Annual Report 2005
Adonis Pouroulis, Chairman
“This has undoubtedly been a transformational year for Petra. We have stated a clear
strategy to build Petra into a mid-tier diamond mining group, offering a unique way for
investors to gain exposure to a buoyant and growing diamond market.
We are well
on our way to achieving this objective and these results demonstrate the rapid progress we
have made.
Petra believes that Africa offers exciting and vibrant deal flow and we look
forward to further benefiting our shareholders from this pipeline of opportunities.”
Contents
1 Highlights
3
Introduction
5 Chairman’s Statement
11 Operational Review
22
Financial Review
24 Directors’ Report
26 Directors’ Remuneration Report
28 Corporate Governance Statement
34 Directors
36 Group Contact Details
37
38 Consolidated Income Statement
38 Consolidated Statement of Total Recognised Gains and Losses
39 Consolidated Balance Sheet
40 Consolidated Cash Flow Statement
41 Notes to the Annual Financial Statements
70 Notice of Annual General Meeting
Independent Auditors’ Report
Highlights
Highlights for 2005
Corporate: merger with Crown Diamonds NL completed and business fully integrated;
placing undertaken raising a total of £17.1 million; dual AIM and ASX listing; acquisition
of Kalahari Diamonds Limited; proposed merger with Mano River Resources Inc
Angola: Alto Cuilo – 320 hectares of kimberlitic anomalies identified; BHP Billiton
elected to fund all exploration at Alto Cuilo; helimag survey undertaken with exciting
results; pace of exploration increased
Botswana: key base established in Botswana, the world’s number one diamond
producer by value, through the acquisition of Kalahari Diamonds Limited
Sierra Leone: 75 tonne per hour production plant to be commissioned on site
during Q3 2005/6; diamond production from treatment of bulk samples expected
H2 2005/6
South Africa: mining income (before depreciation) of £413,732 for the month of June
2005; all mines achieve record US$ diamond prices; strong carat sales and revenue
for the six months to June 2005; operations on track to achieve growth orientated
production and revenue targets
Summary of results
Revenue (June only, post Crown merger effective 31 May)
Loss for the year, before impairment of goodwill*
Loss for the year*
2005
£
1,225,292
6,487,258
11,319,283
2004
£
—
4,219,863
4,219,863
* Includes £3,510,106 (2004: £2,499,983) of expenditure related to development at Alto Cuilo that is not
being incurred from May 2005 due to BHP Billiton’s funding.
Petra Diamonds Limited Annual Report 2005 1
Focus on Africa’s
Petra has taken significant
strides during the past year
towards achieving its objective
of becoming a mid-tier
diamond producer
Focus on Africa’s
rich resources
Introduction
Petra Diamonds Limited (“Petra” or the “Company”) is an AIM
quoted and ASX listed diamond group focused on the exploration
and mining of diamonds in Africa. Petra has taken significant
strides during the past year towards achieving its objective of
becoming a mid-tier diamond producer, with impressive progress
at the Alto Cuilo project, the merger with Crown Diamonds NL,
the acquisition of Kalahari Diamonds Limited in Botswana and
the proposed merger with Mano River Resources Inc.
Through this corporate activity, Petra has developed a well
balanced portfolio of diamond assets in various phases of
development, ranging from green field exploration to production,
with geographically diversified African operations. The Company’s
growth can be seen in its market valuation, which is now the
largest of the diamond companies currently listed on AIM.
Petra’s primary exploration focus continues to be the Alto
Cuilo project area in north-eastern Angola. Huge progress has
been made at this project over the past year, with BHP Billiton
electing to sole fund all exploration costs on behalf of PDAC, the
Petra/BHP Billiton joint venture company. Four major kimberlitic
anomalies have been discovered, covering 320 hectares; other
key anomalies will be drilled in the near future and alluvial
exploration pits have been prepared for further investigation.
The Company also has interests in two further projects in Angola,
Medio Kwanza, west of Alto Cuilo and Muriege, further east, but
the main focus is currently on proving up and realising value at
the Alto Cuilo project.
South Africa remains one of the world’s major producers of quality
diamonds and in February 2005 Petra announced a proposed merger
with Australian listed Crown Diamonds NL (“Crown”). The transaction
became effective in May 2005 and through the merger, which led to
the Company being listed on the ASX, Petra acquired three producing
diamond mines in South Africa: Helam, Star and the Messina/
Dancarl joint venture with Sedibeng Mining, Petra’s Black Economic
Empowerment (“BEE”) partner. All three of these diamond operations
are kimberlite fissure mines with a life of mine in excess of 15 years
each and all three produce high quality diamond gem stones. The
Company is on schedule to produce in excess of 200,000 carats of
gem quality stones from these mines in 2005/6 and record diamond
prices have been achieved from all of these operations in the period
to June 2005.
Both Petra and Nabera Mining (Pty) Ltd continue to work with
both Alexkor and the South African Government in order to
settle the ‘value added’ and management fees due to the Nabera
consortium, in which Petra is a 29.5% shareholder. Whilst
the process has been slow, it remains the Board’s objective to
conclude this business on good terms with all parties.
The strong technical and financial relationship the Company has
with BHP Billiton has been enhanced by Petra’s post year end
announcement in September 2005 of the all-share acquisition
of Kalahari Diamonds Limited (“Kalahari”). Kalahari has highly
prospective exploration land in Botswana. Kalahari’s agreement
with BHP Billiton includes the deployment of BHP Billiton’s Falcon
technology and access to an experienced data acquisition and
geophysics team. This acquisition has given Petra an important
base in Botswana, with access to five known kimberlites in the
Gope area, as well as other potential kimberlites in surrounding
licence areas. Not only is Botswana the world’s largest diamond
producer by value, it also offers a modern, highly developed
mining, commercial and financial environment.
The Company’s commitment to geographic diversification
throughout Africa was further demonstrated by a second post
year end announcement of a proposed merger with Mano
River Resources Inc (“Mano”) in October 2005. Petra has been a
JV partner with Mano in Sierra Leone since the Crown merger,
focusing on the production of diamonds from the underground
mining of diamond-bearing kimberlite dykes within the famous
Kono diamond district. This will be the first time in Sierra Leone’s
history that kimberlite dykes will be commercially mined and
the Company is accelerating its production plans with the
manufacture of a 75 tonne per hour production plant to be
commissioned on site during the first quarter of 2006. The
exceptional quality of Sierra Leone’s diamonds has seen an
average price per carat in the first half of 2005 in the region of
US$200 per carat.
On completion, the Mano transaction would also extend Petra’s
exploration interests in West Africa to Guinea and Liberia. Petra
expects to fast-track the development of the Bouro kimberlite
dyke deposit in Guinea, which is reported to have an in-situ
grade of 500 carats per hundred tonnes and is in good host
rock conditions. Production from this source has the potential
to reach 250,000 carats per annum within three years. In the
Weasua area of Liberia, Mano discovered seven kimberlites. The
property is subject to a 50/50 joint venture with Trans Hex and
Mano can elect to be the operator. Petra intends to fast track the
investigation and potential development of these deposits with
its in-house expertise. A kimberlite has also been discovered in
the Camp Alpha area, where the Liberian government has a 30%
contributory joint venture interest.
The Company remains on course to deliver its strategic goals
of developing a world class exploration base complimented
by producing mines and a geographically diversified spread of
assets. Production of diamonds from South Africa and Sierra
Leone is expected to reach half a million carats per year within
five years; BHP Billiton’s decision to sole fund exploration and
development at Alto Cuilo in Angola gives further confidence to
Petra’s view that Alto Cuilo has the potential to be a substantial
source of diamonds; and the Company’s acquisitions bringing
exposure to Botswana, Guinea and Liberia all augur well for the
future prosperity of the Company and its shareholders.
Petra Diamonds Limited Annual Report 2005 3
A commitment to
Petra is a truly pan-African
diamond group with operations from
Sierra Leone in the west through
Angola and Botswana to
South Africa in the south
The ‘African Renaissance’ is certainly
alive and well, and we are proud
to be an active part of it
A commitment to success and quality
Chairman’s Statement
Dear Shareholder,
It is with great pleasure that I present the 2005
financial statements in what I believe has been
the most important and successful year in your
company’s history. Petra Diamonds started off
the financial year being just one of the many
hopeful junior diamond explorers, and ended
it by being the largest in terms of market
capitalisation and diamond production listed
on the AIM market.
Our objective of becoming a world class diamond mining and
exploration group drew closer to reality as Petra increased
in size and stature. It is a noteworthy achievement that
Petra now employs just under 2,000 people in its various
operations, second only to De Beers in South Africa, as an
employer and producer of diamonds.
Petra is a truly pan-African diamond group with operations
from Sierra Leone in the west through Angola and Botswana
to South Africa in the south. It is a continent that we believe
offers some of the most exciting business opportunities and
one in which we feel we can be a force for good sustainable
development. The ‘African Renaissance’ is certainly alive
and well, and we are proud to be an active part of it.
The year was filled with many highlights and I think it is
important to mention a few.
ANGOLA
The Alto Cuilo project lived up to expectations delivering
unprecedented exploration success. The year saw BHP
Billiton, our joint venture partner, committing to fund all
exploration on the project concession area.
The kimberlite exploration programme led to the discovery
of four major kimberlitic material anomalies, all within
close proximity of each other, totalling a surface area
of 320 hectares. The magnitude of these discoveries is
unprecedented in modern kimberlite exploration. A low
level helimag survey was completed on one quarter of
the project concession area. This has led to further new
potential anomalies requiring the mobilisation of a second
drill rig later this year. The coming year will also see large
diameter drilling of the best 10 to 12 anomalies and the
processing of the mini bulk samples obtained. The objective
of this is to establish economic deposits which could lead
to mine development.
Eighty six alluvial exploration pits were prepared, all with
the aim of uncovering an economic alluvial deposit. Work
is in progress and we will be in a position to report back on
these results in the near future.
The costs of drilling, bulk sampling and associated activities
on Alto Cuilo to the 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, it is our accounting policy to expense exploration
Petra Diamonds Limited Annual Report 2005 5
Geographically
Petra aims to be a world class
diamond group and mid-tier producer
of gemstone diamonds. Our strategy will
therefore be to effectively explore and
develop our projects in Angola, Botswana
and Sierra Leone. This will
be underpinned and supported by
increasing production from the
mines in South Africa
Geographically diversified asset base
Chairman’s Statement
(continued)
expenditure in the year in which it is incurred. Therefore the
Company’s expenditure on Alto Cuilo to date has not been
recognised in the balance sheet and hence no accounting
recognition is given to the potential of this world-class
exploration target.
BOTSWANA
On 7 September 2005 Petra announced that it had
entered into a conditional agreement to acquire the entire
issued share capital of Kalahari Diamonds Limited for a
consideration to be satisfied by the issue of 16,166,529 new
Petra shares. The transaction was approved by the Kalahari
shareholders on 26 September 2005 and completed on
30 September 2005.
The acquisition of Kalahari Diamonds introduces Petra to
Botswana, the world’s largest diamond producer by value.
The Kalahari ground is situated in what we believe to be a
highly prospective diamond territory and the coming year
will see an aggressive exploration programme aimed at the
discovery of new kimberlites. Kalahari has an agreement
with BHP Billiton whereby Kalahari has rights in Botswana
to direct the deployment of BHP Billiton’s proprietary
Falcon technology and also has access to an experienced
Falcon data acquisition and geophysics team.
The acquisition of Kalahari will ultimately introduce
new shareholders to the Petra register including the
World Bank (through the IFC) and some of the world’s
largest diamantaires. BHP Billiton, who owned twenty
percent of Kalahari Diamonds, will also in due course
become a larger shareholder in Petra.
Botswana hosts two of the world’s biggest diamond mines,
Orapa and Jwaneng. The acquisition of Kalahari Diamonds
meets one of Petra’s objectives to geographically diversify
its African asset base and gives Petra the largest land
holding under diamond prospecting licence in Botswana.
SOUTH AFRICA
The successful merger with Crown Diamonds NL to form
one of the largest junior diamond players was key to
Petra’s objective of moving from being a pure explorer to
a producer. This allowed the Company to benefit from a
buoyant rough diamond market that saw prices increasing
for the third year running. Crown brought with it a highly
experienced management team which, coupled with Petra’s
exploration and financial expertise, resulted in a fully
fledged diamond group complete with its own geological,
mining and engineering expertise.
We are confident that your company can further maximise
efficiencies from the mining complexes leading to increased
production. Although the mines in South Africa have been
in production for many years it is the view of the Board and
management 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 the exciting Mano River Resources
joint venture, the Kono project in Sierra Leone. Mobilisation
is underway which will see limited production from the
Kono project in the first half of next year. Sierra Leone
is an investor friendly and Kimberley Process certified
country. We hope that this project will lead on to further
developments in that country.
Petra Diamonds Limited Annual Report 2005 7
Chairman’s Statement
(continued)
WEST AFRICA
On 3 October 2005 the Company announced its proposed
merger with Mano River Resources Inc. The proposed merger
represents another major step in Petra’s long-term growth
strategy of becoming a significant player in the diamond
industry. Through our joint venture with Mano on the
Kono project in Sierra Leone it has become apparent that
West Africa has the potential to become a large producer
of diamonds. Many of the assets in the Mano portfolio, we
believe, can be fast tracked to production. Initial geological
interpretation and studies of these prospects are very
promising. Mano also brings with it a highly experienced
exploration and management team well versed with the
West African environment. The proposed merger gives both
Petra and Mano the ability to realise real value from the
West African assets in the medium term.
RESULTS
As Petra’s effective date of control of the Crown mines was
1 June 2005, the results for the year reflect the results for
the Petra group (pre the acquisition of Crown Diamonds
NL) for the eleven months to 31 May and for the enlarged
group, including one month’s performance from the Crown
operations acquired, 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 expenditure related to
development at Alto Cuilo that fell away from May 2005
due to BHP Billiton’s funding at Alto Cuilo. The activity
and associated costs at Alto Cuilo led to the significant
exploration developments noted above. Petra’s costs with
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 of restating the fixed assets acquired from
the Crown merger to the preferred valuation arrived at by
Snowden Mining Consultants in their report published at
the time of the merger and correspondingly the adjustment
has been reflected in full in the 2005 financial year.
The results from the Crown South African production
operations acquired have been consolidated into the Petra
group results for the month of June 2005 and I am pleased
to report that the ‘profit on mine’, that is mining profit
before depreciation, arising from these operations was
£413,732 for the month.
FUNDING
An institutional placing was undertaken as part of the
Crown merger, which raised £17.1m (£15.3m net of placing
fees and merger costs) at 85 pence per share. These
funds were raised to settle deferred acquisition costs in
respect of 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 the
costs and fees related to the Crown merger and placing and
provide working capital to the Group.
As at 30 June 2005 the Group had cash balances of £15.3m
and, after settlement in July 2005 of the Helam mine
acquisition costs, various term loans and other expenditure
to date, as at 30 September the Group had cash in hand of
£8.2m and other than a loan to finance the Sedibeng JV of
£1.4m, the Group was debt free.
8 Petra Diamonds Limited Annual Report 2005
Chairman’s Statement
(continued)
NABERA
Both Petra and Nabera continue to work with both Alexkor
and the South African Government with regards to the ‘value
added’ and management fees that are due to the Nabera
consortium, in which Petra is a 29.5% shareholder. Whilst the
process is slow, it remains the Board’s objective that the ‘value-
added’ and management fees be finalised with the government
and Alexkor in an amicable manner in the near future.
OBJECTIVES AND STRATEGY
Petra aims to be a world class diamond group and mid-
tier producer of gemstone diamonds. This will be achieved
by possessing a highly prospective exploration portfolio
ensuring future growth, organically expanding the Group’s
production profile and by geographically diversifying the
country spread.
Our strategy will therefore be to effectively explore and
develop our projects in Angola, Botswana and Sierra Leone.
This will be underpinned and supported by increasing
production from the mines in South Africa with no
significant increase in unit operating costs. In the medium
term, production is planned from the kimberlite fissures
in Sierra Leone. In conjunction with all of this, any new
diamond projects that meet and fulfil Petra’s overlying
objectives will be carefully scrutinised.
The past few years have shown us that to achieve success
and maximise our ability to operate on the African
continent, local participation is vital and essential. To this
end a strategy of carefully choosing quality partnerships
will be implemented in our projects. This we believe makes
commercial sense and helps 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 eastern Angola, we provided the adjacent village with
fresh, clean running water for the first time in the village’s
history. A school was built which is staffed with a permanent
teacher, supplied by the Angolan Government. The clinic
in the camp is also staffed with a full time doctor and
paramedic providing treatment not only to the employees
of the project but also to family members and the general
populace. We hope to be able to provide similar and other
services in all the communities in which we work. We believe
it is an important role of your Company to 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 I welcome all these new members to Petra.
In particular I am pleased to have added to the strength of
the Board by welcoming Johan Dippenaar as Petra’s Chief
Executive Officer and Jim Davidson as Technical Director,
giving the Board a balanced blend of mining, geological,
commercial and financial expertise.
I wish to acknowledge and thank all our staff who have
made this the successful year it has been. Their hard work
has certainly paid off. I look forward to your continued
support in what promises to be an equally exciting and
challenging year ahead.
ADONIS POUROULIS
Chairman
25 October 2005
Petra Diamonds Limited Annual Report 2005 9
Increased activity in
Demand for rough diamonds
is predicted to rise by at least
five percent each year until the
end of the decade
Increased activity in
the diamond market
Operational Review
The strong fundamentals of the diamond
market together with Petra’s growth strategy
puts the Company in a strong position to create
a substantial diamond mining group that will
have a world class exploration base, successful
producing mines and a geographically diversified
spread of assets on the African continent.
getting a boost from rising personal incomes and economic
growth. The number of Asian millionaires
increased
8.2 percent last year to 2.3 million as China’s economy
expanded 9.5 percent, according to a report by Cap Gemini
and Merrill Lynch & Co. De Beers have played a major part
in driving demand through their advertising and marketing
campaigns, which have subsequent benefits for the sector
as a whole. Gem diamond demand is also growing, with
diamond engagement rings becoming increasingly popular
in China. Japan is increasingly importing polished stones,
paying premium prices.
DIAMOND MARKET
Manufacturing operations are developing and proliferating,
The global diamond market has changed substantially over
with new cutting facilities being opened in China in
the last five years with a major change in strategy being
anticipation of the demand from its domestic market.
adopted by De Beers from being buyer of last resort to being
Competition in the trading of diamonds is also developing,
the supplier of choice. This strategy has led to substantial
with Antwerp’s and India’s platforms seeing increasing
growth in the volumes and prices of diamonds. The sector
rivalry from operations in Dubai. This is leading to premium
is enjoying strong fundamentals which point towards this
prices being paid in order to secure a supply for the
continuing for the foreseeable future.
downstream activity.
