Annual Report and Accounts 2022
A point of inflection
Petra at a point of inflection
Strengthened and more resilient
We are an independent producer of gem-quality rough diamonds with
strong sustainability credentials throughout our portfolio of mines in
South Africa and Tanzania.
Employees celebrating safety performance at Cullinan Mine.
Petra is at a point of inflection, following our
success in the steps we have already taken in
our transformation to increase our resilience and
cash generation.
We have redefined our purpose and created a
Formula for Success which ensures the culture
we need to deliver our ambitions for Petra is
meaningful to our teams. This, along with our
new Operating Model, our relentless focus on
continuous improvement and the integration of
our new Sustainability Framework, means we are
well set to deliver our value-led growth strategy.
These excellent financial results and cash
generation have enabled a successful tender offer
for our bonds to reduce our gross debt, as well
as the announcement of a new dividend policy.
Richard Duffy
Chief Executive Officer
Photo on cover
The cover features the 39.34 carat blue diamond from the Cullinan Mine sold for
US$40.2 million (cUS$1 million per carat) in July 2021 - believed to be the highest price
per carat on record for a rough diamond. Further information is set out on page 26.
Petra’s Annual and Sustainability Reports
for the financial year to 30 June 2022
Welcome to our FY 2022 Annual Report. Our Sustainability
Report can be found on our website.
petradiamonds.com/investors/results-reports/
This Annual Report covers our business holistically,
considering both the financial and non-financial aspects of
our performance. We address the way sustainability is at the
core of our purpose and integrated into our values, culture,
governance, operations and partnerships, and provide
additional detail in our Sustainability Report.
From next year we will produce an integrated report.
Stay up to date with the latest investor news at:
www.petradiamonds.com
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Highlights: strong performances
Delivering safely and efficiently
PRODUCTION2 UP
(Mcts)
3.4 +3%
SAFETY IMPROVED
(LTIFR)
REVENUE2 UP
(US$m)
0.22 -50%
585.2 +44%
ADJUSTED EBITDA1,2 UP
(US$m)
ADJUSTED NET PROFIT
AFTER TAX1 UP (US$m)
ADJUSTED EARNINGS
PER SHARE1,3 UP (US$ cents)
264.9 +103%
102.0 +500%
42.93 +219%
Generating cash and reducing net debt
OPERATIONAL FREE
CASHFLOW1 UP
(US$m)
CONSOLIDATED NET DEBT:
ADJUSTED EBITDA1 DOWN
230.0 +91%
0.15x -91%
CONSOLIDATED
NET DEBT1 DOWN (US$m)
GROSS DEBT DOWN
(US$m)
40.6 -82%
366.2 -15%
Operating sustainably4
CARBON EMISSIONS5 UP
(tCO2-e/ct)
0.139 +10%
WATER EFFICIENCY5 UP
(m3/t)
1.0 +82%
WOMEN IN THE
WORKFORCE NO CHANGE
(%)
20 0%
TRAINING SPEND UP
(US$m)
6.1 +5%
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Notes to financial measures
1. For all non-GAAP measures refer to the Summary of Results table within the Financial
Results section.
2. For comparative purposes, the FY 2021 variances include Williamson as it is no longer
a discontinued operation – refer to note 2. Consolidated net debt and cash balances
for FY 2021 have not been adjusted.
3. The comparative adjusted profit per share have been adjusted to give effect to
the share consolidation of one new share for every 50 existing shares completed on
29 November 2021 with the Company’s resultant issued share capital now consisting
of 194,201,785 Ordinary Shares of 0.05 pence each.
