First Property Group Annual Report 2012

FY2012 Annual Report · First Property Group
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DeLiverinG GroWtH 
in DiamonDs

Petra Diamonds Limited
Annual Report and Accounts 2012

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Petra Diamonds is a leading independent diamond 
mining group and an important supplier of rough 
diamonds to the international market.

Petra has developed a dynamic company, in which employees are encouraged to fulfil 
their true potential, and underpinning our success is a ‘can do’ attitude. Petra conducts 
all its operations according to the highest ethical standards and will only operate 
in countries which are members of the Kimberley Process.

Discover Petra DiamonDs
2  Examine Our Performance
4  Explore Our Assets
6 
8  Uncover Our strategy
10  Key Performance Indicators

Identify Our Opportunity

BUsiness revieW
14  Chairman’s statement
16  CEO’s Review
20  Financial Review

oPerationaL revieW
26  Finsch
28  Cullinan
30  Koffiefontein
31  Kimberley Underground
32  Williamson
34  Exploration
35  2012 Resource statement

corPorate Governance
40  Risk Management
42  Corporate social Responsibility
44  Board of Directors
46  Corporate Governance
57  Directors’ Report
61  Directors’ Remuneration Report

GroUP accoUnts
74  Independent Auditors’ Report – Group
75  Consolidated Income statement
76   Consolidated statement of Other 

Comprehensive Income

77   Consolidated statement of Changes 

in Equity

79   Consolidated statement of 

Financial Position

80  Consolidated statement of Cashflows
81  Notes to the Annual Financial statements

IBC Glossary

Discover more about Petra 
www.petradiamonds.com

Discover Petra Diamonds 

 Examine
  Our PerfOrmance
   Our business continues to 
show exceptional growth

P2

 Explore
  Our assets
   Our portfolio is diverse 

and we continue to explore

P4

 Identify
  Our OPPOrtunity
   There is a positive long-term 
outlook for rough diamonds

P6

 Uncover
  Our strategy
   We continue to increase output 

and optimise recoveries

P8

Annual Report and Accounts 2012 Petra Diamonds Limited

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Our Performance
At a glance

   Examine
 Our PerfOrmance

financiaL HigHLigHts
 $  Revenue1 up 44% to US$316.9 million (FY 2011: 

US$220.6 million)

 $  Profit from mining activity1,2 up 35% to US$103.3 million 

(FY 2011: US$76.4 million)

 $  Operating cashflow up 57% to US$79.9 million 

(FY 2011: US$50.9 million)

 $  Adjusted EBITDA3 up 35% to US$90.3 million 

(FY 2011: US$67.1 million)

 $  Adjusted EPS4: 7.82 cents per share profit 
(FY 2011: 8.41 cents per share profit)

 $  Basic EPS5: 0.48 cents per share loss (FY 2011: 12.83 cents 

per share profit)

 $  Loss after tax: US$2.1 million (FY 2011: US$59.2 million 
profit), affected by unrealised foreign exchange losses 
of US$38.6 million and non-recurring transaction costs 
of US$3.1 million

 $  Cash at bank6 (30 June 2012): US$47.3 million 

(30 June 2011: US$324.9 million)

 $  Bank debt (30 June 2012): US$65.4 million (FY 2011: 
US$69.6 million); available but undrawn bank facilities 
(30 June 2012): US$66.3 million (30 June 2011: 
US$19.9 million)

 $  Diamond inventory (30 June 2012): US$24.5 million 

(30 June 2011: US$13.3 million)

OPeratiOns HigHLigHts
 $ Production up 98% to 2,208,862 carats (FY 2011: 1,117,795)
 $  Capex of US$138.8 million (FY 2011: US$110.9 million) 
(including interest capitalised), within the Company’s 
expectations and in accordance with the roll-out of the 
Group’s expansion programmes

 $  Large diameter drilling on kimberlite KX36 in Botswana 

completed; treatment and analysis underway

cOrPOrate HigHLigHts
 $  Completion of the acquisition of world-class Finsch mine for 
R1.425 billion (circa US$192 million) on 14 September 2011
 $  Step-up from AIM to the Main Market of the London Stock 
Exchange in December 2011 and subsequent inclusion in 
the FTSE 250 Index in March 2012

 $  Appointment of Dr Patrick Bartlett and Mr Gordon Hamilton 
as independent Non-Executive Directors and, post year end, 
appointment of Mr Tony Lowrie as Senior Independent 
Non-Executive Director

 $  Additional debt facilities totalling circa US$49.5 million 
put in place, comprising ZAR200 million (circa US$24.5 
million) from RMB and, post year end, US$25 million from 
IFC; additional working capital facilities of ZAR100 million 
(circa USS12.2 million) put in place through RMB
 $  Commencement, post year end, of a public disposal 

process to sell the Fissure Mines, which are no longer 
core to Petra’s portfolio

OutLOOk
 $  Expansion plans on target to increase production to 5 Mcts 
by FY 2019; Group production expected to increase circa 
30% to circa 2.85 Mcts in FY 2013, further to a full year’s 
contribution from Finsch and Williamson, plus increased 
output at Kimberley Underground

 $ The review of the Group’s debt requirements is progressing 
well and the syndicate banks have given their provisional 
commitments (subject to completion of due diligence and 
legal documentation) to the debt requirements and 
structure requested by Petra, which will see the Group 
fully funded through to the conclusion of its expansion 
programmes; it is expected that the process, including full 
form signed documentation, will complete in Q2 FY 2013

 $ Whilst the rough diamond market remains under pressure 
as the current economic uncertainty continues, Petra 
believes the medium to long-term outlook remains 
positive due to the strong supply/demand fundamentals

1.  Revenue and profit from mining activity only includes Finsch from 14 September 2011, when the acquisition closed and control passed.

2.   Stated before corporate overheads of US$10.0 million (FY 2011: US$8.0 million), exploration expenditure of US$3.0 million (FY 2011: US$1.3 million), net impairment 
charges and reversals of US$ nil (FY 2011: US$6.5 million), depreciation of US$41.0 million (FY 2011: US$22.4 million), share based expense of US$1.0 million (FY 2011: 
US$1.9 million), net finance income of US$1.8 million (FY 2011: US$3.5 million expense), unrealised foreign exchange loss of US$38.6 million (FY 2011: US$18.6 million 
gain) and non-recurring transaction costs (admission to Main Market US$2.7 million and the Finsch acquisition US$0.4 million) (FY 2011: US$0.3 million).

3.   EBITDA disclosures are “adjusted EBITDA”, being stated before net impairment charges and reversals of US$ nil (FY 2011: US$6.5 million), depreciation of US$41.0 million 
(FY 2011: US$22.4 million), share based expense of US$1.0 million (FY 2011: US$1.9 million), net finance income of US$1.8 million (FY 2011: US$3.5 million expense), 
unrealised foreign exchange loss of US$38.6 million (FY 2011: US$18.6 million gain) and non-recurring transaction costs (admission to Main Market US$2.7 million and 
the Finsch acquisition US$0.4 million) (FY 2011: US$0.3 million).

4.   Stated after non-controlling interests (representing the Group’s black economic empowerment (“BEE”) partners’ interests) of US$0.3 million profit (30 June 2011: US$6.0 
million) and before unrealised foreign exchange movements and non-recurring transaction costs (admission to Main Market and Finsch acquisition). Refer to note 13.

5.   Stated after non-controlling interests (representing the Group’s BEE partners’ interests) of US$0.3 million profit (30 June 2011: US$6.0 million profit). Refer to note 12.

6.   Cash at bank comprises unrestricted cash and restricted cash balances of US$31.3 million and US$16.0 million (rehabilitation deposits) respectively (30 June 2011:  

US$96.9 million and US$228.0 million (rehabilitation deposits and escrowed Finsch purchase consideration)).

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2

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
Petra offers an exceptional growth profile, with a 
core objective to steadily increase annual production 
to 5 million carats by FY 2019.

The Group has a major resource base in excess of 300 million carats.

awarDs recOgnising Our success

‘Emerging Markets CEO of the Year’ Award
Quoted Company Awards 2011
This  award  recognises  the  efforts  of 
Johan  Dippenaar  who,  in  combination 
with the Petra team, has led the Company 
through  a  period  of  extraordinary 
growth,  taking  Petra’s  portfolio  of 
producing diamond mines from three to 
eight  and  firmly  establishing  the 
Company  as  a  leading  independent 
producer.  Johan  has  over  20  years’ 
experience  in  the  leadership  and 
management  of  producing  diamond 
mining companies, having been CEO of 
ASX-quoted Crown Diamonds (“Crown”) 
prior  to  Crown’s  merger  with  Petra  in 
2005.  Petra  will  continue  to  follow  an 
exceptional growth path as the Company 
looks to take production from 2.2 million 
carats in FY 2012 to over 5 million carats 
in FY 2019.

about the award:
“This award seeks to recognise the CEO 
who  has  during  the  past  year  created 
the  most  value  for  shareholders  from 
the  world’s  emerging  markets,  or  most 
astutely positioned his or her business 
for long-term growth derived from the 
globe’s developing economies.”

rOugH DiamOnD PrODuctiOn 
(grOss)
MILLION CARATS

2.2  

+98%

2.2

1.1

1.2

1.1

0.2

08

09

10

11

12

‘New Company of the Year’ Award
PLC Awards 2011

Petra’s  step  up  from  AIM  to  the 
Main  Market  in  December  2011  was 
another  important  development  in 
the  Company’s  progress,  underscoring 
Petra’s  transformation  from  a  junior 
diamond  exploration  company  to  a 
leading independent diamond producer. 

The  Main  Market  is  the  appropriate 
platform  for  the  Company’s  continued 
growth,  allowing  a  broader  range 
of  investors  seeking  direct  exposure 
to the positive long-term fundamentals 
of  the  diamond  market  to  invest  
in Petra. 

Petra subsequently joined the FTSE 250 
Index  in  March  2012  and  is  now 
London’s  largest  quoted  diamond 
mining company.

about the award:
“A future company of the year, but one 
that  has  too  short  a  track  record 
to  be  considered  for  that  award.  The 
winner  will  have  gone  public  in  2011, 
yet  will  already  have  demonstrated 
that  it  possesses  both  growth  and 
management qualities.”

reVenue (grOss)
US$ MILLION

316.9 

+44%

316.9

220.6

177.7

94.4

76.9

08

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10

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OUR ASSETS P4

Annual Report and Accounts 2012 Petra Diamonds Limited

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Our assets
At a glance

   Explore
 Our assets

Tanzania

Botswana (exploration)

South Africa

finsch

cullinan

koffiefontein

A major diamond producer
A major producer with world-class 
infrastructure and modern plant

The world’s most celebrated 
diamond mine
Cullinan earned its place in history 
as the source of the Cullinan diamond 
in 1905, the largest gem diamond ever 
at 3,106 carats rough

One of the world’s top 
kimberlite mines by average 
diamond value
Exceptional infrastructure and 
underground operation

key facts

key facts

key facts

 $ Finsch produces a number 

of +50 carat stones annually

 $ Major resource base of 42.3 Mcts, 
including 23.9 Mcts in reserves

 $ Expansion plan to increase 

production from circa 1.4 Mctpa 
to just under 2 Mctpa by FY 2017 
(underground and tailings)

 $ 18 year initial mine plan

 $ Renowned for large, top quality gem 
diamonds – has produced over 750 
diamonds of +100 carats and a quarter 
of all diamonds of +400 carats

 $  Only reliable source of highly prized, 

rare blue diamonds

 $ World-class resource base of 202.1 

Mcts (including tailings)

 $ Expansion plan to increase production 
from circa 870,000 ctpa to 2.4 Mctpa 
by FY 2019 (underground and tailings)

 $ 18 year initial mine plan

 $ Regularly produces exceptional 
white diamonds of between five 
and 30 carats in size

 $ Resource base of 5.9 Mcts
 $ Expansion plan to increase production 
from circa 40,000 ctpa to 100,000 ctpa 
by FY 2016 (underground and tailings)

 $ 13 year initial mine plan

Petra OwnersHiP

Petra OwnersHiP

Petra OwnersHiP

74%

26% BEE partners (21% Senakha 
Diamonds Investments (Pty) Ltd, 
5% Petra Diamonds Employee 
Share Trust)

74%

26% BEE partners (14% Thembinkosi 
Mining Investments (Pty) Ltd, 12% 
Petra Diamonds Employee Share Trust)

74%

26% BEE partner Re-Teng Diamonds  
(Pty) Ltd

OPeratiOnaL reView

OPeratiOnaL reView

OPeratiOnaL reView

 FINSCH P26

 CULLINAN P28

 KOFFIEFONTEIN P30

4

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
Petra has a well-diversified portfolio, with controlling interests 
in eight producing mines – seven in South Africa and one 
in Tanzania – and an exploration programme in Botswana.

Focus on Africa: the source of circa 60% of the world’s gem diamonds by value.

kimberley underground

fissure mines

williamson

Kimberley is the heart of 
South Africa’s diamond industry
Operation comprises three mines: 
Bultfontein, Dutoitspan and Wesselton

Portfolio of three fissure mines: 
Helam, Sedibeng and Star
Narrow vein, low tonnage ‘fissure’ mines

Tanzania’s most important 
diamond producer
At 146 hectares, Williamson is one 
of the world’s largest kimberlite pipes 
ever to be mined economically

key facts

key facts

key facts

 $ Historic source of large diamonds 

and fancy yellows

 $ Resource base of 7.1 Mcts
 $ Expansion plan to increase 

production from circa 68,000 ctpa 
to circa 135,000 ctpa by FY 2016

 $ 10 year initial mine plan

 $ Fissures are the narrow root zones 
of kimberlites (after the main pipe 
has been eroded away)

 $ Low tonnage operations but 

high grade

 $ Resource base of 5.1 Mcts
 $ Petra has, along with its BEE 
partners, commenced a public 
disposal process in respect 
of its fissure mine operations, 
as they are no longer core 
to the Group’s portfolio

 $   Renowned for high value ‘bubblegum’ 

pink diamonds

 $   Major resource base of 39.6 Mcts
 $  Phase 1 development programme 

completed and production 
recommenced in Q4 FY 2012

 $  Production expected to reach 3.6 Mt 

(circa 216,000 ctpa) by FY 2016

 $  Petra currently evaluating Phase 2 
development to take operation 
above 3.6 Mtpa

 $ 18 year initial mine plan

Petra OwnersHiP

26% BEE partner Sedibeng Mining 
(Pty) Ltd

74%

HeLam: 

 74% Petra, 26% BEE partner Sedibeng 
Mining (Pty) Ltd

seDibeng:  74.5% Petra, 17.85% BEE partner 

Sedibeng Mining (Pty) Ltd, 7.65% BEE 
partner Bokone Properties (Pty) Ltd

star:  

 74% Petra, 26% BEE partner 
Sedibeng Mining (Pty) Ltd

Petra OwnersHiP

25% United Government  
of the Republic of Tanzania

75%

OPeratiOnaL reView

 KIMBERLEY UNDERGROUND P31

OPeratiOnaL reView

 WILLIAMSON P32

OUR OPPORTUNITY P6

Annual Report and Accounts 2012 Petra Diamonds Limited

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Our Opportunity
At a glance

   Identify
 Our OPPOrtunity

tHe DiamOnD market

diamond 

T he 

market’s 
performance  in  FY  2012  was 
characterised  by  volatility,  in 
global 
line  with  uncertain 
economic  conditions.  After  reaching 
new highs in June 2011, prices declined 
from  July 
to  December  2011;  a 
temporary recovery was seen in Q3 FY 
2012  to  31  March,  before  prices 
weakened  again  towards  the  year  end. 
Whilst  in  the  short  term  the  market  is 
expected to remain under pressure, due 
to  the  prevailing  climate  of  economic 
uncertainty,  the  medium  to  long-term 
outlook for the supply/demand balance 
in  the  rough  diamond 
is 
considered  to  be  robust,  with  demand 
generally 
all 
by 
forecasted 
commentators to exceed supply.

industry 

On the supply side, there are fewer than 
30 diamond mines of significance in the 
world  today  and  there  have  been  no 
important  exploration  successes  since 
the  finds  in  Canada  in  the  1990s.  The 
majority  of 
the  major  diamond 
producers have now been in operation 
for  decades  and  cannot  maintain 
previous high levels of output. In certain 
cases, open pit operations are having to 
move  underground,  which  naturally 
limits the volumes that can be extracted 
from the orebody. In order to extend the 
lives  of  these  assets,  major  capital 
expenditure 
development 
and 
programmes are required.

Whilst certain new mines are planned to 
come on stream in the next few years, 
there  is  nothing  of  significant  size  to 
make  up  for  this  downward  trend  in 
production,  leading  some  to  believe 
that  it  will  not  be  possible  to  again 
reach  the  peak  production  levels  of 
circa  176  million  carats  achieved  in 
2005/2006. In 2011, some 124 million 
rough  diamonds  were 
carats  of 
produced globally, a decrease in volume 
of  circa  3%  from  2010’s  total  of  128 
million 
(source:  Kimberley 
Process  Certification  Scheme).  This  is 
than  market 
lower 
considerably 
participants were expecting, suggesting 
that  previous  forecasts  on  future 
production levels could be optimistic.

carats 

Decreasing suPPLy VOLume (MILLION CARATS)
GLOBAL DIAMOND PRODUCTION

Source: Kimberley Process Statistics

200

150

100

50

2004

2005

2006

2007

2008

2009

2010

2011

a sHift frOm west tO east WORLD DIAMOND JEWELLERY SALES
The Far East (classified as China, Hong Kong, Taiwan, India and the Gulf) is expected 
to account for approximately 40% of global demand by 2015 as consumer demand 
continues to grow in emerging markets.

2000

2010

2015
Estimated

$ USA 48%

$  Asia 8%

$ USA 38%

$  India 10%

$ USA 35%

$  Taiwan 2%

$ Japan 18%

$  RoW 10%

$  Europe 16%

$  Gulf 8%

$  China/ 

Hong Kong 11%

$ Japan 11%

$  Taiwan 2%

$  Gulf 9%

$  Hong Kong 2%

$  RoW 20%

$ China 16%

$  Italy 2%

$ Japan 9%

$  RoW 14%

$  India 11%

Source: RBC Capital Markets/De Beers

6

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
There is a positive long-term outlook for the rough diamond 
market due to inherent production constraints which suggest 
that supply will struggle to keep pace with demand. 

Market’s performance in FY 2012 was characterised by volatility in line 
with uncertain economic conditions.

Whilst demand growth may have slowed 
for  now,  demand 
for  diamonds 
continues  to  rise  in  both  established 
markets, such as the US, and new markets, 
such  as  China,  as  global  wealth  and 
consumer 
increase.  An 
additional small but growing segment of 
demand 
in 
diamonds  as  a  hard  asset  investment 
class, and a number of new investment 
products have been launched to provide 
exposure to diamonds.

is  driven  by 

spending 

interest 

The  table  below  sets  out  the  diamond 
prices achieved across Petra’s mines in 
FY 2012 versus FY 2011, as well as the 
price  assumptions  that  management  is 
using as an annual average for FY 2013 
business  plans  (as  set  out  in  the  FY 
2013  Market  Guidance  announcement 
dated  15  August  2012).  Following  the 
recent  announcement  of 
the  sale 
process,  the  Fissure  Mines  have  not 
been included in the table below.

The Company’s first tender of FY 2013 
was concluded in early September and 
revenues  of  US$50.9  million  were 
achieved on the sale of 318,687 carats; 
a  summary  of  the  results  achieved  by 
mine is also set out in the table below. 
The  Company’s  FY  2013  guidance  for 
per carat price assumptions remains in 
place without revision.

Mine

Finsch 
Cullinan
Koffiefontein
Kimberley Underground
Williamson 

FY 2013
actual September
tender results
US$/ct 

133
149 2
566
236 3
243

FY 2013
guidance
average
US$/ct

129
129
475
300
220

FY 2012.1
actual
average
US$/ct

138
128
487
320
236

FY 2011.1
actual
average
US$/ct

n/a
148
564
333
302 4

1.   All average values are a mix of ROM and tailings production, as Petra tenders production from each mine on a mixed ROM/tailings parcel basis.

2.   Included a 69 carat stone sold for $US3.4 million.

3.  Wesselton plant in commissioning stage.

4.   Williamson FY 2011 value relates to alluvial production only, as there was no ROM production whilst the Phase 1 development programme was underway.

OUR STRATEGY P8

Annual Report and Accounts 2012 Petra Diamonds Limited

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Our strategy
At a glance

   Uncover
 Our strategy

Business model

Through its strong and responsible leadership, Petra is investing in the expansion 
and optimisation of its world-class assets in order to deliver significantly increased 
production in the years to come. Underpinning Petra’s strategy is a focus on 
safety and sustainability, thereby driving value for all stakeholders.

LeaDersHiP anD resPOnsibiLity

The Company is committed to the responsible development 
of its assets, to the benefit of all stakeholders.

fOcus On safety anD sustainabiLity

Corporate social responsibility is integral to the way the 
Group structures and operates its mining, development 
and exploration projects.

inVesting

Petra has committed significant capital in order to extend 
the lives of its mines. 

OPtimise recOVeries

Petra is focused on ‘value’ as opposed to ‘volume’ production 
and plans its mining and processing to capture a mine’s 
optimal rough diamond profile. 

wOrLD-cLass assets

Petra has acquired five of the world’s important diamond 
mines and in so doing has compiled a major diamond 
resource of over 300 million carats.

exPansiOn Of mines anD exPLOratiOn 

Petra has expansion plans in place at each of its operations 
and is seeking to discover new, economic kimberlites through 
its exploration programme in Botswana.

PrODuctiOn grOwtH

Petra has set out a transparent growth path which is expected 
to see production rising from 2.2 million carats in FY 2012 
to 5 million carats by FY 2019.

stakeHOLDer VaLue

Petra’s exceptional growth profile is expected to deliver 
substantially higher revenues and earnings over time, 
which will in turn deliver value to all stakeholders.

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8

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Our key objectives

The Group is focused on cash-generative diamond production, with a core objective 
to continue to grow rough diamond output and increase its stature as a leading 
diamond mining group.

Objectives

fy 2012

focus for fy 2013

increase OutPut 
Targeting 5 million carats 
by FY 2019

key PerfOrmance inDicatOrs
ROUGH DIAMOND PRODUCTION P10
REVENUE P10

 $ Acquired Finsch mine
 $ Recommenced production 

at Williamson

 $ Group production doubled 

to 2.2 Mcts

 $ Production target of 2.85 Mcts
 $ Total tonnages treated to increase 

from 10 Mt to circa 17 Mt

OPtimise recOVeries
Aiming to improve operating 
margins at each mine

key PerfOrmance inDicatOrs
SAFETY P10
PROFIT FROM MINING ACTIVITY P11

 $ Focus on recoveries at Finsch saw 
highest frequency of +50ct stones 
per million ROM carats since 2003

 $ Ongoing plant refinements at 

Wesselton (Kimberley Underground) 
and Williamson

 $ Continue to focus on ‘value’ as 
opposed to ‘volume’ production

 $ Ongoing plant refinements at 

Wesselton (Kimberley Underground) 
and Williamson

 $ Introduction of re-crush circuit to 
Cullinan modular tailings plant

 $ Continue to optimise plant 
processing and security

DriVe efficiencies
Maintaining a culture of 
effective cost control

 $ Inflationary cost pressures 

well controlled

 $ Capex in line with guidance

 $ Continue to drive efficiencies 

across the mines

 $ Continue to closely monitor 

and control Capex

key PerfOrmance inDicatOrs
NET OPERATING CASHFLOWS P11
CAPEX P11

resPOnsibLe LeaDersHiP anD sustainabiLity unDerPin Petra’s OPeratiOns

KEY PERFORMANCE INDICATORS P10

Annual Report and Accounts 2012 Petra Diamonds Limited

9

 
 
 
 
 
 
 
Our strategy
Key Performance Indicators

Key Performance Indicators

Petra uses various performance measures of both a financial and a non-financial 
nature to help evaluate the ongoing performance of the business. The following 
performance measures are considered by management to be some of the 
most important in terms of evaluating the overall performance of the Group 
year-on-year.

increase OutPut 

OPtimise recOVeries

rOugH DiamOnD PrODuctiOn 
(grOss)
MILLION CARATS

2.2

reVenue (grOss)
US$ MILLION 

316.9

safety GROUP LOST TIME INJURY 
FREQUENCY RATE (“LTIFR”) 

1.13

2.2

316.9

1.13

220.6

177.7

0.74

0.71

1.03

0.80

1.1

1.2

1.1

94.4

76.9

0.2

08

09

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12

08

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12

08

09

10

11

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DescriPtiOn

Petra has set out a clear and transparent 
growth profile, with production expected 
to rise gradually year-on-year to reach 
5 million carats by FY 2019. 

DescriPtiOn

DescriPtiOn

Petra’s growth path will see production 
rising every year to FY 2019, which is 
in turn expected (dependent on rough 
diamond prices) to deliver commensurate 
growth in revenue.

The safety of employees is Petra’s 
number one priority. LTIFR is defined 
as an occurrence that resulted in a time 
lost from work of one day or shift or 
more and Petra uses this indicator to 
track the annual Group’s performance.

PerfOrmance fOr tHe year

PerfOrmance fOr tHe year

PerfOrmance fOr tHe year

Petra effectively doubled production 
for the year to 2.2 million carats. 
This growth was mainly further 
to the acquisition of Finsch, which 
contributed 1.1 million carats from 
14 September 2011 (the date of 
takeover) to 30 June 2012.

Revenue grew 44% to US$316.9 million 
for FY 2012, primarily due to a 
contribution of US$136.9 million from 
Finsch, even though the mine acquisition 
only completed part way through the 
year on 14 September 2011. The 
contribution from Finsch was offset 
by weaker diamond prices experienced 
during the year.

Petra’s LTIFR increased slightly for 
the year. The team is focused on 
driving improvements, in line with 
the Group’s objective of a zero harm 
working environment. Very regrettably 
there was a fatality at the Kimberley 
Underground mine in January 2012; 
a full investigation was carried out 
into the accident.

risk management

risk management

risk management

Petra takes great care to set achievable 
operational targets, based on detailed 
mine production planning. Production 
performance throughout the year is 
monitored closely and if an operation 
falls behind, remedial steps are taken 
to help make up lost production.

The key factors affecting revenue 
growth are delivery on production 
targets and diamond prices, which are 
both monitored closely by the Group. 
Petra believes that its method of 
selling diamonds via competitive 
tender is the best way to maximise 
the value of its production.

Management’s focus on a zero harm 
environment requires a zero tolerance 
approach for any action that results in 
potential injury to employees. In addition 
to appropriate risk management 
processes, Petra has strategies, systems 
and training in place to promote a safe 
working environment. 

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OPtimise recOVeries

DriVe efficiencies

PrOfit frOm mining actiVity
US$ MILLION 

net OPerating casHfLOw
US$ MILLION 

103.3

79.9

caPex
US$ MILLION 

138.8

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DescriPtiOn

DescriPtiOn

DescriPtiOn

Profit from mining activity reflects 
the operating margins of Petra’s assets. 
Petra’s expansion plans aim to access 
major undiluted ore blocks; this is 
expected to substantially increase 
future margins over time.

Petra is focused on generating strong 
operating cashflow. The Group’s strategy 
is to apply these operating cashflows to 
fund the Group’s substantial Capex profile, 
which will lay the foundations for 
long-term sustainable production growth.

It is key to the Group’s production 
expansion that Capex is applied and 
development rolled out in line with 
stated business plans.

PerfOrmance fOr tHe year

PerfOrmance fOr tHe year

PerfOrmance fOr tHe year

Petra’s on-mine profit increased 35% to 
US$103.3 million in FY 2012, reflecting 
the introduction of Finsch into the Group 
from 14 September 2011, but partly 
offset by the weaker diamond prices 
already noted. This represents an 
operating margin of circa 33%, achieved 
against the background of volatile 
diamond prices.

The Group’s net operating cashflow grew 
by 57% to US$79.9 million in FY 2012, 
reflecting the quality of the Group’s 
assets and management team, set 
against a volatile diamond market 
for the year.

Capex spend for the year increased 
to US$138.8 million. This spend was 
in line with Petra’s original guidance, 
except for an exchange rate adjusted 
under-spend of circa US$35 million, 
due to the deferment of the Phase 2 
expansion programme at Williamson 
(see page 32) and the mining scope 
changes at Finsch (see page 26).

risk management

risk management

risk management

Rigorous operational and financial 
discipline is required in order 
to keep operating costs in check. 
A comprehensive annual budgeting 
process covering all expenditure is 
undertaken and approved by the Board. 
Monthly reporting highlights variances 
and remedial action can therefore be 
taken on a timely basis.

Strong financial and operational 
management, disciplined monitoring 
and reporting, long-term cashflow 
forecasting and strong banking 
relationships assist the Group 
in managing liquidity.

The Group’s annual budgeting process 
includes detailed Capex requirements 
per operation and is approved by the 
Board. Capex is monitored and variances 
noted on a monthly basis. The Group 
continually reviews its cashflow planning 
to ensure that Capex plans are 
adequately financed.

CHAIRMAN’S STATEMENT P14

Annual Report and Accounts 2012 Petra Diamonds Limited

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Finsch is a world-class underground block cave 
diamond mine with state-of-the-art mining 
infrastructure, including a modern processing plant

12

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
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business 
reView
“Our balanced and diverse 
portfolio of mining 
operations provides 
important flexibility in 
terms of how the Group 
achieves its targets.”

Annual Report and Accounts 2012 Petra Diamonds Limited

13

 
 
 
 
 
 
 
chairman’s statement
Adonis Pouroulis

“Petra’s growth profile requires enormous commitment 
and dedication and it is our team which is making 
growth happen each and every day.”

Adonis Pouroulis
Non-Executive Chairman

Chairman’s statement

Our vision is to further Petra’s stature as a diamond 
mining group of global significance. 

important  period 

Dear Shareholder, 

It  gives  me  great  pleasure  to 
introduce  Petra’s  2012  Annual 
Report.  The  2012  financial  year  was 
in  which  the 
an 
Company consolidated its position as a 
leading independent diamond producer, 
further to the acquisition of the world-
class  Finsch  mine  and  the  Company’s 
graduation from AIM to the Main Market 
of the London Stock Exchange.

important 

‘kimberlite 

Delivering on our strategy
Our  vision  is  to  further  Petra’s  stature 
as  a  diamond  mining  group  of  global 
significance. The Company has acquired 
five 
pipe’ 
diamond  mines  from  De  Beers  since 
2007,  being  (in  chronological  order) 
Koffiefontein  (South  Africa),  Cullinan 
(South  Africa),  Williamson  (Tanzania), 
Kimberley  Underground  (South  Africa) 
and  Finsch  (South  Africa).  In  so  doing, 
the  Company  has  compiled  one  of  the 
world’s  largest  diamond  resources  of 
over 300 million carats.

Our  strategy  is  now  to  invest  in  these 
key  assets  in  order  to  expand  and 

optimise  production  at  each  mine. 
long-term, 
We  have  put 
in  place 
sustainable  mine  plans 
for  each 
operation and have set out a clear path 
to steadily grow production year-on-year. 
In  FY  2012,  Petra  effectively  doubled 
production to 2.2 million carats and we 
have our sights set on reaching 5 million 
carats  per  annum  by  FY  2019.  This 
production  growth  will  be  achieved 
solely  through  organic  growth  and  will 
be  mainly  driven  by  the  deepening  of 
our  underground  pipe  mines  to  access 
new, undiluted blocks of ore.

A new flagship
The completion of the acquisition of the 
Finsch mine in South Africa introduced 
an  additional  flagship  mine  to  the 
Group.  Finsch  is  a  long-life,  major 
diamond  producer  with  significant 
reserves  and  resources  and  it  has 
brought  a  further  highly  skilled  and 
experienced  workforce  to  Petra.  The 
integration  of  Finsch  progressed  very 
smoothly  and  the  mine  contributed 
over 1.1 million carats to the Group for 
the  period  from  September  2011  to 
June 2012. 

Number of employees, 
excluding contractors, 
as at 30 June 2012

Cullinan

1,081 employees

Finsch

762 employees

Williamson

563 employees

Koffiefontein

460 employees

Kimberley Underground

581 employees

Helam

542 employees

Sedibeng

471 employees

Star

196 employees

Petra Diamonds Botswana

8 employees

Head Office/Group

104 employees

Petra Group

4,768 employees

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
“Petra is a significant employer in the diamond mining 
industry and we are committed to playing a positive 
role in Africa.”

Corporate social responsibility
Petra  is  a  significant  employer  in  the 
diamond  mining  industry  and  we  are 
committed to playing a positive role in 
Africa.  Sustainability  is  at  the  heart  of 
what  we  do  and  our  approach  is  to 
ensure a long-term future for our assets 
structuring  our 
by  planning  and 
operations 
the  benefit  of  all 
stakeholders.  To  read  more  about  our 
commitment 
social 
responsibility, please review our annual 
Sustainability Report, which is available 
on the Company’s website.

corporate 

to 

to 

is 

focused  on 

Corporate development 
The  Company 
the 
important area of Corporate Governance; 
please see my introduction on page 46 
of  this  report,  in  which  I  set  out  our 
commitment  to  this  area.  I  would  like 
to  welcome  three  new  independent 
Non-Executive  Directors  to  the  Petra 
Board,  who  contribute  a  wealth  of 
complementary  experience  in  terms  of 
geology,  mining,  the  capital  markets, 
audit  and  risk  management,  corporate 
governance,  and  Africa  as  a  place  to 
conduct business.

In line with best practice, I moved from 
Executive  to  Non-Executive  Chairman 
during  the  year,  though  of  course  my 
commitment  to  the  Company’s  success 
remains unchanged. 

Iconic assets mark the 
Diamond Jubilee
Petra  operates  iconic  and  historically 
significant  diamond  mines,  whose 
heritage we greatly value. In particular, 
Cullinan  and  Williamson  have  been  in 
the  spotlight  this  year,  further  to 
important gems from Queen Elizabeth II’s 
private  collection  being  on  display  at 
Buckingham  Palace  in  London  to  mark 
her  Diamond  Jubilee.  The  collection 
includes  pieces  made 
the 
legendary Cullinan Diamond – the world’s 
largest  gem  diamond,  which  weighed 
3,106  carats  as  an  uncut  stone  – 
including the Cullinan III and IV Brooch 
worn  by  the  Queen  at  the  National 
Service of Thanksgiving for her 60 year 
reign.  Also  included  is  the  Williamson 
Pink,  a  flawless  pink  diamond  of 
23  carats  polished,  which  is  noted  by 
the Royal Collection as “the finest pink 
diamond in existence”.

from 

Looking ahead
FY 2013 is now well underway and we 
are targeting further production growth 
to circa 2.85 million carats, due to a full 
year’s  contribution  from  Finsch  and 
Williamson,  as  well  as 
increased 
contributions  from  other  operations. 
We  are  also  looking  forward  to  the 
ongoing exploration results from KX36 
in Botswana, as we continue to evaluate 
this kimberlite’s economic potential.

Whilst  this  is  a  challenging  time  for 
diamond  producers,  given  the  current 
climate of global economic uncertainty, 
we have the quality team and assets in 
place to withstand tough times. We also 
have  a  growing  production  profile, 
ensuring  that  the  Group  is  poised  to 
benefit  when  market 
conditions 
improve. Given the very strong supply/
demand  fundamentals  of  our  industry, 
the long-term outlook remains positive.

The importance of partnerships
Petra would not be in the position it is 
today  were 
it  not  for  the  strong 
partnerships  we  have  forged  over  the 
years,  and  I  would  like  to  especially 
thank  our  host  Governments  of  South 
Africa,  Tanzania  and  Botswana,  as  well 
as  our  black  economic  empowerment 
partners  and 
the  Petra  Diamonds 
Employee Share Trust, for their support.

for 

Finally  I  would  like  to  thank  all  Petra 
their  hard  work 
employees 
throughout the year. The growth profile 
outlined  above  requires  enormous 
commitment  and  dedication  and  it  is 
our  team  which  is  making  this  growth 
happen  each  and  every  day.  We  are 
drawn together with a common purpose 
– to further establish Petra in all aspects 
as  one  of  the  world’s  leading  diamond 
mining  groups  –  and  we  look  forward 
to  further  delivering  on  this  strategy 
in FY 2013.

Adonis Pouroulis
Non-Executive Chairman
15 October 2012

Discover Petra Diamonds

8

mines in africa

+4,700

emPLOyees

2.2m

carats: grOss PrODuctiOn 
in fy 2012

5.0m

carats: grOss PrODuctiOn 
by fy 2019

300m+

carats resOurce base

FTSE 250

incLuDeD in marcH 2012 

Annual Report and Accounts 2012 Petra Diamonds Limited

15

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ceO’s review
Johan Dippenaar

“FY 2012 was a further year of significant progress 
for Petra, with the Company delivering strong revenue 
growth and doubling production to 2.2 million carats.”

 FY  2012  was  a  further  year  of 

significant  progress  for  Petra, 
the  Company  delivering 
with 
revenue  growth  and 
strong 
doubling  production  to  2.2  million 
carats  (“Mcts”).  The  year  also  marked 
two  very 
in 
Petra’s  development,  namely 
the 
completion  of  the  acquisition  of  the 
Finsch  mine  in  South  Africa  and  the 
Company’s  step-up  from  AIM  to  the 
Main  Market  of  the  London  Stock 
Exchange  and  subsequent  inclusion  in 
the FTSE 250 index.

important  milestones 

Finsch  is  one  of  the  world’s  important 
diamond  mines  and  has  brought  a 
further  major  reserves  and  resources 
base  to  the  Group.  The  integration  of 
the  mine  into  the  Petra  Group  ran 
is  already  a  major 
smoothly; 
contributor  to  Petra’s  total  annual 
production 
contribute 
and  will 
significantly to the Company’s longer-term 
target to increase annual production to 
5 Mcts by FY 2019.

it 

to 

increases 

is  central 

Accessing  deeper,  undiluted  ore  blocks 
at  Finsch,  Cullinan  and  Koffiefontein, 
from  which  we  expect  to  deliver 
in  production 
substantial 
the  Group’s 
grade, 
expansion  plans.  Mining  is  a  long-term 
business 
development 
programmes  run  over  the  course  of 
several years. From FYs 2016 and 2017, 
we  expect  to  start  to  see  the  positive 
effects  of  the  access  to  undiluted, 
higher grade ore. 

and 

our 

its 

Our  balanced  and  diverse  portfolio  of 
mining  operations  provides  important 
flexibility  in  terms  of  how  the  Group 
achieves 
targets.  As  with  all 
portfolios,  it  is  important  to  regularly 
assess  the  right  mix  and  balance. 
Management  has  increasingly  focused 
time  and  resources  on  its  flagship 
operations,  the  Fissure  Mines  have 
become  non-core  contributors  to  the 
Group and we have therefore, since the 
year end, commenced a sales process.

As  previously  reported,  the  Company 
has  been  working  on  restructuring  the 
Group’s debt requirements. Most of the 
Group’s current debt facilities were put 
in place before Finsch was acquired and 

Johan Dippenaar
Chief Executive Officer

CEO’s review

2012 has seen Petra further consolidate its position 
as London’s largest listed diamond mining group.

summary

 $ FY  2012  marked  two  very  important  milestones  in  Petra’s 
development,  namely  the  completion  of  the  Finsch  acquisition 
and  the  step-up  from  AIM  to  the  Main  Market  of  the  London 
Stock Exchange and subsequent inclusion in the FTSE 250 index.

 $ We  are  focused  on  continuing  to  increase  production,  with  the 
ultimate objective of taking annual output to 5 Mcts by FY 2019.

 $ We  have  built  up  a  solid  track  record  of  meeting  our  targets; 
our team’s experience and working knowledge of the Group’s mines 
is essential to delivering the Company’s future success.

 $ Petra  is  well  placed  to  withstand  challenging  market  conditions, 

due to the quality of our assets and our management team.

16

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
“Whilst the current economic climate is challenging, 
Petra is well placed to withstand market conditions due 
to the quality of its assets and management team.”

PrODuctiOn COmBInED OPERATIOnS

Sales
Revenue
Diamonds sold

Production
ROM diamonds
Tailings and alluvial diamonds

Total diamonds

Capex1
Expansion
Sustaining2

Total

Unit

FY 2012

FY 2011

Variance

US$m
Carats

Carats
Carats

Carats

US$m
US$m

US$m

316.9
2,084,429

1,872,120
336,742

2,208,862

108.8
29.2

138.0

220.6
1,174,825

1,027,609
90,186

1,117,795

59.1
51.6

110.7

+44%
+77%

+82%
+273%

+98%

+84%
-43%

+25%

1.   Group Capex includes US$11.1 million for the year (FY 2011: US$11.0 million), which was incurred by the Group’s internal projects facility in terms of projects/equipment 
under construction and which will reflect as ‘on-mine’ Capex once these projects are finalised and invoiced to the respective operation. Therefore the Capex figures stated in 
the mine by mine tables in the Operational Review from page 24, plus the US$11.1 million internal projects Capex and Fissure Mines Capex, add together to provide the 
Capex total in the table above.

2.  Excludes US$0.8 million of Capex for Group/corporate/exploration that is not given in the mine by mine tables in the Operational Review.

Construction underway of the new 
modular tailings plant at Cullinan

the cashflows from this mine are highly 
relevant  with  regards  to  debt  planning 
and  servicing.  At  the  same  time,  the 
volatility 
in  rough  diamond  prices 
during FY 2012 and the outlook for the 
next  year  or  so,  when  prices  are 
expected to remain flat or show a small 
increase,  means  that  the  Group  has 
reviewed  its  financing  requirements  to 
ensure that it is fully funded to deliver 
on  the  capital  expansion  programmes. 
The process with the syndicate banks is 
progressing  well  and  they  have  given 
their  provisional  commitment  (subject 
to  completion  of  due  diligence  and 
legal  documentation) 
the  debt 
requirements  and  structure  requested 
by Petra, which will see the Group fully 
funded through to the conclusion of its 
expansion  programmes.  The  Company 
will  update  shareholders  once  the 
formal process, including full form signed 
documentation,  has  been  completed 
(expected to be in Q2 FY 2013).

to 

In  line  with  our  increased  stature  as  a 
FTSE  250  company  and  London’s 
largest  listed  diamond  mining  group, 
Petra  continues  to  evolve  corporately. 
to  welcome 
We  were  delighted 
Dr  Patrick  Bartlett  and  Mr  Gordon 
Hamilton  to  the  Board  during  the  year 
as independent Non-Executive Directors, 
and  Mr  Tony  Lowrie  to  the  Board  as 

Annual Report and Accounts 2012 Petra Diamonds Limited

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ceO’s review continued
Johan Dippenaar

Senior 
Independent  Non-Executive 
Director following the year end. Petra is 
grateful  for  the  contribution  of  its 
independent  Non-Executive  Directors 
and we now benefit from a Board with 
a  broad  range  of  expertise  across  a 
range  of  complementary  and  highly 
relevant disciplines.

Production  effectively  doubled  for  the 
year further to the acquisition of Finsch, 
which contributed 1.1 Mcts in FY 2012, 
although revenue growth was affected 
by the volatility of the diamond market 
and overall weaker prices.

Carats  sold  were  up  77%  to  2,084,429 
(FY  2011:  1,174,825).  Carat  sales  were 
lower  than  carats  produced  due  to  the 
inclusion of Finsch into closing inventory 
for  the  first  time;  going  forward  the 
effects of Finsch should level out.

Petra sold eight stones exceeding US$1 
million  each  during  the  year,  for  total 
revenue  of  US$14.4  million  (FY  2011: 
12 stones exceeding US$1 million each 
were sold for a total of US$27.7 million).

The  Operational  Review  to  follow  on 
pages 24 to 37 provides more detail on 
the Group’s operational performance for 
FY 2012 and forms part of this review.

entered 

Increase in effective interests 
in South African operations
As  announced  in  February  2012,  the 
an 
Company  has 
agreement  whereby  it  can  acquire  a 
49.24%  effective  interest  in  Sedibeng 
Mining  (Pty)  Ltd  (“Sedibeng  Mining”). 
Sedibeng Mining is one of Petra’s South 
African  empowerment  partners,  with 
varying interests in all of Petra’s South 
African operations. 

into 

for 

the  acquisition  of 

The  total  consideration  payable  by 
Petra 
the 
effective  49.24%  holding  in  Sedibeng 
Mining  is  US$17.8  million.  To  date,  the 
Company  has  paid  US$17.2  million  in 
respect to this agreement (refer to note 
30).  It  is  expected  that  the  agreement 
will  complete  in  the  near  future  and 
the  balance  of  the  consideration  of 
US$0.6  million  will  then  be  paid  by 
the Company. 

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Maintenance underway on one of the automated 
(driverless) underground truck fleet at Finsch

Disposals of the Fissure Mines
Post  year  end  on  31  July  2012,  the 
Company  announced  that  it  had,  in 
conjunction  with 
its  BEE  partners, 
decided to undertake a sale process in 
respect of the Fissure Mines.

Due to Petra’s focus on the development 
of  its  major  assets,  the  Group  has 
evolved into a successful producer from 
underground  and  surface  (Williamson), 
high-tonnage  kimberlite  pipe  mines. 
The  Fissure  Mines  have  therefore 
become non-core to the Group, both in 
terms  of  their  revenues  and  resource 
base, and Petra is of the view that the 
Fissure  Mines  have  the  potential  to 
deliver  strong 
the 
ownership of an operator to whom they 
would be core assets. 

returns  under 

On 7 September 2012 Petra announced 
that  the  disposal  process  had  formally 
commenced  and 
that  Petra  had 
appointed  QuestCo  (Pty)  Limited,  a 
South  Africa-based  corporate  finance 
adviser  with  prior  experience  in  the 
successful sale of other diamond assets 
in  South  Africa,  to  manage  the  sale 
process.  Although  in  the  early  stages, 
the sale process is progressing well and 
the  Company  will  provide  a  further 

update  as  and  when  appropriate, 
although  the  nature  of  such  sale 
processes 
is  they  run  for  several 
months at a confidential level.

Potential  transactions  arising  from  the 
sale process will be subject to detailed 
scrutiny  and,  apart  from  financial 
objectives, Petra will consider prospective 
purchasers’  approach  to  employment, 
health  and  safety,  environmental 
management  and  other 
issues 
fundamental to the long-term success of 
the Fissure Mines for all stakeholders.

the  sale  process  and 

Given 
the 
immateriality  of  the  Fissure  Mines’ 
numbers  to  the  enlarged  Petra  Group, 
detailed reporting of the Fissure Mines’ 
results  have  not  been  supplied  in  the 
Operational Review to follow.

Safety
The health and safety of all employees 
remains  the  Company’s  number  one 
priority and Petra is highly focused on 
this area. In addition to appropriate risk 
management  processes,  Petra  has 
strategies, systems and training in place 
to promote a safe working environment. 
Management’s  focus  on  a  zero  harm 
environment  requires  a  zero  tolerance 

18

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
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periods  in  both  the  diamond  and 
capital markets.

We  are  focused  on  continuing  to 
increase  production,  with  the  ultimate 
objective  of  taking  annual  output  to 
5 Mcts by FY 2019. We have built up a 
solid track record of meeting our targets 
and our team’s experience and working 
knowledge  of  the  Group’s  mines  is 
essential  to  delivering  the  Company’s 
future success. 

Finally,  I  would  like  to  thank  the  Petra 
team  for  the  hard  work  and  resilience 
which  continues  to  drive  the  Group 
forward.  I  would  also  like  to  thank 
our  valued  Government  and  BEE 
partners,  whose  support  underpins 
Petra’s long-term prospects.

Johan Dippenaar
Chief Executive Officer
15 October 2012

The open pit operations at the Ebenhaezer 
satellite pipe at Koffiefontein

approach for any action that results in 
potential injury to employees and Petra 
seeks  to  instill  a  systemic  culture 
of safety.

It  is  with  deep  regret  that  Petra 
experienced  a  fatality  on  22  January 
2012  at  the  Kimberley  Underground 
operation.  The  Company  and  its 
management team express their sincere 
condolences  to  the  family  and  friends 
of the deceased.

The Group’s Lost Time Injury Frequency 
Rate  (“LTIFR”)  for  the  year  was  1.13 
(FY 2011: 0.80). The Company’s ongoing 
initiatives  will  endeavour  to  lower  the 
LTIFR in line with its policy of zero harm.