This increasing demand is coming from a number of areas.
In this climate, rough diamond prices may rise by 30 percent
The luxury goods sector in Asia, including jewellery, is
by 2012. Leading diamond analyst James Picton of WH Ireland
predicts that consumption will have reached US$18 billion
by that date. De Beers, which controls approximately half
of the world’s rough diamonds, estimates that demand
might rise to US$14 billion; either figure represents a
substantial increase from the US$10.2 billion generated by
diamond production in 2004, a rise itself of approximately
US$1 billion from the previous year.
From conservative estimates, demand for rough diamonds
is predicted to rise by at least five percent each year until
the end of the decade. Global supply of rough diamonds is
currently increasing at only half this rate. Few significant
diamond deposits have been discovered since the early
Petra Diamonds Limited Annual Report 2005 11
Operational Review
(continued)
1990s, and production from Australia, which has historically
been the world’s largest source of small diamonds, is
declining on a year-by-year basis. Despite Botswana and
Russia continuing to produce diamonds, with the potential
to increase production, and mining companies providing
more funding for exploration, supply shortages are set
to continue. It typically takes 5 – 8 years to assess the
economic viability of newly discovered deposits and bring
them into production.
FOCUS ON AFRICA’S RICH DIAMOND RESOURCES
So the stage is set for all diamond mining companies – from
Petra is focused on developing assets within the African
the large De Beers, BHP Billiton or Rio Tinto to the smallest
continent. The last few years have seen a development and
independent – to seek new kimberlite sources. Exploration is
rationalisation of the political and commercial environments
becoming more adventurous, with companies looking into
in many African countries which are considered to have a
areas which despite offering huge potential were ignored
high likelihood of hosting significant economic diamond
previously in favour of countries with more amenable
deposits. The ‘African Renaissance’, which has been underway
environments. Governments are becoming evermore aware
in recent years, has led to an increased level of exploration
of the value that investments such as diamond exploration
activity in Africa by both junior mining companies as well
can generate and climates are improving in order to invite
as the majors.
the capital potential.
ANGOLA
In summary, demand for rough diamonds is growing and
Petra has several exploration interests in Angola, with the
supply is constrained, driving prices higher. As Reuters
centre of attention being Project Alto Cuilo in the north-east
stated in July 2005, “The market, at least from the miner’s
of the country. Petra also has interests in Medio Kwanza and
perspective, is dazzling.”
Muriege but is not currently active in these concessions.
PETRA’S PROJECTS
12 Petra Diamonds Limited Annual Report 2005
Operational Review
(continued)
HELIMAG IMAGE ALTO CUILO (8 August 2005)
concession area. Initial results showed significantly more
Anomaly 12
(60 ha)
ALTO CUILO
KIMBERLITE PROGRAMME
Anomaly 5
(26 ha)
anomalies than the original 1998 aeromagnetic survey, due
to the use of twin sensors at closer line spacing and lower
flying height. It is anticipated that with completion of the
Anomaly 16
(125 ha)
necessary data processing work the number of anomalies
Anomaly 13/4
(109 ha/115m
tonnes)
Key Code:
= Holes intersecting
kimberlitic material
= Possible new
anomalies from low-
level Midas survey
will be substantially higher than the 69 identified in the
1998 aeromagnetic survey.
Drilling in excess of 12,119 metres on 94 holes has been
undertaken to date, with 66 of these holes intersecting
kimberlite; a success rate of 70%. Drilling results indicate
the presence of kimberlites with preserved crater zones
A low-level Midas helicopter survey was carried out in July
that have undergone very little erosion, thus underscoring
and August this year, identifying new anomalies of 26,
the potential for large size discoveries. Analysis of barren
60 and 125 hectares in surface area, these discoveries being
holes using new data has shown that the siting of some
in addition to the existing 109 hectares (115 million tonne)
of the previously drilled holes was not optimal; some of
deposit identified by Petra in 2004. Petra had been aware
these holes have been re-drilled and have now intersected
of there being a small anomaly at the 125 hectare target
kimberlitic material. To date all the anomalies that have
and had previously drilled two holes confirming it was of
been drilled have intersected kimberlitic material, with
kimberlitic nature but, since the anomaly is under sand cover
some holes intersecting kimberlite to vertical depths of
and with a low magnetic signature, Petra was not aware
280 metres, where drilling was stopped due to limitation of
of the magnitude as now defined by the helicopter survey.
drilling capacity but the kimberlite continued.
This anomaly is larger in surface area than the existing 115
million tonne (109 hectares) deposit at Alto Cuilo and is
The current drilling programme, to include a second core rig
within 500 metres of it. The 40 tonne sample (processed
that is currently being mobilised due to the high number of
in September 2004), which yielded a grade of 47 carats per
magnetic anomalies that require further investigation, will
hundred tonnes, was coincidentally taken from outcrops at
continue with the expectation of significantly increasing
the periphery of this new anomaly where a river had incised
the number of kimberlite discoveries. A third drill, capable
through the sand cover. Petra cannot yet confirm whether
of drilling large diameter holes, is scheduled to arrive by
these outcrops are part of this major new anomaly.
the middle of 2006. A 10 tonne per hour mobile plant has
also been ordered. When this arrives it is intended that
The helicopter survey entailed the flying of 13,183 line
it will take 200 tonne mini bulk samples from the most
kilometres, covering approximately 700km2 (26%) of the total
prospective anomalies.
Petra Diamonds Limited Annual Report 2005 13
Great partnerships
In the period to 30 June 2005
all mines achieved record
US$ prices for their goods and,
looking forward, all South African
operations are on track to achieve
the expected revenue targets
Great partnerships
and performance
Operational Review
(continued)
BHP Billiton has completed a valuation of the diamonds
per hour (“tph”) diamond recovery plant (MB100 and DMS)
recovered from the kimberlite sampling. Based on a
continues to be used mainly for the treatment of alluvial bulk
preliminary result obtained from 310 carats, the diamonds
samples. A total of 4,987 diamonds totalling 1,255 carats at
recovered from the kimberlite samples averaged US$295 per
an average stone size of 0.25 carats have been recovered to
carat. This is in excess of Petra’s previous estimates of
date from both alluvial and kimberlitic sources. Work on the
US$200 per carat.
alluvial exploration programme will continue.
ALLUVIAL PROGRAMME
ENDIAMA / LOCAL PARTNERSHIPS
A pitting and trenching programme on the river flats
Petra’s partnership with Endiama, the official representative
and hillsides is underway in order to further evaluate the
of the Angolan State in the diamond industry, began with
potential for economically viable alluvial deposits. Along the
Petra’s entry into Angola in 1996. The relationship has
Luangue River, 86 pits have been completed to date. Some
always been based on mutual corporate respect and it
of these pits have intersected good gravels, whilst others
has grown substantially in strength and stature under the
were poor or had to be abandoned due either to water or
current leadership of Dr Manuel Calado. Petra is committed
thick overburden. A trench sample of 735 tonnes was treated
to this mutually beneficial relationship and believes that
through the diamond recovery plant, yielding 104.63 carats
further cooperation between Petra and the Angolan
for an in-situ grade of 0.26 carats per cubic metre. The average
Government will continue to be of benefit to all parties. Our
stone size was 0.28 carats (bottom screen size 2.0 mm) with
local Angolan partner, Moyoweno, has also proven in the
two gem quality stones of 2.88 and 1.88 carats being recovered.
past to be a major source of support and Petra is confident
A second trench sample was processed from which a good
that this relationship will continue to grow from strength
5.6 carat stone was recovered. This produced 58 diamonds
to strength.
totaling 24.61 carats at an average stone size of 0.42 and an
in-situ grade of 0.091 carats per cubic metre. The 65 tonnes
BHP BILLITON JOINT VENTURE
BHP Billiton has elected (effective from May 2005) to sole
fund all kimberlite and alluvial exploration and related costs
on behalf of Petra Diamonds Alto Cuilo Limited (“PDAC”),
the Petra/BHP Billiton JV vehicle for the entire Alto Cuilo
concession.
From 1 January 2005 (the date at which BHP Billiton elected
to fund kimberlite exploration within the ML Complex, part
of the Alto Cuilo concession) to the end of September
2005, BHP Billiton has advanced funding of approximately
US$7.2 million to PDAC in respect of exploration at Alto
Cuilo. BHP Billiton will start earning a direct interest in
PDAC when it has advanced funding of US$7.5 million.
Petra Diamonds Limited Annual Report 2005 15
Operational Review
(continued)
BOTSWANA
On 30 September Petra acquired Kalahari Diamonds Limited
(“Kalahari”) in a share-for-share transaction. The acquisition
of Kalahari represents a significant step in Petra’s strategy
of building a quality exploration portfolio to complement
its current producing mines and diversifying its asset base.
Kalahari, through its wholly owned Botswana subsidiary,
Sekaka Diamonds, is the holder of approximately 77,000 km2
of highly prospective diamond prospecting licences in
The acquisition of Kalahari also introduces to Petra
Botswana.
kimberlites in the Gope area, as well as other potential
kimberlites in Sekaka’s licence areas. Petra’s track record in
Botswana is the world’s largest diamond producer by value,
the development of medium sized ore bodies will enable
with large producing mines at Jwaneng, Orapa, Letlhakane
us to effectively evaluate the potential of these kimberlite
and Damatshaa. The Orapa and Jwaneng pipes are of
occurrences and, if economic, quickly turn them to account.
exceptional size and host reserves and resources that support
a life of mine in excess of 20 years at present mining rates.
Petra’s work plan in Botswana over the next year will focus
Botswana also offers a modern, highly developed, mining,
on systematically following up the large licence areas that
commercial and financial environment.
were flown by Falcon prior to the acquisition of Kalahari.
Petra will fly Falcon over additional selected prospecting
Kalahari has an agreement with BHP Billiton to direct the
licence areas, certain of which the Petra Board considers to
deployment of BHP Billiton’s proprietary Falcon technology
be highly prospective. By working with the Falcon technical
as well as have access to an experienced Falcon data
teams, the interpretation of the historical Falcon data, as well
acquisition and geophysical team. The Falcon technology is
as data from the areas yet to be flown, will be augmented.
a new dimension in diamond exploration as it is an airborne
Petra will also further investigate the Gope kimberlite field
gravity system that can cover large remote areas rapidly and
and will drill selected anomalies over the coming months
cost effectively, and is able to ‘see through’ the sand cover
and we look forward to updating our shareholders on what
which overlies much of Botswana. Kalahari sand covers
has the potential to be very exciting results.
about 75% of Botswana and this, together with underlying
Karoo lava, has meant that ordinary diamond exploration
SIERRA LEONE
programmes have faced difficulties in the detection of
Petra has a joint venture with Mano River Resources in
kimberlites. Petra’s access to the Falcon system will assist in
Sierra Leone which allows Petra to earn a 51% profit and
overcoming these difficulties.
equity interest in the Kono diamond project by investing
16 Petra Diamonds Limited Annual Report 2005
Operational Review
(continued)
US$3 million in the project over a three year period. The
Production growth (estimated)
Kono project is a kimberlite project with several identified
fissures from which production is expected during the
next six months. The strike length of the Kono kimberlite
dykes exceeds the total strike length of Petra’s South
African kimberlite dyke operations and Petra believes the
Kono project has the potential to yield high grades of
approximately 100 carats per hundred tonne.
Petra personnel visited the Kono site in April 2005 to plan
for the establishment of a 75 tph production plant as well
as to undertake further geological work on the dykes. Dykes
were opened up to depths of 10m and samples taken.
Manufacture of the 75 tph production plant (DMS and
crushing circuit) was completed in September 2005 and is to
be shipped to Sierra Leone shortly. Petra’s site establishment
0
0
0
’
t
a
r
a
C
350
300
250
200
150
100
50
0
320
295
265
250
200
2005/6
2006/7
2007/8
2008/9
2009/10
South Africa
team will soon transfer to Sierra Leone to complete
RESOURCE ESTIMATES
establishment of the site facilities. It is expected that the
The South African reserves and resources confirm the
plant will be commissioned on site during the first quarter
potential for steady producing, long-life operations. Further
of 2006 with diamond production from the treatment of
studies to investigate production from new or additional
bulk samples to be expected during the first half of 2006.
areas at current operations have commenced.
Petra plans to accelerate expenditure and development of the
In April 2005 Snowden Independent Mining Consultants
project so as to bring production online as early as possible.
published a Competent Persons Report on the Crown assets,
SOUTH AFRICA
prior to the merger with Petra. The proven and probable
reserves together with the inferred resource Run Of Mine
In the period to 30 June 2005 all mines achieved record
(“ROM”) tonnes and corresponding ROM grade as arrived
US$ prices for their goods, carat sales and revenue for the
at by Snowden are set out below. The price per carat in the
six months to end June showed strong growth and, looking
table is the average achieved for the six months to 30 June
forward, all operations are on track to achieve the expected
2005 and the resulting resource value illustrates the
revenue targets as set out in the chart below.
potential of the South African mining operations to sustain
growth expectations.
The South African mines, acquired from Crown Diamonds NL
with effect from 1 June 2005, have now been fully integrated
The South African mines have all been in existence for over
into the Petra group. Production of 200,000 carats for the
50 years and the deepest elevation at which operations are
2005/6 financial year is well on track and the Board is
currently taking place is some 700 metres below surface.
confident that this target will be met.
These ore bodies originated in the mantle of the earth
approximately 140 kilometres below surface and with a
planned ultimate mining depth of 1,000 to 1,200 metres,
Petra is confident that economic mining will continue well
beyond the 10-year reserve and resource statement below.
Petra Diamonds Limited Annual Report 2005 17
Positioned
All in all, we are delighted with
the progress made across all our
projects. I would like to take this
opportunity to thank all our staff
who have contributed to making
this such a productive and exciting
year for Petra
Positioned
for growth
Resources (estimated)
Messina/
Dancarl*
Star Helam Total
Proven, probable
reserves & inferred
resources ROM
tonnes (’000)**
Grade ROM (cpht)**
Total carats (’000)**
Price/carat US$†
Value US$ (million)
* (Sedibeng) Petra has an effective 74.5% share via a JV with Sedibeng
3,886
81
3,147
86
271
1,936
28
542
284
154
1,330
44
585
224
131
7,152
60
4,274
130
556
Mining and Bokone.
** Adjusted from Snowden’s report April 2005. In excess of 30 years of
continuous production has displayed no variation in ROM grade for
magnetic kimberlite for 700 vertical metres depth of mining.
† Actual average prices achieved in six months to 30 June 2005.
Operational Review
(continued)
June sales (ROM production) of 2,126 carats averaged selling
prices of US$287 per carat. This compares to an average
for calendar year 2004 of US$182 per carat and for the six
months to 30 June 2005 of US$224 per carat.
A 15 level at both Wynandsfontein and Burns has been
established and both are in good ground conditions. At
Burns the raise to the west has holed and stoping has
commenced whilst the raise to the east should hole during
the first month of the next quarter. At Wynandsfontein the
zero cross-cut has intersected fissure and raising in both
directions has begun. Stope production of fissure should
commence during the next quarter. The establishment of
these two levels has greatly enhanced our ability to achieve
A review of each of the South African operations to 30 June
our production targets.
2005 is set out below.
STAR
The Burns 13E return ventilation airway holing to the
10 level has been established through the bad ground
A total of 8,256 ROM fissure tonnes was delivered to the plant
conditions. This holing suffered temporary collapse due to
and returned 5,723 carats at a grade of 69 carats per hundred
wet and poor ground during the quarter. However it has
tonne (“cpht”) for the quarter to end June. In the June 2004
now been reopened, dried and robustly supported and
quarter the ROM delivered to the plant was 9,698 tonnes, from
should not suffer any further collapse.
which 4,314 carats were recovered to yield a grade of 45 cpht.
Additional ventilation is being planned in the form of
raisebore holings so as to further secure the ventilation
of the mine. The raiseboring operation should commence
during the next quarter. The ventilation holing from 10 to 9
level suffered continual collapse and has been abandoned.
On 14 level the horizontal distance remaining between Burns
east drive and Wynandsfontein west drive is 645 metres
(distance between the two shafts is 1,400 metres). This
represents approximately another 18 months before
these two tunnels meet and we can abandon the high
maintenance 10 level drive in the shales.
Petra Diamonds Limited Annual Report 2005 19
Operational Review
(continued)
HELAM
June sales (ROM production) of 10,162 carats averaged
selling prices of US$92.90 per carat. This compares to an
average for calendar year 2004 of US$74 per carat and for
the six months to 30 June 2005 of US$86 per carat.
For the quarter to end June 2005, a total of 29,662 ROM
fissure tonnes was delivered to the plant and returned 26,907
carats at a grade of 90 cpht. An additional 797 tonnes of
tailings was treated, delivering 104 carats giving a total of
The plant upgrades are complete and no further changes
27,011 carats.
are envisaged in the near future.
The mechanisation programme is progressing well, with the
SEDIBENG (MESSINA AND DANCARL OPERATIONS)
John main shaft now equipped to 18 level. The pilot raise
June sales (ROM production) of 1,994 carats averaged selling
from 20 to 19 level has been completed and stoping has
prices of US$330 per carat. This compares to an average
commenced. The pilot raise from 21 to 20 level is now 70%
for calendar year 2004 of US$259 per carat and for the six
completed. All other aspects of this capital programme are
months to 30 June 2005 of US$283 per carat.
on schedule.
The re-establishment of Second Lease as a separate mining
with the delivery of 31,081 ROM fissure tonnes from the
entity is also progressing well and on schedule. It is expected
combined operation, which were treated through the
to see the first production from this programme during the
Messina plant, delivering 5,685 carats at a ROM grade of
last quarter of this year.
18 cpht. Messina’s share of the delivered carats was 4,235.
Mining at the Sedibeng Joint Venture has progressed well
At the Edward shaft the mechanisation process is progressing
The decreased production and grade at Sedibeng has been
well, with all previously planned ore passes having been
due to a number of unforeseen circumstances:
completed and commissioned. In addition to the originally
planned programme, two ore passes have been established
• the redevelopment of 20 level necessitated the drawdown
between 13 and 14 level on the main shaft. This increases
of large amounts of waste in the stope to re-establish
our hoisting flexibility and ability to produce increased
ventilation
tonnes. Modifications to the single-drum sub-shaft are
• the re-establishment of 14 level on Dancarl also
being investigated so as to fill up the capacity created by
necessitated the drawdown of
large amounts of
establishment of the abovementioned ore passes.
waste-bearing material so as to re-establish ventilation
20 Petra Diamonds Limited Annual Report 2005
Operational Review
(continued)
• 14 level north on Dancarl only produced stringers for the
All in all, we are delighted with the progress made across all
first 30m of mining
our projects. I would like to take this opportunity to thank
all our staff who have contributed to making this such a
These problems have now all been overcome and production
productive and exciting year for Petra.
is returning to the projected levels.
