2nd May 2006 07:01
Petra Diamonds Ld02 May 2006 Petra Diamonds Limited QUARTERLY ACTIVITIES REPORT FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2006 Petra Diamonds Limited ("Petra" or "the Company" or "the Group"), the AIM-quotedand ASX-listed diamond mining group (AIM and ASX: PDL), announces its quarterlyactivities report (unaudited) for the three month period ended 31 March 2006. Highlights • Exceptional exploration progress at Alto Cuilo in Angola, with further increases in the number and surface area of kimberlitic occurrences • 67.1 carat diamond recovered in South Africa • Kono project in Sierra Leone on track for first production June 2006 • Petra's operations in Botswana again deliver solid exploration progress Post Quarter End Highlights • Increase in kimberlitic occurrences identified at Alto Cuilo to an estimated 1,437 hectares in surface area • 67.1 carat diamond sold for US$704,265 Angola - Project Alto Cuilo • Alto Cuilo's potential as a major diamond project is further substantiated, with 38 kimberlitic occurrences now confirmed by drilling (December Quarterly Activities Report: 26 kimberlitic occurrences), giving a total estimated surface area of kimberlitic discoveries of approximately 1,437 hectares, as announced on 25 April 2006 (December Quarterly Activities Report: 1,080 hectares), continuing an unprecedented rate of development results in global diamond exploration • The third core drill rig will arrive on site shortly and will further accelerate the rate of discoveries and information flow • 74% of the 140 holes drilled to date have intersected kimberlitic material; 412 alluvial pits now completed, as announced on 25 April 2006 (December Quarterly Activities Report: 245 alluvial pits) Botswana - Kalahari Diamonds • 16,802 line kilometres of Falcon airborne gravity and magnetics flown in the Tshwaane block of the Mabutsane project area • 6,249 line kilometres of Xcalibur high-resolution low level airborne magnetic gradiometer survey flown over the Gope area • Ground geophysical orientation survey (magnetics and gravity) carried out over five known kimberlites in the Gope area • Ground follow up on Xcalibur anomalies in progress in the Gope area • Re-processing of all previous Falcon data to be undertaken • Drilling planned for the quarter to September 2006 Sierra Leone - Kono project • Diamond recovery from the first bulk samples expected by June 2006 • Macro diamonds recovered during sampling • First two bulk sampling intrusion points and shaft areas selected and pre-sinking programme initiated • Infrastructure for the central production plant and administrative facility completed • On-site construction of the production plant remains on track and is expected to be completed and commissioned by June 2006; the administrative facilities are already in place South Africa - Helam, Sedibeng and Star mines • Revenue recorded of £2.9 million for the quarter (quarter to December 2005: £2.6 million) • Production from the South African mines of 42,994 carats for the quarter, 131,634 carats for the nine months to March 2006 • Star will fall short of initial target due to focus on the ventilation raise-bore project which will be completed by June 2006; the benefit of this increased ventilation will now assist in tonnage build-up • The quarter to March was unusually challenging, in that South Africa suffered from exceptionally high rainfall which affected the continuity of production; this is not expected to be experienced from May onwards DIAMOND SALES SUMMARY Quarter to; Carats sold Price per carat (average) Sales US$ US$ M 31 March 2006 45,349 113.6 5.131 December 2005 33,985 134.4 4.630 September 2005 44,135 118.6 5.212 Months to;30 June 2005 141,977 131.1 18.6 DIAMOND SALES SUMMARY Quarter to; Total Diamonds Carats per Total Tonnes Tonnes Recovered 100 tonnes Hoisted Treated (carats) treated 31 March 2006: ROM 95,364 66,409 38,452 57.9031 March 2006: Tailings - 40,635 4,542 11.1731 December 2005: ROM 114,573 77,799 37,588 48.3131 December 2005: Tailings - 49,801 5,554 11.1530 September 2005: ROM 101,078 71,894 42,007 58.430 September 2005: Tailings - 45,132 3,491 7.712 Months to;30 June 2005: ROM & tailings 363,388 269,947 143,673 