Petra  produces  an 
in-depth  report 
annually on its sustainable development 
policies  and  practices,  covering  areas 
such as health and safety, environment, 
community and employment. The 2012 
report  will  be  made  available  once 
published  on  the  Petra  website  at 
www.petradiamonds.com. 

labour  unrest 

South African mining 
environment
in 
Since  year  end, 
South Africa’s mining industry has been 
widely  reported  in  the  media.  With 
regards to Petra, it is important to note 
that 
the  Group’s 
employees  are  skilled  and  semi-skilled 
workers,  as  block  cave  mining  is  a 
highly mechanised process. 

the  majority  of 

The  Company  continues  to  monitor 
the  situation  both  within  South  Africa 
as a whole and at its specific operations. 
Petra  has  a  strong  record  of  stable 
labour  relations  and  remains  focused 
on  the  ongoing  dialogue  which  the 
Company has always practised with the 
representative unions.

Outlook
Whilst  the  current  economic  climate 
is  challenging,  Petra  is  well  placed  to 
withstand market conditions, due to the 
quality  of  its  assets  and  management 
team. Our focus on the key areas of our 
business  has  been  honed  over  many 
years of operating underground diamond 
mines, including through other challenging 

Annual Report and Accounts 2012 Petra Diamonds Limited

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financial review
David Abery

“An adjusted net profit after tax of US$39.2 million 
was recorded for FY 2012, adjusted for unrealised 
foreign exchange movements and transaction costs.”

Revenue  of  US$316.9  million  was 

recorded for the year, an increase 
of  44%  on  the  US$220.6  million 
revenue  recorded  for  FY  2011. 
The  increase  in  revenue  was  primarily 
due  to  the  contribution  from  Finsch, 
which  added  an  additional  US$136.9 
million  to  revenue  for  the  year,  even 
though  the  Finsch  acquisition  only 
completed part way through the year on 
14  September  2011.  The  contribution 
from  Finsch  was  offset  by  weaker 
diamond  prices  experienced  during  the 
year, as covered in The Diamond Market 
review on pages 6 and 7.

Mining and processing costs
Gross mining and processing cash costs 
for  the  South  African  operations  
(before diamond royalties and diamond 
inventory  movements),  annualised  for 
the inclusion of Finsch from 14 September 
2012, increased by 16% on a ZAR basis, 
due to:

 $ upwards  pressure  on  electricity  and 
labour costs (9% of the increase); and

 $ treatment  of  higher  tonnages  across 
the operations versus FY 2011 (7% of 
the increase).

Certain  cost  categories  in  South  Africa 
have  increased  in  excess  of  South 
African inflation (South African CPI stood 
at  5.5%  at  30  June  2012).  Petra’s  cost 
focus,  coupled  with  higher  tonnage 
to 
throughput,  enabled 
partially  mitigate  the  direct  effect  of 
inflationary  pressures.  Two  key  areas 
where  costs  escalated  at  a  higher  level 
than  South  African  CPI  are  electricity 
and labour.

the  Group 

David Abery
Finance Director

Financial review

Petra’s management is focused on cashflow 
generation from its operations.

summary

 $ Revenue  rose  44%  to  US$316.9  million,  primarily  due  to  the 

contribution from Finsch.

 $ Profit  from  mining  activity  increased  35%  to  US$103.3  million, 

an on-mine margin of 33%.

 $ Adjusted  EBITDA  rose  35%  to  US$90.3  million;  further  growth 

was affected by weaker diamond prices in FY 2012.

 $ Operating cashflow rose 58% to US$79.9 million, reflecting Petra’s 

focus on this key area.

 $ Detailed  analyst  guidance  notes  can  be  downloaded  from  the 
Company’s website at www.petradiamonds.com/investors/analysts/
analyst-guidance.aspx.

20

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
“Exploration expenditure increased to US$3.0 million 
due to Petra’s work programme at the KX36 kimberlite 
in Botswana and the surrounding area.”

Electricity prices rose by 22% during the 
year and a further increase of circa 16% 
has been approved by the South African 
National Energy Regulator for FY 2013. 
Petra’s  electricity  usage  accounted  for 
approximately 16% of cash on-mine costs. 
Petra endeavours to manage its electricity 
consumption  as  the  Group’s  production 
profile  increases  and  the  Company  has 
achieved good success in this area.

aDjusteD ebitDa 
US$ MILLION

90.3

90.3

70.9

67.1

accounts 

currently 

Labour 
for 
approximately  40%  of  on-mine  cash 
costs  at  the  South  African  pipe  mines 
and  59%  of  on-mine  cash  costs  at  the 
Fissure  Mines.  Going  into  FY  2013,  the 
Company  anticipates  that  labour  cost 
increases  will  continue  to  be  slightly 
above inflation.

As the bulk of Petra’s operating costs are 
incurred  in  ZAR,  the  11%  weakening  of 
the  average  ZAR  exchange  rate  against 
the US dollar (FY 2012: R7.7685:US$1 vs 
FY  2011:  R7.0076:US$1)  negated  some 
of  the  increased  costs  in  ZAR  terms  as 
mentioned above. 

Unit  costs  on  a  mine  by  mine  basis  are 
covered  in  the  Operational  Review  on 
pages 24 to 37.

The mining and processing costs for the 
year  are,  as  in  past  periods,  comprised 
of  on-mine  cash  costs  as  well  as  other 
operational  expenses.  A  breakdown  of 
the total mining and processing costs for 
the year is set out below.

With regards to FY 2013, the Company 
provided  guidance  for  both  tonnages 
and  on-mine  cash  costs  per  tonne  and 
depreciation  on  15  August  2012,  and 
that  guidance  can  be  accessed  on  the 
Company’s website.

As  noted  on  page  23  under  “Cash  and 
diamond inventory”, management expects 
diamond  inventories  to  be  circa  20% 

25.5

–8.6

08

09

10

11

12

net OPerating casHfLOw
US$ MILLION

79.9

79.9

48.8

50.9

0.8

08

4.6

09

10

11

12

higher  in  US  dollar  terms  at  the  end 
of FY 2013 versus the end of FY 2012.

For FY 2013, the Company expects the 
cost  of  the  Group  central  technical  and 
support services to be circa R120 million, 
an increase on FY 2012 (R98.7 million) in 
line with the increased size of the Group 
after the acquisition of Finsch and other 
Group support structures.

Mining profit
The  Company’s  profit  from  mining 
activity  increased  35%  to  US$103.3 
million 
(FY  2011:  US$76.4  million), 
reflecting the introduction of Finsch into 
the Group from 14 September 2011, but 
mitigated by the weaker diamond prices 
as already noted. Even though the Group 
is  in  expansion  and  development  at 
some  of  its  operations,  profit  from 
mining  activity  for  the  Group  reflected 
an  overall  margin  of  circa  33%  for  the 
year  (FY  2011:  circa  35%).  The  margin 
for  FY  2012  was  achieved  against  a 
background of volatile diamond prices.

Operating cashflow
Petra’s  management 
is  focused  on 
cashflow generation from its operations. 
Operating  cashflows  of  US$79.9  million 
were  generated  for  the  year  (FY  2011: 
US$50.9 million). 

Exploration
Petra maintained its focused exploration 
programme  in  Botswana.  Exploration 
expenditure  (before  depreciation)  for 
the  year  of  US$3.0  million  (FY  2011: 
US$1.3 million) increased due to Petra’s 
work programme at the KX36 kimberlite 
and  the  surrounding  area.  Refer  to  the 
Botswana operations section in this report 
for comment on exploration activities.

Company 

The 
expects 
exploration  spend  in  Botswana  to  be 
circa US$5 million in FY 2013. 

currently 

fy 2012 – breakDOwn Of mining anD PrOcessing cOsts

On-mine
cash cost
US$ million

234.3

Diamond
 royalties
US$ million

Inventory
 movement
US$ million

Centralised
 operating
cost
US$ million

Other
US$ million

Sub-total
mining and 
processing 
cost
US$ million

Depreciation
US$ million

Share-based
expense
US$ million

Total
mining and
 processing
 costs
US$ million

1.4

(19.4)

11.6

(5.3)

222.6

40.7

0.6

263.9

Annual Report and Accounts 2012 Petra Diamonds Limited

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financial review continued
David Abery

“An increased cash Capex spend of US$138.8 million 
reflects the progression of the Company’s 
development programmes.”

PrOfit frOm mining actiVity

US$103.3m

aDjusteD ebitDa

US$90.3m

OPerating casHfLOws generateD

US$79.9m

aDjusteD grOuP PrOfit

US$39.2m

Corporate overhead – 
general and administration
Corporate overhead increased to US$10.0 
million  for  the  year  (FY  2011:  US$8.0 
million). The increase over the prior year 
is due to staff costs, general corporate 
costs and professional fees commensurate 
with the Group’s enlarged size. 

For  FY  2013,  the  corporate  overhead 
is expected to remain at circa US$10 million 
and management will continue to keep 
these  central  costs  well  controlled 
and managed.

Transaction costs
Transaction  costs,  which  were  of  a 
non-recurring  nature,  incorporate  the 
professional fees and expenses associated 
with  the  Main  Market  step-up  (US$2.7 
million)  and  the  Finsch  acquisition 
(US$0.4 million).

Depreciation
Depreciation  for  the  year  was  US$41.0 
million  (FY  2011:  US$22.4  million).  The 
increase was mainly attributable to nine 
months  of  depreciation  on  the  Finsch 
(US$14.2  million),  Kimberley 
assets 
Underground’s 
increased  production 
(US$2.0 million) and commissioning of the 
rebuilt plant at Williamson (US$1.5 million).

Net unrealised foreign 
exchange loss
Net unrealised foreign exchange losses of 
US$38.6 million (FY 2011: US$18.6 million 
gain) are mainly due to unrealised foreign 
exchange movements on the retranslation 
of foreign subsidiary intercompany loans 
as a result of the significant movement in 
ZAR/US$ rate from R6.84 at the start of 
the year to close at R8.16 at the end of 
the year.

The  Group’s 
foreign  subsidiary 
loan  balances  are 
intercompany 
substantial due to the funding provided 
by the holding company to its subsidiaries, 
mainly  with  regards  to  the  acquisition 
consideration of the Cullinan and Finsch 
mines.  Under  IFRS,  foreign  exchange 
movements on loans that management 
do  not  consider  will  be  repaid  in  the 
medium  term  are  recorded  to  equity 
within the Foreign Currency Translation 
Reserve, whilst other foreign exchange 
movements are taken to the Consolidated 
Income Statement.

Net finance income
Net  finance  income  of  US$1.8  million 
(FY  2011:  US$3.5  million  expense)  is 
comprised  of  interest  received  on  the 
Group’s  cash  balances,  net  of  interest 
receivable  from  BEE  partners’  loans  of 
US$3.0  million  and  net  realised  foreign 
exchange gains of US$7.4 million, offset 
by various finance expenses, being:

 $ a  charge  for  the  unwinding  of  the 
present  value  adjustment  for  Group 
rehabilitation costs of US$5.9 million;

 $ interest  on  i)  the  Group’s  working 
capital  facility  of  US$1.9  million,  ii) 
the Group’s IFC/RMB debt facilities of 
US$1.4  million 
(stated  after  the 
capitalisation  of  interest  of  US$6.3 
million associated with the funding of 
assets  under  development)  and  iii) 
the  Al  Rajhi/Cullinan  deferred  cash 
consideration  (amount  outstanding 
fully settled in March 2012) of US$0.1 
million; and

 $ interest  accretion  on  the  Al  Rajhi/
Cullinan  deferred  cash  consideration 
of US$1.1 million.

Tax charge
The  tax  charge  of  US$10.5  million  (FY 
2011:  charge  of  US$5.2  million)  arises 
due to deferred tax (net of charges and 
credits),  reflecting  the  utilisation  of 
certain capital allowances during the year.

Adjusted Group profit
An adjusted net profit after tax of US$39.2 
million (refer to note 13) was recorded 
for the year (FY 2011: US$34.9 million), 
adjusted for unrealised foreign exchange 
movements and transaction costs. The 
Company recorded an adjusted profit of 
7.82 cents per share (FY 2011: 8.41 cents 
per share). The adjusted results before 
the non-cash unrealised foreign exchange 
movements and non-recurring transaction 
costs is considered to be more appropriate 
in comparing results year-on-year.

Group loss 
A net loss after tax of US$2.1 million was 
recorded for the year (FY 2011: US$59.2 
million  profit).  These  results  were 
substantially impacted by the non-cash, 
unrealised  loss  on  foreign  exchange 
(US$38.6  million),  which  is  why  the 
Company  considers  that  the  adjusted 
Group  profit  of  US$39.2  million  

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22

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
“The review of the Group’s debt requirements is 
progressing well, with the syndicate banks having 
given their provisional commitments.”

(FY 2011: US$34.9 million) (refer note 13) 
provides for greater comparability year-
on-year  of  underlying  performance.

Cash and diamond inventory
As  at  30  June  2012,  Petra  had  cash  in 
hand of US$47.3 million (30 June 2011: 
US$324.9  million).  The  movement  in 
cash balances over the year is primarily 
attributable to:

(i)   settlement of the Finsch acquisition 
purchase price of US$192 million;

(ii)   cash Capex spend of US$135.5 million; 

and

(iii)  settlement  of  the  Al  Rajhi  deferred 
consideration of US$20 million,

offset by the positive net cash generated 
from operations of US$79.9 million.

regards 

US$31.3  million  is  held  as  unrestricted 
cash,  US$10  million  is  held  by  Petra’s 
reinsurers  as  security  deposits  on  the 
Group’s  cell  captive  insurance  structure 
Group’s 
to 
(with 
environmental  guarantees)  and  US$6.0 
million  is  held  by  Petra’s  bankers  as 
security 
environmental 
rehabilitation  bonds  which  are  lodged 
with 
the  Department  of  Mineral 
Resources in South Africa. 

for  other 

the 

As at 30 June 2012, the Company had 
diamond  inventories  of  circa  US$24.5 
million  (2011:  US$13.3  million).  The 
production cut-off for the last tender of 
the year was the end of May 2012 and it 
will  be  a  similar  date  going  forward. 
However,  due  to  the  expected  increase 
in  production  for  FY  2013,  some  of 
which will be back ended to the second 
half of the year, diamond inventories are 
expected  to  be  circa  20%  higher  in  US 
dollar  terms  at  the  end  of  FY  2013 
versus FY 2012.

BEE loans receivable
The BEE loans of US$89.4 million (FY 2011: 
US$50.9 million) due to Petra arise from:

 $ Petra  having  financed 

the  BEE 
partners’  share  of  the  purchase 
considerations of the Finsch, Cullinan, 
Koffiefontein 
Kimberley 
Underground acquisitions; and

and 

 $ Petra  having  financed 

the  BEE 
partners’  share  of  the  working  and 
development  capital  that  has  been 
required for certain of the mines.

The  increase  in  the  BEE  loans  over  FY 
2012  is  mainly  due  to  Petra  having 
financed the BEE partners’ share of the 
purchase  consideration  of  the  Finsch 
mine during the year.

All BEE loans are repayable out of free 
cashflow from the operations, with Petra 
having  the  first  call  on  such  cash  until 
the BEE loans are repaid. The BEE loans 
in  “Loans  and  other 
are 
receivables” under “Non-current assets” 
on 
the  Consolidated 
face  of 
Statement of Financial Position.

included 

the 

Loans and borrowings 
Loans and borrowings at 30 June 2012 
(current and non-current) were US$69.0 
million  (FY  2011:  US$90.1  million), 
comprising drawn-down IFC/RMB facilities 
of US$65.4 million (IFRS 2 adjusted for 
facility  and  warrant  costs)  (US$69.2 
million gross before IFRS 2 adjustment) 
and  loans  due  to  associates  of  US$3.6 
million (2011: US$1.8 million). 

During the year, the Company settled the 
Al Rajhi deferred consideration liability of 
US$20.1 million (US$20 million capital and 
US$0.1 million interest).

At the end of November 2011, Petra put 
in  place  further  debt  facilities  of  circa 
US$37  million  with  RMB.  The  facilities 
comprise  a  revolving  credit  facility  of 
R200  million  (US$24.5  million)  and  a 
working capital facility of R100 million 
(circa US$12.2 million). Post year end, an 
additional US$25 million revolving credit 
facility  was  put  in  place  with  IFC,  also 
secured on Finsch, so that the lenders 
together provided circa US$50 million in 
revolving credit facilities to Petra (refer 
to notes 22 and 29 for details).

Other  than  the  revolving  credit  and 
working  capital  facilities  above,  Petra  
also  has  working  capital  (overdraft) 
facilities  with  RMB/FirstRand  Bank 
Limited of approximately US$9.8 million  
(R80 million).

As  at  30  June  2012,  undrawn  bank 
facilities  of  US$66.3  million  (FY  2011: 
US$19.9  million)  were  available  to 
the Group.

An  update  with  regards  to  the  review 
of Petra’s longer-term debt requirements 
is covered in the CEO’s Review on pages 
16 to 19.

Other liabilities
Other than trade and other payables of 
US$49  million 
(comprising  US$17.2 
million  trade  creditors,  US$18.8  million 
employee-related accruals and US$13.0 
million  other  payables)  (these  balances 
all  increased  substantially  due  to  the 
acquisition  of  Finsch),  the  remaining 
liabilities  on  the  balance  sheet  mainly 
comprise  provisions  for  rehabilitation 
liabilities,  amounts  owing  due  to  the 
financing  of 
the  minorities,  post-
retirement  employee-related  provisions 
and deferred tax.

Capital expenditure
Capex for the year was US$138.8 million 
(FY 2011: US$110.9 million), being cash 
Capex of US$135.5 million (refer to the 
Production  section  in  the  Operational 
Review  on  pages  24  to  37  for  Capex 
spend by operation) and non-cash items 
mainly in respect of the capitalisation of 
Capex-related  borrowing  costs  of  
US$3.3 million. This increased cash Capex 
spend  reflects  the  progression  of  the 
Company’s  development  programmes, 
most  notably  at  Cullinan,  Finsch, 
Kimberley  Underground  and  the 
commissioning of the Williamson plant.

Petra’s  guidance  for  FY  2012  (issued 
September  2011)  was  total  Capex  of 
US$188.9 million, split as to expansion/
projects Capex of US$166.6 million and 
sustaining Capex of US$22.3 million. The 
underlying  cash  spend  is  mainly  rand-
based  at  the  Group’s  South  African 
projects;  guidance  was  calculated  at 
R6.75:US$1 but the actual average rate 
for  the  year  of  R7.77:US$1  led  to  an 
exchange  rate  saving  on  guidance  of 
US$18.2 million.

The exchange rate adjusted under-spend 
of circa US$35 million was mainly due to 
the deferment of the Phase 2 expansion 
programme  at  Williamson  and  US$14 
million due to the mining scope changes 
at Finsch.

David Abery
Finance Director
15 October 2012

Annual Report and Accounts 2012 Petra Diamonds Limited

23

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A LHD feeds ore into an underground tip at Cullinan, 
where the ore is broken up into a manageable size 
for handling underground

24

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
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OPeratiOnaL 
reView
“Accessing deeper, 
undiluted ore blocks 
is central to the Group’s 
expansion plans.”

Annual Report and Accounts 2012 Petra Diamonds Limited

25

 
 
 
 
 
 
 
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Our assets
In depth

 Finsch

One of the world’s major diamond mines, 
Finsch benefits from state-of-the-art mining 
infrastructure including a modern processing 
plant which was recently upgraded.

43%

reVenue 
cOntributiOn

Finsch performed well during the year, contributing to half of Petra’s 

production  by  volume  and  43%  by  value,  a  solid  result  given 
management  of  the  mine  was  only  assumed  during  September 
2011. The mine produces a regular proportion of high quality gem 
diamonds,  including  fancy  colours.  During  the  year,  two  stones  were 
sold in excess of US$1 million each, being a 32.0 carat diamond which sold 
for US$1.56 million and a 57.3 carat diamond which sold for US$1.49 million.

Production during the year focused on mining ore from the existing Block 
4 horizon. With Petra’s experience and focus on diamond recoveries, a ROM 
grade  of  36.8  Cpht  was  achieved  for  the  year.  Similarly,  the  Company 
was encouraged that the mine recorded the highest frequency of +50 
carat  stones  per  million  ROM  carats  recovered  since  2003;  this  is  an 
important reflection of Petra’s focus on recoveries and ‘value production’.

For FY 2013 and FY 2014, the block depletion model indicates that the 
Block 4 ROM grades are expected to vary due to the increased dilution 
of this mature mining area. Petra will manage the expected reduction in 
grade during this period by supplementing Block 4 tonnages with higher 
grade  material  from  the  Block  4  pillars  and  the  early  sub  level  cave 
(“SLC”)  development  tonnes,  with  an  overall  expected  ROM  grade  at 
Finsch for these years of circa 30 Cpht.

The treatment of the Pre-79 tailings dumps yielded a grade of 17.0 Cpht, 
in  line  with  expectations.  Petra  is  currently  ramping  up  the  tailings 
programme from 2.8 Mt in FY 2013 to 3.5 Mtpa by FY 2014. Treatment 
of  the  Pre-79  dumps  is  planned  to  continue  until  FY  2015/FY  2016, 
followed by treatment of the Post-79 dumps until FY 2020, which would 
be at a lower estimated grade of approximately 10 Cpht.

Costs
The  weighted  average  unit  operating  costs  of  R134  per  tonne  (“/t”)  at 
Finsch are in line with management’s expectations.

South Africa

PerfOrmance summary

 $ Finsch performed very well in FY 2012, 
contributing half of Petra’s production 
by volume and 43% by value.

 $ Petra’s focus on recoveries saw the 

highest frequency of +50 carat stones 
per million ROM carats recovered 
since 2003.

 $ The treatment of the Pre-79 tailings 
dumps yielded a grade of 17.0 Cpht, 
in line with expectations.

reVenue

fy 2012 – grOss numbers

US$136.9m 

DiamOnDs sOLD

989,101 carats 

aVerage Price Per carat

US$138 

Sales
Revenue
Diamonds sold
Average price per carat

ROM production
Tonnes treated
Grade
Diamonds produced

Tailings production
Tonnes treated
Grade
Diamonds produced

Total production
Tonnes treated
Diamonds produced

Costs
On-mine cost per total tonne treated

Capex
Expansion Capex
Sustaining Capex

Total Capex

Unit

FY 2012
actual

FY 2011
actual

US$m
Carats
US$

136.9
989,101
138

Tonnes
Cpht
Carats

2,260,842
36.8
832,396

Tonnes
Cpht
Carats

1,600,170
17.0
272,222

Tonnes
Carats

3,861,012
1,104,618

ZAR

134

US$m
US$m

US$m

8.7
3.3

12.0

n/a
n/a
n/a

n/a
n/a
n/a

n/a
n/a
n/a

n/a
n/a

n/a

n/a
n/a

n/a

Petra has a 74% interest in Finsch; BEE partners 26%

The  acquisition  of  the  Finsch  mine  completed  on  14  September  2011;  therefore  there  are  no 
results for FY 2011.

26

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
The production control room at Finsch

Petra is implementing 
an expansion plan to take 
production to nearly 2 Mctpa 
by FY 2017 by accessing the 
undiluted orebody below the 
current Block 4 and ramping 
up a tailings programme

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Development plan
Petra is implementing an expansion plan at Finsch to take production from 
circa 1.4 million carats per annum (“Mctpa”) to nearly 2 Mctpa by FY 2017. 
This will be achieved by accessing the undiluted orebody below the current 
Block 4, as well as the ramp-up of the tailings treatment programme.

Whilst  the  key  objective  of  this  expansion  plan  has  not  changed,  in 
August  2012  Petra  announced  a  revision  of  the  short-term  mining 
approach at Finsch (covering years FY 2013 to FY 2016), as management 
had  used  on-the-ground  experience  gained  from  operating  the  mine 
since the time of the takeover to reconsider the provisional plans arrived 
at during the due diligence period. 

The  Company’s  geotechnical  studies  have  concluded  that  instead  of 
mining  the  South  West  Precursor  (which  would  have  increased 
geotechnical risks to the current Block 4 cave), the footprint of the SLCs 
should  be  enlarged,  thereby  increasing  tonnes  to  be  mined  from  the 
SLCs  from  circa  4  Mt  to  10  Mt.  Petra  will  gain  access  to  development 
tonnes from the SLCs in FY 2014, with first production from FY 2015, 
ramping  up  to  full  production  by  FY  2017.  This  change  of  scope  will 
result in earlier access to undiluted ore, improving the mine’s long-term 
economics and optimising the production plan from a geotechnical and 
mining perspective. It has the additional benefit of reducing expansion 
Capex at Finsch by circa R570 million (circa US$71 million) (in comparable 
FY 2013 money terms) for the period to FY 2016.

As the main Block 4 production area depletes it will gradually be replaced by 
the SLCs with grades expected to gradually increase to circa 33 Cpht (FY 2015), 
circa 40 Cpht (FY 2016), and then increasing further to circa 47 Cpht when 
ROM ore is primarily drawn from the undiluted Block 5 SLCs.

This change of scope has enabled the deferral of the development of the 
Block  5  cave,  which  will  now  be  established  at  circa  the  900m  level 
(“mL”)  (rather  than  at  880  mL  as  previously  planned)  and  will  be 
operating  at  full  capacity  from  FY  2020  (rather  than  FY  2017).  The 
deferral  of  the  Block  5  cave  is  more  than  compensated  by  accessing 
Block 5 SLC tonnages, which will provide earlier access to undiluted ore 
and which are therefore expected to operate at a similar grade to the 
Block 5 cave.

Petra has mobilised contractors to commence with development of the 
declines.  The  shaft  deepening  tender  process  has  progressed  and  this 
contract will be awarded shortly.

With gross resources of 42.3 million carats, Petra’s initial mine plan has a life 
of 18 years, but resources in residual Block 6 and the Precursor kimberlite 
are expected to prolong the actual life of mine (“LOM”) for considerably longer.

Capex
Capex  of  US$12.0  million  for  the  year  mainly  entailed  investment  in 
mining and development equipment and was an exchange rate adjusted 
under-spend of circa US$14 million due to the mining scope changes. 

The  capital  spend  will  increase  with  the  progression  of  the  expansion 
project  and  associated  underground  development 
in  FY  2013. 
Detailed  guidance  with  regards  to  future  Capex  at  Finsch  as  well 
as  Petra’s  other  operations  is  available  on  the  Company’s  website  at 
http://www.petradiamonds.com/investors/analysts/analyst-guidance.aspx.

Annual Report and Accounts 2012 Petra Diamonds Limited

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In depth

 Cullinan

Renowned as an important source of large and high 
value Type II diamonds. In FY 2012, five stones from 
Cullinan sold for in excess of US$1 million each; 
such stones are regarded as a regular feature of 
Cullinan’s production profile.

35%

reVenue 
cOntributiOn

Cullinan’s  revenue  decreased  to  US$112.0  million  (FY  2011: 

US$140.2 million) due to lower diamond prices for the year and 
a 7% reduction in the number of carats sold. 

Cullinan  is  renowned  as  an  important  source  of  large  and  high 
value  Type  II  diamonds  and  in  its  history  has  produced  four  of  the 
world’s  top  20  high  quality  large  diamonds,  over  750  stones  of  +100 
carats  and  more  than  a  quarter  of  all  diamonds  of  +400  carats.  In  FY 
2012, the following diamonds were each sold for more than US$1 million:

 $ a 129.6 carat white diamond (sold for US$3.35 million);
 $ a 61.7 carat white diamond (sold for US$2.60 million);
 $ a 208.0 carat white diamond (sold for US$1.75 million);
 $ a 4.8 carat blue diamond (sold for US$1.45 million, 

being US$301,500 per carat); and

South Africa

PerfOrmance summary

 $ Cullinan’s revenue decreased due 
to lower diamond prices and a 7% 
reduction in the number of carats sold.

 $ Petra established 11 additional 
drawpoints in the AUC South 
production area.

 $ The ramp-up of Cullinan’s tailings 
programme continued, with a 16% 
increase in volumes achieved.

 $ a 124.2 carat white diamond (sold for US$1.06 million).
As part of Petra’s strategy to maintain underground production until the 
expansion  programme  opens  up  a  new  block  of  undiluted  ore,  the 
Company  has  established  11  additional  drawpoints  in  the  AUC  South 
production  area.  ROM  grade  for  the  year  decreased  to  33.3  Cpht 
(FY 2011: 36.6 Cpht), due to the ongoing dilution of the current working 
areas. This lower ROM grade was partially addressed by an 8% increase in 
throughput of ROM tonnes (2.5 Mt in FY 2012 versus 2.3 Mt in FY 2011).

ROM grades at Cullinan are expected to remain between 34 and 36 Cpht 
until Petra’s expansion programme delivers access to undiluted ore. For 
the period until FY 2016, Petra’s strategy to manage this is to continue 
to  treat  higher  ROM  tonnages  (giving  a  cumulative  increase  from  FY 
2013 to FY 2016 of circa 1 Mt). Grades will start to gradually increase 
from FY 2016 to in excess of 50 Cpht by FY 2018, when the new C-Cut 
block cave will be fully established.

reVenue

fy 2012 – grOss numbers

US$112.0m 

 –20%

DiamOnDs sOLD

876,384 carats 

  –7%

aVerage Price Per carat

US$128 

 –14%

Sales
Revenue
Diamonds sold
Average price per carat

ROM production
Tonnes treated
Grade
Diamonds produced

Tailings production
Tonnes treated
Grade
Diamonds produced

Total production
Tonnes treated
Diamonds produced

Unit

FY 2012
actual

FY 2011
actual

Variance

US$m
Carats
US$

112.0
876,384
128

140.2
944,405
148

Tonnes
Cpht
Carats

2,504,137
33.3
833,285

2,323,403
36.6
851,193

Tonnes
Cpht
Carats

668,534
5.2
34,495

575,605
7.7
44,246

Tonnes
Carats

3,172,671
867,780

2,899,008
895,439

-20% 
-7%
-14%

+8%
-9%
-2%

+16%
-32%
-22%

+9%
-3%

+8%

Costs
On-mine cost per total tonne treated

ZAR

177

164

Petra has a 74% interest in Cullinan; 
BEE partners 26%

Capex
Expansion Capex
Sustaining Capex

Total Capex

US$m
US$m

US$m

46.9
7.5

54.4

11.5
22.4

33.9

+308%
-67%

+60%

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Underground development 
work at Cullinan

Cullinan contains a world-class 
diamond resource of 202.1 million 
carats (including 16.5 million 
carats in tailings) and the 
Company is capitalising on this 
by undertaking an expansion 
programme at the mine to take 
annual production to 2.4 Mcts 
by FY 2019

The  ramp-up  of  Cullinan’s  tailings  programme  continued,  with  a  16% 
increase in volumes achieved. However, the number of carats recovered 
reduced,  further  to  the  decreased  grade.  The  grade  is  expected  to 
increase to circa 10 Cpht by FY 2014, once a re-crush system of material 
larger than 6mm has been incorporated into the operation.

Costs
Unit  cash  operating  costs  at  Cullinan  increased  by  8%  to  R177/t  (FY 
2011:  R164/t),  indicating  firm  cost  control  in  the  South  African 
inflationary environment. Longer-term, once the development plan has 
significantly progressed in the years to come, unit cost efficiencies are 
expected  to  be  driven  by  initiatives  such  as  a  simplified  ore-handling 
system underground and further streamlining of the plant.

Development plan
Cullinan  contains  a  world-class  diamond  resource  of  202.1  Mcts 
(including 16.5 Mcts in tailings) and the Company is capitalising on this 
by  undertaking  an  expansion  programme  at  the  mine  to  take  annual 
production to 2.4 Mcts by FY 2019 (comprising 2.0 Mcts ROM and 0.4 
Mcts tailings). This expansion plan will establish a new block cave on the 
western  side  of  the  orebody  in  the  upper  portion  of  the  major  C-Cut 
resource  (estimated  to  contain  some  133  Mcts  in  total)  and  will  also 
involve a large tailings operation. Petra’s current mine plan has a life of 
18 years, but the actual LOM could be in excess of 50 years, given the 
major residual resources.

The C-Cut development programme is on track and the shaft deepening 
contractor,  Murray  &  Roberts  Cementation,  has  commenced  work  on 
site. Petra has advanced the South Decline to access the new production 
levels  and  work  on  the  North  Decline  has  commenced;  the  additional 
decline has the potential to fast-track the kimberlite development of the 
new block cave and subsequent production build-up. 

Petra is ramping up the tailings operation at Cullinan to treat the 165 Mt 
tailings  deposit.  The  commissioning  of  the  new  tailings  plant  has 
commenced,  with  the  re-crush  section  to  follow  later  in  FY  2013.  The 
Company plans to treat 2.7 Mt in FY 2013, gradually increasing to circa 
4 Mt from FY 2015 (a year later than originally planned due to the later 
introduction of the re-crush circuit).

Capex
Capex of US$54.4 million for the year was in line with the progression 
of Cullinan’s development programme. The majority of the capital was 
spent  on  underground  development  and 
the 
commencement  of  the  shaft  deepening  project  and  the  continued 
construction of the tailings treatment facility.

infrastructure, 

Annual Report and Accounts 2012 Petra Diamonds Limited

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In depth

Koffiefontein

One of the world’s top kimberlite mines by value, 
achieving US$487 per carat for FY 2012. During 
the year, a 63.3 carat white diamond sold for 
US$1.1 million.

6%

reVenue 
cOntributiOn

Koffiefontein is one of the world’s top kimberlite mines by average 

value per carat, achieving US$487 for FY 2012, despite the fact that 
the overall average has to some extent been reduced by the higher 
proportion of lower value tailings production in the total sales mix. 
During the year, a 63.3 carat white diamond was sold for US$1.1 million.

Revenue for FY 2012 fell by 39% to US$18.9 million, due to the weaker 
diamond  market  during  the  year  and  lower  ROM  production.  ROM 
production  levels  were  reduced  in  line  with  Petra’s  business  plan  to 
address higher levels of dilution in the current underground mining areas, 
while developing access to the new blocks. Lower underground tonnages 
were offset by increased production from surface resources (Ebenhaezer 
open pit satellite pipe and tailings) utilising available plant capacity.

Costs
Increased production from the lower-cost Ebenhaezer open pit saw cash 
operating unit costs of R125/t, despite production constraints and cost 
pressures associated with electricity and labour increases.

Development plan update
Similar to Cullinan, Petra’s development plan at Koffiefontein will in time 
establish new production levels where the Company will have access to 
undiluted  ore.  Once  this  has  been  achieved,  Petra  expects  the  overall 
ROM grade at Koffiefontein to improve to circa 8 Cpht.

Due to increased tonnages from Ebenhaezer in FY 2013 to FY 2015, the 
combined Ebenhaezer and tailings grade is expected to improve to circa 
2.6 Cpht, reducing again to 2.0 Cpht from FY 2016, when only tailings 
tonnages will be mined. 

Petra’s expansion plan at Koffiefontein is expected to increase production from 
circa  40,000  carats  per  annum  (“ctpa”)  in  FY  2012  to  circa  100,000  ctpa 
(ROM  and  tailings)  by  FY  2016.  Petra  will  therefore  be  ramping  up  ROM 
production from circa 0.26 Mt in FY 2013 to 1 Mtpa by FY 2016 and on 
to 1.2 Mtpa by FY 2018. The current mine plan has a life of 13 years, but 
the  orebody  remains  open  at  depth  so  the  actual  LOM  could  be 
considerably longer.

Capex
Capex for the year of US$11.5 million was primarily focused on underground 
development and purchasing of plant, mining and surface equipment.

South Africa

PerfOrmance summary

 $ Revenue decreased due to the 

weaker diamond market and lower 
ROM production.

 $ Lower underground tonnages were 
offset by increased production from 
surface resources (Ebenhaezer open 
pit satellite pipe and tailings).

 $ The development plan will in time 
provide access to undiluted ore.

reVenue

fy 2012 – grOss numbers

US$18.9m 

 –39%

DiamOnDs sOLD

38,798 carats 

Sales
Revenue
Diamonds sold
Average price per carat

 –29%

ROM production
Tonnes treated
Grade
Diamonds produced

aVerage Price Per carat

US$487 

 –14%

Petra has a 74% interest in Koffiefontein; 
BEE partners 26%

Tailings/Ebenhaezer production
Tonnes treated
Grade
Diamonds produced

Total production
Tonnes treated
Diamonds produced

Costs
On-mine cost per total tonne treated

Capex
Expansion Capex
Sustaining Capex

Total Capex

30

Petra Diamonds Limited Annual Report and Accounts 2012

Unit

FY 2012
actual

FY 2011
actual

Variance

US$m
Carats
US$

Tonnes
Cpht
Carats

Tonnes
Cpht
Carats

18.9
38,798
487

30.8
54,640
564

498,412
4.9
24,569

712,988
4.9
35,139

967,538
1.6
15,548

675,147
1.9
12,817

Tonnes
Carats

1,465,950
40,117

1,388,135
47,956

-39%
-29%
-14%

-30%
—
-30%

+43%
-16%
+21%

+6%
-16%

ZAR

125

115

+9%

US$m
US$m

US$m

6.1
5.4

11.5

—
11.0

11.0

n/a
-51%

5%

 
 
 
 
 
 
 
 Kimberley Underground

Kimberley Underground comprises three mines – 
Bultfontein, Dutoitspan and Wesselton – which 
were at the heart of South Africa’s early diamond 
rush in Kimberley.

6%

reVenue 
cOntributiOn

South Africa

PerfOrmance summary

 $ The Company was again particularly 
encouraged by the high value of 
Kimberley Underground’s production.

 $ The scrubber section of the Joint Shaft 
plant is now operational and the new 
main plant at Wesselton is in the 
commissioning phase.

 $ A substantial stockpile of ore 

(circa 700,000 tonnes) has been 
built up while the treatment plants 
were being constructed.

The Kimberley Underground operation comprises three kimberlite 

pipe mines: Bultfontein and Dutoitspan (serviced by Joint Shaft 
and the newly built Joint Shaft plant) and Wesselton (serviced by 
the Wesselton Shaft, where a new main plant is currently in the 
commissioning  phase).  A  substantial  stockpile  of  ore  at  each  plant, 
estimated to be circa 700,000 tonnes combined, has been built up while 
the Joint Shaft and Wesselton treatment plants were being constructed.

Despite the weaker diamond market during the year, the Company was 
again  particularly  encouraged  by  the  high  value  of  Kimberley 
Underground’s production, with prices only down 4% on FY 2011.

Tonnages treated and grades for the year were affected due to the plant 
processing constraints. In order to address this, the scrubber section of 
the  Joint  Shaft  plant  is  now  operational  and  the  new  main  plant  at 
Wesselton will enable higher throughput.

In FY 2013, mining will continue at both Wesselton and Joint Shaft at a 
combined  rate  of  circa  760,000  tonnes  per  annum  (“tpa”),  with 
underground  mining  ramping  up  steadily  to  1  Mtpa  from  FY  2016 
onwards. Ore treatment in FY 2013 will be circa 370,000 tpa higher than 
tonnages  mined,  due  to  the  treatment  of  the  ROM  stockpiles.  The 
remaining 330,000 tonnes of stockpile will be treated by FY 2015.

Costs
Unit costs of R295/t were significantly higher due to the increased cost 
base  and  lower  tonnages  being  treated  versus  the  FY  2012  business 
plan. Management expects the unit costs to improve once the Wesselton 
plant is fully operational; an increase in tonnages treated in FY 2013 is 
expected to lead to a significant decline in unit costs to below R200/t.

Development plan
Petra is implementing a development plan at Kimberley Underground that is 
expected to take production from 68,000 ctpa in FY 2012 to an annual 
average steady state of circa 135,000 ctpa by FY 2016. The Company’s mine plan 
has a life of ten years, but the residual resource could further extend the LOM.

Capex
The majority of the Capex for the year related to the construction of the 
main plant at Wesselton and underground development. Over and above 
the on-mine Capex stated in the table below, a further US$8.85 million 
was incurred during the year at Petra’s projects division (based at the 
Helam mine) for the construction of the main plant. This expenditure will 
be  transferred  to  Kimberley  Underground  when  the  commissioning  of 
the Wesselton main plant is completed.

reVenue

fy 2012 – grOss numbers

US$19.8m 

  +9%

DiamOnDs sOLD

61,895 carats 

 +13%

Sales
Revenue
Diamonds sold
Average price per carat

ROM production (all ROM)
Tonnes treated
Grade
Diamonds produced

Unit

FY 2012
actual

FY 2011
actual

Variance

US$m
Carats
US$

Tonnes
Cpht
Carats

19.8
61,895
320

18.2
54,733
333

587,065
11.7
68,422

443,655
12.9
57,402

+9%
+13%
-4%

+32%
-9%
+19%

aVerage Price Per carat

US$320 

  –4%

Capex
Expansion Capex
Sustaining Capex

Petra has a 74% interest in Kimberley Underground; 
BEE partners 26%

Total Capex

Costs
On-mine cost per total tonne treated

ZAR

295

191

+54%

US$m
US$m

US$m

15.4
5.6

21.0

1.8
11.2

13.0

+756%
-50%

+62%

On-mine cash costs exclude costs assigned to ROM stockpiles.

Annual Report and Accounts 2012 Petra Diamonds Limited

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In depth

 Williamson

Petra has successfully completed the Phase 1 
development programme at Williamson and 
production recommenced in Q4 FY 2012.

4%

reVenue 
cOntributiOn

Williamson is an open pit operation, based upon the mining of 

the 146 hectare Mwadui kimberlite. Over the past two years, 
Petra  has  been  implementing  the  Phase  1  development 
programme,  which  involved  a  substantial  rebuild  of  the 
existing  plant  and  major  pit  reshaping  work,  and  the  Company 
successfully recommenced production at Williamson in Q4 FY 2012.

For the brief operating period in FY 2012, the mine contributed 42,855 
carats from the main pit at a grade of 5.2 Cpht. Although the initial ROM 
grade is lower than management’s expectations (6.0 Cpht), the overall 
quality  of  the  production  observed  to  date  was  encouraging.  The 
re-crush circuit in the plant will commence commissioning in Q2 FY 2013 
and it is anticipated that this, along with other continual improvements 
in plant efficiency, will lead to an improvement in ROM grade.

Production guidance for Williamson (excluding alluvials) is circa 2.5 Mtpa 
for FY 2013, climbing to 3.6 Mtpa by FY 2016. Contract mining of alluvial 
diamonds is planned to contribute circa 14,000 carats for FY 2013, with 
production levels thereafter to be reviewed annually.

Tonnes  treated  will  exceed  tonnes  mined  from  FY  2013  to  FY  2016 
further  to  the  processing  of  the  ROM  stockpile  (estimated  to  be  circa 
700,000  tonnes  and  to  contain  circa  40,000  carats),  which  was 
established  by  Petra  during  the  pit-shaping  operations  of  the  Phase  1 
development plan.

Costs
Petra achieved a cost of US$18/t during the initial start-up period, but this 
is  anticipated  to  reduce  to  US$11/t  in  FY  2013.  Longer-term,  operating 
costs are expected to reduce to US$9.5/t from FY 2014 and US$9/t from 
FY  2017  onwards  due  to  increased  tonnages  diluting  the  mine’s  fixed 
cost base.

Tanzania

PerfOrmance summary

 $ The Phase 1 development 

programme involved a substantial 
rebuild of the existing plant and 
major pit reshaping work.

 $ The overall quality of the production 
observed to date was encouraging.

 $ A re-crush circuit in the plant 
will commence commissioning 
in Q2 FY 2013.

reVenue

fy 2012 – grOss numbers

US$11.6m 

 +22%

DiamOnDs sOLD

49,153 carats 

aVerage Price Per carat

US$236 

 +56%

 –22%

Sales
Revenue
Diamonds sold
Average price per carat

ROM production
Tonnes treated
Grade
Diamonds produced

Alluvial production
Tonnes treated
Grade
Diamonds produced

Total production
Tonnes treated
Diamonds produced

Unit

FY 2012

FY 2011.1

Variance

US$m
Carats
US$

Tonnes
Cpht
Carats

Tonnes
Cpht
Carats

11.6
49,153
236

9.5
31,555
302

826,699
5.2
42,855

n/a
n/a
n/a

278,328
5.1
14,195

530,689
5.6
29,510

+22%
+56%
-22%

n/a
n/a
n/a

-48%
-9%
-52%

Tonnes
Carats

1,105,027
57,050

530,689
29,510

+108%
+93%

Costs
On-mine cost per total tonne treated2

US$

18

n/a

n/a

Capex
Expansion Capex
Sustaining Capex

Total Capex

US$m
US$m

US$m

20.6
1.6

22.2

34.8
1.8

36.6

-41%
-11%

-39%

Petra has a 75% interest in Williamson; Government 
of the United Republic of Tanzania 25%

1.   Further to the development programme underway at Williamson for the last few years, only 
alluvial production was carried out during FY 2011; ROM production operations recommenced 
in Q4 FY 2012.

2.  On-mine cash costs exclude costs assigned to ROM stockpiles.

32

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The Williamson team is focused 
on ramping up the operation to 
3.6 Mtpa by FY 2016

Petra’s current mine plan 
for Williamson has a life of 
18 years but, given that the 
Mwadui kimberlite hosts a major 
resource of 39.6 million carats, 
there is potential to extend 
the life of mine considerably

Development plan
Petra’s current mine plan at Williamson is to ramp up ROM production 
from circa 2.5 Mt in FY 2013 to circa 3.6 Mt by FY 2016, following the 
introduction of a re-crush system into the plant circuit. 

The  mine’s  Phase  2  expansion  project,  which  was  initially  planned  to 
take the mine to 10 Mtpa, is currently on hold, though Petra continues 
to  consider  approaches  to  further  significantly  increase  production 
beyond 3.6 Mtpa. An expansion plan above this level will be dependent 
upon  appropriate  electricity  and  water  supply,  as  well  as  the  results 
recorded from treatment by the rebuilt plant of main pit material over 
the  medium  term.  The  Company  will  update  the  market  in  due  course 
when its internal studies are completed.

Petra’s current mine plan for Williamson has a life of 18 years but, given 
that the Mwadui kimberlite hosts a major resource of 39.6 Mcts, there is 
potential to extend the LOM considerably.

Capex
Expansion Capex of US$20.6 million for the year was predominantly spent 
on finalising the rebuilt plant and on other production-related activities, 
including pit shaping/shale removal, haul road construction and slimes/
tailings handling facilities. Due to the deferral of the Phase 2 expansion, 
circa US$25 million of previously planned Capex was not spent in FY 2012.

The  deferral  of  the  original  Phase  2  expansion  programme  has  also 
resulted in expansion Capex savings in FY 2013 of circa US$29 million 
(in comparable FY 2013 money terms).

Annual Report and Accounts 2012 Petra Diamonds Limited

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Our assets continued
In depth

Exploration

Petra’s exploration activities are focused in Botswana, the world’s largest diamond 
producer by value and host to two of the world’s biggest diamond mines, 
Orapa and Jwaneng.

Botswana offers an exceptional basis for diamond exploration in 

that it ranks highly with regards to prospectivity, has a low risk 
profile and an attractive fiscal regime. The Company has diamond 
in  country  covering  approximately 
prospecting 

12,725km2, all of which are ‘on craton’.

licences 

Petra’s  focus  at  present  is  to  evaluate  the  KX36  kimberlite  discovery. 
Results  from  an  initial  drilling  and  microdiamond  sampling  campaign 
were  highly  encouraging,  with  indications  of  a  potentially  high  grade 
(between  75  and  180  Cpht  at  a  bottom-cut  of  1mm)  and  a  relatively 
coarse diamond size distribution. The kimberlite is estimated to have a 
surface area of circa 5 hectares under circa 78m of Kalahari overburden, 
hosting  a  potential  deposit  of  between  28  Mt  and  34  Mt  to  a  vertical 
depth of 516m below surface.

The  next  phase  in  the  work  programme  was  a  1,550m  large  diameter 
drilling  (“LDD”)  programme  which  commenced  in  early  May  2012 
(comprising  five  24-inch  vertical  holes  down  to  a  depth  of  310m),  to 
obtain an initial mini-bulk sample and to ascertain further information 
with regards to grade and an indication of diamond value.

As at the date of this report, all five LDD boreholes had been completed 
(circa 818 tonnes of kimberlite) and the bulk sample material has been 
transported  to  Petra’s  bulk  sampling  plant  in  Kimberley,  South  Africa. 
Preliminary  results  from  analysis  of  the  bulk  sampling  material  are 
expected in Q2 FY 2013.

The  first  phase  (shallow)  of  a  narrow  diameter  drilling  programme, 
designed to improve on current geological and geotechnical information, 
has been completed (circa 1,170m) and the results will now be modelled.

Based  on  the  premise  that  KX36  might  be  one  of  several  kimberlites 
within a new kimberlite field (given that kimberlites generally occur in 
clusters), a high resolution regional soil sampling programme (250m by 
250m grid) covering kimberlite KX36 and its immediate surrounds has 
commenced.  To  date,  818  heavy  mineral  samples  have  been  collected 
and despatched for analysis. The first results are expected to become 
available H1 FY 2013.