In the June 2004 quarter the ROM delivered was
26,114 tonnes, from which 6,018 carats were recovered at
a grade of 23 cpht.
At the Messina section, 23 level has been established and
JOHAN DIPPENAAR
stope production has commenced. Sinking of the shaft
Chief Executive Officer
to 24 level has commenced and should be complete by
25 October 2005
year-end. On 20 level, development into the Dancarl section
has progressed well with seven cross-cuts now on fissure.
Now that ventilation has been re-established, production
from this stope can commence.
At the Dancarl section, progress has been good with the
main and sub-shafts having been cleared to 15 level.
Fissure raising to 14 level has begun and production should
commence during the third quarter. The Dancarl tailings
plant is now running at a comfortable 10,000 tonnes
per month and yields a grade of approximately 6 cpht. A
new 928G Caterpillar FEL has been purchased and is now
operational in feeding this tailings plant. The throughput of
this plant will now be gradually increased.
Plans are being put in place to upgrade the Messina plant
so as to take the total combined increased production from
both Messina and Dancarl.
Petra Diamonds Limited Annual Report 2005 21
Financial Review
RESULTS FOR THE YEAR
Cash costs of production
increased by 15% from
The Group loss for the year before the impairment of
US$7.1 million to US$8.2 million. Cash generation (EBITDA)
goodwill, which arose due to the restatement of the Crown
also benefited from the strong operating results and
fixed assets acquired, was £6,487,258 (2004: £4,219,863).
increased by 380% from US$0.5 million to US$2.4 million.
After the goodwill impairment charge of £4,832,025
The Company’s financial strategy with regards to the South
(2004: nil), the loss for the year amounted to £11,319,283
African operations will be to focus on initiatives to reduce
(2004: £4,219,863). The loss for the year includes £3,510,106
costs and improve operating efficiencies.
(2004: £2,499,983) of expenditure related to exploration
activities at Alto Cuilo paid for by Petra that will no longer
EXPLORATION ACTIVITIES
be incurred from May 2005 due to BHP Billiton’s election to
The loss for the year is stated after the inclusion of the
fund all exploration and related expenditure at Alto Cuilo.
exploration expenditure of £3,799,608 (2004: £2,499,983).
GOODWILL
The vast majority of these expenses were related to the
ongoing developments at Alto Cuilo prior to BHP Billiton’s
The goodwill impairment of £4,832,025 arises from the
election to fund PDAC’s future exploration activity in full
restatement of the fixed assets acquired from Crown
from May 2005 and therefore exploration expenditure with
Diamonds NL when the merger with Petra completed,
regards to Alto Cuilo and the joint venture with BHP Billiton
effective 31 May 2005. The Competent Persons Report
will not be incurred by Petra in the 2006 financial year.
prepared by Snowden Mining Consultants gave low,
Petra’s costs with regards to its current Angolan interests
preferred and high valuations for Crown’s mining assets.
are expected to be approximately £0.25 million for the 2006
The Petra Board decided to take a prudent accounting
financial year.
approach and state the mining assets, comprising mineral
properties, plant and equipment and exploration and
Shareholders should note that the Company expenses
evaluation, in the Petra balance sheet at the preferred
exploration expenditure in the year in which it is incurred.
Snowden valuation of £37,324,028 (US$58,400,000).
This best practice policy aligns Petra with the large mining
MINING ACTIVITIES
groups; we understand that we are among the first junior
mining exploration companies to adopt this approach and
The South African production operations, as acquired
believe it to be in the best long term interest of the Company
in the Crown merger, contributed a ‘profit on mine’
and its shareholders. Therefore the Company’s significant
before depreciation of £413,732 for the month of June
expenditure on Alto Cuilo has not been recognised in the
2005 alone. All three mining operations (Helam, Star and
balance sheet and hence no accounting recognition is given
Sedibeng) achieved record US$ diamond prices during the
to the potential of this world-class exploration asset.
year and recorded revenue of US$2.2 million from sales
of 14,282 carats for the month of June 2005 and revenue
FUNDING DURING THE YEAR
of US$10.7 million from sales of 77,295 carats for the
In June 2005, the Company raised £17.1 million
six months to 30 June 2005.
(£15.3 million net of placing fees and merger costs) by
placing 20,084,352 ordinary shares at 85 pence per share.
Comparing the operating results for the South African
The funds were raised to settle deferred acquisition costs in
operations for the six months to 30 June 2005 to the results
respect of the Helam mine, develop the Sierra Leone joint
for the six months to 31 December 2004 it is evident that
venture properties, investigate new business opportunities
the drive to curtail costs and increase operating efficiencies
in Southern Africa and Sierra Leone, settle various term
and production output is starting to bear fruit. Revenue
loans, secure the outstanding Crown loan notes, settle the
increased by 36% from US$7.9 million to US$10.7 million.
costs and fees related to the Crown merger and placing and
provide working capital to the Group.
22 Petra Diamonds Limited Annual Report 2005
Financial Review
(continued)
In July 2005 the Company settled outstanding Helam
On 27 October 2004 Crown Diamonds (“Crown”), together
acquisition costs of £2,116,036, repaid the outstanding
with its BEE partners (Sedibeng and Bokone), entered into
loan to Photon Global Limited (‘Photon’) of £2 million
an agreement with De Beers for the acquisition of Dancarl.
plus interest of £104,713, settled the bridging loan with
The acquisition was funded by borrowings, secured by
ABN Amro Bank of £2,509,452 and paid the professional
Crown, from ABN AMRO of R30 million. Of this loan Crown
advisers and other fees in respect of the Crown merger.
loaned R16,5 million to Sedibeng and Bokone to finance
their share of the acquisition, the interest rate being the
On 3 February 2005, the Company issued 833,333 new
same as the rate for the loan from ABN AMRO to Crown
shares at a price of 57.54 pence per share, following the
Diamonds. The R30 million loan from ABN AMRO was
exercise of warrants by Photon. On 8 February 2005,
repaid in July 2005 and on 28 July 2005 a loan agreement
Photon exercised further warrants, resulting in the issue of
was entered into with FirstRand Bank, South Africa for
an additional 833,333 new shares at a price of 57.54 pence
an amount of R16,5 million, replacing the Sedibeng and
per share.
Bokone loan portions advanced by Crown, as noted above.
On 14 January 2005, the Company issued 1,953,762 new
shares at a price of 47.5 pence per share following the
exercise of an option by Societe Diamantaire Finkelstein
CH & Co NV.
On 12 January 2005, the Company issued 518,500 new
Finance Director
shares at a price of 50 pence per share following the
25 October 2005
exercise of options by Williams de Broë, the Company’s
Broker and NOMAD.
DAVID ABERY
On 30 November 2004 the Company issued 901,060 new
shares at a price of 88.2 pence per share. These shares were
issued to BHP Billiton World Exploration Inc (“BBWEI”) on
the execution of the joint venture agreement with BBWEI
regarding the Company’s Alto Cuilo project.
FUNDING SUBSEQUENT TO YEAR END
On 28 July 2005 the Sedibeng Joint Venture, in which
the Company has an effective interest of 74.5%, entered
into a loan agreement with the Industrial Development
Corporation of South Africa for a loan facility of R30 million
to fund the future capital expenditure on plant and
earthmoving equipment and the sinking and upgrading of
new and existing shafts at the Sedibeng mines. As at the
date of this review no draw down on this loan facility had
been made.
Petra Diamonds Limited Annual Report 2005 23
Directors’ Report
The Directors present their Report together with the
On 14 October 2005 D Abery purchased a further
audited financial statements of the Group for the year
40,000 shares in the Company.
ended 30 June 2005.
7,500,000 ordinary shares in the Company are held by a
PRINCIPAL ACTIVITIES
trust of which A Pouroulis is a beneficiary.
Petra is a diamond mining group focused on the exploration
and mining of diamonds in Africa. Petra’s strategy is to build
C Finkelstein is a director of Finkelstein Ch & Co NV, which
a portfolio of revenue producing and exploration assets,
has entered into mutual put and call option arrangements
achieving the objective of becoming a successful mid-tier
to subscribe for ordinary shares in the Company. Further
diamond producer and explorer. As at 30 September 2005,
details are set out in Note 17 to the financial statements.
Petra operated in Angola, Botswana, South Africa and
Sierra Leone.
Other than as disclosed above, there were no changes in
Directors’ share interests between the year-end and the
BUSINESS REVIEW
date of this report.
A detailed review of the Group’s operations and finances
for the year and events subsequent to the year-end are
SHARE CAPITAL
set out in the Chairman’s Statement on pages 5 to 9 and
Details of changes to share capital during the year can be
in Note 28.
found in Note 17 to the financial statements.
RESULTS AND DIVIDENDS
SUBSTANTIAL SHAREHOLDINGS
The Group loss for the year amounted to £11,319,283
At 30 September 2005 the following interests in the
(2004: loss £4,219,863). The Directors do not recommend
ordinary shares of the Company represented more than 3%
the payment of a dividend for the year (2004: £nil).
of the issued share capital (other than interests set out in
the Board of Directors and their interests).
BOARD OF DIRECTORS AND THEIR INTERESTS
The interests of the Directors and their families in the
issued share capital of the Company (other than in respect
of options to acquire ordinary shares which are detailed in
the Remuneration Report on pages 26 and 27 and Note 17
to the financial statements) were as follows:
Number of
Percentage of
ordinary shares
issued capital
Kalahari Diamond Resources Plc
16,166,529
ANZ Nominees Limited
14,738,665
Dresdner Bank AG London
10,285,480
Credit Suisse First Boston
Number of
Number of
Client Nominees Limited
shares at
shares at
Saad Investments Limited
10,145,229
7,956,473
30 June 2005
30 June 2004
BNY (OCS) Nominees Limited
5,605,704
WB Nominees Limited
4,757,215
10.97%
10.00%
6.98%
6.88%
5.40%
3.80%
3.23%
A Pouroulis
C Finkelstein
V Ruffer
J Dippenaar
J Davidson
D Abery
C Segall
7,535,000
6,143,706
2,407,122
640,000
640,000
10,000
2,000
7,535,000
4,189,944
2,407,122
—
—
10,000
2,000
24 Petra Diamonds Limited Annual Report 2005
EMPLOYEES
The Group’s employment policies have been developed to
ensure that the Group attracts and retains the required
calibre of management and staff by creating an environment
that rewards achievement, enthusiasm and team spirit.
Effective communication and consultation is key to this
Directors’ Report
(continued)
and the Group endeavours to ensure the appropriate level
The Directors are responsible for keeping proper accounting
of employee involvement and communication.
records, for safeguarding the assets of the Group and for
taking reasonable steps for the prevention and detection of
The Group is committed to the principle and achievement
fraud and other irregularities.
of equal opportunities in employment irrespective of
sex, religion, race or marital status. Full consideration is
AUDITORS
given to applications from disabled persons who apply for
In accordance with section 89 of the Bermuda Companies
employment where the requirements of the position can
Act, a resolution for the re-appointment of KPMG Audit plc
be adequately filled by a disabled person, having regard to
as auditors of the Company is to be proposed at the
their particular abilities and aptitude.
forthcoming Annual General Meeting.
CREDITORS PAYMENT POLICY
By order of the Board
It is the Group’s policy that payments to suppliers are made
in accordance with those terms and conditions agreed
between the Group and its suppliers, provided that all terms
and conditions have been complied with.
GOING CONCERN
DAVID ABERY
Director
Following a review of the Company’s financial position,
25 October 2005
the Directors have concluded that sufficient financial
resources will be available to meet the Company’s current
and foreseeable working capital requirements. On this
basis, they consider it appropriate to prepare the financial
statements on a going concern basis.
DIRECTORS’ RESPONSIBILITIES
Bermudan company law and generally accepted best
practice require the Directors to prepare financial statements
for each financial year which give a true and fair view of
the state of affairs of the Group and the profit or loss of
the Group for that period. In preparing these accounts the
Directors are required to:
• select suitable accounting policies and apply them
consistently;
• make judgements and estimates that are reasonable and
prudent;
• state whether applicable accounting standards have been
followed, subject to any material departures disclosed
and explained in the financial statements; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company and the Group will continue in business.
Petra Diamonds Limited Annual Report 2005 25
Directors’ Remuneration Report
The Remuneration Committee is responsible for determining the remuneration and incentive packages for the executive
Directors and senior management. The employment terms for executive Directors and senior management are designed to
attract and retain individuals of the right calibre; incentives are structured so as to align their interests with those of the
shareholders by rewarding them for enhancing shareholder value.
REMUNERATION POLICY
The remuneration policy aims to attract and retain executives who are incentivised to achieve performance therefore serving
the best interests of the shareholders. In framing and implementing the Directors’ remuneration policy, consideration has
been given to matters set out in the Combined Code.
BASE SALARIES
The policy of the Board is to pay base salaries which are competitive with those paid to executives in organisations of similar
size and market sector.
PERFORMANCE RELATED BONUSES
In order to retain and incentivise the executive Directors and senior management, performance related bonuses will be
awarded on the achievement of agreed performance criteria that are approved by the Remuneration Committee. It is the
policy of the Board that the performance criteria of all such bonuses should be relevant and stretching.
SHARE OPTIONS
The Board believes that the granting of share incentives encourages a broad alignment of the interests of the executive
Directors with the earnings growth of the Company to the mutual benefit of both shareholders and participants. As at
30 June 2005 the following options for current employees were in place to subscribe for ordinary shares in the Company.
At 30 June
At 30 June
Adonis Pouroulis
David Abery
Kevin Dabinett
Johan Dippenaar
Jim Davidson
Senior management
Exercise price
30.0p
35.0p
40.0p
45.0p
44.0p
85.0p
44.0p
85.0p
54.5p
85.0p
85.0p
85.0p
44.0p
54.5p
56.75p
A$1.12
A$1.36
Date of grant
22 April 1997
22 April 1997
22 April 1997
22 April 1997
5 September 2003
16 June 2005
5 September 2003
16 June 2005
28 June 2004
16 June 2005
16 June 2005
16 June 2005
5 September 2003
28 June 2004
13 September 2004
24 September 2004
28 January 2005
Expiry date
11 April 2007
11 April 2007
11 April 2007
11 April 2007
5 September 2013
16 June 2015
5 September 2013
16 June 2015
28 June 2014
16 June 2015
16 June 2015
16 June 2015
5 September 2013
28 June 2014
13 September 2014
24 September 2014
28 January 2015
2005
100,000
100,000
100,000
100,000
750,000
250,000
750,000
250,000
750,000
250,000
750,000
750,000
385,000
133,334
50,000
276,375
86,250
No share options held by current employees were exercised during the year.
2004
100,000
100,000
100,000
100,000
750,000
—
750,000
—
750,000
—
—
—
385,000
500,000
—
—
—
Subsequent to the merger with Crown Diamonds NL (“Crown”), all Crown management share options were converted to Petra
share options in a ratio of one Petra share option for every eight Crown share options held. The expiry dates of the Crown
options were left unchanged.
26 Petra Diamonds Limited Annual Report 2005
Directors’ Remuneration Report
(continued)
NON-EXECUTIVE DIRECTORS
The Board determines the fees of the non-executive Directors in the absence of the relevant non-executive Director. The fees
for their services in the financial year to 30 June 2005 were £25,000.
DIRECTORS’ REMUNERATION
The following table gives a breakdown of the remuneration of the individual Directors who held office during the year ended
30 June 2005.
Executive Directors
A Pouroulis
K Dabinett
D Abery
J Dippenaar*
J Davidson*
Non-executive Directors
C Segall#
C Finkelstein
V Ruffer#
Base
remuneration
£
Performance
related bonus
£
118,092
140,302
126,503
11,875
11,875
408,647
Fees
£
15,000
5,000
5,000
25,000
46,667
10,000
75,000
30,000
30,000
191,667
Performance
related bonus
£
—
—
—
—
Other
£
—
—
—
—
—
Other
£
—
—
—
—
2005
Total
£
164,759
150,302
201,503
41,875
41,875
600,314
2005
Total
£
15,000
5,000
5,000
25,000
2004
Total
£
133,888
39,415
109,815
—
—
283,118
2004
Total
£
15,000
5,000
5,000
25,000
* J Dippenaar and J Davidson joined the Company on 1 June 2005 and were appointed to the Board on Admission to AIM on 16 June 2005
# member of the Remuneration and Audit Committees
During the period under review, each of the executive Directors entered into a service agreement with the Company for
a gross base remuneration package of £142,500 per annum. The service agreements were effective from 8 March 2005
for A Pouroulis, K Dabinett and D Abery, and 1 June 2005 for J Dippenaar and J Davidson. The executive Directors service
agreements include a 12 month notice period upon termination.
During the period under review, each of the non-executive Directors entered into a service agreement with the Company for
a per annum fee, as disclosed in the table above.
It is estimated that under arrangements currently in force, the aggregate base remuneration and benefits to be paid to the
executive and non-executive Directors for the financial year end 30 June 2006 will be £737,500.
By order of the Board
DAVID ABERY
Director
25 October 2005
Petra Diamonds Limited Annual Report 2005 27
Corporate Governance Statement
CORPORATE GOVERNANCE STATEMENT
K Dabinett. Members of this committee meet informally
Effective corporate governance is a priority of the Board
from time to time and no minutes are kept of proceedings.
and outlined below are details of how the Company has
applied the principles of corporate governance as set out
The full Board holds scheduled meetings, and any extraordinary
in the Combined Code (“the Code”). Under the rules of
meetings at such other times as may be necessary to address
the Alternative Investment Market (“AIM”) the Company
any significant matters that may arise. In between meetings,
is not required to comply with the Code and the Board
decisions are adopted by way of written resolutions.
considers that the size of the Group does not warrant
compliance with all of the Code’s requirements. The Board
The agenda for scheduled meetings is prepared in conjunction
fully supports the principles on which the Combined Code
with the Chairman, Chief Executive Officer and Finance Director.
is based and considers that the Company has complied
Standing items include the Chief Executive Officer’s report,
with a number of key requirements. This statement also
Finance Director’s report, financial reports, strategic matters,
outlines the main corporate governance practices which
governance and compliance. Submissions are circulated in
comply with the Australian Stock Exchange Limited (“ASX”)
advance. Executives are regularly involved in Board discussions
Corporate Governance Council Principles of Good Corporate
and directors have other opportunities, including visits to
Governance and Best Practice Recommendations (“ASX
operations, for contact with a wider group of employees.
CGC Recommendations”).
BOARD OF DIRECTORS
Role of the Board
Details of the Board’s procedures in respect to each of these
areas are further outlined below.
The Board’s primary role is the protection and enhancement
Director education
of long-term shareholder value.