53.2 Corporate Cash Flow Summary 3 months to 3 months to 9 months to 31 March 2006 31 December 2005 31 March 2006 £'000 £'000 £'000 Net operating cash outflow - South 210 271 438African mines Net operating cash outflow, 466 388 2,017excluding exploration activities -Group Exploration activity outflows - Botswana 474 422 896- Sierra Leone 586 1072 2210 CAPEX 892 629 1,819 Net Group cash outflow 2,166 1,047 10,060 Exploration expenses: (i) cash outflows are expected to reduce for the Kalahari Diamonds exploration programme in Botswana from July 2006 in line with the refocus of exploration activities as covered under the Review of Operations below; (ii) cash outflows with regards to the Kono project in Sierra Leone are expected to reduce from the quarter to June 2006 as the major costs associated with the construction and commissioning of the recovery plant and associated activities have been met. CAPEX outflows as recorded for the quarters to December 2005 and March 2006 willreduce for the quarter to June 2006 as major CAPEX programmes are nearingcompletion. Cash and Stock Summary 31 March 2006 31 December 2005 £ million £ million Cash balance 4.9 7.1Diamond stock 1.2 1.2Total 6.1 8.3 Diamond stock is recorded at production cost; the quality of stock held at endMarch was unusually high and will give rise to significant cash inflows,including the 67.1 carat stone which was sold in April for £405,000(US$704,265). REVIEW OF OPERATIONS Angola, Project Alto Cuilo Kimberlite Exploration Programme Since the Company's last update on 15 March 2006 within the Interim ResultsStatement, solid exploration progress has been made at Alto Cuilo, with afurther increase in the estimated surface area of kimberlitic occurrences toapproximately 1,437 hectares. Ongoing drilling of the anomalies identified by the Midas low level helicopteraeromagnetic survey has now resulted in the identification of a further 5kimberlitic occurrences with an estimated surface area of approximately 114hectares. This takes the total to 38 kimberlitic occurrences with an estimatedsurface area of approximately 1,437 hectares, a significant increase over theresults reported by the Company on 15 March 2006. Drilling in excess of 19,196metres on 140 holes has been undertaken to date, with 104 of these holesintersecting kimberlitic material, an exceptional rate of 74%. The estimated surface area of the kimberlitic occurrences is based on theinterpretation of the magnetic anomalies identified, together with analysis ofdrilling results. The third core drill rig, which will serve to further accelerate the rate ofdiscoveries and information flow, is set to arrive on site shortly, two monthsahead of schedule. The importance of this third rig is supported by the factthat there are approximately 3,000 hectares of anomalies still to be drilled.Whilst it is unlikely that all of these unexplored anomalies will all bekimberlitic in nature, the size of the area to be investigated and success ratecan continue to be viewed as unprecedented with regards to global kimberliteexploration. The large diameter drill rig and 10 tonne per hour sample plant both remain ontrack for delivery in June 2006. This rig will initially take a minimum of 200tonne bulk samples from the most prospective anomalies and the 10 tonne per hourmobile dense media separation ("DMS") plant will treat these bulk samples. Alluvial Exploration Programme The alluvial pitting and trenching programme continues in order to furtherevaluate the potential for economically viable alluvial deposits, with 412 pitsalready completed. An economic feasibility study is underway on an area ofspecific interest. BHP Billiton Joint Venture As at 31 March 2006, BHP Billiton had advanced funding of US$16.1 million (31December 2005: US$13.3 million) to Petra Diamonds Alto Cuilo Limited in respectof exploration at Alto Cuilo. Botswana, Kalahari Diamonds Since the acquisition of Kalahari Diamonds Limited by Petra in September 2005,there has been a change in exploration focus from primarily large kimberlites(greater than 20 hectares), to include smaller kimberlites (approx 10 hectares)that would not necessarily be detectable by Falcon airborne gravity under deep(greater than 50 