with the average ROM grade remaining broadly flat at 7.8 cpht (FY 2020: 7.7 cpht).

Revenue increased 9% to US$28.0 million (FY 2020: US$25.7 million) for the Year, with an 8% increase in the average price per carat.

Costs

The on-mine cash unit cost increased to ZAR651/t (FY 2020: ZAR510/t), mainly due to decreased tonnages.

Capex

FY 2021 Capex of US$1.7 million was mainly spent on Stay in Business Capex.

FY 2022 Capex is guided at ca. US$1 – 3 million primarily relating Stay in Business Capex.

Williamson – Tanzania (held for sale at 30 June 2021)


Unit


FY 2021


FY 2020


Variance

Sales

Revenue

US$M

4.6

52.5

-91%

Diamonds sold

Carats

30,339

297,245

-90%

Average price per carat

US$

150

177

-15%

ROM Production

Tonnes treated

Tonnes

0

3,980,438

-100%

Diamonds produced

Carats

0

287,356

-100%

Grade

Cpht

0

7.2

-100%

Alluvial Production

Tonnes treated

Tonnes

0

302,567

-100%

Diamonds produced

Carats

0

10,774

-100%

Grade

Cpht

0

3.6

-100%

Total Production

Tonnes treated

Tonnes

0

4,283,005

-100%

Diamonds produced

Carats

0

298,130

-100%

Costs

On-mine cash cost per tonne treated

USD

n/a

10.2

n/a

Capex

Expansion Capex

US$M

0.0

0.0

0%

Sustaining Capex

US$M

0.3

8.0

-96%

Total Capex

US$M

0.3

8.0

-96%

The Williamson mine was placed on care and maintenance during April 2020 and remained on care and maintenance throughout FY 2021 (FY 2020 production: 298,130 carats).

Revenue decreased 91% to US$4.6 million (FY 2020: US$52.5 million), with sales limited to the final parcel recovered prior to the commencement of care and maintenance. Cash on-mine costs, mainly associated with care and maintenance expenses, totalled around US$12.7 million for the Year.

Capex

FY 2021 Capex of US$0.3 million mainly related to Stay in Business Capex.

Project 2022 Update

Project 2022 commenced in July 2019 with the aim of identifying opportunities to increase throughput across the business, drive efficiencies and facilitate continuous improvement. A key objective of this project was to target delivery of significant free cashflow over three years, though this has been impeded primarily by the weakness in the diamond market, compounded further by precautionary measures imposed at the operations related to the COVID-19 pandemic.

Project 2022 is not only now fully operational across the Group, but its principles of focused and continuous improvement are being entrenched in the operating model and are becoming part of the culture of the Company.

Weekly Project 2022 Results Action Review meetings (“RARs”) are held within the first four structural layers of the organisation, starting with the CEO, to monitor progress, provide support and resourcing where required and ensure we are on track to deliver on our targets. In addition, we are in the process of aligning our various incentive and production bonus schemes to support and reward delivery of our Project 2022 targets across the Group.

The implementation of throughput ideas remains the largest contributor to improving operational cash flow, led by Cullinan’s record recovery of 1.94 Mcts in FY 2021. Due to reduced pricing coupled with lower throughput at Finsch, Koffiefontein and Williamson, expectations on the annualised contribution from throughput initiatives were reduced to around US$50 million in the Company’s Q3 FY 2021 Trading Update released in April 2021 and the Company remains confident that it will achieve the annualised contribution of US$50 million, supported by measures taken to curtail the waste ingress at Finsch.

Initiatives undertaken to drive cost efficiencies are expected to contribute an annualised US$20 million going into FY 2022, which remains unchanged from previous guidance.

The Project 2022 Organisational Design Review Phase 1 was completed during FY 2021 and will result in updated role descriptions providing for clearer line of site and improved accountability.

Gross Reserves and Resources

Petra manages one of the world’s largest diamond resources of 230 Mcts and this major resource implies that the potential mine lives of our core assets could be considerably longer than the current mine plans in place at each operation or could support higher production rates.

As at 30 June 2021, the Group’s gross diamond resources (inclusive of reserves) decreased 5% to 230.64 Mcts (30 June 2020: 243.51 Mcts), predominantly due to depletions at all mining assets further to ore mined in FY 2021 and the sale of Petra’s exploration assets in Botswana to Botswana Diamonds PLC, which has removed the KX36 kimberlite pipe (Resource of 8.73 Mcts) from the Resource Statement.