The Group educates new directors about the nature of
the business, current issues, the corporate strategy and
To fulfil this role, the Board is responsible for the overall
the expectations of the Group concerning performance of
corporate governance of the Group including formulating
directors. Directors also have the opportunity to visit Group
its strategic direction, approving and monitoring capital
facilities and meet with management to gain a better
expenditure, setting remuneration, appointing, removing
understanding of business operations. Directors are given
and creating succession policies for directors and senior
access to continuing education opportunities to update
executives, establishing goals for management and
and enhance their skills and knowledge.
monitoring the achievement of these goals, and ensuring the
integrity of internal control and management information
Composition of the Board
systems. It is also responsible for approving and monitoring
The composition of the Board is determined using the
financial and other reporting.
following principles:
Board process
• The Board should comprise directors with a broad range
of expertise both nationally and internationally.
To assist in the execution of its responsibilities, the Board
• Directors appointed by the Board are subject to election
has established an Executive Committee to manage the
by shareholders at the following Annual General Meeting
Company on a day to day basis. Members of this Committee
and thereafter directors are subject to re-election at least
are A Pouroulis, J Dippenaar, D Abery, J Davidson and
every three years.
28 Petra Diamonds Limited Annual Report 2005
Corporate Governance Statement
(continued)
The Board has accepted the following definition of an
that the composition is appropriate given the size of the
independent Director:
Company. In particular, the Board is of the opinion that this
“An independent Director is a director who is not a member
composition gives the necessary mix of industry specific
of management (a non-executive director) and who:
and broad business experience necessary for the effective
• is not a substantial shareholder of the Company or an
governance of the Company, for setting the Company’s
officer of, or otherwise associated, directly or indirectly,
strategic direction, and for creating shareholder value.
with a substantial shareholder of the Company;
The executive Directors are responsible for the day-to-day
• has not within the last three years been employed in an
running of the Company.
executive capacity by the Company or another group
member, or been a director after ceasing to hold any
All executive and non-executive Directors may take
such employment;
independent advice, at the expense of the Company, if
• is not a principal of a professional adviser to the
considered necessary in the performance of their duties.
Company or another group member;
Directors are expected to bring an independent judgement
• is not a significant consultant, supplier or customer of
to bear on issues of strategy, performance, resource and
the Company or another group member, or an officer
standards of conduct.
of or otherwise associated, directly or indirectly, with a
significant consultant, supplier or customer;
Nomination Committee
• has no significant contractual relationship with the
The Board has not established a Nomination Committee
Company or another group member other than as a
as the Board considers a separately established committee
Director of the Company;
is not warranted and its functions and responsibilities can
• is free from any interest and any business or other
be adequately and efficiently discharged by the Board as a
relationship which could, or could reasonably be
whole. The Board assesses the experience, knowledge and
perceived to, materially interfere with the Director’s
expertise of potential directors before any appointment is
ability to act in the best interests of the Company.”
made and adheres to the principle of establishing a board
comprising directors with a blend of skills, experience and
The composition of the Board is reviewed on an annual
attributes appropriate to the Company and its business.
basis to ensure that the Board has the appropriate mix of
The main criterion for the appointment of directors is an
expertise and experience. When a vacancy exists, through
ability to add value to the Company and its business. All
whatever cause, or where it is considered that the Board
Directors appointed by the Board are subject to election
would benefit from the services of a new Director with
by shareholders at the following Annual General Meeting
particular skills, the Board determines the selection criteria
of the Company. The Board will review the utility of a
for the position based on the skills deemed necessary for
Nomination Committee as it enters the next stage of its
the Board to best carry out its responsibilities and then
development, and one will be established if and when
appoints the most suitable candidate who must stand for
considered appropriate by the Board.
election at the next general meeting of shareholders.
Conflict of interest
The Board consists of five executive Directors and three
Directors must keep the Board advised, on an ongoing basis,
non-executive Directors. Of the three non-executive
of any interest that could potentially conflict with those of
Directors, C Segall is considered independent. While the
the Company. Where the Board believes that a significant
majority of the Board is not considered independent for
conflict exists, the Director concerned does not receive the
the purpose of the definition above, the Board considers
relevant Board papers and is not present at the meeting whilst
Petra Diamonds Limited Annual Report 2005 29
Corporate Governance Statement
(continued)
the item is considered. The Board has developed policies to
reviews the Group’s interim and annual financial statements
assist Directors to disclose potential conflicts of interest.
prior to submission to the Board; it reviews the Group’s
statement on internal control systems, considers the
Director dealings in company shares
effectiveness of internal financial controls and any internal
The Constitution permits directors to acquire shares in
audit resource, making recommendations for changes if
the Company. Company policy prohibits directors and
appropriate, and institutes and reviews special projects and
senior management from dealing in Company shares or
investigations on any matter as it sees fit.
exercising options whilst in possession of price sensitive
information, and except in unusual circumstances, only
REMUNERATION COMMITTEE
42 days after either the release of the Company’s half-year
The Remuneration Committee comprises Charles Segall and
and annual results, the annual general meeting or any major
Volker Ruffer, both being non-executive Directors, and is
announcement.
chaired by Charles Segall. The committee may take independent
advice, at the expense of the Company, if considered necessary.
Directors and senior management must notify the Chairman
The main responsibilities of the Remuneration Committee are
of the Board before they sell or buy shares in the Company.
to determine on behalf of the Board and shareholders the
overall policy for executive remuneration; to determine the
Independent professional advice and access to
base salary, benefits, performance related bonus and any
company information
equity participation schemes (including share options) for
Each director has the right of access to all relevant
each of the executive Directors and other senior management
Company information and to the Company’s executives and,
of the Group; and to approve all Directors’ service contracts.
subject to prior consultation with the Chairman, may seek
The Committee ensures that a significant proportion of the
independent professional advice at the Group’s expense.
executive Directors’ remuneration is directly related to the
performance of the Group.
Remuneration of non-executive Directors
When setting fees and other compensation for non-executive
INTERNAL CONTROL FRAMEWORK
Directors, the Board takes independent advice and applies
The Board is responsible for the Group’s system of internal
international benchmarks. Director’s fees cover all main
control and for reviewing its effectiveness. It should be
Board activities and membership of committees. Further
recognised that such a system can only provide reasonable
information is contained in the Directors’ Remuneration
and not absolute assurance against material misstatement
Report on page 26.
or loss, as it is designed to manage rather than eliminate
those risks that may affect the Company in achieving its
AUDIT COMMITTEE
business objectives.
The Audit Committee comprises Charles Segall, Volker
Ruffer and Charles Finkelstein, all being non-executive
The Combined Code requires that the effectiveness of the
Directors, and is chaired by Charles Segall. The Committee
system of internal control be reviewed by the Directors,
may take independent advice, at the expense of the
including financial, operational and risk management. In
Company, if considered necessary. The Committee makes
September 1999 the Turnbull report was published which
recommendations to the Board on the appointment of
offered guidance to directors on complying with the internal
the external auditors, their independence and the level of
control requirements of the Combined Code. Although the
their fees; it reviews the findings of the external auditors
Board considers that the size of the Group does not warrant
and ensures appropriate action is taken by management; it
compliance with all the Code’s requirements, the Board has
30 Petra Diamonds Limited Annual Report 2005
Corporate Governance Statement
(continued)
implemented a reporting structure, as detailed below, to
part of its usual role and through direct involvement
review all aspects of internal control and will continue to
in the management of the Group’s operations ensures
develop the process throughout the 2006 financial year:
risks are identified, assessed and appropriately managed.
• Financial reporting – the Company will report to shareholders
Where necessary, the Board will draw on the expertise of
quarterly and half-yearly, as required by the ASX Listing
appropriate external consultants to assist in dealing with
Rules. The Chief Executive Officer and Finance Director state
or mitigating risk.
in writing to the Board that the Company’s financial reports
present a true and fair view in all material respects, of the
Major risks arise from such matters as actions by
Company’s financial condition and operational results and
competitors, government policy changes, the impact of
are in accordance with relevant accounting standards. They
exchange rate movements on diamond sales, difficulties
also state the Company’s financial reports are founded on a
in sourcing goods and services, environment, occupational
sound system of risk management and internal compliance
health and safety, financial reporting, and the purchase,
and control, which implements the policies adopted by
development and use of information systems.
the Board and that this system is operating efficiently and
• Risk management and compliance and control – the
effectively in all material respects.
Board acknowledges that it is responsible for the overall
• Continuous disclosure - the Company has a policy, based
internal control framework, but recognises that no cost
on existing policies and practices as a company dual listed
effective internal control system will preclude all errors
on the AIM and ASX, that all shareholders and investors
and irregularities. The Board’s internal control processes
have equal access to the Company’s information and has
are comprehensive and comprise:
procedures to ensure that all price sensitive information
– Operating unit controls – operating units confirm
will be disclosed to the AIM and ASX in accordance with
compliance with financial controls and procedures
the continuous disclosure requirements of the AIM and
including information system controls.
ASX Listing Rules. All information provided to the AIM and
– Functional speciality reporting – key areas subject
ASX will be immediately posted to the Company’s website:
to regular reporting to the Board include operations,
– a comprehensive process is in place to identify matters
safety, environment and legal matters.
that may have a material effect on the price of the
Company’s securities;
Practices have been established to ensure:
– the Chief Executive Officer and Finance Director are
– Capital expenditure and revenue commitments
responsible for interpreting the Company’s policy and
above a certain size obtain prior Board approval.
where necessary informing the Board;
– Financial exposures are controlled, including the
– the Finance Director
is
responsible
for all
potential use of derivatives.
communications with AIM and ASX.
– Occupational health and safety standards and
management systems are monitored and reviewed
• Overview of the risk management system – the Board
to achieve high standards of performance and
adopts practices designed to identify significant areas
compliance with regulations.
of business risk and to effectively manage those risks in
– Business transactions are properly authorised and
accordance with the Group’s risk profile. This includes
executed.
assessing, monitoring and managing operational,
– Financial reporting accuracy and compliance with
financial reporting, and compliance risks for the Group.
the financial reporting regulatory framework.
• Risk profile – the Group has not established a separate
– Environmental regulation compliance.
Risk Management Committee. Instead, the Board, as
Petra Diamonds Limited Annual Report 2005 31
Corporate Governance Statement
(continued)
• Environmental regulation – the Group’s operations are
Directors, managers and employees of their rights and
subject to significant environmental regulation under
their duty to act with utmost integrity and objectivity.
international law and the laws of the jurisdictions in
The Code of Conduct is designed to guide compliance
which the Company’s operations are based in relation
with legal and other obligations to the Company’s
to its exploration and mining activities. The Company’s
stakeholders.
exploration and mining activities are concentrated in
• Performance assessment – the Company has adopted
Africa. The Group has an Environmental Management
self-evaluation processes to measure Board performance.
Programme in place for each prospecting and mining
The performance of all directors is assessed through
permit.
analysis, review and specific discussion by the Board
of issues relating to individual Director’s attendance
The Group is committed to achieving a high standard of
at and involvement in Board meetings, interaction
environmental performance. The Board is responsible for
with management, performance of allocated tasks and
the regular monitoring on environmental exposures and
any other matters identified by the Board or other
compliance with environmental regulations.
Directors. Any significant issues identified are actioned
by the Board on an ongoing basis. Due to the Board’s
The Board believes that the Company has adequate
assessment of the effectiveness of these processes,
systems in place for the management of its environmental
the Board has not formalised qualitative performance
requirements and is not aware of any breach of those
indicators to measure Director’s performance.
environmental requirements as they apply to the Group.
• Internal audit – the Group does not have a formally
the Chief Executive Officer via ongoing monitoring of
established internal audit function. The Board ensures
management performance. The Company has established
compliance with the
internal controls and risk
an Employee Share Option Scheme, whereby it can issue
management procedures previously mentioned.
options to eligible employees to subscribe for shares in
The evaluation of key executives is carried out by
• Ethical standards – all Directors, managers and employees
the Company at set prices.
are expected to act with the utmost integrity and
objectivity, striving at all times to enhance the reputation
COMMUNICATION WITH SHAREHOLDERS
and performance of the Group. Every employee has a
Whilst the Board has not formally documented the Group’s
nominated supervisor to whom they may refer issues
continuous disclosure procedures, the Board, as part of its
arising from their employment.
usual role, provides shareholders with information using
• Conflict of interest – Directors must keep the Board
comprehensive continuous disclosure processes which
advised, on an ongoing basis, of any interest that could
includes identifying matters that may have a material
potentially conflict with those of the Group. Where the
effect on the price of the company’s securities, notifying
Board believes that a significant conflict exists for a
them to the AIM and ASX, posting them on the Company’s
Director on a Board matter, the Director concerned does
website, and issuing media releases.
not receive the relevant Board papers and is not present
at the meeting whilst the item is considered.
In summary, the continuous disclosure processes operate
• Code of conduct – the Group has established a
as follows:
documented Code of Conduct. The Group has adopted
• The Finance Director is responsible for all communications
certain induction procedures to inform newly appointed
with the AIM and ASX. Matters that may have an effect
32 Petra Diamonds Limited Annual Report 2005
Corporate Governance Statement
(continued)
on the price of the Company’s securities will be advised
EXTERNAL AUDITORS
to the AIM and ASX on the day they are discovered.
The executive Directors review the performance of the
Senior executives monitor all areas of the Company’s
external auditors on an annual basis and normally meet
internal and external environment.
with them during the year to:
• The Annual Report is distributed to all shareholders. The
• Discuss the external audit plans, identifying any
Board ensures that the Annual Report includes relevant
significant changes in structure, operations, internal
information about the operations of the Group during the
controls or accounting policies likely to impact on the
year, changes in the state of affairs of the Group and details
financial statements and to review the fees proposed for
of future developments, as well as all required disclosures.
the audit work to be performed.
• Notices of all meetings of shareholders.
• Review the periodic reports prior to lodgement and
• Proposed major changes in the Company which may
release, and any significant adjustments required as a
impact on share ownership rights are submitted to a vote
result of the auditor’s findings, and to recommend Board
of shareholders.
approval of these documents, prior to announcement of
• All announcements made to the market, and related
results.
information (including information provided to analysts
• Review the results and findings of the auditor, the
and the media), will be released to the AIM and ASX and
adequacy of accounting and financial controls, and to
placed on the Company’s website.
monitor the implementation of any recommendations
• The full texts of notices of meetings and associated
made.
explanatory material are placed on the Company’s
• Review the draft financial report and recommend Board
website, along with results of such meetings.
approval of the financial report.
All documents that are released publicly will be
reviews or investigations deemed necessary by the
• As required, to organise, review and report on any special
made available on the Group’s internet website at
Board.
www.petradiamonds.com.
The Board encourages full participation of shareholders
at shareholders’ meetings to ensure a high level of
accountability and identification with the Group’s strategy
and goals.
The shareholders are requested to vote on the appointment
of Directors and changes to the Company’s bye-laws
(constitution). Copies of the bye-laws are available to any
shareholder who requests it.
The Board ensures that the external auditors attend the
Company’s Annual General Meeting and other meetings
where it is appropriate to do so.
Petra Diamonds Limited Annual Report 2005 33
Directors
Directors
Adonis Pouroulis
Johan Dippenaar
David Abery
EXECUTIVE CHAIRMAN (35)
CHIEF EXECUTIVE OFFICER (48)
FINANCE DIRECTOR (43)
is a mining engineer with a mining degree
was previously the CEO of Crown Diamonds.
is a Chartered Accountant (ICAEW), who
from the University of the Witwatersrand
He is a chartered accountant by profession
brings to Petra extensive experience as a
in Johannesburg. On leaving university he
and a member of the South African Institute
Finance Director in both the South African
was involved for one year working in South
of Chartered Accountants (SAICA) with over
and UK business environments, as well as
African gold mines thereafter for a further
17 years’ experience in the management of
an in-depth knowledge of AIM. Prior to
year investigating mining propositions in
companies of which 15 years has been in the
Petra, Mr Abery was Finance Director of
the former Soviet Union. In 1997 he created
management of mining companies.
Mission Testing plc, the software testing
and founded Petra Diamonds Limited
and floated the company on the AIM of
London Stock Exchange in April of the
same year. Mr Pouroulis was instrumental
in the creation of the Nabera mining
consortium which led the successful bid for
the management contract on Alexkor, the
State-owned diamond mine.
consultancy successfully floated on AIM in
December 2000. Before that, he was Head
of Finance for Tradepoint Financial Networks
plc (consequently renamed Virt-x plc), the
high-tech electronic stock exchange which
was also quoted on AIM.
34 Petra Diamonds Limited Annual Report 2005
Directors
Kevin Dabinett
Jim Davidson
Directors
(continued)
Non-
executive
Directors
Charles Finkelstein
NON-EXECUTIVE DIRECTOR (45)
is a member of the Antwerp Diamond Bourse
and a director of SC Diamantaire CH Finkelstein
and Co NV, one of the world’s leading diamond
traders. CH Finkelstein’s head office is in Antwerp
and the business has been in existence for more
than 100 years.
CHIEF OPERATING OFFICER (50)
TECHNICAL DIRECTOR (60)
was born in Zambia and educated in
was previously Technical Director of
England, graduating with an Honours
Crown Diamonds. He is responsible for all
Degree in Mining Engineering in 1976 from
Petra geological matters and, with Kevin
Volker Ruffer
NON-EXECUTIVE DIRECTOR (66)
the Royal School of Mines, London. He
Dabinett, group technical development. He
consults for KPMG Frankfurt where he specialises
has since gained extensive operational and
is a qualified geologist and a member of the
in
international
tax planning, mergers,
management experience within the mining
Geological Society of South Africa with over
acquisitions and company re-organisations. He
industry across southern Africa. Throughout
20 years experience in mine management.
was previously managing partner from 1972
his career, he has successfully managed
various mining operations in southern Africa,
often in difficult conditions. Most recently,
Mr Dabinett was with Impala Platinum Ltd
as General Manager of the Marula platinum
project. Whilst at Auridiam Zimbabwe
(Pvt) Ltd as General Manager, he oversaw
the feasibility study and commissioning of
a pilot plant at the River Ranch diamond
project
in Zimbabwe, managing
the
expansion of the project into a 2 million
tonne per annum operating mine.
to 1994. He holds a Masters degree in business
administration from the University of Munster,
Germany.
Charles Segall
DEPUTY CHAIRMAN AND
NON-EXECUTIVE DIRECTOR (64)
is a director of the Atlantic Trust Company
Limited of South Africa where he specialises in
providing trustee services. He is admitted as an
attorney of the High Court of South Africa.
