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AIM to Main Market Presentation December 2011
2
Important Notice
These Presentation Materials do not constitute or form part of any invitation, offer for sale or subscription or any solicitation for any offer to buy or subscribe for any securities in the Company nor shall they or any part of them form the basis of or be relied upon in any manner or for any purpose whatsoever. These Presentation Materials must not be used or relied upon for the purpose of making any investment decision or engaging in an investment activity and any decision in connection with a purchase of shares in the Company must be made solely on the basis of the publicly available information. Accordingly, neither the Company nor its directors makes any representation or warranty in respect of the contents of the Presentation Materials. The information contained in the Presentation Materials is subject to amendment, revision and updating in any way without notice or liability to any party. The presentation materials contain forward-looking statements which involve risk and uncertainties and actual results and developments may differ materially from those expressed or implied by these statements depending on a variety of factors. No representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the information or opinions contained herein, which have not been independently verified. The delivery of these Presentation Materials shall not at any time or in any circumstance create any implication that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the condition (financial or otherwise) of the Company since the date of these Presentation Materials. The Presentation Materials are confidential and being supplied to you for your own information and may not be reproduced, further distributed, passed on, or the contents otherwise divulged, directly or indirectly, to any other person (except the recipient’s professional advisers) or published, in whole or in part, for any purpose whatsoever. The Presentation Materials may not be used for the purpose of an offer or solicitation to subscribe for securities by anyone in any jurisdiction.
Discover Petra Diamonds
• London’s largest quoted pure diamond mining group – ‘PDL’
• Provides direct exposure to the positive long term fundamentals of the diamond market
• AIM has proved ideal growth market for Petra’s rapid development
• Main Market is now appropriate platform for continued growth path
• Core objective to further increase production to over 5 million carats by FY 2019
FY 2007 FY 2011 Gross Resources 9 million carats 300 million carats Production ~180,000 carats 1.1 million carats Gross Revenue US$17.0 million US$220.6 million On Mine EBITDA US$1.3 million US$76.4 million
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The Petra Board
Adonis Pouroulis (41) Non-Executive Chairman Successful mining entrepreneur Founded Petra Diamonds in 1997 and floated first diamond company on AIM Along with fellow directors, built Petra into pan-African diamond group with over 3,600 employees Instrumental in raising funds to help finance and structure early stage mining companies in Africa
Johan Dippenaar (54) CEO One of South Africa’s most successful diamond entrepreneurs with +20 years’ experience Founded diamond group in 1990 and grew portfolio to three producing mines before listing as Crown Diamonds on ASX Merger with Petra in 2005 – now at helm of London’s largest diamond company
David Abery (49) Finance Director Extensive experience as Chief Financial Officer in South African and UK business environments In-depth knowledge of London capital markets Integral to structuring and deliverance of strategic group corporate development, including acquisitions and joint ventures