Following positive results obtained from several ground electromagnetic 
(“EM”)  surveys  conducted  over  kimberlite  KX36,  a  decision  was  also 
taken to deploy an airborne EM survey in the KX36 region. This survey 
will  cover  an  area  of  circa  300  to  400km²  and  is  expected  to  be 
completed by the end of Q3 FY 2013.

In the Lebu West project area, a 29,200 line kilometre Hi-Res Airborne 
Magnetic Gradiometer Survey covering some 2,656km2 was successfully 
completed at the end of Q1 FY 2012. Following the interpretation of this 
high quality data, 24 priority targets were identified, of which six have 
been  drilled  with  negative  results.  The  remaining  targets  will  be 
systematically followed up.

During the year, the Company was granted a six-month extension for a 
part of the prospecting licence hosting kimberlite BK1S (the portion of 
the  kimberlite  body  BK1  (15%–20%)  that  falls  outside  the  Debswana 
Mining  Lease  and  within  Petra’s  prospecting  licence).  Following 
discussions  with  regards  to  the  analysis  and  evaluation  of  this  shared 
orebody,  a  decision  was  taken  to  formally  relinquish  this  licence  on 
expiry  as  it  is  not  considered  to  offer  economic  potential  as  a  stand-
alone operation.

Botswana

PerfOrmance summary

 $ Petra focused on evaluating the 
KX36 kimberlite discovery and 
its surrounding area.

 $ Results from the initial drilling 

and microdiamond sampling were 
very encouraging.

 $ A follow-up mini bulk sample has 
now been completed and results 
are being analysed.

Technical Director Jim Davidson and 
Botswana Country Manager Tobias Hough 
at the KX36 discovery

34

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
2012 resource statement
Jim Davidson

2012 Resource statement

The careful management of Petra’s major diamond resource will ensure 
sustainable, long-life mining operations for the Group for many years to come.

The  Petra  Group  controls  one  of  the  world’s  largest  diamond 

resources. This major resource suggests that the potential mine 
lives  of  Petra’s  assets  could  be  considerably  longer  than  the 
current mine plans in place at each operation.

Gross reserves and resources
As at 30 June 2012, the Group’s gross diamond resources (inclusive of 
reserves)  were  302.1  Mcts;  diamond  resources  were  significantly 
boosted during the year by the acquisition of Finsch, which contributed 
an additional 42.3 Mcts.

The Group’s gross diamond reserves have increased to 47.6 Mcts, again 
primarily due to the acquisition of Finsch.

Attributable reserves and resources
As  at  30  June  2012,  the  Group’s  attributable  total  diamond  resources 
(inclusive  of  reserves)  were  224.0  Mcts  and  the  attributable  total 
diamond reserves were 35.2 Mcts.

jim Davidson
Technical Director

The following table summarises the reserves and resources status of the combined Petra Group operations as at 30 June 2012: 

Category

Reserves
Proved 
Probable 

Subtotal 

Resources
Measured
Indicated
Inferred

Gross

Net attributable

Tonnes 
 (millions)

Grade 
(Cpht) 

Contained 
diamonds

(Mcts) 

 Tonnes
(millions)

 Grade 
 (Cpht)

14.423
111.967

126.390

15.052
460.166
1250.847

7.25
41.54

37.62

8.46
48.13
6.35

1.045
46.507

10.676
82.857

47.552

93.533

1.274
221.458
79.405

11.140
341.503
934.489

7.25
41.54

37.62

8.47
48.00
6.33

Contained
diamonds
 (Mcts)

0.774
34.416

35.190

0.944
163.929
59.108

Total Resources inclusive of Reserves

1726.065

17.50

302.137

1287.132

17.40

223.981

1. For further information, refer to the Reserves and Resources tables of the individual operations to follow.

Finsch

Category

Reserves
Proved 
Probable 

Subtotal 

Resources
Measured
Indicated
Inferred

Total Resources inclusive of Reserves

Gross

Net attributable

Tonnes 
 (millions)

Grade 
(Cpht) 

Contained 
diamonds

(Mcts) 

 Tonnes
(millions)

 Grade 
 (Cpht)

Contained
diamonds
 (Mcts)

—
56.763

56.763

—
50.827
41.314

92.141

—
42.16

42.16

—
49.37
41.65

45.91

—
23.930

—
42.005

23.930

42.005

—
25.095
17.206

—
37.612
30.572

42.301

68.184

—
42.16

42.16

—
49.37
41.65

45.91

—
17.708

17.708

—
18.570
12.732

31.302

1. Resource bottom cut-off: 1.5mm.
2. Reserve bottom cut-off: 1.5mm.
3. Resource tonnes and grade are based on block cave depletion modelling and include external waste.
4. Changes in Reserve and Resource figures due to mining depletions and re-calibration of the Block 4 depletion model.

Annual Report and Accounts 2012 Petra Diamonds Limited

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2012 resource statement continued
Jim Davidson

Cullinan

Category

Reserves
Proved 
Probable 

Subtotal 

Resources
Measured
Indicated
Inferred

Gross

Net attributable

Tonnes 
 (millions)

Grade 
(Cpht) 

Contained 
diamonds

(Mcts) 

 Tonnes
(millions)

 Grade 
 (Cpht)

 —
41.944

41.944

 —
262.873
169.344

 —
48.06

48.06

 —
20.160

 —
31.039

20.160

31.039

— 
70.43
10.04

—
185.143
17.002

 —
194.526
125.315

 —
48.06

48.06

 —
70.43
10.04

Contained
diamonds
 (Mcts)

 —
14.918

14.918

 —
137.006
12.582

Total Resources inclusive of Reserves

432.217

46.77

202.145

319.841

46.77

149.588

1. Resource bottom cut-off: 1.0mm.
2. Reserve bottom cut off: 1.0mm.
3. Resource tonnes and grade are based on block cave depletion modelling and include external waste.
4.  Reserve carats and grades are factorised as per the following resource to reserve liberation factors: ‘Brown’ kimberlite 75.8%, ‘Grey’ kimberlite 71.4%, and ‘Hypabyssal’ 

kimberlite 71.8%.

5. Changes in Reserve and Resource figures due to mining depletions and the addition of 19 new drawpoints in the BAW Phase 1 and AUC South mining areas.

Koffiefontein

Category

Reserves
Proved 
Probable 

Subtotal 

Resources
Measured
Indicated
Inferred

Gross

Net attributable

Tonnes 
 (millions)

Grade 
(Cpht) 

Contained 
diamonds

(Mcts) 

 Tonnes
(millions)

 Grade 
 (Cpht)

Contained
diamonds
 (Mcts)

12.961
8.022

20.983

14.507
38.039
96.278

2.69
9.57

5.32

3.02
7.94
2.55

3.97

0.348
0.768

9.591
5.936

1.116

15.527

0.438
3.019
2.455

10.735
28.149
71.245

5.912

110.129

2.69
9.57

5.32

3.02
7.94
2.55

3.97

0.258
0.568

0.826

0.324
2.234
1.817

4.375

Total Resources inclusive of Reserves

148.824

1. Resource bottom cut-off (Koffiefontein underground and Ebenhaezer): 0.5mm.
2. Resource bottom cut-off (Eskom tailings): 1.0mm.
3. Reserve bottom cut-off: 1.0mm.
4. Changes in Reserve and Resource figures due to mining depletions and planning on the 60 level sub level cave and the Ebenhaezer open pit.

Kimberley Underground

Category

Reserves
Proved 
Probable 

Subtotal 

Resources
Measured
Indicated
Inferred

Total Resources inclusive of Reserves

Gross

Net attributable

Tonnes 
 (millions)

Grade 
(Cpht) 

Contained 
diamonds

(Mcts) 

 Tonnes
(millions)

 Grade 
 (Cpht)

Contained
diamonds
 (Mcts)

—
3.181

3.181

—
9.653
56.204

65.857

—
12.80

12.80

—
18.59
9.44

10.78

—
0.407

0.407

—
1.794
5.306

—
2.354

2.354

—
7.143
41.591

7.100

48.734

—
12.80

12.80

—
18.59
9.44

10.78

—
0.301

0.301

—
1.328
3.926

5.254

1. Resource bottom cut-off (Dutoitspan West Extension): 1.0mm.
2. Resource bottom cut-off (all other underground blocks): 0.5mm.
3. Reserve bottom cut-off: 1.5mm.
4. Changes in Reserve and Resource figures due to mining depletions and a reassessment of Reserves on Dutoitspan and Bultfontein.

36

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fissure Mines combined (Helam, Sedibeng, Star)

Category

Reserves
Proved 
Probable 

Subtotal 

Resources
Measured
Indicated
Inferred

Total Resources inclusive of Reserves

Gross

Net attributable

Tonnes 
 (millions)

Grade 
(Cpht) 

Contained 
diamonds

(Mcts) 

 Tonnes
(millions)

 Grade 
 (Cpht)

Contained
diamonds
 (Mcts)

1.463
2.057

3.520

0.545
0.810
1.705

3.060

47.66
60.40

55.11

153.39
186.61
161.13

166.49

0.697
1.243

1.940

0.836
1.512
2.748

5.096

1.085
1.524

2.609

0.404
0.600
1.263

2.267

47.61
60.36

55.05

153.16
186.45
161.02

166.35

0.517
0.920

1.437

0.619
1.119
2.034

3.772

1. Resource bottom cut-off: 1.0mm.
2. Reserve bottom cut-off: 1.0mm.
3. Measured Resources are classified as one level below current workings or where a block is bounded above and below by current workings.
4. Indicated Resources are classified as two levels below measured Resources.
5.  Inferred Resources are classified as three levels below Indicated Resources or inaccessible mined out areas, or as extensions along strike from existing Resource blocks where 

exploration information allows.

6.  Measured and Indicated Resources have been converted to Reserves by applying historically derived external dilution and in-stope loss factors to resource tonnages and grades.

Williamson

Category

Reserves

Proved 
Probable 

Subtotal

Resources
Measured
Indicated
Inferred

Gross

Net attributable

Tonnes 
 (millions)

Grade 
(Cpht) 

Contained 
diamonds

(Mcts) 

 Tonnes
(millions)

 Grade 
 (Cpht)

Contained
diamonds
 (Mcts)

 —
 —

 —

 —
97.963
886.003

 —
 —

 —

 —
5.00
3.92

4.02

— 
—

—

 —
 —

 —

 —
4.896
34.689

 —
73.473
664.502

39.585

737.975

— 
—

—

 —
5.00
3.92

4.02

— 
—

—

— 
3.672
26.017

29.689

Total Resources inclusive of Reserves

983.966

1. Resource bottom cut-off: 1.0mm.
2. Resource depletion calculated from in-pit survey.
3.  Includes stockpile of 727,000 tonnes of resedimented volcaniclastic kimberlite and brecciated volcaniclastic kimberlite accumulated since previous plant shutdown in March 2010.

General notes on reporting criteria
1. Resources are reported exclusive of reserves.

2. Tonnes are reported as millions; contained diamonds are reported as million carats.

3.  Tonnes are metric tonnes and are rounded to the nearest 1,000 tonnes; carats are rounded to the nearest 1,000 carats; rounding 

off numbers may result in minor computational discrepancies.

4. Resource tonnages and grades are reported exclusive of internal waste, unless where otherwise stated.

5.  Reserve  tonnages  and  grades  are  reported  inclusive  of  external  waste,  mining  and  geological  losses  and  plant  modifying 
factors; reserve carats will generally be less than resource carats on conversion and this has been taken into account in the 
applicable statements.

6.  Reserves and Resources have been reported in accordance with the South African code for the reporting of mineral reserves and 

mineral resources (SAMREC 2007).

7.  The Petra 2012 Resource Statement as shown above is based on information compiled internally within the Group under the 
guidance and supervision of Jim Davidson, Pr. Sci. Nat. (reg. No.400031/06). Jim Davidson has over 30 years’ relevant experience 
in the diamond industry and is a full-time employee of Petra.

8.  All Reserves and Resources have been independently reviewed and verified by John Kilham, Pr. Sci. Nat. (reg. No. 400018/07), 
a competent person with 32 years’ relevant experience in the diamond mining industry, who was appointed as an independent 
consultant by the Company for this purpose.

Jim Davidson
Technical Director
15 October 2012

Annual Report and Accounts 2012 Petra Diamonds Limited

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
The technical training team at Finsch provides a wide 
array of training that covers all technical disciplines 
and ensures operational excellence

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CORPORATE 
GOVERNANCE
“ We are committed to 
maintaining the highest 
standards of business 
conduct and ethics.”

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Risk Management

Risk management

The Group is exposed to a number of risks and uncertainties which could have 
a material impact on its long-term development. Performance and management of 
these risks is an integral part of the management of the Group. The Board has 
identified the following as being the principal strategic, financial, external and 
operational risks (in no order of priority).

Strategic risks

Retention of Key Personnel 
Board Responsibility: the Executive Committee; 
the Remuneration Committee; the Nomination Committee

The successful achievement of the Group’s strategies, business 
plans and objectives depends upon its ability to attract and 
retain key personnel.

MiTiGATiON/COMMENTS
Part of Petra’s success is due to the fostering of a management 
culture where management is empowered and where innovation 
and  creativity  in  the  workplace  is  encouraged.  Petra’s 
employment terms and incentivisation structures are designed 
to attract, incentivise and retain individuals of the right calibre. 

Financial risks

Financing Risks

Board responsibility: the Executive Committee; 
the Audit Committee

Petra  has  a  significant  Capex  programme  over  the  years  to 
FY 2019, with Capex forecast to peak in FYs 2013 and 2014. 
The  Company  plans  to  finance  this  Capex  from  operating 
cashflows and Group debt facilities. Lack of adequate available 
cashflows could delay development work.

External risks

Diamond Price Risk
Board responsibility: the Executive Committee

The  Company’s  financial  performance  is  closely  linked  to 
the    price  of  diamonds  which  are  influenced  by  numerous 
factors beyond the Company’s control, including international 
economic  conditions,  world  diamond  production  levels  and 
consumer trends.

MiTiGATiON/COMMENTS
Whilst management prepares detailed plans, the actual Capex 
may  differ  from  estimates.  in  order  to  mitigate  this,  Capex 
requires  a  tiered  level  of  approval  and  variances  to  Capex 
plans  are  monitored  on  a  timely  basis.  The  Company 
continually  and  regularly  reviews  its  cashflow  planning  to 
ensure that Capex plans are adequately financed.

MiTiGATiON/COMMENTS
Management  closely  monitors  developments  in  the 
international diamond market (across the pipeline from the 
rough market to the retail consumer market) to be in a position 
to  react  in  a  timely  manner  to  changes  in  rough  diamond 
prices and demand. 

Currency Risk
Board responsibility: the Executive Committee; the Audit Committee

With  Petra’s  operations  mainly  in  South  Africa,  but  diamond 
sales based in US dollars, the volatility and movement in the 
rand  is  a  significant  factor  to  the  Group.  Also,  the  Group 
undertakes  transactions  in  a  number  of  different  currencies. 
Fluctuations in these currencies may have a significant impact 
on the Group’s performance.

MiTiGATiON/COMMENTS
The Group continually monitors the movement of the rand against 
the dollar and takes expert advice from its bankers in this regard. 
it is the Group’s policy to hedge a portion of future diamond sales 
when weakness in the rand deems it appropriate. Such contracts 
are generally short-term in nature. Management seeks to mitigate 
other  transaction  risks  by  matching  assets  and  liabilities  in  the 
same currency and where appropriate hedging material exposure.

Country and Political Risk
Board responsibility: the Executive Committee; the Audit Committee

Petra’s operations are predominantly based in South Africa, with 
lesser  exposure  to  Tanzania  and  Botswana.  Emerging  market 
economies are generally subject to greater risks, including legal, 
regulatory, economic and political risks, and are potentially subject 
to rapid change. Please also specifically refer to the commentary 
on the South African mining environment in the CEO’s Review.

MiTiGATiON/COMMENTS
The Petra team is highly experienced at operating in Africa. Petra 
routinely monitors political and regulatory developments in its 
countries of operation. in addition the Company actively engages 
in dialogue with relevant Government representatives in order 
to keep abreast of all key legal and regulatory developments 
applicable to its operations. Petra has a number of internal 
processes and checks in place to ensure that it is wholly compliant 
with all relevant regulations in order to maintain its mining or 
exploration licences within each country of operation.

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Operational risks

Mining and Production Risks
Board responsibility: the Executive Committee

The mining of diamonds from kimberlite deposits involves an 
intrinsic degree of risk from various factors, including geological, 
geotechnical  and  seismic  factors,  industrial  and  mechanical 
accidents,  unscheduled  plant  shutdowns,  technical  failures, 
ground  or  water  conditions  and  inclement  or  hazardous 
weather conditions.

Exploration Risk
Board responsibility: the Executive Committee

Mineral exploration is speculative in nature and is frequently 
unsuccessful. if Petra’s exploration programme in Botswana 
does identify a potentially economic orebody, it could take a 
number  of  years  from  the  early  phases  of  exploration  until 
production  is  possible,  during  which  time  the  economic 
feasibility of the project may be subject to change. 

MiTiGATiON/COMMENTS
All of Petra’s existing kimberlite operations have long histories 
of  production  and  therefore  the  geology  and  economics  of 
each mine are well understood. This detailed knowledge of the 
deposits  allows  management  to  eliminate  much  of  the  risk 
associated with developing a new diamond mine.

MiTiGATiON/COMMENTS
Petra  operates  a  small  but  highly  focused  exploration 
programme  in  Botswana.  Whilst  the  Company’s  exploration 
budget  is  expected  to  increase  as  appraisal  work  on  KX36 
progresses, the team will maintain rigorous and focused cost 
control.  Results  from  KX36  will  be  continually  evaluated 
in order to assess the benefits to shareholders.

Expansion and Project 
Delivery Risks
Board responsibility: the Executive Committee

Petra  has  set  out  a  clear  and  transparent  growth  profile  to 
increase  annual  production  to  5  million  carats  by  FY  2019. 
Actual production may vary from estimates of future production 
for a variety of reasons and it should be noted that long-term 
assumptions  may  be  subject  to  change  as  the  Company 
continually evaluates its projects to optimise efficiency and 
production profitability.

MiTiGATiON/COMMENTS
Petra  has  an  enviable  track  record  in  the  management  of 
underground diamond operations and is respected as one of 
the ‘best in class’ teams in the diamond mining industry. With 
regards  to  potential  budget  or  time  overruns  which  could 
impact the completion of these expansion projects, the Group 
has  established  procedures  to  control,  monitor  and  manage 
the  roll-out  of  its  development  plans.  Petra  operates  eight 
producing mines, which provides flexibility in terms of overall 
portfolio performance.

Social, Safety and Environmental
Board responsibility: the Executive Committee; 
the HSSE Committee

The Group’s success may depend upon its safety, social and 
environmental performance, as failures or violations of relevant 
legislation in South Africa, Tanzania and Botswana could lead 
to delays or suspension of its mining activities.

MiTiGATiON/COMMENTS
The  Group  takes  its  responsibilities  in  these  areas  seriously 
and monitors its performance across these areas on a regular 
basis.  The  HSSE  Committee  assists  the  Board  in  obtaining 
assurance that appropriate systems are in place to deal with the 
management of health, safety, social and environmental risks.

Annual Report and Accounts 2012 Petra Diamonds Limited

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Corporate Social Responsibility

Our commitment to sustainability

Petra Diamonds is committed to the responsible development of its assets to 
the benefit of all stakeholders. The Company operates according to the highest 
ethical and corporate governance standards and seeks to achieve leading 
environmental, health and safety performance. 

Tsholofelo (“Place of Hope” in 
Setswana) is one of the projects 
supported by the Finsch mine. 
In a community with high levels 
of unemployment, with all the 
resulting social challenges, 
Tsholofelo provides hope for 
a better future to previously 
homeless children

Petra’s  strategy  is  to  create  value 

by  optimising  and  extending  the 
lives  of  its  world-class  diamond 
to  deliver  sustainable, 
mines 
long-term  operations  and  significantly 
increased production. This strategy will 
ensure  stable  employment  for  the 
Company’s  workforce,  which  now 
encompasses  over  4,700  people  in 
South  Africa,  Tanzania  and  Botswana. 
Corporate 
is 
integral to the way the Group structures 
and  operates  its  mining,  development 
and  exploration  projects,  and  this 
strategy  will  therefore  also  provide 
continued  benefits  for  Petra’s  local 
communities for many years to come. 

responsibility 

social 

Governance 
The Company’s Health, Safety, Social and 
Environmental  Committee  (“the  HSSE 
Committee”),  is  a  Board-represented 
committee  chaired  by  the  Company’s 
Chief Executive Officer, Johan Dippenaar. 
The HSSE Committee’s purpose is to drive 
the development of the Group’s policies 
on all relevant health, safety, social and 
environmental issues and to ensure that 
the  Board  is  cognisant  of,  and  takes 
account  of,  mining  corporate  social 
responsibility best practice. 

As a company which has grown rapidly 
over the last five years by acquisition, the 
HSSE Committee has identified the need 
to  review 
the  Group’s  existing 
sustainability  policies.  The  HSSE 
Committee has therefore begun a process 
to  develop  an  overarching  series  of 
Group-level strategic policies, which will 
aim to ensure consistent and improving 
standards across the Group’s operations, 
whilst also taking account of international 
best practice. More information on the 
HSSE Committee is available on page 56 
of this report.

Health and safety 
During FY 2012, it was with deep regret 
that a fatality occurred at the Kimberley 
Underground  operation.  A 
full 
investigation  was  carried  out  into  the 
fatal  accident  in  conjunction  with  the 
Department  of  Mineral  Resources  in 
South Africa. Petra’s management would 
like to extend its sincere condolences to 
the family and friends of the deceased.

The key performance indicator that Petra 
uses  to  track  its  overall  safety 
performance  on  an  annual  basis  is 
the  Lost  Time  injury  Frequency  Rate 
(“LTiFR”). Petra’s LTiFR for FY 2012 was 
1.13, in comparison to 0.80 for FY 2011.  

42

Petra Diamonds Limited Annual Report and Accounts 2012

Whilst  the  Company  is  committed  to 
improving this performance, in line with 
its policy of zero harm, it should be noted 
that the severity rate of incidents for the 
year was mostly low. 

Generally  there  is  a  high  level  of 
health  and  safety  performance  across 
Petra’s  operations.  Both  Finsch  and 
Cullinan  are  OHSAS  18001  accredited 
and 
to 
the  Company  expects 
implement  this  standard  across  all  the 
mines in due course.

to 

addition 

appropriate 

The health and safety of employees will 
always  be  Petra’s  top  priority  and  the 
Company is striving every day to build 
upon  its  systemic  culture  of  safety. 
in 
risk 
management  processes,  Petra  has 
strategies, systems and training in place 
to promote a safe working environment. 
Management’s  focus  on  a  zero  harm 
environment  requires  a  zero  tolerance 
approach for any action that results in 
potential injury to employees.

People and communities
its  greatest 
Petra  recognises  that 
asset 
its  people.  The  Company 
encourages  diversity  in  the  workforce 
and treats employees, contractors and 

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Product assurance
As an independent producer, outside of 
the formal supply channels of the majors, 
Petra plays an important role in providing 
a  dependable  and  increasing  supply  of 
high  quality  rough  diamonds  to  the 
market.  The  Company  operates  in  a 
transparent  manner,  according  to  high 
ethical  standards,  and  in  this  way  its 
clients  can  be  assured  that  the  Petra 
product is of impeccable origin.

Petra will only ever operate in countries 
which  are  members  of  the  Kimberley 
Process.  The  Kimberley  Process  is  a 
collaboration  between  Governments, 
NGOs  and  the  diamond  industry,  who 
joined  together  to  stem  the  flow  of 
‘conflict  diamonds’  –  rough  diamonds 
used by rebel movements to finance wars 
against  legitimate  governments.  The 
Kimberley Process Certification Scheme 
imposes  extensive  requirements  on  its 
members  to  enable  them  to  certify 
shipments  of  rough  diamonds  as 
conflict free.

Petra reports in detail on its sustainability 
performance  annually.  The  Group’s 
Sustainability Report is available on the 
Petra corporate website.

The Mwadui Primary School is owned 
and operated by Williamson and 
provides free education to 460 learners

all other stakeholders with respect and 
dignity,  whilst  upholding  their  basic 
human rights.

Petra believes that employees who are 
empowered  and  accountable  for  their 
actions work to the best of their ability, 
and the Company has therefore fostered 
a  culture  whereby  innovation  and 
creativity in the workplace is encouraged 
and  rewarded.  The  result  is  motivated 
and  engaged  employees  who  feel  that 
they have a role to play in the Company’s 
continued development and success.

A  key  focus  for  Petra  is  skills  transfer 
and  training  to  ensure  that  employees 
continue  to  develop  throughout  their 
careers  and  progress  within  the 
organisation, whilst also helping to drive 
operational improvements. in FY 2012, 
Petra commenced a formal skills audit to 
accurately gauge skills levels across the 
Group so that the Company can develop 
future  training  and  development  plans 
for  its  employees.  This  process  will 
continue into FY 2013.

Petra  is  committed  to  identifying 
sustainable projects in conjunction with 
local  authorities,  as  the  elected 
representatives of the communities 

contributes 

affected  by  our  operations.  The  Group 
takes a holistic and structured approach 
to  corporate  social  responsibility 
and 
local 
communities  through  a  variety  of 
initiatives  which  address  poverty 
alleviation,  job  creation  and  local 
economic development. 

its 

to 

Environment 
During  FY  2012,  Petra  finalised  and 
implemented a Group-level Environmental 
Policy  and  Strategy,  which  formalised 
Petra’s  commitment 
to  conduct 
environmentally sustainable prospecting, 
mining and related activities. 

The Company’s operations are subject to 
significant  environmental  regulation 
under  international  and  local  law  and 
Petra has an Environmental Management 
Programme  in  place  for  each  of 
its operations. 

Environmental responsibility is integrated 
into  strategic  planning,  management 
systems  and  daily  activities  and  Petra 
conducts  regular  internal  and  external 
audits of its operations. The Company is 
committed to achieving a high standard 
of environmental performance.

Annual Report and Accounts 2012 Petra Diamonds Limited

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Board of Directors

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Adonis Pouroulis (42)
Non-Executive Chairman

Johan Dippenaar (55)
Chief Executive Officer

Role  Mr  Pouroulis  leads  the  Board  with  focus  on  key 
strategic and corporate governance issues
Committees Chairman of the Nomination Committee
Date of Appointment 1997
Qualifications Mining Engineer – University of Witswatersrand, 
South Africa 

Profile Mr Pouroulis is a mining entrepreneur whose expertise 
lies  in  the  discovery  and  exploration  of  natural  resources 
across Africa, including diamonds, precious/base metals, coal 
and oil and gas, and bringing these assets into production. Mr 
Pouroulis founded Petra Diamonds in 1997 and it became the 
first diamond company to float on AiM. He has since chaired 
Petra as it has developed into a mid-tier diamond producer of 
global  significance  and  London’s  largest  quoted  diamond 
mining group.

External appointments Chairman of Chariot Oil & Gas plc

Role  Mr  Dippenaar  leads  the  management  of  the  Group, 
implements the agreed strategy and runs the business on a 
day-to-day basis
Committees  Member  of  the  Executive  Committee  and 
Chairman of the HSSE Committee
Date of Appointment 2005
Qualifications Chartered Accountant – member of the South 
African institute of Chartered Accountants 

Profile  Mr  Dippenaar  has  over  20  years’  experience  in  the 
leadership  and  management  of  diamond  mining  companies. 
Prior to his appointment as CEO of Petra, he was CEO of ASX-
quoted  Crown  Diamonds  which  merged  with  Petra  in  2005. 
Since  the  merger,  Mr  Dippenaar  has  led  Petra  through  a 
period  of  significant  growth,  taking  the  Company’s  annual 
production  from  circa  175,000  carats  in  FY  2006  to  2.2 
million carats in FY 2012, and establishing the Company as a 
leading independent producer.

External appointments None

David Abery (49)
Finance Director

Jim Davidson (67)
Technical Director

Role Mr Abery leads the financial management of the Group 
and is responsible for financing, treasury, financial controls, 
reporting, legal, investor relations, compliance and corporate 
governance
Committees Member of the Executive Committee
Date of Appointment 2003
Qualifications Chartered Accountant – iCAEW

Profile  Mr  Abery  has  over  17  years’  experience  as  a  chief 
financial  officer  in  both  the  South  African  and  UK  business 
environments.  He  has  been  integral  to  the  structuring  and 
delivery  of  strategic  group  corporate  development  and 
acquisitions at Petra, as well as the instigation of a number of 
innovative  financing  transactions.  Mr  Abery  is  responsible 
for all matters pertaining to Petra’s UK listing.

External appointments None

Role Mr Davidson leads the technical management team and 
is  responsible  for  the  direction  and  implementation  of  the 
Group’s technical and exploration programmes
Committees Member of the Executive Committee
Date of Appointment 2005
Qualifications Geologist – member of the Geological Society 
of South Africa and registered with the South African Council 
for Natural Scientific Professions

Profile Mr Davidson is an acknowledged world authority on 
kimberlite geology and exploration, as well as an expert on 
the  optimal  recovery  of  diamonds  through  plant  processes 
and other automated methods. He has spent in excess of 30 
years  associated  with  diamond  exploration  and  mining,  of 
which  over  20  years  have  included  mine  management  in 
South Africa, and was formerly head of diamond exploration 
in  southern  Africa  for  BP  Minerals  (subsequently  Rio  Tinto) 
before joining Crown Diamonds. 

External appointments None

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Tony Lowrie (70)
Senior independent Non-Executive Director

Dr Pat Bartlett (67)
independent Non-Executive Director

Committees  Member  of  the  Audit,  Remuneration  and 
Nomination Committees
Date of Appointment 12 September 2012
Qualifications Royal Commission, Sandhurst Military Academy

Profile  Mr  Lowrie  has  over  35  years’  association  with 
the  equities  business  and  is  an  experienced  non-executive 
director. He has had a lengthy and distinguished career, which 
included  senior  positions  with  the  Hoare  Govett  group  and 
HG Asia Securities. Between 1996 and 2004 he was chairman 
for ABN AMRO Asia Securities and was formerly also a managing 
director  of  ABN  AMRO  Bank.  He  has  been  a  non-executive 
director  of  Allied  Gold  Mining  Plc,  Dragon  Oil  plc,  J.  D. 
Wetherspoon  plc,  as  well  as  several  quoted  Asian  closed 
end funds. 

Committees  Member  of  the  Audit,  Remuneration  and 
Nomination Committees
Date of Appointment 28 November 2011
Qualifications Member of the South African institute of Mining 
and Metallurgy; registered Professional Natural Scientist

Profile Dr Bartlett was formerly a chief geologist for De Beers 
until his retirement in 2003 and is an acknowledged leading 
expert on kimberlite geology and block caving. Dr Bartlett has 
extensive experience working across southern Africa and has 
an in-depth knowledge of several  of  the  mines  acquired  by 
Petra,  having  previously  worked  at  Finsch,  Koffiefontein, 
Kimberley Underground and Cullinan. Since retiring from De 
Beers,  he  has  consulted  on  block  caving  projects  for  BHP 
Billiton, Anglo American and Rio Tinto.

External  appointments  Director  of  the  Edinburgh  Dragon 
Fund and non-executive director of Kenmare Resources plc.

External appointments A director of the Board of Trustees for 
the De Beers Benefit Society and the De Beers Pension Fund.

Gordon Hamilton (66)
independent Non-Executive Director

Dr Omar Kamal (39)
Non-Executive Director

Committees Chairman of the Audit and Remuneration 
Committees, member of the Nomination Committee
Date of Appointment 28 November 2011
Qualifications Chartered Accountant – iCAEW

Profile Mr Hamilton retired from Deloitte & Touche LLP in 2006 
after more than 30 years as a partner primarily responsible 
for multinational and FTSE 350 company audits, mainly in the 
mining, oil and gas and aerospace and defence industries, as 
well as heading the Deloitte South Africa desk in London. He 
served  for  nine  years  until  2011  as  a  member  of  the  UK 
Financial Reporting Review Panel. Mr Hamilton has extensive 
experience as a non-executive director across a wide range 
of businesses.

External appointments Non-executive director of Barloworld, 
Beazley  plc,  Fairbairn  Private  Bank  and  other  related 
companies within the Nedbank Group.

(Dr  Kamal  is  not  deemed  independent  as  he  represents 
Al  Rajhi  Holdings  W.L.L.,  Petra’s  largest  shareholder,  which 
holds 13% of the Company’s issued share capital.)

Committees None 
Date of Appointment 2010
Qualifications Ph.D. Management (Banking and Finance)

Profile Dr Kamal has over 13 years’ experience within the field of 
finance and investments. His career to date comprises increasing 
high level management responsibility  leading  to his present 
post as Co-CEO of the Al Rajhi Group of companies. Dr Kamal 
has attained a broad spectrum of expertise and knowledge from 
his extensive experience as an academic, his works as a key 
executive in two regional banks in the Arab region, and as a 
Partner at Ernst & Young managing islamic finance advisory 
business.  Dr  Kamal  continues  to  manage  investment  deals 
globally, predominantly in the Asia Pacific, Middle East, Africa 
and Europe regions.

External appointments Co-CEO of the Al Rajhi Group of companies.

Annual Report and Accounts 2012 Petra Diamonds Limited

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Corporate Governance

Corporate 
Governance

Petra is committed to upholding 
corporate governance right down 
the organisation.

Chairman’s introduction

Dear Shareholder,
Effective governance is key to the Board, given our strategy to create a sustainable, long-term future for the business and to 
maximise shareholder value. The Company endeavours to meet the standards set out in the UK Corporate Governance Code 
(“the Code”); in the months preceding Petra’s step-up to the Main Board of the London Stock Exchange in December 2011, the 
Petra Board reviewed its governance standards and whilst the Company generally meets and achieves most standards of best 
practice and Code requirements, the Board recognises that this is an incremental process and during FY 2013 will continue to 
address the remaining corporate governance requirements of the Code.

The Company is committed to upholding not only the levels of corporate governance it has maintained to date, but also to further 
developing and implementing governance best practice right down through the organisation, in line with Petra’s increasing size 
and stature.

Step-up from AiM to the Main Market of the London Stock Exchange
One of the key highlights of FY 2012 was Petra’s step-up from AiM to the Main Market of the London Stock Exchange with a 
Premium listing, following which the Company entered the FTSE 250 on 19 March 2012. As a full list company, Petra is now 
subject to stricter regulation and compliance, including being required to adhere to the Code. Before making the move to the Main 
Market, Petra sought advice from its advisers as to the important differences between the regulatory frameworks for full 
listed companies as opposed to those on AiM, and briefing sessions for the Directors and the investor relations team were 
arranged as appropriate. Whilst on AiM, Petra already had the culture of good governance ingrained into the organisation.

Highlights for FY 2012 and to the date of this report
Below is a list of the key highlights for Petra in FY 2012 and to date in terms of its corporate governance development:
 $ the appointment of Dr Patrick Bartlett and Mr Gordon Hamilton to the Board as independent Non-Executive Directors (“iNEDs”) 

on 28 November 2011 and my subsequent move from Executive to Non-Executive Chairman;

 $ the appointment of Mr Tony Lowrie to the Board as the Senior iNED on 12 September 2012;
 $ the update of Petra’s Board Committee Charters, which are available on our website at http://www.petradiamonds.com/about-

us/corporate-governance/board-committees.aspx;

 $ the revised composition of our Audit and Remuneration Committees to ensure independence, now achieving the complement 

of three NEDs on each committee required for future periods by the Code;

 $ the formation of a Nomination Committee and a Board represented Health, Safety, Social and Environmental (“HSSE”) Committee; 
 $ the update of the Company’s Bye-Laws to be in a form which comply with the Financial Services Authority’s (United Kingdom) 
Listing  Rules  Source  Book  and  the  UK  Corporate  Governance  Code)  –  available  on  our  website  at: 
http://www.petradiamonds.com/investors/company-documents.aspx; and

 $ the launch of a new FTSE-standard corporate website, which aims to provide shareholders with full and transparent information 
about  Petra.  Please  visit  www.petradiamonds.com  and  let  us  know  if  you  have  any  comments,  as  we  welcome  all 
shareholder feedback.

A cultural imperative
Finally, the Board recognises that good governance relates just as much to individual behaviour as it does to the corporate 
regulatory framework. As such, we lead by example in the boardroom and promote a company culture in which integrity is 
valued and rewarded.

Adonis Pouroulis
Non-Executive Chairman
15 October 2012

46

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
 
LIST oF ConTEnTS

 $ Chairman’s introduction: p46
 $ The UK Corporate 

Governance Code: p47

 $ The Report of the Board: p47
 $ The Report of the Audit 

Committee (p52) including:

 $ internal Controls and Risk 

Management: p53

 $ The Report of the 

Remuneration Committee: p54

 $ The Report of the 

Nomination Committee: p55

 $ The Report of the HSSE 

Committee: p56

 $ Directors’ Report: p57
 $ Directors’ Remuneration 

Report: p61

The Report of the Board
Composition of the Board 

3

3

COMPOSiTiON 
Of THE BOARD

1

1

$  Executive Directors: 3
$  Non-Executive Chairman: 1
$  Non-Executive Director: 1
$   independent 

Non-Executive Directors: 3

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The UK Corporate Governance Code Compliance
Petra is not subject to a code of corporate governance in its country of incorporation, 
Bermuda. However, as a Main Market listed company, Petra is required to comply 
with the Code or to explain in this statement why it has not complied in certain areas.

The Company has made good progress in this area to date, although it does not at 
the present time comply with all of the Code requirements.

A  copy  of  the  Code  is  available  on  the  Financial  Reporting  Council’s  website  at: 
http://www.frc.org.uk/. 

The  Company  has  complied  with  the  required  governance  provisions  of  the  Code 
throughout the year from entry to the Main Market, with the following exceptions:

1) Board composition
The Code requires that at least half of the Board’s members should be deemed to 
be independent in nature and that a Senior iNED should be appointed. The Board 
appointed two iNEDs on 28 November 2011 and a Senior iNED post year end on 
12  September  2012.  Given  that  the  Company  previously  qualified  as  a  ‘smaller’ 
company whilst quoted on AiM, in FY 2012 it met the technical requirements of the 
Code by having at least two iNEDs since its entry to the Main Market. The Company 
has now achieved compliance with the requirement for a Senior iNED and is making 
progress towards the requirement that half of the Board (excluding the Chairman) 
comprise  iNEDs.  in  order  to  comply  with  the  Code  going  forward,  the  Company 
would  be  required  to  appoint  one  further  iNED;  the  Nomination  Committee  and 
Board will continue to consider the Petra Board composition during FY 2013.

2)Remuneration of NEDs
Petra’s  Non-Executive  Chairman  holds  options  granted  prior  to  the  Company’s 
move to the Main Market of the London Stock Exchange, representing a form of 
performance related benefits. Whilst the Code states that NEDs should not receive 
performance related remuneration, these are legacy arrangements and the Group 
incorporated the principles of the Code when determining remuneration for NEDs 
for FY 2012 (for further information, please review the Directors’ Remuneration 
Report on pages 61 to 72).

The Board considers that the Petra Directors represent a wide range of skills and 
expertise that are relevant to the successful operation and development of the 
business. The Directors encompass a substantial set of skills and experience in the 
diamond mining industry, which is complemented by the required financial, corporate 
and strategic skills which the Board as a whole considers appropriate. The Board 
and  Nomination  Committee  will  continue  to  evaluate  the  skills,  experience  and 
diversity of the Board going forward.

The  Board  currently  consists  of  three  Executive  Directors,  the  Non-Executive 
Chairman, one NED and three iNEDs. Biographies of the Board are set out on pages 
44 and 45.

in FY 2012, Petra appointed Dr Bartlett and Mr Hamilton to the Board as iNEDs 
and  post  year  end,  Mr  Lowrie  was  appointed  as  Senior  iNED.  All  appointments 
were made following a rigorous selection process, which in the case of the Senior 
iNED was assisted by an external search agency, in order to identify high calibre 
candidates considered to have the appropriate mix of financial, emerging markets 
and technical expertise to suit the specific requirements of the Petra team.

The Board has considered the independence of each Director, including assessment 
of their character and judgement. Mr Pouroulis is not considered independent by 
virtue of his previous role as Chief Executive Officer of the Company (until 2005), 
his shareholding in Petra and options outstanding (as highlighted in The UK Corporate 
Governance Code Compliance section above). Dr Omar Kamal is not considered 
independent as set out on page 45. 

Mr Hamilton is considered to remain independent despite having received fees 
for consultancy services to the Group shortly prior to its move to the Main Market 
and  Dr  Bartlett  is  considered  to  remain  independent  despite  having  previously 
received fees for services to the Group and being a trustee of the De Beers pension 
fund. The fees received are set out on page 69 of the Directors’ Remuneration Report.

Directors appointed by the Board are subject to election by shareholders at the 
following Annual General Meeting and thereafter all Directors are, in accordance 
with the Company’s Bye-Laws, subject to re-election on an annual basis. 

Annual Report and Accounts 2012 Petra Diamonds Limited

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Corporate Governance 
continued

The Report of the Board continued
The Role of the Board
Ultimately,  the  Board’s  role  is  the  protection  and 
enhancement  of  shareholder  value.  To  fulfil  this  role, 
the Board:

 $ provides leadership of the Company within a framework 
of prudent and effective controls which enable risk to be 
assessed and managed; 

 $ sets  the  Company’s  strategic  aims,  ensures  that  the 
necessary financial and human resources are in place for 
the Company to meet its objectives, reviews management 
performance; 

 $ develops  and  promotes  its  collective  vision  of  the 
Company’s purpose, culture, values and the behaviour it 
wishes to promote in conducting business and ensures 
that  its  obligations  to  its  shareholders  and  others  are 
understood and met; and

 $ carries out all duties with due regard for true sustainability 

and the long-term success of the Company.

in order to ensure the effective cooperation of the Board, 
there  is  a  clear  division  between  the  responsibilities  of 
the Directors.

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Promote and conduct the 
affairs of the Company with 
the highest standards of 
integrity, accountability and 
corporate governance.

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The Chairman’s role is to:
 $ ensure good corporate governance;
 $ lead the Board, ensuring the effectiveness of the Board in 

all aspects of its role;

 $ ensure effective communication with shareholders; and
 $ set the Board’s agenda and ensure that all Directors are 
encouraged  to  participate  fully  in  the  activities  and 
decision-making process of the Board.

The Chief Executive Officer’s role is to:
 $ lead  and  provide  strategic  direction  to  the  Company’s 

management team;

 $ run the Company on a day-to-day basis;
 $ be  responsible,  along  with  the  executive  team,  for 
implementing  the  decisions  of  the  Board  and  its 
Committees;  and

 $ be the Company spokesperson, communicating with external 

audiences, such as investors, analysts and the media.

The Senior iNED’s role is to:
 $ provide a sounding board for the Chairman and serve as 
an intermediary for the other Directors as necessary; and

 $ be available to shareholders if they have concerns which 
contact through the normal channels of Chairman, CEO or 
other Executive Directors has failed to resolve or for which 
such contact is inappropriate.

The iNEDs’ role is to:
 $ challenge the opinions of the Executive Directors, provide 
fresh insight in terms of strategic direction and bring their 
diverse  experience  and  expertise  to  the  benefit of the 
leadership of the Group;

 $ assess the performance of the Chairman;
 $ scrutinise the performance of the Executive Directors in 

terms of meeting agreed goals and objectives;

 $ monitor the reporting of performance;
 $ ensure that the financial information, controls and systems 
of  risk  management  within  the  Group  are  robust 
and defensible;

 $ determine  the  appropriate  levels  of  remuneration  of 

Executive Directors; and

 $ appoint or remove Executive Directors to or from the Board, 

when necessary.

Directors’ committee membership

$ Chairman   $ Member

Executive Directors
Mr Dippenaar
Mr Abery
Mr Davidson

non‑Executive Directors
Mr Pouroulis
Mr Lowrie1
Mr Hamilton2
Dr Bartlett2
Dr Kamal3

1 Appointed 12 September 2012.
2 Appointed 28 November 2011.
3 Member until 28 November 2011.

Executive
 Committee

Audit
 Committee

Remuneration
 Committee

Nomination
 Committee

HSSE
Committee

$
$
$

—
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$
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48

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
 
Meetings of the Board and the Board 
Committees in FY 2012
The  table  below  lists  the  number  of  Board  and  Board 
Committee meetings held in FY 2012:

Meeting

FY 2012

Board
Audit Committee
Remuneration Committee
Nomination Committee
HSSE Committee
iNEDs with the Chairman (without the Executive team)
iNEDs assess the Chairman

4
4
3
2
1
1
1

The  Directors  attended  all  Board  meetings  and  Committee 
members attended all Committee meetings during the year 
(following  their  appointment  to  the  Board  in  the  case  of 
the iNEDs).

Board process
The  Board  believes  that  all  Directors  are  able  to  allocate 
sufficient  time  to  the  Company  in  order  to  discharge  their 
responsibilities effectively. The biographies of the Board are 
stated on pages 44 to 45; there were no significant changes 
to  the  members’  commitments  in  FY  2012.  The  full  Board 
meets  formally  at  least  four  times  per  year,  at  such  other 
times as may be necessary to address any significant matters 
that  may  arise,  and  also  communicates  regularly  between 
these meetings.

To assist in the execution of the company strategy, the Board 
has  established  an  Executive  Committee  to  manage  the 
Company on a day-to-day basis. Members of this Committee 
are Mr Dippenaar, Mr Abery and Mr Davidson.

in  compliance  with  the  Code,  the  Chairman  holds  meetings 
with the iNEDs without the Executive Committee present, to 
discuss  matters  freely  (such  as  the  Executive  Committee’s 
performance and any perceived issues/concerns).

Petra  currently  has  the  following  additional  primary 
(see  page  52),  the 
committees:  the  Audit  Committee 
Remuneration  Committee  (see  page  54),  the  Nomination 
Committee  (see  page  55)  and  a  Board-represented  HSSE 
Committee (see page 56). The purpose of these committees is 
to delegate responsibility to Directors and Senior Management 
(in the case of the HSSE Committee) with specific skills and 
knowledge and to facilitate the Board’s overall role.

The Board is supplied on a regular basis with appropriate and 
timely  information  relating  to  all  aspects  of  the  Group  and 
has  regular  opportunities,  including  visits  to  operations,  for 
contact  with  a  wider  group  of  employees,  including  Senior 
Management. in addition, the Directors are free to seek any 
further  information  they  consider  necessary  in  order  to 
discharge their duties effectively. The collective responsibility 
of  the  Board  ensures  that  all  Directors  are  involved  in  the 
process of arriving at significant decisions.

The agenda for Board and Committee meetings is prepared in 
conjunction  with  the  Company/Committee  Chairman  as 
appropriate and all documents that are relevant to the agenda 

of the Board meeting are distributed to the Board in advance 
of  the  meeting.  Senior  Management  are  involved  in  the 
preparation  of  Board  papers  and  are  able  to  contact  any 
member of the Board should they feel the need to do so.

Board and Committee meetings take place in Jersey, Channel 
islands and typically last for two days. The schedule for such 
meetings is arranged so as to allow the Board additional time 
to engage in informal discussions regarding the activities of 
the Group, the capital markets and the diamond and mining 
sectors in general.

Matters reserved for the Board
The Board has a formal schedule of matters reserved that can 
only be decided by the Board. This schedule is reviewed and 
agreed  by  the  Board  each  year.  The  key  matters  reserved 
are the consideration and approval of the Group’s:

 $ vision and strategy;
 $ production and trading results;
 $ financial  statements  and  reporting  (supported  by  the 

Audit Committee);

 $ financial  strategy,  including  debt  and  other  external 

financing sources;

 $ budgets,  expansion  projects,  capital  expenditure  and 

business plans;

 $ material acquisitions and divestments;
 $ corporate  governance  and  compliance  (supported  by  the 

Audit Committee);

 $ risk  management  and  internal  controls  (supported  by  the 

Audit Committee);

 $ material  health,  safety,  social  and  environmental  matters 

(supported by the HSSE Committee);

 $ appointments  and  succession  planning  (supported  by  the 

Nomination Committee); and

 $ remuneration (supported by the Remuneration Committee).

Board performance and evaluation
To date, the Company has adopted self-evaluation processes 
to measure Board performance. The performance of Directors 
is  assessed  through  review  and  specific  discussion  by  the 
Board of issues relating to an individual Director’s attendance 
at  and  involvement  in  Board  meetings,  interaction  with 
management, performance of allocated tasks and any other 
matters identified by the Board or individual Directors. 

Any significant issues identified are actioned by the Board on 
an  ongoing  basis.  in  addition,  the  iNEDs  meet  without  the 
Chairman  at  least  annually  to  appraise  the  Chairman’s 
performance  and  on  such  other  occasions  as  are  deemed 
appropriate.  The  evaluation  of  key  Senior  Management  is 
carried out  by  the  Executive  Committee  and  any  significant 
issues identified are raised with the Board as a whole.