The Group’s gross diamond reserves decreased 14% to 33.33 Mcts (30 June 2020: 38.86 Mcts) primarily due to mining depletions, the impact of increased pit scaling and waste ingress on the remaining reserves in the current SLC at Finsch, changes to the mine plan and mining method for the future block at Finsch, and Williamson remaining on care and maintenance with an associated reduction in reserve estimate given the remaining tenure of the Special Mining License.

The following table summarises the gross Reserves and Resources status of the combined Petra Group operations as at 30 June 2021 and includes the Williamson operation.

Category

Gross

Tonnes
(millions)

Grade
(cpht)

Contained Diamonds
(Mcts)

Reserves

Proved

-

-

-

Probable

116.3

28.7

33.33

Sub-total

116.3

28.7

33.33

Resources

Measured

-

-

-

Indicated

329.1

47.2

155.38

Inferred

1,292.3

5.8

75.27

Sub-total

1,621.3

14.2

230.64

The full 2021 Resource Statement can be accessed at https://www.petradiamonds.com/our-operations/reserves-resources/.

Labour relations

Stable labour relations are essential to our productivity and the delivery of our strategy. We therefore remain highly focused on managing labour relations and on maintaining open and effective communication channels with our employees and the appropriate union representatives at our operations.

Petra did not experience any industrial action during the Year and has seen largely stable labour relations over the last four years. Post Year end, the Company announced that it had reached agreement on a new three-year wage agreement with NUM for employees in the Paterson A and B Bands at the South African operations covering FY 2022 to FY 2024, which should allow for further stability over this timeframe.

GOVERNANCE

Board Succession

Dr Pat Bartlett, Non-Executive Director, retired from the Board after nearly nine years’ service, on 30 June 2020, and Mr Tony Lowrie, Senior Independent Director, retired from the Board in November 2020, after more than eight years’ service. Ms Varda Shine subsequently assumed the role of Senior Independent Non-Executive Director in November 2020.

As previously announced, Mr Gordon Hamilton, Independent Non-Executive Director, will retire from the Board and as Chair of the Audit and Risk Committee at the conclusion of the FY 2021 Annual General Meeting on 19 November 2021. On 1 July 2021, the Company announced the appointment of Ms Deborah Gudgeon as an Independent Non-Executive Director and Chair-designate of the Audit and Risk Committee.

Following completion of the Restructuring in March 2021, the appointment of Mr. Matthew Glowasky as a Non-Independent Non-Executive Director of the Company became effective, further to his nomination by Monarch Master Funding 2 (Luxembourg) S.a.r.l. (“Monarch”). In addition, on 1 July 2021 Ms Alexandra Watson and Mr Johannes Bhatt were both appointed as Non-Independent Non-Executive Directors, having been nominated by Franklin Templeton and Monarch respectively. Monarch also exercised their right under the Nomination Agreement to appoint Mr. Marius Kraemer as their Board Observer with effect from 1 July 2021.

The Company welcomes the new Directors, as well as Mr Kraemer as Board Observer; together they bring a wealth of experience, complementing that of our existing Directors, and their appointments leave the Board well placed to take the Company forward.

PRINCIPAL BUSINESS RISKS

The Group is exposed to a number of risks and uncertainties which could have a material impact on its long-term development, and performance and management of these risks is an integral part of the management of the Group.

A summary of the risks identified as the Group’s principal external, operating and strategic risks (in no order of priority), which may impact the Group over the next twelve months, is listed below.

Risk

Risk appetite

Risk rating

Nature of risk

Change in FY 2021

1. Country and political

High

High

Long term

No change – risk of political instability remains in South Africa, illustrated by civil unrest shortly after Year end, and certain components of the new Mining Charter remain under review. In Tanzania, the risk of political instability remains high further to the death of the Tanzanian President. Petra is in ongoing dialogue with the Government of Tanzania and local advisers in relation to legislative developments, overdue VAT receivables and the blocked parcel of diamonds from Williamson.

2. COVID-19 pandemic (operational impact)

Medium

High

Short to medium term

No change – the impact of COVID-19 is ongoing, but the mitigating processes Petra has put in place are enabling the Company to manage the pandemic without a significant impact on production and sales.

3. Currency

High

Medium

Long term

No change - the ZAR/USD exchange rate continues to be volatile. The short-term strengthening in the Rand has the capacity to offset some of the improvement in Petra’s realised diamond prices.