Jim Davidson (67) Technical Director Acknowledged world authority on kimberlite geology and exploration +20 years’ experience in mine management Formerly Head of Diamond Exploration for Rio Tinto across Southern Africa As Technical Director of Crown Diamonds, managed specialist underground fissure mines over a decade
Dr Patrick Bartlett (66) Independent Non-Executive Director Acknowledged expert on kimberlite geology and design and geotechnical aspects of block caving Formerly Chief Geologist for De Beers; responsible for all kimberlite mines in South Africa In-depth knowledge of several Petra mines, having worked at Finsch, Koffiefontein, Kimberley Underground, plus was geologist at Cullinan between 1983 to 2003 Since retiring has been involved in block caving projects for BHP, Anglo and Rio Tinto
Gordon Hamilton (66) Independent Non-Executive Director Extensive experience as a NED across wide range of businesses, both JSE and LSE listed; chairs Audit Committee for all these companies Formerly a partner for +30 years at Deloitte & Touche LLP; primarily responsible for multinational and FTSE 100 listed company audits, mainly in mining, oil & gas, and aerospace and defence; headed up Deloitte South Africa desk in London Served for 9 years as member of the UK Financial Reporting Review Panel
Dr Omar Kamal (38) Non-Executive Director Managing Director for Al Rajhi (Petra’s largest shareholder) Co-manages international investments in various asset classes – focus on equities, private equity, real estate Possesses broad expertise and knowledge ranging from past experience as an academic, working in the financial industry and strategy consultant with a global financial services arm
“The Company intends to appoint one or more further independent NEDs as soon as is practicable in FY 2012”
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An Exceptional Growth Path
5
Cullinan
July 2008
74% Petra 26% BEE Partners
Block Cave
16yr Mine Plan +50yr Potential Life
Williamson
November 2008
75% Petra 25% Government of
Tanzania
Open Pit
17 yr Mine Plan +50yr Potential Life
Kimberley UG
May 2010
74% Petra 26% BEE Partners
Block Cave
11yr Mine Plan +12yr Potential Life
Finsch
74% Petra 26% BEE Partners
Block Cave
18yr Mine Plan +25yr Potential Life
Koffiefontein
July 2007
74% Petra 26% BEE Partners
Front Cave
14yr Mine Plan +20yr Potential Life
September 2011
Successful track record: • Focus on efficiencies: right-size operation, restructure cost base & empower management • Industry leading team utilises in-house capabilities to execute capex programmes • Focus on ‘value’ as opposed to ‘volume’ production; optimise plant processing & security to
ensure recovery of full spectrum of diamonds • Achieve best rough diamond prices through open tender system
A Diversified Production Portfolio Petra is focused on Africa – source of 60% of the world’s diamond production by value
6 * Petra mines – Petra’s portfolio includes five of the world’s most important kimberlite diamond mines
Diamond Market – Strong Fundamentals
7 Source: Deutsche Bank / Alrosa, April 2011 Source: RBC Capital Markets, September 2011
World Production (MM cts)
0
20
40
60
80
100
120
140
160
180
200
2005A 2006A 2007A 2008A 2009A 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E
MM
ct
Angola Australia Botswana Canada DRC Namibia Russia South Africa Zimbabwe Other Countries
• Many of the world’s major diamond mines are in decline and cannot maintain previous output
• No new important discoveries since the finds in Canada in the early 1990’s
• Strong demand drivers going forward, particularly from emerging markets
• Anglo to buy Oppenheimer’s stake in De Beers, presentation notes “highly attractive industry fundamentals with late cycle exposure” (4 November 2011)
• Tiffany & Co and Swatch both reported to be investigating means to secure rough supply
Significant supply/demand deficit forecast to emerge Production forecast to remain relatively flat
5
7
9
11
13
15
17
19
21
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