4. The FY 21 sustainability metrics were affected by Williamson being on care and maintenance.
5. Williamson on care and maintenance in FY 2021.
Contents
Strategic Report
2
At a Glance
4
6
Chair’s Statement
Chief Executive Officer’s Statement
10 Our Purpose, Values and Culture Change
14 Our Strategy
18 Our Competitive Advantage
20 Our Business Model
22 Our Markets
30 Stakeholder Engagement
33 ESG and Sustainability
41 TCFD Disclosure (Listing Rule 14)
42 Key Performance Indicators
46 Operational Review
50 Cullinan Mine
52 Finsch
54 Williamson
56 Koffiefontein
58 FY 2022 Resource Statement
61
Financial Review
65 Principal Risks and Uncertainties
Corporate Governance
72
Chair’s Introduction to Governance
76 Board of Directors
78 Executive Committee (Exco)
79 Corporate Governance Statement
90 Report of the Audit and Risk Committee
99 Viability Statement
101 Risk Management
112
Report of the Nomination Committee
114
116
Report of the Health, Safety
and Environment (HSE) Committee
Report of the Social, Ethics & Diversity
(SED) Committee
120 Report of the Investment Committee
122 Directors’ Remuneration Report
Financial Statements
138 Directors’ Responsibilities Statement
139 Independent Auditor’s Report
146 Consolidated Income Statement
147
Consolidated Statement of Other
Comprehensive Income
148 Consolidated Statement
of Financial Position
149 Consolidated Statement of Cashflows
150 Consolidated Statement
of Changes in Equity
151
Notes to the Annual Financial Statements
Supplementary Information
207 Alternative Performance Measures
208 Five-year Summary of Consolidated Figures
209 FY 2022 Summary of Results and
Non-GAAP Disclosures
210 Petra’s Partners
212 Shareholder and Corporate Information
216 Glossary
Annual Report and Accounts 2022 Petra Diamonds Limited
1
Strategic Report
At a Glance
Our purpose: creating abundance from rarity
We believe that Earth’s rare and precious legacy can, through responsible mining, create
abundant outcomes for our people, communities, investors, customers and all other
stakeholders, giving expression to life’s special moments
Our Purpose, Values and Culture Change pages 10 to 13
Petra has a significant resource base and operates in a structurally supportive market
One of the world’s largest diamond resources
A market with strong fundamentals
The predicted supply/demand deficit was manifested through a decline
in supply and, as a result, diamond prices strengthened considerably.
GROSS GROUP RESOURCES (MCTS)
226.6 -2%
GROSS GROUP RESERVES (MCTS)
29.97 -10%
FY 2022 Resource Statement pages 58 to 60
Careful management will ensure sustainable,
long-life mining operations pages 14 to 17
LIKE-FOR-LIKE PRICE INCREASE
+41.5%
Our Market pages 22 to 24
Our mines
Revenue by mine (%)
Total production by mine (%)
3
TANZANIA
4
13
US$584.1m1
55+55+
–– Cullinan Mine –– Finsch
–– Williamson2
–– Koffiefontein
28
55
1
7
3.4 MCTS
54+54+
38
54
1 Cullinan Mine
Produces large, high-quality
white and very rare
blue diamonds.
2 Finsch
Regularly produces highly commercial
goods of over five carats, and
occasionally produces over 50 carats
and smaller gem-quality diamonds.
1
2
4
SOUTH AFRICA
REVENUE
(US$ MILLION)
322.4 +29%
TOTAL PRODUCTION
(MCTS)
1.81 -7%
REVENUE
(US$ MILLION)
165.7 +34%
TOTAL PRODUCTION
(MCTS)
1.28 +3%
Ownership
of our mines
3 Williamson, Tanzania
Renowned for beautifully
rounded white and ‘bubble-gum’
pink diamonds.
4 Koffiefontein
Regularly produces high-quality
white diamonds of between five
and 30 carats.
REVENUE
(US$ MILLION)
75.9
TOTAL PRODUCTION
(MCTS)
REVENUE
(US$ MILLION)
TOTAL PRODUCTION
(MCTS)
0.23 +100%
21.5 -23%
0.04 -40%
1. Revenue from sales of rough diamonds (excluding partnership stones).
2. On care and maintenance during FY 2021.
Operational Review pages 46 to 57
2
Petra Diamonds Limited Annual Report and Accounts 2022
SOUTH AFRICAN MINES
Petra: 74%; Kago Diamonds:
14%; Itumeleng Petra
Employee Trust: 12%
TANZANIAN MINE, WILLIAMSON*
Petra: 75%; the Government
of Tanzania: 25%
* After completion of the Framework
Agreement and MoU with Caspian,
Petra will hold an effective 31.5%
interest in the Williamson mine, with
the Government of Tanzania holding
37% and Caspian Limited holding 31.5%.
