Annual Report 2006
CONTENTS
1
Introduction
2-3
Highlights and Summary of Results
4-5
6-9
Activities at a Glance
Chairman’s Statement
10-21
Chief Executive Officer’s Statement
22-23
Diamond Market Review
24-27
Mining, processing, distribution and marketing
28-29
Directors’ Report
30-31
Directors’ Remuneration Report
32-36
Corporate Governance Statement
37
38
Directors
Group Contact Details
FINANCIAL STATEMENTS
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement of Recognised
Income and Expense
Consolidated Balance Sheet
Consolidated Cash Flow Statement
41
42
42
43
44
45-76
Notes to the Annual Financial Statements
77-80
Notice of Annual General Meeting
Petra Diamonds is a growing force in winning
Petra Diamonds is a growing force in winning
diamonds from Africa’s rich resources.
diamonds from Africa’s rich resources.
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Adonis Pouroulis, Chairman; “I am delighted to report on the progress we have made over the past
year. Petra has continued to grow, strengthening our position within the market place whilst signifi cantly
expanding our prospects on the ground. We continue to be very encouraged by the favourable prospects
for the diamond industry globally and believe that the diamond fi elds of Africa offer some of the most
exciting opportunities available. I am confi dent that with the range of our portfolio and the depth of the
skills base now within the group, we are positioned to maintain our rate of growth”.
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Sierra
Leone
Kono
Angola
Alto Cuilo
Botswana
Kalahari
South Africa
Helam
Sedibeng
Star
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Angola
• Project Alto Cuilo (“Alto Cuilo”) - exceptional exploration progress continued
with a substantial increase in the number and surface area of kimberlite
discoveries; analysis of drill core revealed exceptional indicator mineral
chemistry, comparative to some of the world’s major economic mines;
as at 30 June 2006, funding of US$22.8 million advanced by BHP Billiton
(budget of US$20 million approved for the year to June 2007, also to be
funded by BHP Billiton)
• Petra enters into Strategic Cooperation Agreement with AIM-quoted
Xceldiam Limited (“Xceldiam”) with regard to Project Luangue
Botswana
• Acquisition of Kalahari Diamonds Limited in September 2005
• Petra’s operations in Botswana fully integrated into the Petra Group
• Petra’s technical team put in place a revised Kalahari exploration programme,
with the focus on larger as well as smaller kimberlite identifi cation
Sierra Leone
• Kono project in Sierra Leone commences small scale production in June
2006, on time and on budget
• Petra has met its funding requirements to earn a 51% interest in the
project
• Work programme to accelerate in order to better determine the grade and
extent of the resource, and to enable increased production
South Africa
• Production of 175,011 carats from the South African mines for the year to
30 June 2006 (2005: 143,673 carats), an increase of 21.8%
• The South African mines generated an operating cash fl ow of US$677,000
for the year to June 2006
• Diamonds of 76 and 67 carats recovered from the Sedibeng mine, the stones
being sold for US$465,000 and US$704,265 respectively
Post Year-end Highlights
• Petra issued a US$20 million unsecured, interest free bond, convertible at
130 pence per share, to Al Rajhi Holdings W.L.L., a major Saudi Arabian based
investment group; the fi nancing strengthens Petra’s treasury on an interest
free basis, giving Petra the fl exibility to act quickly on potential growth
opportunities
• Project Alto Cuilo – identifi cation of the 50th kimberlite; bulk sample drill
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and plant on site, with the bulk sample rig commissioned and drilling
underway
Summary of Results
Revenue *
Gross profi t on mine – South African operations **
Exploration expenses **
Administration expenses
Loss before depreciation, amortisation
and foreign exchange movements
Loss for the year
CAPEX
Cash at bank
* 2005 Revenue – June only, post Crown merger effective 31 May 2005
** Gross profi t and exploration expenses before depreciation and amortisation
Loss per share (cents)
Production (carats)†
†Production for the 12 months to 30 June 2005
2006
US$
2005
US$
20,868,757
2,275,245
3,320,887
768,258
(2,056,395)
(6,422,352)
(6,481,669)
(3,963,956)
(5,330,698)
(9,954,745)
(18,864,456)
(21,018,778)
8,222,611
2,722,187
7,019,644
27,591,394
(13.11)
(28.43)
175,011
143,673
Petra has taken signifi cant strides during the past year towards achieving its objective of
becoming a mid-tier diamond producer.
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Alto Cuilo
Angola
Botswana
Kalahari
Diamonds
Angola (full review on pages 10 to 12)
Botswana (full review on pages 14 to 15)
Project Alto Cuilo
Kalahari Diamonds
It is widely accepted that Angola may hold some of the
Botswana is the world’s number one producer of
world’s best kimberlite diamond deposits. Petra’s focus
diamonds by value. In September 2005, Petra acquired
is the Alto Cuilo project in the north-east of the country.
Kalahari Diamonds, giving Petra access to the largest
land area under diamond exploration in Botswana.
Exploration activities at Project Alto Cuilo yield ever
more exciting results; as at July 2006, 50 kimberlitic
Kalahari Diamonds is the holder of approximately
occurrences had been identifi ed by drilling and highly
55,000kms2 of highly prospective diamond exploration
encouraging diamond indicator minerals had been
licences. The acquisition of Kalahari represented a
recovered, which are comparable to other economic
signifi cant step forward in Petra’s strategy of building
kimberlite deposits around the world. Bulk sampling
a world class exploration base.
is now underway to ascertain grade and value from a
selection of prioritised kimberlites.
Since the acquisition of Kalahari Diamonds, Petra has
refocused exploration to include both large kimberlites
BHP Billiton is Petra’s JV partner at Alto Cuilo and, as
(greater than 20 hectares) as well as smaller kimberlites
at 30 June 2006, BHP Billiton had provided funding of
(approx imately 10 hectares) that would not necessarily
US$22.8 million in respect of exploration activities.
be detectable under deep Kalahari cover.
Project Luangue
The acquisition of Kalahari also gave Petra access
Petra has entered
into a Strategic Cooperation
to the Gope kimberlite fi eld that is known to host
Agreement with AIM-quoted Xceldiam with regards to
six or seven kimberlites. Petra’s track record in the
Project Luangue, consolidating Petra’s position in the
development of medium sized ore bodies will enable
Alto Cuilo region.
the effi cient evaluation of such kimberlite occurrences
Petra holds warrants to acquire an effective 10% in
Project Luangue for £14 million by way of warrants
Petra has technical support in Botswana from BHP
staggered to December 2008. Petra also has a right of
Billiton and rights to deploy BHP Billiton’s Falcon
fi rst refusal over Xceldiam’s interest in Luangue.
technology.
and, if economic, to turn them to account.
Sierra
Leone
Kono Project
Helam
Star
Sedibeng
South Africa
Sierra Leone (full review on pages 16 to 17)
South Africa (full review on pages 18 to 20)
Kono Project
Helam, Sedibeng and Star mines
The Kono Project area is located in the world renowned
The South African mines are kimberlite fi ssure
Koidu diamond fi eld in the Kono district of east Sierra
operations, each with a remaining life of mine greater
Leone. Petra Diamonds has a 51% interest in the Kono
than 15 years.
Project alongside AIM and TSX quoted Mano River
Resources Inc.
The mines produced 175,000 carats in the year to June
2006, an increase of 21.8% on the 2005 production
The Kono Project is a kimberlite fi ssure project; early
of 143,673 carats. Petra plans to continue to further
stage results are highly encouraging. The fi ssure strike
increase the carat production from South Africa in the
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length may be greater than that of Petra’s South African
year to June 2007 and beyond, giving the Group healthy
production operations. Diamond recovery from the fi rst
production revenues. The current US$/Rand exchange
bulk samples from the Lion fi ssures commenced in
rate gives further revenue upside.
June 2006.
Petra believes that the Kono Project has the potential
of diamonds by volume and the largest employer in
After De Beers, Petra is South Africa’s largest producer
to yield high grades of approximately 100 carats per
diamond mining.
hundred tonnes, as indicated by the original Mano mini
bulk sample of Lion 5 which returned an average grade
Diamonds of 76 and 67 carats were recovered from the
of 94 carats per hundred tonnes (which Petra repeated
Sedibeng mine during the year, the stones being sold
with its own sampling results).
for US$465,000 and US$704,265 respectively.
Sinking of the fi rst two bulk sampling shafts on
diamondiferous fi ssure combined with aggressive
exploration trenching activities is underway. Bulk
sampling infrastructure is in place alongside the pro–
duction plant. Continuous exploration and information
processing activities are providing a clearer picture of
the multiplicity of fi ssures and their potential within the
Kono licence area.
Petra is now a well-established mid-tier producer and explorer of diamonds.
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Dear Shareholder,
It is with great pleasure that I present the 2006 fi nancial statements. The past fi nancial year has
seen your Company grow into an established and integrated diamond miner and explorer and
we have continued to develop the various in-house skills that will enable us to further increase
our production base.
These abilities are evident across all our mining
Angola
operations – through our production in South Africa,
Kimberlite Exploration
the development of complex diamond exploration
Alto Cuilo once again delivered excellent exploration re-
programmes in Botswana, the progress made at Alto
sults. The number of kimberlite occurrences discovered
Cuilo in Angola and the establishment of our mining
surpassed the 50 mark, a signifi cant milestone. The rate
operations in Sierra Leone. We have shown that Petra also
of these discoveries increased as additional core drilling
possesses the corporate depth and principals required to
equipment was commissioned on site.
develop a solid working relationship with a major, as is
the case with BHP Billiton.
To date it is estimated that the surface area of kimberlite
discovered at Alto Cuilo is in excess of 1,500 hectares.
Petra is now a well-established mid-tier producer and
Furthermore, we have achieved an exceptional success
explorer of diamonds. Our focus and expertise lie on the
rate of 83% of magnetic anomalies drilled being confi rmed
African continent, a continent that, although still mired
as kimberlitic. Of the total of 249 magnetic anomalies
in poverty, in 2005 produced around 62% by value of
identifi ed so far, 60 have now been drilled and a total of
the world’s rough diamond output. It is one of our main
50 have been confi rmed as kimberlitic. This serves as a
goals to create sustainable economic development
reminder of the size and extent of the project, together
by investing in projects with long economic lives. The
with the standard of exploration results. There are very
economic benefi t of discovering a large, economic
few kimberlite projects anywhere in the world that have
kimberlite is substantial, not only to a company like
had such success in identifying kimberlites, but when
Petra but also to the economy of the African countries
the surface area of the discoveries at Alto Cuilo is taken
in which we operate. The refocusing of international
into account, the results are even more remarkable.
exploration dollars in Africa, whatever the commodity,
makes for an exciting and often vibrant environment in
which to work. It is pleasing to see Africa gaining mining
and exploration momentum and that the investing
community worldwide acknowledges Africa’s natural
resource wealth. We also welcome the wide-reaching
reforms currently sweeping the diamond industry which
promise to give more autonomy to Africa’s producer
nations and more direct employment down the diamond
benefi ciation chain, from mine to market.
Petra is the proud employer of over 2,000 people and
actively contributes to the economic development of the
African countries in which it operates. Petra only operates
in countries that are committed to the Kimberley process
for the marketing of diamond production; such sound,
environmentally aware and responsible
investment
in the African diamond industry will only assist in the
development of countries in which we operate and the
continent as a whole.
Petra achieved a great deal during the year and some
of the highlights are covered below.
At the same time, analysis of kimberlite core delivered
some highly encouraging diamond indicator mineral
results together with a favourable mantle geotherm
conducive for diamond formation. Diamond indicator
mineral chemistry is crucial in terms of assessing
a kimberlite’s likelihood of hosting diamonds. The
results at Alto Cuilo are very exciting because they
are comparable to other major economic kimberlite
deposits around the world.
The large diameter drill rig has now been commissioned
on site
in anticipation of the mini-bulk sample
programme scheduled for later this year. The results of
this sampling campaign will give a better understanding
of the kimberlite deposits and will start yielding
critical data relating to grade and price per carat.
Accompanying the drill rig is a 10 tonne per hour Dense
Media Separation (“DMS”) plant that will be used solely
for the processing of kimberlite material retrieved from
the large diameter drill rig. This rig will initially stockpile
200 tonne bulk samples and the DMS plant, which is a
custom-made closed circuit unit designed specifi cally
CHAIRMAN’S STATEMENT continued
for kimberlite bulk sampling, will start treating the
I wish to acknowledge the important role BHP Billiton
samples. A ranking of priority kimberlite targets for
has played in the evolution of Alto Cuilo. We have found
large diameter drilling has been drawn up and may be
their work to be of the highest standard and their spirit
revised as more results become available. The ranking is
of partnership to be one where all partners benefi t. At
based on mineral chemistry results, the surface area of
the same time our Angolan partners have also been of
the various kimberlites and the logistics of plant access
the utmost assistance in taking Alto Cuilo to the next
to the various targets. Initial bulk sampling results are
level and I thank both Endiama and Moyoweno for their
anticipated by December 2006.
ongoing support.
Petra and BHP Billiton are working together at Alto Cuilo,
with BHP Billiton funding the exploration and related
South Africa
costs. As at 30 June 2006, BHP Billiton had advanced
The South African operations increased production by
funding of US$22.8 million to the project, and a budget
21.8% from 143,673 carats for the year to June 2005 to
of US$20 million has been approved for the year to
175,011 carats for the year to June 2006. The Company
June 2007, also to be funded by BHP Billiton. This is a
is targeting to increase production from its existing
substantial exploration spend for any mineral commodity,
operations again this year.
and we look forward to working with BHP Billiton to
further develop Alto Cuilo over the coming year.
The year also saw some exceptionally large and
beautiful stones being mined. Diamonds of 76 and
On 30 May 2006 the Company also announced a
67 carats were recovered from the Sedibeng mining
strategic cooperation alliance with Xceldiam Limited,
complex and the stones sold for US$465,000 and
Page 7
an AIM listed diamond explorer with exploration
US$704,265 respectively.
rights at Project Luangue just north of Alto Cuilo. The
projects share a common border and Petra notes with
interest the early drilling success at Project Luangue
as announced on 25 July 2006. Core drilling at Project
Luangue returned excellent fi rst results, with drilling
on the fi rst target intersecting kimberlite. This news
supports Petra’s belief that Project Luangue may host
kimberlite geology similar to that of Alto Cuilo and Petra
looks forward to further developments from Project
Luangue. The agreement with Xceldiam puts Petra
in a position to signifi cantly increase its exploration
interests in the area, should it choose to do so.
Alluvial Exploration
The alluvial programme continues in order to further
evaluate the potential for economically viable alluvial
deposits. A feasibility study has been commissioned on
a small alluvial block of ground adjacent to the existing
65 tonne per hour DMS plant. Petra’s initial investment
in plant and earth moving equipment will serve as
the infrastructure to process and mine these alluvial
deposits. Alluvial exploration also continues elsewhere
in the project area.
As shareholders may be aware, to date over 1 500
carats of kimberlite and alluvial diamonds have been
recovered from the sampling operations. It is believed
that apart from production of diamonds, invaluable
exploration information will also be gleaned from these
alluvial programmes.
Tight costs and increased effi ciencies were achieved
on the operations as further investments in mining
mechanisation were made which will result in increased
effi ciencies for the coming year.
Although two of the three mines operated well,
technical diffi culties were experienced at the Star mine.
These problems, mainly the construction of
the new ventilation shaft, will be overcome
in the coming year and it is anticipated
that Star will achieve its production
target and contribute to Group results.
Botswana
Kalahari Diamonds Limited, which was acquired
effective 30 September 2005, is now a fully
integrated part of the Petra Group giving your
Company a prime position in Botswana,
the world’s largest diamond producer by
value. The Kalahari ground is situated
in what we believe to be highly prospective
diamond territory and the period under
review has seen encouraging
exploration results.
Field exploration in
Botswana gained momentum
whilst a shift was made in
philosophy to include the
search for those kimberlites
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less than 20 hectares in size. Anomalies were identifi ed
adopt US Dollars as its reporting currency with effect
in the Gope, Orapa and Mabutsane/Thswaane blocks.
from 1 July 2005.
The coming year will see follow-up ground work
including drilling of various anomalies in these areas.
Concurrently, existing kimberlite deposits on our
ground will be further examined for possible economic
viability.
Sierra Leone
Developments on the Kono project moved ahead apace
during the year. In just under a year of establishing a
foothold in Sierra Leone, Petra commenced trial mining
operations. This entailed the construction in-house
of a 75 tonne per hour DMS as well as the sinking
of shafts to access the diamond bearing kimberlite
fi ssures. All of this was done within budget and on time.
Kono produced its fi rst diamonds from the project on
schedule in June of this year.
In terms of Petra’s joint venture agreement with Mano
River Resources, Petra has met the requirement to
spend US$3 million on the project to earn a 51% interest,
and the parties are now funding project expenditure on
a 51/49 basis.
The coming year will see an increased rate in shaft
sinking which will allow increased access to different
kimberlite dyke faces. This will in turn enable a better
determination of grade and quality and ultimately lead
to an increase in diamond production. The aggressive
rolling exploration and trenching method has proven
to be both very effective and cost effi cient and it is
envisaged that six additional trenches will be opened,
the fi ssure penetrated and the results evaluated by
December 2006. This approach will provide Petra with
a better understanding of the diamondiferous fi ssures
available, their potential and the project strategy ahead.
The relationship between Petra management and
the various relevant authorities in Sierra Leone, in
particular in the Kono district, remains strong and we
thank the Sierra Leonean authorities for being openly
accommodative of foreign investment. Also, our joint
The gross profi t on mine from the South African
mines’ operations for the year to 30 June 2006 was
US$3,320,887 (2005: US$768,258). After exploration
expenses, Group administration expenses and fi nancing
costs, the
loss before depreciation, amortisation
and foreign exchange movements for the year was
US$5,330,698 (2005: US$9,954,745). After unrealised
foreign exchange losses on intercompany loans of
US$6,114,780 (2005: US$892,065), amortisation of
intangibles of US$2,832,355 (2005: US$8,186) and
depreciation of US$5,706,977 (2005: US$1,125,260),
the loss after tax for the year to 30 June 2006 was
US$18,864,456 (2005: US$21,018,778).
Group net cash outfl ow for the year is stated after
taking account of the investment in Xceldiam Limited of
US$1,271,410 (2005: Nil), repayment of all outstanding
convertible loan notes of US$1,239,403, cash infl ow from
the acquisition of Kalahari Diamonds of US$5,560,464 as
well as the settlement in July 2005 of the Helam mine
acquisition costs and various term loans.
A charge of US$2,832,355 has been recognised in
respect of the amortisation of licences during the year,
being the accounting adjustment in accordance with
IFRS of intangible assets of US$17,620,258, which were
brought into the balance sheet following the acquisition
of Kalahari Diamonds Limited in September 2005.