Petra Diamonds Limited Annual Report 2005 35
Group Contact Details
GROUP CONTACT DETAILS
Group Head Office
Elizabeth House, 9 Castle Street,
St. Helier, Jersey, JE4 2QP
Financial PR consultants
AUSTRALIA
Parkgreen Communications
Australian financial advisers
1st Floor, Ireland House,
to the Company
150 New Bond Street, London,
Euroz Securities Limited
PO Box 1075, Elizabeth House,
W1S 2AQ
Level 14, The Quadrant, 1 William
9 Castle Street, St. Helier,
Jersey, JE4 2QP
Telephone: +44 15 3470 0111
E-mail: info@petradiamonds.com
Perth office
Level 1, 1A Agnew Way,
Subiaco WA 6008
PO Box 1882, Subiaco WA 6904
Telephone: +61 8 9381 8888
Telephone: +44 20 7493 3713
Street, Perth WA 6000, Australia
E-mail:
Telephone:+61 8 9488 1400
justine.howarth@parkgreenmedia.com
E-mail: kpaganin@euroz.com.au
Legal advisers to the Company
Legal advisers to the Company
(as to English Law)
Memery Crystal
(as to Australia Law)
Blake Dawson Waldron
44 Southampton Buildings,
221 St. George’s Terrace,
London, WC2A 1AP
Perth WA 6000, Australia,
Telephone: +44 20 7242 5905
DX 169, Perth
E-mail: lgregory@memerycrystal.com
Telephone: +61 8 9366 8000
E-mail: admin@crowndiamond.com.au
E-mail: roger.davies@bdw.com
ADVISERS
UNITED KINGDOM
Principal bankers
Barclays Bank Plc
ASX registrars
38 Hans Crescent, Knightsbridge,
Computershare Registry Services
Nominated adviser and broker
London SW1X OL2
Pty Ltd
Williams de Broë Plc
6 Broadgate, London, EC2M 2RP
Telephone: +44 20 7588 7511
E-mail: frank.moxon@wdebroe.com
BERMUDA
Telephone: +44 20 7114 7200
Level 2, Reserve Bank Building,
E-mail: tony.young@barclays.co.uk
45 St Georges Terrace, Perth WA 6000
Telephone: +61 8 9323 2000
E-mail:
Secretary and registered office
Melissa.neil@computershare.com.au
AIM registrars
Michael Ashford
Capita IRG (Offshore) Limited
2 Church Street, Hamilton, HM11,
Public relations
44 The Esplanade,
Bermuda
Field Public Relations
Jersey Channel Islands, JE4 0XQ
Company Registration Number:
231 South Road, Mile End SA 5031
Telephone: +44 20 8639 2486
EC23123
Telephone: +61 8 8234 9555
E-mail: kstafford@capitaregistrars.com
Telephone: +1 441 295 5950
E-mail: Kevin@fieldpr.com.au
Auditors
KPMG Audit Plc
Arlington Business Park, Theale,
Reading, Berkshire, RG7 4SD
Telephone: +44 118 964 2000
E-mail: mbashford@cdp.bm
Legal advisers to the Company
(as to Bermuda Law)
Conyers Dill & Pearman
Clarendon House, 2 Church Street,
E-mail: andrew.stevenson@kpmg.co.uk
Hamilton, HM11, Bermuda
Telephone: +1 441 295 1422
E-mail: info@cdp.bm
36 Petra Diamonds Limited Annual Report 2005
Independent Auditors’ Report to the members of Petra Diamonds Limited
We have audited the financial statements on pages 38 to 69.
This report is made solely to the Company in accordance with the terms of our engagement. Our audit work has been
undertaken so that we might state to the Company those matters we are required to state to it in our Auditors’ Report and
for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than
the Company for our audit work, for this report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The Directors are responsible for preparing the Annual Report. As described on page 25, this includes responsibility for
preparing the financial statements in accordance with applicable Bermudan law and International Financial Reporting
Standards. Our responsibilities, as independent auditors, are established by Bermudan law, the Auditing Practices Board of
the United Kingdom and by our profession’s ethical guidance.
We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in
accordance with Bermudan law.
We read the other information contained in the Annual Report and consider whether it is consistent with the audited
financial statements. We consider the implications for our report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices Board of the United
Kingdom. An audit includes an examination, on a test basis, of evidence relevant to the amounts and disclosures in the
financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the
preparation of the financial statements; and whether the accounting policies are appropriate to the Group’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the state of the Group’s affairs as at 30 June 2005 and
of its loss for the year then ended in accordance with International Financial Reporting Standards and have been properly
prepared in accordance with Bermudan law.
KPMG AUDIT PLC
Chartered Accountants
Registered Auditor
Reading
25 October 2005
Petra Diamonds Limited Annual Report 2005 37
Consolidated Income Statement
for the year ended 30 June 2005
Revenue
Cost of sales
Gross profit
Other operating income
Exploration expenditure
Operating expenditure - other
Operating expenditure - impairment of goodwill
Financial income
Financial expense
Net financing costs
Loss before tax
Income tax expense
Loss for the year
Basic and diluted loss per share – pence
2004
£
—
—
—
4,424
(2,499,983)
(1,478,477)
—
16,099
(261,926)
(245,827)
Notes
2005
£
1,225,292
4
(1,060,954)
164,338
—
(3,799,608)
(2,503,010)
(4,832,025)
19,636
(333,106)
(313,470)
5
6
12
7
8
10
(11,283,775)
(4,219,863)
(35,508)
—
(11,319,283)
(4,219,863)
(15.31)
(7.45)
The Group’s income and expenses all relate to continuing operations in the current and previous years.
Consolidated Statement of Total Recognised Gains and Losses
for the year ended 30 June 2005
Loss for the year
Exchange adjustments on translation of subsidiary and branch undertakings
recognised directly in equity
Total recognised gains and losses relating to the year
2005
£
2004
£
(11,319,283)
(4,219,863)
647,083
153,094
(10,672,200)
(4,066,769)
38 Petra Diamonds Limited Annual Report 2005
Consolidated Balance Sheet
at 30 June 2005
Notes
2005
£
2004
£
11
12
13
15
14
15
16
17
18
18
18
19
20
21
22
23
20
21
22
40,938,217
1,782,408
187,199
—
89,960
79,576
—
—
41,215,376
1,861,984
782,996
1,563,640
15,374,678
17,721,314
58,936,690
—
550,838
3,766,852
4,317,690
6,179,674
13,094,946
6,784,998
56,711,873
18,834,587
2,286,161
1,639,078
(34,767,466)
(23,578,125)
37,325,514
3,680,538
239,470
2,000,000
1,114,737
956,758
6,648,166
8,959,131
6,464,162
5,049,297
1,138,586
12,652,045
21,611,176
58,936,690
13,620
—
—
2,013,620
—
166,412
319,104
485,516
2,499,136
6,179,674
ASSETS
Property, plant and equipment
Intangible assets
Investment in associates
Trade and other receivables
Total non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Issued capital
Share premium account
Foreign currency translation reserve
Accumulated loss
Total equity
Liabilities
Interest-bearing loans and borrowings
Trade and other payables
Provisions
Deferred tax liabilities
Total non-current liabilities
Interest-bearing loans and borrowings
Trade and other payables
Provisions
Total current liabilities
Total liabilities
Total equity and liabilities
The financial statements were authorised for issue by the Directors on 25 October 2005
Petra Diamonds Limited Annual Report 2005 39
Consolidated Cash Flow Statement
for the year ended 30 June 2005
Loss after taxation for the year
(11,319,283)
(4,219,863)
Notes
2005
£
2004
£
Depreciation of property plant and equipment – exploration
Depreciation of property plant and equipment – mining
Depreciation of property plant and equipment – other
Amortisation of intangible assets
Profit on sale of property plant and equipment
Impairment of intangible assets
Impairment of goodwill
Interest received
Interest paid
Foreign exchange loss
340,966
249,394
15,628
4,409
(866)
73,710
4,832,025
(19,636)
216,585
497,083
44,402
—
7,783
4,250
—
—
—
(16,099)
113,700
218,432
Operating loss before working capital changes
(5,109,985)
(3,847,395)
(Increase) in trade and other receivables
Increase in trade and other payables
(Increase) in inventories
Cash utilised in operations
Interest paid
Net cash utilised by operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Acquisition of subsidiary net of cash acquired
Interest received
Acquisition of property, plant and equipment
Development expenditure
Net cash from investing activities
Cash flows from financing activities
Proceeds from the issue of share capital
(Decrease)/increase in long-term borrowings
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate fluctuations on cash held
(563,539)
1,088,439
(28,860)
(383,855)
107,308
—
(4,613,945)
(4,123,942)
(216,585)
(113,700)
(4,830,530)
(4,237,642)
3
11
12
866
57,688
19,636
—
—
16,099
(1,414,606)
(1,776,097)
(102,270)
—
(1,438,686)
(1,759,998)
18,106,789
(218,837)
17,887,952
11,618,736
3,766,852
(10,910)
7,577,133
1,923,410
9,500,543
3,502,903
263,949
—
Cash and cash equivalents at end of the year
16
15,374,678
3,766,852
40 Petra Diamonds Limited Annual Report 2005
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
1. ACCOUNTING POLICIES
Petra Diamonds Limited is a company registered and domiciled in Bermuda. The financial statements incorporate the
principal accounting policies set out below, which are consistent with those adopted in the previous financial year.
1.1 Statement of compliance
The Group financial statements are prepared in accordance with International Financial Reporting Standards
(IFRS) adopted by the International Accounting Standards Board (IASB), and interpretations issued by the
Standing Interpretations Committee of the IASB.
1.2 Basis of preparation
The Group financial statements are prepared on the historical cost basis and are presented in Pounds Sterling.
The preparation of financial statements in conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities,
income and expenses. The estimates and associated assumptions are based on historical experience and factors
that are believed to be reasonable under the circumstances, the results of which form the basis of making
judgements about carrying values of assets and liabilities that are not readily apparent from other 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 the estimate is revised if the revision only affects that period, or in the
period of revision and future periods if the revision affects both current and future periods.
The accounting policies set out below have been applied consistently to all periods presented in these financial
statements by all Group entities.
1.3 Basis of consolidation
Subsidiaries
Subsidiaries are those entities over whose financial and operating policies the Group has the power to exercise
control. The Group financial statements incorporate the assets, liabilities and results of operations of the Company
and its subsidiaries. The results of subsidiaries acquired and disposed of during a financial year are included from
the effective dates of acquisition to the effective dates of disposal. Where necessary, the accounting policies of
subsidiaries are changed to ensure consistency with the policies adopted by the Group.
Associates
An associate is an enterprise over whose financial and operating policies the Group has the power to exercise
significant influence and which is neither a subsidiary nor a joint venture of the Group. The equity method of
accounting for associates is adopted in the Group financial statements. In applying the equity method, account
is taken of the Group’s share of accumulated retained earnings and movements in reserves from the effective
date on which an enterprise becomes an associate and up to the effective date of disposal.
The share of associated retained earnings and reserves is generally determined from the associate’s latest audited
financial statements. Where the Group’s share of losses of an associate exceeds the carrying amount of the
associate, the associate is carried at nil.
Petra Diamonds Limited Annual Report 2005 41
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
1. ACCOUNTING POLICIES (continued)
1.3 Basis of consolidation (continued)
Associates (continued)
Additional losses are only recognised to the extent that the Group has incurred obligations or made payments on
behalf of the associate. Where the Group does not exercise any significant influence the investment is stated at
cost less any impairment.
Joint ventures
Joint ventures are arrangements where the Group has joint control, established by contractual agreement. Where
this is through a separate legal entity, the consolidated financial statements include the Group’s proportionate
share of the entities assets, liabilities, revenue and expenses with items of a similar nature on a line by line basis,
from the date that joint control commences until the date that joint control ceases. Where the arrangement is
through a pooling of assets the Group maintains ownership of the assets and records its share of revenue and
expenses.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with
associates and jointly controlled entities are eliminated to the extent of the Group’s interest in the enterprises.
Unrealised gains arising from transactions with associates are eliminated against the investment in the
associates.
Unrealised losses on transactions with associates are eliminated in the same way as unrealised gains except that
they are only eliminated to the extent that there is no evidence of impairment.
1.4 Property, plant and equipment
Property, plant and equipment are stated at historic cost less accumulated depreciation and accumulated
impairment losses. Where an item of property, plant and equipment comprises major components with different
useful lives, the components are accounted for as separate items of property, plant and equipment. Depreciation
is provided on the straight-line basis over the estimated useful lives of assets.
The depreciation rates are as follows
Exploration assets:
Plant and machinery
Office equipment
Computer equipment
Motor vehicles
Mining assets
10% – 20% straight-line basis
10% straight-line basis
25% straight-line basis
20% straight-line basis
Plant, machinery and equipment
Units of production method
Mineral properties
Units of production method
42 Petra Diamonds Limited Annual Report 2005
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
1. ACCOUNTING POLICIES (continued)
1.4 Property, plant and equipment (continued)
Subsequent expenditure relating to an item of property, plant and equipment is capitalised when it is probable
that future economic benefits from the use of asset will be increased. All other subsequent expenditure is
recognised as an expense in the period in which it is incurred.
Repairs and maintenance which neither materially add to the value of assets nor appreciably prolong their useful
lives are charged against income.
Surpluses/(deficits) on the disposal of property, plant and equipment are credited/(charged) to income. The
surplus or deficit is the difference between the net disposal proceeds and the carrying amount of the asset.
1.5 Leases
Finance leases
Leases that transfer substantially all the risks and rewards of ownership of the underlying asset to the Group are
classified as finance leases. Assets acquired in terms of finance leases are capitalised at the lower of fair value and the
present value of the minimum lease payments at inception of the lease, and depreciated over the estimated useful life
of the asset. The capital element of future obligations under the leases is included as a liability in the balance sheet.
Lease payments are allocated using the effective interest rate method to determine the lease finance cost, which is
charged against income over the lease period, and the capital repayment, which reduces the liability to the lessor.
Operating leases
Leases where the lessor retains the risks and rewards of ownership of the underlying asset are classified as
operating leases. Payments made under operating leases are charged against income on a straight line basis over
the period of the lease.
1.6
Intangible assets
Evaluation and exploration costs are written off in the year in which they are incurred. Pre-production
expenditure is only capitalised once feasibility studies indicate commercial viability and the Board takes the
decision to develop the project further. Capitalisation of pre-production expenditure ceases when the project is
capable of commercial production whereupon it is amortised on a unit of production basis.
Mineral rights are capitalised at cost and are amortised on a unit of production basis for operating mines and
over twenty years for prospecting rights.
Goodwill for all business combinations are accounted for by applying the purchase method. Goodwill represents
amounts arising on acquisition of subsidiaries, associates and joint ventures. Goodwill represents the difference
between the cost of the acquisition and the fair value of the net identifiable assets acquired.
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash generating units
and is not amortised but is tested annually for impairment. In respect of associates, the carrying amount of
goodwill is included in the carrying amount of the investment in the associate.
Negative goodwill arising on acquisition is recognised directly in profit or loss.
Petra Diamonds Limited Annual Report 2005 43
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
1. ACCOUNTING POLICIES (continued)
1.7 Impairment
The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine whether there
is any indication of impairment. If there is any indication that an asset may be impaired, its recoverable amount
is estimated. The recoverable amount is the higher of its net selling price and its value in use. For intangible assets
that are not yet available for use, goodwill or intangible assets with an indefinite useful life, an impairment test
is performed at each balance sheet date.
In assessing value in use, the expected future cash flows from the asset are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.
For an asset that does not generate cash inflows that are largely independent of those from other assets the
recoverable amount is determined for the cash-generating unit to which the asset belongs. An impairment loss
is recognised in the income statement whenever the carrying amount of the cash-generating unit exceeds its
recoverable amount.
A previously recognised impairment loss is reversed if the recoverable amount increases as a result of a change in
the estimates used to determine the recoverable amount, but not to an amount higher than the carrying amount
that would have been determined (net of depreciation) had no impairment loss been recognised in prior years.
For goodwill a recognised impairment loss is not reversed.
1.8 Financial instruments
Measurement
Financial instruments are initially measured at cost, which includes transaction costs. Subsequent to initial
recognition these instruments are measured as set out below.
Trade and other receivables
Trade and other receivables originated by the Group are stated at cost less provision for doubtful debts.
Cash and cash equivalents
Cash and cash equivalents are measured at fair value, based on the relevant exchange rates at balance sheet date.
Financial liabilities
Non-derivative financial liabilities are recognised at amortised cost, comprising original debt less principal
payments and amortisations.
Derivative instruments
Derivative instruments are measured at fair value.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to
initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and
redemption value being recognised in the income statement over the period of the borrowings on an effective
interest rate basis.
44 Petra Diamonds Limited Annual Report 2005
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
1. ACCOUNTING POLICIES (continued)
1.8 Financial instruments (continued)
Gains and losses on subsequent measurement
Gains and losses arising from a change in the fair value of financial instruments that are not part of a hedging
relationship are included in net profit or loss in the period in which the change arises.
Gains and losses from measuring the hedging instruments relating to a fair value hedge at fair value are
recognised immediately in net profit or loss.
Gains and losses from remeasuring the hedging instruments relating to a cash flow hedge to fair value are initially
recognised directly in equity. If the hedged firm commitment or forecast transaction results in the recognition of an
asset or a liability, the cumulative amount recognised in equity up to the transaction date is adjusted against the
initial measurement of the asset or liability. For other cash flow hedges, the cumulative amount recognised in equity
is included in net profit or loss in the period when the commitment or forecast transaction affects profit or loss.
Where the hedging instrument or hedge relationship is terminated but the hedged transaction is still expected
to occur, the cumulative unrealised gain or loss at that point remains in equity and is recognised in accordance
with the above policy when the transaction occurs. If the hedged transaction is no longer expected to occur, the
cumulative unrealised gain or loss is recognised in the income statement immediately.
Offset
Financial assets and financial liabilities are offset and the net amount reported in the balance sheet when the
company has a legally enforceable right to set off the recognised amounts, and intends either to settle on a net
basis, or to realise the asset and settle the liability simultaneously.
1.9 Revenue
Revenue comprises net invoiced diamond sales, option fees, and management fees to customers excluding VAT,
investment income and other non-operating income. Revenue is recognised when significant risks and rewards
of ownership are transferred to the buyer, costs can be measured reliably and receipt of future economic benefits
is probable.
1.10 Investment income
Interest is recognised on a time proportion basis, taking account of the principal outstanding and the effective
rate over the period to maturity, when it is probable that such income will accrue to the Group.
1.11 Tax
Current tax comprises tax payable calculated on the basis of the expected taxable income for the year, using the
tax rates enacted at the balance sheet date, and any adjustment of tax payable for previous years.
Deferred tax is provided using the balance sheet liability method, based on temporary differences. Temporary
differences are differences between the carrying amounts of assets and liabilities for financial reporting purposes
and their tax base. The amount of deferred tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at
the balance sheet date.