The Board will comply with the Code’s requirements that the 
evaluation  of  the  board  of  FTSE  350  companies  should  be 
externally facilitated at least every three years.

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Corporate Governance 
continued

Summary of the Board’s main work in FY 2012
 $ strategy and delivery, with a particular focus on the acquisition and successful integration of the Finsch mine and the roll-

out of the expansion programmes across the other mines;

 $ corporate development, including the step-up from AiM to the Main Market of the London Stock Exchange;
 $ evaluation of external growth opportunities;
 $ financial overview; 
 $ corporate governance and compliance;
 $ appointments (see the Report from the Nomination Committee on page 55); and
 $ remuneration and new incentive schemes (see the Directors’ Remuneration Report from page 61).

The Report of the Board continued
The Role of the Board continued
Induction of new Directors
The Company educates new Directors about the nature of the 
business, current issues, the corporate strategy and timeline 
for  key  objectives  to  be  met,  and  the  expectations  of  the 
Board concerning the performance of the Directors. Directors 
also have the opportunity to visit Group operations and meet 
to  gain  a  better 
with 
understanding of Petra’s business.

the  operational  management 

in  FY  2012,  Petra  provided  tailored  induction  programmes 
for  Dr  Bartlett  and  Mr  Hamilton,  who  joined  the  Board  on 
28  November  2011.  Shortly  before  joining  the  Board, 
Dr  Bartlett  and  Mr  Hamilton  visited  Petra’s  flagship  mines, 
Cullinan  and  Finsch  (in  conjunction  with  an  analyst  visit),  and 
visited 
in 
Johannesburg  to  see  the  first  layout  of  Finsch  production. 
This provided an opportunity for the incoming iNEDs to canvas 
independent analyst views of the Company, its management 
team, its projects and its prospects going forward.

the  Company’s  diamond  marketing  office 

Upon  joining  the  Board,  Dr  Bartlett  and  Mr  Hamilton  were 
provided  with  direct  access  to  members  of  Petra’s  Senior 
Management  team  and  were  provided  with  relevant 
information packs on the Company. Dr Bartlett was provided 
with directors’ training, carried out by Deloitte, as he had not 
previously served on the Board of a FTSE listed company.

Mr  Lowrie  joined  the  Board  in  September  2012  and  his 
induction, which will include visits to the Group’s operations 
and meetings with Senior Management, is underway.

Director education 
The Board seeks to maximise the contribution of all Directors 
on  an  ongoing  basis.  Key  to  this  is  appropriate  ongoing 

training and the Group makes this available to all Directors. 
Training  covers  the  Group,  its  industry  and  governance 
matters more generally.

During  FY  2013,  the  Directors  will  attend  training  and 
educational sessions on matters relevant to their responsibilities 
on the Board, such as the Code, legal developments, executive 
remuneration and other relevant topics.

Conflict of interest
Directors must keep the Board advised, on an ongoing basis, 
of  any  interest  that  could  potentially  conflict  with  those 
of the Company. Where the Board believes that a significant 
conflict exists, the conflict is clearly recorded in the Board 
minutes and if considered appropriate (due to the nature of 
the conflict) by the rest of the Board, the Director concerned 
is not present at the meeting whilst the item is considered. 

Director dealings in Company shares 
Company policy prohibits Directors and Senior Management 
from  dealing  in  shares  or  exercising  share  options  whilst  in 
possession  of  price  sensitive  information.  Directors  and 
Senior  Management  must  notify  and  get  approval  from  the 
Chairman  (Directors)/Finance  Director  (Senior  Management) 
before  they  deal  in  shares  or  exercise  share  options  in 
the Company.

Independent professional advice and access to 
Company information
All  Directors  have  access  to  advice  from  the  Company’s 
retained auditors, legal advisers and brokers, as well as from 
other independent professional advisers (as appropriate), at 
the expense of the Company if considered necessary in the 
performance of their duties. Each Director has right of access 
to all relevant Company information.

PETRA’S InvESToR RELATIonS CALEnDAR In FY 2012:

•  Trading Update – investor/analyst 

conference call and marketing

•  Preparation for move from AIM 

to Main Board

•  Analyst site visit to Finsch 

and Cullinan

JULY

AUGUST

SEPTEMBER

OCTOBER

NOVEMBER

DECEMBER

•  FY 2011 results – analyst 

•  AIM to Main investor roadshow 

presentation/webcast and investor 
roadshow in UK, Canada and US

• Analyst guidance issued FY 2012

• AMA Diamond Conference

in UK

• Step-up to Main Market

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
The Report of the Board continued
The Role of the Board continued
Other commitments
The Executive Directors may accept external appointments to 
act as non-executive directors of other companies subject to 
the Board’s consent. Any fees for such appointments would 
normally be retained by the Director concerned. 

Remuneration of NEDs
When  setting  fees  for  NEDs,  the  Board  takes  independent 
professional advice and applies appropriate benchmarks. During 
FY  2012,  the  Company  engaged  Deloitte’s  remuneration 
services to report to the Company on NED remuneration within 
the Company’s industry and within the FTSE 250. Directors’ 
fees include membership of committees. Further information 
is contained in the Directors’ Remuneration Report on pages 
61 to 72.

Insurance for Directors and Officers
The Company has arranged appropriate Directors’ and Officers’ 
insurance cover in respect of legal claims against its Directors.

Communication with shareholders 
and continuous disclosure
The  Company  supports  an  open  dialogue  with  shareholders 
so  that  the  Board  understands  shareholders’  needs  and 
objectives  and  their  views  on  the  Company’s  performance. 
investor  relations  is  an  important  aspect  of  the  Company’s 
overall  communications  strategy  and  Petra  has  a  dedicated 
in-house  corporate  communications  and  investor  relations 
department  based  in  London  to  ensure  that  any  investor 
query or concern is responded to and dealt with efficiently 
and  in  a  timely  manner.  Petra’s  investor  relations  team 
regularly  provides  feedback  to  management  on  all  such 
shareholder  communication  and  analyst  research  notes  are 
circulated as received.

As  part  of  Petra’s  proactive  investor  relations  approach,  the 
Board  and  the  investor  relations  team  commit  time  to  hold 
regular  formal  and  informal  meetings  in  person  with  the 
Company’s shareholders in order to get direct feedback and input 
on  strategy  and  performance.  The  Company  also  hosts  results 
webcasts at least twice a year which are broadcast live on the 
Company’s website to ensure that all shareholders can participate 
in the presentation, regardless of their location, and are stored 
thereafter at www.petradiamonds.com.

Petra’s  website  provides  information  on  forthcoming  events 
for  shareholders  and  analysts  at 
link: 
http://www.petradiamonds.com/investors/financial-and-
events-calendar.aspx.

the  following 

The Annual General Meeting
The  Board  encourages  full  participation  of  shareholders  at 
shareholder meetings, such as the AGM, to ensure a high level 
of accountability and identification with the Group’s strategy 
and goals. The Chief Executive Officer gives a presentation to 
shareholders annually at the AGM, providing an overview of 
the last year’s progress and challenges, as well as insight into 
forward  looking  objectives  and  outlook.  The  Company’s 
external auditors attend the AGM.

Equal access and continuous disclosure
Petra ensures that all shareholders and investors have equal 
access  to  the  Company’s  information,  and  has  procedures 
to  ensure  that  all  price  sensitive  information  is  disclosed 
to shareholders in accordance with the Listing Rules and the 
Disclosure and Transparency Rules. All public announcements 
are  simultaneously  posted  to  the  Company’s  website  at  
www.petradiamonds.com.

The Company’s Annual Report and Accounts is made available 
to all shareholders. The Board ensures that the Annual Report 
and  Accounts  includes  relevant  information  about  the 
operations of the Group during the year, changes in the state 
of affairs of the Group and details of future developments, as 
well as all required disclosures. Notices of shareholder meetings 
and  associated  explanatory  material  are  placed  on  the 
Company’s website. 

eCommunications and Shareholder Portal
Shareholders  previously  passed  a  resolution  to  allow  the 
Company  to  use  electronic  means  and  its  website  
(www.petradiamonds.com)  to  send  or  supply  statutory 
documents and communications to shareholders, such as its 
Annual  Report  and  Accounts.  Shareholders  now  have  the 
flexibility to receive shareholder communications from Petra 
electronically, should they so choose.

As well as providing shareholders with greater choice as to how 
communications  are  received,  publication  via  its  corporate 
website allows Petra to reduce the costs and environmental 
impact of such communications and to speed up the provision 
of information to its shareholders.

To  offer  shareholders  even  more  flexibility,  Petra  has  also 
set  up  a  Shareholder  Portal  via  Capita  Registrars  at 
www.capitashareportal.com,  offering  a  whole  host  of 
shareholder services online.

•  Trading Update – analyst 

•  Goldman Sachs Luxury Goods 

Conference in Hong Kong

•  Mines and Money Conference 

in Hong Kong

• Investor roadshow in Hong Kong

presentation and investor roadshow

• Entrance to FTSE 250

•  RBC Diamond Conference in 

London and investor roadshow

JANUARY

fEBRUARY

MARCH

APRiL

MAY

JUNE

•  GMP Conference in South Africa

• Indaba Conference in South Africa

•  Interim Results – analyst 

presentation, webcast and 
investor roadshow in UK

•  Q3 FY 2012 Interim Management 

Statement – investor/analyst 
conference call

Annual Report and Accounts 2012 Petra Diamonds Limited

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Corporate Governance 
The Report of the Audit Committee

“I was delighted to be appointed Audit Committee Chairman 
during the year. The Committee’s main focus is to ensure 
that Petra’s internal controls and risk management systems 
continue to evolve and mature as the Company continues 
along its high growth path.”

Gordon Hamilton, Chairman of the Audit Committee

MEMBERSHiP Of THE 
AUDiT COMMiTTEE

ROLE Of THE AUDiT COMMiTTEE

Mr Hamilton (Chairman) 
non‑Executive Director 
(appointed 28 November 2011)

Mr Lowrie 
non‑Executive Director 
(appointed 12 September 2012)

Dr Bartlett 
non‑Executive Director 
(appointed 28 November 2011)

Dr Kamal 
non‑Executive Director 
(until 28 November 2011)

The principal functions of the Audit Committee include the following:

 $ to monitor the integrity of all financial statements made by the Company and 
any  formal  announcements  relating  to  the  Company’s  financial  performance, 
reviewing significant financial reporting judgements contained in them;

 $ to ensure that Petra’s internal controls and risk management systems continue 

to evolve and mature;

 $ to  review  and  challenge  where  necessary  accounting  policies  and  practices, 
decisions  requiring  a  major  element  of  judgement,  the  clarity  of  disclosures, 
compliance with accounting standards, and compliance with FSA, London Stock 
Exchange and other legal requirements;

 $ to  review  the  Company’s 

internal  audit  function  and  ensure 

it 

is 

adequately resourced and effective;

 $ to  consider  the  appointment,  re-appointment  or  removal  of  the  external 
auditors and to recommend the remuneration and terms of engagement of the 
external auditors;

 $ to assess the external auditors’ independence and objectivity;
 $ to review the engagement of the external auditors to ensure the provision of 
non-audit services by the external audit firm does not impair its independence 
or objectivity; and

 $ to give due consideration to relevant laws and regulations, the provisions of the 

Code and the requirements of the Listing Rules.

Membership
in FY 2012, Petra changed the composition of its Audit Committee, further to the 
appointment of Mr Hamilton and Dr Bartlett as iNEDs. The Audit Committee is now 
chaired  by  Mr  Hamilton  and  its  members  are  Dr  Bartlett  and,  post  year  end, 
Mr Lowrie. Mr Hamilton is considered to be highly appropriate for this role given 
that he spent more than 30 years as a partner at Deloitte LLP primarily responsible 
for  multinational  and  FTSE  350  listed  company  audits.  The  qualifications  of  the 
members are provided on pages 44 to 45.

Audit Committee meetings
The Audit Committee meets formally at least twice per year; three Audit Committee 
meetings  were  held  during  FY  2012.  The  Audit  Committee  invites  the  Chief 
Executive Office and the Finance Director to attend the meetings as appropriate.

The  Audit  Committee  also  meets  with  the  external  auditors  independent  of 
Executive Management. The Audit  Committee  may,  if considered necessary,  take 
independent advice at the expense of the Company.

The meetings during FY 2012 included presentations by the BDO LLP audit partner 
regarding the results of its audit of FY 2011, interim review for H1 FY 2012 and the 
audit  planning  proposal  for  FY  2012.  The  Audit  Committee  considered  and 
approved  the  financial  statements  and  formal  announcements  made  during  the 
year, including key financial reporting judgements and accounting policies as a part 
of that review.

Audit Committee Charter
The  Audit  Committee  Charter  was  revised  during  FY  2012  and  is  in  line  with 
best  practice. 
the  Company’s  website  here: 
www.petradiamonds.com/about-us/corporate-governance/board-committees.aspx.

it  can  be  accessed  on 

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internal controls 
and risk management
The  Board  is  responsible  for  the 
Group’s system of internal control and 
for  reviewing  its  effectiveness.  it 
should  be  recognised  that  such  a 
system can only provide reasonable 
and  not  absolute  assurance  against 
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. The Code requires that the 
effectiveness of the system of internal 
control be reviewed by the Directors, 
including  financial,  operational  and 
risk management. 

The  Board,  on  an  ongoing  basis, 
conducts reviews of the effectiveness 
of  the  Company’s  risk  management 
and  internal  control  systems  and 
reports  to  shareholders  that  they 
have  done  so.  During  the  year,  the 
Audit  Committee  agenda  included 
specific  consideration  regarding  the 
Group’s  internal  controls  and  risk 
management  procedures,  including 
reviews  as  part  of  the  move  to  the 
Main Market. The review covered all 
material controls, including financial, 
operational and compliance controls 
and  confirmed  that  appropriate 
controls  have  been  in  operation  for 
the year under review and to date.

The  Group  has  not  established  a 
separate Board level risk committee. 
instead, the Board, as part of its usual 
role and through direct involvement 
in  the  management  of  the  Group’s 
operations, ensures risks are identified, 
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.

Please  refer  to  pages  40  and  41  of 
the  annual  report  where  the  Group 
has identified key risks and how they 
are mitigated. 

External Auditors
As part of its meetings, the Audit Committee proposed the re-appointment of BDO 
LLP to act as auditors for FY 2012 having considered the independence, objectivity, 
tenure and effectiveness of BDO LLP and the audit process. This was undertaken 
within the framework of the Audit Committee terms of reference. BDO LLP provide 
taxation services to the Group and acted as Reporting Accountant as part of the 
move to the Main Market, receiving fees as set out in note 7. The Audit Committee 
fully  considered  the  objectivity  and  independence  of  BDO  LLP  as  part  of  re-
appointment  considering  all  current  ethical  guidelines,  The  auditors’  fees  were 
approved as part of this process.

internal control processes
The Board’s internal control processes are comprehensive and include:

 $ operating  unit  controls  –  operating  units  comply  with  financial  controls  and 

procedures including information system controls;

 $ functional reporting – key areas subject to regular reporting to the Board include 
operations and production, finance, investor relations, technical,  safety, human 
resources, corporate social responsibility, environment and legal matters;

 $ internal audit function – towards the end of FY 2012, the Committee decided to 
increase  the  resource  available  to  the  internal  audit  function  to  a  level  that  is 
appropriate  to  cover  the  enlarged  Petra  Group.  The  Company  is  currently 
recruiting to staff this internal audit resource. Any matters arising of a material 
nature from the internal audit manager’s reviews were brought to the attention 
of the Board. The Audit Committee ensures compliance with the internal controls 
and risk management procedures previously mentioned; and 

 $ Group  Code  of  Conduct  –  the  Group  has  a  documented  Code  of  Conduct.  The 
Group has induction procedures to inform newly appointed employees of their 
rights and their duty to act with utmost integrity and objectivity. The Code of 
Conduct is designed to guide compliance with legal and other obligations to the 
Company’s stakeholders. Petra is currently in the process of updating its Code of 
Conduct  to  include  new  and  revised  recommendations  on  key  areas  such  as 
human rights, whistle-blowing and anti-bribery policies. Once the new Code of 
Conduct is available it will be made public on the Group’s website. 

Practices have been established to ensure:

 $ financial exposures are controlled, including the potential use of derivatives;
 $ environmental  performance  is  regularly  monitored  to  ensure  the  Group  is  in 
compliance with the laws of the jurisdictions in which the Group’s operations are 
based in relation to its exploration and mining activities;

 $ occupational  health  and  safety  standards  and  management  systems  are 
monitored  and  reviewed  to  achieve  high  standards  of  performance  and 
compliance with regulations;

 $ ethical  standards  are  monitored  as  all  Directors,  managers  and  employees  are 
expected to act with the utmost integrity and objectivity, striving at all times to 
enhance the reputation and performance of the Group;

 $ business transactions are properly authorised and executed; and
 $ financial  reporting  accuracy  and  compliance  with  the  financial  reporting 

regulatory framework.

Whilst being satisfied that controls and risk management remain appropriate for 
the  Group’s  activities,  the  Audit  Committee  continues  to  undertake  a  thorough 
review of internal controls, risk management procedures, internal audit resourcing 
and strategy to ensure that its practices develop and remain appropriate.

Annual Report and Accounts 2012 Petra Diamonds Limited

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Corporate Governance 
The Report of the Remuneration Committee

“I have enjoyed working with Dr Bartlett and our independent 
advisers, Deloitte LLP, to implement a new Group remuneration 
policy, which is highly performance driven and aligned with the 
long-term interests of our shareholders.”

Gordon Hamilton, Chairman of the Remuneration Committee

MEMBERSHiP Of 
THE REMUNERATiON 
COMMiTTEE

Mr Hamilton (Chairman) 
non‑Executive Director 
(appointed 28 November 2011)

Mr Lowrie 
non‑Executive Director 
(appointed 12 September 2012)

Dr Bartlett 
non‑Executive Director 
(appointed 28 November 2011)

Dr Kamal 
non‑Executive Director 
(until 28 November 2011)

ROLE Of THE REMUNERATiON COMMiTTEE

The principal duties of the Remuneration Committee include 
the following:

 $ to agree with the Board a framework and policy for remuneration of the Executive 

Directors and Senior Management;

 $ to agree with the Board the Company’s policy on the duration of contracts with 
Executive  Directors  and  notice  periods  and  termination  payments  under 
such contracts;

 $ to advise on the design of and determine the total individual remuneration 
package of each of the Executive Directors including base salary, benefits, annual 
performance bonuses and performance-based share awards; 

 $ to review the remuneration trends across the Group and its industry; and 
 $ to  oversee  any  major  changes  in  employee  benefits  structures  throughout 

the Group.

Membership
in FY 2012, Petra changed the composition of its Remuneration Committee, further 
to  the  appointment  of  Mr  Hamilton  and  Dr  Bartlett  as  iNEDs.  The  Remuneration 
Committee is now chaired by Mr Hamilton and its members are Dr Bartlett and, post 
year end, Mr Lowrie. 

Remuneration Committee meetings
The  Remuneration  Committee  meets  formally  at  least  twice  per  year  and  three 
Remuneration Committee meetings were held during FY 2012. The Remuneration 
Committee  invites  Executive  Directors  to  attend  the  meetings  as  appropriate; 
their  own 
the 
remuneration  or  performance.  No  Director  or  Senior  Manager  is  involved  in 
deciding their own remuneration.

the  meeting  on  matters 

relevant 

invitees 

leave 

to 

The activities and focus of this Committee are covered in detail in the Directors’ 
Remuneration Report on pages 61 to 72.

The  Remuneration  Committee  meets  with  the  Company’s  external  remuneration 
consultants  independent  of  the  Executive  Directors.  The  Remuneration  Committee 
may, if considered necessary,  take  further  independent  advice  at  the  expense  of 
the Company. 

Remuneration Committee Charter
The Remuneration Committee Charter was revised during FY 2012 and is in line 
with  best  practice. 
it  can  be  accessed  on  the  Company’s  website  at: 
ht tp: //www.petradiamonds.com/ab out-us/corporate-governance/ b oard-
committees.aspx.

54

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
The Report of the Nomination Committee

“Our role is to identify the right mix of management skills 
and experience required to effectively guide Petra along its 
high growth path.”

Adonis Pouroulis, Chairman of the Nomination Committee

MEMBERSHiP Of 
THE NOMiNATiON 
COMMiTTEE

ROLE Of THE NOMiNATiON COMMiTTEE

The principal duties of the Nomination Committee include 
the following:

Mr Pouroulis (Chairman)  
non‑Executive Chairman 
(appointed 28 November 2011)

 $ to review regularly the structure, size and composition of the Board (including 
the skills, knowledge and experience) and make recommendations to the Board 
with regard to any changes;

Mr Lowrie 
non‑Executive Director 
(appointed 12 September 2012)

Dr Bartlett 
non‑Executive Director 
(appointed 28 November 2011)

Mr Hamilton 
non‑Executive Director 
(appointed 28 November 2011)

 $ to identify, nominate and recommend for the approval of the Board, appropriate 

candidates to fill Board vacancies as and when they arise;

 $ to satisfy itself with regard to succession planning that processes and plans 
are in place with regard to both Board and Senior Management appointments;

 $ to review annually the time required from Non-Executive Directors and use 
performance  evaluation  to  assess  whether  the  Non-Executive  Director  has 
devoted sufficient time to his or her duties;

 $ to recommend to the Board the re-election (if appropriate) by Shareholders 
of any Director under the retirement and re-election provisions in the Company’s 
Bye-Laws;

 $ to make recommendations to the Board concerning membership of the Audit 

and Remuneration Committees; and

 $ to ensure that on appointment to the Board, Non-Executive Directors receive 

formal written terms of appointment.

Membership
On 28 November 2011, Petra formed its Nomination Committee. it is chaired by Mr 
Pouroulis and its members are Mr Hamilton, Dr Bartlett and, post year end, Mr Lowrie.

Nomination Committee meetings
The Nomination Committee will meet formally at least twice a year, however in FY 
2012 only one meeting was held, given that the Committee was only formed nearly 
half way through the financial year. The Nomination Committee is authorised by 
the Board to obtain whatever external professional advice it considers necessary.

Key Nomination Committee functions in FY 2012 included:

 $ the  evaluation  of  the  Petra  Board  and  the  subsequent  identification  of  the 
complementary skills, experience, independence and knowledge required from 
new appointees;

 $ following the above, a detailed specification was drawn up for the appointment 

of a new iNED to the Petra Board;

 $ the appointment of an executive search agency, considered to be a specialist in 

the resources sector, to assist with the iNED search; and

 $ the appointment of, post year end, Mr Lowrie.

Nomination Committee Charter
The  Nomination  Committee  Charter  can  be accessed on the Company’s website at: 
ht tp: //www.petradiamonds.com/ab out-us/corporate-governance/ b oard-
committees.aspx.

Annual Report and Accounts 2012 Petra Diamonds Limited

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Corporate Governance 
The Report of the Health, Safety, Social and Environmental (“HSSE”) Committee

“Sustainability is at the heart of Petra’s operations – we want 
to protect the environment, contribute to the social stability 
and welfare of our local communities and, above all, keep 
our employees safe.”

Johan Dippenaar, Chairman of the HSSE Committee

MEMBERSHiP Of 
THE HSSE COMMiTTEE

ROLE Of THE HSSE COMMiTTEE

Mr Dippenaar (Chairman) 
Chief Executive officer

Members of Petra’s Senior 
Management team

The principal duties of the HSSE Committee include the following:

 $ to evaluate the effectiveness of the Group’s policies and systems for identifying 
and managing health, safety, social and environmental risks within the Group’s 
operations;

 $ to assess the policies and systems within the Group for ensuring compliance 
with applicable legal and regularity requirements with respect to health, safety, 
social and environmental aspects;

 $ to assess the performance of the Group with regard to the impact of health, 
safety,  social  and  environmental  decisions  and  actions  upon  employees, 
communities and other stakeholders;

 $ to  review  management’s  investigation  of  all  fatalities  and  serious  accidents 
within the Group and actions taken by management as a result of such fatalities 
or serious accidents;

 $ to evaluate the quality and integrity of any reporting to external stakeholders 

concerning health, safety, social and environmental issues;

 $ to review the Group’s performance indicators in connection with health, safety, 

social and environmental aspects; and

 $ to review the Group’s public disclosure on health, safety, social and environmental 

matters and approve them as necessary.

Membership
On  28  November  2011,  Petra  formed  its  HSSE  Committee.  it  is  chaired  by 
Mr Dippenaar and is comprised of members of Petra’s Senior Management team.

HSSE Committee meetings
The HSSE Committee will meet formally at least twice a year, however in FY 2012 
only one meeting was held, given that the Committee was formed half way through 
the  financial  year.  The  HSSE  Committee  is  authorised  by  the  Board  to  obtain 
whatever external professional advice it considers necessary.

Key HSSE Committee meetings in FY 2012 considered:
 $ HSSE strategy, policies and procedures;
 $ Group  safety  record  and  full  investigation  into  the  fatality  at  Kimberley 

Underground in January 2012;

 $ environmental management systems;
 $ social responsibility;
 $ stakeholder engagement; and
 $ legal compliance relating to HSSE.

HSSE Committee Charter
The  HSSE  Committee  Charter  can  be  accessed  on  the  Company’s  website  at: 
ht tp: //www.petradiamonds.com/ab out-us/corporate-governance/ b oard-
committees.aspx.

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56

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
Directors’ Report

Directors’ Report

This Annual Report and Accounts has been prepared to provide Shareholders 
with a fair and balanced review of Petra’s business.

The Directors present their management 
report,  which  includes  the  Corporate 
Governance Statement on pages 46 to 56, 
together  with  the  Audited  Financial 
Statements of the Group for the year ended 
30 June 2012 from pages 73 to 122. 

For the purpose of DTR 4.1.8R this report 
plus  any  cross-references  made  herein 
is deemed the ‘management report’ and 
should be read with the Annual Financial 
Statements on pages 73 to 122.

Principal activities
Petra Diamonds is a leading independent 
diamond mining group and an increasingly 
important supplier of rough diamonds to 
the international market. The Company 
has  a  well-diversified  portfolio,  with 
controlling  interests  in  eight  producing 
mines:  seven  in  South  Africa  (Finsch, 
Cullinan,  Koffiefontein,  Kimberley 
Underground, Helam, Sedibeng and Star) 
and  one  in  Tanzania  (Williamson).  in 
addition,  Petra  has  an  exploration 
operation in Botswana. 

Business review
This  Annual  Report  and  Accounts  has 
been prepared to provide shareholders 
with a fair and balanced review of Petra’s 
business,  the  outlook  for  the  future 
development of the Group, as well as the 
principal  risks  and  uncertainties  which 
could affect the Group’s performance. 

The table below identifies where to find 
specific information related to the Business 
Review within this Annual Report.

Results and dividends
The  Group’s  net  loss  after  tax  for  the 
year amounted to US$2.1 million (2011: 
net profit after tax of US$59.2 million). 
The  Directors  do  not  recommend  the 
payment  of  a  dividend  for  the  year 
(2011: US$nil). 

As  set  out 
in  the  Discover  Petra 
Diamonds  section,  the  CEO’s  Review 
and the Financial Review of this Annual 
Report, the Group is currently reinvesting 
its cashflow in the expansion of its key 
operations. The Board will formalise the 
Group’s  dividend  policy  when  the 
Group’s free cashflow, after the capital 
expansion programmes associated with 
these major expansions, is sufficient to 
support  the  ongoing  payment  of  the 
dividend. The Directors recognise that it 
is  important  that  a  mining  company 
such  as  Petra  aims  to  introduce  a 
dividend policy when appropriate in the 
Company’s development.

Share capital and stock 
exchange listing
The Company has one class of ordinary 
shares  of  10p  each  (the  “Ordinary 
Shares”).  Details  of  the  Company’s 
authorised and issued Ordinary Share 

capital together with any changes to the 
share capital during the year are set out 
in  note  21  to  the  financial  statements. 
The  Company’s  shares  are  admitted  to 
the  premium  segment  of  the  Official 
List and are traded on the Main Market 
of  the  London  Stock  Exchange.  The 
Ordinary  Shares  themselves  are  not 
admitted  to  CREST,  but  dematerialised 
depositary  interests  representing  the 
underlying  Ordinary  Shares  issued  by 
Capita iRG Trustees Limited can be held 
and  transferred  through  the  CREST 
system.  The  rights  attaching  to  the 
Ordinary  Shares  are  governed  by  the 
Companies  Act  1981  (Bermuda)  (as 
amended) and the Company’s Bye-Laws.

The Company is a member of the FTSE 250.

Share rights
Shareholders  have  the  right  to  receive 
notice of and attend any general meeting 
of the Company. Each shareholder who 
is  present  in  person  (or,  being  a 
corporation,  by  representative)  or  by 
proxy at a general meeting on a show of 
hands has one vote and, on a poll, every 
such holder present in person (or, being 
a corporation, by representative) or by 
proxy shall have one vote in respect of 
every Ordinary Share held by them. 

There are no shareholders who carry any 
special rights with regards to the control 
of the Company.

Content

Section

A detailed review of the Group’s operations and finances for 
FY 2012, key events subsequent to the year end and factors 
affecting the future development of the Group

Review of exploration activities

Resource Statement

Principal risks

Corporate governance

Directors’ remuneration

Discover Petra Diamonds section, 
including Key Performance indicators

Chairman’s Statement

CEO’s Review

Financial Review

Operational Review

Operational Review

Operational Review

Risk Management 

Corporate Governance

Directors’ Remuneration Report

Pages

1 to 11

14 to 15

16 to 19

20 to 23

24 to 37

34 to 34

35 to 37

40 to 41

46 to 56

61 to 72

Annual Report and Accounts 2012 Petra Diamonds Limited

57

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Directors’ Report 
continued

Restrictions on transfer 
of shares 
There are no restrictions on the transfer 
of Ordinary Shares other than:

 $ the Board may in its absolute discretion 
refuse  to  register  any  transfer  of 
Ordinary  Shares  over  which  the 
Company has a lien or which are not 
fully  paid  up  provided  it  does  not 
prevent  dealings  in  the  Ordinary 
Shares on an open and proper basis;

 $ the Board may also refuse to register 
a transfer if it is not satisfied that all 
applicable  consents,  authorisations 
and permissions of any governmental 
body  or  agency  in  Bermuda  have 
been  obtained;

 $ certain restrictions may from time to 
time  be  imposed  by  laws  and 
regulations;

 $ pursuant  to  the  Company’s  share 
dealing  code  whereby  the  Directors 
and employees of the Company require 
approval  to  deal  in  the  Company’s 
Ordinary Shares; and

 $ where a person with at least a 0.25% 
interest in the Company’s shares has 
been served with a disclosure notice 
and has failed to provide the Company 
with information concerning interests 
in those Ordinary Shares.

Appointment and replacement 
of Directors
The  Directors  shall  have  power  at  any 
time to appoint any person as a director 
to fill a vacancy on the Board occurring 
as  a  result  of  the  death,  disability, 
removal, disqualification or resignation 
of  any  Director  or  to  fill  any  deemed 
vacancy  arising  as  a  result  of  the 
number of directors on the Board being 
less  than  the  maximum  number  of 
directors that may be appointed to the 
Board from time to time.

The Company may by resolution at any 
special  general  meeting  remove  any 
Director  before  the  expiry  of  their 
period  of  office.  Notice  of  any  such 
meeting  convened  for  the  purpose  of 
removing  a  Director  shall  contain  a 
statement of the intention to do so and 
be  served  on  such  Director  not  less

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than 14 days before the meeting and at 
such  meeting  the  Director  shall  be 
entitled  to  be  heard  on  the  motion  for 
such Director’s removal.

A  Director  may  be  removed  (with  or 
without  cause)  by  notice  in  writing  by 
all of their co-Directors, provided such 
notice is delivered to the Secretary and 
such Director.

Company Bye-Laws
The Company is incorporated in Bermuda 
and  the  City  Code  therefore  does  not 
formally  apply  to  the  Company.  The 
Company’s Bye-Laws were amended in 
November 2011 to incorporate material 
City Code protections appropriate for a 
company  to  which  the  City  Code  does 
not apply.

The  amended  Bye-Laws  now  require 
that  all  Directors  stand  for  re-election 
annually at the Company’s AGM.

The Bye-Laws of the Company may only 
be amended by a resolution of the Board 
and by a resolution of the shareholders.

in 

Power to issue shares
At  the  AGM  held  on  27  January  2012, 
authority was given to the Directors to 
allot  unissued  Relevant  Securities  (as 
the 
defined 
Company  up  to  a  maximum  aggregate 
nominal value of £14,864,839.90, being 
an amount equal to the unissued share 
capital  of  the  Company  as  at  14 
December 2011. That authority was not 
used by the Company. 

the  Bye-Laws) 

in 

The  Directors  are  seeking  approval 
from  Shareholders 
this 
authority  at  the  AGM  to  be  held  on 
29  November  2012,  further  details  of 
which are set out in the Notice of AGM.

renew 

to 

A special resolution passed at the AGM 
held  on  27  January  2012  granted 
authority to the Directors to allot equity 
securities (as defined in the Bye-Laws) 
in  the  Company  for  cash  on  (a)  a  non-
pre-emptive  basis  pursuant  to  a  rights 
issue or other offer to shareholders and 
(b)  otherwise  up  to  an  aggregate 
nominal  value  of  £2,506,758  (being 
equal to approximately 5% of the issued 
share  capital  of  the  Company  as  at 
14 December 2011). That authority was 
not used by the Company. 

The Directors are also seeking approval 
from shareholders to renew this authority 
at the AGM to be held on 29 November 
2012, further details of which are set out 
in the Notice of AGM.

Repurchase of shares
The  Company  may  purchase  its  own 
shares for cancellation or to acquire them 
as  Treasury  Shares  (as  defined  in  the 
Bye-Laws)  in  accordance  with  the 
Companies Act 1981 (Bermuda) on such 
terms  as  the  Board  shall  think  fit.  The 
Board may exercise all the powers of the 
Company  to  purchase  or  acquire  all  or 
any part of its own shares in accordance 
with the Companies Act 1981 (Bermuda), 
provided,  however,  that  such  purchase 
may not be made if the Board determines 
in its sole discretion that it may result in 
a  non  de  minimis  adverse  tax,  legal  or 
regulatory consequence to the Company, 
any  of  its  subsidiaries  or  any  direct  or 
indirect holder of shares or its affiliates.

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. 

in addition to the Company’s corporate 
website 
(www.petradiamonds.com), 
which is regularly updated with current 
news about the Group, Petra maintains 
an employee-only intranet, which gives 
access  to  all  the  Group’s  policies  and 
procedures, information on key personnel 
and who to contact should an employee 
have  a  specific  query  or  concern. 
Certain  mines  also  produce  a  regular 
employee  newsletter  which  highlights 
key developments and provides thought 
leadership  in  areas  such  as  integrity, 
accountability, safety and wellbeing. All 
the  mines  have  highly  visible  notice 
boards,  where  important  and  current 
employee information is made available.

The Group is committed to the principle 
and achievement of equal opportunities 

58

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
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Board of Directors 
and their interests
The  interests  of  the  Directors  and 
their  families  in  the  issued  share 
capital of the Company as at 30 June 
2012 (other than in respect of share 
options and share awards granted to 
the  Directors,  which  are  detailed  in 
the  Directors’  Remuneration  Report 
on pages 61 to 72 and note 28 to the 
financial statements) were as follows: 

Adonis Pouroulis1,2
9,564,650 shares
(9,564,650 at 30 June 2011)

Johan Dippenaar
640,000 shares
(640,000 at 30 June 2011)

David Abery2
1,979,649 shares
(1,979,649 at 30 June 2011)

Jim Davidson
640,000 shares
(640,000 at 30 June 2011)

Dr Patrick Bartlett
nil shares at 30 June 2012
(N/A at 30 June 2011)3

Gordon Hamilton
70,000 shares at 30 June 2012
(N/A at 30 June 2011)3

Dr Omar Kamal4
n/A shares at 30 June 2012
(N/A at 30 June 2011)

Total
12,894,299 shares
(12,824,299 at 30 June 2011)

1.  7,735,000 ordinary shares in the Company 
are held by a trust of which Mr Pouroulis is 
a beneficiary.

2.  3,659,299 ordinary shares in the Company 
are  held  by  a  trust  of  which  Mr  Pouroulis 
and Mr Abery are beneficiaries.

3.  Mr  Hamilton  and  Dr  Bartlett  were 

appointed on 28 November 2011.

4.  Dr  Kamal  is  on  the  Board  of  Petra  as  a 
representative of Al Rajhi Holdings W.L.L., 
Petra’s  largest  shareholder  (see  table  of 
substantial shareholdings right).

There  were  no  changes  in  the  Directors’ 
interests  since  30  June  2012  to  the  date  of 
this Annual Report.

in  employment  irrespective  of  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 filled by 
a disabled person, having regard to their 
particular abilities and aptitude.

Loss of office
There  are  no  agreements  between  the 
Company and its Directors or employees 
which  provide  for  compensation 
for  loss  of  office  or  employment 
(whether through resignation, purported 
redundancy  or  otherwise)  that  occurs 
because of a takeover bid. 

Employee share schemes 
The Company operates various employee 
share incentive schemes. Further details 
of  these  schemes  are  set  out  in  the 
Directors’ Remuneration Report on pages 
61  to  72  and  note  28  of  the 
financial statements.

Creditors’ payment policy
it is the Group’s policy that payments to 
suppliers  are  made  in  accordance  with 
those  terms  and  conditions  agreed 
between  the  Group  and  its  suppliers, 
provided  that  all  terms  and  conditions 
have been complied with. 

Financial instruments
The  Group  makes  use  of  financial 
instruments in its operations as described 
in note 26 of the financial statements.

Going concern
Following  a  review  of  the  Group’s 
financial  position,  the  Directors  have 
that  sufficient  financial 
concluded 
resources will be available to meet the 
Group’s 
foreseeable 
cashflow  requirements.  On  this  basis, 
they consider it appropriate to prepare 
the  financial  statements  on  a  going 
concern basis. 

current 

and 

Substantial shareholdings
At 24 September 2012 the interests as indicated in the table below in the ordinary 
shares of the Company represented more than 3% of the issued share capital (other 
than interests set out to the left in the Board of Directors’ interests). 

Substantial shareholdings

number 
of ordinary
shares

Percentage of
issued share
capital

Al Rajhi Holdings W.L.L.
Saad investments Company Limited/Awal Bank
JPMorgan Asset Management Holdings inc.
Capital Group international, inc
Prudential plc group of companies*
T. Rowe Price
Scottish Widows investment Partnership
BlackRock investment (UK) Limited
Kames Capital
Directors

66,525,600
60,844,185
39,603,194
36,691,116
25,637,015
25,335,174
25,015,647
20,994,369
16,439,120
12,894,299

* Of this holding, 25,467,015 shares are held by M&G investment Funds 3.

13.3%
12.1%
7.9%
7.3%
5.1%
5.0%
5.0%
4.2%
3.3%
2.5%

Annual Report and Accounts 2012 Petra Diamonds Limited

59

 
 
 
 
 
 
 
Directors’ Report 
continued

Directors’ responsibilities
The  Directors  are  responsible  for 
preparing  the  Annual  Report  and  the 
financial statements in accordance with 
the Bermuda Companies Act 1981. 

Company  law  requires  the  Directors  to 
prepare  financial  statements  for  each 
financial  year.  Under  that 
law  the 
Directors  are  required  to  prepare  the 
group financial statements in accordance 
with  international  Financial  Reporting 
Standards  (“iFRSs”)  as  adopted  by  the 
European  Union.  Under  company  law 
the  Directors  must  not  approve  the 
financial  statements  unless  they  are 
satisfied  that  they  give  a  true  and  fair 
view of the state of affairs of the Group 
and  Company  and  of  the  profit  or  loss 
for the Group for that period. 

in preparing these financial statements, 
the Directors are required to:

 $ select  suitable  accounting  policies 
and then apply them consistently;

 $ make 

judgements  and  accounting 
estimates  that  are  reasonable  and 
prudent;

 $ state  whether 

they  have  been 
prepared in accordance with iFRSs as 
adopted  by  the  European  Union, 
subject  to  any  material  departures 
disclosed  and  explained 
the 
financial statements; 

in 

 $ prepare  the  financial  statements  on 
the  going  concern  basis  unless  it  is 
inappropriate  to  presume  that  the 
Company will continue in business; 

The Directors are responsible for keeping 
adequate  accounting  records  that  are 
sufficient  to  show  and  explain  the 

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Company’s transactions and disclose with 
reasonable  accuracy  at  any  time  the 
financial  position  of  the  Company  and 
enable them to ensure that the financial 
statements  comply  with  Bermuda 
Companies Act 1981, and as regards the 
group financial statements, Article 4 of 
the  iAS  Regulation.  They  are  also 
responsible for safeguarding the assets 
of  the  Company  and  hence  for  taking 
reasonable steps for the prevention and 
detection of fraud and other irregularities.

Website publication
The  Directors  are  responsible  for 
ensuring  the  Annual  Report  and  the 
financial statements are made available 
on  a  website.  Financial  statements  are 
published on the Company’s website in 
accordance with legislation in the United 
Kingdom governing the preparation and 
dissemination  of  financial  statements, 
which may vary from legislation in other 
jurisdictions.  The  maintenance  and 
integrity of the Company’s website is the 
responsibility  of  the  Directors.  The 
Directors’ responsibility also extends to 
the  ongoing  integrity  of  the  financial 
statements contained therein.

Directors’ responsibilities 
pursuant to DTR4
The  Directors  confirm  to  the  best  of 
their knowledge:

 $ the  Group  financial  statements  have 
been  prepared  in  accordance  with 
iAS 
iFRSs  and  Article  4  of  the 
Regulation  and  give  a  true  and  fair 
view of the assets, liabilities, financial 
position  and  profit  and  loss  of  the 
Group; and

 $ the  Annual  Report  includes  a  fair 
review  of  the  development  and 
performance of the business and the 
financial  position  of  the  Group  and 
the parent company, together with a 
description or the principal risks and 
uncertainties that they face.

Auditors
As far as each of the Directors is aware, 
at the time this report was approved:

 $ there 

is  no  relevant  available 
information of which the auditors are 
unaware; and

 $ they have taken all steps that ought to 
have been taken to make themselves 
aware of any relevant audit information 
and to establish that the auditors are 
aware of that information.

in  accordance  with  Section  89  of  the 
Bermuda Companies Act, a resolution to 
confirm the appointment of BDO LLP as 
auditors  of  the  Company  is  to  be 
proposed at the Annual General Meeting 
to be held on 29 November 2012. 

The financial statements were approved 
by the Board of Directors on 15 October 
2012 and are signed on its behalf by:

David Abery
Director
15 October 2012

60

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
Directors’ Remuneration Report

Letter from the Chairman of the Remuneration Committee

Dear Shareholder,
i  am  pleased  to  present  Petra’s  first  Directors’  Remuneration  Report  following  my  appointment  as  Chairman 
of the Remuneration Committee and the Company’s subsequent move to the Main Market of the London Stock Exchange.

This  has  been  a  transformational  year  for  the  Group  and  the  progress  made  means  Petra  is  well  placed  to  continue 
to execute its ambitious growth strategy over the coming years. Petra’s achievements in FY 2012 included:

 $ the completion of the acquisition of the Finsch mine from De Beers and subsequent integration of the mine into the Group 

with significant production and operational success;

 $ the step-up, with a Premium Listing, to the Main Market of the London Stock Exchange in December 2011 and inclusion 

in the FTSE 250 index in March 2012; and

 $ a doubling in production to 2.2 million carats and a 44% increase in revenue to US$316.9 million.
Following the appointment of Dr Bartlett and myself to the Board and to the Remuneration Committee (the “Committee”) 
as  independent  Non-Executive  Directors,  a  comprehensive  review  of  the  Company’s  remuneration  strategy  was 
undertaken.  in  view  of  the  move  of  the  Company  from  AiM  to  the  Main  Market,  and  taking  account  of  the  Group’s 
increased  size  and  complexity,  it  was  appropriate  that  the  Committee  should  introduce  a  more  formal  framework  for 
Executive Directors’ remuneration.

Petra,  as  a  leading  diamond  mining  group,  offers  shareholders  a  unique  growth  and  value  proposition  and  it  is  in  the 
interests of shareholders for the remuneration strategy to reflect this. We did not want to simply adopt an “off the shelf” 
pay policy. We decided that, as new Board and Committee members, there was merit in taking time to understand the 
business  before  arriving  at  the  remuneration  framework.  in  particular,  we  wanted  to  make  sure  that  the  performance 
measures used for incentive awards are fully aligned with Petra’s strategy and are key to driving shareholder value.

As  part  of  this  process  we  also  consulted  with  a  number  of  our  major  shareholders.  As  the  incoming  Chairman  of  the 
Committee, i found this dialogue to be particularly helpful and constructive. i would like to thank all those shareholders 
who took part in the process.

i hope that this report provides a clear overview of our new policies and that you will be supportive of our approach. 

Gordon Hamilton
Chairman of the Remuneration Committee
15 October 2012

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61

 
 
 
 
 
 
 
 
Directors’ Remuneration Report 
continued

ROLE AND RESPONSiBiLiTiES Of THE COMMiTTEE

The Remuneration Committee is responsible for determining on behalf of the Board 
and shareholders:

 $ the  Company’s  general  policy  on  the  remuneration  of  the  Executive  Directors,  the  Chairman  and  selected  members 

of the wider Senior Management team;

 $ the total individual remuneration for the Chairman and for the Executive Directors and Senior Management including base 

salary, bonuses, share awards and benefits;

 $ the design and operation of the Company’s share incentive plans;
 $ performance conditions attached to variable incentives; and
 $ service contracts for Executive Directors.
The full Terms of Reference for the Remuneration Committee have been approved by the Board and are available on the 
Company’s website at http://www.petradiamonds.com/about-us/corporate-governance/board-committees.aspx.

This Report sets out information regarding 
the remuneration arrangements  for  the 
Company’s Executive Directors, as well 
as  the  Non-Executive  Directors.  The 
content of this report has been drafted 
with  reference  to  the  UK  Corporate 
Governance Code, the Large and Medium-
sized Companies and Groups (Accounts 
and Reports) Regulations 2008 and the 
relevant  requirements  of  the  FSA 
Listing Rules.

Remuneration Committee 
Details of the Remuneration Committee 
are set out in the Corporate Governance 
Review on page 54 of this Annual Report. 

Where appropriate, the Chief Executive 
and Finance Director attend Remuneration 
Committee meetings to provide suitable 
context  regarding  the  business.  The 
Chairman  and  other  Non-Executive 
Directors of the Company are also invited 
to attend selected meetings. individuals 
who attend meetings do not participate 
in  discussions  relating  to  their 
own remuneration.

The Committee has engaged the services 
of  Deloitte  LLP  (“Deloitte”)  to  provide 
independent  advice  to  the  Committee 
relating to remuneration matters. During 
the year Deloitte also provided unrelated 
tax  and  general  advisory  services  to 
the Company.

Remuneration policy
Our management team is highly regarded 
in the market and brings unique skills to 
bear  that  are  extremely  sought  after 
within  the  specialised  diamond  sector. 
Petra’s  culture  is  highly  performance 
driven, and against this background our 
approach to remuneration is guided by 
the following overarching principles:

 $ The employment terms for Executive 
Directors and Senior Management are 
designed  to  attract,  motivate  and 
retain high calibre individuals who will 
drive the performance of the business. 
The  Group  competes  for  talent  with 
major mining companies and packages 
need to be competitive in this market.

 $ Remuneration  packages  should  be 
weighted  towards  performance-
related pay. 

 $ Performance  measures  should  be 
tailored to Petra’s strategic goals and 
targets should be demanding. 

 $ Share-based  reward  should  be 
meaningful – the Committee believes 
long-term  share  awards  provide 
alignment with the long-term interests 
of shareholders and the Company.

 $ Remuneration structures should take 
into account best practice developments, 
but these should be applied in a manner 
which is appropriate for Petra’s industry 
and specific circumstances.

Review of remuneration 
strategy
As part of the process for stepping up to 
the  Main  Market,  during  2011  and  the 
early  part  of  2012  the  Committee 
undertook  an  in-depth  review  of  the 
Company’s remuneration strategy. 

There  was  a  need  to  implement  a 
remuneration  policy  that  was  more 
attuned to the status of a Main Market 
company  and  took 
into  account 
conventional Main Market and evolving 
best  practice.  However,  the  primary 
objective was to develop a remuneration 
framework  that  fully  supported  the 
delivery of Petra’s strategic ambitions.

framework 

The remuneration review was undertaken 
in  two  phases.  First,  the  Committee 
implemented  a 
for 
remuneration.  As  part  of  this  process, 
the  Company  obtained  shareholder 
approval  for  a  new  share  plan  –  the 
Performance Share Plan – at the AGM in 
January 2012. Further details of this plan 
are  set  out  in  the  relevant  section  on 
pages 65 and 66.

