3rd Oct 2005 07:01
Petra Diamonds Ld03 October 2005 Petra Diamonds Limited ("Petra", "the Company" or "the Group") Preliminary Results Announcement for the year ended 30 June 2005 (unaudited) Highlights Corporate: merger with Crown Diamonds NL completed and business fullyintegrated; placing undertaken raising a total of £17.1 million; dual AIM andASX listing; acquisition of Kalahari Diamonds Limited Angola: Alto Cuilo - 320 hectares of kimberlitic anomalies identified; BHPBilliton elected to fund all exploration at Alto Cuilo; helimag surveyundertaken with exciting results; pace of exploration increased Botswana: key base established in Botswana, the world's number one diamondproducer by value, through the acquisition of Kalahari Diamonds Limited Sierra Leone: 75 tonne per hour production plant to be commissioned on siteduring Q3 2005/6; diamond production from treatment of bulk samples expected Q32005/6 South Africa: mining income (before depreciation) of £413,732 for the month ofJune 2005; all mines achieve record US$ diamond prices; strong carat sales andrevenue for the 6 months to June 2005; operations on track to achieve growthorientated production and revenue targets Adonis Pouroulis, Chairman, said; "This has undoubtedly been a transformational year for Petra. We have stated aclear strategy to build Petra into a mid tier diamond mining group, offering aunique way for investors to gain exposure to a buoyant and growing diamondmarket. We are well on our way to achieving this objective and these resultsdemonstrate the rapid progress we have made. Petra believes that Africa offersexciting and vibrant deal flow and we look forward to further benefiting ourshareholders from this pipeline of opportunities." Summary of Results 2005 2004 Revenue (June only, post Crown merger effective 31 May) £1,225,292 - Loss for the year, before impairment of goodwill * £6,487,258 £4,219,863 Loss for the year * £11,319,283 £4,219,863 * Includes £3,510,106 (2004: £2,499,983) of expenditure related to developmentat Alto Cuilo that is not being incurred from May 2005 due to BHP Billiton'sfunding at Alto Cuilo. Chairman's Statement 2005 Dear Shareholder, It is with great pleasure that I present the 2005 financial statements in what Ibelieve has been the most important and successful year in your company'shistory. Petra Diamonds started off the financial year being just one of themany hopeful junior diamond explorers, and ended it by being the largest interms of market capitalisation and diamond production listed on the AIM market. Our objective of becoming a world class diamond mining and exploration groupdrew closer to reality as Petra increased in size and stature. It is anoteworthy achievement that Petra now employs just under 2,000 people in itsvarious operations, second only to De Beers in South Africa, as an employer andproducer of diamonds. Petra is a truly pan-African diamond group with operations from Sierra Leone inthe west through Angola and Botswana to South Africa in the south. It is acontinent that we believe offers some of the most exciting businessopportunities and one in which we feel we can be a force for good sustainabledevelopment. The 'African Renaissance' is certainly alive and well, and we areproud to be an active part of it. The year was filled with many highlights and I think it is important to mentiona few. Angola The Alto Cuilo project lived up to expectations delivering unprecedentedexploration success. The year saw BHP Billiton, our joint venture partner,committing to fund all exploration on the project concession area. Thisfast-tracked exploration on both alluvial and kimberlite anomalies. The kimberlite exploration programme led to the discovery of four majorkimberlitic material anomalies, all within close proximity of each other,totalling a surface area of 320 hectares. The magnitude of these discoveries isunprecedented in modern kimberlite exploration. A low level helimag survey wascompleted on one third of the project concession area. This has led to furthernew potential anomalies requiring the mobilisation of a second drill rig laterthis year. The coming year will also see large diameter drilling of the best 10to 12 anomalies and the processing of the mini bulk samples obtained. Theobjective of this is to establish economic deposits which could lead to