The results from the Crown South African production
operations acquired were consolidated
into
the
Petra Group results from 1 June 2005. Therefore, the
comparative period to June 2005 includes results of the
South African operations acquired for one month and the
period to 30 June 2006 includes a full 12 months results.
The results for the year to 30 June 2005 have been
restated, as with effect from 1 July 2005 the Company
has complied with IFRS 2 Share-Based Payments, in
respect of share options granted to management.
venture partner, Mano River Resources Inc, has been
Funding
very supportive in our efforts and I thank them for their
On 18 September 2006, Petra announced the issue of a
valuable assistance.
Results
As the principal functional currency of the Group’s
business transactions in Angola, Botswana and Sierra
Leone is US Dollars and in South Africa diamond sales
are made in US Dollars, the Group has decided to
US$20 million unsecured, interest free convertible bond,
convertible at 130 pence per share, to Al Rajhi Holdings
W.L.L., a major Saudi Arabian based investment group.
This fi nancing strengthens Petra’s treasury on an interest
free basis, without dilution to existing shareholders,
and gives Petra the ability to actively consider revenue
and production growth opportunities that have the
CHAIRMAN’S STATEMENT continued
Page 9
potential to fast-track Petra’s development and further
social awareness programmes. The local population
entrench the Company as a mid-tier diamond producer.
has access to a fully funded and well equipped clinic
The fi nancing will also serve to underpin our funding
where all fi rst line consultations are available, the clinic
should we decide to expand our exploration interests
being staffed by Angolan doctors and nurses as well as
by exercising our warrants as part of the Xceldiam
expatriate trauma paramedics. A local primary school has
cooperation agreement.
Nabera
Both Petra and Nabera continue to work with Alexkor
and the South African Government with regards to
the “value add” and management fees that are due
to the Nabera consortium, in which Petra is a 29.5%
shareholder. Whilst, for reasons outside of Petra’s
control, progress has been disappointing, the Board
remains focused on an acceptable resolution to the
outstanding claims.
Objectives and strategy
Petra’s objective
is to become an
independent
world-class gemstone diamond producer. This will be
achieved by holding a highly prospective exploration
portfolio ensuring future growth, organically expanding
the Group’s production profi le and by geographically
diversifying the country spread and risk. Our focus,
however, will remain on the African continent.
Our strategy is therefore to explore and develop our
projects in Angola, Botswana and Sierra Leone whilst
increasing production from the South African operations.
Production is expected to slowly build-up from Sierra
Leone as greater knowledge is gained from the various
kimberlite fi ssures. We will also continue to analyse
other opportunities, which meet our strict acquisition
criteria, for future inclusion to enhance the growth of
the business.
The diamond
industry
remains
robust on
the
fundamentals of supply and demand. With an increase
in demand and without the commensurate increase
in global production the outlook for any new diamond
mine is good. Whilst operating on the African continent
key partnerships are vital and we as a group will foster
our existing partnerships further and seek to strengthen
new ones.
been built and currently there are around 100 learners
from the community attending. Local farmers have also
been assisted to produce agricultural products using
more modern methods and then giving them a market in
terms of the project’s consumption and requirements.
Such development is not only applicable to our Angolan
operations and there are similar examples of other
similar social development projects in other countries
in which the Group operates.
Staff
I wish to thank our staff for their continued dedication
and hard work. The core team of the Company (both
Petra and Crown pre-merger) has remained intact and
I am grateful for this. It is with this staff continuity that
we have managed to grow the business and withstand
the ups and downs of the resources sector. We all share
the same goal of seeing Petra become an independent,
strong voice and contributor to the diamond industry.
Without the employees of Petra this is not possible.
Some of our people work in diffi cult situations, as often
deposits are found in remote parts of the world. They
do this with an enthusiasm and pride in their work and
I am extremely proud to be a part of this fl ourishing and
dynamic business.
I would like to thank two directors who left the
Company during the past year. Charles Finkelstein
made a signifi cant contribution over the years as
a non-executive director; he not only assisted your
Company through diffi cult times in its formative stages
but was also a window into the ever-changing diamond
world. I would also like to thank Kevin Dabinett for the
dedication and support he gave to your Company and
wish him every success for the future.
Social development
Petra believes it important to improve the lives of the
communities in the areas in which we operate. For
example, at Alto Cuilo we have assisted in the introduction
of primary and secondary health care, education,
sustainable job creation, health and safety training and
Adonis Pouroulis
Chairman
26 October 2006
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Angola
Sierra Leone
Alto Cuilo
Angola
Botswana
South Africa
Diamonds – Contributing to ‘The African Renaissance’
Petra Diamonds’ focus remains on the diamond fi elds of Africa, where we have operated successfully
for nearly 10 years, and where there is the opportunity to discover new and rich deposits. Whilst the
diamond industry in South Africa is relatively mature, developing countries such as Angola and Sierra
Leone are open again for business and offer some of the most prospective hunting ground for diamonds
in the world. At the same time, modern exploration techniques could uncover dramatic new fi nds in
Botswana, home already to the world’s largest producing diamond mine.
Petra views Angola as one of the most prospective
in the exploration at Alto Cuilo reaching a special
milestone during July 2006 with the discovery of the
50th kimberlite at the project. It is now estimated that
the surface area of kimberlite discovered at Alto Cuilo
is in excess of 1,400 hectares, ranking the project fi rmly
by size as one of the most important diamond projects
countries for diamonds globally and the Company’s
in development today.
fl agship Project Alto Cuilo, a joint venture with BHP
Billiton, lies in the north-east of the country. Petra
Kimberlite Programme
has two further Angolan projects in the same region,
Medio Kwanza and Muriege, though the Company is
not currently active at these concessions, with its focus
being on the development of Alto Cuilo.
Alto Cuilo
Petra’s exploration programme at Alto Cuilo over the
last year has further substantiated its potential as a
major diamond project. Exploration continues to make
solid progress, with further increases in the number of
kimberlites identifi ed and analysis of drill core revealing
exceptional indicator mineral chemistry.
Ongoing drilling of the anomalies identifi ed by the Midas
low level helicopter aeromagnetic survey resulted
Petra currently has three core drill rigs working full
time on site, which have accelerated the exploration
programme signifi cantly, and as at the date of this review
core drilling totals 26,000 metres on 190 holes. Drilling
has also commenced in the previously untested north
east of the project area where 4 of the 50 kimberlites
discovered to date have recently been identifi ed.
The importance of this accelerated drilling programme
is evident when it is considered that of the total 249
magnetic anomalies, 60 have now been drilled and 50
have been confi rmed as kimberlitic. This success rate
of 83% is exceptional and surpasses the norms for
global kimberlite exploration.
GENERAL REVIEW continued
Analysis of diamond indicator mineral chemistry is
at Alto Cuilo utilising a large diameter drill rig and the
Page 11
very important in terms of predicting whether or not
diamond indicator mineral analysis has assisted in a
a kimberlite is likely to hold an economic deposit of
more informed identifi cation of the priority kimberlite
diamonds. It is accepted by the world’s kimberlite
targets for this programme. The programme will
experts that the higher the count of the acknowledged
generate a better understanding of the kimberlite
diamond stability fi eld indicators, the higher the
deposits as well as producing critical data relating to
likelihood of the kimberlite hosting economic grades.
grade and value per carat.
Petra has therefore been highly encouraged to discover
that kimberlite core tested so far at Alto Cuilo has
The large diameter drill rig (“LDD rig”) has commenced
returned results that are consistent with diamond-
operation and will initially stockpile 200 tonne bulk
producing kimberlites globally.
samples from each selected kimberlite, to be treated
by the 10 tonne per hour Dense Media Separation
Key data revealed was as below:
(“DMS”) plant which is expected to be commissioned
in November 2006. This lead time will enable the
(i) Chrome diopside analysis has returned a favourable
exploration team to stockpile suffi cient material to
mantle geotherm, indicating that there is a high
enable the DMS plant to go directly to full capacity
probability that the kimberlite will have sampled
treatment of the samples when it is commissioned.
material derived from the earth’s diamond stability
Priority targets have already been identifi ed and ranked
fi eld at a temperature favourable for the formation
for LDD drilling according to mineral chemistry, surface
of diamonds;
area and logistical considerations.
(ii) Peridotitic garnet analysis revealed pressure-
The LDD rig is a RB40 drill rig from Prakla Bohrtechnic
temperature conditions compatible with
the
in Germany and will be drilling holes with a diameter of
presence of diamond stability fi eld G10 garnets
43 centimetres (17 inches) to depths of up 350 metres.
derived from well within the diamond stability fi eld;
The LDD rig is able to extract volumes of material large
and
enough to enable Petra to evaluate macro diamonds
that may be contained therein, as well as giving more
(iii) Eclogitic garnet analysis also gave excellent results,
accurate data relating to overall grade and carat value.
with an abundance of high sodium eclogitic garnets
in some kimberlites, further increasing the potential
The commencement of bulk sampling is a signifi cant
for quality diamondiferous kimberlite.
step in the development of Alto Cuilo, following the
extensive exploration that has been carried out to
The stage is now set to commence fi rst bulk sampling
date.
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Alluvial Programme
BHP Billiton Joint Venture
The potential for Alto Cuilo to host economic alluvial
BHP Billiton continues to sole fund exploration at Alto
deposits continues to be explored and an ongoing
Cuilo and as at 30 June 2006 had advanced funding of
pitting and trenching programme continues in order to
US$22.8 million to PDAC in respect of exploration at Alto
further evaluate this possibility. Valuable exploration
Cuilo, equating to a 53.3% interest in PDAC. In addition,
information is also recorded from these activities.
a budget of circa US$20 million, to be funded by BHP
Billiton, has been approved for the year to June 2007.
Preliminary Diamond Valuation
To date over 1,500 carats of kimberlite and alluvial
The partnership with BHP Billiton is of great importance
diamonds have been recovered from the sampling
to Petra and has enabled us to dramatically accelerate
operations at Alto Cuilo. BHP Billiton previously
the progression of this unique project, and we will
completed a preliminary valuation, based on an initial
continue to work together to build upon the mutually
310 carats recovered from the kimberlite samples,
benefi cial association.
which determined an average value of US$295 per
carat. This is an excellent result and in excess of Petra’s
Xceldiam - Strategic Cooperation
previous estimates of US$200 per carat.
On 30 May 2006 Petra entered into a Strategic Cooperation
Agreement with Xceldiam Limited with regard to the
Endiama / Local Partnerships
Luangue and Alto Cuilo diamond exploration projects.
Petra Diamonds Alto Cuilo Limited (“PDAC”), the
The projects share a common border and it is the area
Petra/BHP Billiton JV company, is in partnership at
within 20 kilometres either side of this common border
Alto Cuilo with Endiama, the offi cial state diamond
where exploration activities are focused, based on the
mining company of Angola, and Moyoweno, a local
geological and diamond prospectivity. Xceldiam and
Angolan company. The good relationships with our
Petra will share information and cooperate on technical,
local partners have contributed enormously to the
operational and other related matters with regard to the
success at the Alto Cuilo project and we appreciate
development of these projects.
their input and support. PDAC is proud to be working
in partnership with both Endiama and Moyoweno to
Petra notes with interest the early drilling success at
help develop an exciting and vibrant diamond industry
Project Luangue as announced on 25 July 2006. Core
in Angola, which in turn will contribute to the socio-
drilling returned excellent fi rst results, with drilling
economic development of the country as a whole. It is
on the fi rst target intersecting kimberlite. This news
our experience that Angola is receptive to, and indeed
supports Petra’s belief that Project Luangue may host
welcoming of, foreign investment and we will continue
kimberlite geology similar to that of Project Alto Cuilo
to work in close harmony with our local partners going
and Petra looks forward to further developments from
forward.
Project Luangue.
Page 13
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Botswana
Sierra Leone
Botswana
Kalahari
Diamonds
Angola
South Africa
On 30 September 2005 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.
Further to the acquisition of Kalahari, Petra is one of
the largest holders of diamond exploration ground in
Botswana, with approximately 55,000 km2 of highly
prospective licences held through its wholly owned
Botswana subsidiary, Sekaka Diamonds (Pty) Limited.
Modern exploration techniques mean it is now possible
to identify kimberlite anomalies covered by Kalahari sand
cover which has previously prevented the discovery
of new diamond deposits in Botswana. Petra has an
agreement with BHP Billiton to direct the deployment
of the proprietary Falcon technology, an airborne gravity
Botswana is the world’s largest diamond producer by
system which assists in identifying anomalies through
value, with large producing mines at Jwaneng, Orapa,
the sand cover.
Letlhakane and Damatshaa. The Orapa and Jwaneng
kimberlite pipes are of exceptional size and host
Petra’s exploration fi eld effort has gathered momentum
reserves and resources that support a life of mine in
this year as management has extended the exploration
excess of 20 years at present mining rates.
remit to search for smaller kimberlites as well as larger
Botswana offers a modern and highly developed mining,
commercial and financial environment. Diamonds
Gope
kimberlite targets.
contribute 70% to Botswana’s export earnings and
The acquisition of Kalahari gave Petra access to the
these revenues ensure that 90% of Botswanans have
Gope kimberlite fi eld, that was already known to host
access to education and that there is near universal
six or seven kimberlites. Geophysical targets from
health coverage. The real benefi ts brought to Botswana
Xcalibur and Falcon surveys fl own by Petra in this
by its diamond industry serve as an encouraging
area have been prioritised for further investigation and
prototype for other African countries with emerging
their geophysical ‘responses’ compared to the known
diamond potential.
kimberlites from the orientation survey conducted
GENERAL REVIEW continued
GENERAL REVIEW continued
during the year. Their spatial relationship has also been
Mabutsane / Tshwane
compared to the known kimberlitic indicator minerals
A ground gravity survey was carried out over the
Page 15
(“KIM”) anomaly that was identifi ed by previous
exploration companies. This KIM halo is offset from
the known Gope kimberlites by at least 12 kilometres,
and is therefore probably not related to the known
bodies, implying that there could be potentially large,
undiscovered kimberlites in the Gope fi eld.
A total of 41 targets have now been investigated in the
Gope area by follow up ground geophysics, identifying a
number of co-incident gravity and magnetic anomalies
with similar characteristics to known Gope kimberlites
within, and directly adjacent to, the KIM halo. A drilling
large gravity-only anomaly previously drilled in the
Mabutsane/Tshwane area. This was considered the best
mode of follow up as specifi c gravity determinations
on cuttings recovered from this hole failed to explain
the cause of the anomaly and to facilitate geophysical
modeling of the causative body. Modeling was carried
out by the BHP Billiton Falcon unit in Melbourne, and
the 3D SolidEarth™ model produced indicates a large
pipe-like ‘unit’ extending from about 200 metres depth
to about 1800 metres depth. This was confi rmed by a
model produced by Xcalibur using magnetic data from
programme to test these anomalies will commence in
this anomaly. The top of this unit is deeply concave and
the latter part of this year.
was not penetrated by the borehole drilled by Petra in
2005.
Orapa South
Ground follow-up geophysics has started on the 13
anomalies in the north of the Orapa South fl ight blocks,
directly south of the producing Orapa kimberlite fi eld,
and a mere 10 kilometres from AK6, a diamondiferous
kimberlite which is currently being evaluated by De
Beers and African Diamonds. This locality has a Kalahari
sand cover of up to 50 metres and thus a dedicated KIM
survey will also be undertaken, so as to assist in the
selection and interpretation of anomalies.
Orapa North
Trenching on 9 anomalies was chosen as the preferred
method of ground follow-up for the Orapa North area as
If a kimberlite model is to be assumed, the model
suggests about 4 lobes of low density material,
coalescing at depth. One may expect these lobes to
form one very large crater, which, given the absence
of kimberlite indicator minerals in the drill hole and
surrounds, could have been infi lled by late Karoo group
rocks and later, covered again by the Kalahari sand
beds seen today. A decision will be made during this
year whether to deepen the existing hole in the centre
of the anomaly, or to drill on the edge of the anomaly
where the causative body could be closer to surface.
Kalahari sand cover is negligible and calcrete horizons
The fi nal Tshwane data has been received from BHP
seldom exceed 3 metres in thickness. Samples were
Billiton and anomalies are in the process of being
taken from all trenches for heavy mineral extraction at
selected for ground follow-up work.
Petra’s preparation laboratory at Swartruggens, South
Africa.
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Sierra Leone
Sierra
Leone
Kono Project
Angola
Botswana
South Africa
Petra has a joint venture with Mano River Resources in Sierra Leone which allowed Petra to earn
a 51% equity interest in the Kono diamond project by investing US$3 million in the project over a
three-year period. This threshold has been surpassed during the year, with total spend by Petra
as of 30 June 2006 of US$4.4 million, and Mano is now contributing funding to maintain their 49%
share.
hour Dense Media Separation (“DMS”) plant and this
was successfully commissioned in early June 2006. The
Company was subsequently able to commence the
treatment of samples comprising mixed and diluted
material from exploration and shaft sinking operations.
First diamonds were duly recovered from the Kono
project on schedule in June 2006.
The recovery of 44 diamonds, totaling 5.6 carats and
including a 1.4 carat stone, from the small amount of
material processed was highly encouraging, though
the scale of the test work means that Petra is not in
a position yet to arrive at any representative grade.
Sample testing continues and Petra will report on
The strike length of the Kono kimberlite dykes exceeds
the total strike length of Petra’s South African kimberlite
further fi ndings when available.
dyke operations and Petra believes the Kono project
has the potential to yield high grades of approximately
Exploration Development
100 carats per hundred tonne.
First Diamond Production
Petra had set a target for fi rst diamond production from
Kono by mid 2006, less than a year after the Company
had begun operations in Sierra Leone, and this target
was met due to the completion on time of a number
of key objectives. The construction of the central base
camp in Yengema Village was completed on schedule
in May 2006. Petra constructed in-house a 75 tonne per
Shaft sinking operations continue to proceed well and a
sound infrastructure is in place alongside the DMS plant.
Two shafts, both of which are on kimberlite fi ssure, are
in progress, Black Rock and Lost Shaft. The shafts will
be sunk to a depth of around 30 metres before stopes
are prepared to access production test tons of fi ssure.
In addition, exploration trenching has uncovered
two very promising diamondiferous fi ssure strikes at
Levuma on the Lion 5 dyke extensions and Yendema,
GENERAL REVIEW continued
GENERAL REVIEW continued
GENERAL REVIEW continued
Page 17
south west of the original Lion 2 dyke strike. Exploration
trenching is underway at Bundofulahan, a fi ssure strike
north of Lion 4. At Bardu, a south-west extension of
the Lion 5 dyke extension also exists, with exploration
results expected by September 2006.
The aggressive rolling exploration trenching method
has proven to be a very effective and cost effi cient
method of quickly exploring the fi ssures surrounding
the central base camp and processing infrastructure. It
is envisaged that six additional trenches will be opened,
the fi ssure penetrated and the results evaluated by
The shaft sinking programme will be signifi cantly
December 2006.