Petra Diamonds Limited Annual Report 2005 45
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
1. ACCOUNTING POLICIES (continued)
1.11 Tax (continued)
Deferred tax is charged to the income statement except to the extent that it relates to a transaction that is
recognised directly in equity, or a business combination that is an acquisition. The effect on deferred tax of any
changes in tax rates is recognised in the income statement, except to the extent that it relates to items previously
charged or credited directly to equity.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available
against which the associated unused tax losses and deductible temporary differences can be utilised. Deferred
tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
1.12 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events,
for which it is probable that an outflow of economic benefits will occur, and where a reliable estimate can be
made of the amount of the obligation. Where the effect of discounting is material, provisions are discounted.
The discount rate used is a pre-tax rate that reflects current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
Environmental rehabilitation
The estimated cost of environmental rehabilitation is based on current legal requirements and existing technology.
A provision is raised for the present value of environmental damage incurred on the initial set-up of assets and
other long-term projects. These costs are included in the cost of the related asset. The capitalised assets are
depreciated in accordance with the accounting policy for property, plant and equipment. Annual increases in the
provision, as a result of the change in the net present value, are charged to the income statement. The cost of
the ongoing current programmes to prevent and control pollution is charged against income as incurred.
The obligation to restore environmental damage caused through operations is raised as the relevant operations
take place. Assumptions have been made as to the remaining life of existing sites based on studies conducted by
independent technical advisers.
1.13 Foreign currency
Foreign currency transactions
Transactions in foreign currencies are recorded at rates of exchange ruling at the transaction date. Monetary
assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the
balance sheet date. Gains and losses arising on translation are credited to or charged against income.
Financial statements of foreign entities
Assets and liabilities of foreign entities are translated at rates of exchange ruling at the financial year-end; and
income and expenditure and cash flow items are translated at rates of exchange ruling at the date of the transaction.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of
the foreign entity and translated at the exchange rate ruling at the balance sheet date. Exchange differences arising
from the translation of foreign entities are taken directly to a foreign currency translation reserve. The Group financial
statements are presented in sterling which is also the measurement currency of Petra Diamonds Limited, the Company.
For the Australian and South African subsidiaries the measurement currencies are Australian dollars and South African
rand. For British Virgin Island and Angolan subsidiaries, the measurement currency is United States dollars.
46 Petra Diamonds Limited Annual Report 2005
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
1. ACCOUNTING POLICIES (continued)
1.14 Short-term employee benefits
The cost of all short-term employee benefits is recognised during the period in which the employee renders
the related service. The provisions for employee entitlements to wages, salaries, annual and sick leave represent
the amount which the Group has a present obligation to pay as a result of employees’ services provided to the
balance sheet date. The provisions have been calculated at undiscounted amounts based on current wage and
salary rates.
1.15 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held on call with banks, and investments in money
market instruments, net of bank overdrafts, all of which are available for use by the Group unless otherwise
stated.
1.16 Share-based payments
The Company utilises share options and warrants. The exercise price is fixed at the date of grant and no
compensation is due at the date of grant. On exercise, equity is increased by the amount of the proceeds
received.
1.17 Inventories
Inventories, which include rough diamonds, are stated at the lower of cost-of-production on the weighted
average basis or estimated net realisable value. Cost price includes direct labour, other direct costs and related
production overheads. Net realisable value is the estimated selling price in the ordinary course of business less
marketing costs. Consumable stores are stated at the lower of cost on the weighted average basis or estimated
replacement value.
1.18 Convertible note
Convertible notes that can be converted to share capital at the option of the holder, where the number of shares
issued does not vary with changes in their fair value, are accounted for as compound financial instruments.
Transaction costs that relate to the issue of a compound financial instrument are allocated to the liability and
equity components in proportion to the allocation of proceeds. The equity component of the convertible notes
is calculated as the excess of the issue proceeds over the present value of the future interest and principal
payments, discounted at the market rate of interest applicable to similar liabilities that do not have a conversion
option. The interest expense recognised in the income statement is calculated using the effective interest rate
method.
1.19 Segment reporting
A segment is a distinguishable component of the Group that is engaged either in providing mining or exploration
activities, or in providing products or services within a particular economic environment, which is subject to risks
and rewards that are different from those of other segments. The basis of segment reporting is representative of
the internal structure used for management reporting.
Petra Diamonds Limited Annual Report 2005 47
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
2. SEGMENTAL INFORMATION
Segment information is presented in respect of the Group’s business and geographical segments. The primary format is
based on the Group’s management and internal reporting structure.
Segment results, assets and liabilities include items directly attributable to a segment 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 to acquire 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 in South Africa.
Exploration – exploration operations carried out in Angola, Sierra Leone and South Africa.
Revenue from external customers
1,225,292
Business segments
2005
Segment result
Operating profit
Net financing income/(costs)
Income tax expense
Profit/(loss) for year
Segment assets
Total assets
Segment liabilities
Total liabilities
Cash flows from operations
Cash flows from investing
Cash flows from financing
Capital expenditure
Depreciation and amortisation
Mining
Exploration
Eliminations
Consolidated
£
£
—
164,338
(11,007,711)
37,406
72,058
(35,508)
(11,007,711)
(385,528)
—
73,956
(11,393,239)
£
—
—
—
—
—
—
£
1,225,292
(10,843,373)
(10,970,305)
(313,470)
(35,508)
(11,319,283)
45,065,076
43,718,814
(29,847,200)
58,936,690
45,065,076
43,718,814
(29,847,200)
58,936,690
18,553,530
3,258,949
(201,303)
21,611,176
18,553,530
3,258,949
(201,303)
21,611,176
339,461
(5,169,991)
(81,054)
(1,357,632)
(245,582)
18,133,534
188,992
249,394
1,225,614
361,003
—
—
—
—
—
—
(4,830,530)
(1,438,686)
17,887,952
1,414,606
610,397
(4,905,735)
Impairment losses
(4,832,025)
(73,710)
Geographical segments
Angola
South Africa
Sierra Leone
Consolidated
2005
Revenue from external customers
£
—
£
1,225,292
£
—
£
1,225,292
Segment assets
2,879,685
55,869,806
187,199
58,936,690
Cash flows from operations
(3,072,044)
(1,758,486)
—
(4,830,530)
Cash flows from investing
Cash flows from financing
Capital expenditure
Impairment losses
(1,167,925)
(168,491)
(102,270)
(1,438,686)
4,856,812
12,928,870
102,270 17,887,952
1,225,614
188,992
—
(4,905,735)
—
—
1,414,606
(4,905,735)
48 Petra Diamonds Limited Annual Report 2005
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
2.
SEGMENTAL INFORMATION (continued)
Business segments
2004
Revenue from external customers
Segment result
Operating profit
Net financing costs
Income tax expense
Loss for year
Segment assets
Total assets
Segment liabilities
Total liabilities
Cash flows from operations
Cash flows from investing
Cash flows from financing
Capital expenditure
Depreciation and amortisation
Impairment losses
Mining
Exploration
Eliminations
Consolidated
£
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
£
—
(3,974,036)
(3,974,036)
(245,827)
—
(4,219,863)
6,179,674
6,179,674
2,499,136
2,499,136
(4,237,642)
(1,759,998)
9,500,543
1,776,097
56,435
—
£
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
£
—
(3,974,036)
(3,974,036)
(245,827)
—
(4,219,863)
6,179,674
6,179,674
2,499,136
2,499,136
(4,237,642)
(1,759,998)
9,500,543
1,776,097
56,435
—
Geographical segments
Angola
South Africa
Eliminations
Consolidated
2004
Revenue from external customers
Segment assets
Cash flows from operations
Cash flows from investing
Cash flows from financing
Capital expenditure
Impairment losses
£
—
2,122,150
(2,828,032)
(1,762,332)
4,208,434
1,762,332
—
£
—
4,057,524
(1,409,610)
2,334
5,292,109
13,765
—
£
—
—
—
—
—
—
—
£
—
6,179,674
(4,237,642)
(1,759,998)
9,500,543
1,776,097
—
Petra Diamonds Limited Annual Report 2005 49
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
3. ACQUISITION OF SUBSIDIARY
Effective 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 of 37,962,256 shares. Crown operated three diamond mines in South Africa and
had an exploration interest in Sierra Leone. In the one month to 30 June 2005 the subsidiary contributed a mining profit,
before depreciation, of £413,732. If the acquisition had occurred on 1 July 2004, the Group revenue would have been
£9,570,839 and the loss would have increased by £1,743,555.
Effect of the acquisition
The acquisition had the following effect on the Group’s assets and liabilities.
Crown’s net assets at acquisition date
Consolidated fair value of net assets of entity acquired:
Mineral properties
Plant and equipment
Exploration and evaluation
Cash assets
Inventories
Receivables
Receivables from related parties
Deferred tax liabilities
Settlement of purchase consideration
Bank loans – secured
Bank loans – unsecured
Convertible notes – secured
Loans from directors of Crown
Accruals and payables
Interest on interest-bearing liabilities
Payables to related party
Provision for rehabilitation
Other provisions
Goodwill
Consideration paid satisfied in shares
Book
Fair value
values
adjustments
£
£
Carrying
values
£
15,202,872
7,877,282
3,450,111
10,711,196
18,652,983
18,588,478
82,567
57,688
754,136
406,140
133,083
(6,423,275)
(3,849,972)
(805,554)
(2,439,659)
(1,276,717)
(356,918)
(929,409)
(43,620)
(116,182)
(924,251)
(527,209)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
82,567
57,688
754,136
406,140
133,083
(6,423,275)
(3,849,972)
(805,554)
(2,439,659)
(1,276,717)
(356,918)
(929,409)
(43,620)
(116,182)
(924,251)
(527,209)
6,821,002
14,161,307
20,982,309
4,832,025
25,814,334
50 Petra Diamonds Limited Annual Report 2005
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
4. COST OF SALES
Raw materials and consumables used
Employee expenses
Depreciation of mining assets
Changes in inventory of finished goods
5.
EXPLORATION EXPENDITURE
Employee expenses
Depreciation of exploration assets
Drilling costs
Equipment hire
Other exploration costs
6. OPERATING EXPENDITURE – OTHER
Auditors’ remuneration
– audit services
Amortisation of intangible assets
Depreciation of property plant and equipment
Operating lease rentals
Staff costs
Bid expenditure
Impairment of intangible assets
Profit on disposal of property plant and equipment
Other charges
In addition to the above, fees paid to the auditors during 2005 amounting to
£121,099 in respect of non-audit services, largely in respect of the merger with
Crown Diamonds NL, have been charged to the share premium account as share
issue costs.
7. NET FINANCING COSTS
On bank loans and overdrafts
Other debt finance costs
Foreign exchange losses
Financial expense
Interest received
2005
£
395,958
470,364
249,394
(54,762)
1,060,954
994,315
340,966
953,356
570,305
940,666
2004
£
—
—
—
—
—
479,350
44,402
361,240
120,010
1,494,981
3,799,608
2,499,983
117,796
4,409
15,628
187,822
967,310
—
73,710
866
60,534
4,250
7,783
216,548
537,839
33,394
—
—
1,135,469
2,503,010
618,129
1,478, 477
(29,395)
(187,190)
(116,521)
(333,106)
19,636
(313,470)
(74)
(113,626)
(148,226)
(261,926)
16,099
(245,827)
Petra Diamonds Limited Annual Report 2005 51
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
8.
TAXATION
Current taxation
– Current tax expense
Deferred taxation
– Current period
2005
£
—
35,508
35,508
%
2004
£
—
—
—
2004
£
%
2005
£
Reconciliation of tax rate
Loss before taxation
(11,283,775)
(4,219,863)
Tax at UK corporate rate
(30.00)
(3,385,132)
(30.00)
(1,265,959)
Effects of:
Non-deductible expenses
Non-taxable income
Assessed loss not utilised
Effect of tax rates in foreign jurisdictions
Total tax charge
12.83
(0.02)
3.81
13.07
(0.31)
1,447,708
(2,256)
429,912
1,474,260
(35,508)
2.9
—
—
27.1
—
120,560
—
—
1,145,399
—
52 Petra Diamonds Limited Annual Report 2005
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
9. DIRECTORS AND EMPLOYEES
Staff costs (excluding the non-executive Directors) during the year were as follows:
Wages and salaries – mining
Wages and salaries – exploration
Wages and salaries – administration
Social security costs
Provident fund costs
The number of employees at the various mining and exploration operations
(excluding the non-executive Directors of the Group at the end of the period
was 1,832 (2004:102), employed as follows:
Mining and exploration
Administration
Remuneration in respect of executive and non-executive Directors was as follows:
Base
Performance
remuneration
related bonus
Other
Executive Directors
A Pouroulis
K Dabinett
D Abery
J Dippenaar
J Davidson
Non-executive Directors
C Segall
C Finkelstein
V Ruffer
£
£
118,092
140,302
126,503
11,875
11,875
46,667
10,000
75,000
30,000
30,000
£
—
—
—
—
—
408,647
191,667
Performance
Fees
related bonus
Other
£
15,000
5,000
5,000
25,000
£
—
—
—
—
£
—
—
—
—
2005
£
2004
£
470,364
994,315
865,159
3,848
98,303
2,431,989
Number
—
479,350
488,223
696
48,920
1,017,189
Number
1,776
56
1,832
2005
Total
£
164,759
150,302
201,503
41,875
41,875
600,314
2005
Total
£
15,000
5,000
5,000
25,000
76
26
102
2004
Total
£
133,888
39,415
109,815
—
—
283,118
2004
Total
£
15,000
5,000
5,000
25,000
Petra Diamonds Limited Annual Report 2005 53
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
10. LOSS PER SHARE
The calculation of loss per share is based on the loss for the financial year
of £11,319,283 (2004: £4,219,863) and on a weighted average of 73,937,847
(2004: 56,682,704) ordinary shares of 10p each in issue during the year.
Loss for the year
2005
£
2004
£
11,319,283
4,219,863
Shares
Shares
Basic weighted average number of ordinary shares in issue
73,937,847
56,682,704
Basic loss per share – pence
Due to the Group’s loss for the year, the diluted loss per share is the same
as the basic loss per share
Weighted average number of ordinary shares
As at 1 July 2004
Effect of shares issued during the period
Weighted number at 30 June 2005
Pence
(15.31)
Pence
(7.45)
67,849,976
6,087,871
73,937,847
51,638,496
5,044,208
56,682,704
Plant and
machinery
Mining
assets
£
Plant and
machinery
Exploration
assets
£
Computers
and office
equipment
£
Motor
vehicles
£
Mineral
properties
£
Total
£
11. PROPERTY, PLANT AND EQUIPMENT
Cost
At 1 July 2004
—
1,598,572
100,816
Exchange differences
531,563
15,385
Business combination
18,581,076
—
(2,178)
7,402
176,706
36,926
—
1,876,094
533,620
1,115,316
— 18,652,986
37,241,464
Additions
Disposals
164,732
140,602
65,225
1,041,355
2,692
1,414,606
—
—
—
(6,860)
—
(6,860)
At 30 June 2005
19,277,371
1,754,559
171,265
1,248,127 19,189,298 41,640,620
Depreciation
At 1 July 2004
Exchange differences
Disposals
Provided in the year
At 30 June 2005
Net book amount
30 June 2005
—
—
—
28,980
8,310
—
28,201
(1,071)
—
152,984
258,901
21,854
36,505
2,350
(6,860)
72,555
—
—
—
93,686
9,589
(6,860)
99,694
605,988
152,984
296,191
48,984
104,550
99,694
702,403
19,124,387
1,458,368
122,281 1,143,577 19,089,604 40,938,217
Net book amount 30 June 2004
—
1,569,592
72,615
140,201
—
1,782,408
The Group leases plant and machinery under a number of finance lease agreements. At the end of each of the leases
the Group has the option to purchase the plant and equipment. At 30 June 2005, the net carrying amount of leased
plant and machinery was £378,559 (2004: £Nil). The leased equipment secures lease obligations (see Note 20).
An option was granted on 15 October 2003 to J Dippenaar and J Davidson to acquire the game farm situated on and
around the Helam Diamond Mine for R2,500,000 (£209,121). The option expires on 15 October 2011.
54 Petra Diamonds Limited Annual Report 2005
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
12. INTANGIBLE ASSETS
Cost
At 1 July 2004
Exchange differences
Acquisition by business combination
Expenditure on exploration
At 30 June 2005
Amortisation
At 1 July 2004
Exchange differences
Impairment
Provided in the year
At 30 June 2005
Goodwill
£
Pre-production
expenditure
£
Mineral rights
£
Total
£
—
—
4,832,025
—
—
2,362
82,567
102,270
89,817
(4,608)
89,817
(2,246)
—
4,914,592
— 102,270
4,832,025
187,199
85,209
5,104,433
—
—
(4,832,025)
—
(4,832,025)
—
—
—
—
—
(10,241)
3,151
(73,710)
(4,409)
(10,241)
3,151
(4,905,735)
(4,409)
(85,209)
(4,917,234)
Net book amount 30 June 2005
Net book amount 30 June 2004
—
—
187,199
—
—
79,576
187,199
79,576
Goodwill has been impaired according to a preferred fair valuation of the net realisable assets of the acquired
business combination as determined by an independent valuation.
Mineral rights have been impaired as the estimated future cash flows do not support the net book value of the asset.
13. INVESTMENTS IN ASSOCIATES
Interests in associates
At year end the Group had interests in the following:
Ownerships
Namibia Mining House (Pty) Ltd
Nabera Mining (Pty) Ltd
Country
Namibia
South Africa
2005
%
35.0
29.5
Summary of financial information on associates – 100 per cent
2005
Assets
Liabilities
Equity
Revenues
Namibia Mining House (Pty) Ltd
—
—
—
Nabera Mining (Pty) Ltd
5,743
(161,830)
156,087
2004
Namibia Mining House (Pty) Ltd
Nabera Mining (Pty) Ltd
—
23,492
—
(96,387)
—
72,895
If the investments in associates had been included at cost, they would have been
included at the following amounts:
Cost
Amounts written off
Net book amount
—
—
—
—
2005
£
463
(463)
—
2004
%
35.0
29.5
(Loss)
—
(38,326)
—
(28,488)
2004
£
463
(463)
—
Petra Diamonds Limited Annual Report 2005 55
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
14. INVENTORIES
Diamonds held for resale
Consumables and stores
15. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Other receivables
Prepayments
Non-current
Rehabilitation guarantee
The rehabilitation guarantee comprises a risk policy which is anticipated to be
recovered upon closure and rehabilitation of one of the Group’s mines.
16. CASH AND CASH EQUIVALENTS
Unsecured
Cash at bank and on hand
Secured
Fixed and floating charge deposit
2005
£
2004
£
604,487
178,509
782,996
414,098
1,059,656
89,886
1,563,640
89,960
89,960
—
—
—
—
501,984
48,854
550,838
—
—
13,989,636
3,766,852
1,385,042
—
15,374,678
3,766,852
As security for the Company’s obligations to the Convertible Note Holders, the
Company has pledged A$3,3 million (£1,385,042) in a fixed and floating charge
deposit (Refer Note 20 (iv)).