US
$bn
Supply in 2008 Prices Demand
A Shift From West To East
World Diamond Jewellery Sales 2000
Source: RBC Capital Markets / De Beers
World Diamond Jewellery Sales 2010 World Diamond Jewellery Sales 2015E
RoW 10%Other
Asia 8%
Europe 16%
US 48%
India 0%
Japan 18%
RoW 20%
Gulf 8%Japan 11%
US 38%
China Hong Kong
11%
India 10%
Taiwan 2%
Italy 2%
RoW 14%
Hong Kong 2%
Gulf 9%Japan 9%
US 35%
China 16%
India 11%
Taiwan 2%
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An Emerging Market Of New Consumers
• Urbanisation trend – by 2025: 221 Chinese cities with +1m population (vs 107 cities in Europe, Japan, US combined)
• The number of middle income consumers expected to increase by +800m by 2030 (half of these consumers will be in China / India) (World Bank projections)
• Diamond consumption per capita in emerging regions currently far below mature markets
9 Source: Shanghai Diamond Exchange Source: De Beers used in RBC Capital Markets – ‘Diamonds – Fundamentals Shine Through – July 2011
China Diamond Engagement Ring Acquisition Rate China’s Polished Diamond Imports
0% 0% 0% 0% 0%
33%
0%
13%
0% 0%
59%
45%
23%
0% 0%
62%
38% 39%
18%15%
0%
10%
20%
30%
40%
50%
60%
70%
Shanghai Beijing Guangzhou Chengdu Dalian
1993 1997 2000 2006
50
75
100
125
150
175
200
Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11
June
200
6 =
100
Source: RBC Capital Markets
Current Market Conditions
Global economic uncertainty caused prices to fall from June ‘11 highs
• Diamantaires adopting a ‘wait and see’ approach due to current financial markets
• Rand weakness partially offsets lower pricing (SA production)
• Positive recent results from Signet, Tiffany & Co, Richemont and LVMH – sales up 10% to +20%
• Increased corporate activity in diamond sector:
• Chow Tai Fook – a leading Chinese diamond retailer may raise as much as US$2.8 billion in Hong Kong IPO – plans to increase stores in Asia from 1,300 to 2,000 by 2016 (Bloomberg – 28 Nov 2011)
• Graff Diamonds – preparing to raise US$1 billion in Hong Kong IPO to expand in Asia – (Financial Times – 9 Nov 2011)
• Retailers considering options to secure rough supply:
• Tiffany & Co – eyeing further diamond mine funding: “We have recognised that it may be necessary to commit capital to assure diamond supply” (Financial Times – 23 Sep 2011)
• Swatch – would like to take a stake in a diamond mine – “"The demand for watches with diamond decoration has increased explosively." (Reuters – 16 Jul 2011)
Rough Diamond Price Index
Major auction houses report continued positive high end sales The 110ct Cora Sun Drop fancy vivid yellow diamond (right) sold for US$12.4m, world record for a yellow stone Sotheby’s, 15 November 2011
High End Sales Remain Strong
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Focus & Strategy
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Petra plans to produce +5 Mctpa through organic growth
Increase output
Focused on cash-generative
diamond production Optimise
recoveries Drive
efficiencies
• Acquisition of Finsch mine
• Utilise resources available including tailings deposits
• Programmes to deepen underground mines to establish new block caves and provide access to undiluted ore
• Focus on “value” as opposed to “volume” production
• Optimise plant processing and security
• Contain costs on a unit basis • Utilise in-house skills to execute
capex programmes
Steadily growing annual production, with a target of over 5 million carats by FY 2019
Maintaining a culture of effective cost control
Aiming to improve operating margins at each mine over time
Production & Revenue – FY 2011 & Estimated FY 2019
Gross Production
FY 2011: 1.1 million carats
Gross Revenue
FY 2011: US$221 million
0.9
0.05
0.080.06
0.03
2.4
1.9
0.1
0.10.2
0.6
140.2
30.8
21.8
18.2
9.5
37.8%32.4%
6.6%
4.0%
5.4%13.8%
FY 2019: 5.4 million carats FY 2019: +US$1 billion*
* Calculated using a 4% real price increase FY 2019 figures are management estimates