minedevelopment. Seventy seven alluvial exploration pits were prepared, all with the aim ofuncovering an economic alluvial deposit. Work is in progress and we hope to bein a position to report back on these results in the near future. The costs of drilling, bulk sampling and associated activities on Alto Cuilo tothe end of April, when BHP Billiton elected to fund all expenditure, amounted to£3,510,106. Shareholders should note that, in accordance with best practice, itis our accounting policy to expense exploration expenditure in the year in whichit is incurred. Therefore the Company's expenditure on Alto Cuilo to date hasnot been recognised in the balance sheet and hence no accounting recognition isgiven to the potential of this world-class exploration target. Botswana On 7 September 2005 Petra announced that it had entered into a conditionalagreement to acquire the entire issued share capital of Kalahari DiamondsLimited for a consideration to be satisfied by the issue of 16,166,529 new Petrashares. The transaction was approved by the Kalahari shareholders on 26September 2005 and completed on 30 September 2005. The acquisition of Kalahari Diamonds introduces Petra to Botswana, the world'slargest diamond producer by value. The Kalahari ground is situated in what webelieve to be a highly prospective diamond territory and the coming year willsee an aggressive exploration programme aimed at the discovery of newkimberlites. Kalahari has an agreement with BHP Billiton whereby Kalahari hasrights in Botswana to direct the deployment of BHP Billiton's proprietary Falcontechnology and also has access to an experienced Falcon data acquisition andgeophysics team. The acquisition of Kalahari will ultimately introduce new shareholders to thePetra register including the World Bank (through the IFC) and some of theworld's largest diamantaires. BHP Billiton, who owned twenty percent of KalahariDiamonds, will also in due course become a larger shareholder in Petra. Botswana hosts two of the world's biggest diamond mines, Orapa and Jwaneng. Theacquisition of Kalahari Diamonds meets one of Petra's objectives togeographically diversify its African asset base and gives Petra the largest landholding under diamond prospecting licence in Botswana. South Africa The successful merger with Crown Diamonds NL to form one of the largest juniordiamond players was key to Petra's objective of moving from being a pureexplorer to a producer. This allowed the Company to benefit from a buoyant roughdiamond market that saw prices increasing for the third year running. Crownbrought with it a highly experienced management team which coupled with Petra'sexploration and financial expertise resulted in a fully fledged diamond groupcomplete with its own geological, mining and engineering expertise. We are confident that your company can further maximise efficiencies from themining complexes leading to increased production. Although the mines in SouthAfrica have been in production for many years it is the view of the Board andmanagement that at least a fifteen year life remains in all these operations. Sierra Leone Along with the three producing South African mines, Crown brought with it theexciting Mano River Resources joint venture, the Kono project in Sierra Leone.Mobilisation is underway which will see limited production from the Kono projectin the first half of next year. Sierra Leone is an investor friendly andKimberley Process certified country. We hope that this project will lead on tofurther developments in that country. Results As Petra's effective date of control of the Crown mines was 1 June 2005, theresults for the year reflect the results for the Petra group (pre theacquisition of Crown Diamonds NL) for the eleven months to 31 May and for theenlarged group, including one month's performance from the Crown operationsacquired, to 30 June 2005. The loss for the year, before the goodwill impairment referred to below, was£6.5m (2004: £4.2m). This loss includes £3.5m (2004: £2.5m) of expenditurerelated to development at Alto Cuilo that fell away from May 2005 due to BHPBilliton's funding at Alto Cuilo. The activity and associated costs at AltoCuilo led to the significant exploration developments noted above. Petra's costswith regards to its current Angolan interests are expected to be approximately£0.25m