Read more on page 8
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Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Petra’s ongoing transformation underpins sustainable growth
A new Operating Model
focused on cash generation
Facilitating a new culture of
continuous improvement
Our balance sheet
significantly strengthened
Enabling our focus on reducing
gross debt further
Sustainability being
embedded throughout
our operations
Supported by a new Sustainability
Framework providing rigour
A growth strategy to
benefit all stakeholders
Mine plans up to 2031 with
growth potential beyond
Our Strategy
pages 14 to 17
Financial Review
pages 61 to 64
ESG and Sustainability
pages 33 to 40
Our Strategy
pages 14 to 17
Prioritising safe, sustainable and responsible business practices
Our people are integral to our business and ensuring a safe
workplace is our number one priority.
Diamond mining has one of the smallest environmental footprints in
the minerals sector and Petra is focused on managing its greenhouse
gas footprint.
Our production is certified as conflict free in accordance with the
Kimberley Process and we are a founder member of the Natural
Diamond Council (NDC) which aims to advance the integrity of the
modern diamond jewellery industry, and inspire, educate and protect
the consumer.
59%; 89%
OF PROCUREMENT SPEND WITH LOCAL SUPPLIERS IN
SOUTH AFRICA; AND TANZANIA
50%
IMPROVEMENT IN LOST TIME INJURY FREQUENCY RATE
3 of our 4
MINES ARE THE PRIMARY ECONOMIC CONTRIBUTOR
TO THEIR DISTRICT OR REGION
14%
SOUTH AFRICAN MINES OWNED BY HISTORICALLY
DISADVANTAGED SOUTH AFRICANS
AND 12% BY EMPLOYEES
ESG and Sustainability pages 33 to 40
Our GHG target
PETRA IS COMMITTED TO REDUCING ITS GHG PROFILE
AND TO GENERATE ZERO EMISSIONS ON A NET BASIS
FOR SCOPES 1 AND 2 BY 2050.
HOWEVER, WE ASPIRE TO REACH THIS GOAL BY 2040
OR EARLIER AND HAVE PUT IN PLACE A 2030 GHG
REDUCTION TARGET FOR SCOPE 1 AND 2 EMISSIONS
OF 35–40%, BASED ON OUR 2019 BASE LINE.
The right skills and experience and a culture of continuous improvement
Petra’s team has great depth of experience and expertise in the management of diamond mines, particularly underground, and of operating in
Sub-Saharan Africa. Petra’s culture is one of continuous improvement to empower management to make decisions, motivate and create
accountability in our employees, and to collaborate and engender co-operation with our stakeholders.
EMPLOYEES WORLDWIDE
5,265 +8%
WOMEN IN THE WORKFORCE
(%)
20% 0%
BOARD FEMALE DIVERSITY
(%)
40% +10%
TRAINING AND DEVELOPMENT
SPEND (US$M)
6.1 +5%
Valuing our people page 36
Our investment proposition
Resilient, cash-generative operations
Enhancing stakeholder returns
Transformation led by proven management team
Third largest global resource supports further growth potential
Diversified portfolio with delivery of high-value blue, pink and
large white diamonds
Operating Model drives stability and cash generation
Best-in-class safety performance
Ambitious and rigorous Sustainability Framework
Strengthened balance sheet
Strong operational
cash generation
Value-driven organic and
inorganic growth strategy
A disciplined capital
allocation approach
1.
Self-funded mine
expansion projects
2. Gross debt reduction
3.
Dividend policy
in place
Strong diamond market, supported by a structural supply deficit
Annual Report and Accounts 2022 Petra Diamonds Limited
3
Strategic Report
Chair’s Statement
Petra at a point of inflection
Production, totalling 3.4 million carats, was in line with guidance,
while revenue grew 44% to a record US$585.2 million. Adjusted
EBITDA more than doubled to US$264.9 million with an adjusted
EBITDA margin of 45%, driven by the strong revenue growth and our
measures to improve profitability. Adjusted EPS rose 219% to a record
USc42.93, reversing last year’s loss.