4. Diamond price

High

Medium

Long term

Lower - diamond prices recovered during H2 FY 2021 and overall increased ca. 9% during the Year, following the major disruption of the diamond pipeline in FY 2020 caused by the COVID 19 pandemic.

5. Financing

Medium

Medium

Short to medium term

Lower – progress with Project 2022 initiatives led to an improvement in operational free cashflow supported by stronger diamond markets during H1 CY’21, despite the negative impact of COVID-19 pandemic. Following shareholder, noteholder and regulatory approvals, the capital and debt restructure project which was a key focus area for management was completed.

6. Labour relations

Medium

Medium

Short to medium term

Lower - stable labour relations were experienced during the Year. Post Year end, the Company reached agreement on a new three-year wage agreement with NUM for employees in the Paterson A and B Bands at the South African operations covering FY 2022 to FY 2024.

7. Licence to operate

Medium

Medium

Long term

No change - continued compliance in all material aspects with relevant laws, regulations and standards. Incorporated in Petra’s licence to operate is its continued focus on safety, as well as its impacts on the environment and communities. In May 2021, Petra announced the findings of the independent Board Sub-Committee into the alleged human rights breaches in Tanzania, as well as setting out the mitigating and preventative actions the Company had taken or was putting place to address the findings. The Company also reached a settlement, on a no admission of liability basis, in relation to claims of alleged human rights breaches. The risk of illegal mining at Williamson is ongoing.

8. Mining and production

Medium

Medium

Long term

Higher - positive throughput improvements driven by Project 2022 led to a strong operational performance at Cullinan during FY 2021, offset by work to curtail waste ingress and pit sidewall instability at Finsch, and rainfall impacting production at Finsch and Koffiefontein in Q3 FY 2021. With Williamson in care and maintenance, low production levels at Koffiefontein and lower production at Finsch, there is greater dependency on production at Cullinan.

9. ROM grade and product mix volatility

Medium

Medium

Short term

No change – Cullinan ROM grades were in line and slightly above expectations, whilst both Finsch and Koffiefontein were below expectations. Finsch’s production was impacted by waste ingress and the medium to long term impact on the mine’s LOM planning is being reviewed. The mines recovered the full range of diamonds in FY 2020, with a higher recovery of specials at Cullinan.

OUTLOOK

The medium to long-term outlook for our market and for our business remains positive. The completion of the Company’s financial restructuring in FY 2021 showed that we retain significant support from the investment market and has provided enhanced stability for the Company to deliver on its operational plans.

I believe that Petra has high quality assets, a skilled and motivated workforce, a refreshed company culture, ongoing optimisation plans and support from our stakeholders. This, set against an improving diamond market, positions the Company well for the years to come.

Richard Duffy

Chief Executive

14 September 2021

Notes

1. The following exchange rates have been used for this announcement: average for the Year US$1:ZAR15.41 (FY 2020: US$1:ZAR15.68); closing rate as at 30 June 2021 US$1:ZAR14.27 (30 June 2020: US$1:ZAR17.32).

2. The following definitions have been used in this announcement:

a. ct: carat

b. cpht: carats per hundred tonnes

c. CY: calendar year

d. FY: financial year

e. Kcts: thousand carats

f. Mctpa: million carats per annum

g. Mcts: million carats

h. mL: metre level

i. Mt: million tonnes

j. Mtpa: million tonnes per annum

k. ROM: run-of-mine, i.e. relating to production from the primary orebody

l. SLC: sub-level cave, a variation of block caving

APPENDIX

The below operational results include Williamson and are provided for reference only:

Combined Operations (Including Williamson)

Unit

FY 2021

FY 2020

Variance

Sales

Diamonds sold

Carats

3,960,475

2,895,497

37%

Revenue

US$M

406.9

295.8

38%

Production

ROM diamonds

Carats

3,057,860

3,442,593

-11%

Tailings & other1 diamonds

Carats

182,452

146,583

+24%

Total diamonds

Carats

3,240,312

3,589,176

-10%

Tonnages

ROM tonnes

Mt

7.7

11.5

-33%

Tailings & other1 tonnes

Mt

0.4

0.8

-50%

Total tonnes

Mt

8.1

12.3

-34%

On mine cash costs

US$M

276.1

225.3

23%

Capex

Expansion

US$M

16.9

21.8

-23%

Sustaining

US$M

6.9

14.6

-53%

Total

US$M

23.8

36.4

-35%

Notes:

1. 'Other' represents alluvial diamond mining at Williamson.