The integrated result of the above mentioned activities
will provide Petra with a better understanding of the
diamondiferous fi ssures available, their potential and
the project strategy ahead. Petra is faced with a large
quantity of diamondiferous fi ssures available on the
Kono concessions but is confi dent that the strong
progress made in the last year has helped enormously
to refi ne and prioritise the bulk sampling and exploration
focus going forward.
stepped up by the implementation of a second shift
supported by additional shaft sinking specialists from
Petra’s South African operations. The aim is to phase
over from shaft sinking to stoping activities as soon as
possible in order to gain access to production test tons
in the quarter to December. This is necessary in order
to accurately determine the grade of the deposit and to
get a sample of diamonds large enough to ascertain the
quality of the diamonds by December 2006.
The roll out of three test shafts up to a depth of 20
metres on the most promising diamondiferous dyke
strikes recently uncovered by exploration trenching
will enable Petra to gain access to mini-bulk samples
in order to identify and determine the most promising
kimberlite dykes. If the results are favourable the
test shafts could be seamlessly converted into bulk
sampling and mining shafts.
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South Africa
Sierra Leone
Angola
Helam
Star
Sedibeng
Botswana
South Africa
Petra has increased production from its three mines in South Africa from 143,673 carats (year to June
2005) to 175,011 carats (year to June 2006). This production increase is notable as it was achieved
despite severe operational problems presented by power outages, heavy rainfall and occasionally
poor ground conditions. Management is confi dent that the ongoing operational improvement of
the mines will ensure steady production in the coming years.
complete to 20 level and the further deepening of this
shaft system to 25 level is on a 3-year schedule. In the
interim, the build-up tons will be delivered from second
lease as set out above.
At Edward shaft, a surface ore handling system
similar to John shaft is nearing completion and will
assist in reducing costs. Underground shaft sinking
has progressed to 25 level (23 and 24 are the active
levels) so as to ensure continued production from this
section. Instead of sinking another subshaft, innovative
engineering solutions are being applied to enhance the
duty cycle of the existing sub-winder (other than the
Helam
At the Helam mine, several major steps toward the
sinking of another sub-shaft).
semi-mechanisation of the mine have been completed
which will result eventually in a reduction in labour
In the semi-mechanisation drive a fl eet of 14 mechanised
cost. Foremost among these achievements is the
loaders is now operational, complete with the air and
fi nalisation of the skip-hoisting system at John shaft,
electrical reticulation as well as the maintenance to
which enables the Company to hoist unrestricted
keep these loaders operational.
tons from underground as they become available. In
addition, the second lease incline hoisting system has
Surface exploration has been stepped up at Helam so
been fully commissioned and tonnage build-up from
as to identify and possibly develop a new shaft system
this section will now commence as additional levels
from surface to the western extensions of the Edward
are added on. The deepening of John main shaft is now
shaft fi ssures.
GENERAL REVIEW continued
GENERAL REVIEW continued
GENERAL REVIEW continued
Unfortunately, Petra had to contend with severe
the fact that the Burns section fl oods fi rst), resulting in
Page 19
thunderstorms over the year which resulted in power
a depression of grade.
outages and fl ood
interruptions. The Company’s
electrical standby system currently only allows for
In all other respects, the mine is on track with 15
emergency services and is therefore being upgraded
level on both the Burns and Wynandsfontein sections
so as to better cope during the next wet season. Minor
well established. The 14 level main access haulage to
labour disruptions also led to some lost production but
Wynandsfontein has been rescheduled for completion
Petra will continue to work towards managing such
by June 2007 and will assist in depressing operational
eventualities going forward.
costs. Sinking (slyping) of the main shaft from 12 to 14
level is continuing and deepening to 16 level is soon to
Star
commence.
At the Star production lagged behind projected levels,
mainly due to issues concerning ventilation, and work
The building of the plant front-end crushing section has
is continuing to improve this situation. The raise bore
been completed and commissioned. Star mine has an
drilling from surface to 13 level (a vertical hole some
extremely hard ore so the introduction of a rolls crusher
520 metres with a diameter of 1.4 metres) has been
will assist in the reduction of diamond breakage and
completed by the contractor. The required return-
subsequently increase the grade of diamond recovery.
ventilation airway has been completed on 13 level and
ventilation districts in the Burns operational sections will
Sedibeng (Messina and Dancarl operations)
be established after Petra has completed the support
Production
is going well at Sedibeng, although
of the bad ground conditions in certain sections of the
slightly behind schedule. The delays in production
raise bore hole. This work is expected to be completed
have resulted from power outages during the afore
during the fi rst half of FY 2007 to further improve the
mentioned periods of severe thunderstorm activity,
underground ventilation conditions. The
improved
resulting in fl ooding of the lower levels, as well as
conditions will assist in increasing production from
poor ground conditions on 23 level where anticipated
underground operations.
fi ssure development did not materialise and gave only
“stringers”. Stope development on this level has now,
Further problems relating to
loss of production
however, been achieved.
resulted from power outages during thunderstorms
with attendant fl ooding, as well as power outages due
In all other respects the mine is performing well. Shaft
to cable theft on the national electric supply grid. The
sinking on the Messina section is progressing and at
abovementioned further resulted in ore being drawn
year-end the shaft was 8 metres short of 24 level.
preferably from the Wynandsfontein section (due to
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Development of the 20 south drive is on track and at
Capex has been approved for the construction of
year-end was 50m short of being vertically beneath the
a complete new 100 tonne per hour DMS diamond
Dancarl main shaft. The next step is to raise bore from
recovery plant, which will cater for all production from
this level into the bottom of Dancarl shaft at 16 level.
the Sedibeng mining and tailings. It will incorporate all
Once this is done, the shaft will be deepened to 21
the modifi cations that we have learnt will be of benefi t
level and a new winder will be installed on surface to
to our operation, in particular ensuring the protection
handle the increased duty cycle with greater tonnage
of large diamonds. The plant is being fabricated at the
from the Dancarl section. In the interim, production
Helam mine facility and is planned to be commissioned
from Dancarl is progressing well with 15 level solidly
in the third quarter of FY 2007. It is anticipated that
established and the re-establishment of the shaft to 16
the new plant will result in a dramatic reduction in
level in progress.
operating costs and a signifi cant improvement in
In terms of brownfi elds exploration, a 2,000 tonne test
was conducted on the southern portions of the Dancarl
RESOURCE ESTIMATES
diamond security.
fi ssures. Results returned grades compatible with the
The South African reserves and resources confirm the
thin nature of the fi ssures in this locality, with grade
potential for long-life production operations. Further,
being depressed by large amounts of sidewall dilution
“brownfi elds” exploration has the potential to identify
and resultant low kimberlite percentage. Exploration
new areas of production from the current operations
Page 20
in the lower levels is also being executed to determine
and work in this area has been intensifi ed.
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the grade of the known “magazine fi ssure” which is
some 60 metres distant from our current operations.
Resources (estimated)
Proven, probable reserves & inferred resources
ROM tonnes (‘000)**
Grade ROM (cpht)**
Total carats (‘000)**
Price/carat US$
Value US$ (million)
Helam
Sedibeng
Star
Total
1,936,000
1,700,000
3,886,000
7,522,000
28
44
81
59
542,000
748,000
3,147, 000
4,437,000
250
135.5
200
149.6
74
232.8
117
517.9
**Adjusted from Snowden’s report dated 1st February 2005
BLACK ECONOMIC EMPOWERMENT
In summation, I am delighted with the progress we
The Company views Black Economic Empowerment
have made across all our projects over the past year.
(“BEE”) as an essential process to address historic
This progress could not have been achieved without
wrongs and give previously disadvantaged groups
the skills, work ethic and dedication of our staff and I
in South Africa the opportunity to participate in
would like to extend management’s sincere thanks to
and benefi t from the exceptional mineral wealth of
our hard working and spirited team. We are proud to
their country. However, BEE is a pragmatic growth
have developed a group of the highest calibre and in
strategy, as well as a moral initiative, and affords Petra
our people we have perhaps our greatest asset.
the opportunity to forge new partnerships in South
Africa and acquire further projects. Good progress
has been made to achieve the objectives of South
African legislation through the 25.5% BEE ownership
of Sedibeng. Legislation requires 15% ownership by
2009 and 26% ownership by 2014 across Petra’s South
Johan Dippenaar
African operations. More transactions are planned for
Chief Executive Offi cer
the year to June 2007.
26 October 2006
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Although diamonds have been discovered in well over
South Africa has put in place measures to structurally
35 countries, the bulk of the production (by value)
change the way diamond wealth is shared among
comes from just six countries, Botswana, Russia,
corporate entities and the state. The South African
Canada, South Africa, Angola and DRC. Over 60% of the
Diamond Amendment Act has the objective of ensuring
world’s production (by value) comes from the African
signifi cantly higher levels of diamond benefi ciation
continent; even so, Africa has still been relatively
with the country. Mutually benefi cial results require
under-explored and Petra believes it therefore holds
corporate and political stewardship and dialogue
signifi cant promise. There are regions within Africa that
between government and producers; provided that
have produced alluvial diamonds for well over half a
competitive conditions are maintained and that
century without the primary kimberlite sources of the
policies are consistent, enabling producers to sell at
alluvial deposits having yet been discovered, so there
internationally competitive prices that recognise the
is a real opportunity for exploration companies using
inherent risk of mine development, Petra supports the
modern techniques.
South African Government’s objectives to increase the
The diamond value chain (or diamond pipeline) consists of
level of benefi ciation activities.
exploration, mining, sorting, distribution, trading of rough
From Supply Controlled to Demand Driven
stones, processing (converting the rough into polished),
Environment
grading for polished sales and/or retail consumption,
jewellery manufacturing, and retail. Presently, we fi nd
ourselves in a “constructive upheaval” in which a myriad
of contemporary corporate and consumer values are
progressively having a profound impact on the very
In today’s corporate environments, it has become an
imperative to align legal and ethical compliances with
business and marketing strategies and to ensure a
similar focus on the entire value chain.
foundations of the diamond value chain from the miners
Diamond miners have always recognised the “value”
to the consumers.
The progression of diamonds through the pipeline takes
global rough diamond production of around US$12.7
billion to around US$19.3 billion in polished diamonds
at polished wholesale prices. Ultimately, on the
downstream end of the pipeline, the activity translates
into around US$65 billion in worldwide diamond
jewellery retail sales,
including the non-diamond
components such as precious metals, semiprecious
stones, designs, distribution costs, marketing and
advertising.
Recognising the Aspirations of Producer
Governments
The major producer governments are now investigating
other opportunities that arise from having substantial
diamond resources and corresponding production.
From an economic perspective, sustainable and
equitable management of diamond resources needs
to be applied in a responsible manner so that the
countries in question derive benefi ts corresponding to
their mineral wealth.
of their marketing rights – but they rarely considered
using their leverage to secure part of the downstream
revenues. Petra’s management is closely following
these international trends as we recognise that Petra
may well become far more than “just” an explorer and
miner. We now witness the successful development
and integration of new marketing methods, such as
branding, internet, vertical integration, franchising,
joint-ventures with manufacturers and a range of other
innovative and potentially very rewarding options.
These new marketing methods are transforming the
industry into a truly competitive, fully demand-driven
market, accompanied by an accelerated growth in
retail demand for diamond jewellery.
Fundamental structural changes of an entire value
chain are not without risk. The players involved are
comforted by the widely accepted forecast that
worldwide diamond demand will signifi cantly exceed
supply in the fi nal years of this decade, especially for
the better, more ‘exceptional’ goods. The pursuit for
vertical integration has caused the industry to make
considerable investments in downstream marketing
Government policies are now shifting focus to diamond
and promotion, brand development, and investments in
benefi ciation and economic diversifi cation. For example,
jewellery manufacturing and retail stores.
several new diamond cutting factories are expected to
become operational in countries like Botswana, which
has traditionally not been the case.
Throughout the past few years we have seen
consecutive year-on-year growth in consumer demand;
Page 23
pipeline. All these developments will further heighten
consumer confi dence in the industry and bolster
investor confi dence in the companies involved in the
value chain. The changes are bold, innovative and
exciting - the diamond business of tomorrow presents
challenges, promises and opportunities and each and
every player will have to consider their strategies and
business model accordingly.
indeed, the fi rst part of this decade recorded better
growth rates than the industry saw throughout the
1990s. Consumer demand is healthy, especially in
emerging markets such as India, the Gulf countries
(enjoying high oil revenues), and China.
The diamond industry traditionally relied on controlling
supply to the market. Diamond producers are now
adopting business models aimed at making the industry
more responsive to the increasingly sophisticated
and brand-conscious consumer preferences and at
creating accelerated growth in consumer demand. The
transformation from a supply controlled to demand
driven approach requires the entire
industry to
dramatically change its marketing approaches. This is a
major transformation and all role players will watch the
transformation with interest.
Johan Dippenaar
There are other external factors impacting the value
Chief Executive Offi cer
chain as well. In a business environment post Enron
26 October 2006
and with the past concerns surrounding confl ict
diamonds, we see greater transparency, greater
This market review has been compiled with the assistance
corporate accountability, and a renewed commitment
of Chaim Even-Zohar and his staff at Tacy Limited, Diamond
to ethical and legal compliance issues throughout the
Industry Consultants.
Page 24
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Mining, processing, distribution and marketing
The demand for rough diamonds is predicted to rise by at least fi ve percent each year until the end of the
decade. We aim to be a world-class diamond group and mid-tier producer of gemstone diamonds.
1Geology:
The cross section shown here provides a closer look at the
earth’s crust and underlying mantle. Just below the crust is the
portion of the mantle called the lithosphere, which is rigid and
acts like rock. Below this is the asthenosphere, a more plastic,
fl owing region that enables the overlying crustal plates to move
in what is known as plate tectonics.
The demand for rough diamonds is predicted to rise by at least fi ve
percent each year until the end of the decade. We aim 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 production from the mines in South Africa.
2Surfacing:
2Surfacing:
Surfacing:
Diamonds ascend to the earth’s surface in rare molten
rock, or magma, that originates at great depths.
Carrying diamonds and other samples from the earth’s
mantle, this magma rises and erupts in small but violent
volcanoes. The magma itself does not contain diamond;
instead, it acts as an elevator that carries deep-formed
rocks and material upward.
The magma for such a volcano must originate at a
depth where diamonds can be formed, 90 miles (150
km) deep or more (three times or more the depth of
source magma for most volcanoes); this is a relatively
rare occurrence.
Just beneath such volcanoes is a carrot-shaped “pipe”
fi lled with volcanic rock, mantle fragments, and some
embedded diamonds.
The rock is called kimberlite after the city of Kimberley,
South Africa, where the pipes were fi rst discovered
in the 1870s. Another rock that provides diamonds is
lamproite.
Kimberlite deposits are known as blue ground for
the deeper serpentinized part of the deposits, or as
yellow ground for the near surface smectite clay and
carbonate weathered and oxidized portion.
Volcaniclastic RockPyroclastic RockCraterSurfaceKimberlite sillsMagneticKimberlite dykesRoot ZoneDiatreme dykesDiatreme
3Mining a kimberlite pipe:
3Mining a kimberlite pipe:
Mining a kimberlite pipe:
Mining of a diamond-bearing pipe starts with the excavation of a pit into the pipe. In this process, called “open-pit” or “open-cast”
mining, the initially loose and eventually hard ore material is removed with large hydraulic shovels and ore trucks. Hard rock is drilled
and blasted with explosives so the broken material can be removed. When deep, rich ore warrants it, the mining goes underground
with vertical shafts descending to horizontal drifts, or passageways that enter the pipe.
In bedrock adjacent to the pipe, shafts are sunk and drifts are tunneled into the pipe. This is known as block caving. Concrete-lined
tunnels are excavated under a large vertical section, perhaps 140 to 180 meters of kimberlite. Along the tunnels are draw points, or
openings in the concrete casing where kimberlite is drilled and blasted to cave in a section above the tunnel. Broken kimberlite falls
through the draw points and is scraped out of the tunnel with a drag or scraper bucket attached to a cable and winch, working much
like a clothes line on a pulley. The kimberlite above the tunnels falls under its own weight and leads to a slow, continuous caving of
ground that is removed through the draw points. The scraped kimberlite rubble is loaded into cars on a lower level and moved to a
crusher underground. The crushed ore is then conveyed to skips that carry the ore up the vertical shaft for processing.
4Processing diamond ore:
4Processing diamond ore:
Processing diamond ore:
Once a mining operation yields ore, the diamonds must be sorted from the other materials.
This process relies primarily on diamond’s high density. An old but effective method is to use
a washing pan, which forces heavy minerals like diamond to the bottom and waste to the
Page 25
top. Cones and cyclones use swirling heavy fl uids mixed with crushed ore to achieve density
separations.
����
����
�����������
LEFT: This diagram shows how cones (left)
and cyclones (right) use heavy-media
separation. Diamond-bearing concentrate
is mixed with a fl uid near the density of
diamond. Separation occurs in cones and
cyclones by swirling the mixture at low and
high velocities respectively. In the cone,
�����������
����
rotational mixing permits lighter minerals
to fl oat to the top and run out as overfl ow,
while diamonds and dense minerals sink
to the bottom and are sucked out with a
compressed air siphon. In the cyclone,
fast rotation of the suspension drives
heavy minerals to the conical wall, where
they sink to the bottom and are extracted,
while fl oat waste minerals are sucked
from the center of the vortex. Cyclones are
about 99.999% effi cient at concentrating
diamonds and similarly dense minerals
from the original ore.
��������������
����
RIGHT: The x-ray separator system acts on a thin stream of particles from
���������
the concentrate accelerated off a moving belt into the air, where they
encounter an intense beam of x-rays. Any diamond fl uoresces in the
x-rays, activating a photomultiplier that triggers a jet of air, defl ecting the
������������
diamonds into a collector bin
��������������������
�������
�������������������
�����������
��������
�����������������������
��������������������
�������������������������
�����������
���������
��������������
Mining, processing, distribution and marketing continued
Diamonds are the most coveted of all precious gems. The diamond will likely continue to be a highly
coveted jewel, because, well, “A Diamond is Forever.”
5Sorting and distributing:
5Sorting and distributing:
Sorting and distributing:
The ultimate purpose of sorting is to estimate an asking
price for the rough diamonds. Diamonds then are sold
off to either diamond dealers and jewellers who sell the
gems, or are sold for industrial use.
Diamonds are the most coveted of all precious
gems. While this has not always been the case,
diamonds are nonetheless exquisite gems that
go through a long, tedious refi ning process from
the time they are pulled from the ground to
when you see them in the jewellery store. And,
while some of the mystique of diamonds may be
gone - they’re just carbon, after all - the diamond
will likely continue to be a highly coveted jewel,
Page 26
because, well, “A Diamond is Forever.”
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Charles Greig & Son
6Gem diamond industry
6Gem diamond industry
Gem diamond industry
Diamonds do not show all of their beauty as rough stones; instead, they must be cut and polished to exhibit the
characteristic fi re and brilliance that diamond gemstones are known for.