The second part of the review focused 
on performance metrics and targets. This 
included the finalisation of details of the 
measures  and  targets  for  the  2011 
Longer Term Share Plan (“2011 LTSP”). 

The  Committee’s  approach  was  to 
consider  performance  measures  in  the 
context  of  Petra’s  strategy.  Petra  has 
acquired and developed an exceptional 
portfolio  of  assets.  The  next  phase  of 
development is focused on executing the 
capital expansion programmes required 
to  achieve  a  substantial  increase  in 
production  levels.  Delivering  on  these 
programmes  is  key  to  delivering 
exceptional shareholder value.

The Committee spent considerable time 
developing suitable performance metrics 
to  ensure  that  they  supported  the 
Company’s strategy and were aligned to 
performance outcomes that created long-
term  shareholder  value.  For  long-term 
incentives,  our  approach  includes  a 
balance of total shareholder return and 
achievement  of  capital  expansion 
projects and production targets.

Once performance targets for long-term 
share  awards  were  identified,  the 
Committee  engaged  with  major 
shareholders to consult on the proposed 
approach, prior to the grant of awards.

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
Remuneration for Executive Directors – summary of key elements 

Salary

 $ Comprises annual base salary.
 $ influenced by role scope, individual performance 

and experience and market positioning.

Base salaries effective from July 2012:

 $ Johan Dippenaar  – £290,000
 $ David Abery 
– £270,000
 $ Jim Davidson 

– £270,000

Benefits

 $ Cash allowance.
 $ Group life, disability and critical illness insurance.

Executive Directors receive an allowance of 10% 
of salary in lieu of both pension and benefits.

Annual 
bonus

 $ Short-term annual incentive based on 
performance during the financial year.

 $ Linked to key financial, operational 

and strategic objectives.

Maximum award of up to 150% of base salary. 
For FY 2012 25% of the award earned for the 
year will be deferred for two years into shares 
(or a cash equivalent). 

For FY 2013, the bonus will be linked to:

 $ profit;
 $ cost management;
 $ carat production;
 $ project delivery;
 $ health, safety, social and environment 

objectives; and

 $ strategic and corporate priorities.

Performance 
Share Plan

 $ Conditional share awards which vest subject 

to achievement of performance targets.

Normal maximum award of up to 150% of base 
salary (plan maximum of 200% of salary).

 $ Aligned to shareholder value and Petra’s 

long-term delivery objectives.

Performance measured over three financial 
years against the following metrics:

Legacy 
arrangements

 $ Share awards under three legacy plans: 

the 1997 Executive Share Option Scheme 
(“1997 ESOS”), the 2005 Executive Share 
Option Scheme (“2005 ESOS”) and the 
2011 Longer-Term Share Plan (“2011 LTSP”).

 $ No intention to grant further awards 

to Executive Directors under these plans.

 $ TSR relative to FTSE 350 mining companies;
 $ absolute TSR;
 $ carat production; and
 $ project delivery.
The first awards under this plan were granted 
during FY 2012. 

The last award to Executive Directors under 
the 1997 and 2005 ESOS was granted in 
March 2010. Outstanding awards are subject 
to share price targets.

The awards under the 2011 LTSP are based 
on carat production and project delivery. 
The performance period for outstanding 
awards ends on 30 June 2016.

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Annual Report and Accounts 2012 Petra Diamonds Limited

63

 
 
 
 
 
 
 
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Directors’ Remuneration Report 
continued

How does Petra’s remuneration strategy link with its corporate strategy?

OUR STRATEGiC OBJECTiVES

PERfORMANCE MEASURES fOR iNCENTiVES

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Production

 $ Project delivery and carat production are at 
the core of Petra’s strategy. These measures 
are therefore fully embedded in the 
performance measurement framework.

fOCUS ON 
PRODUCTiON

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Expansion 
project 
delivery

 $ Progress is measured as part of the 

short-term bonus, and the long-term share 
awards include stretching targets supporting 
Petra’s long-term ambitions.

D

RiVE Effi C i E N C i

S

E

Profit and 
costs

 $ Petra remains focuses on managing costs 
and profitability. Profit and cost measures 
form part of the annual bonus metrics.

Steadily growing annual production

improving operating margins

Culture of effective cost control

MAXiMiSE RETURNS

HSSE

 $ Health, safety, social and environment 

measures are explicitly included as part of 
the annual bonus framework, reflecting 
Petra’s commitment to corporate 
responsibility.

Total 
shareholder 
return

 $ Share awards are linked to value created for 
shareholders by measuring both relative and 
absolute total shareholder return (“TSR”).

Base salary and benefits
The Committee reviewed the approach 
to base salaries for Executive Directors 
as  part  of  the  wider  review  of 
remuneration in the context of moving 
to the Main Market.

The base salaries for Executive Directors 
are  determined  by  the  Remuneration 
Committee  taking  into  account  a  range 
of  factors  including  role  scope,  the 

individual’s performance and experience, 
and positioning against comparable roles 
in other mining companies of similar size 
and complexity. When considering salary 
increases, the Committee is also mindful 
of  general  economic  conditions  and 
salary  increases  for  the  broader 
employee population. Under the normal 
review cycle, base salaries are generally 
reviewed to take effect from the start of 
the financial year on 1 July.

Other benefits
in lieu of pension plan participation and 
other  benefits,  the  Directors  receive  a 
benefit  cash  supplement  of  10%  of 
salary.  Other  than  membership  of  the 
Group management life insurance scheme 
(including  disability  and  critical  illness), 
Executive Directors are not provided with 
any further benefits and do not participate 
in a Company pension scheme. 

For  FY  2013,  the  Committee  has  determined  that  the  base  salaries  (per  annum) 
for Executive Directors should be as below: 

J Dippenaar

D Abery

J Davidson

Base salary to 
30 June 2012 
(following 
Main Market 
step-up)

£280,000

£260,000

£260,000

Base salary at 
1 July 2012

£290,000

£270,000

£270,000

64

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
 
 
fiXED AND VARiABLE 
REMUNERATiON AS A PERCENTAGE 
Of TOTAL REMUNERATiON

Percentage of total remuneration

0%

20%

40%

60%

80%

100%

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$  Fixed – salary plus benefits
$   Bonus – cash and deferred elements
$  PSP

Breakdown of metric type for 
FY 2013 balance scorecard

Metrics

Profitability (including 
EBiTDA, net profit and 
cost management)

Delivery and production 
(including carat production 
and delivery against 
project milestones )

Corporate (including 
corporate and strategic 
priorities and health, safety, 
social and environmental 
performance)

% of total
award

40%

30%

30%

Annual bonus
The  annual  bonus  plan  is  designed  to 
reward  and  incentivise  performance 
over the financial year. 

the  Group 

During  a  period  of  rapid  growth,  the 
Board had been of the view that, rather 
than set static targets, it was in the best 
interests  of 
to  assess 
performance at the end of the financial 
year  based  on  achievement  in  relation 
to  integration  and  delivery  on  newly 
acquired  and  existing  mines  as  well  as 
taking  into  consideration  performance 
with regards to the financial, operating 
and strategic objectives of the Company.

For FY 2012, the Committee’s assessment 
of  performance  during  the  year  took 
into  account  a  review  of  a  scorecard 
of  key  measures  and  milestone 
achievements in the year including the 
following key achievements: 

 $ successful acquisition and integration 

of the Finsch mine; 

 $ significant increase in production from 
1.1 million carats to 2.2 million carats;

 $ good  progress  of  capital  expansion 

projects; and

 $ successful step-up to the Main Market.
On  the  basis  of  this  review,  the 
Committee  determined  that  the  bonus 
for  Executive  Directors  would  be  68% 
of  the  maximum  award  (equating  to 
102% of base salary), of which 25% will 
be  deferred  for  two  years  into  shares 
(or  a  cash  equivalent  as  certain  of  the 
Executive  Directors  are 
limited  by 
South  Africa’s  exchange  control  rules 
from holding further Petra shares).

in  future  years,  the  Committee  will 
operate  a  bonus  framework  using  a 
balanced scorecard approach, linked to 
the  financial,  operating  and  strategic 
objectives  of  the  Company.  A  formal 
bonus  maximum  has  also  been 
introduced and the maximum bonus for 
Executive  Directors  for  delivery  of 
exceptional  performance  will  now  be 
capped  at  150%  of  base  salary.  As 
with 2012, a portion of the bonus will 
continue  to  be  deferred  for  two  years 
into shares (or a cash equivalent). Prior 
to  determining  bonus  outcomes  the 
consider 
Committee 

also 

will 

performance  in-the-round  to  ensure 
that payouts are appropriate.

Performance Share Plan
The Committee believes that long-term 
share awards should form a key part of 
the  remuneration  policy  and  provide  a 
direct  means  of  aligning  reward  with 
both the long-term performance of the 
of 
Company 
shareholders. 

interests 

and 

the 

As part of the Company’s transition from 
AiM  to  the  Main  Market,  the  Committee 
looked to adopt a remuneration structure 
that was more aligned with conventional 
practice  amongst  FTSE  350  companies. 
As  part  of  this  transition,  shareholder 
approval  was  obtained  for  the  2012 
Performance  Share  Plan  (“PSP”)  at  the 
AGM in January 2012.

At the time of the AGM, the Committee 
was  not  in  a  position  to  finalise  the 
performance  conditions  for  the  first 
PSP  awards.  This  process  was  delayed 
to allow the newly appointed members 
of the Committee to take the necessary 
time  to  ensure  that  the  performance 
the 
conditions  were  aligned  with 
Company’s 
the 
objectives.  Once 
Committee  had  finalised  deliberations 
on the performance targets for awards, 
the  Committee  consulted  with  the 
Company’s 
shareholders 
regarding  the  proposed  performance 
targets prior to granting awards.

largest 

Petra’s strategy formed the foundation 
of  the  Committee’s  determination  of 
measures  and  targets.  Over  recent 
years,  the  Company  has  acquired  and 
developed  an  exceptional  portfolio  of 
assets. The next phase of development 
for the Company is focused on executing 
the  capital  expansion  programmes 
required 
to  achieve  a  substantial 
increase in production levels. Executing 
this  strategy  will  be  key  to  delivering 
exceptional  shareholder  value  and 
outperforming mining peers. 

Against that background, the performance 
targets  for  the  PSP  awards  granted  to 
Executive Directors during the year are 
based  on  a  combination  of  absolute 
and  relative  total  shareholder  return 
(50% of the total award) and operational 
delivery  and  carat  production  targets 
(50% of the total award).

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Annual Report and Accounts 2012 Petra Diamonds Limited

65

 
 
 
 
 
 
 
Directors’ Remuneration Report 
continued

Performance share plan
The award is split into the following elements:

TSR (50%)

TSR vs FTSE 350 mining 
companies

 $ Half of the award is linked to returns made for shareholders
 $ The first element is linked to relative TSR measured against other 

25% of award

mining peers

Absolute TSR 

25% of award

Delivery and 
production (50%)

Carat production 

25% of award

Expansion project delivery

25% of award

 $ The second element is based on absolute TSR so that reward is 

linked to creation of absolute value for shareholders

 $ During the next phase of growth, increasing production is a key 

objective that is central to Petra’s stated strategy 

 $ The production target is expressed as a cumulative target so that 

the Company needs to deliver performance throughout the 
performance period

 $ The Company is committed to realising value from its asset portfolio; 

this requires expansion projects at a number of key sites

 $ This element is based on an assessment of performance at each 

mine where a significant expansion programme is in place

 $ The  assessment  at  the  end  of  the  period  is  based  on  an  agreed 
framework  with  vesting  based  on  the  weighted  average  score 
out  of  ten  across  all  mines;  the  objectives  for  each  mine  are 
approved by the Board

 $ The mark out of ten is based on various factors including 

the achievement of key milestones, timeframe for delivery 
and management of costs

in line with best practice, the vesting of awards is also subject to a malus provision which enables the Committee to reduce, 
cancel or impose further conditions on an award in various circumstances such as serious misstatement or a serious failure of 
risk management.

The  Committee  has  the  discretion  to  adjust  the  performance  targets  in  exceptional  circumstances,  for  example  significant 
acquisitions/disposals or a significant change in business strategy.

in  respect  of  FY  2012,  the  Executive  Directors  were  granted  a  maximum  share  award  with  a  face  value  of  150%  of  salary. 
Full vesting is subject to achievement of the following performance targets over the three financial years ending on 30 June 2014:

TSR

no portion 
of element vests

25% of 
element vests

100% of 
element vests

TSR vs FTSE 350 mining companies – 25% of award

Below median

Median

Upper quartile

Absolute TSR – 25% of award

Straight-line vesting between these points

Less than 
8% per annum

8% per annum 16% per annum

Delivery and production

no portion 
of element vests

25% of 
element vests

80% of 
element vests

100% of 
element vests

Carat production – 25% of award

Less than 8m carats

8m carats

8.45m carats

8.9m carats

Expansion project delivery – 25% of award

Lower than 6 out of 10

6 out of 10

8 out of 10

10 out of 10

Straight-line vesting between these points

For awards to be granted in respect of FY 2013, maximum award levels to Executive Directors remained unchanged at 150% of 
salary.  The  Committee  retained  the  same  performance  criteria  as  the  previous  award,  except  that  the  cumulative  carat 
production  over  the  three-year  period  to  30  June  2015  must  exceed  10.5  million  for  full  vesting,  with  threshold  vesting 
requiring 9.4 million carats.

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
Legacy plans
Petra  has  three  legacy  plans  which 
were adopted by the Company prior to 
moving  up  to  the  Main  Market.  The 
Committee  does  not  intend  to  grant 
further  awards  to  Executive  Directors 
under any of these plans and would only 
do so in very exceptional circumstances.

(i) 1997 Employee Share 
Option Scheme (“1997 ESOS”)
The  Company  previously  operated  the 
Employee 
Scheme 
(introduced  in  1997),  whereby  it  can 
issue  options  to  eligible  employees 
(including  Executive  Directors  and 
Senior  Management)  to  subscribe  for 
shares in the Company at set prices.

Share  Option 

Awards  that  are  capable  of  exercise 
under  this  plan  remain  outstanding  for 
selected participants.

(ii) 2005 Employee Share 
Option Scheme (“2005 ESOS”)
The  Company  previously  operated  the 
Employee 
Scheme 
(introduced  in  2005),  whereby  it  can 
issue  options  to  eligible  employees 
(including  Executive  Directors  and 
Senior  Management)  to  subscribe  for 
shares in the Company at set prices.

Share  Option 

to 

Options  granted 
the  Executive 
Directors  have  been  subject  to  the 
performance condition that, in order to 
be exercisable, the market value of the 
Company’s  shares  must  increase  in 
value by an amount greater than 10% in 
excess of the UK Retail Prices index rise 
(“RPi”) in year one for one-third of the 
grant  to  vest,  by  20%  over  the  RPi 
between  the  date  of  grant  and  the 
second  anniversary  of  grant  for  the 
second third of the grant to vest, and by 
30%  over  the  RPi  between  the  date  of 
grant  and  the  third  anniversary  of 
grant for the final third of the grant to 
vest.  The  Board  considered  that  a 
performance  condition  based  on  share 
price  growth  targets  was  aligned  with 
shareholders  and  appropriate  for  the 

Company’s strategy at the time that the 
share options were granted.

last  award  under 

The 
this  plan 
was granted to the Executive Directors 
in  March  2010.  During  the  year,  the 
awards  granted  in  2009  and  2010 
became capable of exercise.

(iii) 2011 Longer-Term Share Plan
The  2011  Longer-Term  Share  Plan  was 
implemented prior to the step up to the 
Main  Market.  This  share  plan  was 
implemented to address (i) the retention 
of  the  Executive  Directors  and  Senior 
Management  over  the  period  to  2016, 
which  is  a  pivotal  period  for  the 
Company as the expansion programmes 
are rolled out across the Group; and (ii) 
lack  of  share  awards  to  the 
the 
Executive  Directors 
Senior 
Management  since  March  2010.  The 
performance  targets  for  awards  under 
the 2011 LTSP were considered as part 
of  the  FY  2012  review  and  were 
designed  to  support  the  next  phase  of 
the Company’s development by focusing 
on  key  operational  priorities  over  an 
extended  four-year  time  horizon.  No 
to 
further  awards  will  be  made 
Executive Directors under the LTSP.

and 

The performance targets for the awards 
granted  to  Executive  Directors  will  be 
assessed  over  the  four-year  period  to 
30 June 2016. The targets are set out at 
the foot of this page.

Up to 50% of the award may vest based 
on  performance  against  accelerated 
vesting  targets.  For  the  production 
element,  up  to  12.5%  of  the  element 
may vest if the accelerated target of 9 
million  carats  cumulative  production  is 
delivered  to  30  June  2015,  rising  to 
50%  for  an  accelerated  target  of  10 
million  carats  cumulative  production. 
The 
performance 
conditions,  malus  and  exceptional 
adjustment  provisions  are  in  line  with 
the PSP. 

assessment 

of 

2011 Longer‑Term Share Plan
Performance targets for the awards granted to Executive Directors, four‑year period to 30 June 2016

no portion 
of element vests

25% of 
element vests

80% of 
element vests

100% of 
element vests

Carat production – 50% of award

Less than 12.4m carats

12.4m carats

13m carats

13.6m carats

Expansion project delivery – 50% of award

Lower than 6 out of 10

6 out of 10

8 out of 10

10 out of 10

Straight-line vesting between qualifying points

Annual Report and Accounts 2012 Petra Diamonds Limited

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Directors’ Remuneration Report 
continued

Shareholding guidelines
it is the Company’s policy that each of 
the  Executive  Directors  holds  a 
meaningful  number  of  Petra  Diamonds 
shares.  The  guideline  is  a  minimum  of 
one year’s basic salary for the applicable 
Director.  Executive  share  ownership  is 

further  supported  by  the  opportunity 
to acquire shares through the Company’s 
bonus  deferral  and  share  incentive 
schemes. Where Executives are unable 
(due  to 
to  hold  additional  shares 
exchange  control  regulations),  the  use 
of cash equivalents linked to the share 

price 
shareholders.

provides 

alignment  with 

The  current  share  interests  of  the 
Directors are detailed on page 59 of the 
Directors’  Report  and  repeated  below. 
Executive  Directors  currently  exceed 
the guideline for Petra share ownership.

Director

J Dippenaar

D Abery

J Davidson

Role

Chief Executive Officer

Finance Director

Technical Director

Shareholding
 (number of shares)
 as at 30 June 2012

640,000

1,979,649

640,000

Service contracts
On  28  November  2011,  the  Executive 
Directors  each  entered  into  updated 
employment  agreements  with 
the 
Company.  Each  of  these  agreements  is 
terminable by 12 months’ written notice 
on either side and contain non-compete, 
and  dealing  with 
non-solicitation 
customers/clients  and  non-solicitation 
of  directors  or  senior  employees 
restrictions  following  termination.  in 
the 
the  event  of 

termination  by 

payable. 

Company  of  an  Executive  Director’s 
employment, 
contractual 
the 
Remuneration  Package  (incorporating 
base salary and benefits), reflecting the 
12 month notice period, would normally 
be 
Remuneration 
The 
Committee’s policy is to emphasise the 
duty of the terminated party to mitigate 
any loss caused by early termination to 
the  fullest  extent  possible.  in  these 
circumstances,  any  payments  may  be 
made on a phased monthly basis.

into 

On 28 November 2011, the Non-Executive 
Directors  entered 
letters  of 
appointment  with  the  Company.  Other 
than  Dr  Kamal  (who  entered  into  an 
updated  letter  of  appointment),  the 
appointments are for an initial term of 
three years, which is terminable by one 
month’s written notice on either side at 
any  time.  On  termination,  the  Non-
Executive  Directors  would  be  entitled 
to  payment  of  fees  for  the  one  month 
contractual notice period.

Director

Role

Date of contract

Term

Notice period 
by Company
or Director

Executive Directors

J Dippenaar

D Abery

J Davidson

non‑Executive Directors

A Pouroulis

A Lowrie1

Dr P Bartlett

G Hamilton

Dr O Kamal2

Chief Executive Officer

28 November 2011

Finance Director

Technical Director

28 November 2011

28 November 2011

n/a

n/a

n/a

12 months

12 months

12 months

Non-Executive Chairman

28 November 2011

36 months

Senior independent Non-Executive

12 September 2012

36 months

independent Non-Executive

28 November 2011

36 months

independent Non-Executive

28 November 2011

36 months

Non-Executive

28 November 2011

n/a

1 month

1 month

1 month

1 month

n/a

1. Mr Lowrie was appointed following the year end as Senior independent Non-Executive Director.

2.  Dr Kamal’s appointment is terminable on Al Rajhi Holdings W.L.L. ceasing to have a right to appoint a Director, which would occur if 
their shareholding in the Company fell to less than 10%, as set out in the Al Rajhi Holdings W.L.L. Option Agreement, which was 
entered into when the Company increased its effective interest in the Cullinan mine in 2009.

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
NON-EXECUTiVE 
DiRECTORS’ 
REMUNERATiON

$   Adonis Pouroulis 

Non-Executive Chairman  
Basic annual fee: £140,000

$   Tony Lowrie 

(appointed 12 September 2012) 
Senior iNED 
Basic annual fee: £70,000

$   Dr Patrick Bartlett 

iNED 
Basic annual fee: £50,000

$   Gordon Hamilton 
iNED; Chairman of 
Audit Committee and 
Remuneration Committee 
Basic annual fee: £50,000 
Committee chair fees: £20,000 
Total: £70,000
$   Dr Omar Kamal 

NED 
Basic annual fee: £40,000

Chairman and Non-Executive 
Directors’ fees
The  remuneration  of  Non-Executive 
Directors is determined by the Chairman 
and Executive Directors.

Other  than  as  noted  in  the  paragraph 
below,  Non-Executive  Directors  do  not 
participate  in  the  Company’s  bonus 
schemes  or 
share 
arrangements, 
pension  plans,  and  do  not  receive  any 
other remuneration from the Company 
outside of the fee policy outlined below. 

With  effect  from  28  November  2011, 
Adonis Pouroulis moved from the position 
of  Executive  Chairman  to  that  of  Non-
Executive Chairman. As a consequence 
of his previous role, Mr Pouroulis has a 
number of outstanding share options which 
were  granted  under  the  Company’s 
1997 and 2005 Employee Share Option 
Schemes.  Following  his  move  to  the 
position  of  Non-Executive  Chairman 
and in line with provision D.1.3 of the UK 
Corporate Governance Code, Mr Pouroulis 
in  any  future 
will  not  participate 
Company share scheme arrangements.

Mr  Pouroulis  continues  to  receive  the 
benefit of membership of the Group’s life 
insurance scheme.

Non-Executive Directors receive a fixed 
basic  fee  for  their  normal  services 
rendered during the year and a fee for 
chairmanship of Committees. The annual 
fees  for  Non-Executive  Directors  are 
illustrated  in  the  chart  to  the  left. 
All fees are payable in cash.

The additional fee paid for chairmanship 
of the Audit and Remuneration Committee 
is  £10,000  in  each  case.  There  is  no 
additional  fee  for  chairmanship  of  the 
Nomination or HSSE Committees.

Prior to formal appointment Mr Hamilton 
advised  the  Company  in  relation  to 
various  corporate  matters  in  the  lead 
up to the Company’s move to the Main 
Market. For these additional services he 
was paid a fee of £40,000.

Prior to formal appointment Dr Bartlett 
advised  the  Company  in  relation  to 
various operational matters in the lead 
up to the Company’s move to the Main 
Market. For these additional services he 
was paid a fee of £3,464.

Performance graph
The graph below shows a comparison between the TSR for Petra Diamonds’ shares 
for the five-year period to 30 June 2012, and the TSR for the companies comprising 
the FTSE 350 Mining index over the same period. This index has been selected to 
provide a sector relevant comparator to Petra Diamonds. The TSR measure is based 
on a 30 trading day average.

TOTAL SHAREHOLDER RETURN Of PETRA DiAMONDS
COMPARED TO THE FTSE 350 MiNiNG iNDEX

30 trading day average 
Source: Datastream

Petra Diamonds Limited

FTSE 350 Mining index

140

120

100

80

60

40

20

0

Please supply data for TSR graph

June
2007

June 
2008

June 
2009

June 
2010

June 
2011

June 
2012

Annual Report and Accounts 2012 Petra Diamonds Limited

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Directors’ Remuneration Report 
continued

Directors’ emoluments
The following table gives a breakdown of the remuneration of the individual Directors who held office during the year ended 
30 June 2012. Although the Company’s reporting currency is US dollars, these figures are stated in pounds sterling so as to 
be aligned with the Directors’ service contracts.

Cash
in lieu of
 pension and
 benefits2
£

Basic salary
 and fees
£

For the year ended 30 June 2012

Annual
performance
bonus – paid 
in cash
£

Annual
performance
bonus
 – deferred
into shares
£

Non-cash 
benefits3
£

2012
Total
£

2011
Total
£

261,752

14,729

4,719

214,200

71,400

566,800

404 800

251,232

251,232

13,677

13,677

134,672

29,722

41,611

38,167

—

—

—

—

4,586

2,786

2,350

—

—

—

198,900

66,300

534,695

404,800

198,900

66,300

532,895

403,792

—

—

—

—

—

—

—

—

137,022

212,129

29,722

41,611

38,167

—

—

35,000

1,008,388

42,083

14,441

612,000

204,000

1,880,912

1,460,521

Executive Directors

J Dippenaar

D Abery

J Davidson

Chairman

A Pouroulis1

non‑Executive Directors

P Bartlett

G Hamilton

O Kamal

Notes
1.  Mr Pouroulis moved to the position of Non-Executive Chairman with effect from 28 November 2011. Prior to this, Mr Pouroulis held 

the role of Executive Chairman. His remuneration for the period 1 July 2011 to 27 November 2011 was £52,500.

2.  With effect from 21 December 2011, following the Committee’s review noted above, the Executive Directors receive a cash benefit 

supplement in lieu of pension and other benefits, calculated as 10% of their basic salary.

3. Non-cash benefits comprise contributions made by the Company to the Group’s life assurance, disability and critical illness scheme.

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
Directors’ interests in the Performance Share Plan
As at 30 June 2012, Executive Directors held the following interests in the Performance Share Plan: 

Date of
award

Outstanding 
at 1 July
2011

Awarded
 during the
 period

Vested
during the
period

Lapsed
during the
period

outstanding 
at 30 June
 2012

J Dippenaar

15 May 2012

Total

D Abery

Total

15 May 2012

J Davidson

15 May 2012

Total

—

—

—

—

—

—

267,516

267,516

248,408

248,408

248,408

248,408

—

—

—

—

—

—

—

—

—

—

—

—

267,516

267,516

248,408

248,408

248,408

248,408

Performance
 period

1 July 2011–
30 June 2014

1 July 2011–
30 June 2014

1 July 2011–
30 June 2014

Notes
1.  The  performance  conditions  applicable  to  the  Performance  Share  Plan  consist  of  (a)  TSR  relative  to  FTSE  350  mining 
companies (25%); (b) absolute TSR (25%); (c) carat production (25%); and (d) project delivery (25%). Further details of the 
performance conditions are set out in the “Performance Share Plan” section of this report.

2.  The share price on 15 May 2012, the date of the award, was 133.0 pence. The 30 day trading average price to the date 

preceding the date of the award, which was used to calculate the maximum share award, was 157.0 pence.

Directors’ interests in the 2011 Longer-Term Share Plan
As at 30 June 2012, Executive Directors held the following interests under the 2011 Longer-Term Share Plan:

Date of
award

Outstanding 
at 1 July
2011

Award during 
the period

Vested
during 
the period

Lapsed
during 
the period

outstanding
at 30 June
2012

J Dippenaar

15 May 2012

Total

D Abery

15 May 2012

Total

J Davidson

15 May 2012

Total

—

—

—

—

—

—

400,000

400,000

400,000

400,000

400,000

400,000

—

—

—

—

—

—

—

—

—

—

—

—

400,000

400,000

400,000

400,000

400,000

400,000

Performance
period

1 July 2012–
30 June 2016

1 July 2012–
30 June 2016

1 July 2012–
30 June 2016

Notes
1.  Awards under the 2011 LTSP were determined during 2011. As a result of lengthy close periods as well as the process of 

finalisation of performance conditions, formal awards under the plan were delayed until May 2012.

2.  The performance conditions applicable to the Longer-Term Share Plan consist of (a) carat production (50%); and (b) project 

delivery (50%). Further details of the performance conditions are set out in the “Legacy plans” section of this report.

3. The share price on 15 May 2012 was 133.0 pence.

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71

 
 
 
 
 
 
 
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Directors’ Remuneration Report 
continued

Directors’ interests in share options
As at 30 June 2012, the following share options were outstanding:

Date of
grant

Exercisable
from

Exercise
 price
 (pence)

Options
 outstanding
at 1 July
2011

Granted
in year

Lapsed
in year

Exercised
in year

A Pouroulis

5 Sep 2003

5 Sep 2006

44.0

500,000

1997 and 
2005 ESOS

Total

16 June 2005

16 June 2008

85.0

250,000

31 May 2006

31 May 2009

79.5

250,000

12 March 2009 12 March 2012

27.5

250,000

30 Sep 2009

30 Sep 2012

45.5

100,000

17 March 2010 2/3

rds 17 March
 2012
rd 17 March
2013

1/3

60.5

100,000

1,450,000

J Dippenaar

16 June 2005

16 June 2008

85.0

750,000

2005 ESOS

31 May 2006

31 May 2009

79.5

250,000

12 March 2009 12 March 2012

27.5

750,000

30 Sep 2009

17 March 2010 2/3

30 Sep 2012
rds 17 March
 2012
rd 17 March
2013

1/3

45.5

350,000

60.5

350,000

2,450,000

Total

D Abery

5 Sep 2003

5 Sep 2006

44.0

500,000

1997 and 
2005 ESOS

Total

16 June 2005

16 June 2008

85.0

250,000

31 May 2006

31 May 2009

79.5

250,000

12 March 2009 12 March 2012

27.5

750,000

30 Sep 2009

30 Sep 2012

45.5

350,000

17 March 2010 2/3

rds 17 March
 2012 
rd 17 March
 2013

1/3

60.5

350,000

2,450,000

J Davidson

16 June 2005

16 June 2008

85.0

750,000

2005 ESOS

31 May 2006

31 May 2009

79.5

250,000

12 March 2009 12 March 2012

27.5

750,000

30 Sep 2009

17 March 2010 2/3

30 Sep 2012
rds 17 March
 2012 
rd 17 March
 2013

1/3

45.5

350,000

60.5

350,000

2,450,000

Total

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Options
 outstanding
at 30 June
 2012

Expiry date

500,000 5 Sep 2013

250,000 16 June 2015

250,000 31 May 2016

250,000 12 March 2019

100,000 30 Sep 2019

100,000 17 March 2020

1,450,000

750,000 16 June 2015

250,000 31 May 2016

750,000 12 March 2019

350,000 30 Sep 2019

350,000 17 March 2020

2,450,000

500,000 5 Sep 2013

250,000 16 June 2015

250,000 31 May 2016

750,000 12 March 2019

350,000 30 Sep 2019

350,000 17 March 2020

2,450,000

750,000 16 June 2015

250,000 31 May 2016

750,000 12 March 2019

350,000 30 Sep 2019

350,000 17 March 2020

2,450,000

Share option notes
1. The closing market price of an ordinary share on 30 June 2012 was 120.7 pence.

2.  During  the  financial  year  ended  30  June  2012,  the  highest  market  price  was  188.2  pence  and  the  lowest  market  price 

was 97.0 pence.

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
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GrouP 
accounts

74  Independent Auditors’ Report – Group
75  Consolidated Income Statement
76   Consolidated Statement of Other Comprehensive Income
77   Consolidated Statement of Changes in Equity
79   Consolidated Statement of Financial Position
80   Consolidated Statement of Cashflows
81  Notes to the Annual Financial Statements

Annual Report and Accounts 2012 Petra Diamonds Limited

73

 
 
 
 
 
 
 
Independent auditors’ report – Group
To the shareholders of Petra Diamonds Limited

We have audited the financial statements of Petra Diamonds Limited for the year ended 30 June 2012 which comprise the 
Consolidated  Income  Statement  and  Consolidated  Statement  of  Other  Comprehensive  Income,  the  Consolidated  Statement 
of  Changes  in  Equity,  the  Consolidated  Statement  of  Financial  Position,  the  Consolidated  Statement  of  Cashflows  and  the 
related notes. The financial reporting framework that has been applied in their preparation is the Bermuda Companies Act 
1981 and International Financial Reporting Standards as adopted by European Union (“IFRS”).

Our report has been prepared pursuant to the requirements of the Bermuda Companies Act 1981 and for no other purpose. 
No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of the 
Bermuda Companies Act 1981 or has been expressly authorised to do so by our prior written consent. Save as above, we do 
not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any 
and all such liability.

Directors’ responsibility for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation and 
fair presentation of the financial statements in accordance with the Bermudan Companies Act 1981 and IFRS, and for such 
internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from 
material misstatement, whether due to fraud or error.

The Directors have complied with the requirements of rules 9.8.7 and 9.8.7A of the Listing Rules of the UK Financial Services 
Authority in preparing their Annual Report. 

Auditors’ responsibility
Our responsibility is to audit and express an opinion on these financial statements in accordance with the Bermudan Companies 
Act 1981 and International Standards on Auditing (as issued by the International Federation of Accountants (“IFAC”)). Those 
standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance 
about whether the financial statements are free from material misstatement. 

An audit includes performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. 
The  procedures  selected  depend  on  the  auditors’  judgement,  including  the  risks  of  material  misstatement  of  the  financial 
statements, whether due to fraud or error. In making those risk assessments, the auditors consider the internal control relevant 
to the entity’s preparation of financial statements that give a true and fair view in order to design appropriate audit procedures 
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s 
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of 
accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion on financial statements
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group 
and  its  financial  performance  and  cashflows  for  the  year  then  ended  in  accordance  with  IFRS  and  have  been  prepared  in 
accordance with the Companies Act 1981 as enacted in Bermuda.

Report on other legal and regulatory requirements
Under  Listing  Rules  we  are  required  to  review  the  part  of  the  Corporate  Governance  Statement  relating  to  the  Company’s 
compliance with nine provisions of the UK Corporate Governance Code specified for our review. We have nothing to report in 
this respect.

BDO LLP
Chartered Accountants
London
United Kingdom
15 October 2012

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

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74

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
consolidated Income statement
For the year ended 30 June 2012

US$ million

Revenue

Mining and processing costs

Other direct income 

Exploration expenditure 

Corporate expenditure

Impairment reversal 

Impairment charge

Total costs

Other financial income

Other financial expense

Unrealised foreign exchange (loss)/gain

Financial income 

Financial expense

Profit before tax

Income tax charge

(Loss)/profit for the year 

(Loss)/profit for the year attributable to:

Equity holders of the parent company

Non-controlling interest

Notes

4

5

6

7

8

8

9

9

10

2012

316.9

(263.9)

9.0

(3.1)

(13.7)

—

—

2011

220.6

(169.7)

2.7

(1.4)

(9.4)

11.7

(5.2)

(271.7)

(171.3)

19.1

(17.3)

(38.6)

19.1

(55.9)

8.4

(10.5)

(2.1)

(2.4)

0.3

(2.1)

8.4

(11.9)

18.6

27.0

(11.9)

64.4

(5.2)

59.2

53.2

6.0

59.2

(Loss)/profit per share attributable to the equity holders  
of the parent during the year

From continuing operations:

Basic (loss)/profit – US$ cents

Diluted (loss)/profit – US$ cents

12

12

(0.48)

(0.48)

12.83

12.35

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Annual Report and Accounts 2012 Petra Diamonds Limited

75

 
 
 
 
 
 
 
consolidated statement of other comprehensive Income
For the year ended 30 June 2012

US$ million

(Loss)/profit for the year

Exchange differences recognised on translation of the share-based payment reserve

Exchange differences on translation of foreign operations

Exchange differences on non-controlling interest

Valuation loss on available for sale financial asset 

Total comprehensive (expense)/income for the year

Total comprehensive income and expense for the year attributable to:

Equity holders of the parent company

Non-controlling interest 

There is no taxation arising from items of other comprehensive income.

The notes on pages 81 to 122 form part of these financial statements.

 2012

(2.1)

0.2

(34.4)

(4.9)

(0.2)

(41.4)

(36.8)

(4.6)

(41.4)

2011

59.2

0.2

15.4

4.0

(0.4)

78.4

68.4

10.0

78.4

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
consolidated statement of changes in Equity
For the year ended 30 June 2012

US$ million

At 1 July 2011

(Loss)/profit for the year

Other comprehensive 
(expense)/income

Transfer between reserves for 
exercise of options and warrants

Equity settled share-based payments

Allotments during the year:

– Share options exercised

– Warrants exercised

—

—

—

—

—

—

—

—

0.4

0.5

1.1

4.4

Share
capital

Share
premium
account

Foreign
currency
translation
reserve

Share-
based
payment
reserve

Other
reserves

Retained
losses

Attributable
to the
parent

Non-
controlling
interest

Total 
equity

84.8

645.6

(10.7)

9.7

—

(0.5)

(61.9)

667.0

32.0

699.0

—

(2.4)

(2.4)

0.3

(2.1)

—

(34.4)

0.2

(0.2)

—

(34.4)

(4.9)

(39.3)

—

—

—

—

(0.6)

1.0

—

—

—

—

—

—

0.6

—

—

—

—

1.0

1.5

4.9

—

—

—

—

—

1.0

1.5

4.9

At 30 June 2012

85.7

651.1

(45.1)

10.3

(0.7)

(63.7)

637.6

27.4

665.0

The notes on pages 81 to 122 form part of the financial statements.

Annual Report and Accounts 2012 Petra Diamonds Limited

77

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consolidated statement of changes in Equity
For the year ended 30 June 2012 continued

US$ million

At 1 July 2010

Profit for the year

Other comprehensive 
income/(expense)

4% non-controlling interest purchased 

– Koffiefontein (note 3(a))

26% disposal of Helam1

26% disposal of Star1

Transfer between reserves for 
exercise of options and warrants

Equity-settled share-based payments

Share-based payments cancelled2

Equity warrants issued3

Allotments during the year:

– Fundraising

– Share options exercised

– Warrants exercised

Share issue costs 

At 30 June 2011

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

21.7

304.2

0.4

1.3

—

1.3

10.2

(17.6)

Share
capital

Share
premium
account

Foreign
currency
translation
reserve

Share-
based
payment
reserve

Other
reserves

Retained
losses

Attributable
to the
parent

Non-
controlling
interest

Total 
equity

61.4

347.5

(26.1)

4.6

—

(0.1)

(130.0)

257.3

33.6

290.9

—

53.2

53.2

6.0

59.2

—

15.4

0.2

(0.4)

—

15.2

4.0

19.2

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(4.1)

1.9

(0.8)

7.9

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

0.9

6.0

3.9

4.1

—

—

—

—

—

—

—

0.9

6.0

3.9

—

1.9

(0.8)

7.9

325.9

1.7

11.5

(17.6)

(1.7)

(6.0)

(3.9)

—

—

—

—

—

—

—

—

(0.8)

—

—

—

1.9

(0.8)

7.9

325.9

1.7

11.5

(17.6)

84.8

645.6

(10.7)

9.7

(0.5)

(61.9)

667.0

32.0

699.0

1.  In  FY  2011,  the  Group  disposed  of  26%  of  its  shareholding  in  Helam  and  Star  to  Petra’s  black  economic  empowerment  (“BEE”) 

partners which represented a change in ownership interest in which the Group retained control.

2.  Employees received cash payments of US$0.8 million during the prior year in respect of options cancelled. The payments equate to 
the fair value at the date of cancellation and the Group recognised a charge to equity in accordance with IFRS 2 together with the 
acceleration of the remaining unamortised fair value in respect of the options of US$0.1 million in the Consolidated Income Statement.

3.  The fair value of warrants granted during the prior year.

Share capital
The share capital comprises the issued ordinary shares of the Company at par.

Share premium account
The share premium account comprises the excess value recognised from the issue of ordinary shares at par less share issue costs.

Foreign currency translation reserve
The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of foreign 
entities and foreign exchange differences on net investments in foreign operations.

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; 

 $ the fair value of shares under the 2011 Longer-term Share Plan and the 2012 Performance Share Plan;
 $ the fair value of warrants as measured at grant date and recognised immediately to reflect the vesting conditions; and 
 $ amounts transferred to retained losses in respect of exercised and lapsed warrants and options.

Other reserves
The other reserves comprise the cumulative gains or losses arising from available-for-sale financial assets of US$0.7 million 
(30 June 2011: US$0.5 million).

Retained losses
The retained losses comprise the Group’s cumulative accounting profits and losses incurred since incorporation.

Non-controlling interest
Non-controlling  interest  comprises  amounts  attributable  to  third  party  shareholders  in  the  Cullinan,  Finsch,  Kimberley 
Underground,  Koffiefontein,  Star,  Helam,  Sedibeng  and  Williamson  mines.  The  non-controlling  interest  share  of  total 
comprehensive  income  includes  US$4.6  million  total  comprehensive  expense  (30  June  2011:  US$10.0  million  total 
comprehensive income) for the year. 

78

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
consolidated statement of Financial Position
At 30 June 2012

US$ million

ASSETS

Non-current assets

Property, plant and equipment

Available-for-sale financial assets

Deferred tax asset¹

Loans and other receivables

Total non-current assets

Current assets

Inventories

Trade and other receivables

Derivative financial assets

Cash and cash equivalents – unrestricted

Cash and cash equivalents – restricted

Total current assets

Total assets

EQUITY AND LIABILITIES

Equity 

Share capital

Share premium account

Foreign currency translation reserve

Share-based payment reserve

Other reserves

Retained losses

Attributable to equity holders of the parent company

Non-controlling interest

Total equity

LIABILITIES 

Non-current liabilities

Loans and borrowings

Trade and other payables

Provisions

Deferred tax liabilities1

Total non-current liabilities

Current liabilities

Loans and borrowings

Other current liabilities – firm commitment

Trade and other payables

Provisions

Total current liabilities

Total liabilities

Total equity and liabilities

Notes

2012

2011

14

17

25

19

18

19

26

20

20

21

22

23

24

25

22

26

23

24

740.5

0.2

9.3

89.6

839.6

47.8

56.5

—

31.3

16.0

151.6

991.2

85.7

651.1

(45.1)

10.3

(0.7)

(63.7)

637.6

27.4

665.0

46.9

66.6

85.0

54.4

501.4

0.4

5.1

51.1

558.0

32.9

49.8

6.0

96.9

228.0

413.6

971.6

84.8

645.6

(10.7)

9.7

(0.5)

(61.9)

667.0

32.0

699.0

71.4

29.0

63.1

42.8

252.9

206.3

22.1

—

49.0

2.2

73.3

326.2

991.2

18.7

6.0

39.4

2.2

66.3

272.6

971.6

 1.  The  30  June  2011  deferred  tax  has  been  reclassified  to  show  the  deferred  tax  asset  separately  from  the  deferred  tax  liability 
to  provide  greater  comparability  to  the  30  June  2012  Consolidated  Statement  of  Financial  Position.  There  has  been  no  effect 
on profit or equity from this reclassification. Accordingly, no Statement of Financial Position at 30 June 2010 has been provided. 
There was no deferred tax asset at 30 June 2010.

The notes on pages 81 to 122 form part of the financial statements.

The financial statements were approved and authorised for issue by the Directors on 15 October 2012.

Annual Report and Accounts 2012 Petra Diamonds Limited

79

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consolidated statement of cashflows

US$ million

Notes

Profit before taxation for the year from continuing operations

Depreciation of property, plant and equipment – exploration

Depreciation of property, plant and equipment – mining

Depreciation of property, plant and equipment – other

Transaction and acquisition costs

Reversal of impairment

Impairment

(Profit)/loss on sale of property, plant and equipment

(Decrease)/increase in provisions

Present value adjustment of rehabilitation provision – change in assumptions

9

9

9

Other finance income

Other finance expense

Unrealised foreign exchange loss/(gain)

Share-based payment provision

Operating profit before working capital changes

Decrease/(increase) in trade and other receivables

Increase in trade and other payables

Increase in inventories

Cash generated from operations

Finance expense

Taxation paid

Net cash generated from operating activities

Cashflows from investing activities

Proceeds from sale of property, plant and equipment

Acquisition of assets at Kimberley Underground net of cash

Acquisition of 4% interest in Koffiefontein

Acquisition of assets at Finsch net of cash 

Acquisition costs for the purchase of Finsch assets

Finance income

Acquisition of property, plant and equipment

Loans advanced to BEE partners

Deposits paid for increased working interest in the Group’s 
South African operations

30

Transfer from/(to) restricted cash deposits

Net cash utilised in investing activities

Cashflows from financing activities

Proceeds from the issuance of share capital

Payment of share placing costs

Transaction costs of admission to the Main Market of the London Stock Exchange

Increase in non-current borrowings

Repayment of non-current borrowings

Repayment of current borrowings

Net cash (utilised in)/generated by 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

Cash and cash equivalents at end of the year

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8.4

0.1

40.7

0.2

3.1

—

—

(0.1)

(0.7)

(4.8)

(19.1)

17.3

38.6

1.0

84.7

4.5

4.3

(11.6)

81.9

(2.0)

—

79.9

1.4

—

—

(0.4)

1.8

(135.5)

—

(11.2)

212.0

(123.9)

6.4

—

(2.7)

—

—

(20.0)

(16.3)

(60.3)

96.9

(5.3)

31.3

2011

64.4

0.1

22.2

0.1

0.3

(11.7)

5.2

0.3

1.4

—

(8.4)

11.9

(18.6)

1.9

69.1

(25.6)

12.5

(3.5)

52.5

(1.2)

(0.4)

50.9

0.1

0.3

(0.8)

—

(0.3)

2.2

(105.2)

(8.7)

—

(218.3)

(330.7)

339.1

(17.6)

—

75.6

(15.0)

(32.3)

349.8

70.0

24.8

2.1

96.9

3

(192.0)

The notes on pages 81 to 122 form part of the financial statements.

Significant non-cashflow transactions which are not reflected in the Consolidated Statement of Cashflows are set out in note 31.

80

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
notes to the annual Financial statements
For the year ended 30 June 2012

1. Accounting policies
Petra Diamonds Limited (“Petra” or “the Company” or “the Group”), a limited liability company listed on the Main Market of the 
London  Stock  Exchange,  is  registered  in  Bermuda  with  its  group  management  office  domiciled  in  Jersey.  The  Company’s 
registered  address  is  2  Church  Street,  Hamilton,  Bermuda.  The  financial  statements  incorporate  the  principal  accounting 
policies set out below, which are, except as noted below, consistent with those adopted in the previous financial statements. 

1.1 Basis of preparation 
The Group financial statements are prepared in accordance with International Financial Reporting Standards (IFRS and IFRIC 
Interpretations) issued by the International Accounting Standards Board (“IASB”), as adopted by the European Union (“IFRS”). 

Going concern
The Group’s business activities, together with factors likely to affect its future development, performance and position, are set 
out  in  the  Business  Review  and  the  Operational  Review.  The  financial  position  of  the  Group,  its  cashflows  and  borrowing 
facilities are set out in the CEO’s Review and the Financial Review. The notes to the financial statements set out the Group’s 
objectives, policies and processes for managing its capital, exposures to credit risk and liquidity risk. 

The Directors have reviewed the Group’s current cash resources, funding requirements and ongoing trading of the operations. 
As a result of the review, the going concern basis has been adopted in preparing the financial statements and the Directors 
have no reason to believe that the Group will not be a going concern in the foreseeable future based on forecasts and available 
cash resources. 

Currency reporting 
The  functional  currency  of  the  Company  is  pounds  sterling  (GBP)  and  the  functional  currency  of  the  Group’s  business 
transactions in Botswana and Tanzania is US dollars. The functional currency of the South African operations is South African 
rand  (ZAR);  reference  to  transactions  in  South  African  rand  in  the  Annual  Report  is  denoted  by  an  R.  The  Group  financial 
statements are presented in US dollars. Also refer to the foreign currency accounting policy in note 1.14. ZAR balances are 
translated to US dollars at R8.16 as at 30 June 2012 (30 June 2011: R6.83) and at an average rate of R7.76 for transactions 
during the year ended 30 June 2012 (30 June 2011: R7.00).