PETRA DIAMONDS LIMITED – PRELIMINARY ANNOUNCEMENT

UNAUDITED CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 30 JUNE 2021

US$ million

Notes

2021

20201

Revenue

4

402.3

243.3

Mining and processing

(337.2)

(238.2)

Other direct income

1.7

1.0

Exploration expenditure

17

(0.6)

Corporate expenditure including settlement costs

5

(21.3)

(8.7)

Impairment of non-financial assets

16

(17.7)

(50.5)

Impairment of BEE loans receivable – expected credit loss reversal / (charge)

13

5.8

(10.9)

Total operating costs

(368.7)

(307.9)

Profit on disposal of subsidiary

17

14.7

Financial income

6

84.1

7.9

Financial expense

6

(74.0)

(160.8)

Gain on extinguishment of Notes net of unamortised costs

6,8

213.3

Profit / (loss) before tax

271.7

(217.5)

Income tax (charge) / credit

(23.0)

52.5

Profit / (loss) for the year from continuing operations

248.7

(165.0)

Loss on discontinued operations including associated impairment charges (net of tax)

17


(52.1)

(58.0)

Profit / (loss) for the Year

196.6

(223.0)

Attributable to:

Equity holders of the parent company

187.1

(190.0)

Non-controlling interest

9.5

(33.0)

196.6

(223.0)

Earnings / (loss) per share attributable to the equity holders of the parent during the Year:

Continuing operations:

Basic earnings / (loss) per share – US cents

14

6.67

(15.26)

Diluted earnings / (loss) per share – US cents

14

6.67

(15.26)

From continuing and discontinued operations:

Basic earnings / (loss) per share – US cents

14

5.22

(21.96)

Diluted earnings / (loss) per share – US cents

14

5.22

(21.96)

1. Comparative results have been restated to reflect the results of Williamson within loss on discontinued operations including associated impairment charges (net of tax) as per the requirements of IFRS 5 (refer to note xx).

PETRA DIAMONDS LIMITED - PRELIMINARY ANNOUNCEMENT

UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2021

US$ million

2021

2020

Profit / (loss) for the Year

196.6

(223.0)

Exchange differences on translation of the share-based payment reserve

0.2

(0.2)

Exchange differences on translation of foreign operations1,2

64.2

(91.3)

Exchange differences on non-controlling interest1

(1.2)

(0.6)

Total comprehensive income / (expense) for the Year

259.8

(315.1)

Total comprehensive income and expense attributable to:

Equity holders of the parent company

251.5

(281.5)

Non-controlling interest

8.3

(33.6)

259.8

(315.1)

¹ These items will be reclassified to the consolidated income statement if specific future conditions are met.

² The Company has disclosed the net assets of the Williamson mine under non-current assets held for sale and liabilities directly associated with non-current assets held for sale in the Statement of Financial Position.

PETRA DIAMONDS LIMITED – PRELIMINARY ANNOUNCEMENT

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 30 JUNE 2021

US$ million

Notes

2021

2020

ASSETS

Non-current assets

Property, plant and equipment

7

696.8

675.8

Right-of-use assets

1.2

4.9

BEE loans and receivables

13

46.6

137.0

Other receivables

10.3

Deferred tax assets

23.3

Total non-current assets

744.6

851.3

Current assets

Trade and other receivables

50.7

20.0

Inventories

59.9

103.5

Cash and cash equivalents (including restricted amounts)

163.8

67.6

Total current assets

274.4

191.1

Non-current assets classified as held for sale

17

59.6

0.3

Total assets

1,078.6

1,042.7

EQUITY AND LIABILITIES

Equity

Share capital

8,9

145.7

133.4

Share premium account

8,9

959.5

790.2

Foreign currency translation reserve

(402.1)

(453.0)

Share-based payment reserve

1.8

1.1

Other reserves

(0.8)

(0.8)

Accumulated losses

(253.3)

(440.4)

Attributable to equity holders of the parent company

450.8

30.5

Non-controlling interest

(10.5)

(18.8)

Total equity

440.3

11.7

Liabilities

Non-current liabilities

Loans and borrowings

10

400.0

Lease liabilities

0.5

1.1

BEE loans payable

13

108.6

Provisions

71.3

55.6

Deferred tax liabilities

48.9

40.5

Total non-current liabilities

520.7

205.8

Current liabilities

Loans and borrowings

10

30.3

769.0

Lease liabilities

0.5

3.6

Trade and other payables

49.1

52.5

Provisions

4.2

Total current liabilities

84.1

825.1

Liabilities directly associated with non-current assets classified as held for sale