Diamonds are cut into a variety of shapes that are generally designed to accentuate these features. Diamonds which
have been prepared as gemstones are sold on diamond exchanges called bourses. There are 24 registered diamond
bourses. This is the fi nal tightly controlled step in the diamond supply chain; wholesalers and even retailers are able to
buy relatively small lots of diamonds at the bourses, after which they are prepared for fi nal sale to the consumer.
Diamonds which are not cut to the specifi cations of Tolkowsky’s round brilliant shape (or subsequent variations) are
known as “fancy cuts.” Popular fancy cuts include the baguette (from the French, meaning rod or loaf of bread),
marquise, princess (square outline), heart, briolette (a form of the rose cut), and pear cuts.
A large trade in gem-grade diamonds exists. One hallmark of the trade in gem-quality diamonds is its remarkable
concentration: wholesale trade and diamond cutting is limited to a few locations.
Page 27
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The Directors present their Report together with the
and around the Helam Diamond Mine for R2,500,000
audited fi nancial statements of the Group for the year
(US$343,874). The option expires on 15 October 2011.
ended 30 June 2006.
SHARE CAPITAL
PRINCIPAL ACTIVITIES
Details of changes to share capital during the year can
Petra is focused on the mining and exploration of
be found in Note 19 to the fi nancial statements.
diamonds in Africa. Petra’s strategy is to build a portfolio
of revenue producing and exploration assets, achieving
SUBSTANTIAL SHAREHOLDINGS
the objective of becoming a successful mid-tier diamond
At 30 September 2006 the following interests in the
producer and explorer.
ordinary shares of the Company represented more than
3% of the issued share capital (other than interests set
BUSINESS REVIEW
out above in the Board of Directors Interests).
A detailed review of the Group’s operations and fi nances
for the year and events subsequent to the year end are
set out in the Chairman’s Statement on pages 6 to 9 and
in Note 32.
RESULTS AND DIVIDENDS
Page 28
The Group’s loss for the year amounted to US$18,864,456
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(2005: loss US$21,018,778). The Directors do not
recommend the payment of a dividend for the year
(2005: US$ nil).
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 30
and 31 and Note 19 to the fi nancial statements) were
as follows:
Saad Investments
Company Limited
Kalahari Diamond
Resources Plc
ANZ Nominees
Limited
Al Rajhi Holdings
W.L.L.
Chase Nominees
Limited
Credit Suisse Client
Nominees Limited
HSBC Global Custody
Nominees Limited
Euroclear Nominees
Limited
BNY (OCS) Nominees
Limited
Number of
ordinary
shares
Percentage
of issued
capital
22,651,387
15.05%
16,166,529
10.74%
11,093,955
7.37%
8,853,333
5.88%
8,142,700
5.41%
6,767,744
4.50%
5,900,000
3.92%
5,756,885
3.83%
Number
of shares
at 30 June
2006
Number
of shares
at 30 June
2005
7,535,000
7,535,000
2,407,122
2,407,122
640,000
640,000
50,000
2,000
640,000
640,000
10,000
2,000
A Pouroulis
V Ruffer
J Dippenaar
J Davidson
D Abery
C Segall
WB Nominees Limited
5,401,701
5,594,204
3.72%
3.59%
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
and the Group endeavours to ensure the appropriate level
of employee involvement and communication.
7,500,000 ordinary shares in the Company are held by a
The Group is committed to the principle and achievement
trust of which A Pouroulis is a benefi ciary.
of equal opportunities in employment irrespective of
There were no changes in Directors’ share interests
between the year end and the date of this Report.
An option was granted on 25 June 2004 to J Dippenaar
and J Davidson to acquire the game farm situated on
sex, religion, race or marital status. Full consideration
is given to applications from disabled persons who
apply for employment where the requirements of the
position can be adequately fi lled by a disabled person,
having regard to their particular abilities and aptitude.
DIRECTORS’ REPORT continued
CREDITORS PAYMENT POLICY
AUDITORS
It is the Group’s policy that payments to suppliers are
The Directors appointed BDO Stoy Hayward LLP as
made in accordance with those terms and conditions
auditors to the Company with effect from the audit for
agreed between the Group and its suppliers, provided
the year to June 2006. The Directors thank KPMG Audit
that all terms and conditions have been complied
plc for their audit services in previous years.
with.
GOING CONCERN
Following a review of the Company’s fi nancial position,
the Directors have concluded that suffi cient fi nancial
resources will be available to meet the Company’s
current and foreseeable working capital requirements.
In accordance with Section 89 of the Bermuda
Companies Act, a resolution to confi rm the appointment
of BDO Stoy Hayward LLP as auditors of the Company
is to be proposed at the Annual General Meeting to be
held on 8 December 2006.
On this basis, they consider it appropriate to prepare
By order of the Board
the fi nancial statements on a going concern basis.
David Abery
Director
26 October 2006
Page 29
DIRECTORS RESPONSIBILITIES
Bermudan company law and generally accepted best
practice require the Directors to prepare fi nancial
statements for each fi nancial year which give a true
and fair view of the state of affairs of the Group and the
profi t 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 fi nancial
statements; and
• prepare the fi nancial statements on the going
concern basis unless it is inappropriate to presume
that the Company and the Group will continue in
business.
The Directors are responsible for keeping proper
accounting records, for safeguarding the assets of the
Group and for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
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The Remuneration Committee
is responsible
for
PERFORMANCE RELATED BONUSES
determining the remuneration and incentive packages
In order to retain and incentivise the executive Directors
for the executive Directors and senior management.
and senior management, performance related bonuses will
The employment terms for executive Directors and
be awarded on the achievement of agreed performance
senior management are designed to attract and
criteria that are approved by the Remuneration Committee.
retain individuals of the right calibre; incentives are
It is the policy of the Board that the performance criteria of
structured so as to align their interests with those of
all such bonuses should be relevant and stretching.
the shareholders by rewarding them for enhancing
shareholder value.
SHARE OPTIONS
REMUNERATION POLICY
The Board believes that the granting of share incentives
encourages a broad alignment of the interests of the
The remuneration policy aims to attract and retain
executive Directors and senior management with the
executives who are incentivised to achieve performance
earnings and asset growth of the Company to the
therefore serving the best interests of the shareholders.
mutual benefi t of both shareholders and participants.
In framing and implementing the Directors’ remuneration
During the year the Company adopted IFRS 2 with
policy, consideration has been given to matters set out
respect to the treatment of employee share options,
in the Combined Code.
details of which can be found in Notes 30 and 31 to the
Page 30
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.
fi nancial statements.
As at 30 June 2006 the following options for employees
were in place to subscribe for ordinary shares in the
Company.
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Adonis Pouroulis
David Abery
Johan Dippenaar
Jim Davidson
Senior management
Exercise
Price
30.0p
35.0p
40.0p
45.0p
44.0p
85.0p
79.5p
44.0p
85.0p
79.5p
85.0p
79.5p
85.0p
79.5p
44.0p
54.5p
56.75p
A$1.12
A$1.36
65.75p
79.5p
Date of grant
22 April 1997
22 April 1997
22 April 1997
22 April 1997
At
30 June
2006
At
30 June
2005
Expiry date
11 April 2007
100,000
100,000
11 April 2007
100,000
100,000
11 April 2007
100,000
100,000
11 April 2007
100,000
100,000
5 September 2003
5 September 2013
750,000
750,000
16 June 2005
31 May 2006
16 June 2015
250,000
250,000
31 May 2016
250,000
—
5 September 2003
5 September 2013
750,000
750,000
16 June 2005
31 May 2006
16 June 2005
31 May 2006
16 June 2005
31 May 2006
16 June 2015
250,000
250,000
31 May 2016
250,000
—
16 June 2015
750,000
750,000
31 May 2016
250,000
—
16 June 2015
750,000
750,000
31 May 2016
250,000
—
5 September 2003
5 September 2013
385,000
385,000
28 June 2004
28 June 2014
—
133,334
13 September 2004
13 September 2014
50,000
50,000
24 September 2004
24 September 2014
238,875
276,375
28 January 2005
28 January 2015
72,500
86,250
27 November 2005
27 November 2015
500,000
31 May 2006
31 May 2016
500,000
—
—
DIRECTORS’ REMUNERATION REPORT continued
The following share options were exercised and lapsed during the year.
Estate of W Roberts
Kevin Dabinett
Senior management
Exercise
price
30.0p
35.0p
40.0p
45.0p
54.5p
54.5p
A$1.12
A$1.36
A$1.12
A$1.36
54.5p
54.5p
Date of grant
Date of exercise
Number of options
exercised/lapsed
11 April 1997
11 April 1997
11 April 1997
11 April 1997
28 June 2004
28 June 2004
24 September 2004
28 January 2005
24 September 2004
28 January 2005
28 June 2004
28 June 2004
22 July 2005
22 July 2005
22 July 2005
22 July 2005
31 May 2006
Lapsed*
12 June 2006
12 June 2006
Lapsed*
Lapsed*
31 March 2006
Lapsed*
50,000
50,000
50,000
50,000
250,000
500,000
9,375
3,438
28,125
10,312
133,334
266,666
*These share options lapsed due to the employees leaving the Company.
DIRECTORS’ REMUNERATION
The following table gives a breakdown of the remuneration of the individual Directors who held offi ce during the year
Page 31
ended 30 June 2006.
Executive Directors
A Pouroulis
K Dabinett*
D Abery
J Dippenaar
J Davidson
Non-executive Directors**
C Segall #
C Finkelstein***
V Ruffer #
Base
remuneration
Performance
related bonus
US$
US$
Other
US$
253,448
237,254
253,448
253,448
253,448
64,706
–
–
186,314
64,706
64,706
64,706
–
–
–
2006
Total
US$
318,154
423,568
318,154
318,154
318,154
2005
Total
US$
305,941
279,096
374,171
77,758
77,758
1,251,046
258,824
186,314
1,696,184
1,114,724
26,679
7,410
8,893
42,982
–
–
–
–
–
_
–
–
26,679
7,410
8,893
42,982
27,854
9,285
9,285
46,424
K Dabinett left the company effective 31 May 2006
*
** The Board determines the non-executive Directors’ fees in the absence of the relevant non-executive Director
*** C Finkelstein resigned as a non-executive director effective 30 April 2006
# Member of the Remuneration and Audit Committees
It is estimated that under arrangements currently in force, the aggregate base remuneration and benefi ts to be paid
to the executive and non-executive Directors for the fi nancial year end 30 June 2007 will be US$1,050,000.
By order of the Board
David Abery
Director
26 October 2006
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CORPORATE GOVERNANCE STATEMENT
The agenda for scheduled meetings is prepared in
Effective corporate governance is a priority of the Board
conjunction with the Chairman, Chief Executive Offi cer
and outlined below are details of how the Company
and Finance Director. Standing items include the Chief
has applied the principles of corporate governance
Executive Offi cer’s report, Finance Director’s report,
as set out in the Combined Code (“the Code”). Under
fi nancial reports, strategic matters, governance and
the rules of the Alternative Investment Market (“AIM”)
compliance. Submissions are circulated in advance.
the Company is not required to comply with the Code
Executives are regularly involved in Board discussions
and the Board considers that the size of the Group
and Directors have other opportunities, including
does not warrant compliance with all of the Code’s
visits to operations, for contact with a wider group of
requirements. The Board fully supports the principles
employees.
on which the Combined Code is based and considers
that the Company has complied with a number of key
requirements. This statement also outlines the main
corporate governance practices which comply with the
Australian Stock Exchange Limited (“ASX”) Corporate
Governance Council Principles of Good Corporate
Governance and Best Practice Recommendations (“ASX
CGC Recommendations”).
BOARD OF DIRECTORS
Role of the Board
The Board’s primary role
is the protection and
enhancement of long-term shareholder value.
Details of the Board’s procedures in respect to each of
these areas are further outlined below.
Director education
The Group educates new Directors about the nature of
the business, current issues, the corporate strategy and
the expectations of the Group concerning performance
of Directors. Directors also have the opportunity to visit
Group facilities and meet with management to gain a
better understanding of business operations. Directors
are given access to continuing education opportunities
to update and enhance their skills and knowledge.
To fulfi l this role, the Board is responsible for the
Composition of the Board
overall corporate governance of the Group including
The composition of the Board is determined using the
formulating
its strategic direction, approving and
following principles:
monitoring capital expenditure, setting remuneration,
• The Board should comprise Directors with a
appointing, removing and creating succession policies
broad range of expertise both nationally and
for Directors and senior management, establishing
internationally.
goals for management and monitoring the achievement
• Directors appointed by the Board are subject to
of these goals, and ensuring the integrity of internal
election by shareholders at the following Annual
control and management information systems. It is also
General Meeting and thereafter Directors are subject
responsible for approving and monitoring fi nancial and
to re-election at least every three years.
other reporting.
Board process
The Board has accepted the following defi nition of an
independent Director:
To assist in the execution of its responsibilities, the
“An independent Director is a director who is not a
Board has established an Executive Committee to
member of management (a non-executive director)
manage the Company on a day-to-day basis. Members
and who:
of this Committee are A Pouroulis, J Dippenaar, D Abery
• is not a substantial shareholder of the Company or an
and J Davidson. Members of this committee meet
offi cer of, or otherwise associated, directly or indirectly,
informally from time to time and no minutes are kept
with a substantial shareholder of the Company;
of proceedings.
The full Board holds scheduled meetings, and any
extraordinary meetings at such other times as may be
necessary to address any signifi cant matters that may
arise. In between meetings, decisions are adopted by
way of written resolutions.
• has not within the last three years been employed
in an executive capacity by the Company or another
Group member, or been a Director after ceasing to
hold any such employment;
• is not a principal of a professional adviser to the
Company or another Group member;
CORPORATE GOVERNANCE STATEMENT continued
Page 33
• is not a signifi cant consultant, supplier or customer of
the experience, knowledge and expertise of potential
the Company or another Group member, or an offi cer
directors before any appointment is made and adheres
of or otherwise associated, directly or indirectly, with
to the principle of establishing a board comprising
a signifi cant consultant, supplier or customer;
directors with a blend of skills, experience and attributes
• has no signifi cant contractual relationship with the
appropriate to the Company and its business. The main
Company or another Group member other than as a
criterion for the appointment of Directors is an ability to
Director of the Company;
add value to the Company and its business. All Directors
• is free from any interest and any business or other
appointed by the Board are subject to election by
relationship which could, or could reasonably be
shareholders at the following Annual General Meeting
perceived to, materially interfere with the Director’s
of the Company. The Board will review the utility of a
ability to act in the best interests of the Company.”
Nomination Committee as it enters the next stage of its
The composition of the Board is reviewed on an annual
basis to ensure that the Board has the appropriate mix
of expertise and experience. When a vacancy exists,
through whatever cause, or where it is considered that
the Board would benefi t from the services of a new
Director with particular skills, the Board determines the
selection criteria for the position based on the skills
deemed necessary for the Board to best carry out its
responsibilities and then appoints the most suitable
candidate who must stand for election at the next
general meeting of shareholders.
The Board consists of four executive Directors and two
development, and one will be established if and when
considered appropriate by the Board.
Confl ict of interest
Directors must keep the Board advised, on an ongoing
basis, of any interest that could potentially confl ict with
those of the Company. Where the Board believes that
a signifi cant confl ict exists, the Director concerned
does not receive the relevant Board papers and is not
present at the meeting whilst the item is considered.
The Board has developed policies to assist Directors to
disclose potential confl icts of interest.
non-executive Directors. Of the two non-executive
Director dealings in company shares
Directors, C Segall is considered independent. While the
The Constitution permits Directors to acquire shares
majority of the Board is not considered independent for
in the Company. Company policy prohibits directors
the purpose of the defi nition above, the Board considers
and senior management from dealing
in shares
that the composition is appropriate given the size of the
or exercising options whilst in possession of price
Company. In particular, the Board is of the opinion that
sensitive information except in unusual circumstances,
this composition gives the necessary mix of industry
42 days after either the release of the Company’s half-
specifi c and broad business experience necessary for
year and annual results, the annual general meeting or
the effective governance of the Company, for setting
any major announcement.
strategic direction, and for creating shareholder value.
The executive Directors are responsible for the day-to-
day running of the Group.
All executive and non-executive Directors may take
Directors and senior management must notify and get
approval from the Chairman of the Board before they
deal in shares or exercise options in the Company.
independent advice, at the expense of the Company,
Independent professional advice and access to
if considered necessary in the performance of their
company information
duties. Directors are expected to bring an independent
Each Director has the right of access to all relevant
judgement to bear on issues of strategy, performance,
Company information and to the Company’s executives
resource and standards of conduct.
and, subject to prior consultation with the Chairman,
may seek independent professional advice at the
Nomination Committee
Group’s expense.
The Board has not established a Nomination Committee
as the Board considers a separately established
Remuneration of non-executive Directors
committee is not warranted and its functions and
When setting fees and other compensation for non-
responsibilities can be adequately and effi ciently
executive Directors, the Board takes independent
discharged by the Board as a whole. The Board assesses
advice and applies international benchmarks. Director’s
Page 34
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fees cover all main Board activities and membership
The Combined Code requires that the effectiveness
of committees. Further information is contained in the
of the system of internal control be reviewed by the
Directors’ Remuneration Report on page 31.
Directors, including fi nancial, operational and risk
AUDIT COMMITTEE
management. In September 1999 the Turnbull report
was published which offered guidance to directors on
The Audit Committee comprises Charles Segall and
complying with the internal control requirements of the
Volker Ruffer (both being non-executive Directors)
Combined Code. Although the Board considers that the
and is chaired by Charles Segall. The Committee may,
size of the Group does not warrant compliance with all
if considered necessary, take independent advice at
the Code’s requirements, the Board has implemented
the expense of the Company. The Committee makes
a reporting structure, as detailed below, to review all
recommendations to the Board on the appointment
aspects of internal control and will continue to develop
of the external auditors, their independence and
the process throughout the 2007 fi nancial year:
the level of their fees; it reviews the fi ndings of the
• Financial reporting – the Company will report to
external auditors and ensures appropriate action is
shareholders quarterly and half-yearly, as required by
taken by management; it reviews the Group’s interim
the ASX Listing Rules. The Chief Executive Offi cer and
and annual fi nancial statements prior to submission
Finance Director state in writing to the Board that
to the Board; it reviews the Group’s statement on
the Company’s fi nancial reports present a true and
internal control systems, considers the effectiveness
fair view in all material respects of the Company’s
of internal fi nancial controls and any internal audit
fi nancial condition and operational results and are
resource, making recommendations for changes if
in accordance with relevant accounting standards.
appropriate, and institutes and reviews special projects
They also state the Company’s fi nancial reports are
and investigations on any matter as it sees fi t.
founded on a sound system of risk management and
internal compliance and control, which implements
REMUNERATION COMMITTEE
the policies adopted by the Board and that this
The Remuneration Committee comprises Charles Segall
system is operating effi ciently and effectively in all
and Volker Ruffer (both being non-executive Directors)
material respects.
and is chaired by Charles Segall. The Committee may,
• Continuous disclosure – the Company has a policy,
if considered necessary, take independent advice at
based on existing policies and practices as a company
the expense of the Company. The main responsibilities
dual-listed on the AIM and ASX, that all shareholders
of the Remuneration Committee are to determine
and investors have equal access to the Company’s
on behalf of the Board and shareholders the overall
information and has procedures to ensure that all
policy for executive remuneration; to determine the
price sensitive information will be disclosed to the
base salary, benefi ts, performance related bonus and
AIM and ASX in accordance with the continuous
any equity participation schemes (including share
disclosure requirements of the AIM and ASX Listing
options) for each of the executive Directors and other
Rules. These procedures include;
senior management of the Group; and to approve all
– A comprehensive process to identify matters that
Directors’ service contracts. The Committee ensures
may have a material effect on the price of the
that a signifi cant proportion of the executive Directors’
Company’s securities;
remuneration is directly related to the performance of
– The Chief Executive Offi cer and Finance Director
the Group.
being responsible for interpreting the Company’s
policy and where necessary informing the Board;
INTERNAL CONTROL FRAMEWORK
– The Finance Director being responsible for all
The Board is responsible for the Group’s system of
communications with AIM and ASX;
internal control and for reviewing its effectiveness.