Fissure Mines
Kimberley Undergroud
Koffiefontein
Williamson
Cullinan
Finsch
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Admission & Outlook
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Admission to trading on Main Market with a premium listing will be shortly after 8 December
• 7 March 2012: Subject to Index review, Petra should qualify for inclusion in the FTSE 250
• Premium listing and entry to FTSE 250 will raise Petra’s profile, further stimulating investment and liquidity
• Will allow a broader range of investors to utilise Petra as a way to gain direct exposure to diamonds
Outlook
• Robust balance sheet – Petra announced additional debt facilities of ca. US$48 million on 30 Nov 2011
• Provides assurance to Petra’s capital expansion programmes
• Inclusion of Finsch in FY 2012 will see production rise to over 2 million carats
• On target to reach +5 million carats by FY 2019
Diamond market
• Some short-term volatility due to current financial / capital markets uncertainty
• Medium to long-term fundamentals remain firmly in place
• Petra’s strong production growth will maximise leverage to anticipated supply deficit
Thank You
Finsch mine, South Africa
Capital Structure
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High Quality Shareholder Base 28 Nov 2011
Al Rajhi Holdings W.W.L. 13.3%
Saad Investments Company Ltd/AWAL Bank 12.2%
JP Morgan Asset Management (UK) Ltd 8.6%
Capital Group International, Inc. 7.3%
Scottish Widows Investment Partnership 6.4%
BlackRock Investment (UK) Ltd 4.2%
T. Rowe Price 4.1%
M&G Investments 3.6%
Kames Capital 3.3%
Ignis Investment Services Limited 3.0%
Directors 2.8%
Listing AIM: PDL
Average daily trading volume (shares) – 2011 YTD
1.6m
Shares in issue ~500m
Free float 71.7%
Market cap @ 99.5p (28 November)
£497m
Share Price Chart
Aim Of Expansion Programmes – Undiluted Ore
16
Virgin kimberlite ore
Production level
Undercut level
Drawpoints
Loaders
Haulage
Undiluted ore
Schematic - block cave mining method
• Current mining at underground pipe mines taking place in diluted mature caves and low grade remnants
• Expansion programmes will open up fresh block caves, delivering undiluted ore in higher grade areas
• Substantial higher revenue per tonne leading to increased margins
Cullinan – Mining Overview
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Cullinan Mining Schematic
BA5
Rock Shaft
Men & Material Shaft
Current Shaft Bottom 580 Level
630m Level
AUC South and BAW Phase 1
BB1E
830m Level
1073m base of Resource (open ended at depth)
930m Shaft Bottom
Current Infrastructure
Planned Infrastructure
C-CUT Phase 1
200 0 metres
Current extent of South Decline
16Ha @ 830 Level
Loading Level
880m Shaft Bottom
Current Shaft Bottom 805 Level
732m Level
Expansion Plan – Key Components • South Decline to establish
production at 830m and then on to the bottom of the new shaft at 930m – end FY 2012 (breakaway already established at 830m)
• Contract for shaft deepening & related infrastructure to be awarded imminently
• Development of North Decline to create further access to 830m production level - commencing Q3 FY 2012
• Shaft deepening from 580m to 930m to replace the current conveyor belt ore-handling system – mid FY 2015
• Production from new cave – commencing during FY 2015
• Upgrading and streamlining of plant facilities in order to treat 4Mt underground & 4Mt tailings – from FY 2015, 4 year ongoing programme
Vent Shaft
Production Shaft
630m Level 670m Level
770m Level
Shaft Bottom 825m
880m Block Cave
950m Decline to 880m
SLC Conveyor
Ore Handling
Sub level Cave
Block 4 Pillars
Block 4 Remaining
Block 5 Not in
current mine plan
Precursor SLC
Finsch – Mining Overview
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Kimberlite Footprint @880m Level: Main pipe: 3.7ha Precursors: 1.5ha
Finsch Mining Schematic
Current Infrastructure
Planned Infrastructure