17

33.5

0.1

Total liabilities

638.3

1,031.0

Total equity and liabilities

1,078.6

1,042.7

PETRA DIAMONDS LIMITED –PRELIMINARY ANNOUNCEMENT

UNAUDITED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2021

US$ million

Notes

2021

2020

Profit / (loss) before taxation for the Year from continuing and discontinued operation


219.6

(275.3)

Depreciation of property plant and equipment

75.9

78.3

Amortisation of right-of-use asset

0.9

5.2

Unrealised gain on lease liability

(0.8)

Impairment charge – non financial assets

16

17.7

92.3

Impairment charge/(reversal) – other receivables

16

(0.4)

Impairment of BEE loans receivable – expected credit loss (release) / charge

13

(5.8)

10.9

Gain on extinguishment of Notes net of unamortised costs

6,8

(213.3)

Loss and impairment charge on discontinued operations

17

43.2

Profit on disposal of subsidiary

17

(14.7)

Movement in provisions

4.8

(0.1)

Financial income

6

(84.1)

(7.9)

Financial expense

6

74.0

161.0

Profit on disposal of property, plant and equipment

(0.6)

(0.1)

Share based payment provision

0.5

0.7

Operating profit before working capital changes

118.1

63.8

(Increase) / decrease in trade and other receivables

(26.9)

11.4

Increase / (decrease) in trade and other payables

5.5

(15.5)

Decrease / (Increase) in inventories

42.8

(32.7)

Cash generated from operations

139.5

27.0

Net realised losses on foreign exchange contracts

(6.1)

(8.3)

Finance expense paid

(6.7)

(26.2)

Income tax received / (paid)

0.3

(0.6)

Net cash generated from / (utilised by) operating activities

127.0

(8.1)


Cash flows from investing activities

Acquisition of property, plant and equipment

(19.4)

(39.3)

Proceeds from sale of property, plant and equipment

0.3

0.8

Loans advanced to BEE partners

(7.0)

(14.1)

Repayments from KEM JV

0.4

Finance income received

0.7

1.2

Net cash utilised in investing activities

(25.4)

(51.0)

Cash flows from financing activities

Cash transaction costs settled – Debt Restructuring

8

(29.9)

Cash paid on lease liabilities

(0.7)

(5.0)

Increase in borrowings

8,18

30.0

100.9

Repayment of borrowings

18

(7.4)

(43.5)

Net cash (utilized) / generated from financing activities

(8.0)

52.4

Net increase / (decrease) in cash and cash equivalents

93.6

(6.7)

Cash and cash equivalents at beginning of the Year

53.6

71.7

Effect of exchange rate fluctuations on cash held

9.7

(11.4)

Cash and cash equivalents at end of the Year1

156.9

53.6

The cashflows specific to the discontinued operation net of associated impairments (net of tax) are included in the amounts above and are disclosed in note 17.

¹ Cash and cash equivalents in the Consolidated Statement of Financial Position includes restricted cash of US$16.1 million (30 June 2020: US$14.0 million) and unrestricted cash of US$147.7 million (30 June 2020: US$53.6 million) and excludes unrestricted cash attributable to Williamson of US$9.2 million.

PETRA DIAMONDS LIMITED – PRELIMINARY ANNOUNCEMENT

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2021

(Unaudited)


US$ million

Share
capital

Share
premium
account

Foreign
currency
translation
reserve

Share-based
payment
reserve

Hedging and other
reserves

At 1 July 2020

133.4

790.2

(453.0)

1.1

(0.8)

Profit for the Year

Other comprehensive income / (expense)

64.2

0.2

Recycling of foreign currency translation reserve on disposal of Sekaka (refer note 17)

(13.3)

Equity settled share based payments

0.5

Allotments during the Year:

- Ordinary shares – Debt for equity issue (net of US$12.3 million issue costs) – refer to note 8

12.3

169.3

At 30 June 2021

145.7

959.5

(402.1)

1.8

(0.8)

(Unaudited)


US$ million

Accumulated losses

Attributable
to the
parent

Non-controlling
interest

Total
equity

At 1 July 2020

(440.4)

30.5

(18.8)

11.7

Profit for the Year

187.1

187.1

9.5

196.6

Other comprehensive income / (expense)

64.4

(1.2)