for the 2005/6 financial year. The goodwill impairment has arisen due to the Board taking the prudent view ofrestating the fixed assets acquired from the Crown merger to the preferredvaluation arrived at by Snowden Mining Consultants in their reports published atthe time of the merger and correspondingly the adjustment has been reflected infull in the 2005 financial year. The results from the Crown South African production operations acquired havebeen consolidated into the Petra Group results for the month of June 2005 and Iam pleased to report that the 'profit on mine', that is mining profit beforedepreciation, arising from these operations was £413,732 for the month. Funding An institutional placing was undertaken as part of the Crown merger, whichraised £17.1m (£15.3m net of placing fees and merger costs) at 85 pence pershare. These funds were raised to settle deferred acquisition costs in respectof the Helam mine, develop the Sierra Leone joint venture properties,investigate new business opportunities in Southern Africa and Sierra Leone,settle various term loans, secure the outstanding Crown loan notes, settle thecosts and fees related to the Crown merger and placing and provide workingcapital to the Group. As at 30 June 2005 the Group had cash balances of £15.3m and, after settlementin July of the Helam mine acquisition costs, various term loans and otherexpenditure to date, as at 30 September the Group had cash in hand of £8.2m andother than a loan to finance the Sedibeng JV of £1.4 m, the Group was debt free. Nabera Both Petra and Nabera continue to work with both Alexkor and the South AfricanGovernment with regards to the "value added" and management fees that are due tothe Nabera consortium, in which Petra is a 29.5% shareholder. Whilst the processis slow, it remains the Board's objective that the "value-added" and managementfees be finalised with the Government and Alexkor in an amicable manner in thenear future. Objectives and strategy Petra aims to be a world class diamond group and mid-tier producer of gemstonediamonds. This will be achieved by possessing a highly prospective explorationportfolio ensuring future growth, organically expanding the Group's productionprofile and by geographically diversifying the country spread. Our strategy will therefore be to effectively explore and develop our projectsin Angola, Botswana and Sierra Leone. This will be underpinned and supported byincreasing production from the mines in South Africa with no significantincrease in unit operating costs. In the medium term, production is planned fromthe kimberlite fissures in Sierra Leone. In conjunction with all of this, anynew diamond projects that meet and fulfil Petra's overlying objectives will becarefully scrutinised. The past few years have shown us that to achieve success and maximise ourability to operate on the African continent, local participation is vital andessential. To this end a strategy of carefully choosing quality partnershipswill be implemented in our projects. This we believe makes commercial sense andhelps ensure the long term viability and sustainability of our business. Social development I am proud to inform shareholders that at Project Alto Cuilo in north easternAngola, we provided the adjacent village with fresh, clean running water for thefirst time in the village's history. A school was built which is staffed with apermanent teacher, supplied by the Angolan Government. The clinic in the camp isalso staffed with a full time doctor and paramedic providing treatment not onlyto the employees of the project but also to family members and the generalpopulace. We hope to be able to provide similar and other services in all thecommunities in which we work. We believe it is an important role of your Companyto improve the lives of all the communities in which we are involved. Staff The merger with Crown resulted in many new people joining the Group and Iwelcome all these new members to Petra. In particular I am pleased to have addedto the strength of the Board by welcoming Johan Dippenaar as Petra's ChiefExecutive Officer and Jim Davidson as Technical Director, giving the Board abalanced blend of mining, geological, commercial and financial expertise. I wish to acknowledge and thank all our staff who have made this the successfulyear it has been. Their