metres) Kalahari cover. Gope With the above in mind, a low level (15 metres above ground level) survey wasflown over 680 km(2) of the Gope area, covering an area containing knownkimberlites of 10 hectares or less, and the larger part of a historicalkimberlitic indicator minerals ("KIM") anomaly covering approximately 1,000 km(2). Historical Falcon magnetic data is also in the process of being re-griddedand levelled to enhance anomalies that could represent smaller kimberlites. In addition to detecting the known kimberlites in the area, the airborne surveyidentified 25 anomalies from a first pass interpretation, and a further 22anomalies from more detailed interpretation with similar characteristics to theknown kimberlites. Ground orientation geophysics (magnetics and gravity) has also been undertakenover five of the known kimberlites covered by the Xcalibur survey to assesstheir magnetic and gravity signatures from ground follow-up work. This will helpin assessing and prioritising Xcalibur anomalies during the ground follow-upexploration phase that is currently in progress in the area. Mabutsane / Tshwaane The Falcon airborne gravity and magnetic survey of the Tshwaane block to thenorth of previous Mabutsane flight blocks was completed during the March 2006quarter, and preliminary gravity and magnetic data was received at the end ofthat quarter. There were no patently obvious large targets identified from thegravity data, though a number of exciting magnetic anomalies have beenidentified that will be further assessed once the final data set has beenreceived during the quarter to June. Follow up ground field work is projected tostart on this area and the reprocessed Mabutsane flying blocks, during thequarter to June 2006. The prominent gravity-only circular anomaly of 1.5 kilometre diameter that wasdrilled during the quarter to December 2005 is still to be adequately explained.The borehole has been re-logged in conjunction with the University of Botswana,and the base of the Kalahari has now been placed at 47 metres. Indicatorminerals have been recovered from borehole chips from 0 -130 metres (coveringthe first and second interpreted positions of the base of the Kalahari), andfrom 200 metres -240 metres (covering the Beaufort/Ecca contact). Insignificantamounts of KIM's were recovered in all samples, and all potential KIM garnetsfrom the end of the hole (230 metres -240 metres) were sent to Mineral Servicesin Cape Town for microprobe analyses; all proved to be non-kimberlitic. Density measurements of chips taken over the length of the borehole give densityranges typical of normal Karoo sediments, indicating that the source of theanomaly has not yet been tested. Further ground gravity work will be carried outover the anomaly to facilitate more accurate geophysical modelling of thecausative body. This anomaly must therefore be further investigated, with thepossibility of an intra-formational deep-seated kimberlite still to be tested. Other Areas All Falcon data from previous fly-blocks is being re-processed, with the primaryaim of enhancing the magnetic data. Interpretation of new data from areas apartfrom those already mentioned will start with the Orapa South Falcon blocks thatlie in close proximity to Orapa and Lethlakane, and straddle the 90 million yearkimberlite trend. Preliminary review of this magnetic data reveals anomalies asclose as 10 kilometres to the AK6 kimberlite which is presently being appraisedby African Diamonds. Follow up ground field work will commence in the second quarter as theinterpretation of the re-processed data proceeds. Sierra Leone - Kono Project Site establishment The infrastructure of the central production treatment and administrativefacility at the former National Diamond Mining Company facilities in the YengemaVillage has been completed. The facility has been positioned centrally betweenthe Lion dykes to reduce the ore transportation distance from the explorationand shaft sites. The construction of the production plant is well advanced with plantcommissioning underway and it is expected that it will be ready for diamondrecovery from treatment of initial bulk samples in June 2006. Exploration developments Exploration for the