63.2

Recycling of foreign currency translation reserve on disposal of Sekaka (refer note 17)

(13.3)

(13.3)

Equity settled share based payments

0.5

0.5

Allotments during the Year:

- Ordinary shares – Debt for equity issue (net of US$12.3 million issue costs) – refer to note 8

181.6

181.6

At 30 June 2021

(253.3)

450.8

(10.5)

440.3

PETRA DIAMONDS LIMITED – PRELIMINARY ANNOUNCEMENT

UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2021

(Unaudited)


US$ million

Share
capital

Share
premium
account

Foreign
currency
translation
reserve

Share-based
payment
reserve

Hedging and other
reserves

12 month Period ended 20 June 2020:

At 1 July 2019

133.4

790.2

(361.7)

6.2

(0.8)

Loss for the Year

Other comprehensive expense

(91.3)

(0.2)

Transfer between reserves - Williamson non-controlling interest.

Transfer between reserves for lapsed employee options

(5.6)

Equity settled share based payments

0.7

At 30 June 2020

133.4

790.2

(453.0)

1.1

(0.8)

(Unaudited)


US$ million

Accumulated losses

Attributable
to the
parent

Non-controlling
interest

Total
equity

12 month Period ended 20 June 2020:

At 1 July 2019

(255.6)

311.7

14.4

326.1

Loss for the Year

(190.0)

(190.0)

(33.0)

(223.0)

Other comprehensive expense

(91.5)

(0.6)

(92.1)

Transfer between reserves - Williamson non-controlling interest.

(0.4)

(0.4)

0.4

Transfer between reserves for lapsed employee options

5.6

Equity settled share based payments

0.7

0.7

At 30 June 2020

(440.4)

30.5

(18.8)

11.7

NOTES TO THE CONDENSED CONSOLIDATED PRELIMINARY FINANCIAL STATEMENTS

FOR THE YEAR 30 JUNE 2021

1. GENERAL INFORMATION

Petra Diamonds Limited (the “Company”), a limited liability company listed on the Main Market of the London Stock Exchange, is registered in Bermuda with its Group management office domiciled in the United Kingdom. The Consolidated Preliminary Financial Statements of the Company for the year ended 30 June 2021 comprise the Company and its subsidiaries, joint operations and associates (together referred to as the “Group”).

2. ACCOUNTING POLICIES

This unaudited preliminary report does not include all the notes of the type normally included in an annual financial report. This condensed report is to be read in conjunction with the Annual Report for the year ended 30 June 2020, and any public announcements made by the Group during the reporting period. The annual financial report for the year ended 30 June 2020 was prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS’s”) and the accounting policies applied in this condensed preliminary report are consistent with the polices applied in the annual financial report for the year ended 30 June 2020 unless otherwise noted. The preliminary report has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

Accounting policy for Non-current assets held for sale and discontinued operations

Where an operation within the Group is separately identified or forms part of a separate reporting structure, the Group will classify the asset as held for sale, in accordance with IFRS 5, if management has committed to a plan to sell, the operation is available for sale, an active search for a buyer is in place, or if any transaction is highly probable within 12 months of classifying as held for sale. The Williamson operation met the criteria mentioned above and as such has been classified as held for sale as at 30 June 2021. The assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell. An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset is recognised at the date of derecognition. Non-current assets classified as held for sale and the assets of an operation classified as held for sale are presented separately from the other assets in the statement of financial position. The liabilities of an identified operation classified as held for sale are presented separately from other liabilities in the statement of financial position.

A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resell. The results of discontinued operations are presented separately in the statement of profit or loss.

Unrealised foreign exchange gains and losses on historic retranslation of the subsidiaries results into US Dollars are recycled to the consolidated income statement upon completion of the disposal. The Group designates the results of discontinued activities, including those of disposed subsidiaries, separately in accordance with IFRS and reclassifies the results of the operation in the comparative period from continuing to discontinued operations.

Debt for Equity conversion

When the Group issues equity to settle outstanding debt, the value attributed to the ordinary shares issued is based on the fair value of the equity at the date of settlement to extinguish the debt. The fair value is derived by reference to the closing share price at the date of the conversion, it is considered to be a Level 1 fair value measurement. Costs identified as being directly associated with the debt for equity conversion are taken directly to share premium.

Accounting policy for substantial modification of financial liabilities

When the Group’s borrowings are refinanced, and the refinancing is considered to be a substantial modification, the difference between the carrying amount of a financial liabil......

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