We are reaping the benefits of our focus on cash. Operational free
cashflow rose 91% to US$230 million.
With consolidated net debt at Year end of US$40.6 million, 82% down
from last year’s US$228.2 million, our consolidated net debt:Adjusted
EBITDA ratio came down to just 0.15x, compared with 1.75x last year.
Enabling a reduction in gross debt and dividend policy
This performance has enabled two important developments
announced after the Year end:
Š Our successful tender offer for our Second Lien Notes has already
reduced our gross debt by US$144 million and the offer has been
extended to try and reduce our debt by a further US$29 million
Š Our new dividend policy targeting an ordinary dividend within the
range of 15% to 35% of adjusted free cashflows after interest and
tax and having adjusted for any windfall earnings
Strong diamond market fundamentals
Conditions in the diamond market markedly improved as demand
resumed following the pandemic, particularly during the 2021/22
festive season and contributed to our 41.5% increase in year-on-year
like-for-like rough diamond prices. The global constraints to
production, as mines close or transition from open pit to
underground, continues and underpins the structural supply deficit
which is expected to persist for some time. While the effects of the
current conflict in Ukraine have led to difficult economic conditions
globally, diamond pricing to date has remained robust.
Petra’s position in the market pages 22 to 29
Petra’s sustainable business practices
and ethical values
Š Consumers of diamonds are increasingly demanding reassurance as
to the ethical origins, provenance and sustainability of natural
diamonds. We are committed to the Kimberley Process’s standards
for ethical production and, as a founder member of the Natural
Diamond Council, help promote the value and sustainability of
natural diamonds by highlighting the benefits of diamond mining
in local communities and its relatively low environmental impact
Š During the Year, we introduced a Group-wide Sustainability
Framework built on four pillars which cover our relationships with
employees, our operations and production, our impact on the
environment, and our partnerships with our stakeholders
Š Valuing our People
Š Respecting our Planet
Š Securing Shared-Value Partnerships
Š Delivering Reliable Production
We have set targets for our key undertakings.
ESG and Sustainability page 33
Sustainability Report pages 38 to 40
With all we have successfully achieved
to strengthen Petra, combined with a
supportive diamond market, we are at
a point of inflection and are looking
forward with optimism to the future.
Peter Hill CBE
Non-executive Chair
Petra’s strengthened operational platform
This 2022 Annual Report records a year of significant achievement,
which positions Petra at a point of inflection as we build on our stable
and resilient operating platform and strengthened balance sheet,
underpinned by a diamond market with strong fundamentals.
We made significant progress in further transforming the business, by:
Š Enhancing the efficiency, profitability and cash generation
of our operations through Project 2022
Š Further strengthening our balance sheet through Restructuring,
substantial cash generation, repayment of banking facilities and,
since the Year end, the launch of our successful tender offer to
reduce gross debt
Š Embedding a new Organisational Design and culture, initiating
our Formula for Success
Š Integrating our Sustainability Framework throughout our business
Excellent financial results
Alongside these steps in our transformation, Petra has delivered
very strong results.
We achieved good safety results, halving the Lost Time Injury
Frequency Rate (LTIFR). We implemented systems across all our
operations aimed at preventing and containing the spread of
COVID-19, and continued the roll-out of vaccinations for employees.
4
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Petra’s Board
During the Year, Jon Dudas joined the Board as an Independent
Non-executive Director effective from 1 March 2022, further
strengthening the Board through his broad experience across the
mining and resources sectors, in operations, general management,
information technology, finance and strategy.
Matthew Glowasky stepped down from the Board as a
Non-Independent Non-executive Director on 17 May 2022. He was
appointed in March 2021, following completion of the Restructuring
pursuant to a Nomination Agreement between Petra and Monarch.