intrusion points (shaft sinking sites) on the Konokimberlite fissures is ongoing. During the quarter, investigation of the Lion 1intrusion point in the Nimikoro area was suspended because of unsatisfactoryresults. However, two intrusion points have been selected, one on Lion 5 and oneon Lion 3. These sites are being prepared for shaft establishment. It isexpected that each shaft will be sunk to a depth of 30 metres, when adits willbe driven along strike of the kimberlite fissures to recover in the order of10,000 tons of kimberlite from each shaft site. These kimberlite bulk sampleswill be processed in separate batches so that grades and diamond values for eachkimberlite fissure can be established to prioritise the full scale mining of thefissures. Kimberlite fissure exploration is being actively pursued on Lion 1 (KamaoChiefdom), Lion 5 (Tankoro Chiefdom), the extentions of Lion 5 into the theNimikoro Chiefdom and the Lion 2 and Lion 3 localities. Kimberlite fissures havebeen located at many localities and are being systematically opened up and testsampled. Macro diamonds have been recovered from small sample lots at Lion 2 andLion 3 whilst 6 macro diamonds, totaling approximately 1 carat, have beenrecovered from the kimberlite fissure selected for the intrusion point at Lion5. South Africa All the operations suffered from the effects of the unusually high rainfallexperienced in South Africa for the period mid-February to mid-April. Star Mine A total of 8,502 ROM fissure tonnes was delivered to the plant for 3,655 carats,yielding a grade of 42.9 carats per hundred tonnes ("cpht") for the quarter. Inaddition 5,253 tonnes of tailings were processed for 905 carats. This resultedin a total of 4,560 carats for the combined operations. During the quarter the pilot drilling and reaming of the raise-bore ventilationshaft (1.4 metres diameter) was completed. This entailed the drilling of 500vertical metres of shaft which produced approximately 3,000 additional wastetonnes that had to be hoisted from the mine. Final sealing and support of thisshaft is now being undertaken by contractors and should be complete by the timethe required return-ventilation airways are complete on 13 level. The time framefor completion is a further two months. As mentioned in the previous quarter, the upgrade of the plant front-end washingand crushing section is complete and will be commissioned during the quarter toJune 2006. In the Wynandsfontein section 3 new panels have been established on 15 level,utilising the new mining method, and are producing well. The 10 level haulagecontinues to be problematic, but replacement by the 14 level haulage is on trackfor commissioning before year-end. Now that the raise-bore project is nearingcompletion the deepening of the sub-shaft to 16 level will be recommenced. In the Burns section, 1 one new panel has been established on 15 level,utilising the new mining method and is producing well. Further, 2 new miningmethod panels are near production on this level. In addition 3 traditionalpanels are still producing on 14 level. Preparation for the deepening of themain shaft between 12 and 14 levels has progressed well (pilot raisingcomplete). Slyping of these two levels will commence during the quarter whilstthe pilot raising of 15 level to 14 level will commence. The preparation (coverdrilling) for the sinking to 16 level will also commence during the quarter toJune. Helam Mine A total of 27,824 ROM fissure tonnes was delivered to the plant for 26,658carats, yielding a grade of 95.8 cpht for the quarter. In addition 1,386 caratswere produced from the tailings operation. This resulted in a total of 28,044carats for the combined operation. The slyping and equipping of John Main Shaft to 20 level will be completedshortly. The pilot raising of the main shaft between 21 and 20 level is 50%complete. The location of the transfer belt (west sub shaft) to John Shaft hasbeen re-planned to 22 level (original 21 level). This is being done to utilizeprimary development rather than doing 120 metres of additional development. The Second Lease incline has been holed and equipped to 17 level. A loadingarrangement is now being prepared and will be commissioned during the