– All information provided to the AIM and ASX being
It should be recognised that such a system can only
immediately posted to the Company’s website at
provide reasonable and not absolute assurance against
www.petradiamonds.com.
material misstatement or loss, as it is designed to
manage rather than eliminate those risks that may affect
the Company in achieving its business objectives.
• Overview of the risk management system – the Board
adopts practices designed to identify signifi cant areas
of business risk and to effectively manage those
CORPORATE GOVERNANCE STATEMENT continued
risks in accordance with the Group’s risk profi le.
which the Group’s operations are based in relation
This includes assessing, monitoring and managing
to its exploration and mining activities. The Group’s
operational, fi nancial reporting, and compliance risks
exploration and mining activities are concentrated in
for the Group.
Africa. The Group has an Environmental Management
• Risk profi le – the Group has not established a
Programme in place for each prospecting and mining
separate Risk Management Committee. Instead, the
permit.
Board, as part of its usual role and through direct
involvement in the management of the Group’s
operations ensures risks are identifi ed, assessed and
appropriately managed. Where necessary, the Board
will draw on the expertise of appropriate external
consultants to assist in dealing with or mitigating
risk. Major risks arise from such matters as actions
by competitors, government policy changes, the
impact of exchange rate movements on diamond
sales, diffi culties in sourcing goods and services,
environment, occupational health and safety,
fi nancial reporting, and the purchase, development
and use of information systems.
The Group
is committed to achieving a high
standard of environmental performance. The
Board is responsible for the regular monitoring on
environmental exposures and compliance with
environmental regulations. The Board believes that
the Group has adequate systems in place for the
management of its environmental requirements and
is not aware of any breach of those environmental
requirements as they apply to the Group.
• Internal audit – the Group does not have a formally
established
internal audit
function. The Board
ensures compliance with the internal controls and
risk management procedures previously mentioned.
Page 35
• Risk management and compliance and control – the
• Ethical standards – all Directors, managers and
Board acknowledges that it is responsible for the
overall internal control framework, but recognises
that no cost effective internal control system will
preclude all errors and irregularities. The Board’s
internal control processes are comprehensive and
comprise:
– Operating unit controls – operating units confi rm
compliance with fi nancial controls and procedures
including information system controls.
employees are expected to act with the utmost
integrity and objectivity, striving at all times to
enhance the reputation and performance of the
Group. Every employee has a nominated supervisor
to whom they may refer issues arising from their
employment.
• Confl ict of interest – Directors must keep the Board
advised, on an ongoing basis, of any interest that
could potentially confl ict with those of the Group.
– Functional speciality reporting – key areas
Where the Board believes that a signifi cant confl ict
subject to regular reporting to the Board include
exists for a Director on a Board matter, the Director
operations, safety, environment and legal matters.
concerned does not receive the relevant Board
Practices have been established to ensure:
– Capital expenditure and revenue commitments
papers and is not present at the meeting whilst the
item is considered.
• Code of conduct – the Group has established a
above a certain size obtain prior Board approval.
documented Code of Conduct. The Group has
– Financial exposures are controlled, including the
adopted certain induction procedures to inform
potential use of derivatives.
newly appointed directors, managers and employees
– Occupational health and safety standards and
of their rights and their duty to act with utmost
management systems are monitored and reviewed
integrity and objectivity. The Code of Conduct is
to achieve high standards of performance and
designed to guide compliance with legal and other
compliance with regulations.
obligations to the Company’s stakeholders.
– Business transactions are properly authorised and
• Performance assessment – the Company has
executed.
adopted self-evaluation processes to measure Board
– Financial reporting accuracy and compliance with
performance. The performance of all Directors is
the fi nancial reporting regulatory framework.
assessed through analysis, review and specifi c
• Environmental regulation – the Group’s operations are
subject to signifi cant environmental regulation under
international law and the laws of the jurisdictions in
discussion by the Board of issues relating to
individual Director’s attendance at and involvement
in Board meetings, interaction with management,
Page 36
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performance of allocated tasks and any other
All documents that are released publicly will
matters identifi ed by the Board or other Directors.
be made available on the Group’s website at
Any signifi cant issues identifi ed are actioned by the
www.petradiamonds.com.
Board on an ongoing basis.
The evaluation of key executives is carried out by
the Chief Executive Offi cer via ongoing monitoring
of management performance. The Company has
established an Employee Share Option Scheme,
whereby it can issue options to eligible employees to
subscribe for shares in the Company at set prices.
COMMUNICATION WITH SHAREHOLDERS
Whilst the Board has not formally documented the
Group’s continuous disclosure procedures, the Board,
as part of its usual role, provides shareholders with
information using comprehensive continuous disclosure
processes which includes identifying matters that may
have a material effect on the price of the Company’s
securities, notifying them to the AIM and ASX, posting
them on the Company’s website, and issuing media
releases.
In summary, the continuous disclosure processes
operate as follows:
• The Finance Director
is
responsible
for all
communications with the AIM and ASX. Matters that
may have an effect on the price of the Company’s
securities will be advised to the AIM and ASX on the
day they are discovered. Senior executives monitor
all areas of the Company’s internal and external
environment.
• The Annual Report is distributed to all shareholders.
The Board ensures that the Annual Report includes
The Board encourages full participation of shareholders
at shareholders’ meetings to ensure a high level of
accountability and identifi cation 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.
EXTERNAL AUDITORS
The Executive Directors review the performance of the
external auditors on an annual basis and normally meet
with them during the year to:
• Discuss the external audit plans, identifying any
signifi cant changes in structure, operations, internal
controls or accounting policies likely to impact on
the fi nancial statements and to review the fees
proposed for the audit work to be performed.
• Review the periodic reports prior to lodgement and
release, and any signifi cant adjustments required as
a result of the auditor’s fi ndings, and to recommend
Board approval of these documents, prior to
announcement of results.
• Review the results and fi ndings of the auditor, the
adequacy of accounting and fi nancial controls, and to
monitor the implementation of any recommendations
relevant information about the operations of the
made.
Group during the year, changes in the state of affairs
of the Group and details of future developments, as
well as all required disclosures.
• All announcements made to the market, and related
information
(including
information provided
to
analysts and the media), will be released to the AIM
and ASX and placed on the Company’s website.
• The full texts of notices of meetings and associated
explanatory material are placed on the Company’s
website, along with results of such meetings.
• Review the draft fi nancial report and recommend
Board approval of the fi nancial report.
• As required, to organise, review and report on any
special reviews or investigations deemed necessary
by the Board.
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Adonis Pouroulis, aged 36, is a mining engineer with a mining degree from the University
of the Witwatersrand in Johannesburg. On leaving university he was involved for one year
working in South African gold mines thereafter for a further year investigating mining
propositions in the former Soviet Union. In 1997 he created and founded Petra Diamonds
Limited and fl oated the company on the AIM of the London Stock Exchange in April of the
same year.
Executive Chairman
Adonis Pouroulis
Johan Dippenaar (CA), aged 49, was previously the CEO of Crown Diamonds. He is a
chartered accountant by profession and a member of the South African Institute of
Chartered Accountants with over 18 years experience in the management of companies of
which 16 years has been in the management of mining companies.
Chief Executive Offi cer
Johan Dippenaar
Page 37
David Abery (ACA), aged 44, is a Chartered Accountant (ICAEW), who brings to Petra extensive
experience as a fi nance Director in both the South African and UK business environments,
as well as an in-depth knowledge of AIM. Prior to Petra, Mr Abery was Finance Director
of Mission Testing plc, the Gatwick based software testing consultancy successfully fl oated
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.
Finance Director
David Abery
Jim Davidson, aged 61, was previously Technical Director of Crown Diamonds. He is
responsible for all Petra’s geological matters and group technical development. He is a
qualifi ed geologist and a member of the Geological Society of South Africa with over 20
years experience in mine management
Technical Director
Jim Davidson
Non-executive Directors
Non-executive Director
Volker Ruffer
Volker Ruffer, aged 67, consults for KPMG Frankfurt where he specialises in international tax planning, mergers,
acquisitions and company re-organisations. He was previously managing partner from 1972 to 1994. He holds a
Masters degree in business administration from the University of Munster, Germany.
Deputy chairman and non-executive Director
Charles Segall
Charles Segall, aged 65, 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.
s
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BERMUDA
Secretary and registered offi ce
Michael Ashford
2 Church Street, Hamilton, HM11, Bermuda
Company Registration Number: EC23123
Telephone: +1 441 295 5950
E-mail: mbashford@cdp.bm
Web: www.cdp.bm
Legal advisers to the Company
(As to Bermuda Law )
Conyers Dill & Pearman
Clarendon House, 2 Church Street,
Hamilton, HM11, Bermuda
Telephone: +1 441 295 1422
E-mail: info@cdp.bm
Web: www.cdp.bm
AUSTRALIA
Legal advisers to the Company
(As to Australia Law )
Blake Dawson Waldron
221 St. George’s Terrace, Perth WA 6000,
Australia, DX 169, Perth
Telephone: +61 8 9366 8000
E-mail: roger.davies@bdw.com
Web: www.bdw.com
ASX Registrars
Computershare Registry Services Pty Ltd
Level 2,
Reserve Bank Building,
45 St Georges Terrace,
Perth, WA 6000
Telephone: +61 8 9323 2000
Facsimile: +61 8 9323 2033
Contact: Ms Melissa Neil
E-mail: Melissa.neil@computershare.com.au
Public Relations
Field Public Relations
231 South Road,
Mile End, SA 5031
Telephone: +61 8 8234 9555
Facsimile: +61 8 9234 9566
Contact: Mr Kevin Skinner
Mobile: +61 414 822631
E-mail: Kevin@fi eldpr.com.au
GROUP CONTACT DETAILS
Group Head Offi ce
Elizabeth House, 9 Castle Street,
St. Helier, Jersey, JE4 2QP
PO Box 1075, Elizabeth House,
9 Castle Street, St. Helier, Jersey, JE4 2QP
Website: www.petradiamonds.com
Email: info@petradiamonds.com
ADVISERS
UNITED KINGDOM
Nominated adviser and broker
Collins Stewart
9th Floor,
88 Wood Street,
London,
EC2V 7QR
Tel: +44 20 7523 8000
Email: jguy@collins-stewart.com
Web: www.collins-stewart.com
AIM Registrars
Capita IRG (Offshore) Limited
44 The Esplanade, Jersey, Channel Islands, JE4 0XQ
Telephone: +44 20 8639 2486
E-mail: kstafford@capitaregistrars.com
Web: www.capitaregistrars.com
Auditors
BDO Stoy Hayward LLP
8 Baker Street, London, W1U 3LL
Telephone: +44 20 7486 5888
E-mail: scott.knight@bdo.co.uk
Web: www.bdo.co.uk
Financial PR Consultants
Parkgreen Communications
1st Floor, Ireland House,
150 New Bond Street, London, W1S 2AQ
Telephone: +44 20 7493 3713
E-mail: justine.howarth@parkgreenmedia.com
Web: www.parkgreenmedia.com
Legal advisers to the Company
(As to English Law )
Memery Crystal
44 Southampton Buildings, London, WC2A 1AP
Telephone: +44 20 7242 5905
E-mail: lgregory@memerycrystal.com
Web: www.memerycrystal.com
Principal Bankers
Barclays Bank Plc
38 Hans Crescent, Knightsbridge
London, SW1X OL2
Telephone: +44 20 7114 7200
E-mail: tony.young@barclays.co.uk
Web: www.barclays.co.uk
Page 39
Page 40
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FINANCIAL STATEMENTS
Independent Auditors’ Report
Consolidated Income Statement
Consolidated Statement of Recognised Income and Expense
Consolidated Balance Sheet
Consolidated Cash Flow Statement
41
42
42
43
44
45-76
Notes to the Annual Financial Statements
77-80
Notice of Annual General Meeting
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I
INDEPENDENT AUDITORS’ REPORT TO THE
authorised to do so by our prior written consent. Save
SHAREHOLDERS OF PETRA DIAMONDS LIMITED
as above, we do not accept responsibility for this report
We have audited the Group financial statements (the
to any other person or for any other purpose and we
financial statements) of Petra Diamonds Limited for
hereby expressly disclaim any and all such liability.
the year ended 30 June 2006 which comprise the
Consolidated Income Statement, the Consolidated
Basis of audit opinion
Balance Sheet, the Consolidated Cash Flow Statement,
the Group Statement of Recognised Income and
Expense and the related notes. These financial
statements have been prepared under the accounting
policies set out therein.
Respective
responsibilities of directors and
auditors
The Directors’ responsibilities for preparing the report
and the financial statements in accordance with
We conducted our audit
in accordance with
International Standards on Auditing (UK and Ireland)
issued by the Auditing Practices Board. An audit
includes 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 of whether the accounting policies are appropriate
to the Group’s circumstances, consistently applied and
applicable law and International Financial Reporting
adequately disclosed.
Standards (IFRS) are set out in the Statement of
Directors’ Responsibilities. Our responsibility is to audit
the financial statements in accordance with relevant
legal and regulatory requirements and International
Standards on Auditing (UK and Ireland).
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
Page 41
We report to you our opinion as to whether the
statements are free from material misstatement,
financial statements give a true and fair view and
whether caused by fraud or other irregularity or error.
have been properly prepared in accordance with the
In forming our opinion we also evaluated the overall
Companies Act 1981 as currently enacted in Bermuda.
adequacy of the presentation of information in the
We also report to you if, in our opinion, the company
financial statements.
has not kept proper accounting records or if we have
not received all the information and explanations we
In our opinion:
require for our audit.
•
the Group financial statements give a true and fair
We read other information contained in the report to
consider whether it is consistent with the audited
financial statements. The other information comprises
Highlights and Summary of Results, Activities at a
Glance, Chairman’s Statement, Chief Executive Officer’s
Statement, Diamond Market Review, Mining, processing,
distribution and marketing, Directors’ Report, Directors’
Remuneration Report and Corporate Governance
Statement. Our responsibilities do not extend to any
other information.
Our report has been prepared pursuant to the
requirements of the Companies Act 1981 as enacted
in Bermuda relating to the responsibilities of auditors
and for no other purpose. No person is entitled to rely
view, in accordance with IFRS, of the state of the
Group’s affairs as at 30 June 2006 and of its loss for
the year then ended;
•
the Group financial statements have been properly
prepared in accordance with the provisions of the
Companies Act 1981 as enacted in Bermuda;
BDO Stoy Hayward LLP
Chartered Accountants
on this report unless such a person is a person entitled
London
to rely upon this report by virtue of and for the purpose
26 October 2006
of the Companies Act 1981 or has been expressly
Consolidated Income Statement for the year ended 30 June 2006
Revenue
Cost of sales
Gross (loss)/profit
Exploration expenditure
Operating expenditure – other
Impairment of goodwill
Financial income
Financial expense
Net financing costs
Loss before tax
Income tax expense
Loss for the year
Notes
2006
US$
Restated
2005
US$
4
5
6
7
8
20,868,757
2,275,245
(23,178,587)
(1,970,087)
(2,309,830)
305,158
(4,924,437)
(7,063,678)
(12,596,449)
(4,856,021)
—
(8,972,587)
411,107
(565,201)
(154,094)
36,462
(402,177)
(365,715)
(19,984,810)
(20,952,843)
1,120,354
(65,935)
(18,864,456)
(21,018,778)
Basic and diluted loss per share – cents
10
(13.11)
(28.43)
Consolidated Statement of Recognised Income and Expense
for the year ended 30 June 2006
Loss for the year
Exchange adjustments on translation of subsidiary and branch undertakings
recognised directly in equity
Total recognised income and expense relating to the year
The notes on pages 45 to 76 form part of the annual financial statements.
2006
US$
Restated
2005
US$
(18,864,456)
(21,018,778)
1,561,653
1,161,255
(17,302,803)
(19,857,523)
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Consolidated Balance Sheet at 30 June 2006
ASSETS
Property, plant and equipment
Intangible assets
Investment in associates
Investments – listed
Investments – unlisted
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
Share-based payment 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 notes on pages 45 to 76 form part of the annual financial statements.
The financial statements were authorised for issue by the Directors on 26 October 2006.
Page 43
Notes
2006
US$
Restated
2005
US$
11
12
13
14
15
17
16
17
18
19
20
20
20
20
22
23
24
25
22
23
24
66,045,627
73,467,724
13,105,561
335,947
—
1,271,410
4,785,697
164,402
—
—
—
161,442
85,372,697
73,965,113
2,197,605
2,760,378
7,019,644
11,977,627
1,405,165
2,806,105
27,591,394
31,802,664
97,350,324
105,767,777
27,031,103
23,500,190
123,189,903
101,775,127
2,541,087
972,962
4,102,740
354,670
(81,608,667)
(62,748,364)
72,126,388
66,984,363
2,914,960
867,823
1,697,756
9,932,634
15,413,173
1,149,646
6,658,735
2,002,382
429,753
2,000,507
1,716,998
11,930,797
16,078,055
11,600,585
9,061,468
2,043,306
9,810,763
22,705,359
25,223,936
38,783,414
97,350,324
105,767,777
Consolidated Cash Flow Statement for the year ended 30 June 2006
Loss after taxation for the year
(18,864,456)
(21,018,778)
Notes
2006
US$
Restated
2005
US$
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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
Loss/(profit) on sale of property plant and equipment
Impairment of intangible assets
Impairment of goodwill
Interest received
Interest paid
Present value adjustment on rehabilitation provision
Foreign exchange loss
Operating loss before working capital changes
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Increase in inventories
Cash utilised in operations
Interest paid
Taxation movement
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
Increase in investments
Acquisition of property, plant and equipment
Development expenditure
Net cash from investing activities
Cash flows from financing activities
Net proceeds from the issue of share capital
Decrease in long-term borrowings
Net cash from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate fluctuations on cash held
35,687
5,630,717
40,573
2,832,355
26,717
—
—
(411,107)
565,201
140,783
633,140
463,100
29,020
8,186
(1,607)
136,872
8,972,587
(36,462)
402,177
—
6,114,780
892,065
(3,888,750)
140,515
(9,519,700)
(1,011,327)
(3,604,742)
1,953,312
(792,440)
(51,792)
(8,145,417)
(8,629,507)
(565,201)
(402,177)
(1,120,354)
—
(9,830,972)
(9,031,684)
41,447
3
5,560,464
411,107
(1,271,410)
1,607
103,527
36,462
—
11
11
(4,152,748)
(2,538,654)
(4,069,863)
(183,533)
(3,481,003)
(2,580,591)
469,404
32,494,444
(7,605,319)
(392,723)
(7,135,915)
32,101,721
(20,477,890)
20,489,446
27,591,394
(123,860)
6,808,208
293,740
Cash and cash equivalents at end of the year
18
7,019,644
27,591,394
The notes on pages 45 to 76 form part of the annual financial statements.