Number
of shares
2005
£
Number
of shares
2004
£
17. ISSUED CAPITAL
Authorised – ordinary shares of 10p each
As at 1 July 2004 and 30 June 2005
200,000,000
20,000,000
120,000,000
12,000,000
Issued and fully paid
At 1 July
Allotments during the year
Conversion of convertible notes
67,849,976
6,784,998
51,638,496
5,163,849
63,086,597
6,308,660
16,211,480
1,621,149
12,883
1,288
—
—
At 30 June
130,949,456
13,094,946
67,849,976
6,784,998
All the allotments during the year were in respect of the merger with Crown Diamonds NL and in respect of funds
raised to further grow the business into Africa.
56 Petra Diamonds Limited Annual Report 2005
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
17. ISSUED CAPITAL (continued)
Warrants and Options
Put and call options
Holder
Williams de Broë Plc
Societe Diamantaire Finkelstein CH & Co NV
Exercise price
Total value
Expiry
85.0p
67.5p
£170,716
17 June 2008
US$1.75m
31 October 2005
Williams de Broë Plc have an option over 200,843 ordinary shares in the Company exercisable for a period of three
years from 17 June 2005 at an exercise price of 85p.
The Company and Societe Diamantaire Finkelstein CH & Co NV (“Finkelstein“) have granted each other a mutual put and
call option for Finkelstein to subscribe US$1.75 million for ordinary shares in the Company, such option being exercisable
once the market value of Petra’s ordinary shares equals or exceeds 75p respectively for at least 15 consecutive trading
days. The subscription price will be equal to a 5% discount to that market price. The option is renewable at the
Company’s choice on an annual basis. Charles Finkelstein, a director of the Company, is also a director of Finkelstein.
Warrants
Holder
Photon Global Limited
Photon Global Limited
Photon Global Limited
Photon Global Limited
Employee share options
Holder
Estate of W Roberts
A Pouroulis
D Abery
K Dabinett
J Dippenaar
J Davidson
Senior management
Shares
Exercise price
Expiry
1,500,000
1,000,000
833,333
833,333
30p
100p
55.85p
55.85p
31 December 2007
31 December 2007
14 August 2006
14 August 2006
Number of shares
Exercise price
Expiry
50,000
50,000
50,000
50,000
100,000
100,000
100,000
100,000
750,000
250,000
750,000
250,000
750,000
250,000
750,000
750,000
385,000
133,334
50,000
276,375
86,250
30.0p
35.0p
40.0p
45.0p
30.0p
35.0p
40.0p
45.0p
44.0p
85.0p
44.0p
85.0p
54.5p
85.0p
85.0p
85.0p
44.0p
54.5p
56.75p
A$1.12
A$1.36
22 July 2005
22 July 2005
22 July 2005
22 July 2005
11 April 2007
11 April 2007
11 April 2007
11 April 2007
5 September 2013
16 June 2015
5 September 2013
16 June 2015
28 June 2014
16 June 2015
16 June 2015
16 June 2015
5 September 2013
28 June 2014
13 September 2014
24 September 2014
28 January 2015
On 11 July 2005 all of the options held by the Estate of W Roberts were exercised.
Petra Diamonds Limited Annual Report 2005 57
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
18. RESERVES
At 1 July 2004
Loss for the year
Transfer from reserves of subsidiary
Exchange differences
Premium allotments during the year
Share issue costs
Convertible Notes issued
At 30 June 2005
—
—
—
39,500,928
(1,628,873)
5,231
56,711,873
19. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS’ FUNDS
Loss for the year
Transfer from subsidiaries reserves
New share capital subscribed
Movement in foreign currency translation reserves
Net movement in shareholders’ fund
Opening shareholders’ funds
Closing shareholders’ funds
20. INTEREST BEARING LOANS AND BORROWINGS
Current
Bank overdraft – secured (i)
Bank loan – secured (i)
Bank loan – secured (ii)
Bank loan – unsecured (iii)
Convertible note - secured (iv)
Loan unsecured (v)
Loan unsecured (vi)
Lease and instalment purchase liabilities (vii)
Lease and instalment purchase liabilities (vii)
Non-current
Bank loan – secured (i)
Bank loan – secured (ii)
Loan unsecured (v)
Lease and instalment purchase liabilities (vii)
58 Petra Diamonds Limited Annual Report 2005
Share premium
account
£
Foreign currency
translation reserve
£
Accumulated loss
£
18,834,587
1,639,078
—
—
647,083
—
—
—
(23,578,125)
(11,319,283)
129,942
—
—
—
—
2,286,161
(34,767,466)
2005
£
2004
£
(11,319,283)
(4,219,863)
129,942
44,187,234
647,083
33,644,976
3,680,538
37,325,514
—
7,577,133
153,094
3,510,364
170,174
3,680,538
179,434
16,655
70,729
2,509,452
1,229,621
2,000,000
370,358
228
87,685
6,464,162
160,337
47,153
—
—
—
—
—
—
—
—
—
—
—
—
—
2,000,000
31,980
239,470
—
2,000,000
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
20. INTEREST BEARING LOANS AND BORROWINGS (continued)
(i) Bank loans – secured
First National Bank
A controlled entity, Helam Mining Pty Ltd (“Helam”), has a R10,000,000 (£836,484) overdraft facility with First
National Bank, a division of FirstRand Bank Limited. At year end the overdraft was drawn down to R2,145,098
(£179,434). The weighted average interest rate for the overdraft as at 30 June 2005 is 11.02%.
Helam has a term loan facility with First National Bank and at year end an amount of R2,115,907 (£176,992),
R199,106 (£16,655) payable within the next 12 months and R1,916,801 (£160,337) payable over a period of
seven years, was drawn on the term loan. The interest rate for the term loan at 30 June 2005 is 11.02% and the
final instalment is due on 30 November 2012.
The above facilities are secured against properties of Helam for up to R7,850,000 (£656,640) and a R8,000,000
(£669,187) general notarial bond over moveable assets along with unlimited letters of suretyship from Star
Diamonds Pty Ltd and Messina Diamonds Pty Ltd and a letter of joint suretyship for R2,000,000 (£167,297) from
Directors J Dippenaar and J Davidson. The facilities with First National Bank are subject to annual review.
(ii) Bank loan – secured
Industrial Development Corporation of South Africa
A controlled entity, Messina Investment Limited, has a R1,409,260 (£117,883) interest free loan, R845,556 (£70,729)
payable within the next 12 months and R563,704 (£47,153) payable over a period greater than 12 months, with the
Industrial Development Corporation of South Africa Limited. The loan has a final repayment date of 28 February
2007. The loan is guaranteed by two controlled entities, Star Diamonds Pty Ltd and Messina Diamonds Pty Ltd.
(iii) Bank loan – unsecured
ABN Amro Bank BV
A controlled entity, Crown Resources Pty Ltd, has a R30,000,000 (£2,509,452) bridging loan with ABN Amro Bank
NV. The loan is guaranteed by Directors, A Pouroulis and C Finkelstein of the Company. Interest is payable at the
South African Prime lending rate less 0.5% per annum. At 30 June 2005 the effective interest rate was 10.47%.
The loan was repaid on 15 July 2005.
(iv) Convertible note – secured
A controlled entity, Crown Diamonds NL, has 16,078,191 (£1,229,621) convertible notes on issue at 30 June 2005.
During the month of June 2005, 85,000 Crown Diamonds NL convertible notes were converted into 12,883
ordinary shares of the Company. The notes bear interest at 11% per annum and are secured by a fixed charge over
$A3,300,000 (£1,385,042) of funds held on deposit with Barclays Bank Plc. The notes are convertible into ordinary
shares of the Company, at the option of the note holder or repayable on 30 November 2005. The conversion price
is the lesser of $A1.44 or 85% of the average price of the Company’s shares for the past 10 trading days.
Movements in secured convertible notes
Balance at beginning of year
Balance acquired through business combination
Exchange differences
Converted to Crown Diamonds NL shares
Converted to ordinary shares
Balance at the end of year
30 June
2005
Number
—
17,034,750
—
(871,559)
(85,000)
16,078,191
30 June
2004
Number
—
—
—
—
—
—
30 June
2005
£
—
1,276,717
25,340
(65,999)
(6,437)
1,229,621
30 June
2004
£
—
—
—
—
—
—
(v) Loan – unsecured
The Company has a loan facility with Photon Global Limited for £2,000,000. The loan is unsecured and bears
interest at LIBOR plus 2% payable bi-annually in March and September each year. At 30 June 2005 the effective
interest rate was 7.09%. The loan was repaid in full on 5 July 2005.
(vi) Loan – unsecured
A controlled entity, Helam Mining Pty Ltd, is indebted to Directors J Dippenaar and J Davidson for a total
of R4,427,556 (£370,358). The loan is unsecured and earns interest of 11% pa. In July 2005 a repayment of
R4 million was made on these Directors’ loans.
(vii) Lease and hire purchase liabilities
The lease and hire purchase liabilities are secured over plant and equipment with a written down value of
£378,559. The effective interest rate varies between 9.92% and 10.75% with monthly instalments varying
between R4,700 (£393) and R29,505 (£2,468). The remaining periods range from 2 months to 25 months.
Petra Diamonds Limited Annual Report 2005 59
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
21. TRADE AND OTHER PAYABLES
Current
Trade payables
Settlement of purchase consideration for controlled entity (i)
Settlement of purchase consideration for controlled entity (ii)
Settlement of purchase consideration for controlled entity (ii)
Provident fund contributions
Other creditors
Interest on loans
Non current
Amounts owing to associates
Settlement of purchase consideration for controlled entity (i) and (ii)
Reduction for deferred settlement (ii)
2005
£
2004
£
1,702,611
306,268
2,116,036
417,642
110,319
272,544
123,877
5,049,297
28,997
1,394,395
(308,655)
1,114,737
47,053
—
—
—
24,928
94,431
—
166,412
13,620
—
—
13,620
(i) The settlement of the residual purchase price of Messina Investments Limited acquired by Crown Diamonds
NL in July 2003 to the major shareholder, Star Mining Limited of $711,489 (£306,268) was due following the
completion of the capital expansion programme commenced in 2003. The residual purchase price was paid in
full on 5 July 2005.
(ii) The settlement of part of the purchase price of US$3,800,000 (£2,116,036) to Carminda Limited, a company
associated with Star Mining Limited was due upon the successful completion by the Company of a capital
raising. The US$3,800,000 was paid in full on 5 July 2005. The balance of US$3,250,000 (£1,812,037) is payable
from 50% of the cash surplus of the Helam Diamond mine (as defined) over three years as follows:
Current
US$750,000
Non current
US$1,000,000
US$1,500,000
(£417,642) for the year ending 31 December 2005 payable by 30 April 2006
(£557,757) for the year ending 31 December 2006 payable by 30 April 2007
(£836,638) for the year ending 31 December 2007 payable by 30 April 2008
Any shortfall in the amount payable in any one year can be carried forward to the next year until such time that
the total amount payable of US$3,250,000 (£1,812,037) has been extinguished.
The reduction in the acquisition price from the deferred settlement is determined in accordance with IFRS 3
– Business Combinations. The deferred settlement value has been determined after applying a cost of funding
rate of 8.5% pa to the three year repayment schedule detailed above. The reduction in the acquisition price from
the deferred settlement at the date of acquisition by a controlled entity, Crown Diamonds NL in July 2004 was
determined to be £429,154. This amount will be amortised over the three and half year term commencing from
the date of acquisition of the Helam Diamonds Mine by Crown Diamonds NL. For the month of 30 June 2005
the amount of interest was £10,878.
60 Petra Diamonds Limited Annual Report 2005
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
22. PROVISIONS
Balance at 1 July 2004
Acquired by business combination
Net provisions made during the year
Exchange differences
Balance at 30 June 2005
Current
Non current
Employee
entitlements and
other provisions
£
Rehabilitation
£
Total
£
319,104
517,076
287,614
14,792
1,138,586
1,138,586
—
1,138,586
—
924,251
6,067
26,440
956,758
956,758
956,758
319,104
1,441,327
293,681
41,232
2,095,344
1,138,586
956,758
2,095,344
Employee entitlements and other provisions
The provision includes employee entitlements relating to accrued leave, provident fund contributions, medical and
bonuses and other accruals. The provision is based on estimates made, where appropriate, from historical information.
The Group expects to incur the liability over the next 12 months.
Rehabilitation
The provision is the estimated cost of the environmental rehabilitation at each site, which is based on current legal
requirements and existing technology.
23. DEFERRED TAXATION
Balance at beginning of the year
Acquisition of Crown Diamonds NL
Income statement charge
Foreign currency translation difference
Balance at the end of year
Comprising:
– capital allowances
– provisions
– prepayments and accruals
– forex allowances
– tax losses
Deferred tax not raised
Deferred tax liability
2005
£
2004
£
—
6,423,275
35,508
189,383
6,648,166
—
—
—
—
—
8,404,189
(360,435)
2,290
(2,436)
481
(146)
(376,614)
(12,427,041)
(4,759,420)
11,407,586
6,648,166
—
(2,101,308)
(2,101,600)
2,101,600
—
Deferred tax assets as above, have not been raised due to the uncertainty over the future recoverability of these assets.
Petra Diamonds Limited Annual Report 2005 61
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
24. FINANCIAL INSTRUMENTS
Exposure to currency, credit and interest rate risk arise in the normal course of the Group’s business. The Group may
from time to time use financial instruments to help manage these risks. The Directors review and agree policies for
managing each of these risks.
Credit risk
The Group disposes of its product through a tender process on a recognised bourse. This mitigates the need to
undertake credit evaluations. Where the final product is not disposed of on a tender basis the Directors undertake
suitable credit evaluations before passing ownership of the product.
At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk
is represented by the carrying amount of the financial asset in the balance sheet.
Foreign currency risk
The Group is exposed to foreign currency risk on sales, purchase and borrowings that are denominated in a currency
other than pound sterling. The currencies giving rise to this risk are primarily United States dollars, South African
rands and Australian dollars. At the end of the year the Company held £439,805 of monetary assets in US dollars,
£57,943 in South African rands and £99,731 in Australian dollars. Foreign exchange differences on retranslation of
these assets and liabilities are taken to the income statement. From time to time the Group may acquire a forward
contract to fix the exchange rate on a future transaction.
Interest rate risk
The Group has borrowings that incur interest at floating rates and no interest rate swaps are used. Management
constantly monitors the floating interest rates so that action can be taken should it be considered necessary.
Effective interest rates and re-pricing analysis
In respect of income-earning financial assets and interest-bearing financial liabilities, the following table indicates
their effective interest rates and age analysis at the balance sheet date. Each interest bearing financial liability
reprices based on the respective country specific prime lending rates as disclosed in Note 20, with the exception of
the convertible notes and the secured loan from the Industrial Development Corporation of South Africa which are
fixed rate and interest free respectively.
62 Petra Diamonds Limited Annual Report 2005
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
24. FINANCIAL INSTRUMENTS (continued)
30 June 2005
Cash and cash equivalents (£’000)
Effective
Interest
rate
6 months
or less
6 – 12
months
Total
1 – 2
years
2 – 5
years
More
than
5 years
16
4.50% 15,374
15,374
—
—
—
—
Notes
Cash
Interest bearing loans
and borrowings
Bank
– Overdraft secured
20(i)
11.02%
– Term facility secured
20(i)
11.02%
– Loan secured
20(ii)
—
– Loan unsecured
20(iii)
10.47%
Convertible notes
20(iv)
11.00%
Loan unsecured
20(v)
7.09%
Loan unsecured
20(vi)
11.00%
Finance leases
20(vii) 10.75%
30 June 2004
Cash and cash equivalents (£’000)
179
177
118
2,509
1,230
2,000
370
120
179
8
36
2,509
1,230
2,000
370
44
6,703
6,376
—
9
36
—
—
—
—
44
89
—
18
46
—
—
—
—
30
94
—
69
—
—
—
—
2
71
—
73
—
—
—
—
—
73
Cash
16
—
3,768
—
—
—
—
—
Interest-bearing loans
and borrowings
Bank
– Overdraft secured
– Loan – secured
– Loan – secured
– Loan – unsecured
Convertible notes
Loan unsecured
20(v)
6.62%
25. EMPLOYEE BENEFITS
—
—
—
—
2,000
2,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,000
2,000
—
—
—
—
—
—
—
—
—
—
—
—
The Group participates in a defined contribution provident fund scheme for the benefit of the employees and
executive Directors. The assets of the scheme are administered by trustees in a fund independent from the Group.
Petra Diamonds Limited Annual Report 2005 63
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
2005
£
2004
£
26. COMMITMENTS
Operating leases
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
115,995
44,579
249,117
62,851
The Group leases its offices under operating leases. The leases run for periods
of between one and three years, and included options to renew after that date.
Lease payments are increased annually to reflect market rentals. The leases do
not include contingent rentals.
During the year ended 30 June 2005 £187,822 was recognised as an expense in
the income statement in respect of operating leases, as disclosed in note 6.
27. CONTINGENT LIABILITIES
Details of contingent liabilities where the probability of future payments/receipts
is not considered remote are set out below, as well as details of contingent
liabilities and contingent assets, which although considered remote, the Directors
consider should be disclosed.
The Directors are of the opinion that provisions are not required in respect of
these matters, as it is not probable that a future sacrifice of economic benefits
will be required or the amount is not capable of reliable measurement.
Contingent liabilities not considered remote
Performance bond with government instrumentalities which are secured by way
of fixed charges over realty, a general notarial bond over movable assets and a
guarantee from two Directors in respect of various mining licences and supply
contracts.
Performance bond with government instrumentality secured by way of a deposit
in respect of a mining licence.
Delayed settlement of $US1,450,000 to Star Mining Limited within 30 days of
lodgement of the 2006 annual financial statements if Messina Investments Ltd
and its controlled entities (“Messina”) earns net profit after tax at the South
African level of at least $6,000,000 for the financial year ending 2006. If Messina
earns between 70% and 100% of the $6,000,000 the $US1,450,000 will be
apportioned accordingly. Star Mining Limited may elect to receive any settlement
due in shares being 85% of the average share price prior to settlement.
Delayed settlement of $US1,450,000 to Star Mining Limited within 30 days of
lodgement of the 2007 annual financial statements if Messina earns net profit
after tax at the South African level of at least $6,000,000 for the financial year
ending 2007. If Messina earns between 70% and 100% of the $6,000,000 the
$US1,450,000 will be apportioned accordingly. Star Mining Limited may elect to
receive any settlement due in shares being 85% of the average share price prior
to settlement.
561,398
89,060
807,979
807,979
—
—
—
—
64 Petra Diamonds Limited Annual Report 2005
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
27. CONTINGENT LIABILITIES (continued)
Contingent liabilities considered remote
A former Director of Crown Diamonds NL has lodged a claim for $1,193,407 being a project sourcing fee resulting
from the acquisition of Helam Mining Pty Ltd. In the Directors’ opinion, disclosure of any further information about
this matter would be prejudicial to the interests of the Company.