Expansion Plan – Key Components • Mining currently taking place
in Block 4 at 630m – FY 2012
• Treatment of Pre 1979 Tailings – until FY 2015
• Accessing and development of Precursor SLC at 630m – FY 2013
• Development of Sub Level Cave at 770m – FY 2013
• Production from Block 5 at 880m – FY 2014 onwards
• Treatment of Post 1979 Tailings – FY 2015 to FY 2020
• Deepening of shaft to 950m and ore-handling infrastructure on 880m Level – End FY 2015
• Ramp up ROM to 3.5 Mpta – FY 2018
880m base of Resource (open ended at depth)
Williamson – Mining Overview
19
Granite Breccia RVK Bouma Shale Island BVK PK
Geology
205m
LOM Pit Shell
Schematic showing cut-away geology and planned open pit
N 1km
Williamson Kimberlite Pipe Schematic Expansion Plan – Key Components
• Stockpile (due to pit shaping activities) of ca. 900,000 t (ca. 45,000 cts)
• Enhanced rebuild of existing plant (3 Mtpa) near completion – expected to be in production Q3 FY 2012
• Standby power to be made available at site due to recent power issues – Q3 FY 2012
• Construction of new plant including autogenous mill – FY 2013
• Expansion plan to enable a 10 Mtpa operation – New timing tbc
Koffiefontein – Mining Overview
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Koffiefontein Kimberlite Pipe Schematic Expansion Plan – Key Components
• Installing new front cave at 590m Level – FY 2013
• Installing new block cave at 690m Level – FY 2016
• Tailings programme now ramped up with Petra processing +0.5 Mtpa
Kimberley Underground – Mining Overview
4.5 ha @ 870m Level
0.5 ha @ 845m Level
3.5 ha @ 995m Level
Kimberley Underground Kimberlite Pipes Schematic Expansion Plan – Key Components
• Bedding down Joint Shaft Plant after initial commissioning issues
• Constructing and commissioning of mobile pan plant (40,000 tpm) at Wesselton – September 2011
• Constructing and commissioning of main plant (40,000 tpm) at Wesselton – April 2012
• Underground development – FY 2012 onwards
• Sampling programme underway to extend mine life – FY 2012 onwards
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Capex Profile
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Financial Year 2012 2013 2014 2015 2016 2017 2018 2019 Operation Area
Finsch Existing Block 4 (630 meter Level) - Block 4 pillars - SLC Block 4 precursor - SLC 770 meter Level - Block 5 880 meter Level Development tonnes ROM Tonnes (Mt) 2.2 3.2 3.2 3.2 3.5 3.5 3.5 3.5 Tailings Tonnes (Mt) 1.6 2.8 3.5 3.5 3.5 3.0 3.0 3.0 Expansion Capex (US$m) 34.2 107.8 110.4 65.4 29.9 - - - Stay-in-business Capex (US$m) 4.7 6.6 6.9 6.9 7.1 6.8 6.8 6.9
Cullinan ROM Tonnes (Mt) 2.4 2.4 2.4 2.6 2.6 2.8 3.2 4.0 Tailings Tonnes (Mt) 1.0 3.0 4.0 4.0 4.0 4.0 4.0 4.0 Expansion Capex (US$m) 60.9 78.5 74.8 52.6 20.7 19.0 19.0 19.0 Stay-in-business Capex (US$m) 4.2 8.6 6.9 7.0 6.1 6.1 6.1 6.3 Williamson ROM Tonnes (Mt) 0.9 5.1 10.0 10.0 10.0 10.0 10.0 10.0 Expansion Capex (US$m) 45.9 35.3 - - - - - - Stay-in-business Capex (US$m) 4.3 6.2 6.5 6.2 5.9 5.6 5.3 5.0 Koffiefontein ROM Tonnes (Mt) 0.6 0.8 1.0 1.1 1.2 1.2 1.2 1.2 Tailings Tonnes (Mt) 0.9 0.9 0.7 0.6 0.5 0.5 0.5 0.5 Expansion Capex (US$m) 7.5 8.5 9.2 5.9 8.9 - - - Stay-in-business Capex (US$m) 4.0 4.2 4.3 2.8 2.6 2.5 2.5 2.4 Kimberley U/G ROM Tonnes (Mt) 1.1 1.2 1.0 1.0 1.0 1.0 1.0 1.0 Expansion Capex (US$m) 17.9 9.6 7.4 - - - - - Stay-in-business Capex (US$m) 3.0 2.9 2.4 2.4 2.3 2.3 2.2 1.7 Fissures ROM Tonnes (Mt) 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.3 Tailings Tonnes (Mt) - - - - - - - - Expansion Capex (US$m) - - - - - - - - Stay-in-business Capex (US$m) 2.1 2.1 2.1 2.0 1.9 1.9 1.9 1.8 Petra Diamonds (Gross)
ROM Tonnes (Mt) 7.4 12.9 17.9 18.2 18.6 18.8 19.2 20.0 Expansion Capex (US$m) 166.5 239.7 201.7 123.9 59.5 19.0 19.0 19.0 Stay-in-business Capex (US$m) 22.3 30.6 29.1 27.2 25.9 25.2 24.9 24.1
1. All monetary values stated in 2011 money terms; ZAR:USD rate used: R6.75