Notes to the Annual Financial Statements for the year ended 30 June 2006
1. ACCOUNTING POLICIES
Petra Diamonds Limited is 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, other than
the adoption of IFRS 2, as detailed below.
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 International
Financial Reporting Interpretations Committees of the IASB.
1.2 Basis of preparation
The Group financial statements are prepared on the historical cost basis and are presented in US Dollars. For the
year to 30 June 2005 the Group reported in Pounds Sterling and during the current year the Group adopted US
Dollars as its functional reporting currency.
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.
Page 45
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.
Currency reporting
The Group changed its functional currency during the 2006 financial year from Pounds Sterling to US Dollars. The
principal functional currency of the Group’s business transactions in Angola, Botswana and Sierra Leone is US
Dollars; in South Africa diamond sales are made in US Dollars. In order to provide comparatives in US Dollars the
audited financial statements as at 30 June 2005 were translated at a rate of US$1.79 to £1 for balance sheet items
and an average rate of US$1.86 to £1 for income statement items.
Change in accounting policy
During the year to 30 June 2006 the Company adopted IFRS 2 with respect to the treatment of employee share
options. In order to comply with IFRS 2, the Company now expenses the fair value of share-based employee
options with a corresponding increase in equity. The fair value is measured at grant date and spread over the
period during which the employees become unconditionally entitled to the options. The comparative numbers
have been appropriately restated. Note 30 discloses the financial impact on the Company’s results as a result of
the adoption of IFRS 2.
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.
Notes to the Annual Financial Statements for the year ended 30 June 2006
1. ACCOUNTING POLICIES (continued)
1.3 Basis of consolidation (continued)
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.
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 entitys’ 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.
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The depreciation rates are as follows
Mining assets:
Plant, machinery and equipment
Units of production method
Mineral properties
Units of production method
Exploration and other assets:
Plant and machinery
10% – 20% straight-line basis
Office equipment
10% straight-line basis
Computer equipment
25% straight-line basis
Motor vehicles
20% straight-line basis
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 that 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.
Notes to the Annual Financial Statements for the year ended 30 June 2006
1. ACCOUNTING POLICIES (continued)
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.
Page 47
Mineral rights are capitalised at cost and are amortised on a unit of production basis for operating mines and over
the estimated useful life for prospecting rights.
Goodwill for all business combinations is 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.
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 pre-tax 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.
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Notes to the Annual Financial Statements for the year ended 30 June 2006
1. ACCOUNTING POLICIES (continued)
1.8 Financial instruments
Measurement
Financial instruments are initially recorded at cost, which includes transaction costs. Subsequent to initial
recognition these instruments are reported 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. Non-
current trade and other receivables are stated at amortised cost.
Cash and cash equivalents
Cash and cash equivalents are stated 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 stated at fair value.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at cost 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.
Gains and losses on subsequent measurement of financial instruments
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 re-measuring 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.
Notes to the Annual Financial Statements for the year ended 30 June 2006
1. ACCOUNTING POLICIES (continued)
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.
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.
Page 49
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.
Decommissioning, mine closure and environmental rehabilitation
The estimated cost of decommissioning, mine closure and environmental rehabilitation is based on current legal
requirements and existing technology. A provision is raised based on the present value of the estimated costs.
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 programmes to
prevent and control pollution and ongoing rehabilitation costs of the Group’s operations, 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 operations 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.
The results of operations not reporting in US Dollars are translated at the average rates of exchange during the
period as this is considered to be a reasonable approximation of the actual rates during the year and the operations
balance sheets are translated at exchange rates ruling at the balance sheet date. Exchange differences which arise
from the translation of the results and balance sheets of foreign subsidiary operations are taken to reserves.
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.
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Notes to the Annual Financial Statements for the year ended 30 June 2006
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 and annual 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 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 Employee defined contribution schemes
Obligations for contributions to defined contribution provident schemes are recognised as an expense in the
income statement as incurred.
1.17 Share-based payments
The fair value of options granted is recognised as an employee expense with a corresponding increase in equity.
The fair value is measured at grant date and spread over the period during which the employees become
unconditionally entitled to the options. The fair value of the options granted is measured based on the Black-
Scholes model, taking into account the terms and conditions upon which the instruments were granted. The
amount recognised as an expense is adjusted to reflect the actual number of share options that vest except
where forfeiture is only due to share prices not achieving the threshold for vesting. 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.
1.18 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.
1.19 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.
1.20 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.
1.21 Investments
Investments are stated at cost. The carrying value of the investments is reviewed at each balance sheet date to
determine whether there is any indication of impairment.
Notes to the Annual Financial Statements for the year ended 30 June 2006
2. SEGMENT 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.
Eliminations consist of those inter-group transactions associated with acquisitions of business combinations.
Business and geographical segments
The Group comprises the following business segments:
Mining
– extraction and sale of rough diamonds from mining operations in South Africa.
Exploration – exploration activities in Angola, Sierra Leone and South Africa.
Business segments
2006
Revenue from external
customers
Segment result
Operating loss
Net financing income/
(costs)
Income tax
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
US$
Exploration
US$
Eliminations Consolidated
US$
US$
Page 51
20,868,757
—
(2,309,829)
(14,968,544)
(4,862,172)
(14,968,544)
(1,178,884)
1,024,790
1,120,354
—
—
20,868,757
— (17,278,373)
— (19,830,716)
—
—
(154,094)
1,120,354
(4,920,702)
(13,943,754)
— (18,864,456)
64,677,253
32,673,071
64,677,253
32,673,071
19,436,688
5,787,248
19,436,688
5,787,248
677,480
(10,508,452)
—
—
—
—
—
97,350,324
97,350,324
25,223,936
25,223,936
(9,830,972)
(3,529,914)
1,544,211
(1,495,300)
(3,481,003)
(712,276)
(6,423,639)
8,118,313
104,298
5,630,717
2,908,615
—
—
—
—
—
—
(7,135,915)
8,222,611
8,539,332
—
Geographical segments
Angola
Botswana
South Africa Sierra Leone
Jersey Consolidated
2006
Revenue from external
customers
US$
—
US$
US$
—
20,868,757
US$
—
4,785,697
13,380,911
74,777,905
4,405,811
US$
US$
—
—
—
20,868,757
97,350,324
(9,830,972)
—
—
—
—
—
(357,262)
(9,473,710)
—
—
(3,529,914)
(4,069,864)
4,118,775
(3,481,003)
357,254
(712,276)
4,069,864
(10,850,757)
(7,135,915)
60,472
4,092,276
4,069,863
—
—
—
—
—
8,222,611
—
Segment assets
Cash flows from
operations
Cash flows from
investing
Cash flows from
financing
Capital expenditure
Impairment losses
Notes to the Annual Financial Statements for the year ended 30 June 2006
2. SEGMENT INFORMATION (continued)
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Business segments –
Restated
2005
Revenue from external
customers
Segment result
Operating profit/(loss)
Net financing income/
(costs)
Income tax
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
Impairment losses
Geographical segments
restated
2005
Revenue from external
customers
Mining
US$
Exploration
US$
Eliminations
US$
Consolidated
US$
2,275,245
—
—
2,275,245
305,158
(20,440,219)
— (20,135,061)
69,459
(20,656,587)
— (20,587,128)
133,804
(499,519)
(65,935)
—
—
—
(365,715)
(65,935)
137,328
(21,156,106)
— (21,018,778)
80,873,782
80,501,594
(55,607,599)
105,767,777
80,873,782
80,501,594
(55,607,599)
105,767,777
33,296,165
5,848,510
(361,261)
38,783,414
33,296,165
5,848,510
(361,261)
38,783,414
630,346
(9,662,028)
(43,388)
(2,537,203)
(381,066)
32,482,787
350,939
2,187,715
463,100
670,346
(8,972,587)
(136,872)
—
—
—
—
—
—
(9,031,684)
(2,580,591)
32,101,721
2,538,654
1,133,446
(9,109,459)
Angola
US$
Botswana
US$
South Africa
US$
Sierra Leone
US$
Jersey
US$
Consolidated
US$
—
—
2,275,245
—
—
2,275,245
Segment assets
5,167,883
— 100,263,947
335,947
— 105,767,777
Cash flows from
operations
Cash flows from
investing
Cash flows from
financing
Capital expenditure
Impairment losses
(5,704,479)
(2,168,720)
8,716,035
2,187,715
—
—
—
—
—
—
(3,327,205)
—
—
(9,031,684)
(325,493)
(189,905)
103,527
(2,580,591)
(9,789,503)
183,536
32,991,653
32,101,721
350,939
(9,109,459)
—
—
—
—
2,538,654
(9,109,459)
The Group commenced activities in Botswana effective 1 October 2005 on the acquisition of Kalahari Diamonds Ltd. Therefore there are
no comparative numbers for the year to June 2005.
Notes to the Annual Financial Statements for the year ended 30 June 2006
3. ACQUISITION OF SUBSIDIARY
The Company acquired the issued share capital in Kalahari Diamonds Limited (“Kalahari”), for US$21,997,991, effective
30 September 2005. The consideration was satisfied by the issue of 16,166,529 Petra shares. Kalahari, through its
wholly owned Botswana subsidiary, Sekaka Diamonds (Pty) Limited, is the holder of a substantial number of diamond
prospecting licences in Botswana. In the nine months to 30 June 2006, Kalahari recorded an exploration loss, before
depreciation and amortisation, of US$ 2,177,756. If the acquisition had occurred on 1 July 2005, the Group’s loss for the
year to 30 June 2006 would have increased by US$1,391,374.
Effect of the acquisition
The acquisition had the following effect on the Group’s assets and liabilities.
Kalahari’s net assets at acquisition date:
Consolidated fair value of net assets of entity acquired:
Plant and equipment
Prospecting licences
Cash assets
Receivables
Accruals and payables
Book
values
US$
Fair value
adjustments
US$
Carrying
values
US$
176,384
—
176,384
1,283,470
16,336,788
17,620,258
Page 53
5,560,464
95,394
(1,454,509)
—
—
—
5,560,464
95,394
(1,454,509)
Consideration amount satisfied in shares
5,661,203
16,336,788
21,997,991
The fair value adjustment of US$16,336,788 arose as a result of the revaluation of the Prospecting licences purchased from
Sekaka Diamonds (Pty) Limited.
4. COST OF SALES
Raw materials and consumables used
Employee expenses
Depreciation of mining assets
Changes in inventory of finished goods
5. EXPLORATION EXPENDITURE
Employee expenses
Depreciation of exploration assets
Amortisation of intangible assets
Drilling costs
Equipment hire
Other exploration costs
2006
US$
6,292,071
12,214,540
5,630,717
2005
US$
735,256
873,419
463,100
(958,741)
(101,688)
23,178,587
1,970,087
313,182
1,846,344
35,687
2,832,355
633,140
8,186
1,277,973
1,770,287
207,689
257,551
1,058,999
1,746,722
4,924,437
7,063,678
Notes to the Annual Financial Statements for the year ended 30 June 2006
6.
OPERATING EXPENDITURE – OTHER
Auditors’ remuneration
Current auditors
– audit services
– other services
Previous auditors
– audit services
Depreciation of property plant and equipment
Foreign exchange losses
Operating lease rentals
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Staff costs
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Bid and project expenditure
Impairment of intangible assets
Profit on disposal of property plant and equipment
Administration expenses – mining operations
Other charges
In addition to the above, the 2006 audit fee payable by the Group to its newly
appointed auditors is $172,549.
7. NET FINANCING COSTS
On bank loans and overdrafts
Other debt finance costs
Financial expense
Interest received
2006
US$
—
—
2005
US$
—
—
368,132
40,573
6,114,780
222,257
218,735
29,020
892,065
348,767
1,804,326
1,796,198
359,743
—
26,717
1,421,192
—
136,872
(1,608)
90,778
2,238,729
1,345,194
12,596,449
4,856,021
(412,485)
(152,716)
(565,201)
411,107
(154,094)
(54,584)
(347,593)
(402,177)
36,462
(365,715)
Notes to the Annual Financial Statements for the year ended 30 June 2006
2006
US$
2005
US$
—
—
(1,120,354)
(1,120,354)
%
65,935
65,935
2005
US$
%
2006
US$
(19,984,810)
(20,952,843)
Page 55
(30.00)
(5,995,443)
(30.00)
(6,285,853)
0.53
(0.05)
1.43
33.69
5.61
105,613
(9,102)
286,204
6,733,082
1,120,354
12.83
(0.02)
3.81
13.07
(0.31)
2006
US$
2,688,249
(4,189)
798,304
2,737,554
(65,935)
2005
US$
8. TAXATION
Current taxation
– Current tax expense
Deferred taxation
– Current period
Reconciliation of tax rate
Loss before taxation
Tax at UK corporate rate
Effects of:
Non-deductible expenses
Non-taxable income
Assessed loss not utilised
Effect of tax rates in foreign jurisdictions
Total tax charge
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 1,853 (2005:1,832), employed as follows:
Mining and exploration
Administration
12,214,540
873,419
313,182
1,846,344
1,631,632
1,606,514
1,722
170,972
7,145
182,539
14,332,048
4,515,961
Number
Number
1,793
60
1,853
1,776
56
1,832
Notes to the Annual Financial Statements for the year ended 30 June 2006
9. DIRECTORS AND EMPLOYEES (continued)
Remuneration in respect of Executive and non-executive Directors was as follows:
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Executive Directors
A Pouroulis
K Dabinett
D Abery
J Dippenaar
J Davidson
Non-executive Directors
C Segall
C Finkelstein
V Ruffer
10. LOSS PER SHARE
Loss for the year
Base
remuneration
Performance
related bonus
US$
US$
Other
US$
2006
Total
US$
2005
Total
US$
253,448
237,254
253,448
253,448
253,448
64,706
—
318,154
305,941
—
186,314
423,568
279,096
64,706
64,706
64,706
—
—
—
318,154
318,154
318,154
374,171
77,758
77,758
1,251,046
258,824
186,314
1,696,184
1,114,724
Performance
related
bonus
US$
Fees
US$
26,679
7,410
8,893
42,982
—
—
—
—
Other
US$
—
—
—
—
2006
Total
US$
2005
Total
US$
26,679
27,854
7,410
8,893
9,285
9,285
42,982
46,424
2006
US$
2005
US$
(18,864,456)
(21,018,778)
Shares
Shares
Basic weighted average number of ordinary shares in issue
143,916,416
73,937,847
Basic loss per share – cents
Due to the Group’s loss for the year, the diluted loss per share is the
same as the basic loss per share. The adoption of IFRS 2 during the
year did not have a significant impact on the basic loss per share
calculation.
Weighted average number of ordinary shares
As at 1 July 2005
Effect of shares issued during the
period
Weighted number at 30 June 2006
Cents
(13.11)
Cents
(28.43)
73,937,847
67,849,976
69,978,569
6,087,871
143,916,416
73,937,847
Notes to the Annual Financial Statements for the year ended 30 June 2006
Page 57
11. PROPERTY, PLANT AND EQUIPMENT
Plant and
machinery
Mining
assets
US$
Plant and
machinery
Exploration
assets
US$
Computers
and office
equipment
Exploration
assets
US$
Motor
vehicles
Exploration
assets
US$
Mineral
properties
Mining
assets
US$
Total
US$
Cost
Balance at 1 July 2004
—
2,889,259
182,215
319,378
—
3,390,852
Exchange differences
953,943
7,148
Business combination
33,345,599
—
(5,199)
13,284
64,006
957,631
1,977,529
—
33,474,649
66,833,532
Additions
Disposals
295,628
252,324
117,052
1,868,816
4,834
2,538,654
—
—
—
(12,311)
—
(12,311)
Balance at 30 June 2005
34,595,170
3,148,731
307,352
2,239,889
34,437,114
74,728,256
Balance at 1 July 2005
34,595,170
3,148,731
307,352
2,239,889
34,437,114
74,728,256
Exchange differences
(2,867,505)
(2,160)
(12,968)
(2,216)
(2,808,768)
(5,693,617)
Business combination
—
Additions
Disposals
Transfer from intangible
assets
8,118,313
(5,552)
335,947
—
—
—
—
98,847
82,287
(26,168)
77,537
22,011
(9,265)
—
—
Transfer to investments
—
(3,122,653)
(149,811)
(2,230,948)
—
—
—
—
—
176,384
8,222,611
(40,985)
335,947
(5,503,412)
Balance at 30 June
2006
Depreciation
Balance at 1 July 2004
Exchange differences
40,176,373
23,918
299,539
97,008
31,628,346
72,225,184
—
—
52,378
(11,118)
50,970
(3,644)
65,979
(6,554)
—
—
169,327
(21,316)
Disposals
274,545
490,284
40,581
140,938
178,911
1,125,259
Provided in the year
—
—
—
(12,738)
—
(12,738)
Balance at 30 June 2005
274,545
531,544
87,907
187,625
178,911
1,260,532
Balance at 1 July 2005
274,545
531,544
87,907
187,625
178,911
1,260,532
Exchange differences
(22,756)
(2,148)
Disposals
—
Provided in the year
3,420,604
—
147
(6,776)
(15,437)
48,541
48
(14,829)
(46,461)
(8,338)
—
(23,775)
27,571
2,210,113
5,706,976
Transfer to investments
—
(505,821)
(31,270)
(180,624)
—
(717,715)
Balance at 30 June 2006
3,672,393
23,722
82,965
26,282
2,374,195
6,179,557
Carrying amounts
At 1 July 2004
—
2,836,881
131,245
253,399
—
3,221,525
At 30 June 2005
34,320,625
2,617,187
219,445
2,052,264
34,258,203
73,467,724
At 1 July 2005
34,320,625
2,617,187
219,445
2,052,264
34,258,203
73,467,724
At 30 June 2006
36,503,980
196
216,574
70,726
29,254,151
66,045,627
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 machinery. At 30 June 2006, the net carrying amount of leased plant and machinery was US$151,972
(2005: US$679,362). The leased equipment secures finance lease obligations (as discussed in Note 22).