quarter.In the interim, ore is being trammed by the traditional tramming route to theeast sub shaft. At John Main Shaft the preparation for skip hoisting has been completed with theloading arrangement and measuring flask on 15 level complete. The skip has beendelivered and will be installed shortly. A 1.06 MVA standby generatorinstallation has been acquired and should be commissioned during the nextquarter. At Edward Shaft the sub shaft deepening has reached 25 level. On surface, theore handling upgrade at Edward Shaft is still on schedule for completion by theend of the next quarter. Sedibeng Mine A total of 30,083 ROM fissure tonnes were delivered from the mining operation,which yielded 8,139 carats at a ROM grade of 27.0 cpht. In addition 2,251carats were produced from the Dancarl tailings operation at a grade in excess of8 cpht. This resulted in a total of 10,390 carats for the combined operation. The above average rainfall stretched pumping systems to the limit at times (3.5million litres/day) and resulted in some bottom level flooding. This somewhathampered shaft sinking and bottom level development during the quarter but wewill be able to recoup these these reversals. The 20 South drive into the Dancarl section is 90 metres short of beingvertically beneath Dancarl main shaft. The planning to initiate a raise-boreholing to the bottom of Dancarl main shaft is in progress so as to open thisblock of ground for mining. JOHAN DIPPENAARCHIEF EXECUTIVE OFFICER Notes 1. The information in this report that relates to Exploration Results, MineralResources or Ore Reserves is based on information compiled by Jim Davidson, Pr.Sci Nat (reg No 400031/06), who is a Member of the Geological Society of SouthAfrica, a 'Recognised Overseas Professional Organisation' ('ROPO'), included ina list promulgated by the ASX from time to time. Jim Davidson is a full-timeemployee of the Company and has sufficient experience which is relevant to thestyle of mineralisation and type of deposit under consideration and to theactivity which he is undertaking to qualify as a Competent Person as defined inthe 2004 Edition of the 'Australasian Code for Reporting of Exploration Results,Mineral Resources and Ore Reserves'. Jim Davidson has given his written consentto the inclusion in this report of the matters based on his information in theform and context in which it appears. 2. It should be noted that the potential quantity in this report is conceptualin nature, there has been insufficient exploration to define a Mineral Resourceand it is uncertain if further exploration will result in the determination of aMineral Resource. For further information, please contact: Justine Howarth / Annabel Leather Telephone: +44 (0) 20 7493 3713Parkgreen Communications, London Kevin Skinner Telephone: +61 (0) 8 8234 9555Field PR, Adelaide Mobile: +61 (0) 414 822 631 Rule 5.3 Appendix 5B Mining exploration entity quarterly report* Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98,30/9/2001. Name of entityPetra Diamonds Limited ACN or ARBN Quarter ended ("current quarter") 114474574 31 March 2006 Consolidated statement of cash flows* Current quarter Year to dateCash flows related to operating activities £'000 £'000 9 Months 1.1 Net profit/(loss) before taxation (1,171) (405)1.2 Adjustments for: - Depreciation and amortisation 806 2,094 - Foreign exchange loss/(gain) (404) (3,097) - Other non cash items 37 95 1.3 Operating profit /(loss) before working capital changes (732) (1,313)1.4 (Increase)/Decrease in trade and other receivables (281) (68)1.5 (Decrease)/Increase in trade payables 673 4351.6 (Increase)/Decrease in inventories (47) (838) Cash generated(used) in operations (387) (1,784)1.7 Interest paid (79) (233) Net Operating Cash Flows (466) (2,017) Cash flows related to investing activities 1.8 Payment for a) development expenditure (1,060) (3,106) b) instalment for equity and subsidiary investments - (3,134) c) property plant and equipment (892) (1,819)1.9 Proceeds from sale of: (a) prospects - - (b) equity investments - - (c) other fixed assets 14 461.10 Acquisition of subsidiary net cash - 3,1541.11 Interest received 41 2101.12 Other - - Net investing cash flows (1,897) (4,649) 1.13 Total