1.2 New standards and interpretations applied
The IASB has issued the following new standards, amendments to published standards and interpretations to existing standards 
with effective dates prior to 1 July 2011 which have been adopted by the Group for the first time this year and which have 
not had a material effect:

IAS 24
IFRIC 14

IFRS 7

Revised – Related Party Disclosures
Amendment – IAS 19 Limit on a Defined Benefit Asset
Improvements to IFRSs
Transfer of Financial Assets

Effective period
commencing
on or after

1 January 2011
1 January 2011
1 January 2011
1 July 2011

Impact on Group

Yes
Yes
Yes
No

New standards and interpretations not yet effective
Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the 
Group’s accounting periods beginning after 1 July 2012 or later periods and which the Group has decided not to adopt early 
or which are yet to be EU endorsed. These are:

IFRS 1*
IAS 12* 
IAS 1
IFRS 9*
IFRS 10*
IFRS 11*
IFRS 12*
IFRS 13*
IFRIC 20*
IAS 27*
IAS 28*
IAS 19

IAS 32*
IFRS 9

Amendment – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters
Amendment – Deferred Tax: Recovery of Underlying Assets 
Amendment – Presentation of Items of Other Comprehensive Income
Financial Instruments
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Fair Value Measurement
Stripping Costs in the Production Phase of a Surface Mine
Amendment – Separate Financial Statements
Amendment – Investments in Associates and Joint Ventures
Amendment – Employee Benefits
Annual improvements to IFRSs (2009–2011 Cycle)
Offsetting Financial Assets and Financial Liabilities
Financial Instruments

* Not yet adopted by the European Union.

Effective period
 commencing 
on or after

1 July 2011
1 January 2012
1 July 2012
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
 1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2014
1 January 2015

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81

 
 
 
 
 
 
 
notes to the annual Financial statements
For the year ended 30 June 2012 continued

1. Accounting policies continued
1.2 New standards and interpretations applied continued
The Group is currently assessing the impact of these standards on the financial statements. Those anticipated to be significant 
to the Group are as follows:

IFRS  11  –  The  principle  in  IFRS  11  is  that  a  party  to  a  joint  arrangement  recognises  its  rights  and  obligations  arising 
from the arrangement rather than focusing on the legal form. The application of the principle results in the following:

 $ where the parties have rights to the assets and obligations for the liabilities relating to the arrangement, they are parties to 
joint operations. A joint operator accounts for assets, liabilities and corresponding revenues and expenses arising from the 
arrangement; and

 $ where the parties have rights to the net assets of the arrangement, they are parties to a joint venture. A joint venturer 

accounts for an investment in the arrangement using the equity method under IAS 28 “Investments in Associates”.

The Group does not currently have any joint ventures within the scope of IFRS 11 but this standard may be relevant going 
forward for any new mines.

IFRS 12 – The new standard amends disclosures regarding interests in other entities including subsidiaries, joint arrangements, 
associates and unconsolidated structured entities. The disclosures are intended to help users understand the judgements and 
assumptions  made  by  a  reporting  entity  when  deciding  how  to  classify  its  involvement  with  another  entity;  help  users 
understand the interest that non-controlling interests have in consolidated entities; and help users assess the nature of the 
risks associated with interests in other entities.

The Group anticipates changes to its disclosure as a result of this standard and is currently assessing the impact.

IFRIC 20 – This interpretation applies to waste removal (stripping) costs that are incurred in surface mining activity, during the 
production phase of the mine (production stripping costs). The Group has recently re-commenced production from its open 
cast mine (Williamson) and so this standard will be relevant. IFRIC 20 requires that, to the extent that the benefit from the 
stripping  activity  is  realised  in  the  form  of  inventory  produced,  the  directly  attributable  costs  of  that  activity  should  be 
treated as ore stockpile inventory. To the extent that the benefit is the improved access to ore, the directly attributable costs 
should be treated as a non-current ‘stripping activity asset’, if the following criteria are met:

 $ it is probable that the future economic benefit (improved access to the orebody) associated with the stripping activity will 

flow to the entity;

 $ the entity can identify the component of the orebody for which access has been improved; and
 $ the costs relating to the improved access to that component can be measured reliably.
The  stripping  activity  asset  is  initially  measured  at  cost  and  is  treated  as  an  enhancement  of  an  existing  asset,  not  as  an 
independent asset. Subsequently the stripping activity asset is accounted for in a manner consistent with that adopted for the 
asset  it  has  enhanced  and  is  depreciated  on  a  units  of  production  basis,  over  the  expected  useful  life  of  the  identified 
component of the orebody that becomes more accessible as a result of the stripping activity. 

1.3 Basis of consolidation
Subsidiaries
Subsidiaries  are  those  entities  over  which  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.

Business combinations
The results of business combinations are accounted for using the purchase method. In the Consolidated Statement of Financial 
Position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the 
acquisition  date.  The  results  of  acquired  operations  are  included  in  the  Consolidated  Statement  of  Other  Comprehensive 
Income from the date on which control is obtained. Business combinations are deconsolidated from the date control ceases. 
The  interest  of  non-controlling  shareholders  in  the  acquiree  is  initially  measured  at  the  non-controlling  shareholders’ 
proportion  of  the  fair  value  of  the  assets,  liabilities  and  contingent  liabilities  recognised.  All  costs  incurred  on  business 
combinations are charged to the Consolidated Income Statement. 

Changes in the Group’s ownership interests that do not result in a loss of control are accounted for as equity transactions with 
the existing shareholder under IAS 27.

Non-controlling interests
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity. Non-
controlling interests consist of the amount of those interests at the date of the original business combination and the non-
controlling shareholder’s share of changes in equity since the date of the combination. As a result of the revision to IAS 27 
“Consolidated and Separate Financial Statements”, the non-controlling interests’ share of losses, where applicable, are attributed 
to the non-controlling interests irrespective of whether the non-controlling shareholders have a binding obligation and are 
able to make an additional investment to cover the losses. 

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
1. Accounting policies continued
1.3 Basis of consolidation continued
Associates
An  associate  is  an  enterprise  over  whose  financial  and  operating  policies  the  Group  has  the  power  to  exercise  significant 
influence and which is neither a subsidiary nor a joint venture of the Group. The equity method of accounting for associates 
is  adopted  in  the  Group  financial  statements.  In  applying  the  equity  method,  account  is  taken  of  the  Group’s  share  of 
accumulated  retained  earnings  and  movements  in  reserves  from  the  effective  date  on  which  an  enterprise  becomes  an 
associate and up to the effective date of disposal. 

The share of associated retained earnings and reserves is generally determined from the associate’s latest audited financial 
statements. Where the Group’s share of losses of an associate exceeds the carrying amount of the associate, the associate 
is carried at nil. 

Additional  losses  are  only  recognised  to  the  extent  that  the  Group  has  incurred  obligations  or  made  payments  on  behalf 
of the associate.

Transactions eliminated on consolidation 
Intra-group balances and transactions, and any gains or losses 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 over the estimated useful lives 
of assets.

The depreciation rates are as follows:

Mining assets:

Plant, machinery and equipment 
Mineral properties  

Units of production method 
Units of production method

Exploration and other assets:

Plant and machinery 
Office equipment 
Computer equipment 
Motor vehicles 

10%–20% straight-line basis 
10% straight-line basis 
25% straight-line basis 
20% straight-line basis

Depreciation  of  mineral  properties  for  the  Group’s  operating  mines,  Cullinan,  Finsch,  Williamson,  Koffiefontein,  Kimberley 
Underground, Helam, Sedibeng and Star, are based on current life of mine plans. The current mine plans indicate useful life of 
mines  of  between  10  and  22  years.  Resources  remaining  after  the  current  life  of  mine  plans  have  not  been  included  in 
depreciation calculations. 

Cullinan mining assets relating to the C-Cut block of the mine have not been depreciated as the C-Cut has not yet been accessed.

At  each  mine,  assets  are  allocated  to  the  sections  of  the  relevant  orebodies  that  they  will  be  used  to  mine  and  are  being 
depreciated over the specific tonnes associated with the identified areas.

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. 

Expenditure relating to an item of property, plant and equipment considered to be an asset under construction is capitalised 
when it is probable that future economic benefits from the use of that asset will be realised.

Surpluses/(deficits)  on  the  disposal  of  property,  plant  and  equipment  are  credited/(charged)  to  the  Consolidated  Income 
Statement. The surplus or deficit is the difference between the net disposal proceeds and the carrying amount of the asset.

1.5 Leases
Finance leases 
Leases that transfer substantially all the risks and rewards of ownership of the underlying asset to the Group are classified as 
finance leases. Assets acquired under 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 Consolidated Statement of Financial Position.

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.

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Annual Report and Accounts 2012 Petra Diamonds Limited

83

 
 
 
 
 
 
 
 
 
 
 
 
 
 
notes to the annual Financial statements
For the year ended 30 June 2012 continued

1. Accounting policies continued
1.6 Exploration and evaluation costs
Exploration and evaluation costs on greenfield sites 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 where upon it is amortised on a unit of production basis. 

Exploration and evaluation expenditure on brownfield sites, being those adjacent to deposits already being mined or where 
the economic feasibility of existing deposits has yet to be proven, is capitalised within mineral properties. Amortisation only 
occurs upon commencement of commercial production. 

1.7 Intangible assets 
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.  Amortisation  is  included  within  mining  and  processing  costs  or  exploration  expenditure 
as appropriate. 

1.8 Impairment
The carrying amounts of the Group’s assets are reviewed at each reporting 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 fair value less cost to sell and its value in use. 

In assessing value in use, the expected future pre-tax cashflows 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 
Consolidated 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. 

Refer to note 8 for detailed disclosure of the results of impairment reviews performed. Reversal of impairments and impairment 
charges and reversals are credited/(charged) to a separate line item under total costs in the Consolidated Income Statement. 

1.9 Financial instruments
Financial assets
The  Group  classifies  its  financial  assets  into  one  of  the  following  categories  and  the  Group’s  accounting  policy  for  each 
category is as follows:

Fair value through profit or loss
This  category  comprises  only  in-the-money  derivatives  that  were  not  designated  and  effective  for  hedge  accounting  at 
inception.  They  are  carried  in  the  Consolidated  Statement  of  Financial  Position  at  fair  value  with  changes  in  fair  value 
recognised in the Consolidated Income Statement in the finance income or finance expense line. The Group does not have any 
assets held for trading nor does it voluntarily classify any financial assets as being at fair value through profit or loss. 

Loans and receivables
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. 
The  assets  arise  principally  through  the  provision  of  goods  and  services  to  customers  (e.g.  trade  receivables),  but  also 
incorporate other types of contractual monetary assets including cash and cash equivalents and loans and other receivables. 
They are initially recognised at the fair value plus transaction costs that are directly attributable to the acquisition or issue and 
subsequently carried at amortised cost using the effective interest method, less provision for impairment.

Available-for-sale
Non-derivative financial assets not included in the above categories are classified as available for sale and comprise principally 
of the Group’s strategic investment in the entities not qualifying as subsidiaries, associates or jointly controlled entities. The 
assets  are  carried  at  fair  value  with  changes  in  fair  value  recognised  directly  in  the  Consolidated  Statement  of  Other 
Comprehensive Income and accumulated in other reserves. Where a decline in the fair value of an available-for-sale financial 
asset  constitutes  objective  evidence  of  impairment,  the  amount  of  the  loss  is  removed  from  equity  and  recognised  in the 
Consolidated Income Statement. Fair values of quoted investments are based on current market prices at the reporting date. 
The  Group  only  holds  quoted  investments.  Available-for-sale  financial  assets  are  fair  valued  at  each  reported  date  and 
reviewed  as  set  out  above.  As  at  30  June  2012  a  cumulative  loss  of  US$0.7  million  (30  June  2011:  US$0.5  million)  was 
recorded in other reserves in respect of the available-for-sale financial assets.

Financial liabilities
The Group classifies its financial liabilities into one of two categories. Other than financial liabilities in a qualifying hedging 
relationship (see below), the Group’s accounting policy for each category is as follows:

Fair value through profit or loss 
This  category  comprises  only  out-of-the-money  derivatives  that  were  not  designated  and  effective  for  hedge  accounting 
at inception. The liabilities are carried in the Consolidated Statement of Financial Position at fair value with changes in fair 
value recognised in the Consolidated Income Statement in the finance income or finance expense line.

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
1. Accounting policies continued
1.9 Financial instruments continued
Other liabilities
Trade payables and other short-term and long-term monetary liabilities
Trade  payables  and  other  short-term  and  long-term  monetary  liabilities,  which  are  initially  recognised  at  fair  value, 
are subsequently carried at amortised cost using the effective interest method. 

Interest-bearing borrowings 
Bank  borrowings  and  the  debt  element  of  convertible  debt  issued  are  recognised  initially  at  fair  value  less  attributable 
transaction costs. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest 
rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of 
liability carried in the Consolidated Statement of Financial Position. ‘Interest expense’ in this context includes initial transaction 
costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding. 

Hedging instruments
Derivative financial instruments are initially measured at fair value on the contract date and are subsequently re-measured to 
fair value at each reporting date. On the date that relevant derivative contracts are entered into, the Group may designate the 
derivative for hedge accounting. Where a hedge instrument is designated for hedge accounting at inception, the Group formally 
assesses, at inception and on an ongoing basis, whether the derivatives are highly effective in offsetting changes in the fair 
value or cashflows of the hedged item. 

Cashflow hedges
Changes in the fair value of a derivative that is effective in offsetting changes in the cashflow of the hedged item, and that is 
designated and qualifies as a cashflow hedge, are recognised directly in equity. Changes in the fair value of derivatives that 
do not qualify for hedge accounting or were not designated for hedge accounting at inception are recognised in the Consolidated 
Income Statement. Amounts recognised in equity are transferred to the Consolidated Income Statement in the period during 
which the hedged forecast impacts net profit or loss. Any ineffective element of a cashflow hedge, which has been designated 
for  hedge  accounting,  is  taken  to  the  Consolidated  Income  Statement.  The  Group  has  not  had  any  hedging  instruments 
designated as cashflow hedges for hedge accounting as at 30 June 2012 or 30 June 2011. 

Fair value hedges
Where derivatives are used to hedge the Group’s exposure to fair value risk and qualify and are designated as fair value hedges, 
both the derivative and hedged item are measured at fair value with changes in fair value recognised in the Consolidated 
Income Statement within financial income/(expense). During the prior year, the Group designated forward currency contracts 
and restricted foreign currency deposits as hedging instruments, representing a fair value hedge of the foreign exchange risk 
on the firm commitment to purchase the Finsch mine. The hedging instruments were recognised in the Consolidated Statement 
of  Financial  Position  at  fair  value  and  changes  in  fair  value  were  recognised  in  the  Consolidated  Income  Statement. 
The change in the fair value of the unrecognised firm commitment attributable to the hedged risk (foreign exchange variation) 
is recognised as an ‘other asset/(liability)’ and recognised within the Consolidated Income Statement to the extent that the 
hedge is effective. The hedging instrument and firm commitment being hedged were settled during the year through completion 
of the Finsch purchase.

Impairment of financial assets
Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of 
the counterparty or default or significant delay in payment) that the Group will be unable to collect all the amounts due under 
the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present 
value of the future expected cashflows associated with the impaired receivable. For trade receivables, which are recorded 
net,  such  provisions  are  recorded  in  a  separate  allowance  account  with  the  loss  being  recognised  within  administrative 
expenses  in  the  Consolidated  Income  Statement.  On  confirmation  that  the  trade  receivable  will  not  be  collectable,  the  gross 
carrying value of the asset is written off against the associated provision. 

Fair value hierarchy
Financial assets and liabilities measured at fair value are classified according to their fair value hierarchy as disclosed in note 26.

1.10 Revenue 
Revenue comprises net invoiced diamond sales to customers excluding VAT. Diamond sales are made through a competitive 
tender process and 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. This is deemed to be the point at which the tender is awarded. 

Revenue from test production on projects pending confirmation of commercial viability is credited to revenue and an equal 
amount charged to cost of sales and credited to mining assets so as to record zero margin. 

1.11 Finance and other income
Finance and other income comprise income from interest and other non-operating income. Interest is recognised on a time 
apportioned basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is 
probable that such income will accrue to the Group. 

1.12 Tax 
Current tax comprises tax payable calculated on the basis of the expected taxable income for the year, using the tax rates 
enacted or substantively enacted at the reporting 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.

Annual Report and Accounts 2012 Petra Diamonds Limited

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notes to the annual Financial statements
For the year ended 30 June 2012 continued

1. Accounting policies continued
1.12 Tax continued
Deferred  tax  is  charged  to  the  Consolidated  Income  Statement  except  to  the  extent  that  it  relates  to  a  transaction  that  is 
recognised directly in Other Comprehensive Income or a business combination that is an acquisition. The effect on deferred 
tax of any changes in tax rates is recognised in the Consolidated Income Statement, except to the extent that it relates to items 
previously charged or credited directly to Other Comprehensive Income. 

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which 
the associated unused tax losses and deductible temporary differences can be utilised. Deferred tax assets are reduced to the 
extent that it is no longer probable that the related tax benefit will be realised. 

1.13 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 and rehabilitation will generally occur on or after the closure of the mine, 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. Increases in the provision, as a result of the unwinding of discounting are 
charged to the Consolidated Income Statement within finance expense. 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. 

Changes to the present value of the obligation due to changes in assumptions are recognised as adjustments to the provision 
together with an associated increase/(decrease) in the related decommissioning asset to the extent that a decommissioning 
asset exists. In circumstances where the decommissioning asset has been fully amortised the adjustment is recognised within 
other direct income.

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. 

1.14 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  reporting  date.  Gains  and 
losses arising on translation are credited to, or charged against, income. The issue of shares are included in share capital and 
share premium at the prevailing US$/sterling spot rate at the date of the transaction. 

Financial statements of foreign entities 
Assets and liabilities of foreign entities (i.e. those with a functional currency other than US$) are translated at rates of exchange 
ruling at the financial year end; income and expenditure and cashflow items are translated at rates of exchange ruling at the 
date of the transaction or at rates approximating the rates of exchange at the date of the translation where appropriate. 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 reporting date or the effective rate when a transaction is hedged (refer to note 3). 
Exchange differences arising from the translation of foreign entities are taken directly to a foreign currency translation reserve. 

Foreign operations
Unrealised gains and losses arising on the translation of loans to subsidiaries into the currency in which they are denominated 
and that are not expected to be repaid in the foreseeable future are treated as part of the net investment in foreign operations. 
The unrealised foreign exchange gains and losses attributable to foreign operations are taken directly to the Consolidated 
Statement of Other Comprehensive Income and reflected in the foreign currency translation reserve. 

Unrealised gains and losses arising on the translation of loans to subsidiaries into the currency in which they are denominated 
and that are expected to be repaid in the foreseeable future are recognised in the Consolidated Income Statement. 

1.15 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  reporting  date.  The  provisions  have  been 
calculated based on current wage and salary rates. 

1.16 Cash and cash equivalents 
Cash and cash equivalents comprise cash on hand, deposits held on call with banks, investments in money market instruments, 
and net of bank overdrafts, all of which are available for use by the Group unless otherwise stated. Restricted cash represents 
amounts held by banks and other financial institutions as a guarantee in respect of environmental rehabilitation obligations in 
respect of the Group’s South African mines and deposits held in escrow accounts not freely available to the Group. 

1.17 Employee pension schemes
Defined contribution scheme
Obligations  for  contributions  to  defined  contribution  pension  schemes  are  recognised  as  an  expense  in  the  Consolidated 
Income Statement as incurred. 

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1. Accounting policies continued
1.17 Employee pension schemes continued
Defined benefit scheme
The defined benefit liability or asset recognised in the financial statements represents the present value of the defined benefit 
obligation as adjusted for unrecognised actuarial gains and losses and unrecognised past service costs, and reduced by the 
fair  value  of  plan  assets.  Any  net  asset  recognised  is  limited  to  unrecognised  actuarial  losses,  plus  the  present  value  of 
available refunds and any reduction in future contributions that the Company is entitled to in terms of Section 15E of the 
Pension Funds Act in South Africa. 

Actuarial gains and losses are recognised to the extent that, at the beginning of the financial period, any cumulative unrecognised 
actuarial gain or loss exceeds 10% of the greater of the present value of the projected benefit obligation and the fair value of 
the plan assets (‘the corridor’), that portion is recognised in the Consolidated Statement of Other Comprehensive Income in the 
period in which it is incurred. Actuarial gains or losses within the corridor are not recognised. 

The actuarial calculation is performed by a qualified actuary using the projected unit credit method. 

1.18 Post-retirement medical fund
The  Group  operates  a  post-retirement  medical  fund,  which  is  unfunded  and  therefore  recognised  as  a  liability  on  the 
Consolidated  Statement  of  Financial  Position  within  provisions.  The  liability  is  based  on  an  actuarial  valuation  performed 
at each year-end reporting date.

1.19 Share-based payments
Employee and Director share option scheme
The fair value of options granted to employees 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. 

2011 Longer-term Share Plan and 2012 Performance Share Plan
The fair value of the share award granted to the Directors 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 Directors become unconditionally 
entitled to the share award. The fair value of the share award granted is measured based on the Monte Carlo 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 shares awarded that vest except where forfeiture is only due to share prices not 
achieving the threshold for vesting. The exercise price is variable at the date of grant and no compensation is due at the date 
of grant. On exercise, a transfer between equity reserves will occur by the amount of the expense incurred over the period. 

1.20 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 of production 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. Work in progress is stated 
at raw material cost including allocated labour and overhead costs.

1.21 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.

1.22 Borrowing costs 
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalised 
as part of the cost of that asset. Other borrowing costs are recognised as an expense in the period in which the borrowing cost 
is incurred.

1.23 Critical assumptions and judgements
The preparation of the consolidated financial statements requires management to make estimates and judgements and form 
assumptions  that  affect  the  reported  amounts  of  the  assets  and  liabilities,  reported  revenue  and  costs  during  the  periods 
presented therein, and the disclosure of contingent liabilities at the date of the financial statements. Estimates and judgements 
are continually evaluated and based on management’s historical experience and other factors, including future expectations 
and events that are believed to be reasonable. The estimates and assumptions that have a significant risk of causing a material 
adjustment to the financial results of the Group in future reporting periods are discussed below. 

Judgements
Life of mine and ore reserves
There are numerous risks inherent in estimating ore reserves and the associated life of a mine. Therefore management must 
make a number of assumptions in making those estimates, including assumptions as to exchange rates, rough diamond and other 
commodity prices, recovery and production rates. Any such estimates and assumptions may change as new information becomes 
available. Changes in exchange rates, commodity prices, recovery and production rates may change the economic viability of 
ore reserves and may ultimately result in the restatement of the ore reserves and potential impairment to the carrying value 
of the mining assets and life of mine. The determination of the life of mine and ore reserves also impacts the depreciation of 
mining assets depreciated on a unit of production basis, as set out in note 1.4 and the expected timing of rehabilitation.

Annual Report and Accounts 2012 Petra Diamonds Limited

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notes to the annual Financial statements
For the year ended 30 June 2012 continued

1. Accounting policies continued
1.23 Critical assumptions and judgements continued
Judgements continued
Impairment reviews
While conducting an impairment review of its assets, the Group exercises judgement in making assumptions about future rough 
diamond prices, ore reserves, feasibility studies, future development and production costs. Changes in estimates used can result in 
significant changes to the Consolidated Income Statement and Statement of Financial Position. The Group prepares value in use 
impairment models and assesses mining assets for impairment. The carrying value of the Kimberley Underground mining assets 
are sensitive to rough prices, production and the assessment of additional orebodies. The carrying value of mining assets at 
Sedibeng and Helam are sensitive to rough diamond prices and the forecasted growth in production rates. The policy in respect 
of impairment reviews is set out in note 1.8 and details of impairment reviews carried out during the year are set out in note 8.

Taxation judgement
The Group has received a number of historical tax claims in respect of its mining operations, relating to the period prior to the 
operations being acquired by the Group. Judgement is applied by management, having consulted with local tax advisers, on 
the probability of payments being made to settle the claims. A provision of US$2.2 million (30 June 2011: US$2.2 million) has 
been made in respect of these claims. 

Finsch fair value adjustments
Judgement was applied in determining the fair value adjustments in respect of the Finsch acquisition. The fair value adjustments 
to property, plant and equipment, trade and other receivables, inventory and consumable stores, environmental liabilities and 
medical aid provisions were to ensure these amounts were at fair value.

Capitalisation of feasibility and development costs at the Williamson mine
Judgement has been applied by management during the prior years in determining whether feasibility expenditure should be 
capitalised or expensed. The Group embarked on a feasibility study at the Williamson mine through an intensive bulk sampling 
programme with a view to better understanding the orebody. This was done to optimise the design of the treatment plant to 
further increase production in the future. Based on management’s judgements, direct expenditure was considered to be capital 
in nature and was capitalised on the basis that the future economic benefits of the mining assets were expected to flow to the 
Group in line with guidance from IAS 16. All other costs are expensed as care and maintenance costs. During the current and 
prior year, the Group incurred costs as part of its refurbishment project to upgrade the plant and reshape the open pit. 
All direct costs incurred by the Group, including internal development costs, which are directly attributable to bringing the 
asset into use and which increase the future economic benefits that will flow to the Group, have been capitalised. During FY 2012 
the Group commenced production; costs ceased to be capitalised and depreciation of the previously capitalised assets commenced.

Assumptions and estimates
Provision for rehabilitation 
Significant estimates and assumptions are made in determining the amount attributable to rehabilitation provisions. These deal 
with uncertainties such as the legal and regulatory framework, timing and future costs. In determining the amount attributable 
to rehabilitation provisions, management used a discount rate range of 7.66%–8.93% (30 June 2011: 8%–9%), current life of mine 
plans and mine work programs of 10 to 50 years (30 June 2011: 11 to 53 years) and an inflation rate range of 5.6%–6.9% (30 
June 2011: 6.9%–7.0%). The Group estimates the cost of rehabilitation with reference to approved environmental plans filed with 
the local authorities. Changes to estimates are recognised when such plans are approved given uncertainties which may 
exist until the point of approval. The carrying value of rehabilitation provisions at the reporting date is US$73.2 million (30 June 
2011: US$55.8 million).

Valuation of share options and share-based incentives
In determining the fair value of share-based payments made during the year to employees and Directors, a number of assumptions 
have been made by management. The details of these assumptions are set out in note 28. The total charge to the Consolidated 
Income Statement in respect of share-based payments for the year is US$1.0 million (30 June 2011: US$1.9 million). 

Valuation of warrants 
No warrants were issued during the year.

During  the  prior  year,  a  number  of  assumptions  were  made  by  management  in  respect  of  determining  the  fair  value  of 
warrants issued as part of a debt financing exercise. The details of these assumptions are set out in note 28. The fair value of 
the warrants is debited against prepayments until such time as the loan is drawn down. When the loan was drawn down, the 
fair  value  was  debited  against  the  interest  bearing  non-current  borrowings  and  the  effective  interest  rate  and  associated 
accretion charges adjusted accordingly. The fair value of the warrants was US$7.9 million of which US$6.8 million has been 
debited against the interest-bearing non-current borrowings and is being amortised through the effective interest rate.

Deferred tax
Judgement is applied in making assumptions about future taxable income, including diamond prices, production, rehabilitation 
costs and expenditure to determine the extent to which the Group recognises deferred tax assets. The Statement of Financial 
Position deferred tax assets total US$9.3 million and relate to the Kimberley Underground mine. The deferred tax asset is expected 
to be utilised over the next two years in line with forecast, following the commissioning of the Wesselton plant. 

Inventory and inventory stockpile
Judgement is applied in making assumptions about the value of inventories and inventory stockpiles, including diamond prices, 
production grade and expenditure to determine the extent to which the Group values inventory and inventory stockpiles.

Depreciation
Judgement is applied in making assumptions about the depreciation charge, including estimated useful life of individual assets 
and residual values, the life of mine, tonnes associated with specific areas of the orebodies identified and allocation of assets 
to the areas of the orebodies which they will be used to mine.

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2. Segment information
Segment information is presented in respect of the Group’s operating and geographical segments:

Mining – the extraction and sale of rough diamonds from mining operations in South Africa and Tanzania.

Exploration – exploration activities in Botswana. 

Segments are based on the Group’s management and internal reporting structure. Management reviews the Group’s performance 
by reviewing the results of the mining activities in South Africa and Tanzania, reviewing the results of the exploration activities 
in Botswana and reviewing the corporate administration expenses in Jersey. Each segment derives, or aims to derive, its revenue 
from diamond mining and diamond sales, except for the corporate and administration cost centre.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on 
a  reasonable  basis.  Segment  results  are  calculated  after  charging  direct  mining  costs  and  depreciation.  Unallocated  items 
comprise  mainly  interest-earning  assets  and  income,  interest-bearing  borrowings  and  expenses,  and  corporate  assets  and 
expenses. Segment capital expenditure is the total cost incurred during the period to acquire or construct segment assets that 
are expected to be used for more than one period. Eliminations comprise transactions between Group companies that are 
cancelled  on  consolidation.  The  results  are  not  materially  affected  by  seasonal  variations.  Revenues  are  generated  from 
tenders held in Johannesburg and Antwerp for external customers from various countries, the ultimate customers of which 
are not known to the Group.

The  Group’s  non-current  assets  are  located  in  South  Africa  US$741.7  million  (30  June  2011:  US$477.6  million),  Tanzania 
US$95.6 million (30 June 2011: US$79.9 million) and Jersey US$2.3 million (30 June 2011: US$0.5 million).

South Africa – mining activities

Tanzania
– mining
 activities

Botswana

Jersey

Operating
segments
US$ million

Cullinan
2012

Finsch
2012

Koffiefontein 
2012

Kimberley
Underground
2012

Fissure
 Mines
2012

Williamson
2012

Exploration
2012

Corporate 
administration
2012

Inter-
segment
2012

Consolidated
2012

Revenue 

112.0

136.9

18.9

19.8

17.7

11.6

—

—

—

316.9

Segment 
result
Other direct 
income

Operating 
profit/(loss)1
Other financial 
income
Other financial 
expense
Unrealised 
foreign 
exchange loss
Income tax 
expense
Non-controlling 
interest 

Loss 
attributable 
to equity 
holders of 
the parent 
company

Segment 
assets
Segment 
liabilities
Capital 
expenditure

25.1

60.2

(6.7)

(6.1)

(10.7)

(9.1)

(3.1)

(13.7)

0.3

36.2

4.2

1.2

0.7

3.1

(0.5)

0.3

—

—

—

9.0

29.3

61.4

(6.0)

(3.0)

(11.2)

(8.8)

(3.1)

(13.7)

0.3

45.2

19.1

(17.3)

(38.6)

(10.5)

(0.3)

(2.4)

379.1

234.4

49.6

89.3

110.3

108.1

13.7

1,154.1

(1,147.4)

991.2

200.9

199.8

33.3

107.3

137.7

225.9

35.2

452.8

(1,066.7)

326.2

54.4

12.0

11.5

21.0

16.9

22.2

0.5

0.3

—

138.8

1.  Operating profit is equivalent to revenue of US$316.9 million less total costs of US$271.7 million as disclosed on the Consolidated 

Income Statement.

The Group acquired Finsch effective 14 September 2011, therefore there are no comparative figures presented for the year 
ended 30 June 2011 in respect of the Finsch operating segment. 

Capital expenditure at the Fissure Mines includes work in progress of US$11.1 million (30 June 2011: US$11.0 million) in respect 
of the manufacture of plant and equipment for other mines within the Group. Other income in respect of the Fissure Mines 
includes US$38.4 million (30 June 2011: US$21.2 million) of revenue and US$39.4 million (30 June 2011: US$21.4 million) 
of costs in respect of the projects division at Helam for the manufacture of plant and equipment for other mines within the 
Group. Segment assets and liabilities include inter-company receivables and payables which are eliminated on consolidation. 
Capital expenditure at Williamson includes US$19.5 million (30 June 2011: US$35.8 million) of cash costs capitalised in respect 
of the plant rebuild and expansion programme.

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220.6

40.1
2.7

42.8

11.7
(5.2)
8.4
(11.9)

18.6
(5.2)
(6.0)

53.2

971.6
272.6
110.9

notes to the annual Financial statements
For the year ended 30 June 2012 continued

2. Segment information continued

South Africa – mining activities

Tanzania 
– mining
 activities

Botswana

Jersey

Operating segments
US$ million

Cullinan
2011

Koffiefontein
2011

Kimberley
Underground
2011

Fissures
2011

Williamson
2011

Exploration
2011

Corporate
administration
2011

Inter-
segment
2011

Consolidated
2011

Revenue 

140.2

30.8

18.2

21.8

53.5
1.9

55.4

2.8
0.5

3.3

3.3
(0.4)

2.9

(4.4)
0.4

(4.0)

11.7
(5.2)

9.5

(6.0)
0.3

(5.7)

—

(1.5)
—

(1.5)

—

(9.4)
—

(9.4)

0.1

1.8
—

1.8

Segment result
Other income/(expense)

Operating profit/(loss)1
Reversal of impairment –
Fissures
Impairment – Fissures 
Other financial income
Other financial expense
Unrealised foreign 
exchange gain
Income tax expense 
Non-controlling interest

Profit attributable to 
equity holders of the 
parent company

Segment assets
Segment liabilities2
Capital expenditure

409.7
199.3
33.9

57.7
30.1
11.0

76.6
83.0
13.0

110.1
140.5
16.2

90.0
196.0
36.6

8.8
27.2
—

1,000.7
320.2
0.2

(782.0)
(723.7)
—

1.  Operating profit is equivalent to revenue of US$220.6 million less total costs of US$177.8 million (before net impairment reversals 

of US$6.5 million) as disclosed on the Consolidated Income Statement.

2.  The 2011 deferred tax has been reclassified to show the deferred tax asset separately from the deferred tax liability to provide 
greater  comparability  to  the  2012  Consolidated  Statement  of  Financial  Position.  There  has  been  no  effect  on  profit  or  equity 
from this reclassification.

Capital expenditure at the Helam Projects internal equipment manufacturing operation (a division within the Fissure operations) 
includes work in progress of US$11.0 million in respect of the manufacture of plant and equipment for other mines within the 
Group. Other income in respect of the Fissure Mines includes US$21.2 million of revenue and US$21.4 million of costs in respect 
of Helam projects for the manufacture of plant and equipment for other mines within the Group. Segment assets and liabilities 
include  inter-company  receivables  and  payables  which  are  eliminated  on  consolidation.  Capital  expenditure  at  Williamson 
includes US$35.8 million of cash costs capitalised in respect of the plant rebuild and expansion programme.

3. Acquisitions
30 June 2012
Acquisition of Finsch
On 21 January 2011, the Company announced that it, together with its Finsch BEE partners, had entered into an agreement 
to acquire the Finsch mine in South Africa as a going concern (assets and assumed liabilities) from De Beers for R1.425 billion, 
via Finsch Diamond Mine (Pty) Ltd (“FDM”) (previously named Afropean Diamonds (Pty) Ltd), in which the Company owns 
a 74% interest and the Finsch BEE partners a 26% interest. On 14 September 2011, the Company announced the completion 
of  the  Finsch  acquisition,  which  represented  the  date  the  Group  acquired  control  of  the  mine.  As  part  of  the  transaction, 
the Company funded the Finsch BEE partners’ share of the R1.425 billion consideration through loans to the BEE partners. The 
final cash consideration paid in US$ terms was US$192 million, reflecting the benefit of an effective hedging strategy to hedge 
the foreign exchange risk on the firm commitment to acquire Finsch.

It is not practical to obtain the turnover and operating results for the Finsch mine for the period 1 July 2011 to date of acquisition, 
as the Finsch turnover and operating results were previously treated as a branch within a larger corporate by the vendor and 
are not available to the Group. The Finsch mine generated revenue since date of acquisition to 30 June 2012 of US$136.9 million. 
Costs  of  US$0.4  million  (30  June  2011:  US$0.3  million)  associated  with  the  acquisition  have  been  expensed  in  full  in  the 
Consolidated Income Statement.

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
3. Acquisitions continued
30 June 2012 continued
Effect of the acquisition
The acquisition has had the following effect on the Group’s assets and liabilities:

Finsch net assets at acquisition date 
US$ million

Mining property, plant and equipment
Land
Inventory consumables and stores
Trade and other receivables
Environmental liabilities
Medical aid and provisions
Employee-related payables
Trade and other payables

Net assets acquired

Satisfied as follows:
Cash consideration paid by the Company
Cash consideration advanced by the Company to the BEE consortium

Book values

Fair value
adjustments

Fair values

235.3
0.7
4.1
1.6
(16.2)
(5.1)
(2.7)
(3.2)

214.5

(13.2)
—
(0.7)
(1.6)
(7.5)
(0.2)
0.6
0.1

(22.5)

222.1
0.7
3.4
—
(23.7)
(5.3)
(2.1)
(3.1)

192.0

142.1
49.9

192.0

Judgement was applied in determining the fair value adjustments in respect of the Finsch acquisition. The fair value adjustments 
to property, plant and equipment, trade and other receivables, inventory and consumable stores, environmental liabilities and 
medical aid provisions were to ensure these amounts were reflected at fair value.

30 June 2011
(a) Increase in effective interest in the Koffiefontein mine to 74%
On 10 December 2010, the Company increased its effective interest in the Koffiefontein mine in South Africa from 70% to 74% 
for a cash consideration of R6.0 million (US$0.8 million).

The additional 4% interest in Koffiefontein was purchased by Blue Diamond Mines (Pty) Ltd, a wholly owned subsidiary of the 
Company,  through  the  acquisition  of  a  shareholding  in  Re-Teng  Diamonds  (Pty)  Ltd,  the  holding  company  of  Petra’s  BEE 
partners at Koffiefontein; the interests in Koffiefontein are now Petra 74%, BEE partners 26%. 

In  the  year  ended  30  June  2011,  Koffiefontein  recorded  a  net  loss  before  taxation  of  R1.4  million  (US$0.2  million).  If  the 
acquisition  had  occurred  on  1  July  2010,  the  Group’s  share  of  the  loss  from  the  Koffiefontein  mine  for  the  year  ended 
30 June 2011 would have increased by R0.06 million (US$0.01 million) and the non-controlling interest share would have 
reduced accordingly.

Effect of the acquisition
The purchase had the following effect on the Group’s assets and liabilities:

Koffiefontein net assets at acquisition date
US$ million

Book value of net assets at 10 December 2010
Book value of 4% interest acquired
Fair value of consideration paid:
– Settled in cash

Excess of carrying value of 4% interest purchased over fair value consideration paid

43.8
1.7

0.8

0.9

In accordance with IAS 27, as the purchase represented a transaction with existing shareholders which had not resulted in the 
gain or loss of control, the carrying value of the 4% interest acquired of US$1.7 million as at 10 December 2010 was deducted 
from the Group’s non-controlling interest balance relating to Koffiefontein. The US$0.9 million excess of the carrying value of 
the 4% acquired in Koffiefontein over the fair value consideration of US$0.8 million was recognised directly in equity and 
attributed to the Group.

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91

 
 
 
 
 
 
 
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notes to the annual Financial statements
For the year ended 30 June 2012 continued

4. Mining and processing costs
US$ million

Raw materials and consumables used
Employee expenses
Depreciation of mining assets
Diamond royalty
Changes in inventory of finished goods and stockpiles

5. Other direct income
US$ million

(Profit)/loss on disposal of fixed assets
Revaluation of environmental rehabilitation liability – change in estimate
Other mining income

6. Exploration expenditure
US$ million

Employee expenses
Depreciation of exploration assets 
Drilling and air survey expenses
Rental and equipment hire
Other exploration expenses

7. Corporate expenditure
US$ million

Auditors’ remuneration:
– Audit services¹
– Non-audit services2
Depreciation of property, plant and equipment 
Operating lease rentals – buildings
Staff costs
Other charges
Transaction costs²
Share-based payments:
– Directors
– Senior Management

2012 

138.0
103.2
40.7
1.4
(19.4)

263.9

2012 

(0.1)
(4.8)
(4.1)

(9.0)

2011

77.1
75.0
22.2
0.6
(5.2)

 169.7

2011

0.3
—
(3.0)

 (2.7) 

2012 

2011

1.0 
0.1 
1.6 
0.1 
0.3 

3.1 

0.5
0.1
0.5
0.1
0.2

1.4 

2012 

2011

0.5 
0.1 
0.2 
0.6 
5.2 
3.6 
3.1

0.3 
0.1 

13.7 

0.4
0.1
0.1
0.4
4.3
2.5
0.3

0.6
0.7

9.4 

1.  Audit fees for the year ended 30 June 2012 stated above refer to fees for the 2011 audit. 

 2.  Transaction costs comprise Finsch acquisition costs (US$0.4 million) (30 June 2011: US$0.3 million) and costs relating to the admission 
to the Main Market of the London Stock Exchange (US$2.7 million) (30 June 2011: US$nil). The costs in respect of admission to the 
Main Market include $0.7 million (30 June 2011: US$nil) paid to the auditors for non-audit services.

All share-based payments are in respect of equity-settled share option schemes and share award schemes as stated in note 28.

8. Impairment and reversal of impairments of operational assets and investments
In  accordance  with  IAS  36  “Impairment  of  Assets”,  when  events  or  changes  in  market  conditions  indicate  that  tangible  or 
intangible assets may be impaired, such assets are reviewed in detail to determine whether their carrying value is higher than 
their recoverable value, which could lead to recording an impairment loss (recoverable value is the higher of value in use and 
fair value less costs to sell). Value in use is estimated by calculating the present value of the future cashflows expected to be 
derived from the asset. Fair value less costs to sell is based on the most reliable information available (market statistics, recent 
transactions, etc.). The discounted cashflow basis has been used to calculate a value in use for the mining operations for those 
mines for which value in use exceeds fair value less cost to sell. 

92

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
 
 
8. Impairment and reversal of impairments of operational assets and investments continued
Impaired assets are reviewed annually to determine whether any substantial change to their fair value amounts previously 
impaired would require reversal.

When  determining  recoverable  values  of  investments  and  property,  plant  and  equipment,  assumptions  and  estimates  are 
made as set out in note 1.23. Any change in these assumptions can have a significant effect on the recoverable amount and 
could lead to a revision of recorded impairment losses. 

30 June 2012
During the year ended 30 June 2012, the Group has reviewed the carrying value of its investments and operational assets for 
indicators  of  impairment  and  following  the  assessment  no  impairment  of  investments,  property,  plant  and  equipment  or 
reversal of impairment gains in prior years are considered appropriate. Details of the impairment test assessments are shown 
in notes 8.1 and 8.2 to follow. 

30 June 2011
During the year ended 30 June 2011, the Group reviewed the carrying values of its investments and operational assets for 
indicators of impairment and, following that assessment, a reversal of a prior impairment to Helam’s property, plant and 
equipment and a further impairment to Star’s property, plant and equipment was considered to be appropriate. The reversal 
of previous impairment charges at Helam reflected improved diamond prices, production and cashflows and was determined 
net of depreciation which would have arisen if the asset had not been impaired. The additional impairment to Star reflected 
continued production levels which were insufficient to support the carrying value on a value in use basis and this assessment 
remains appropriate at 30 June 2012. The impairment of Star was determined based on fair value less costs to sell which was 
considered  to  exceed  value  in  use.  Impairment  reversals  of  US$11.7  million  were  recorded  in  the  Consolidated  Income 
Statement  in  respect  of  Helam’s  assets.  Impairment  charges  of  US$5.2  million  were  recorded  in  the  Consolidated  Income 
Statement in respect of Star’s assets for 2011.

Impairment reversal
US$ million

Helam Mining (Pty) Ltd 

Asset class

Property, plant 
and equipment

Mineral properties
Underground development
Buildings
Mining property, 
plant and equipment

Forex movement

Subtotal

Segment

Net book
value1

Reversal of
impairment

Fissure Mines

9.0

—

9.0

15.2

7.4
4.8
1.0

2.0

(3.5)

11.7

Carrying
value

24.2

(3.5)

20.7

1. Net book value refers to the carrying value of the amounts including the previous impairments.

2.  Helam’s assets were previously impaired in December 2008 by US$12.9 million (R114.5 million) using an exchange rate of US$1:R8.87. 
In FY 2011 the initial impairment of R114.5 million in the subsidiary was reversed less depreciation that would have been incurred 
had the impairment never taken place. The resulting impairment reversal was US$15.2 million (R103.7 million) using an exchange 
rate of US$1:R6.83. US$3.5 million of the reversal was recognised in the foreign currency translation reserve to take into account 
the movement in the foreign exchange rate from the date of the initial impairment to date of the reversal when translating the rand 
value to US dollars, with US$11.7 million recognised as an income statement gain. 

Operational assets impaired
US$ million

Asset class

Segment

Net book
value

Impairment
raised

Carrying 
value

Property, plant 
and equipment

Underground 
development
Land and buildings
Mining property, 
plant and equipment

Star Diamonds (Pty) Ltd 

Subtotal

Net impairment reversal 
– Helam and Star

Fissure Mines

7.0

7.0

1.8

1.8

(5.2)

(1.7)
(2.1)

(1.4)

(5.2)

6.5

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Annual Report and Accounts 2012 Petra Diamonds Limited

93

 
 
 
 
 
 
 
notes to the annual Financial statements
For the year ended 30 June 2012 continued

8. Impairment and reversal of impairments of operational assets and investments continued
8.1 Impairment testing assumptions 
30 June 2012
Subsequent  to  the  year  end  the  Group  announced  its  intention  to  sell  the  Fissure  Mines.  In  the  absence  of  appropriate 
comparable  transactions  or  market  prices,  a  value  in  use  basis  has  been  used  to  assess  year  end  asset  carrying  values 
for  Helam  and  Sedibeng  JV.  The  key  assumptions  used  in  determining  the  recoverable  value  calculations  for  Helam 
and  Sedibeng  JV,  determined  on  a  value  in  use  basis,  are  the  recoverable  value  of  reserves  and  resources,  diamond  prices, 
a before-tax risk-free rate per RSA Government bonds adjusted for market risk and volatility, diamond prices, inflation rate, 
exchange rates, life of mine and capital expenditure. No impairment was considered to exist based on the value in use models 
but  it  is  noted  that  the  carrying  values  are  sensitive  to  diamond  prices  and  achieving  forecast  production  growth  rates. 
The recoverable amount of Star was assessed using fair value less cost to sell in a manner consistent with the prior year.

30 June 2011
a) Helam Mining (Pty) Ltd and Star Diamonds (Pty) Ltd 
The key assumptions used in determining the recoverable value calculations for Helam determined on a value in use basis, 
are listed in the table below in respect of the year ended 30 June 2011, given the impairment reversal in that year:

Key assumptions

Explanation

Recoverable value 
of reserves 
and resources

Economically recoverable reserves and resources were based on management’s expectations based 
on the availability of reserves at mine sites and technical studies undertaken in-house and by 
third party specialists. Refer to “Life of mine” below for further information.

Diamond prices

Diamond prices were based on historical prices and prevailing market conditions. The US$/carat price 
used in the calculations was US$185.

Discount rate

Inflation rate

Exchange rates

The discount rate used represents the before tax risk free rate per the RSA Government bonds 
adjusted for market risk and volatility.

Long-term inflation rate of 4.0% above a long-term US inflation rate of 2.5% per annum was used 
for US$ diamond prices. Long-term inflation rate of 3.5% above the prevailing US inflation rate was 
used for Opex and Capex valuations.

Exchange rates were based on external market consensus and after considering long-term market 
expectations. The US$/ZAR exchange rate range used commenced at R6.99, further devaluing at 
3.5% per annum. 

Life of mine

20 years life of mine; total extractable resources 2.03 Mt at extraction rate of 101 ktpa.

Capital expenditure  Management estimated the timing of the capital expenditure based on the Group’s current and future 

financing plans for the operation. 

Valuation basis

Discounted present value of future cashflows.

Sensitivity

Management did not consider there to be any reasonable change in assumption which may give rise 
to an impairment loss.

Star’s impairment in the prior year was determined based on the recoverable amount at 30 June 2011 and that assessment is 
considered to remain appropriate at 30 June 2012 for impairment assessment. The Directors assessed the recoverable amount 
using fair value less costs to sell. The carrying value of assets was determined with reference to the plant and equipment that 
management considers to be saleable or transferable to other mines within the Group for use in a manner which will generate 
sufficient future economic value to support the carrying value of those specific assets. The carrying value of these assets 
approximates fair value less cost to sell for the cash-generating unit.

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
8. Impairment and reversal of impairments of operational assets and investments continued
8.2 Impairment tests – other mining operations 30 June 2012 and 30 June 2011
The Group performs impairment testing on an annual basis of all operations and when there are potential indicators which 
may  require  impairment.  In  addition  to  the  Fissures,  the  Group  also  performed  impairment  testing  for  Cullinan,  Finsch, 
Koffiefontein, Kimberley Underground and Williamson. The results of the impairment testing performed did not indicate any 
impairments on the remaining mining operations. The key assumptions used in determining the recoverable value calculations, 
determined on a value in use basis, are listed in the table below:

Key assumptions

Explanation

Recoverable value of 
reserves and 
resources

Economically  recoverable  reserves  and  resources  are  based  on  management’s  expectations  based 
on the availability of reserves at mine sites and technical studies undertaken in-house and by third 
party specialists. Refer to “Life of mine” below for further information.