hard work has certainly paid off. I look forward to yourcontinued support in what promises to be an equally exciting and challengingyear ahead. Adonis Pouroulis 30 September 2005 PETRA DIAMONDS LIMITED - PRELIMINARY RESULTS CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2005 (Unaudited) Notes 2005 2004 Unaudited Audited £ £Revenue 1,225,292 -Cost of Sales 4 (1,060,954) - Gross profit 164,338 -Other operating income - 4,424Exploration expenditure 5 (3,799,608) (2,499,983)Other operating expenditure 6 (2,503,010) (1,478,477)Impairment of goodwill (4,832,025) -Financial income 19,636 16,099Financial expense (333,106) (261,926)Net financing costs 7 (313,470) (245,827)Loss before tax (11,283,775) (4,219,863)Income tax expense (35,508) -Loss for the year (11,319,283) (4,219,863)Basic and diluted loss per share - pence 8 (15.31) (7.45)The Group's income and expenses all relate to continuing operations in the current and previousyear. CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 30 JUNE 2005 2005 2004 £ £Loss for the year (11,319,283) (4,219,863)Exchange adjustments on translation of subsidiary and branchundertakings recognised directly in equity 647,083 153,094Total recognised gains and losses relating to the (10,672,200) (4,066,769)year CONSOLIDATED BALANCE SHEET FOR THE YEAR ENDED 30 JUNE 2005 (Unaudited) Notes 2005 2004 Unaudited Audited £ £ASSETSProperty, plant and equipment 40,938,217 1,782,408Intangible assets 187,199 79,576Investment in associates - -Trade and other receivables 89,960 -Total non-current assets 41,215,376 1,861,984 Inventories 782,996 -Trade and other receivables 1,563,640 550,838Cash and cash equivalents 15,374,678 3,766,852Total current assets 17,721,314 4,317,690 Total assets 58,936,690 6,179,674 EQUITY AND LIABILITIESEquityIssued capital 13,094,946 6,784,998Share premium account 56,711,873 18,834,587Foreign currency translation reserve 2,286,161 1,639,078Accumulated loss (34,767,466) (23,578,125)Total equity 37,325,514 3,680,538 LiabilitiesInterest-bearing loans and borrowings 239,470 2,000,000Trade and other payables 1,114,737 13,620Provisions 956,758 -Deferred tax liabilities 6,648,166 -Total non-current liabilities 8,959,131 2,013,620 Interest-bearing loans and borrowings 6,464,162 -Trade and other payables 5,049,297 166,412Provisions 1,138,586 319,104Total current liabilities 12,652,045 485,516 Total liabilities 21,611,176 2,499,136 Total equity and liabilities 58,936,690 6,179,674 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2005 (Unaudited) 2005 2004 Unaudited Audited £ £Loss after taxation for the year (11,319,283) (4,219,863)Depreciation of property plant and equipment - 340,966 44,402explorationDepreciation of property plant and equipment - mining 249,394 -Depreciation of property plant and equipment - other 15,628 7,783Amortisation of intangible assets 4,409 4,250Profit on sale of property plant and equipment (866) -Impairment of intangible assets 73,710 -Impairment of goodwill 4,832,025 -Interest received (19,636) (16,099)Interest paid 216,585 113,700Foreign exchange loss 497,083 218,432Operating loss before working capital changes (5,109,985) (3,847,395)(Increase) in trade and other receivables (563,539) (383,855)Increase in trade and other payables 1,088,439 107,308(Increase) in inventories (28,860) -Cash utilised in operations (4,613,945) (4,123,942)Interest paid (216,585) (113,700)Net cash utilised by operating activities (4,830,530) (4,237,642)Cash flows from investing activitiesProceeds from sale of property, plant and equipment 866 -Acquisition of subsidiary net of cash acquired 57,688 -Interest received 19,636 16,099Acquisition of property, plant and equipment (1,414,606) (1,776,097)Development expenditure (102,270) -Net cash from investing activities (1,438,686) (1,759,998) Cash flows from financing activitiesProceeds from the issue of share capital 18,106,789 7,577,133(Decrease) / increase in long term borrowings (218,837) 1,923,410Net cash from financing activities 17,887,952 9,500,543 Net increase in cash and cash equivalents 11,618,736 3,502,903Cash and cash equivalents at beginning of the year 3,766,852 263,949Effect of exchange rate fluctuations on cash held (10,910) -Cash and cash equivalents at end of the year 15,374,678 3,766,852 NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2005 1. BASIS