operating and investing cash flows (carried forward) (2,363) (6,666) 1.13 Total operating and investing cash flows (brought forward) (2,363) (6,666) Cash flows related to financing activities 1.14 Subscription for shares and notes - net of costs - -1.15 Proceeds from sale of forfeited shares - -1.16 Proceeds from borrowings 244 2,6381.17 Repayment of borrowing - Convertible Notes and other group (47) (5,863) borrowings1.18 Dividends paid - -1.19 Transaction deal costs - (169) Net financing cash flows 197 (3,394) Net (decrease) increase in cash held (2,166) (10,060) 1.20 Cash at beginning of quarter/year to date 7,070 15,375 1.21 Exchange rate adjustments to item 1.20 (47) 12 1.22 Cash at end of quarter 4,857 5,327 Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the relatedentities Current quarter £'000 1.23 Aggregate amount of payments to the parties included in item 1.1 N/A 1.24 Aggregate amount of loans to the parties included in item 1.17 N/A 1.25 Explanation necessary for an understanding of the transactions N/A Non-cash financing and investing activities 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows N/A 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest N/A Financing facilities available Add notes as necessary for an understanding of the position. Amount available Amount used £'000 £'0003.1 Loan facilities 900 4703.2 Credit standby arrangements Nil Nil Estimated cash outflows for next quarter £'000 4.1 Exploration and evaluation 2004.2 Development 250 Total 450 Reconciliation of cash Reconciliation of cash at the end of the quarter (as Current quarter Previous quartershown in the consolidated statement of cash flows) £'000 £'000to the related items in the accounts is as follows. 5.1 Cash on hand and at bank 807 8605.2 Deposits at call 4,520 6,2105.3 Bank overdraft (470) -5.4 Other (provide details) Total: cash at end of quarter (item 1.22) 4,857 7,070 Changes in interests in mining tenements Tenement Nature of interest Interest at Interest at reference (note (2)) beginning of end of quarter quarter6.1 Interests in mining tenements relinquished, reduced or lapsed N/A 6.2 Interests in mining tenements acquired or increased N/A Issued and quoted securities at end of current quarter Description includes rate of interest and any redemption or conversion rightstogether with prices and dates. Total number Number quoted Issue price per Amount paid up per security security (see note 3) (pence) (see note 3) (pence)7.1 Preference +securities (description)7.3 +Ordinary securities 148,229,539 148,229,539 - -7.4 Changes during quarter (a) Increases through new issue 101,563 101,563 - - (b) Decreases through returns of capital, buy-backs - - - - 7.5 +Convertible debt securities 11% pa Nov 2005 - - - - 7.6 Changes during quarter (a) Increases through issues (b) Decreases through conversion and repayment - - - - 7.7 Options (description and conversion factor - see details below) 6,398,468 NONE SEE BELOW 7.8 Issued during quarter - - - 7.9 Exercised during quarter (133,334) - 54.5p 7.10 Expired during quarter - - Options 276,375 Employee Incentive Options expiring various dates, exercisable at $A1.12 each 86,250 Employee Incentive Options expiring various dates, exercisable at $A1.36 each 400,000 Director incentive Options expiring 11 April 2007 with exercise price of 30p, 35p, 40p and 45p each for each 100,000 tranche Director incentive Options expiring 5 September 2013 with exercise price of 44p each 1,500,000 Director incentive Options expiring 28 June 2014 with exercise price of 54.5p each 750,000 Director incentive Options expiring 16 June 2015 with exercise price of 85p each 2,250,000 Employee incentive Options expiring 5 September 2013 with exercise price of 44p each 385,000 Employee incentive Options expiring 13 September 2014 with exercise price of 56.75p each 50,000 Options exercisable by 16 June 2008 at 85p each 200,843 Employee incentive Options expiring 27 November 2015 with an exercise price of 65.75p 500,000 Warrants over ordinary shares Exercise Expiry Price 1,500,000 30p 31 December 2007 1,000,000 100p 31 December 2007 1,666,666 55.85p 14 August 2006 200,843 85p 17 June 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Petra Diamonds