Diamond prices

Diamond  prices  are  based  on  guidance  prices  as  shown  on  page  7.  The  ROM  US$/carat  price  range 
used in the calculations was US$140–US$600 (30 June 2011: US$180–US$640).

Discount rate

Inflation rate

Exchange rates

Life of mine

The discount rate used for the South African operations represents the before tax risk-free rate per the 
RSA Government bonds adjusted for market risk and volatility.
The  discount  rate  used  for  Williamson  Diamonds  Ltd  represents  the  before  tax  risk-free  rate 
per the Tanzanian Government bonds adjusted for market risk and volatility.

Long-term  inflation  rate  of  4.0%  (30  June  2011:  4.0%)  above  a  long-term  US  inflation  rate  of  2.5% 
(30 June 2011: 2.5%) per annum was used for US$ diamond prices. Long-term inflation rates of 3.5%–
5.0% (30 June 2011: 3.5%–4.5%) above the prevailing US inflation rate were used for Opex and Capex 
valuations.

Exchange  rates  are  based  on  external  market  consensus  and  after  considering  long-term  market 
expectations.  The  US$/ZAR  exchange  rate  range  used  commenced  at  R8.00  (30  June  2011:  R6.99), 
further devaluing at 3.5% (30 June 2011: 3.5%) per annum.

Cullinan  –  18  years  (30  June  2011:  16  years)  life  of  mine  plan;  total  resource  processed  115.0  Mt 
(65.3 Mt underground ROM and 49.7 Mt tailings) (30 June 2011: 114.4 Mt (54.4 Mt underground ROM 
and  60  Mt  tailings))  at  rate  of  5.7  Mtpa  (3.0  Mtpa  underground  ROM  tonnes  and  2.7  Mtpa  tailings 
tonnes)  increasing  to  8.0  Mtpa  (4.0  Mtpa  underground  ROM  tonnes  and  4.0  Mtpa  tailings  tonnes) 
(30 June 2011: 3.4 Mtpa (2.4 Mtpa underground ROM tonnes and 1.0 Mtpa tailings tonnes) increasing 
to 8.0 Mtpa (4.0 Mt underground ROM tonnes and 4.0 Mt tailings tonnes)). 
Finsch  –  18  years  (30  June  2011:  n/a)  life  of  mine  plan;  total  resource  processed  87.1  Mt  (61.3  Mt 
underground ROM and 25.8 Mt tailings) (30 June 2011: n/a) at rate of 6.0 Mtpa increasing to 7.0 Mtpa 
(30 June 2011: n/a).
Koffiefontein – 13 years (30 June 2011: 14 years) life of mine plan; total resource processed 22.3 Mt 
(13.3  Mt  underground  ROM  and  9.0  Mt  surface/tailings  tonnes)  (30  June  2011:  23.7  Mt  (16.1  Mt 
underground  ROM  tonnes  and  7.6  Mt  surface/tailings  tonnes))  at  rate  of  1.7  Mtpa  (0.3  underground 
ROM tonnes and 1.4 Mtpa surface/tailings tonnes) ramping up to 1.2 Mtpa underground ROM tonnes 
and 0.5 Mtpa surface/tailings tonnes (30 June 2011: 1.5 Mtpa (0.6 Mtpa underground and 0.9 Mtpa 
surface/tailings tonnes) increasing to 1.7 Mtpa (1.2 Mtpa underground and 0.5 Mtpa Mt surface/tailings 
tonnes)).
Kimberley Underground – 10 years (30 June 2011: 11 years) life of mine plan; total resource processed 
9.8 Mt (30 June 2011: 9.4 Mt) at rate of 1.0 Mtpa (30 June 2011: 1.0 Mtpa).
Williamson – 18 years (30 June 2011: 17 years) life of mine plan: total resource processed 64.0 Mt (30 
June 2011: 155.9 Mt) at rate of 3.0 Mtpa increasing to 3.6 Mtpa (30 June 2011: 2.7 Mtpa increasing to 
10.0 Mtpa).
Resources remaining after the current life of mine plans have not been included in impairment testing 
for the above operations.

Capital expenditure  Management  has  estimated  the  timing  of  the  capital  expenditure  based  on  the  Group’s  current 

and future financing plans for each operation. 

Valuation basis

Discounted present value of future cashflows.

Sensitivity

Management notes that a 3.6% movement in diamond prices as compared to the guidance prices for FY 
2011  at  Kimberley  Underground  Mines  JV  would  result  in  a  break-even  impairment  scenario.  The 
carrying  value  of  Kimberley  Underground  is  also  dependant  on  the  successful  development  of  the 
North West Corner orebody. Kimberley Underground has the lowest headroom of the mines detailed above. 

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95

 
 
 
 
 
 
 
notes to the annual Financial statements
For the year ended 30 June 2012 continued

9. Net financing (expense)/income
US$ million

Interest expense on bank loans and overdrafts¹

Gross interest expense on bank loans and overdrafts¹
Interest expense on bank loans and overdrafts capitalised¹

Other debt finance costs¹
Unwinding of present value adjustment for rehabilitation costs
Realised foreign exchange losses 
Unrealised foreign exchange losses²

Financial expense
Realised foreign exchange gains
Other unrealised foreign exchange gains²
Net change in fair value of hedged item and instrument

Net change in fair value of hedged item in a fair value hedge
Net change in fair value of hedging instrument in a fair value hedge

Interest received on loans and other receivables
Interest received on bank deposits

Financial income

2012

(1.4)

(7.7)
6.3

(9.8)
(5.9)
(0.2)
(38.6)

(55.9)
7.6
—
—

—
—

9.7
1.8

19.1

(36.8)

2011

(1.0)

(4.5)
3.5

(6.7)
(3.8)
(0.4)
—

(11.9) 
0.7
18.6
—

(6.0)
6.0

5.5
 2.2

27.0 

15.1 

1. Calculated using the effective interest method in respect of financial liabilities calculated at amortised cost.

2.  The 30 June 2011 comparatives have been amended to combine unrealised foreign exchange gains and losses into a single unrealised 
foreign exchange gain to provide consistency with 30 June 2012 and to better reflect the underlying nature of the transactions.

10. Taxation
US$ million

Current taxation
– Current tax credit
Deferred taxation 
– Current period

Reconciliation of tax rate
– Profit before taxation 
Tax at Bermudan corporate rate of 0%
Effects of:
– Tax charge at rates in foreign jurisdictions
– Non-deductible expenses
– Unredeemed capital allowances utilised
– Temporary differences recognised
– Tax losses and timing differences not recognised

Total tax charge

2012

2011

—

(10.5)

(10.5)

8.4
—

(4.8)
(3.9)
27.3
(11.5)
(17.6)

(10.5)

1.2

(6.4)

 (5.2) 

 64.4 
—

(6.0)
(1.0)
18.1
(5.6)
(10.7)

(5.2)

During  the  year,  the  Group  did  not  utilise  taxation  benefits  of  previously  unrecognised  tax  losses  which  reduce  the  current 
taxation payable (30 June 2011: US$0.6 million tax losses utilised). Tax losses not utilised do not have an expiry period in the 
country in which they arise, unless the entity ceases to continue trading. Gross tax losses and unredeemed capital allowances 
available but not utilised as at 30 June 2012 amount to US$425.8 million (30 June 2011: US$257.7 million) and primarily arise 
in South Africa (US$360.7 million) (30 June 2011: US$185.6 million) and Tanzania (US$65.1 million) (30 June 2011: US$72.1 million); 
amounts stated include both tax losses and unredeemed capital allowances and are stated at 28%, being the tax rate in South Africa, 
and 30%, being the tax rate in Tanzania. 

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
 
 
11. Directors’ and employees’ remuneration
Staff costs (excluding the Non-Executive Directors) during the year were as follows:

US$ million

Wages and salaries – mining
Wages and salaries – exploration
Wages and salaries – administration
Pension

2012

103.2
1.0
5.1
0.1

109.4

2011

75.0
0.5
4.2
0.1

79.8

In addition, during the year the Group capitalised US$3.5 million (30 June 2011: US$4.7 million) of wages and salaries relating 
to the rebuild and expansion projects at Williamson. 

The number of employees (excluding the Non-Executive Directors and contractors) at the 
various mining and exploration operations of the Group at the end of the year was 4,768 
(30 June 2011: 3,902), employed as follows:
Mining and exploration
Administration

Number

Number

4,536
232

4,768

3,729
173

3,902 

Key  management  is  considered  to  be  the  Executive  Directors,  Chairman  and  Non-Executive  Directors.  Total  remuneration 
for  the  year,  which  includes  base  salary,  cash  benefits  and  annual  performance  bonus,  for  the  Executive  Directors  was 
US$2.6  million  (30  June  2011:  US$2.1  million).  The  IFRS  2  charge  relating  to  the  Executive  Directors  for  the  year  was 
US$0.3 million (30 June 2011: US$0.6 million). See note 28 in respect of share-based payments. 

The Chairman received remuneration, which includes base remuneration, of US$0.2 million (30 June 2011: US$0.3 million, 
which includes base remuneration and annual performance related bonus). 

Non-Executive Directors received remuneration, which includes base remuneration, of US$0.2 million (30 June 2011: US$0.1 million).

Further detail in respect of the Executive Directors’, Chairman’s and Non-Executive Directors’ remuneration during the year is 
disclosed in the Directors’ Remuneration Report on pages 61 to 72.

12. Earnings per share

Numerator

(Loss)/profit for the year

Denominator

Weighted average number of ordinary shares used in basic EPS
As at 1 July
Effect of shares issued during the year

As at 30 June

Total
2012
US$

Total 
2011
US$

(2,409,520)

53,193,664

Shares

Shares

499,874,009
2,013,545

352,803,021
61,912,017

501,887,554

414,715,038

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Annual Report and Accounts 2012 Petra Diamonds Limited

97

 
 
 
 
 
 
 
 
 
notes to the annual Financial statements
For the year ended 30 June 2012 continued

12. Earnings per share continued

Dilutive effect of potential ordinary shares

Shares

Shares

14,411,634

16,034,806

Weighted average number of ordinary shares in issue used in diluted EPS

516,299,188

430,749,844

Basic (loss)/profit per share – US$ cents
Diluted (loss)/profit per share – US$ cents

US cents

US cents

(0.48)
(0.48)

12.83
12.35

In  the  current  year,  the  number  of  potentially  dilutive  ordinary  shares,  in  respect  of  employee  share  options,  Executive 
Director  share  award  schemes  and  warrants  is  14,411,634.  These  potentially  dilutive  ordinary  shares  may  have  a  dilutive 
effect on future earnings per share. There are no share options and warrants that have been excluded from the potentially 
dilutive ordinary shares of 14,411,634 (30 June 2011: 16,034,806). There have been no significant post balance sheet changes 
to the number of options and warrants to impact the dilutive number of ordinary shares. The Group was loss making for the 
year ended 30 June 2012 and therefore the basic and diluted loss per share are the same as potentially dilutive shares are 
anti-dilutive.

13. Adjusted earnings per share
In  order  to  show  results  from  operating  activities  on  a  consistent  basis,  an  adjusted  earnings  per  share  is  presented 
which excludes certain items as set out below. It is emphasised that the adjusted earnings per share is a non-GAAP measure. 
The  Petra  Board  considers  the  adjusted  earnings  per  share  to  better  reflect  the  underlying  performance  of  the  Group. 
The Company’s definition of adjusted earnings per share may not be comparable to other similarly titled measures reported 
by other companies.

Numerator

(Loss)/profit for the year
Adjustments:
Net unrealised foreign exchange loss/(gain) (note 9)
Transaction costs (note 7)

Adjusted profit for the year

2012
US$

2011
US$

(2,409,520)

53,193,664

38,604,888
3,070,563

(18,600,253)
273,385

39,265,931

34,866,796

Denominator

Shares

Shares

Weighted average number of ordinary shares used in adjusted basic EPS
As at 1 July
Effect of shares issued during the year

As at end of year

Dilutive effect of potential ordinary shares

Weighted average number of ordinary shares in issue used in diluted 
adjusted earnings per share

Adjusted basic profit per share – US$ cents
Adjusted diluted profit per share – US$ cents

499,874,009
2,013,545

352,803,021
61,912,017

501,887,554

414,715,038

Shares

Shares

14,411,634

16,034,806

516,299,188

430,749,844

US cents

US cents

7.82
7.61

8.41
8.09

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
14. Property, plant and equipment

US$ million

Cost
Balance at 1 July 2010
Exchange differences
Impairment (reversed/raised) (note 8)
Additions
Disposals 

Balance at 30 June 2011

Balance at 1 July 2011
Exchange differences
Business combination
Additions
Transfer of assets under construction
Disposals 

Balance at 30 June 2012

Depreciation
Balance at 1 July 2010
Exchange differences
Reversal of impairment (note 8)
Disposals 
Provided in the year

Balance at 30 June 2011

Balance at 1 July 2011
Exchange differences
Disposals 
Provided in the year

Balance at 30 June 2012

Net book value
At 30 June 2011

At 30 June 2012

Plant and

Computers
and office
Plant and
machinery machinery equipment

Motor
vehicles
mining exploration exploration exploration
assets1
assets

assets

assets

Mineral

Assets
under
properties construction
mining
assets3

mining
assets2

 258.1 
28.6
3.4
46.1
(3.0)

 333.2 

 333.2 
(53.6) 
222.8 
59.6
44.2
(5.8) 

600.4 

 29.6 
5.3
0.8
(2.1)
21.8

 55.4 

 55.4 
(10.9) 
(5.0) 
39.8 

79.3 

 277.8 

521.1 

 1.2 
0.2
—
—
—

 1.4 

 1.4 
(0.2) 
—
0.1
—
—

1.3 

 (0.1)
0.1
—
—
0.1

 0.1

 0.1
— 
—
— 

0.1 

 1.3 

1.2

 1.2 
—
—
0.1
—

 1.3 

 1.3 
(0.3) 
—
0.4
—
— 

1.4 

 0.4 
0.1
—
(0.1)
0.2

 0.6 

 0.6 
(0.1) 
—
0.2 

0.7 

 0.7 

0.7 

Total

 409.7
39.3 
11.6 
110.9 
(3.0) 

 0.2 
—
—
0.1
—

 117.4 
5.1
8.2
—
—

 31.6 
5.4
—
64.6
—

 0.3 

 130.7 

 101.6 

568.5

 0.3 
(0.1)
—
0.3
—
—

 130.7 
(21.2) 

 101.6 
(18.1) 

—
—
—
—

—
78.4
(44.2)
—

568.5
(93.5) 
222.8 
138.8
—
(5.8) 

0.5 

109.5 

117.7 

830.8 

 0.1 
—
—
—
—

 0.1 

 0.1 
— 
—
0.1 

0.2 

 8.7 
1.1
0.8
—
0.3

 10.9 

 10.9 
(1.8) 
— 
0.9 

10.0 

 — 
—
—
—
—

 — 

 — 
— 
— 
—

— 

 38.7 
 6.6 
1.6 
(2.2) 
22.4 

 67.1 

 67.1 
(12.8) 
(5.0) 
41.0 

90.3 

 0.2 

 119.8 

 101.6 

 501.4

0.3 

99.5 

117.7 

740.5 

1. The mining assets are secured against the loan facilities as set out in note 22.

2.  Mineral  properties  are  in  respect  of  various  mines  within  the  Group  and  the  useful  life,  based  on  current  life  of  mine  plans, 

is disclosed in note 1.4. 

3.  Assets under construction include refurbishments and expansion of mining property, plant and equipment at the Cullinan, Finsch, 
Kimberley Underground, Koffiefontein and Williamson mines. The contractual commitments the Group had at year end were in respect 
of  assets  under  construction  and  future  Capex  projects  of  US$28.5  million  (30  June  2011:  US$11.6  million).  Borrowing  costs 
of US$6.3 million (30 June 2011: US$3.5 million) have been capitalised to assets under construction.

15. Intangible assets 
US$ million

Cost

Balance at 1 July 2011 and 30 June 2012

Amortisation

Balance at 1 July 2011 and 30 June 2012

Net book value
At 30 June 2011

At 30 June 2012

Total

14.5 

(14.5)

—

—

Prospecting licences
Prospecting  licences  in  Botswana  are  fully  amortised.  The  Group  continues  to  conduct  exploration  activities  in  Botswana. 
During the year exploration expenditure of US$3.1 million (30 June 2011: US$1.4 million) was expensed in respect of exploration 
activities within Botswana.

Annual Report and Accounts 2012 Petra Diamonds Limited

99

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notes to the annual Financial statements
For the year ended 30 June 2012 continued

16. Investments in associates
Interests in associates
At year end, the Group had interests in the following companies:

Namibia Mining House (Pty) Ltd
Nabera Mining (Pty) Ltd
Organizações Moyoweno – Comércio Geral Lda

Country

Namibia
South Africa
Angola

Ownership

2012

35.0%
29.5%
40.0%

Summary of financial statements of associates (US$ million):

2012

Assets

Liabilities

Equity

Revenues

Namibia Mining House (Pty) Ltd
Nabera Mining (Pty) Ltd
Organizações Moyoweno – 
Comércio Geral Lda

2011

Namibia Mining House (Pty) Ltd
Nabera Mining (Pty) Ltd
Organizações Moyoweno – 
Comércio Geral Lda

—
—

 0.8 

—
—

 0.8 

—
(1.4)

 (0.4)

—
(1.3)

 (0.4)

—
1.3

 (0.4)

—
1.2 

 (0.4)

—
—

—

—
—

—

2011

35.0%
29.5%
40.0%

Loss
after tax

—
(0.1)

—

—
 (0.1)

—

The unrecognised share of losses in aggregate is US$nil (30 June 2011: US$nil). If the investments in associates had been 
included at cost, they would have been included at US$nil (30 June 2011: US$nil).

The initial investments by the Group in Namibia Mining House (Pty) Ltd, Nabera Mining (Pty) Ltd and Organizações Moyoweno 
– Comércio Geral Lda (“Moyoweno”) have all been impaired in full in prior periods. Moyoweno’s financial year end is 31 December, 
the statutory reporting period for companies based in Angola, and its primary asset is a 13% investment in the Alto Cuilo project 
in Angola, from which the Group withdrew in 2009. Interim financial information for Moyoweno has been used as at year end 
for the Group. The Group has no contractual or constructive obligation to fund the net deficit positions of its associates.

17. Available-for-sale financial assets
US$ million

Balance at 1 July
Fair value adjustment taken to other reserves (no tax implications)

Balance at 30 June

2012

0.4 
(0.2) 

0.2 

2011

 0.8 
(0.4)

0.4

The Company owns 4,500,000 ordinary shares in Stellar Diamonds plc (“Stellar”). At year end the Company adjusted the fair 
value of its investment in Stellar to the fair market value of £0.1 million (30 June 2011: £0.3 million), being US$0.2 million 
(30 June 2011: US$0.4 million). The movement of US$0.2 million (30 June 2011: US$0.4 million) was taken to other reserves. 
The reduction in value is not considered significant by management.

18. Inventories
US$ million

Diamonds held for resale
Work in progress stockpiles
Consumables and stores
Livestock

Provision for impairment of slow moving consumables and stores

2012

24.5 
15.3 
8.5 
0.2 

48.5 
(0.7) 

47.8 

2011

 13.3 
14.8
4.9 
0.2 

 33.2 
(0.3)

32.9 

As at 30 June 2012, diamonds (inventories held for resale) with a value of US$9.9 million (30 June 2011: US$2.6 million) have 
been written down to fair value less costs to sell (due to fair value less cost to sell being below cost) within the overall carrying 
value of US$24.5 million (30 June 2011: US$13.3 million), resulting in a charge to the income statement of US$7.3 million 
(30 June 2011: US$1.2 million). The movement in provisions against slow moving consumables and stores resulted in a charge 
to the income statement of US$0.4 million (30 June 2011: US$0.2 million).

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
 
19. Trade and other receivables
US$ million

Current
Trade receivables
Other receivables¹
Prepayments²

Non-current
Rehabilitation guarantee³
BEE partners4

2012

25.1
11.9
19.5

56.5

0.2
89.4

89.6

2011

20.6
20.9
8.3

49.8

0.2
50.9

51.1

1.  Included within other receivables are amounts related to funding advanced to joint venture BEE partners on the Koffiefontein and 
Kimberley Underground mines assets of US$nil (30 June 2011: US$5.3 million), rehabilitation deposits and other deposits of US$nil 
(30 June 2011: US$5.5 million), current tax receivable of US$1.0 million (30 June 2011: US$nil) and Value Added Tax refunds of 
US$7.3 million (30 June 2011: US$7.2 million) receivable. The rehabilitation deposit previously disclosed under other receivables has 
been reclassified to secured cash and cash equivalents.

2.  Included within prepayments is US$16.6 million (30 June 2011: US$5.0 million) relating to a deposit paid for further investment 
in  the  Group’s  South  African  projects.  The  original  US$17.2  million  payment,  which  will  be  deducted  in  full  from  any  future 
acquisition consideration, was made by a Group company with pounds sterling as its functional currency, resulting in unrealised 
exchange rate fluctuations in the US dollar equivalent for presentational purposes only (refer to note 30).

3.  The  rehabilitation  guarantee  comprises  an  insurance  risk  policy  which  will  be  recovered  upon  the  successful  rehabilitation 

at the Sedibeng JV operation.

4.  Interest  on  loans  advanced  to  BEE  partners  is  charged  at  the  prevailing  South  African  prime  interest  rate  plus  2%.  The  loans 

are repayable from future cashflows generated from the underlying mining operations. 

The financial assets classified as loans and receivables included in receivables are as follows:

US$ million

Current trade receivables
Other receivables (excluding VAT and prepayments)
Non-current receivables

2012

25.1
4.5
89.6

119.2

2011

20.6
13.7
51.1

85.4

The  trade  receivables  are  all  due  within  normal  trading  terms  and  there  are  no  trade  receivables  classified  as  past  due. 
Trade receivables are due within two days of awarding the rough diamond sales tender to the successful bidder and were 
significant at year end due to the tenders’ proximity to year end. The trade receivables relating to the year-end tender have 
all been received post year end. No receivables are considered to be past due or impaired. 

The carrying values of these loans and receivables are denominated in the following currencies:

US$ million

Pounds sterling
South African rand
US dollars

20. Cash 
US$ million

Cash and cash equivalents – unrestricted
Cash – restricted

2012

1.0
102.9
15.3

119.2

2012

31.3
16.0

47.3

2011

0.9
83.2
1.3

85.4

2011

96.9 
228.0 

324.9 

As  security  for  the  Group’s  rehabilitation  obligations  at  the  Helam,  Star,  and  Sedibeng  mines,  the  Company  has  ceded 
US$6.0 million (30 June 2011: US$14.8 million) in a fixed deposit. The restricted cash will return to the Group’s sole control 
when the above mentioned operations are included in the Group’s rehabilitation insurance product which currently includes the 
Cullinan,  Finsch,  Kimberley  Underground  and  Koffiefontein  mines.  The  insurance  product  has  secured  cash  assets  of 
US$10.0 million (30 June 2011: US$4.6 million). The Group has a commitment to pay insurance premiums over the next two years of 
US$11.8 million  (30  June  2011:  US$23.3  million)  to  fund  the  insurance  product.  The  rehabilitation  provisions  are  disclosed 
in note 24. 

A controlled entity, Helam Mining (Pty) Ltd, has a R10.0 million (US$1.2 million) (30 June 2011: R10.0 million (US$1.5 million)) 
overdraft facility with First National Bank, a division of FirstRand Bank Ltd. At year end and at 30 June 2011, the overdraft 
was not utilised. When utilised, the overdraft is off-set against other cash balances held with First National Bank as it forms 
part of the Group’s operational cash balances. The weighted average interest rate for the overdraft as at 30 June 2012 is 0% 
(30 June 2011: 0%). For additional facilities available to the Group refer to note 22. 

Annual Report and Accounts 2012 Petra Diamonds Limited

101

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notes to the annual Financial statements
For the year ended 30 June 2012 continued

21. Issued capital
US$ million

Authorised – ordinary shares of 10p each 

Number of shares

2012

Number of shares

2011

As at 1 July 2011 and 30 June 2012

650,000,000

115.2

650,000,000

115.2

Issued and fully paid
At 1 July
Allotments during the year

At 30 June

499,874,009
5,780,421 

505,654,430

84.8
0.9

85.7

352,803,021
 147,070,988 

499,874,009

61.4
23.4

84.8

Allotments during the year were in respect of the exercise of 3,464,259 warrants held over ordinary shares by RBC Capital 
Markets and Rand Merchant Bank (“RMB”) and the exercise of 2,316,162 share options held by employees. 

Allotments during the prior year were in respect of 136,698,212 shares issued as part of a capital fundraising exercise, 
the exercise of 8,292,777 warrants held over ordinary shares by Canaccord Genuity and RMB and the exercise of 2,079,999 
share options held by employees. 

Warrants

Holder

RBC Capital Markets
RMB
International Finance Corporation
International Finance Corporation
International Finance Corporation

Expiry

17 December 2011
2 November 2014
2 November 2012
2 November 2013
2 November 2014

Exercise
price
(pence)

80
100
90
95
100

2012
Number
of warrants

—
—
 2,100,000 
 2,100,000 
 2,100,000 

2011
Number
of warrants

 1,364,259 
 2,100,000 
 2,100,000 
 2,100,000 
 2,100,000 

During the year warrants over 3,464,259 ordinary shares were exercised by RBC Capital Markets and RMB. RMB exercised 
2,100,000 warrants over ordinary shares at an exercise price of 100 pence and RBC Capital Markets exercised 1,364,259 
warrants over ordinary shares at an exercise price of 80 pence. 

In the prior year, as part of the debt facilities referred to in note 22 parts (iii) and (iv), 12,600,000 warrants over Petra shares 
were granted to the International Finance Corporation (“IFC”) (6,300,000) and RMB (6,300,000), with an exercise price ranging 
between 90 pence–100 pence per warrant and which vested on 3 November 2010.

The Black-Scholes methodology as outlined in IFRS 2 has been used to value the warrants, as set out in note 28.

Employee share options

Holder

Directors
Senior Management

Total

Exercise price
(pence)

44.0–85.0 
27.5–96.0

Shares

8,800,000
8,279,428

17,079,428

Expiry

5 September 2013–16 March 2020
28 January 2015–25 November 2020

2011 Longer-term Share Plan and 2012 Performance Share Plan

2011 Longer-term Share Plan

Shares

Price at
grant date
(pence)

Performance period

Directors

1,200,000

133.0

1 July 2012–30 June 2016

2012 Performance Share Plan

Directors

Shares

764,332

Price at 
grant date
(pence)

133.0

Performance period

1 July 2011–30 June 2014

Further detail in respect of Directors and Senior Management share options, together with the Executive Director Longer-term 
Share Plan and Performance Share Plan, is disclosed in the Directors’ Remuneration Report on pages 61 to 72.

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102

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
 
22. Interest-bearing loans and borrowings
US$ million

2012

2011

Current
Bank loan – secured (i)
Bank loan – secured (ii)
Bank loan – secured (iii)
Bank loan – secured (iv) 
Deferred consideration (v)

Non-current
Bank loan – secured (i)
Bank loan – secured (iii)
Bank loan – secured (iv) 
Associate loans

— 
—
11.3
10.8
— 

22.1 

— 
19.9 
23.4 
3.6 

46.9 

— 
— 
—
—
18.7 

 18.7 

— 
36.5
33.1
1.8

 71.4 

(i) Bank loans – secured
RMB and IFC – Finsch Diamond Mine (Pty) Ltd (“FDM”)
On 29 November 2011, the Company (through its wholly owned subsidiary FDM) entered into an agreement with RMB (a division 
of  FirstRand  Bank  Ltd)  with  regards  to  new  debt  facilities  of  ZAR400  million  (US$49.0  million).  The  facilities  comprise  a 
revolving credit facility (“RCF”) of ZAR300 million (US$36.8 million) and a working capital facility (“WCF”) of ZAR100 million 
(US$12.2 million).

The RCF is available for draw-down for up to 22 months from 30 November 2011 (the date of financial close of the transaction) 
subject to the RCF commitment amount being reduced by 25% on 1 July 2013. The RCF bears interest at the South African 
three  month  JIBAR  rate  plus  2.5%  margin.  The  RCF  is  repayable  24  months  from  financial  close  of  the  transaction,  being 
30 November 2011.

The WCF is available for draw-down for a period of 11 months from financial close and is subject to annual review. The WCF 
bears interest at the South African three month JIBAR rate plus 2.4% margin. The WCF is repayable 12 months from financial 
close of the transaction, being 30 November 2011 (subject to annual review).

The debt facilities are secured over the assets of the Finsch mine. At 30 June 2012 the Group had not drawn down on the RCF 
facility and the WCF facility balance was US$nil.

(ii) Bank loans – secured
First National Bank 
The Company’s South African subsidiaries have a total loan facility of R70.0 million (US$8.6 million) (30 June 2011: R70.0 million 
(US$10.2 million)) with First National Bank of which Rnil (US$nil) (30 June 2011: Rnil (US$nil)) has been drawn down. The facility 
is renewed on an annual basis and is repayable on demand.

The  above  facility  is  secured  by  a  guarantee  issued  by  the  Company,  suretyships  from  Star  Diamonds  (Pty)  Ltd, 
Helam Mining (Pty) Ltd, Sedibeng JV and Blue Diamond Mines (Pty) Ltd, and cessions of inter-group loans payable in favour 
of First National Bank. 

(iii) Bank loans – secured
RMB 
The loan facility is available for the Company’s draw-down up to and including 14 September 2012 and has a capital repayment 
holiday  period  to  14  September  2012.  The  loan  is  repayable  in  eight  semi-annual  payments  commencing  after  the  capital 
repayment holiday period with the final payment due on 15 March 2016. The loan incurs interest at the South African three 
month  JIBAR  rate  plus  4.5%  and  is  payable  in  semi-annual  payments  from  the  commencement  date  of  the  loan  facility. 
The effective interest rate for the debt facility at 30 June 2012 is 13.7% (30 June 2011: 14.0%). 

RMB was granted 6.3 million warrants over Petra shares all of which have been exercised by RMB since grant date. The warrant 
exercise prices for each tranche were 90 pence, 95 pence and 100 pence respectively. The Black-Scholes methodology as 
outlined in IFRS 2 was used to value the warrants, as set out in note 28.

The unamortised portion of facility fees and warrant fair value charges of R12.2 million (US$1.5 million) (30 June 2011: R17.6 
million (US$2.5 million)) associated with the facility drawn-down are debited against the gross draw-down value of R267.1 million 
(US$32.7  million)  (30  June  2011:  R267.1  million  (US$39.0  million)),  in  accordance  with  IAS  32  and  IAS  39,  to  reflect  a  net 
interest-bearing liability of R253.3 million (US$31.2 million) (30 June 2011: R249.5 million (US$36.5 million)). The remaining 
R6.5  million  (US$0.8  million)  (30  June  2011:  R6.5  million  (US$0.9  million))  of  facility  fees  and  warrant  fair  value  charges 
associated within the undrawn facility are held in prepayments as the loan facility is expected to be utilised.

The above facility is secured by various encumbrances and pledges, concluded in respect of certain assets belonging to the 
Group including the Cullinan mine mining rights; moveable and immoveable assets at Cullinan mine; and the shares in Cullinan 
Diamond Mine (Pty) Ltd, Blue Diamond Mines (Pty) Ltd and Williamson Diamonds Ltd.

Annual Report and Accounts 2012 Petra Diamonds Limited

103

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notes to the annual Financial statements
For the year ended 30 June 2012 continued

22. Interest-bearing loans and borrowings continued
(iv) Bank loans – secured
IFC
The loan facility is available for the Company’s draw-down up to and including 14 September 2012 and has a capital repayment 
holiday  period  to  14  September  2012.  The  loan  is  repayable  in  eight  semi-annual  payments  commencing  after  the  capital 
repayment holiday period, with the final payment due on 15 March 2016. The loan incurs interest at the US$ six month LIBOR 
rate plus 4.5% and is payable in semi-annual payments from commencement date of the loan facility. The effective interest 
rate for the debt facility at 30 June 2012 is 8.9% (30 June 2011: 8.9%).

The IFC was granted 6.3 million warrants over Petra shares. The warrants vested on grant and the warrant expiry dates will 
be in equal tranches at the end of years two, three and four from the warrant grant date. The warrant exercise prices for each 
tranche are 90 pence, 95 pence and 100 pence respectively. The Black-Scholes methodology as outlined in IFRS 2 was used 
to value the warrants, as set out in note 28.

The  unamortised  portion  of  facility  fees  and  warrant  fair  value  charges  of  US$2.3  million  (30  June  2011:  US$3.4  million) 
associated with the facility drawn-down are debited against the gross draw-down value of US$36.5 million (30 June 2011: 
US$36.5  million),  in  accordance  with  IAS  32  and  IAS  39,  to  reflect  a  net  interest  bearing  liability  of  US$34.2  million 
(30  June  2011:  US$33.1 million). The  remaining  US$0.4  million  (30  June  2011:  US$0.4  million)  of  facility  fees  and  warrant 
fair value charges associated within the undrawn facility are held in prepayments as the loan facility is expected to be utilised.

The above facility is secured by various encumbrances and pledges, concluded in respect of certain assets belonging to the 
Group including the Cullinan mine mining right; moveable and immoveable assets at Cullinan mine; and the shares in Cullinan 
Diamond Mine (Pty) Ltd, Blue Diamond Mines (Pty) Ltd and Williamson Diamonds Ltd.

(v) Deferred Cullinan consideration
Al Rajhi Holdings W.L.L. (“Al Rajhi”)
During  the  year,  the  Company  settled  the  deferred  consideration  liability  of  US$20.1  million  (US$20.0  million  capital  and 
US$0.1 million interest), which was due for repayment in full on or before 31 March 2012 (subsequent to the liability being 
renegotiated during the year) and accrued interest at 7% per annum. 

There are no significant differences between the fair value and carrying value of loans and borrowings.

23. Trade and other payables 
US$ million

Current
Trade payables
Deferred consideration (i)
Accruals and other payables

Taxation payable

Non-current
Amounts owing to BEE partners (ii)

2012

2011

17.2 
2.8 
29.0 

49.0 
— 

49.0 

66.6 

66.6 

11.5 
 2.8 
 25.1 

 39.4 
— 

 39.4 

 29.0 

 29.0 

Current
(i)   The Group is liable to pay US$3.2 million (30 June 2011: US$3.2 million) (US$2.8 million after discounting (30 June 2011: 
US$2.8 million)), being the balance of the Helam Mining (Pty) Ltd purchase price which is payable from 50% of the cash 
surplus generated by Helam Mining (Pty) Ltd for the years ended 31 December 2006 and 2007.

 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$2.8 million has been extinguished. At year end no portion of the liability had been repaid and the 
total liability will be carried forward.

(ii)   The loans bear interest at the prevailing South African prime interest rate. The loans are repayable from future cashflows 
from the underlying operations only when the loans advanced to BEE partners (refer to note 19) have been repaid in full 
to the Group. 

The financial liabilities included in trade and other payables (which exclude taxation) are as follows:

US$ million

Trade payables
Other payables (includes deferred consideration)
Non-current trade payables owing to BEE partners

2012

17.2
31.8
66.6

115.6

2011

 11.5 
 27.9 
29.0 

 68.4 

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104

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
 
23. Trade and other payables  continued
Current continued
The carrying values of financial liabilities classified as trade and other payables are denominated in the following currencies:

US$ million

Botswana pula
Pounds sterling
South African rand
US dollar

24. Provisions

US$ million

Balance at 1 July 2010
Increase in provisions
Unwinding of present value adjustment of rehabilitation provision
Exchange differences

Balance at 30 June 2011

Current
Non-current

Balance at 30 June 2011

Balance at 1 July 2011
Acquired through acquisition
Decrease in rehabilitation liability provision – change in estimate
Increase in provisions
Unwinding of present value adjustment of rehabilitation provision
Exchange differences

Balance at 30 June 2012

Current
Non-current

Balance at 30 June 2012

2012

0.3
1.8
103.2
10.3

115.6

Post-retirement
medical fund
and income tax

Rehabilitation

 7.5
1.4
—
 0.6

 9.5

 2.2
 7.3

 9.5

 9.5
5.3
—
1.4
—
(2.2)

14.0

2.2
11.8

14.0

 44.7
3.9
3.8
3.4

 55.8

—
 55.8

 55.8

 55.8
23.7
(3.3)
—
5.9
(8.9)

73.2

—
73.2

73.2

2011

—
1.8
54.2
12.4

68.4

Total

52.2
5.3
3.8
4.0

 65.3 

2.2
63.1

 65.3 

65.3
29.0
(3.3)
1.4
5.9
(11.1)

87.2

2.2
85.0

87.2

Employee entitlements and other provisions
The provisions relate to provision for an unfunded post-retirement medical fund and income tax. The provision for the post-
retirement  medical  fund  is  further  disclosed  in  note  34.  The  provision  for  taxation  is  based  on  estimates  made,  where 
appropriate, from historical information and professional advice.

Rehabilitation
The provision is the estimated cost of the environmental rehabilitation at each site, which is based on current legal requirements 
and existing technology. The Group estimates the present value of the rehabilitation expenditure at each mine as follows:

 $ Koffiefontein mine of US$6.8 million (30 June 2011: US$7.8 million), provided over the current life of mine plan of 13 years;
 $ Cullinan mine of US$14.7 million (30 June 2011: US$18.9 million) provided over the estimated mine works programme of 50 years 

including the C-cut;

 $ Finsch mine of US$23.0 million (30 June 2011: US$nil) provided over the estimated total life of mine of 18 years.
 $ Kimberley Underground mines of US$9.9 million (30 June 2011: US$14.1 million) provided over the current life of mine plan 

of 10 years;

 $ Williamson mine of US$15.3 million (30 June 2011: US$12.9 million) provided over the current life of mine plan of 18 years; and
 $ Helam, Star and Sedibeng of US$3.5 million (30 June 2011: US$2.1 million) (the Fissure Mines) provided over their current 

life of mine plan of approximately 13 years.

The vast majority of the rehabilitation expenditure is expected to be incurred at the end of the life of the respective mine. 
This is represented by the current life of mine plans for the mines, with the exception of Cullinan which is expected to be 
rehabilitated after 50 years, of which 18 years are included in the current life of mine plan. The 50 year period assumes mining 
of the C-Cut.

The  significant  assumptions  and  uncertainties  are  disclosed  in  note  1.23.  Cash  and  cash  equivalents  have  been  secured 
in respect of rehabilitation provisions, as disclosed in note 20. 

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Annual Report and Accounts 2012 Petra Diamonds Limited

105

 
 
 
 
 
 
 
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For the year ended 30 June 2012 continued

25. Deferred taxation
US$ million

Balance at beginning of the year
Income statement charge
Foreign currency translation difference

Balance at the end of the year

Comprising:
Deferred tax asset
Deferred tax liability

2012

37.7
10.5
(3.1)

45.1

(9.3)
54.4

45.1

2011

 30.3
 6.4
 1.0

 37.7

(5.1)
42.8

37.7

The deferred tax assets and liabilities are offset to determine the amounts stated in the Statement of Financial Position when 
the taxes can legally be offset and will be settled net.

Deferred taxation comprises:

US$ million

Deferred tax liability:
– Capital allowances
– Foreign exchange allowances

Deferred tax asset:
– Capital allowances
– Provisions and accruals
– Foreign exchange allowances
– Tax losses

Net deferred taxation liability/(asset)

US$ million

Deferred tax liability:
– Capital allowances
– Prepayments and accruals
– Foreign exchange allowances

Deferred tax asset:
– Capital allowances
– Provisions and accruals
– Foreign exchange allowances
– Tax losses

Net deferred taxation liability/(asset)

2012 deferred taxation schedule of movements

US$ million 

Deferred tax liability:
– Capital allowances
– Prepayments and accruals
– Foreign exchange allowances
Deferred tax asset:
– Capital allowances
– Provisions and accruals
– Foreign exchange allowances
– Tax losses

Net deferred tax movement

106

Petra Diamonds Limited Annual Report and Accounts 2012

Total

152.5
0.1

152.6

(83.3)
(17.1)
(1.8)
(37.3)

(139.5)

13.1

Total

88.3
0.1
2.7

91.1

(40.4)
(9.7)
(1.6)
(36.8)

(88.5)

2.6

Total 

53.0
(0.1)
(3.1)

(36.6)
(5.9)
0.4
(0.3)

7.4

2012
Recognised

2012 
Unrecognised

152.5
0.1

152.6

(81.3)
(16.8)
(1.8)
(7.6)

(107.5)

45.1

—
—

—

(2.0)
(0.3)
—
(29.7)

(32.0)

(32.0)

2011
Recognised

2011 
Unrecognised

88.3
0.1
2.7

91.1

(39.0)
(9.1)
(1.3)
(4.0)

(53.4)

37.7

—
—
—

—

(1.4)
(0.6)
(0.3)
(32.8)

(35.1)

(35.1)

Statement of
Financial Position
 (foreign currency
 translation reserve)

Income
statement

64.2
(0.1)
(2.6)

(42.9)
(7.4)
0.2
(0.9)

10.5

(11.2)
—
(0.5)

6.3
1.5
0.2
0.6

(3.1)

 
 
 
 
 
 
 
25. Deferred taxation continued
2011 deferred taxation schedule of movements

US$ million 

Deferred tax liability:
– Capital allowances
– Prepayments and accruals
– Foreign exchange allowances
Deferred tax asset:
– Capital allowances
– Provisions and accruals
– Foreign exchange allowances
– Tax losses

Net deferred tax movement

Statement of
Financial Position
 (foreign currency
 translation reserve)

Income
statement

24.0
0.1
2.4

(11.6)
(2.4)
(2.3)
(3.8)

6.4

5.3
—
—

(3.3)
(1.0)
—
—

1.0

Total 

29.3
0.1
2.4

(14.9)
(3.4)
(2.3)
(3.8)

7.4

Deferred tax assets of US$9.3 million have been recognised in respect of tax losses to be utilised by future taxable profits at 
Kimberley Underground, which incurred tax losses during the year. The Directors believe it is probable these tax assets will 
be recovered through future taxable income or the reversal of temporary differences, reflecting increased treatment capacity 
as the Wesselton plant is commissioned. 

26. Financial instruments
Exposures to currency, liquidity, market price, 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. Details of the significant accounting policies and methods adopted, including the criteria for 
recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class 
of financial asset, financial liability and equity instrument, are disclosed in note 1.

The details of the categories of financial instruments of the Group are as follows: 

US$ million

2012

2011

Financial assets:
Loans and receivables:
– Non-current trade receivables
– Trade receivables
– Other receivables
– Cash and cash equivalents – restricted
– Cash and cash equivalents – unrestricted
Available-for-sale financial assets (Level 1 valuation)
Fair value designated hedge:
– Derivative financial instruments (Level 2 valuation)

Financial liabilities:
Held at amortised cost:
– Non-current amounts owing to BEE partners
– Non-current loans and borrowings
– Current loans and borrowings
– Trade and other payables (includes deferred consideration)
Fair value designated hedge:
– Other current liabilities – firm commitment (Level 2 valuation)

89.6
25.1
4.5
16.0
31.3
0.2

—

166.7

66.6
46.9
22.1
49.0

—

184.6

51.1
20.6
13.7
228.0
96.9
0.4

6.0

416.7

 29.0
71.4
18.7
 39.4

 6.0

164.5

There is no significant difference between the fair value of financial assets and liabilities and the carrying values set out in the 
table above, noting that non-current receivables bear interest and are therefore not discounted. Available-for-sale financial 
assets are valued based on the share price at the reporting date. A loss of US$0.2 million (30 June 2011: US$0.4 million) has 
been recognised in the Consolidated Statement of Other Comprehensive Income in respect of the reduction of the available-
for-sale financial assets to fair value.

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107

 
 
 
 
 
 
 
notes to the annual Financial statements
For the year ended 30 June 2012 continued

26. Financial instruments continued
Fair value measurement hierarchy
IFRS 7 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair 
value using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurement. 
The fair value hierarchy has the following levels: 

(a)  quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

(b)   inputs  other  than  quoted  prices  included  within  Level  1  that  are  observable  for  the  asset  or  liability,  either  directly 

(i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and

(c)  inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

The level of the financial asset or financial liability in the fair value hierarchy is determined on the basis of the lowest level input 
that is significant to the fair value measurement. Financial assets and financial liabilities are classified in their entirety into 
only one of the three levels. The only financial instruments held by the Group that were carried at fair value at 30 June 2012 
and 30 June 2011 were the available-for-sale financial asset and forward currency contracts. The available-for-sale financial 
assets were valued using Level 1 of the hierarchy using quoted prices. The hedging instrument and hedged item were valued 
by broker statements using observable market prices. 

The currency profile of the Group’s financial assets and liabilities is as follows:

US$ million

Financial assets:
Botswana pula
Pounds sterling
South African rand
US dollar

Financial liabilities:
Botswana pula
Pound sterling
South African rand
US dollar

2012

2011

0.8
2.5
141.4
22.0

166.7

—
36.3
137.9
10.4

184.6

0.1
290.6
120.5
5.5

416.7

—
41.0
92.3
31.2

164.5

The Group is exposed through its operations to one or more of the following risks:

 $ credit risk;
 $ foreign exchange risk;
 $ liquidity risk;
 $ interest rate risk; and
 $ other market price risk.
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note 
describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. 
Further quantitative information in respect of these risks is presented throughout these financial statements. 

Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:

 $ trade and other receivables (current and non-current);
 $ cash at bank;
 $ trade and other payables (current and non-current);
 $ loans and borrowings; 
 $ hedging instruments; and
 $ firm commitments.

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
26. Financial instruments continued
Credit risk
The  Group  sells  its  rough  diamond  production  through  a  tender  process  on  a  recognised  bourse.  This  mitigates  the  need 
to  undertake  credit  evaluations.  Where  production  is  not  sold  on  a  tender  basis  the  Directors  undertake  suitable  credit 
evaluations before passing ownership of the product.

At the reporting date there were no significant concentrations of credit risk, other than the US$16.6 million carrying value of 
the prepayment included in trade and other receivables which has been paid to Sirius for the transaction referred to in note 30. 
The maximum exposure to credit risk is represented by the carrying amount of the financial assets in the Consolidated Statement 
of Financial Position. The financial assets are carried at amortised cost, with no indication of impairment. The Group considers 
the credit quality of loans and receivables that are neither past due nor impaired to be good.

Credit risk associated with loans to BEE partners is mitigated by a contractual obligation for the loans to be repaid from future 
cashflows prior to any payments being paid to the BEE partners from future cashflows generated by the Group’s operations 
in which the BEE partners hold interests. 

Group cash balances are deposited with reputable banking institutions within the countries in which it operates. Excess cash 
is  held  in  overnight  call  accounts  and  term  deposits  ranging  from  seven  to  30  days.  Refer  to  note  20  for  restricted  cash 
secured in respect of rehabilitation obligations. At year end the Group had undrawn borrowing facilities of US$66.3 million 
(30 June 2011: US$18.5 million).

Foreign exchange risk
Foreign exchange risk arises because the Group has operations located in parts of the world where the functional currency is 
not  the  same  as  the  Group’s  primary  functional  currency  of  US  dollars.  The  Group’s  net  assets  arising  from  its  foreign 
operations  are  exposed  to  currency  risk  resulting  in  gains  and  losses  on  translation  into  US  dollars.  Only  in  exceptional 
circumstances will the Group consider hedging its net investments in foreign operations, as generally it does not consider that 
the reduction in foreign currency exposure warrants the cashflow risk created from such hedging techniques. 

Foreign  exchange  risk  also  arises  when  individual  Group  operations  enter  into  transactions  denominated  in  a  currency 
other than their functional currency. The policy of the Group is, where possible, to allow Group entities to settle liabilities 
denominated in their local currency with the cash generated from their own operations in that currency. In the case of the 
funding of non-current assets, such as projects to expand productive capacity entailing material levels of capital expenditure, 
the central Group treasury function will assist the foreign operation to obtain matching funding in the functional currency 
of that operation and shall provide additional funding where required. The currency in which the additional funding is provided 
is determined by taking into account the following factors: 

 $ the  currency  in  which  the  revenue  expected  to  be  generated  from  the  commissioning  of  the  capital  expenditure 

will be denominated;

 $ the degree to which the currency in which the funding provided is a currency normally used to effect business transactions 

in the business environment in which the foreign operation conducts business; and

 $ the currency of any funding derived by the Company for onward funding to the foreign operation and the degree to which 

it is considered necessary to hedge the currency risk of the Company represented by such derived funding.