OF PREPARATION The Group financial statements are prepared on the historical cost basis and arepresented in Pounds Sterling. The preparation of financial statements in conformity with IFRS requiresmanagement to make judgements, estimates and assumptions that affect theapplication of policies and reported amounts of assets and liabilities, incomeand expenses. The estimates and associated assumptions are based on historicalexperience and factors that are believed to be reasonable under thecircumstances, the results of which form the basis of making judgements aboutcarrying values of assets and liabilities that are not readily apparent fromother sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised if the revision only affects that period, or in the periodof revision and future periods if the revision affects both current and futureperiods. The accounting policies set out below have been applied consistently to allperiods presented in these financial statements by all Group entities. 2. SEGMENTAL INFORMATION Segment information is presented in respect of the Group's business andgeographical segments. The primary format is based on the Group's management andinternal reporting structure. Segment results, assets and liabilities include items directly attributable to asegment as well as those that can be allocated on a reasonable basis.Unallocated items comprise mainly income earning assets and revenue,interest-bearing borrowings and expenses and corporate assets and expenses.Segment capital expenditure is the total cost incurred during the period toacquire segment assets that are expected to be used for more than one period. Business and Geographical segments The Group comprises the following business segments: Mining - the extraction and sale of rough diamonds from mining operations inSouth Africa for the diamond industry. Exploration - the exploration of rights held in Angola, Sierra Leone and SouthAfrica. Business segments Mining Exploration Eliminations Consolidated 2005 2005 2005 2005 £ £ £ £Revenue from external customers 1,225,292 - 1,225,292 -Segment result 164,338 (11,007,711) - (10,843,373)Operating profit 37,406 (11,007,711) - (10,970,305)Net financing income/(costs) 72,058 (385,528) - (313,470)Income tax expense (35,508) - - (35,508)Profit/(loss) for year 73,956 (11,393,239) - (11,319,283) Segment assets 45,065,076 43,718,814 (29,847,200) 58,936,690Total assets 45,065,076 43,718,814 (29,847,200) 58,936,690 Segment liabilities 18,553,530 3,258,949 (201,303) 21,611,176Total liabilities 18,553,530 3,258,949 (201,303) 21,611,176 Cash flows from operations 339,461 (5,169,991) - (4,830,530)Cash flows from investing (81,054) (1,357,632) - (1,438,686)Cash flows from financing (245,582) 18,133,534 - 17,887,952Capital expenditure 188,992 1,225,614 - 1,414,606Impairment losses (4,832,025) (73,710) - (4,905,735) Geographical segments Angola South Africa Sierra Leone ConsolidatedRevenue from external customers - 1,225,292 - 1,225,292Segment assets 2,879,685 55,869,806 187,199 58,936,690Cash flows from operations (3,072,044) (1,758,486) - (4,830,530)Cash flows from investing (1,167,925) (168,491) (102,270) (1,438,686)Cash flows from financing 4,856,812 12,928,870 102,270 17,887,952Capital expenditure 1,225,614 188,992 - 1,414,606Impairment losses - (4,905,735) - (4,905,735) 2. SEGMENTAL INFORMATION (continued) Business segments Mining Exploration Consolidated 2004 2004 2004 £ £ £Revenue from external customers - - -Segment result - (3,974,036) (3,974,036)Operating profit - (3,974,036) (3,974,036)Net financing costs - (245,827) (245,827)Income tax expense - - -Loss for year - (4,219,863) (4,219,863) Segment assets - 6,179,674 6,179,674Total assets - 6,179,674 6,179,674 Segment liabilities - 2,499,136 2,499,136Total liabilities - 2,499,136 2,499,136 Cash flows from operations - (4,237,642) (4,237,642)Cash flows from investing - (1,759,998) (1,759,998)Cash flows from financing - 9,500,543 9,500,543Capital expenditure - 1,776,097 1,776,097Impairment losses - - - Geographical segments Angola South Africa Sierra Leone ConsolidatedRevenue from external customers - - - -Segment assets 2,122,150 4,057,524 - 6,179,674Cash flows from operations (2,828,032) (1,409,610) - (4,237,642)Cash flows from investing (1,762,332) 2,334 - (1,759,998)Cash flows from financing 4,208,434 5,292,109 - 9,500,543Capital expenditure 1,762,332 13,765 - 1,776,097Impairment losses - - - - 3. ACQUISITION OF SUBSIDIARY On 31 May 2005, the Company acquired all the shares in Crown Diamonds NL ("Crown"), an Australian listed entity, for £25,814,334, satisfied by the issue of37,962,256 shares. Crown operated three diamond mines in the Republic of SouthAfrica and had an exploration interest in Sierra Leone. In the one month to the30 June 2005 the subsidiary contributed a mining profit, before depreciation of£413,732. Effect of the acquisition The acquisition had the following effect on the Group's assets and liabilities. Crown's net assets at acquisition date: Book Values Fair value Carrying Values Adjustments Consolidated fair value of net assets of entityacquired:-Mineral properties 15,202,872 3,450,111 18,652,983Plant and equipment 7,877,282 10,711,196 18,588,478Exploration and evaluation 82,567 - 82,567Cash assets 57,688 - 57,688Inventories 754,136 - 754,136Receivables 406,140 - 406,140Receivables from related parties 133,083 - 133,083Deferred tax liabilities (6,423,275) - (6,423,275)Settlement of purchase consideration (3,849,972) - (3,849,972)Bank loans - secured (805,554) - (805,554)Bank loans - unsecured (2,439,659) - (2,439,659)Convertible notes - secured (1,276,717) - (1,276,717)Loans from directors of Crown (356,918) - (356,918)Accruals and payables (929,409) - (929,409)Interest on interest bearing liabilities (43,620) - (43,620)Payables to related party (116,182) - (116,182)Provision for rehabilitation (924,251) - (924,251)Other provisions (527,209) - (527,209) 6,821,002 14,161,307 20,982,309Goodwill 4,832,025Consideration paid satisfied in shares 25,814,334 4. COST OF SALES 2005 2004 £ £Raw materials and consumables used 395,958 -Employee expenses 470,364 -Depreciation of mining assets 249,394 -Changes in inventory of finished goods (54,762) - 1,060,954 - 5. EXPLORATION EXPENDITURE 2005 2004 £ £Employee expenses 994,315 479,350Depreciation of exploration assets 340,966 44,402Drilling costs 953,356 361,240Equipment hire 570,305 120,010Other exploration costs 940,666 1,494,981 3,799,608 2,499,983 6. OTHER OPERATING EXPENDITURE 2005 2004 £ £Auditors' remuneration- audit services 117,796 60,534Amortisation of intangible assets 4,409 4,250Depreciation of property plant and equipment 15,628 7,783Operating lease rentals 187,822 216,548Staff costs 967,310 537,839Bid expenditure - 33,394Impairment of intangible assets 73,710 -Profit on disposal of property plant and equipment 866 -Other charges 1,135,469 618,129 2,503,010 1,478, 477In addition to the above, fees paid to the auditors during 2005amounting to £121,099 in respect of non-audit services have beencharged to the share premium account as share issue costs. 7. NET FINANCING COSTS 2005 2004 £ £On bank loans and overdrafts (29,395) (74)Other debt finance costs (187,190) (113,626)Foreign exchange losses (116,521) (148,226) (333,106) (261,926)Interest received 19,636 16,099 (313,470) (245,827) 8. LOSS PER SHARE 2005 2004 £ £The calculation of loss per share is based on the loss for thefinancial year of £11,319,283 (2004: £4,219,863) and on aweighted average of 73,937,847 (2004: 56,682,704) ordinary sharesof 10p each in issue during the year. Loss for the year 11,319,283 4,219,863 Shares SharesBasic weighted average number of ordinary shares in issue 73,937,847 56,682,704 Pence PenceBasic loss per share - pence (15.31) (7.45)Due to the Group's loss for the year, the diluted loss per shareis the same as the basic loss per share Weighted average number of ordinary sharesAs at 1 July 2004 67,849,976 51,638,496Effect of shares issued during the period 6,087,871 5,044,208Weighted number at 30 June 2005 73,937,847 56,682,704 9. DIVIDENDS The Directors do not recommend the payment of a dividend for the year. 10. ANNUAL REPORT AND ACCOUNTS The results for the year ended 30 June 2005 are unaudited and do not constitutestatutory accounts. The Report and Accounts for the year ended 30 June 2004,which include an unqualified Audit Report, are available from the Company'sheadquarters at Elizabeth House, 9 Castle Street, St. Helier, Jersey, JE4 2QP.Copies of the audited Report and Accounts for the year ended 30 June 2005 willbe posted to shareholders in October 2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Petra Diamonds