While Monarch does not currently intend to nominate a Director to
replace Mr Glowasky, it retains its right to do so.
Appreciation of our excellent Petra people
It was gratifying and humbling to see how well the Petra team
responded to both the challenges and the opportunities of FY 2022.
A second year of COVID-19 meant renewed restrictions, but our team
managed the disruption well.
The strong performance we are reporting is a tribute to the
dedication and resilience of our people and their willingness to
embrace our new culture of continuous improvement, and our
ambitions to increase cash generation, reduce debt and grow our
business. For this I thank each and every one of you.
The future
Petra’s enhanced Operating Model provides a platform for greater
stability and resilience, enabling further cash generation to fund our
capex requirements and support further deleveraging.
Therefore, considering all we have achieved this Year to strengthen
Petra, we really are at a point of inflection and looking forward with
more optimism than we have been able to in recent years.
Peter Hill CBE
Non-executive Chair
10 October 2022
Our Greenhouse gas (GHG) target
Petra’s climate-change ambitions align with the Paris Agreement
and the Nationally Determined Contributions of the jurisdictions we
operate in. For Scope 1 and 2 emissions, we are committed to be net
zero by 2050, but aspire to reach this goal by 2040 or earlier and
have put in place a 2030 GHG reduction target of 35 - 40% based
on our 2019 base line.
Sustainability Report pages 67 to 72
Summary table for recommended disclosures for the TCFD
(Taskforce on Climate-Related Financial Disclosures) page 41
Stakeholder engagement
We enhanced stakeholder engagement by simplifying and clarifying
our policies and processes, introducing feedback and grievance
mechanisms, and implementing revised Stakeholder Engagement
Plans at all our operations. We also continued our programme of
community development work within our host communities, including
providing educational support, sustainable job creation, skills transfer,
enterprise development and infrastructure development.
Stakeholder engagement pages 16 to 18
Sustainability Report pages 15 to 22 at petradiamonds.com/
investors/results-reports/
We continue to address the alleged human rights issues in Tanzania,
first reported in 2020. Our remedial actions have the approval of the
Government of Tanzania, and we have completed the second phase
of stakeholder engagements for the Independent Grievance
Mechanism (IGM). The IGM is expected to become fully operational
by the end of this calendar year.
Petra has also provided £1 million for a number of Restorative Justice
Projects (RJPs) to provide sustainable benefits to local communities,
including medical services, income generation, and sexual and
gender-based violence projects. We have been encouraged by
positive reactions to our approach from local stakeholders.
Read more at petradiamonds.com/our-operations/our-mines/williamson/
allegations-of-human-rights-abuses-at-the-williamson-mine/
The Board continues to ensure that the interests of stakeholders are
considered in both Board discussions and decisions. Consistent with
the requirements of the UK Corporate Governance Code, Petra has
reported on how the interests of stakeholders, and the matters set
out in Section 172 of the Companies Act, 2006, have been considered
by the Board in FY 2022.
Section 172 on stakeholder relationships pages 30 to 32
Consolidating our investment at Williamson mine
in Tanzania
Petra has entered into agreements to reduce its exposure in Tanzania
while retaining control of the Williamson mine.
The Framework Agreement with the Government of Tanzania, approved
by our shareholders at a Special General Meeting, will result in the dilution
of Petra’s indirect shareholding in Williamson Diamonds Limited (WDL).
Completion of the Memorandum of Understanding (MoU) transaction
with Caspian Limited (Caspian) will have the effect of reducing Petra’s
indirect holding in WDL further to 31.5% but with Petra retaining control
of WDL.
Completion of the Framework Agreement and the MoU transaction are
subject to obtaining the necessary regulatory consents. In addition, the
MoU requires the necessary definitive transaction agreements to be
agreed with Caspian. Both transactions are expected to complete in the
first half of FY 2023.