The  purchase  price  of  Finsch  was  fixed  in  South  African  rands  and  as  such  created  a  foreign  currency  risk  for  the  Group. 
The Group entered into forward exchange contracts and held South African rands in escrow accounts to mitigate the foreign 
currency risk on the Finsch purchase price.

The foreign currency effect on the Group’s financial assets and liabilities is as follows:

US$ million

Financial assets:
Botswana pula
Pounds sterling
South African rand
US dollar

Financial liabilities:
Pounds sterling
South African rand
US dollar

30 June 2012

Year-end 
US$ rate 

Year-end
amount 

US$ 
strengthens 10% 

US$ 
weakens 10%

0.1304
0.6367
0.1225
1.0000

0.6367
0.1225
1.0000

0.8
2.5
141.4
22.0

166.7

36.3
137.9
10.4

184.6

0.7
2.3
127.2
22.0

152.2

32.7
124.1
9.3

166.1

0.9
2.8
155.5
22.0

181.2

39.9
151.7
11.4

203.0

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Annual Report and Accounts 2012 Petra Diamonds Limited

109

 
 
 
 
 
 
 
notes to the annual Financial statements
For the year ended 30 June 2012 continued

26. Financial instruments continued
Foreign exchange risk continued

US$ million

Financial assets:
Botswana pula
Pounds sterling
South African rand
US dollar

Financial liabilities:
Pounds sterling
South African rand
US dollar

30 June 2011

Year-end 
US$ rate 

Year-end
amount 

US$ 
strengthens 10% 

US$ 
weakens 10%

0.1523
0.6243
0.1463
1.0000

0.6243
0.1463
1.0000

0.1
290.6
120.5
5.5

416.7

41.0
92.3
31.2

164.5

0.1
261.5
108.4
5.5

375.5

36.9
83.0
31.2

151.1

0.1
319.7
132.5
5.5

457.8

45.1
101.5
31.2

177.8

The Directors consider a 10% currency movement to be the maximum likely cumulative change over the next 12 months.

Derivatives
US$ million

Derivative financial assets
Derivatives designated as hedging instruments
Forward foreign exchange contracts – fair value hedges

Total derivatives designated as hedging instruments

Total derivative financial assets
Less non-current portion

Current portion

2012

2011

—

—

—
—

—

6.0

6.0

6.0
—

6.0

The  fair  value  of  the  derivative  financial  assets  was  split  between  current  and  non-current  depending  on  the  remaining 
maturity  of  the  forward  exchange  contract  and  its  contractual  cashflows.  The  fair  value  of  the  Group’s  foreign  exchange 
contracts is based on broker quotes.

The  Group  took  out  forward  foreign  exchange  contracts  and  held  deposits  in  South  African  rands  to  manage  the  foreign 
exchange risk associated with the unrecognised firm commitment to purchase the Finsch mine for R1.425 billion (refer to note 3).

The material principal amount of the forward contracts designated as fair value hedging instruments were US$86.4 million. 
The hedging instruments were effective at inception and at date of completion of the Finsch acquisition. The fair value of the 
hedging instruments was recognised as an asset in the Consolidated Statement of Financial Position in the prior year and an 
equal  liability  (‘other  current  liabilities  –  firm  commitment’)  was  recognised  reflecting  the  cumulative  foreign  exchange 
movement attributable to the unrecognised firm commitment. The movements (US$6.0 million gain and US$6.0 million loss) 
were recognised in financial income.

The maximum exposure to derivative credit risk at the prior reporting date was the fair value of the derivative assets in the 
Consolidated Statement of Financial Position. No credit risk exists at 30 June 2012 as the Finsch mine acquisition completed.

The derivative financial assets have a maturity profile of less than three months.

Liquidity risk
Liquidity risk arises from the Group’s management of working capital, management of capital expenditure and the finance 
charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its 
financial obligations and when necessary will seek to raise funds through the issue of shares and or debt. 

It is the policy of the Group to ensure that it will always have sufficient cash to allow it to meet its liabilities when they fall 
due. To achieve this aim, the Group maintains cash balances and funding facilities at levels considered appropriate to meet 
ongoing obligations. 

Cashflow is monitored on a regular basis. Projections reflected in the Group working capital model indicate that the Group will 
have  sufficient  liquid  resources  to  meet  its  obligations  as  disclosed  in  note  1.1.  The  maturity  analysis  of  the  actual  cash 
payment due in respect of loans and borrowings is set out in the table overleaf. The maturity analysis of trade and other 
payables are in accordance with those terms and conditions agreed between the Group and its suppliers. For trade and other 
payables, payment terms are 30 days, provided all terms and conditions have been complied with. Exceptions to those terms 
are set out in note 23, as reflected under non-current. 

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
26. Financial instruments continued
Liquidity risk continued
Maturity analysis
The below maturity analysis reflects cash and cash equivalents and loans and borrowings based on actual carrying values 
rather than actual cashflows.

US$ million

Cash
Cash and cash equivalents – unrestricted
Cash – restricted

Total cash

Loans and borrowings
Bank loan – secured
Bank loan – secured
Deferred consideration
Associate loans

Cashflow of loans and borrowings

US$ million

Cash
Cash and cash equivalents – unrestricted
Cash – restricted

Total cash

Loans and borrowings
Bank loan – secured
Bank loan – secured
Deferred consideration
Associate loans

Cashflow of loans and borrowings

Effective 
interest
rate 

Notes 

20 0.1%–4.5%
20 0.1%–4.5%

22(iii)
22(iv)
22(v)
22

13.7%
8.9%
—
9.5%

30 June 2012

6 months 
or less

6–12
months

Total 

1–2
years

2–5
years

31.3
16.0

47.3

31.2
34.2
—
3.6

69.0

72.5

31.3
—

31.3

5.7
5.4
—
—

—
—

—

5.6
5.4
—
—

11.1

11.0

8.5

8.5

30 June 2011

—
—

—

10.5
10.3
—
—

20.8

17.3

—
16.0

16.0

9.4
13.1
—
3.6

26.1

38.2

Effective 
interest
rate 

Notes 

6 months 
or less

6–12
months

Total 

1–2
years

2–5
years

20 0.1%–5.8%
20 0.1%–5.8%

96.9
 228.0

96.9
213.2

324.9

310.1

22(iii)
22(iv)
22(v)
22

14.0%
 8.9%
 6.0%
9.5%

36.5
33.1
18.7
1.8

—
—
18.7
—

90.1

 18.7

97.4

20.0

—
—

—

—
—
—
—

—

—

—
—

—

9.8
9.1
—
—

18.9

18.9

— 
14.8 

14.8 

26.7
24.0
— 
1.8

52.5 

58.5

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. An analysis of the sensitivity 
to  interest  rate  changes  is  presented  overleaf.  The  Directors  consider  100  basis  points  to  be  the  maximum  likely  change 
in interest rates over the next 12 months.

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Annual Report and Accounts 2012 Petra Diamonds Limited

111

 
 
 
 
 
 
 
notes to the annual Financial statements
For the year ended 30 June 2012 continued

26. Financial instruments continued
Interest rate risk continued
The effect of an interest rate increase/(decrease) on the Group in the year is as follows:

US$ million

Bank loan – secured
Bank loan – secured
Associate loans

US$ million

Bank loan – secured
Bank loan – secured
Deferred consideration loan – 
unsecured
Associate loans

Notes

22(iii)
22(iv)
22

Notes

22(iii)
22(iv)

22(v)
22

Year-end
interest
rate

13.7%
8.9%
9.5%

Year-end
interest
rate

14.0%
 8.9%

6.0%
 9.5%

30 June 2012

Year-end
interest- 
bearing 
liability

31.2
34.2
3.6

69.0

30 June 2011

Year-end
interest- 
bearing 
liability

36.5
33.1

18.7
1.8

 90.1

Interest
rate
increases
1%

0.3
0.3
—

0.6

Interest
rate
increases
1%

 0.3
 0.3

—
—

0.6

Interest
rate
(decreases)
 1%

(0.3)
(0.3)
—

(0.6)

Interest
rate
(decreases)
 1%

(0.3) 
(0.3) 

— 
— 

 (0.6)

The  loan  disclosed  in  note  22(v)  was  a  discounted  deferred  consideration  and  therefore  was  not  exposed  to  fluctuations 
in interest rates. 

Other market price risk
The Group generates revenue from the sale of rough and polished diamonds. The significant number of variables involved 
in determining the selling prices of rough diamonds, such as the uniqueness of each individual rough stone, the content of the 
rough diamond parcel and the ruling US$/ZAR spot rate at the date of sale, makes it difficult to accurately extrapolate the 
impact the fluctuations in diamond prices would have on the Group’s revenue. 

Capital disclosures
Capital  is  defined  by  the  Group  to  be  the  capital  and  reserves  attributable  to  equity  holders  of  the  parent  company. 
The Group’s objectives when maintaining capital are:

 $ to safeguard the ability of the entity to continue as a going concern; and
 $ to provide an adequate return to shareholders.
The Group monitors capital on the basis of the debt to equity ratio. This ratio is calculated as net debt to equity. Net debt is 
calculated as total liabilities (excluding provisions and deferred tax liabilities) less restricted and unrestricted cash and cash 
equivalents. Equity comprises all components of equity attributable to equity holders of the parent company. 

The debt to equity ratios at 30 June 2012 and 30 June 2011 are as follows:

US$ million

Total debt
Cash and cash equivalents

Net debt/(funds)

Total equity attributable to equity holders of the parent company

Net debt/(funds) to equity ratio

2012

184.6
(47.3)

137.3

637.6

0.21:1

2011

164.5
(324.9)

 (160.4)

667.0

(0.24):1

The Group manages its capital structure by the issue of ordinary shares, raising debt finance where appropriate, and managing 
Group cash and cash equivalents.

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
27. Contingent liabilities
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 new material provisions 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.

28. Share-based payments
Share grants to Directors: 2011 Longer-term Share Plan (“2011 LTSP”) and 2012 Performance 
Share Plan (“2012 PSP”)
On 15 May 2012, performance-based share awards under the 2011 LTSP and 2012 PSP were granted to Directors. The share-based 
payment awards are considered to be equity-settled, albeit they can be cash settled at the Company’s option. The share 
plans were implemented to address the retention of Directors and Senior Management over the period to FY 2016, which 
is a pivotal period for the Company as the expansion programmes are rolled out across the Group. 

The fair value of the 2011 LTSP and 2012 PSP granted during the year and the assumptions used in the Monte Carlo model 
are as follows:

2011 LTSP – non-market based subject to performance conditions

Fair value
Grant date
Share price at grant date
Life of award
Expected dividends

2012 PSP – market-based performance conditions

Fair value (PSP absolute TSR/PSP relative TSR/PSP non-market)
Grant date
Share price at grant date
Expected volatility
Life of award
Expected dividends
Performance period
Correlation
Risk-free interest rate (based on national Government bonds)

2012

133.0p
15 May 2012
133.0p
3.4 years–4.4 years
—

2012

47p/85.0p/133.0p
15 May 2012
133.0p
53%
2.4 years
—
3 years
41%
0.4%

The expected volatility is based on historic volatility of the Group’s share price, adjusted for any extreme changes in the share 
price during the historic period. During the year, 1,200,000 LTSP and 764,332 PSP shares were awarded at a fair value price 
of 133.0 pence. The correlation is based on analysis of historical correlation rates. The market-based conditions are detailed 
on page 66 of the Directors’ Remuneration Report and the grant date fair value incorporates the effect of these market-based 
conditions. The awards have no exercise price.

Further information on the terms of the awards (including their vesting conditions) can be found on pages 66 and 67 of the 
Directors’ Remuneration Report, together with a reconciliation of the awards for the year and the remaining contractual term on 
page 71. 

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Annual Report and Accounts 2012 Petra Diamonds Limited

113

 
 
 
 
 
 
 
notes to the annual Financial statements
For the year ended 30 June 2012 continued

28. Share-based payments continued
Employee and Director share options
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.  There  were  no  new  employee  share  options  granted  during  the  year. 
The terms and conditions of the share options granted during the year ended 30 June 2011 are disclosed below. The share-based 
payment expense has been calculated using the Black-Scholes model. All share options are equity-settled.

Fair value of share options granted and assumptions are as follows:

Fair value at measurement date
Exercise price
Share price at grant date
Expected volatility
Vesting period
Option life
Expected dividends
Risk-free interest rate (based on national Government bonds)

2012

2011

—
—
—
—
—
—
—
—

31.0p–51.2p
92.8p
97.0p
79.2%
1 year–3 years
10 years
—
0.98%–2.48%

The expected volatility is based on historic volatility of the Group’s share price, adjusted for any extreme changes in the 
share price during the historic period. During the year, 2,316,162 (30 June 2011: 2,079,999) options held by employees 
were  exercised  and  the  Company  expensed  US$1.0  million  (30  June  2011:  US$1.9  million)  related  to  the  fair  value  of 
employee share options and the LTSP and PSP plans. During the year, nil (30 June 2011: 130,000) options lapsed, 188,333 
(30 June 2011: 504,079) share options with a weighted average option price of 46.4 pence (30 June 2011: 42.4 pence) were 
cancelled immediately before vesting and nil (30 June 2011: 500,000) share options were granted.

The terms and conditions of the options in issue are as follows, whereby all options are equity settled by delivery of shares:

Employees and Directors entitled

Grant date

Number

Vesting period 

Options granted to Directors

Options granted to 
Senior Management

5 September 2003
16 June 2005
31 May 2006
12 March 2009
30 September 2009
17 March 2010

28 January 2005
27 November 2005
31 May 2006
31 July 2006
12 March 2009
30 September 2009
17 March 2010
25 November 2010

1,000,000
2,000,000
1,000,000
2,500,000
1,150,000
1,150,000

12,500
48,098
97,544
210,608
2,978,002
1,817,673
2,631,670
483,333

1/3 per annum from grant date
1/3 per annum from grant date
1/3 per annum from grant date
1/3 per annum from grant date
1/3 per annum from grant date
1/3 per annum from grant date

25% from grant date for two years,
 then 50% in third year
1/3 per annum from grant date
1/3 per annum from grant date
1/3 per annum from grant date
1/3 per annum from grant date
1/3 per annum from grant date
1/3 per annum from grant date
1/3 per annum from grant date

Remaining life
of options
(years)

1
3
4
7
8
8

3
3
4
6
7
8
8
9

Outstanding at beginning of the year
Cancelled during the year
Lapsed during the year
Exercised during the year
Granted during the year

Outstanding at the end of the year

Exercisable at the end of the year

2012

2011

Weighted
average
exercise price
(pence)

47.88
46.43
—
39.62
—

49.17

49.53

Weighted 
average
exercise price
(pence)

 48.60
42.39
 43.42
 51.05
92.80

Number

19,583,923
(188,333)
—
(2,316,162)
—

Number

 21,798,001
(504,079)
(130,000)
(2,079,999)
500,000

17,079,428

 47.88

19,583,923

14,506,959

 51.38

11,770,578

The  weighted  average  market  price  of  the  shares  in  respect  of  options  exercised  during  the  year  was  170.45  pence 
(30 June 2011: 156.87 pence). The options outstanding at 30 June 2012 have an exercise price in the range of 27.5 pence 
to 96.0 pence (30 June 2011: 27.5 pence to 96.0 pence) and a weighted average remaining contractual life of six years 
(30 June 2011: seven years).

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114

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
28. Share-based payments continued
Employee and Director share options continued
Employees received cash payments of US$nil (30 June 2011: US$0.8 million) during the year in respect of options cancelled. 
The payments equate to the fair value at the date of cancellation and the Group recognised a charge to equity in accordance 
with IFRS 2 together with the acceleration of the remaining unamortised fair value in respect of the options of US$nil (30 June 
2011: US$0.1 million) in the Consolidated Income Statement.

Warrants
There were no new warrants granted during the year.

During the year ended 30 June 2011, as part of the debt facilities referred to in note 22 parts (iii) and (iv), 12,600,000 warrants over 
Petra shares were granted to the IFC (6,300,000) and RMB (6,300,000). The fair value of the 12,600,000 warrants has been 
calculated using the Black-Scholes model and were debited against prepayments until such time as the loan was drawn down. 
The  warrants  were  fair  valued  at  US$7.9  million.  When  the  loan  was  drawn  down,  the  fair  value  was  debited  against  the 
interest-bearing non-current borrowings and the effective interest rate and associated accretion charges adjusted accordingly 
(refer to note 22 parts (iii) and (iv)).

The inputs for warrants issued are as follows:

Fair value at measurement date
Exercise price
Share price at date of grant
Expected volatility
Warrant life
Expected dividends
Risk-free interest rate (based on national Government bonds)

2012

2011

36.2p–41.7p
—
— 90p, 95p and 100p
102.0p
—
43%–63%
—
— 2 years–4 years
—
—
0.65%–1.16%
—

The expected volatility is based on historic volatility of the Group’s share price, adjusted for any extreme changes in the share 
price  during  the  historic  period.  During  the  year  nil  warrants  (30  June  2011:  nil)  lapsed  and  3,464,259  (30  June  2011: 
8,292,777) were exercised with option prices in the range of 80 pence to 100 pence. 

The terms and conditions of the grants are as follows, whereby all warrants are settled by delivery of shares:

Outstanding at beginning of the year
Exercised during the year
Granted during the year

Outstanding at the end of the year

Exercisable at the end of the year

2012

2011

Weighted
average
exercise price
(pence)

93.98
92.12
—

95.00

95.00

Weighted 
average 
exercise price
(pence)

 80.00
86.33
 95.00

Number

 5,457,036
(8,292,777)
12,600,000

 93.98 

9,764,259

 93.98 

9,764,259

Number

9,764,259
(3,464,259)
—

6,300,000

6,300,000

The warrants outstanding at 30 June 2012 have an exercise price in the range of 90 pence to 100 pence (30 June 2011: 
80 pence to 100 pence) and a weighted average remaining contractual life of two years (30 June 2011: three years). 

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Annual Report and Accounts 2012 Petra Diamonds Limited

115

 
 
 
 
 
 
 
notes to the annual Financial statements
For the year ended 30 June 2012 continued

29. Post-balance sheet events
IFC revolving credit facility
On  16  July  2012,  the  Company  announced  that  its  subsidiary  Finsch  Diamond  Mine  (Pty)  Ltd)  (“FDM”)  had  entered  into 
a  revolving  credit  facility  agreement  (the  “IFC  Agreement”)  with  IFC  with  regards  to  a  new  revolving  credit  facility  of 
US$25  million  secured  on  the  assets  of  FDM  in  respect  of  the  Finsch  diamond  mine  in  South  Africa  (“Finsch”)  and  the 
Company’s interest in FDM.

The new facility has been put in place in addition to the ZAR300 million (approximately US$36.8 million) RMB revolving credit 
facility that was announced on 30 November 2011. On completion of the IFC Agreement, the ZAR300 million RMB facility 
reduced to ZAR200 million (approximately US$24.5 million), so that the lenders together provide circa US$49.5 million in 
revolving credit facilities to Petra.

The RMB and IFC credit facilities are available for Petra’s draw down until 31 December 2013. On 31 December 2013 the IFC 
revolving  credit  facility  will  reduce  to  US$18.7  million  and  the  RMB  revolving  credit  facility  will  reduce  to  R150  million 
(US$18.4 million). All capital outstanding is to be repaid by 31 May 2014. The IFC revolving credit facility bears interest at 
US Libor plus 3.5% and the RMB revolving credit facility bears interest at the South African three month JIBAR rate plus 3.5%.

Proposed sale of Fissure Mines
On  31  July  2012,  the  Company  announced  that  it  had,  in  conjunction  with  its  BEE  partners,  decided  to  undertake  a  sale 
process in respect of its fissure mine operations, comprising the Helam (excluding Helam Projects), Sedibeng and Star mines in 
South Africa (the “Fissure Mines”) which form the Fissures operating segment. The Group have appointed professional advisers 
and commenced a formal sale process subsequent to the year end.

Through the Company’s focus on the development of its major assets, the Company has evolved into a successful producer 
from underground and surface (Williamson), high-tonnage kimberlite pipe mines. The Fissure Mines have therefore become 
non-core to the Company, both in terms of their revenues and resource base, and Petra is of the view that the Fissure Mines 
have the potential to deliver strong returns under the ownership of an operator to whom they would be core assets.

30. Related parties
Subsidiaries, associates and joint ventures
Details of subsidiaries, associates and joint ventures are disclosed in note 32 and note 16 respectively.

Directors
Details relating to Directors’ emoluments and shareholdings in the Company are disclosed in note 11 and in the Directors’ 
Remuneration Report (pages 68 and 70) respectively. Key management remuneration is disclosed in note 11.

There are no material loans to Directors or Senior Management that have not been disclosed in the notes.

During the year, a subsidiary of the Company paid US$2.7 million (R22.3 million) (30 June 2011: US$5.6 million (R39.2 million)) 
to Zeren (Pty) Ltd (“Zeren”) in respect of an exclusivity agreement covering specialised plant and equipment. The cumulative 
amount  paid  to  Zeren  is  US$8.6  million  (R70.2  million)  (30  June  2011:  US$7.0  million  (R47.9  million))  and  is  shown  under 
property, plant and equipment in the Consolidated Statement of Financial Position. The equipment was supplied to a subsidiary 
of  the  Company  at  Zeren’s  cost  and,  given  its  specialised  nature,  on  an  exclusive  basis.  Mr  Dippenaar,  Mr  Davidson  and 
Mr Abery are all Directors of the Company and are also directors and shareholders of Zeren. 

During the year, the Company paid an additional US$11.2 million to Sirius Resource Fund 1 Ltd (“Sirius”) as part of a transaction 
whereby  the  Company  intends  to  acquire  from  Sirius  an  increased  interest  in  the  Group’s  South  African  operations. 
The cumulative amount paid to Sirius is US$17.2 million and is shown under trade and other receivables in the Statement of 
Financial  Position.  Mr  Pouroulis  is  a  director  of  Sirius  Investment  Management  LP  which  provides  investment  advisory 
services to Sirius.

Umnotho weSizwe Group (Pty) Ltd (“Umnotho”), one of Petra’s BEE partners, holds a 36% interest in the Cullinan mine BEE 
holding  company,  Thembinkosi  Mining  Investments  (Pty)  Ltd  (“Thembinkosi”).  The  Group  has  a  non-current  receivable  due 
from  Thembinkosi  of  US$29.6  million  and  a  non-current  payable  due  to  Thembinkosi  of  US$26.6  million.  Included  in  net 
finance expense (note 9) the Group has finance income due from Thembinkosi of US$3.2 million and finance expense payable 
to Thembinkosi of US$2.4 million. These sums arise due to the funding that the Group has provided to Thembinkosi to finance 
its interests in Cullinan mine. Mr Abery is a director of Umnotho. Mr Pouroulis and Mr Abery are beneficiaries of a trust that 
is a shareholder in Umnotho.

Sedibeng  Mining  (Pty)  Ltd  (“Sedibeng”),  one  of  Petra’s  BEE  partners,  is  indirectly  owned  by  Sirius.  Sedibeng  holds  direct 
interests in the Kimberley Underground, Sedibeng JV, Star and Helam mines and indirect interests in Cullinan, Koffiefontein 
and  Finsch  through  its  shareholding  in  Thembinkosi,  Senahka  Diamonds  Investments  (Pty)  Ltd  (“Senakha”)  and  Re-Teng 
Diamonds (Pty) Ltd respectively. The Group has a non-current receivable due from Sedibeng of US$16.7 million and a non-
current payable due to Sedibeng of US$2.8 million in respect of funding provided to the BEE partner to finance the acquisition 
of  its  interest  in  the  mines.  These  sums  arise  due  to  the  funding  that  the  Group  has  provided  to  Sedibeng  to  finance  its 
interests in the Kimberley Underground, Sedibeng JV and Koffiefontein mines.

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116

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
30. Related parties continued
Directors continued
During  the  year,  the  Company  settled  the  Al  Rajhi  deferred  consideration  liability  of  US$20.1  million  (refer  to  note  22). 
Dr  Kamal  is  co-CEO  of  the  Al  Rajhi  Group  of  companies.  Al  Rajhi  is  one  of  Petra’s  largest  shareholders.  Dr  Kamal  is  also 
a Non-Executive Director of Petra.

During  the  year,  Mr  Dippenaar  and  Mr  Davidson  exercised  an  option  to  acquire  the  Helam  game  farm  from  the  Company 
for US$0.3 million (R2.5 million).

Shareholders
The principal shareholders of the Company are detailed in the Directors’ Report on page 59.

Nabera Mining (Pty) Ltd 
The Company is a 29.5% shareholder in Nabera Mining (Pty) Ltd (“Nabera”), the company that managed the Alexkor diamond 
mine between 1999 and 2001. During the year ended 30 June 2012, Petra did not incur any expenses on behalf of Nabera 
(30 June 2011: Rnil (US$nil)). Prior period expenses were incurred in relation to the recovery of the management fee and other 
amounts due to Nabera from Alexkor Limited and the South African Government. During the year Petra impaired the receivable, 
in respect of prior period expenses incurred on behalf of Nabera, of US$0.3 million (30 June 2011: US$0.3 million).

31. Significant non-cash transactions
US$ million

Operating activities
Share-based payments
Unrealised foreign exchange loss/(gain)
Reversal of impairment
Impairment
(Decrease)/increase in provisions
Depreciation of property, plant and equipment
(Profit)/loss on sale of property, plant and equipment
Other finance income
Other finance expense
Present value adjustment of rehabilitation provision – change in assumptions

Investing activities
Non-cash capital expenditure (capitalisation of borrowing costs and other)
Non-cash interest on investing activity

Financing activities
Non-cash interest on investing activity

2012

2011

1.0
38.6
—
—
(0.7)
41.0
(0.1)
(9.4)
10.6
(4.8)

76.2

3.3
9.7

13.0

6.7

6.7

 1.9
 (18.6)
 (11.7)
5.2
 1.4
 22.4
 0.3
 (2.9)
 8.0
—

6.0

5.7
5.5

11.2

3.9

3.9

During the year non-cash transactions were recorded, being a non-current receivable due from Senakha (the Group’s main 
BEE partner at Finsch) of US$38.0 million and a non-current payable due to Senakha of US$38.0 million. These amounts arose 
due to the funding that the Group provided to Senakha to finance its interests in Finsch Diamond Mine (Pty) Ltd.

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Annual Report and Accounts 2012 Petra Diamonds Limited

117

 
 
 
 
 
 
 
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notes to the annual Financial statements
For the year ended 30 June 2012 continued

32. Subsidiaries
At 30 June 2012 the Group held 20% or more of the allotted share capital of the following significant subsidiaries:

Country of
incorporation

Class 
of share
capital held

Percentage
held 2012

Percentage
held 2011

Nature of business

Autumn Star Investments (Pty) Ltd¹
South Africa
Blue Diamond Mines (Pty) Ltd2
South Africa
Crown Resources (Pty) Ltd
South Africa
South Africa
Cullinan Diamond Mine (Pty) Ltd
Cullinan Investment Holdings Ltd British Virgin Islands
Dancarl Diamonds (Pty) Ltd¹
South Africa
Ealing Management Services 
South Africa
(Pty) Ltd
Finsch Diamond Mine (Pty) Ltd3
South Africa
South Africa
Helam Mining (Pty) Ltd
Kalahari Diamonds Ltd
United Kingdom
Kimberley Underground Mines JV Unincorporated JV
Koffiefontein Mine JV2
South Africa
South Africa
Messina Diamonds (Pty) Ltd
Messina Investments Ltd
South Africa
Petra Diamonds Botswana 
(Pty) Ltd4
Petra Diamonds Southern 
Africa (Pty) Ltd
Premier Rose 
Management Services 
(Pty) Ltd
Sedibeng Diamond Mine JV5
Star Diamonds (Pty) Ltd
Wilcroft Company Ltd
Williamson Diamonds Ltd

South Africa
Unincorporated JV
South Africa
Bermuda
Tanzania

South Africa

Botswana

Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary

Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary

Ordinary

Ordinary

Ordinary
Ordinary
Ordinary
Ordinary
Ordinary

 40%
 100%
 100%
 74%
 100%
40%

100%
74%
74%
100%
74%
70%
100%
100%

100%

100%

100%
74.5%
74%
100%
75%

 40% Mining and exploration
 100% Mining and exploration
100% Mining and exploration
 74% Mining and exploration
 100% Mining and exploration
40% Mining and exploration

100%

100%

Services provision
74% Mining and exploration
74% Mining and exploration
Investment holding
74% Mining and exploration
70% Mining and exploration
100% Mining and exploration
Investment holding
100%

100%

Exploration

100%

Services provision

100%
Services provision
74.5% Mining and exploration
74% Mining and exploration
Investment holding
75% Mining and exploration

100%

1.  Although  the  Company  owns  40%  of  Autumn  Star  Investments  (Pty)  Ltd  and  Dancarl  Diamonds  (Pty)  Ltd,  the  Company  has 

consolidated its investments on the basis of control and management of daily and strategic operational activities.

2.  The  Company  owns  an  effective  74%  interest  in  Koffiefontein  Mine  JV  through  its  investment  in  Re-Teng  Diamonds  (Pty)  Ltd 

(refer to note 3(a)).

3.  During the year, Afropean Diamonds (Pty) Ltd changed its name to Finsch Diamond Mine (Pty) Ltd. The Group reduced its interest 

to 74% prior to the purchase of Finsch.

4. During the year, Sekaka Diamonds (Pty) Ltd changed its name to Petra Diamonds Botswana (Pty) Ltd.

5.  The Company owns an effective 57.5% of Sedibeng Diamond Mine JV (“Sedibeng”) through its investment in Messina Diamonds (Pty) 

Ltd and an effective 17% of Sedibeng through its investment in Autumn Star Investments (Pty) Ltd.

33. Pension scheme
The Company operates a defined benefit scheme and defined contribution scheme. The defined benefit scheme was acquired 
as part of the acquisition of Cullinan Diamond Mine (Pty) Ltd and is closed to new members. All new employees are required 
to join the defined contribution scheme. The assets of the pension schemes are held separately from those of the Group’s assets.

Defined benefit scheme
The defined benefit scheme, which is contributory for members, provides benefits based on final pensionable salary and contributions.

The pension charge or income for the defined benefit scheme is assessed in accordance with the advice of a qualified actuary 
using the projected unit credit method. The most important assumptions made in connection with the charge or income were 
that the return on the funds will be 8.95% (30 June 2011: 9.01%), based on the average yield of South African Government long 
dated bonds plus 6.47%, and that salaries will be increased at 7.77% (30 June 2011: 7.30%), based on current  South  African 
consumer price index plus 1%. The market value of the assets of the defined benefit scheme at 30 June 2012 is R139.0 million 
(US$17.0 million) (30 June 2011: R132.8 million (US$19.4 million)) and the actuarial valuation of the assets on an ongoing basis 
represented 109.0% (30 June 2011: 116.1%) of the benefit of R128.0 million (US$15.7 million) (30 June 2011: R120.6 million 
(US$17.6  million))  that  had  accrued  to  members  allowing  for  expected  future  increases  in  earnings.  The  pension  surplus  is 
R11.0 million (US$1.3 million) (30 June 2011: R12.2 million (US$1.8 million)). The pension fund values are converted using the 
year-end foreign exchange rate of US$1:R8.16 (30 June 2011: US$1:R6.83). 

118

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
33. Pension scheme continued
Defined benefit scheme continued
US$ million

Defined benefit obligations
Present value of funded obligations
Fair value of plan assets
Unrecognised net gain – paragraph 58 limit

Recognised surplus for defined benefit obligations

Movements in present value of the defined benefit 
obligations recognised in the Statement of Financial Position
Net surplus for the defined benefit obligation as at 1 July
Net expense recognised in the income statement
Contributions by employer
Unrecognised surplus due to IAS 19 paragraph 58 limit

Net surplus for defined benefit obligations at 30 June

2012

2011

 (15.7)
 17.0
 (1.3)

— 

—
 (0.4)
 0.4
—

—

 (17.6)
19.4
(1.8)

—

—
 (0.4)
 0.4
—

—

Refer to note 1.17 for details of the limit applied to recognition of pension surplus asset.

US$ million

2012

2011

(Expense)/income recognised in the income statement
Current service cost
Finance expense
Expected return on assets
Recognition in terms of IAS 19 paragraph 58A

Change in the fair value of the defined benefit assets
Net surplus for the defined benefit obligation as at 1 July
Foreign exchange movement on opening balances
Expected return on assets
Benefits paid to members
Contributions
Actuarial gains/(losses)

At 30 June

Change in the present value of the defined benefit obligations
At 1 July
Foreign exchange movement on opening balance
Benefits paid to members
Current service cost
Finance cost
Contributions by members
Actuarial losses

At 30 June

Actuarial gains and losses
Actuarial gains/(losses) on plan assets
Actuarial losses on plan liabilities

Analysis of plan assets
Cash
Equity
Bonds
Property
Other – offshore

(0.4)
(1.3)
1.4
(0.1)

(0.4)

19.4
(3.2)
1.4
(2.0)
0.6
0.8

17.0

(17.6)
2.7
2.0
(0.4)
(1.3)
(0.1)
(1.0)

(15.7)

0.8
(1.0)

63.4%
10.1%
17.7%
3.8%
5.0%

100.0%

 (0.5)
 (1.4)
 2.2
 (0.7)

 (0.4)

18.3
2.0
 1.8
 (2.4)
 0.6
 (0.9)

 19.4

 (14.2)
(1.5)
2.4
(0.5)
(1.4)
(0.2)
(2.2)

 (17.6)

 (0.9)
 (2.2)

100.0%
—
—
—
—

100.0%

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Annual Report and Accounts 2012 Petra Diamonds Limited

119

 
 
 
 
 
 
 
notes to the annual Financial statements
For the year ended 30 June 2012 continued

33. Pension scheme continued
Defined benefit scheme continued

US$ million

Principal actuarial assumptions
Discount rate at 30 June
Expected return on plan assets at 30 June
Future salary increases
Inflation
Future pension increases

Determination of estimated pension expense for the year ended 30 June 2013
Member contributions
Company contributions
Benefit payments

Deferred cumulative actuarial gains
Funded status

Net change on assets
Net change on liabilities

2012
% per annum

2011
% per annum

8.95%
8.95%
7.77%
6.77%
5.08%

0.2
0.4
(2.1)

1.3

(2.4)
1.9

(0.5)

9.01%
9.01%
7.30%
6.30%
4.74%

 0.2
 0.4
 (2.6)

 1.8

 1.1
 (3.4)

 (2.3)

US$ million

2012

2011

2010

2009

Defined benefit obligation trends
Plan assets
Plan liabilities

Surplus

17.0
(15.7)

1.3

19.4
(17.6)

1.8

18.3
(14.2)

4.1

18.0
(13.4)

4.6

Assumptions  regarding  future  mortality  experience  are  set  based  on  advice  in  accordance  with  published  statistics 
and experience in the fund. 

The average life expectancy in years of a pensioner retiring at the age of 65 on 30 June 2012 date is as follows:

Male
Female

2012

15.92
20.02

2011

18.01
22.52

Further to the acquisition of the defined benefit fund, the Group has no experience adjustments.

34. Post-retirement medical fund
The Company operates a post-employment health care liability scheme. The post-employment health care liability scheme was 
acquired as part of the acquisition of Cullinan Diamond Mine (Pty) Ltd and is closed to new members. All new employees will 
be responsible for funding their own post-employment health care liability costs. 

The  benefit  liability  for  the  post-employment  health  care  liability  scheme  is  assessed  in  accordance  with  the  advice  of 
a  qualified  actuary  using  the  projected  unit  credit  method.  The  Group  obtained  a  valuation  using  a  third  party  actuary  at 
30 June 2011 and management has updated that valuation report for 30 June 2012. This is considered sufficient to achieve 
a materially accurate valuation. The Group’s post-employment health care liability consists of a commitment to pay a portion 
of the members’ post-employment medical scheme contributions. This liability is also generated in respect of dependants who 
are  offered  continued  membership  of  the  medical  scheme  on  the  death  of  the  primary  member.  The  most  important 
assumptions  made  in  connection  with  the  charge  or  income  were  that  the  health  care  cost  of  inflation  will  be  7.25% 
(30 June 2011: 6.75%), based on the average yield of South African Government long dated bonds of 8.75% (30 June 2011: 9.25%), 
and that salaries will be increased at 6.25% (30 June 2011: 5.75%). The actuarial accrued liability funded status of the post-
employment  health  care  liability  scheme  at  30  June  2012  is  R96.5  million  (US$11.8  million)  (30  June  2011:  R45.5  million 
(US$7.3 million)). The post-employment health care liability values are converted using the year-end foreign exchange rate of 
US$1:R8.16 (30 June 2011: US$1:R6.83).

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Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
34. Post-retirement medical fund continued
US$ million

Post-retirement medical fund
Present value of post-employment medical care obligations

Unfunded status at 30 June

Movements in present value of the post-retirement 
medical fund obligations recognised in the Statement of Financial Position
Net liability for the post retirement medical fund obligation as at 1 July
Foreign exchange movement on opening balances
Arising on acquisition of subsidiary
Net expense recognised in the income statement
Net discount rate change
Change in assumptions
Changes in % continuing at post-employment
Membership changes
Other

Net liability for post-employment medical care obligations at 30 June

Expense recognised in the income statement
Current service cost
Finance expense

The expense is recognised in the following line items in the income statement:
Mining and processing costs
Finance expense

Reconciliation of fair value of scheme liabilities
At 1 July
Foreign exchange movement on opening balances
Arising on acquisition of subsidiary
Net expense recognised in the income statement
Net discount rate change
Change in assumptions
Changes in % continuing at post-employment
Membership changes
Other

Liabilities at fair market value as at 30 June

2012

11.8

11.8

7.3
(1.7)
5.3
1.2
2.0
(2.7)
1.1
(0.7)
—

11.8

0.3
0.9

1.2

0.3
0.9

1.2

7.3
(1.7)
5.3
1.2
2.0
(2.7)
1.1
(0.7)
—

11.8

2011

7.3

 7.3

5.3
0.6
—
 0.8
—
—
—
—
0.6

 7.3

 0.2
 0.6

 0.8

 0.2
 0.6

 0.8

 5.3
0.6
—
0.8
—
—
—
—
 0.6

 7.3

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Annual Report and Accounts 2012 Petra Diamonds Limited

121

 
 
 
 
 
 
 
notes to the annual Financial statements
For the year ended 30 June 2012 continued

34. Post-retirement medical fund continued

Principal actuarial assumptions
Discount rate at 30 June
Health care cost inflation
Future salary increases
Net replacement ratio
Net discount rate
Normal retirement age (years)
Fully accrued age (years)

%
per annum

%
per annum

8.75%
7.25%
6.25%
75.00%
1.40%
60.0
60.0

9.25%
6.75%
5.75%
60.00%
2.34%
 60.0
 60.0

US$ million

2012

2011

Determination of estimated post-retirement 
medical fund expense for the year ended 30 June 2013
Current service cost
Finance expense
Benefit payments

0.4
0.9
(0.1)

 0.2 
 0.6 
 (0.1)

US$ million

Actuarial accrued liability
Funded status

2012

11.8

2011

2010

2009

7.3

5.2

2.0

Sensitivity analysis 
Health care inflation rate
The effect of a 1% increase or decrease in the health care inflation rate on the post-retirement medical fund accrued liability 
is as follows:

US$ million

Accrued liability
% difference

US$ million

Accrued liability
% difference

30 June 2012

1% increase

1% decrease

11.8
—

14.3
21.3%

9.8
(16.8%)

30 June 2011

1% increase

1% decrease

7.3
—

8.7
19.2%

4.9
(32.8%)

Average retirement age
The table below shows the impact of a one year change in the expected average retirement age:

US$ million

Accrued liability
% difference

US$ million

Accrued liability
% difference

30 June 2012

11.8
—

30 June 2011

7.3
—

Retirement
one year
earlier

12.5
5.8%

Retirement
one year
earlier

7.5
2.7%

Retirement
one year
later

11.2
(5.5%)

Retirement
one year
later

6.8
(6.8%)

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122

Petra Diamonds Limited Annual Report and Accounts 2012

 
 
 
 
 
 
 
 
 
 
“carat” or “ct” 

 a measure of weight used for diamonds, equivalent to 
0.2 grams

“overburden” 

Glossary

“aGm” 

“alluvial” 

annual general meeting

 deposits of diamonds which have been removed from 
the  primary  source  by  natural  erosive  action  over 
millions of years, and eventually deposited in a new 
environment  such  as  a  river  bed,  an  ocean  floor  or 
a shoreline

“Bee” 

black economic empowerment

“Block caving” 

“Bulk sample” 

 a method of mining in which large blocks of ore are 
undercut so that the ore breaks and caves under its 
own weight. The undercut zone is initially drilled and 
blasted and some broken ore is drawn down to create 
a void into which initial caving of the overlying ore 
can  take  place.  As  more  broken  ore  is  drawn 
progressively  following  cave  initiation,  the  cave 
propagates  upwards  through  the  orebody  or  block 
until  the  overlying  rock  also  caves  and  surface 
subsidence occurs. The broken ore is removed through 
the production or extraction level developed below 
the  undercut  level.  Once  the  caves  have  been 
propagated, it is a low cost mining method which is 
capable  of  automation  to  produce  an  underground 
“rock factory”

 a large sample for the purpose of estimating the grade 
of a diamond deposit and to produce a large enough 
quantity  of  diamonds  to  enable  an  evaluation  of 
diamond quality

“capex” 

capital expenditure

“cpht” 

“craton” 

carats per hundred tonnes

 a part of the Earth’s crust which has been relatively 
stable for a very long period

“ctpa” 

carats per annum

“cut-off grade” 

 the lowest grade of mineralised material considered 
economic to extract; used in the calculation of the ore 
reserves in a given deposit

“diamondiferous” 

containing diamonds

“drawpoint” 

 openings on the sides of the drift going up into a block cave

“eBitDa” 

“ePs” 

“feasibility study” 

“fissure” 

“FY” 

“grade” 

 earnings before interest, tax, depreciation and amortisation

earnings per share

 a definitive engineering estimate of all costs, revenues, 
equipment requirements and production levels likely 
to  be  achieved  if  a  mine  is  developed;  the  study  is 
used to define the economic viability of a project and 
to support the search for project financing

 informal  term  for  a  narrow,  vertical,  vein-like 
kimberlite dyke

financial year (1 July to 30 June)

“H1” or “H2” 

 first half, or second half, of the financial year

“hypabyssal rock” 

 an igneous rock that originates at medium to shallow 
depths within the crust and contains intermediate grain 
size and often porphyritic texture

“ineD” 

independent non-executive director

“indicated resource” 

“inferred resource” 

“kimberlite” 

 that part of a diamond resource for which tonnage, 
densities,  shape,  physical  characteristics,  grade  and 
average  diamond  value  can  be  estimated  with  a 
reasonable  level  of  confidence.  It  is  based  on 
exploration sampling and testing information gathered 
through appropriate techniques from locations such 
as outcrops, trenches, pits, workings and drill holes. 
The locations are too widely or inappropriately spaced 
to confirm geological and/or grade continuity but are 
spaced closely enough for continuity to be assumed 
and sufficient diamonds have been recovered to allow 
a  confident  estimate  of  average  diamond  value 
(sAMREC Code)

 that part of a diamond resource for which tonnage, 
grade and average diamond value can be estimated 
with  a  low  level  of  confidence.  It  is  inferred  from 
geological evidence and assumed but not verified by 
geological and/or grade continuity and a sufficiently 
large  diamond  parcel  is  not  available  to  ensure 
reasonable representation of the diamond assortment. 
It is based on information gathered through appropriate 
techniques from locations such as outcrops, trenches, 
pits, workings and drill holes that may be limited or 
of uncertain quality and reliability (sAMREC Code)

 a  brecciated  ultrabasic  igneous  rock  containing 
phlogopite  mica,  bronzite  pyroxene  and  ilmenite; 
kimberlites may or may not contain diamonds

“ kimberlite 
indicator minerals”  establish the diamond-bearing potential of kimberlite

minerals that can help locate the presence and 

“ktpa” 

“LHD” 

“Lom” 

thousand tonnes per annum

load haul dumper

life of mine

“LtiFr” 

“mctpa” 

“mcts” 

lost time injury frequency rate

million carats per annum

million carats

“measured resource”  that part of a diamond resource for which tonnage, 
densities,  shape,  physical  characteristics,  grade  and 
average diamond value can be estimated with a high 
level of confidence. It is based on detailed and reliable 
exploration sampling and testing information gathered 
through appropriate techniques from locations such 
as outcrops, trenches, pits, workings and drill holes. 
The  locations  are  spaced  closely  enough  to  confirm 
geological  and  grade  continuity  and  sufficient 
diamonds have been recovered to allow a confident 
estimate of average diamond value

“mini bulk-sample” 

 a large sample, commonly in the order of 50 tonnes 
to  100  tonnes,  for  the  purpose  of  determining  the 
exploration potential of a diamond prospect

“mt” 

“mtpa” 

“neD” 

“nGos” 

“open pit” 

“orebody” 

million tonnes

million tonnes per annum

non-executive director

non-governmental organisations

 mining in which ore that occurs close to the Earth’s 
surface is extracted from a pit or quarry

 a continuous well-defined mass of material of sufficient 
ore content to make extraction feasible

 material  of  little  or  no  value,  which  overlies  rock 
formations of economic interest

“pa” 

per annum

“Probable reserves”   the  economically  mineable  material  derived  from  a 
measured  and/or  indicated  diamond  resource.  It  is 
estimated  with  a  lower  level  of  confidence  than  a 
proven reserve. It is inclusive of diluting materials and 
allows for losses that may occur when the material is 
mined. Appropriate assessments, which may include 
feasibility  studies,  have  been  carried  out,  including 
consideration  of,  and  modification  by,  realistically 
assumed mining, metallurgical, economic, marketing, 
legal, environmental, social and governmental factors. 
These  assessments  demonstrate  at  the  time  of 
reporting that extraction is reasonably justified

“Proved reserves” 

 the  economically  mineable  material  derived  from  a 
measured  diamond  resource.  It  is  estimated  with  a 
high  level  of  confidence.  It  is  inclusive  of  diluting 
materials and allows for losses that may occur when 
the material is mined. Appropriate assessments, which 
may include feasibility studies, have been carried out, 
including  consideration  of,  and  modification  by, 
realistically assumed mining, metallurgical, economic, 
marketing, legal, environmental, social and governmental 
factors. These assessments demonstrate at the time 
of reporting that extraction is reasonably justified

 the  process  of  restoring  mined  land  to  a  condition 
approximating  to  a  greater  or  lesser  degree  its 
original state

“re-crush system” 

 processes oversized material from the Primary crushers, 
further reducing it in size

“rom” 

“rsa” 

“shaft”  

“sLc”  

“slimes” 

run-of-mine

Republic of south Africa

an underground vertical or inclined passageway 

 sub level cave

 the fine fraction of tailings discharged from a processing 
plant without being treated; in the case of diamonds, 
usually that fraction which is less than 1mm in size

“stockpile” 

a store of unprocessed ore

“sub-level caving” 

 follows the same basic principles as the Block Caving 
mining  method,  however  work  is  carried  out  on 
intermediate levels; the caves are smaller in size and 
not as long lasting. This method of mining is quicker 
to  bring  into  production  than  block  caving,  as  the 
related  infrastructure  does  not  require  the  level  of 
permanence needed for a long-term block cave. This 
method is used to supplement Block Caving in order 
to provide production flexibility

“tailings” 

material left over after processing ore

“tailings dump” 

“tonnage” 

 dumps created of waste material from processed ore 
after the economically recoverable metal or mineral 
has been extracted

 quantities where the tonne is an appropriate unit of 
measure; typically used to measure reserves of target 
commodity bearing material or quantities of ore and 
waste material mined, transported or milled

“tpa” 

“tpm” 

tonnes per annum

tonnes per month

“type ii diamonds” 

 Type  II  diamonds  are  defined  by  containing  no 
detectable nitrogen and are often colourless or brown

 the content of diamonds, measured in carats, within 
a volume or mass of rock

“rehabilitation” 

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Elizabeth House 
PO Box 1075 
9 Castle street 
st Helier  
Jersey JE4 2QP

+44 1534 700 111 
+44 1534 700 007 

Tel: 
Fax: 
Email:  info@petradiamonds.com

WWW.PetraDiamonDs.com

The  cover  of  the  report  is  printed  on  Trucard 
gloss which is certified as a FsC®. The text of the 
report  is  printed  on  Cocoon  50  silk  paper  and 
Cocoon 100 offset, both of which are FsC certified. 
Cocoon 50 silk is made from 50% recycled waste 
and 50% virgin fibre. Cocoon 100 offset is made 
from 100% recycled waste. All paper and board is 
produced  in  mills  which  hold  Is0  9001  and 
IsO 14001 accreditation.