Notes to the Annual Financial Statements for the year ended 30 June 2006
12. INTANGIBLE ASSETS
Pre-
production
expenditure
US$
Goodwill
US$
Mineral
rights
US$
Prospecting
licences
US$
Total
US$
Cost
Balance at 1 July 2004
Exchange differences
Transfer to property plant and
equipment
—
—
—
Acquisition by business combination
8,671,552
148,175
Development expenditure
—
183,533
Balance at 30 June 2005
8,671,552
335,947
152,916
8,671,552
335,947
152,916
—
9,160,415
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Balance at 1 July 2005
Exchange differences
Transfer to property plant and
equipment
Acquisition by business combination
Development expenditure
—
—
—
—
Balance at 30 June 2006
8,671,552
Amortisation
Balance at 1 July 2004
Exchange differences
Impairment
Provided in the year
Balance at 30 June 2005
Balance at 1 July 2005
Exchange differences
Impairment
Provided in the year
—
—
(8,671,552)
—
(8,671,552)
(8,671,552)
—
—
—
Balance at 30 June 2006
(8,671,552)
—
162,335
4,239
(9,419)
—
—
—
—
—
—
—
—
—
—
162,335
(5,180)
—
8,819,727
183,533
9,160,415
—
—
(1,692,720)
(1,692,720)
(335,947)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(335,947)
17,620,258
17,620,258
—
—
152,916
15,927,538
24,752,006
(18,510)
10,652
(136,872)
(8,186)
(152,916)
—
—
—
—
—
(18,510)
10,652
(8,808,424)
(8,186)
(8,824,468)
(152,916)
—
(8,824,468)
—
—
—
10,378
10,378
—
—
(2,832,355)
(2,832,355)
(152,916)
(2,821,977)
(11,646,445)
Carrying amounts
At 1 July 2004
At 30 June 2005
At 1 July 2005
At 30 June 2006
—
—
—
—
—
143,825
335,947
335,947
—
—
—
—
—
143,825
335,947
335,947
—
—
13,105,561
13,105,561
The amortisation of intangible assets has arisen due to the Board taking the view that Kalahari’s prospecting licences have an average
remaining life of four years. Therefore the intangible asset recorded on the acquisition of Kalahari of US$17,620,258 (Note 3) has
been amortised for the nine month period from 1 October 2005 to 30 June 2006. The amortisation charge is recognised in exploration
expenditure in the income statement.
Notes to the Annual Financial Statements for the year ended 30 June 2006
13. INVESTMENTS IN ASSOCIATES
Interests in associates
At year end the Group had interests in the following:
Namibia Mining House (Pty) Ltd
Nabera Mining (Pty) Ltd
Country
Namibia
South Africa
Petra Diamonds Alto Cuilo Ltd
British Virgin Islands
Summary of financial information on
associates – 100 percent
Ownerships
2006
35.0%
29.5%
47.0%
2005
35.0%
29.5%
100.0%
2006
Assets
Liabilities
Equity
Revenues
Namibia Mining House (Pty) Ltd
—
—
—
Nabera Mining (Pty) Ltd
4,173
(921,600)
917,427
—
—
(Loss)
—
(50,674)
Page 59
Petra Diamonds Alto Cuilo Ltd
40,985,151
(41,760,383)
775,232
2,718,171
(701,796)
2005
Namibia Mining House (Pty) Ltd
—
—
—
Nabera Mining (Pty) Ltd
10,306
(290,420)
280,114
Petra Diamonds Alto Cuilo Ltd
27,264,695
(27,338,127)
(73,432)
If the investments in associates had been included at cost, they would have been
included at the following amounts:
Cost
Amounts written off
Net book amount
14. INVESTMENTS – LISTED
Balance at beginning of year
Purchased during the year
Balance at the end of year
—
—
—
2006
US$
20,453,042
(20,453,042)
—
30 June
2006
US$
—
1,271,410
1,271,410
—
(68,780)
(74,432)
2005
US$
831
(831)
—
30 June
2005
US$
—
—
—
The Company purchased 1,555,555 ordinary shares in Xceldiam Ltd at a placing price of 45 pence (US$0.82) per share.
The market value at 30 June 2006 was US$1,200,776
Notes to the Annual Financial Statements for the year ended 30 June 2006
15. INVESTMENT – UNLISTED
Balance at beginning of year
Transfer from property plant and
equipment at net book value
Balance at the end of year
The investment comprises the assets, previously disclosed under
Note 11, contributed by the Company to the Joint Venture project
with BHP Billiton at Alto Cuilo in Angola.
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16. INVENTORIES
Diamonds held for resale
Consumable and stores
17. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Other receivables
Prepayments
Non-current
Rehabilitation guarantee
The rehabilitation guarantee comprises a risk policy which is anticipated to be recov-
ered upon successful rehabilitation of one of the Group’s mines.
18. CASH AND CASH EQUIVALENTS
Unsecured
Cash at bank and on hand
Secured
Fixed and floating charge deposit
30 June
2006
US$
—
4,785,697
4,785,697
30 June
2005
US$
—
—
—
1,843,967
1,084,812
353,638
320,353
2,197,605
1,405,165
46,565
743,140
2,689,916
1,901,659
23,897
161,306
2,760,378
2,806,105
164,402
164,402
161,442
161,442
7,019,644
25,105,799
—
2,485,595
7,019,644
27,591,394
As security for the Company’s obligations to the Convertible Note Holders the Company had pledged A$3,3 million
(US$2,485,595) in a fixed and floating charge deposit. The Company’s obligations to the Convertible Note Holders was
satisfied on 30 November 2005.
A controlled entity, Helam Mining Pty Ltd, has a R10,000,000 (US$1,375,496) overdraft facility with First National Bank, a
division of FirstRand Bank Limited. At year end the overdraft, which forms part of the above cash balances, was drawn
down to R1,950,239 (US$268,255). The weighted average interest rate for the overdraft as at 30 June 2006 is 11.57%
Notes to the Annual Financial Statements for the year ended 30 June 2006
Number of
shares
2006
US$
Number of
shares
2005
US$
19. ISSUED CAPITAL
Authorised – ordinary shares of 10p each
As at 1 July 2005 and 30 June 2006
200,000,000
35,892,000
200,000,000
35,892,000
Issued and fully paid
At 1 July
Allotments during the year
Conversion of convertible notes
At 30 June
130,949,456
23,500,190
67,849,976
12,176,357
16,863,649
3,347,105
63,086,597
11,321,521
1,011,993
183,808
12,883
2,312
148,825,098
27,031,103
130,949,456
23,500,190
Allotments during the year were in respect of shares issued for the acquisition of Kalahari Diamonds Limited, the
conversion of Convertible Note Holders into ordinary shares and the exercise by employees of Company share
options.
Options
Holder
Williams de Broë Plc
Exercise price
Total value
Expiry
85.0p
US$308,771
17 June 2008
Page 61
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 option over 200,843 shares was exercised in full on 3 October
2006.
Warrants
Holder
Photon Global Limited
Photon Global Limited
Photon Global Limited
Photon Global Limited
Employee share options
Holder
A Pouroulis
D Abery
J Dippenaar
J Davidson
Senior management
Shares Exercise price
Expiry
1,500,000
1,000,000
833,333
833,333
30.0p
31 December 2007
100.0p
31 December 2007
55.85p
55.85p
14 August 2006
14 August 2006
Shares Exercise price
Expiry
100,000
100,000
100,000
100,000
750,000
250,000
250,000
750,000
250,000
250,000
750,000
250,000
750,000
250,000
385,000
50,000
238,875
72,500
500,000
500,000
30.0p
35.0p
40.0p
45.0p
44.0p
85.0p
79.5p
44.0p
85.0p
79.5p
85.0p
79.5p
85.0p
79.5p
44.0p
11 April 2007
11 April 2007
11 April 2007
11 April 2007
5 September 2013
16 June 2015
31 May 2016
5 September 2013
16 June 2015
31 May 2016
16 June 2015
31 May 2016
16 June 2015
31 May 2016
5 September 2013
56.75p
13 September 2014
A$1.12
24 September 2014
A$1.36
28 January 2015
65.75p
27 November 2015
79.5p
31 May 2016
Notes to the Annual Financial Statements for the year ended 30 June 2006
Share
premium
account
US$
Foreign
currency
translation
reserve
US$
Share-based
payment
reserve
US$
Accumulated
loss
US$
20. RESERVES
Balance at 1 July 2004
34,041,633
2,962,470
—
(42,615,103)
Implementation of IFRS 2 (refer note 30)
—
—
140,833
(140,833)
Restated balance at 1 July 2004
34,041,633
2,962,470
140,833
(42,755,936)
Loss for the year
Transfer from reserves of subsidiary
Equity based share options
—
—
—
—
—
—
—
—
(21,018,778)
233,194
213,837
(213,837)
Exchange differences – adoption of US$ reporting
currency
(241,084)
(20,985)
Exchange differences – translation of subsidiaries
—
1,161,255
Premium allotments during the year
Share issue costs
Convertible notes issued
Balance at 30 June 2005
70,888,365
(2,923,175)
9,388
—
—
—
—
—
—
—
—
1,006,993
—
—
—
—
101,775,127
4,102,740
354,670
(62,748,364)
Balance at 1 July 2005
101,775,127
4,102,740
—
(62,393,694)
Implementation of IFRS 2 (refer note 30)
—
—
354,670
(354,670)
Restated balance at 1 July 2005
101,775,127
4,102,740
354,670
(62,748,364)
Loss for the year
Equity based share options
Transfer from reserves of subsidiary
Exchange differences
Premium allotments during the year
Share issue costs
Convertible notes issued
Balance at 30 June 2006
Share premium reserve
—
—
—
—
—
(1,561,653)
20,550,930
(57,472)
921,318
—
—
—
618,292
—
—
—
—
—
(18,864,456)
—
—
4,153
—
—
—
123,189,903
2,541,087
972,962
(81,608,667)
The share premium reserve comprises the excess value recognised from the issue of ordinary shares at par value.
Foreign currency translation reserve
The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of
foreign entities.
Share-based payment reserve
The share-based payment reserve comprises the fair value of employee options as measured at grant date and spread
over the period during which the employees become unconditionally entitled to the options.
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Notes to the Annual Financial Statements for the year ended 30 June 2006
21. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS’ FUNDS
Opening shareholders’ funds
Implementation of IFRS 2
Restated opening shareholders’ funds
Loss for the year
Transfer from subsidiaries reserves
Exchange differences – adoption of US$ reporting currency
Movement in share-based payment reserve
New share capital subscribed
Movement in foreign currency translation reserves
Net movement in shareholders’ funds
Closing shareholders’ funds
22. INTEREST BEARING LOANS AND BORROWINGS
Current
Bank overdraft – secured
Bank loan – secured (i)
Bank loan – secured (ii)
Bank loan – secured (iii)
Bank loan – secured (iv)
Convertible note – secured (v)
Loan unsecured (vi)
Loan unsecured
Bank loan unsecured
Lease and instalment purchase liabilities (vii)
Lease and instalment purchase liabilities (vii)
Non-Current
Bank loan – secured (i)
Bank loan – secured (ii)
Bank loan – secured (iii)
Bank loan – secured (iv)
Lease and instalment purchase liabilities (vii)
(i) Bank loans secured
First National Bank
Page 63
2006
US$
2005
US$
66,984,363
6,652,204
—
140,833
66,984,363
6,793,037
(18,864,456)
(21,018,778)
—
233,194
4,153
618,292
744,924
213,837
24,945,689
78,856,894
(1,561,653)
1,161,255
5,142,025
60,191,326
72,126,388
66,984,363
—
322,012
29,423
77,537
386,395
567,392
29,889
126,930
—
—
—
2,206,678
41,200
664,644
—
—
—
3,589,200
4,503,463
409
47,699
157,360
1,149,646
11,600,585
234,856
287,741
—
84,621
952,482
1,722,374
—
—
5,248
57,391
2,914,960
429,753
Helam has a term loan facility with First National Bank and at year end an amount of R1,921,331 (US$264,279) was drawn
on the loan, R213,906 (US$29,423) payable within the next 12 months and R1,707,425 (US$234,856) payable over a period
of five years. The effective interest rate for the term loan at 30 June 2006 was 11.57% 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 (US$1,079,765) and a R8,000,000
(US$1,100,398) 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 (US$275,100 ) from Directors
Mr J Dippenaar and Mr J Davidson. The facilities with First National Bank are subject to annual review.
Notes to the Annual Financial Statements for the year ended 30 June 2006
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22. INTEREST BEARING LOANS AND BORROWINGS (continued)
(ii) Bank loan – secured
Industrial Development Corporation of South Africa
A controlled entity, Messina Investment Limited, has a R563,704 (US$77,537) interest free loan with the Industrial
Development Corporation of South Africa Limited. The loan is payable within the next 12 months and 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 – secured
Industrial Development Corporation of South Africa
The Sedibeng Joint Venture (“Sedibeng JV”), which comprises subsidiaries of the Company, Messina Diamonds (Pty)
Limited (“Messina”) and Dancarl Diamonds (Pty) Limited (“Dancarl”), has a loan facility of R30,000,000 (US$4,126,490)
with the Industrial Development Corporation of South Africa (“IDC”) to fund future capital expenditure at the
Messina and Dancarl mines. The drawdown value of the loan facility at 30 June 2006 is R9,733,766 (US$1,338,877),
R2,809,128 (US$386,395) payable within the next 12 months and R6,924,638 (US$952,482) payable over a period
greater than 12 months. The loan is repayable over 60 months at 0.5% below the prevailing South African prime
lending interest rate. The effective interest rate for the loan facility at 30 June 2006 is 11.57% and the final instalment
is due on 01 August 2011.
As security for the loan, Messina has signed suretyship as co-principal debtor and registered a general notarial
bond over Messina’s movable assets in favour of the IDC.
(iv) Bank loan – secured
Rand Merchant Bank
A controlled entity, Autumn Star Investment Holdings (Pty) Ltd (“Autumn Star”) has a loan agreement with FirstRand
Ltd (“FirstRand”) for a loan facility of R16,500,000 (US$2,269,570). At 30 June 2006 an amount of R16,646,831
(US$2,289,766) was outstanding on the loan facility, R4,125,000 (US$567,392) payable within the next 12 months
and R12,521,831 (US$1,722,374) payable over a period of four years. The loan is repayable in annual instalments
of R4,125,000 (US$567,392) commencing 1 August 2006. Interest is payable biannually at 0.5% below the prevailing
South African prime lending interest rate. The effective interest rate for the loan facility at 30 June 2006 is 11.30%
and the final instalment is due on 1 August 2009. Autumn Star and Messina Investments Limited have signed
suretyship for the loan in favour of FirstRand.
(v) Convertible note – secured
A controlled entity, Crown Diamonds NL, had 16,078,191 (US$2,206,678) convertible notes on issue at the beginning
of the year. During the year, 6,660,430 Crown Diamonds NL convertible notes were converted into 1,011,993
ordinary shares of the Company. The notes were convertible into ordinary shares of the Company, at the option of
the note holder or repayable on 30 November 2005.
Movements in secured convertible notes
30 June
2006
Number
30 June
2005
Number
30 June
2006
US$
30 June
2005
US$
Balance at beginning of year
16,078,191
—
2,206,678
—
Balance acquired through business combination
Exchange differences
—
—
17,034,750
—
2,291,196
—
(94,399)
45,475
Redeemed during the year
(9,417,761)
(871,559)
(1,239,403)
(118,442)
Converted to ordinary shares
(6,660,430)
(85,000)
(872,876)
(11,551)
Balance at the end of year
—
16,078,191
—
2,206,678
Notes to the Annual Financial Statements for the year ended 30 June 2006
22. INTEREST BEARING LOANS AND BORROWINGS (continued)
(vi) Loan – unsecured
A controlled entity, Helam Mining (Pty) Ltd, is indebted to Directors Mr J Dippenaar and Mr J Davidson for a total of
R299,529 (US$41,200). The loan is unsecured and earns interest at 11% pa. In July 2005 a repayment of R4,128,027
(US$622,850) was made against these Directors’ loans, reducing the balance from R4,427,556 (US$664,050).
(vii) Lease and hire purchase liabilities
The lease and hire purchase liabilities are secured over plant and equipment with a net carrying value of US$151,972.
The effective interest rate varies between 11.02% and 11.30% with monthly instalments varying between R11,560
(US$1,590) and R29,504 (US$4,508). The remaining periods range from 1 month to 13 months.
23. TRADE AND OTHER PAYABLES
Current
Trade payables
Settlement of purchase consideration for controlled entity (i)
Settlement of purchase consideration for controlled entity (ii)
Settlement of purchase consideration for controlled entity (ii)
Provident fund contributions
Other creditors
Interest on loans
Non-current
Amounts owing to associates
2006
US$
2005
US$
3,457,178
3,055,506
Page 65
—
—
549,628
3,800,000
1,750,000
117,724
1,333,833
—
750,000
197,978
486,046
222,310
6,658,735
9,061,468
11,546
52,038
Settlement of purchase consideration for controlled entity (i) and (ii)
1,500,000
2,502,381
Reduction for deferred settlement (ii)
(643,723)
(553,912)
867,823
2,000,507
(i) The residual purchase price of US$549,628 (AUD$711,489) with regards to the acquisition of Messina Investments
Limited was settled in full on 5 July 2005.
(ii) The settlement of part of the purchase price of the Helam Diamond mine (as defined) of US$3,800,000 was paid on
5 July 2005. The balance of US$3,250,000 is payable from 50% of the cash surplus of the Helam Diamond mine (as
defined) over three years as follows:
Current
US$1,750,000
for the year ending 31 December 2006 payable by 30 April 2007
Non-current
US$1,500,000
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 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 US$770,160.
During the year, the reduction in the acquisition price was increased by US$320,384. The reduction in the acquisition
price will be amortised over the three-and-half-year term commencing from the date of acquisition of the Helam
Diamond mine by Crown Diamonds NL. For the year to 30 June 2006 the amount of interest was US$230,573.
Notes to the Annual Financial Statements for the year ended 30 June 2006
24. PROVISIONS
Balance at 1 July 2004
Acquired by business combination
Net provisions made during the year
Exchange differences
Balance at 30 June 2005
Current
Non-current
Balance at 30 June 2005
Page 66
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Acquired by business combination
Net provisions made during the year
Balance at 30 June 2006
Current
Non-current
Balance at 30 June 2006
Employee entitlements
Employee
entitlements
US$
Rehabilitation
US$
Total
US$
576,749
—
576,749
927,944
1,658,661
2,586,605
516,152
22,461
10,888
47,449
527,040
69,910
2,043,306
1,716,998
3,760,304
2,043,306
—
2,043,306
—
1,716,998
1,716,998
2,043,306
1,716,998
3,760,304
2,043,306
1,716,998
3,760,304
—
—
—
(40,924)
(19,242)
(60,166)
2,002,382
1,697,756
3,700,138
2,002,382
—
2,002,382
—
1,697,756
1,697,756
2,002,382
1,697,756
3,700,138
The provision for employee entitlements relates to accrued leave, provident fund contributions, performance 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.