Annual Report and Accounts 2022 Petra Diamonds Limited
5
Strategic Report
Chief Executive Officer’s Statement
Strong revenue growth, profitability and cash
generation in a robust diamond market
In addition to Project 2022, the key drivers
were our record recovery of Exceptional
Stones1, the resumption of operations at the
Williamson mine, and a 41.5% increase in
like-for-like2 diamond prices. The diamond
market remains broadly supportive as a result
of the prevailing structural supply deficit,
although ongoing macroeconomic uncertainties
may lead to some volatility in the short term.
Our strong cash generation has enabled us to
target a further reduction in gross debt. The
tender offer for our Second Lien Notes was
successful and reduced our gross debt by
US$144 million and we have extended the
offer to try and reduce our debt further by up
to US$29 million. This is expected to lead to
considerable savings in interest expenses.
I am also very pleased to announce that,
on the back of our much improved financial
position, the Board has approved a
dividend policy.
Richard Duffy
Chief Executive Officer
We are delighted with our overall performance,
which caps the turnaround, begun three years
ago. Our continued focus on safety has
supported a 50% improvement in our LTIFR.
Additionally, sustainability is being integrated
across our business through the implementation
of our new Sustainability Framework.
Project 2022, now concluded, has delivered
US$265 million in net free cash over its three
years, contributing to our record financial
results for FY 2022.
Financial highlights
Š Revenue up 44% to US$585 million
Š Doubling of adjusted EBITDA to US$265 million
Š Adjusted basic earnings per share up 219% to
USc42.93
Š Operational free cashflow up 91% to US$230 million
Š Consolidated net debt of US$40.6 million, with
leverage of 0.15x
Enabling
Launch of US$150 million tender offer to reduce gross debt
Š The success of this offer, has resulted in a reduction in gross debt
of US$144 million and we have extended the tender offer to seek
to further reduce gross debt up to US$175 million
Announcement of dividend policy
Š The Board approved a dividend policy targeting an ordinary
dividend within the range of 15% to 35% of adjusted free cashflows
after interest and tax and having adjusted for any windfall earnings
1. Petra classifies ‘Exceptional Stones’ as rough diamonds which sell for US$5 million or more each.
2. Like-for-like refers to the change in realised prices between tenders and excludes revenue from all single stones and Exceptional Stones, while normalising for the product mix impact.
6
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Strong financial performance
Overall revenue increased 44% to US$585.2 million, comprising
US$584.1 million from rough diamond sales and an additional
US$1.1 million from our first partnership stone sale. The drivers
of this revenue growth were the year-on-year 41.5% increase in
like-for-like diamond prices and record recovery and sale of
Exceptional Stones, totalling US$89.1 million (FY 2021: US$62.0 million).
Loadshedding and energy reform in South Africa
The recent increase in loadshedding in South Africa is currently having
minimal impact on our operations. Our excess processing capacity at
both Cullinan Mine and Finsch allows us to reduce our processing
energy draw to meet the prescribed load curtailment requirements,
whilst maintaining mining at full production and catching up on
processing when conditions return to normal.
The 11% reduction in rough diamonds sold reflects the particularly
high volumes sold in FY 2021, mostly off-tender, as the inventory
build-up after the initial COVID-19 outbreak was released.
Adjusted EBITDA rose 103% to US$264.9 million with an Adjusted EBITDA
margin of 45% reflecting the strong revenue growth and positive
operational leverage, supported by the recovery of Exceptional Stones.
The 91% improvement in operating free cashflow generation has
been supported by the Project 2022 initiatives. Over the three years
since its commencement, the Project has contributed US$265.4 million
of net free cashflow benefits, exceeding our revised target of delivering
net free cashflow of between US$100 million and US$150 million.
This cash generation means that we lowered our consolidated
net debt to US$40.6 million as at 30 June 2022, down from
US$228.2 million as at 30 June 2021.
Safe and efficient production
We strive to achieve a zero harm working environment. Petra has
focused on improving safety performance through remedial actions
and behaviour-based intervention programmes. As a result, we have
improved the LTIFR by 50% to pre-pandemic levels, and LTIs by 40%
which were of low severity and mostly behavioural in nature. We
continue the roll-out of COVID-19 vaccinations for employees, and
64% of the workforce in South Africa and 16% of the workforce in
Tanzania have been vaccinated. The vaccination rate in South Africa
is well ahead of the national average of 51%.