Indemnities have been provided to Directors in respect of liabilities to third parties arising from their positions, except
where the liability arises out of conduct involving a lack of good faith. No monetary limit applies to these agreements.
New legislation
In South Africa the Mineral and Petroleum Resources Development Act 28 of 2002 (the MRDA) was signed into law
on 3 October 2002 and was promulgated on 1 May 2004.
The MRDA seeks to facilitate participation by historically disadvantaged South Africans in mining ventures and
to ensure that unexploited mineral rights are turned to account by applying the ‘use it and keep it’ principle. To
give effect to these two broad objectives, the right to prospect and mine for all minerals vests in the State and
applications will be made directly to the State for those rights.
The transitional provisions of the MRDA facilitate the conversion of prospecting and mining rights currently held at
common law and under the Minerals Act (termed, old order rights in the MRDA) to the new forms of prospecting and
mining rights contemplated by the MRDA (new order rights). The conversion applicant will have two years in the case
of prospecting and five years in the case of mining to lodge their rights for conversion. For successful conversion,
applicants will be required to be in possession of a valid prospecting permit or mining authorisation and to have
been physically prospecting or mining (as the case may be) on the area to which their application relates as at the
promulgation date.
Furthermore, conversion applicants will have to satisfy the specified criteria for conversion, which in the case of
the conversion of a mining right requires, among other things, the applicant to submit an undertaking as to how
it will give effect to the black economic empowerment provisions of the MRDA. The substance and detail for these
black economic empowerment provisions are contained in a document entitled, “broad-based socio-economic
empowerment charter” (the “empowerment charter”), which empowerment charter was agreed upon by the
South African Government, representatives of the South African mining industry and organised labour and which
empowerment charter was issued in October 2002.
The empowerment charter embraces a set of criteria such as ownership, human resource development, employment
equity and procurement. Specifically, on the issue of ownership, the empowerment charter requires mining companies
to achieve 26% ownership in mining companies by historically disadvantaged South Africans within ten years of the
promulgation date. Compliance will be assessed by reference to a “score-card”, a draft of which was circulated to key
stakeholders in the mining industry on 21 January 2003 and was released for public comment on 19 February 2003.
At this stage the potential financial impact of this new legislation on the consolidated entity’s operations, if any,
cannot be determined.
Environmental
The controlled entities of the Company provide for all known environmental liabilities. While the Directors of
each of those entities and the Company believe that, based upon current information, their current provisions for
environmental rehabilitation are adequate, there can be no assurance that material new provision will not be required
as a result of new information or regulatory requirements with respect to known mines operations or identification of
new remedial obligations at other mine operations.
Petra Diamonds Limited Annual Report 2005 65
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
28. POST-BALANCE SHEET EVENTS
Kalahari
On 6 September 2005 Petra Diamonds entered into an agreement to acquire, in a share-for-share transaction, the
entire issued share capital of Kalahari Diamonds Limited (‘Kalahari’) from Kalahari Diamonds Resources Plc (‘KDR’). On
30 September 2005 Petra Diamonds issued 16,166,529 shares to KDR in consideration for the sale of Kalahari’s entire
issued share capital. On completion of the transaction Kalahari will therefore become a wholly owned subsidiary of
Petra Diamonds.
Kalahari is a diamond exploration company which explores for diamonds in Botswana through a strategic alliance
with BHP Billiton. Kalahari (through its wholly owned Botswana subsidiary, Sekaka Diamonds (Pty) Limited) is the
holder of approximately 77,000 km2 of highly prospective diamond prospecting licences in Botswana and has a
relationship with BHP Billiton giving Kalahari rights to direct the deployment of BHP Billiton’s proprietary Falcon
technology.
Mano River Resources
On 3 October 2005 the Group announced that it had signed a preliminary agreement whereby the businesses of the
Group and Mano River Resources Inc (“Mano”) would be combined to create an enlarged diamond exploration and
mining group. The transaction will be effected by an offer of new Petra ordinary shares to Mano shareholders in a
share for share transaction, on the basis of one new Petra ordinary share for each 5.5 Mano common shares. The
transaction remains subject to the satisfaction of certain conditions precedent and is expected to be complete by
28 February 2006.
Convertible Noteholders
Since 30 June 2005, 677,500 November 2005 Convertible Notes worth A$121,950 (£10,201) were converted to
98,132 Petra Diamonds Limited ordinary shares.
Financing
On 20 July 2005, the Sedibeng Joint Venture (Sedibeng JV), which comprises Messina Diamonds (Pty) Limited
(“Messina”) and Dancarl Diamonds (Pty) Limited (“Dancarl”), entered into a loan agreement with the Industrial
Development Corporation of South Africa (IDC) for a loan facility of R30 million to fund future capital expenditure
at the Messina and Dancarl mines. The loan is repayable over 60 months at 0.5% below the prevailing South African
prime lending interest rate. As security for the loan, Messina and Dancarl have each signed suretyship as co-principal
debtor and, a general notarial bond has been registered over each of Dancarl’s and Messina’s movable assets in favour
of the IDC.
On 28 July 2005 Autumn Star Investment Holdings (Pty) Ltd (“Autumn Star”), in which the Company has an interest
of 40%, signed a loan agreement with FirstRand Ltd (“FirstRand”) for a loan facility of R16,500,000. The loan is
repayable in annual instalments of R4,125,000 (£345,050) commencing 1 August 2006. Interest is payable biannually
at 0.5% below the prevailing South African prime lending interest rate with the first interest payment due on
31 December 2005. Star Diamonds (Pty) Ltd, Messina Diamonds (Pty) Ltd, Crown Resources (Pty) Ltd and Messina
Investments Limited have signed suretyship for the loan in favour of FirstRand.
During July 2005 a total repayment of R4 million was made on the director loans from J Dippenaar and J Davidson.
The total outstanding balance on director loans were reduced from R4.4 million to R0.4 million.
66 Petra Diamonds Limited Annual Report 2005
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
29. RELATED PARTIES
Subsidiaries and associates
Details of subsidiaries are disclosed in Note 30.
Directors
Details relating to Directors’ emoluments and shareholdings in the Company are disclosed in Note 9 and the Directors
Report respectively.
Shareholders
The principal shareholders of the Company are detailed in the Directors Report on page 24.
Contingent liabilities
Details of contingent liabilities are disclosed in Note 27.
RELATED PARTY TRANSACTIONS
Nabera Mining (Pty) Limited
The Company is a 29.5% shareholder in Nabera Mining (Pty) Limited (“Nabera”), the company that managed
the Alexkor diamond mine between 1999 and 2001. During the year ended 30 June 2005 Petra Diamonds paid
expenses on behalf of Nabera amounting to R672,056, the expenses were incurred in relation to the recovery of the
management fee and value-added due to Nabera from Alexkor Limited and the South African Government. All such
expenses incurred on Nabera’s behalf will be reimbursed to the Company on receipt of the management fee and value
added.
Finkelstein Ch & Co NV
Societe Diamantaire Finkelstein Ch & Co NV, of which Charles Finkelstein is a director, has entered into mutual put
and call option arrangements with Petra to subscribe for ordinary shares in the Company. Further details are set out
in Note 17 to the financial statements.
Transactions with related parties take place at terms and conditions no more favourable than to third parties.
Petra Diamonds Limited Annual Report 2005 67
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
30. SUBSIDIARIES AND ASSOCIATES
At 30 June 2005 the Group held 20% or more of the allotted share capital of the following:
Country of
incorporation
Class of
share
capital held
Proportion
held
Nature of business
Afropean Diamonds (Pty) Ltd
Blue Diamond Mines (Pty) Ltd
South Africa
Ordinary
100% Mining and exploration
South Africa
Ordinary
100% Mining and exploration
Dimeng Diamond Holdings (Pty) Ltd
South Africa
Ordinary
59% Mining and exploration
Engiminas Consultoria e Enginharia LDA
Angola
Ordinary
100% Mining and exploration
Nabera Holdings (Pty) Ltd
Nabera Mining (Pty) Ltd
South Africa
Ordinary
100%
Dormant
South Africa
Ordinary
29.5% Mining and exploration
Namibia Mining House (Pty) Ltd
Namibia
Ordinary
35%
Dormant
Pagvlei Mining (Pty) Ltd
South Africa
Ordinary
100% Mining and exploration
Petra Diamonds Alto Cuilo Ltd
British Virgin Islands
Ordinary
100% Mining and exploration
Petra Diamonds Angola Services Ltd
British Virgin Islands
Ordinary
100% Mining and exploration
Petra Diamonds Namibia (Pty) Ltd
Namibia
Ordinary
100% Mining and exploration
Petra Diamonds Southern Africa (Pty) Ltd
South Africa
Ordinary
Power Corporation Angola (Pty) Ltd
Bermuda
Ordinary
100%
70%
Services provision
Exploration
68 Petra Diamonds Limited Annual Report 2005
Notes to the Annual Financial Statements (continued)
for the year ended 30 June 2005
30. SUBSIDIARIES AND ASSOCIATES (continued)
In addition, subsidiaries acquired as a result of the merger with Crown Diamonds NL in May 2005
Country of
incorporation
Class of
share
capital held
Proportion
held
Nature of business
Alltop Investments Pty Ltd
Australia
Ordinary
100%
Dormant
Autumn Star Trading 192 (Pty) Ltd
South Africa
Ordinary
40% Mining and exploration
Compass Mining Services Pty Ltd
Crown Resources (Pty) Ltd
Crown Diamonds NL
Dalestar Corporation Pty Ltd
Dancarl Diamonds (Pty) Ltd
Helam Mining (Pty) Ltd
Ida Valley Pty Ltd
Johannesburg Diamond Trading
Corporation (Pty) Ltd
Kamara Holdings Pty Ltd
Madeline Alluvial Diamonds and
Mineral Development (Pty) Ltd
Majestic Resources Pty Ltd
Australia
Ordinary
South Africa
Ordinary
Australia
Ordinary
Australia
Ordinary
100%
100%
100%
100%
Dormant
Dormant
Dormant
Dormant
South Africa
Ordinary
100% Mining and exploration
South Africa
Ordinary
Australia
Ordinary
South Africa
Ordinary
Australia
Ordinary
South Africa
Ordinary
Australia
Ordinary
100%
100%
100%
100%
100%
100%
100%
Dormant
Dormant
Dormant
Dormant
Dormant
Investment
Dormant
Majestic Resources South Africa (Pty) Ltd
South Africa
Ordinary
Messina Diamond Mine (Pty) Ltd
South Africa
Ordinary
100% Mining and exploration
Messina Investments Limited
Nooitgedacht Diamonds (Pty) Ltd
Paardekraal Properties (Pty) Ltd
Santara Holdings Pty Ltd
Sedibeng Diamond Mine JV
Star Diamond Mine (Pty) Ltd
South Africa
Ordinary
South Africa
Ordinary
South Africa
Ordinary
Australia
Ordinary
100%
100%
100%
100%
Investment holding
Dormant
Dormant
Dormant
South Africa
Ordinary
57.5% Mining and exploration
South Africa
Ordinary
100% Mining and exploration
Union Investments Corporation (Pty) Ltd
South Africa
Ordinary
Vulcan Mining Pty Ltd
Australia
Ordinary
100%
100%
Dormant
Dormant
Although the Company owns only 40% of Autumn Star Trading 192 (Pty) Ltd (“Autumn”), the Company has consolidated
its investment in Autumn on the basis of respective risks and obligations. The Company will continue to consolidate the
results of Autumn until such time that the other equity shareholders start to proportionately share in the associated risks.
Petra Diamonds Limited Annual Report 2005 69
Notice of Annual General Meeting
Notice is hereby given that the eighth Annual General Meeting of Petra Diamonds Limited (the Company) will be held on
Friday, 2 December 2005 at 11:00 am at the offices of Memery Crystal, 44 Southampton Buildings, London, WC2A 1AP for
the purpose of considering and, if thought fit, passing the following resolutions:
1. STATUTORY ACCOUNTS
That the financial statements of the Company for the year ended 30 June 2005, together with the Reports of the
Directors and Auditors, be received.
2. APPOINTMENT OF AUDITORS
That KPMG Audit plc of Arlington Business Park, Theale, Reading, England RG7 4SD be re-appointed as auditors of
the Company to hold office until the conclusion of the next general meeting at which accounts are laid, or until their
successors are appointed and that the Directors be authorised to fix the remuneration of the auditors.
3. RE-ELECTION OF DIRECTORS
That each of (a) Johan Dippenaar, (b) Jim Davidson (c) David Abery (d) Volker Ruffer and (e) Charles Finkelstein (each to
be separately proposed and voted upon), who retire in accordance with the Company’s Bye-Laws, each be and are hereby
re-elected as directors of the Company to hold office until the date on which his office is otherwise vacated.
4. RATIFICATION OF SHARE ISSUE
That the Company ratifies the issue of a total of 16,166,529 fully paid ordinary shares in the Company on 30 September
2005 at an issue price of 74.75 pence per share to Kalahari Diamond Resources plc for the acquisition of the entire issued
share capital of Kalahari Diamonds Limited.
By order of the Board
A POUROULIS
Chairman
25 October 2005
Registered office
Clarendon House, 2 Church Street, Hamilton HM11, Bermuda
Company registration number: EC23123
70 Petra Diamonds Limited Annual Report 2005
Notice of Annual General Meeting (continued)
EXPLANATORY NOTES
These explanatory notes form part of the Notice of Meeting.
NOTES
A member entitled to attend and vote at the above meeting may appoint a proxy to attend and vote in their stead on a show
of hands or on a poll. A proxy need not be a member of the Company. A member who is entitled to cast 2 or more votes at
the meeting may appoint up to 2 proxies.
To be valid, the form of the proxy must be lodged with:
• the Company’s UK branch registrars, Capita IRG plc (Proxies), PO Box 25, Beckenham, Kent BR3 4TU; or
• the Company’s Australian share registrars, Computershare Registry Services Pty Ltd, Level 2 Reserve Bank Building,
45 St Georges Terrace, Perth WA 6000 (fax (08) 9323 2033),
not less than 48 hours before the time appointed for the meeting or any adjournment thereof.
ITEM 3. RE-ELECTION OF DIRECTORS
Information on the experience and qualifications of directors seeking re-election is included in the Company’s Annual
Report.
ITEM 4. RATIFICATION OF SHARE ISSUE
On 7 September 2005, the Company advised ASX that it had entered into a conditional agreement for the acquisition of the
entire issued share capital of Kalahari Diamonds Limited (Kalahari) from its parent company Kalahari Diamond Resources plc
(Acquisition). The Acquisition was completed on 30 September 2005 (Completion Date).
Under the Acquisition, a total of 16,166,529 fully paid ordinary shares in the Company were issued to Kalahari Diamond
Resources plc on the Completion Date at the average quoted share price of the Company of 74.75 pence per share on the
Completion Date (Consideration Shares). This represented approximately 12.3% of the Company’s then issued share capital.
From their date of issue, the Consideration Shares ranked equally in all respects with the Company’s then existing fully paid
ordinary shares.
Item 4 seeks member approval under ASX Listing Rule 7.4 to ratify the issue of the Consideration Shares. The effect of
such ratification will be that the Consideration Shares will not be counted as reducing the number of securities which the
Company can issue in the future without member approval under the 15% limit imposed by ASX Listing Rule 7.1 (i.e. the
15% limit is “renewed” to the extent of the ratification).
Petra Diamonds Limited Annual Report 2005 71
Notice of Annual General Meeting (continued)
Kalahari, through its wholly-owned Botswana subsidiary, Sekaka Diamonds (Pty) Limited, is the holder of approximately
77,000 km2 of highly prospective diamond prospecting licences in Botswana. The acquisition represents a significant step in
Petra’s strategy of building a quality exploration portfolio to complement its current producing mines, as Petra continues its
objective of becoming a significant player in the diamond industry.
Further details on the Acquisition are contained in announcements made by the Company to the London Stock Exchange
and ASX.
The Directors of the Company believe the resolution is in the best interests of the Company and its members and unanimously
recommend that members vote in favour of it.
VOTING EXCLUSION STATEMENT
Under Rule 14.11 of the Listing Rules of Australian Stock Exchange Limited, the Company will disregard any votes cast on
the resolution by Kalahari Diamond Resources plc or any of its associates. However, the Company need not disregard a vote
if it is cast by a Kalahari Diamond Resources plc or any of its associates as proxy for a person who is entitled to vote, in
accordance with the directions on the proxy form.
72 Petra Diamonds Limited Annual Report 2005
Form of Proxy
PETRA DIAMONDS LIMITED
I/We
of
being a member(s) of Petra Diamonds Limited (the Company) hereby appoint
the Chairman of the Meeting or
as my/our proxy to vote on my/our behalf on the resolutions to be proposed at the 2005 Annual General Meeting of the
members of the Company to be held on Friday, 2 December 2005 and at every adjournment thereof as indicated below or,
in the absence of any such indication, my/our proxy shall vote or abstain as he/she thinks fit:
For
Against
Abstain
The resolutions
Item No. 1
Statutory accounts
Item No. 2
Appointment of auditors
Item No. 3
Re-election of directors
3(a) Re-election of Johan Dippenaar
3(b) Re-election of Jim Davidson
3(c) Re-election of David Abery
3(d) Re-election of Volker Ruffer
3(e) Re-election of Charles Finkelstein
Item No. 4
Ratification of share issue
Signed this
day of
2005
Signature
Petra Diamonds Limited Annual Report 2005
Notes
1. Proxies are entitled to vote on a poll or on a show of hands.
2. Members shall place an ‘X’ in the box indicating the way in which their vote is to be cast.
3. If the member is a corporation, the proxy should be signed either by a duly authorised officer or attorney or be completed
under the common seal of the company.
4. Members wishing to appoint their own proxy, who need not be a member, should fill in the name of their proxy in the
space provided with or without deleting the words ‘the chairman of the meeting or’.
5. This proxy should be completed and dispatched so as to arrive at:
• the Company’s UK branch registrars, Capita IRG plc (Proxies), PO Box 25, Beckenham, Kent BR3 4TU; or
• the Company’s Australian share registrars, Computershare Registry Services Pty Ltd, Level 2 Reserve Bank Building,
45 St Georges Terrace, Perth WA 6000 (fax (08) 9323 2033),
not less than 48 hours before the time appointed for the meeting or any adjournment thereof.
6. A member may vote for or against the re-election of the directors as a whole by placing an ‘X’ in the appropriate box. If a
member wishes to vote for or against the re-election of one or more of the directors he/she should place an ‘X’ indicating
those directors he/she is voting for or against, as the case may be, in the appropriate box.
7. Any alterations to this Form of Proxy should be initialled by the member.
Petra Diamonds Limited Annual Report 2005