Notes to the Annual Financial Statements for the year ended 30 June 2006
25. DEFERRED TAXATION
Balance at beginning of the year
Acquisition of business combination
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
2006
US$
2005
US$
11,930,799
—
—
11,527,209
(1,120,354)
65,935
(877,811)
337,655
9,932,634
11,930,799
12,884,658
15,082,158
(625,511)
(646,837)
1,313
863
(314,666)
(675,871)
(29,286,079)
(22,301,568)
(17,340,285)
(8,541,255)
27,272,919
20,472,054
9,932,634
11,930,799
Page 67
Deferred tax assets as above, have not been raised due to the uncertainty over the
future recoverability of these assets.
26. 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, purchases and borrowings. The currencies giving rise to this
risk are primarily Pounds Sterling and South African Rands. At the end of the year the Company held US$2,941,290 of
monetary assets in Pounds Sterling, US$304,382 in South African Rands and US$62,399 in Australian Dollars. Foreign
exchange differences on retranslation of these assets and liabilities are taken to the income statement. From time to
time the Group may acquire forward contracts to fix the exchange rate on future transactions.
Interest rate risk
The Group has borrowings that incur interest at floating rates and no interest rate swaps are used. Management
constantly monitors the floating interest rates so that action can be taken should it be considered necessary.
Effective interest rates and re-pricing analysis
In respect of income-earning financial assets and interest bearing financial liabilities, the following table indicates their
effective interest rates and age analysis at the balance sheet date. Each interest bearing financial liability reprices
based on the respective country specific prime lending rates as disclosed in Note 22, with the exception of the
Convertible notes and the secured loan from the Industrial Development Corporation of South Africa which are fixed
rate and interest free respectively.
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Notes to the Annual Financial Statements for the year ended 30 June 2006
26. FINANCIAL INSTRUMENTS (continued)
30 June 2006
Cash and cash equivalents (US$ ‘000)
Effective
interest
rate
4.03%
Notes
18
Cash
Interest bearing loans and borrowings
Bank loan – secured
22(i)
11.57%
Bank loan – secured
22(ii)
Bank loan – secured
22(iii)
Bank loan – secured
22(iv)
Convertible note
– secured
Loan – unsecured
Finance leases
– secured
22(v)
22(vi)
—
11.57%
11.30%
—
11.30%
22(vii)
11.30%
6 months
or less
6–12
months
1–2
years
2–5
years
More than
5 years
7,020
—
—
—
—
14
38
283
567
—
41
24
967
15
39
284
—
—
—
25
363
40
—
242
567
—
—
5
854
138
—
531
1,155
—
—
1,824
57
—
—
—
—
—
57
Total
7,020
264
77
1,340
2,289
—
41
54
4,065
30 June 2005
Cash and cash equivalents (US$ ‘000)
Cash
Notes
18
Effective
interest
rate
6 months
or less
6–12
months
Total
1–2
years
2–5
years
More than
5 years
4.50%
27,591
27,591
—
—
—
—
Interest bearing loans and borrowings
Bank overdraft
secured
22
Bank loan – secured
22(i)
Bank loan – secured
22(ii)
11.02%
11.02%
—
322
317
213
322
14
65
Bank loan – secured
22(iii)
10.47%
4,503
4,503
Convertible note
– secured
Loan – unsecured
Loan – unsecured
Finance leases
– secured
22(v)
22
22(vi)
11.00%
7.09%
11.00%
2,207
3,589
664
2,207
3,589
664
22(vii)
10.75%
215
79
12,030
11,443
—
16
65
—
—
—
—
78
159
—
32
83
—
—
—
—
54
169
—
124
—
—
—
—
—
4
128
—
131
—
—
—
—
—
—
131
27. EMPLOYEE BENEFITS
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.
Notes to the Annual Financial Statements for the year ended 30 June 2006
28. COMMITMENTS
Operating leases:
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
The Group leases its offices under operating leases. The leases run for periods of three
years with an option to renew after that date. The leases are currently on a month
to month basis with a three month notice period. Lease payments are increased
annually to reflect market rentals. The leases do not include contingent rentals.
During the year ended 30 June 2006 US$222,257 was recognised as an expense in the
income statement in respect of operating leases, as disclosed in note 6.
2006
US$
2005
US$
94,003
—
208,165
80,001
29. CONTINGENT LIABILITIES
Page 69
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.
923,151
1,007,485
Performance bond with government instrumentality secured by way of a deposit in
respect of a mining licence.
163,768
159,827
Delayed settlement of US$1,450,000 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 AUD$6,000,000 for the financial year ending 2006. If Messina earns between 70%
and 100% of the AUD$6,000,000 the US$1,450,000 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 US$1,450,000 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 AUD$6,000,000 for the financial year ending 2007.
If Messina earns between 70% and 100% of the AUD$6,000,000 the US$1,450,000 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.
1,450,000
1,450,000
1,450,000
1,450,000
Notes to the Annual Financial Statements for the year ended 30 June 2006
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29. CONTINGENT LIABILITIES (continued)
Contingent liabilities considered remote
A former Director of Crown Diamonds NL has lodged a claim for AUD$1,193,407 (US$871,036) 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 MPRDA) was signed into law on
3 October 2002 and was promulgated on 1 May 2004.
The MPRDA 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 MPRDA 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 MPRDA. 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 mining operations or identification of
new rehabilitation obligations at other mine operations.
Notes to the Annual Financial Statements for the year ended 30 June 2006
30. ADOPTION OF IFRS 2 (SHARE-BASED EMPLOYEE OPTIONS)
During the year, the Company adopted IFRS 2 with respect to the treatment of employee share options. In order to
comply with IFRS 2, the Company now expenses the fair value of share-based employee options with a corresponding
increase in equity. The fair value is measured at grant date and spread over the period during which the employees
become unconditionally entitled to the options. The comparative numbers have been appropriately restated. The effect
of the change is as follows:
Increase in net loss due to increase in personnel costs following the
adoption of IFRS 2:
– 30 June 2004
– 30 June 2005
Restatement of opening accumulated losses in respect of prior year
adjustment
Gross
US$
Taxation
US$
Net
US$
(140,833)
(213,837)
(354,670)
—
—
—
(140,833)
(213,837)
(354,670)
31. SHARE-BASED OPTIONS
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The Company has an established share option programme that entitles the Remuneration Committee, at its discretion,
to grant share options to directors and senior management. The terms and conditions of the share options granted
during the year ended 30 June 2006 are disclosed below. Share options granted prior to 7 November 2002 have, in
accordance with the transitional provisions and recognition and measurement principles in IFRS 2, not been taken into
account. The share-based option expense has been calculated using the Black-Scholes model.
Fair value of share options and assumptions for the 12 months ended 30 June 2006:
Fair value at measurement date
Exercise price
Share price 30 June 2006
Expected volatility
Option life
Expected dividends
Risk-free interest rate (based on national government bonds)
Directors
Senior
management
21.7p – 41.9p
9.6p – 30.5p
44p – 85p
44p – 79.5p
99.50p
50%
99.50p
50%
10 years
1 – 10 years
—
—
4.73% 4.82% - 5.25%
The expected volatility is based on historic volatility, adjusted for any extreme changes in the share price during the
historic period. During the year 596,147 options were exercised and the Company expensed US$602,246 related to the
fair value of employee share options (refer to Note 30 for prior year adjustments).
Notes to the Annual Financial Statements for the year ended 30 June 2006
31. SHARE-BASED OPTIONS (continued)
The terms and conditions of the grants are as follows, whereby all options are settled by delivery of shares:
Employees entitled
Grant date
Number
Vesting conditions
Remaining life of
options (years)
Options granted to directors
22 April 1997
400,000
Options granted to senior
management
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5 September 2003
1,500,000
16 June 2005
2,000,000
31 May 2006
1,000,000
5 September 2003
385,000
13 September 2004
50,000
24 September 2004
238,875
28 January 2005
72,500
27 November 2005
500,000
31 May 2006
500,000
1/3 rd per annum
from grant date
1/3 rd per annum
from grant date
Subject to
performance of share
price
1/3 rd per annum
from grant date
1/3 rd per annum
from grant date
1/3 rd per annum
from grant date
25% from grant date
for 2 years, then 50%
in 3rd year
25% from grant date
for 2 years, then 50%
in 3rd year
1/3 rd per annum
from grant date
1/3 rd per annum
from grant date
1
7
9
10
7
8
8
9
9
10
2006
Weighted
average price
2006
Number
2005
Weighted
average price
2005
Number
31. SHARE-BASED OPTIONS (continued)
Outstanding at beginning of the year
60.66p
6,030,959
46.47p
3,735,000
Forfeited during the year
Exercised during the year
Granted during the year
63.97p
(788,437)
54.50p
(366,666)
48.71p
(596,147)
—
—
76.06p
2,000,000
79.71p
2,662,625
Outstanding at the end of the year
65.97p
6,646,375
60.66p
6,030,959
Exercisable at the end of the year
2,417,844
1,611,667
The options outstanding at 30 June 2006 have an exercise price in the range of 44p to 85p and a weighted average
contractual life of eight years.
Notes to the Annual Financial Statements for the year ended 30 June 2006
32. POST-BALANCE SHEET EVENTS
Convertible Bond Issue
On 19 September 2006 the Company issued a US$20 million unsecured interest free convertible bond (“the Convertible”)
as well as the grant of warrants over 2 million shares (“the Warrant”). The Convertible and Warrant agreements were
completed on 18 September 2006 and were issued to Al Rajhi Holdings W.L.L., a member of the Al Rajhi group, a major
Saudi Arabian based investment group.
The Convertible and the Warrant are convertible or exercisable at an exercise price of 130 pence per Petra share. If not
converted, the Convertible is repayable in full on 18 September 2009. The Warrant is exercisable any time from date
of drawdown under the Convertible and expires on 18 September 2009. On 5 October 2006 the Company drew down
US$20 million under the terms of the Convertible.
New Shares Issued
On 6 July 2006 the Company issued 1,666,666 new shares at a price of 55.85p following the exercise of warrants by
Photon Global Limited.
33. RELATED PARTIES
Subsidiaries and associates
Details of subsidiaries are disclosed in Note 34.
Directors
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Details relating to Directors’ emoluments and shareholdings in the Company are disclosed in Note 9 and the Directors’
Report respectively.
Details relating to Directors’ loans are disclosed in Note 22(vi) and the Directors’ Report.
Shareholders
The principal shareholders of the Company are detailed in the Directors’ Report on page 28.
Contingent liabilities
Details of contingent liabilities are disclosed in Note 29.
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 2006 Petra Diamonds paid expenses on behalf
of Nabera amounting to R5,811 (US$799) (30 June 2005 R672,056 (US$100,795)). 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.
Transactions with related parties take place at terms and conditions no more favourable than to third parties.
Notes to the Annual Financial Statements for the year ended 30 June 2006
34. SUBSIDIARIES AND ASSOCIATES
At 30 June 2006 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
Alltop Investments (Pty) Ltd
South Africa
Australia
Ordinary
Ordinary
Autumn Star Trading 192 (Pty) Ltd
South Africa
Ordinary
Basama Diamonds Ltd
Seychelles
Ordinary
Blue Diamond Mines (Pty) Ltd
Compass Mining Services (Pty) Ltd
Crown Diamonds NL
Crown Resources (Pty) Ltd
Dalestar Corporation (Pty) Ltd
South Africa
Australia
Australia
South Africa
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
40%
51%
100%
100%
100%
100%
100%
Dancarl Diamonds (Pty) Ltd
South Africa
Ordinary
100%
Dimeng Diamond Holdings (Pty) Ltd
South Africa
Ordinary
59%
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Engiminas Consultoria e Enginharia LDA
Helam Mining (Pty) Ltd
Ida Valley (Pty) Ltd
Angola
South Africa
Australia
Johannesburg Diamond Trading Corporation (Pty) Ltd
South Africa
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
United
Kingdom
Australia
Kalahari Diamonds Ltd*
Kamara Holdings (Pty) Ltd
Madeline Alluvial Diamonds and Mineral
Development (Pty) Ltd
South Africa
Ordinary
100%
Dormant
Majestic Resources (Pty) Ltd
Majestic Resources South Africa (Pty) Ltd
Australia
South Africa
Ordinary
Ordinary
100%
100%
Messina Diamond Mine (Pty) Ltd
South Africa
Ordinary
100%
Messina Investments Limited
Nabera Holdings (Pty) Ltd
Nabera Mining (Pty) Ltd
Namibia Mining House (Pty) Ltd
Nooitgedacht Diamonds (Pty) Ltd
Paardekraal Properties (Pty) Ltd
South Africa
South Africa
South Africa
Namibia
South Africa
South Africa
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
29.50%
35%
100%
100%
Pagvlei Mining (Pty) Ltd
South Africa
Ordinary
100%
Investment
holding
Dormant
Mining and
exploration
Investment
holding
Dormant
Mining and
exploration
Dormant
Dormant
Dormant
Mining and
exploration
Mining and
exploration
Dormant
Mining and
exploration
Mining and
exploration
Mining and
exploration
Dormant
Dormant
Dormant
Dormant
Mining and
exploration
Mining and
exploration
Mining and
exploration
Dormant
Dormant
Dormant
Services
provision
Dormant
Notes to the Annual Financial Statements for the year ended 30 June 2006
34. SUBSIDIARIES AND ASSOCIATES (continued)
Petra Diamonds Alto Cuilo Ltd
Petra Diamonds Angola Services Ltd
Country of
incorporation
Class of share
capital held
Proportion
held
British Virgin
Islands
British Virgin
Islands
Ordinary
47%
Ordinary
100%
Petra Diamonds Namibia (Pty) Ltd
Namibia
Ordinary
100%
Nature of
business
Mining and
exploration
Mining and
exploration
Mining and
exploration
Services
provision
Petra Diamonds Southern Africa (Pty) Ltd
South Africa
Power Corporation Angola Ltd
Santara Holdings (Pty) Ltd
Sedibeng Diamond Mine JV
Sekaka Diamonds (Pty) Ltd*
Star Diamond Mine (Pty) Ltd
Union Investments Corporation (Pty) Ltd
Bermuda
Australia
South Africa
Botswana
South Africa
South Africa
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Vulcan Mining (Pty) Ltd
Australia
Ordinary
100%
70%
Exploration
100%
Dormant
57.5%
Mining and
exploration
100%
Exploration
100%
100%
100%
Mining and
exploration
Dormant
Dormant
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* Kalahari Diamonds Ltd and Sekaka Diamonds (Pty) Ltd are subsidiaries acquired as a result of the Kalahari Diamonds Ltd acquisition in
September 2005.
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.
Shareholders Information for the year ended 30 June 2006
The following additional information is required by the Australian Stock Exchange Limited Listing Rules.
SHAREHOLDINGS
The information is made available up to 30 September 2006.
SUBSTANTIAL SHAREHOLDERS
Twenty Largest Holders as at 30 September 2006:
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Saad Investments Company Limited
Kalahari Diamond Resources Plc
ANZ Nominees Limited
Al Rajhi Holdings W.L.L.
Credit Suisse Client Nominees Limited
HSBC Global Custody Nominees Limited
Euroclear Nominees Limited
BNY (OCS) Nominees Limited
WB Nominees Limited
Artemis Nominees Limited
Chase Nominees Limited
Societe Diamantaire CH Finkelstein and Company NV
Chetwynd Nominees Limited
Vidacos Nominees Limited
Mellon Nominees (UK) Limited
Barclays Nominees (Geurnsey) Limited
Dartington Portfolio Nominees Limited
HSBC Global Custody Nominee (UK) Limited
Dresdner Bank AG London Branch Account
HSBC Global Custody Nominee (UK) Limited
DISTRIBUTION OF HOLDERS
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Fully Paid
Ordinary
Percentage of
Capital Held
22,651,387
16,166,529
11,093,955
8,853,333
6,767,744
5,900,000
5,756,885
5,594,204
5,401,701
4,762,802
4,278,000
4,189,944
3,500,000
2,662,500
2,502,406
2,467,833
2,055,658
1,627,274
1,553,982
1,503,062
119,289,199
15.05%
10.74%
7.37%
5.88%
4.50%
3.92%
3.83%
3.72%
3.59%
3.16%
2.84%
2.78%
2.33%
1.77%
1.66%
1.64%
1.37%
1.08%
1.03%
1.00%
79.27%
Listed Fully
Paid Ordinary
936
781
190
200
77
2,184
The number of shareholders holding less than a marketable parcel of ordinary shares on the Australian Stock Exchange at
30 September 2006 was 113.
Voting Rights
The voting rights attaching to ordinary shares (“shares”) are set out in Clauses 4.4, 4.5 and 4.7 of the Company’s Bye-
Laws.
In summary, subject to the provision of Companies Act (1981) of Bermuda, ASX Listing Rules, the Company’s Bye-Laws and
any rights or restrictions for the time being attached to any class of shares, at a general meeting of shareholders:
(a) each shareholder is entitled to vote and may vote in person or by proxy;
(b) on a show of hands, every person present who is a shareholder or a proxy has one vote; and
(c) on a poll, every person present who is a shareholder or as a proxy shall, in respect of each fully paid share held, or in
respect of which they act as a proxy, have one vote.
Notice of Annual General Meeting for the year ended 30 June 2006
Notice is hereby given that the ninth Annual General Meeting of Petra Diamonds Limited (the Company) will be held at
11:00 am on Friday, 8 December 2006 at the offices of Memery Crystal LLP, 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 2006, together with the Reports of the Directors
and Auditors, be received.
2. APPOINTMENT OF AUDITORS
That BDO Stoy Hayward LLP of 8 Baker Street, London, W1U 3LL be 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) Adonis Pouroulis and (b) Charles Segall (each to be separately proposed and voted upon), who retire in
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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.
By order of the Board
A Pouroulis
Chairman
26 October 2006
Registered office
Clarendon House, 2 Church Street, Hamilton HM11, Bermuda
Company registration number: EC23123
Notice of Annual General Meeting for the year ended 30 June 2006
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 two or more
votes at the meeting may appoint up to two 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 George’s 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.
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.
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FORM OF PROXY for the year ended 30 June 2006
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 2006 Annual General Meeting of the
members of the Company to be held at 11:00 am on Friday, 8 December 2006 and at every adjournment thereof as indicated
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below or, in the absence of any such indication, my/our proxy shall vote or abstain as he/she thinks fit:
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 Adonis Pouroulis
3 (b) Re-election of Charles Segall
Signed this
Signature
For
Against
Abstain
day of
2006
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.
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