The vast majority of the 44% increase in ore processed is attributable
to Williamson recommencing operations in August 2021 following a
17-month period of care and maintenance. Williamson ore is lower
grade in comparison to our South African mines and this translated
into a 3% increase in diamonds recovered, within our guidance range.
Project 2022 has, as part of the focus on cash generation, been highly
effective in addressing both operational efficiencies as well as the
efficiency of our operational and capital expenditure. We have
created a Business Improvement function to ensure that the systems
and processes developed as part of Project 2022, which concluded
this Year, will continue to deliver benefits and seek out further
improvement opportunities. Supporting this culture of continuous
improvement, our new Operating Model has clarified lines of
accountability and further empowers our people.
Cash on-mine costs and General and Administrative (G&A) costs
were in line with guidance. The 11% increase in adjusted mining and
processing costs was principally due to the resumption of operations
at Williamson during the first quarter of the Year, the stronger
average ZAR:USD exchange rate and inflationary increases.
Group capex of US$52.2 million was below guidance following
delayed delivery of certain capital items planned for FY 2022 due to
increased lead times. As a result, around US$12 million of capex that
was due to be incurred in FY 2022 is now expected to be incurred in
FY 2023. US$34.5 million of the FY 2022 capital spend was expansionary
capex and the vast majority of total capex was invested at the Cullinan
Mine and Finsch (US$35.0 million and US$12.0 million respectively).
The regulator in South Africa recently removed the cap for private
power generation without licencing which has opened up
opportunities for high energy users to integrate renewables on their
own sites, and Petra is actively looking at options that are optimal
from a financing and partnering perspective that would enable us to
integrate renewables into our energy mix, lower our cost of energy,
secure our energy supply, and support our target of achieving net
zero GHG emissions by 2050 or earlier.
Our mine plans
Resources
Petra manages one of the world’s largest gross diamond resources
(inclusive of reserves) of 226.6 Mcts, supporting a potential mine life
well beyond the current mine plans. The 2% reduction compared to
230.64 Mcts in 30 June 2021 was predominantly due to depletions
resulting from mining at all our assets in FY 2022.
Petra’s gross diamond reserves decreased 10% to 29.97 Mcts (30 June
2021: 33.33 Mcts) primarily due to mining depletions, minor changes
in mine plans and Williamson remaining on care and maintenance
until August 2021.
Life extension projects approved during the Year
As announced previously, the Board approved extension projects at our
major South African mines, the Cullinan Mine and Finsch, during the Year.
Š At the Cullinan Mine we will establish a CC1 East sub-level cave, on
the same level as the current C-Cut operation, extending the mine
plan to 2031. The capital investment is estimated at US$173 million
over the life of the project and is expected to deliver a project
internal rate of return (IRR) of more than 30% and incremental
project net present value (NPV) of more than US$70 million. Capital
expenditure began during the Year and production is expected to
begin in FY 2024, ramping up to a steady state in FY 2026
Š At Finsch, we will extend the mine below the current area, creating
a Lower Block 5 3-level sub-level cave, extending the mine plan to
2030. The capital investment is estimated at US$216 million and
the IRR is also expected to be in excess of 30% with incremental
NPV of more than US$90 million. Capital expenditure for this
project will commence during FY 2023 and we expect production
to commence in FY 2025
Š The capex involved in these projects is expected to be self-funded
There are further opportunities beyond these mine extension plans,
given the significant scale of the orebodies at the Cullinan Mine,
Williamson and Finsch.
Koffiefontein
As Koffiefontein approaches the end of its mine plan, Petra has been
exploring options for a responsible exit. The sales process that Petra
announced in April 2022 has been unsuccessful in identifying a
potential buyer and so Petra is now evaluating its other options and
continues to operate the mine responsibly.
Annual Report and Accounts 2022 Petra Diamonds Limited
7
Strategic Report
Chief Executive Officer’s Statement continued
Diamond market remains buoyant
despite uncertainties
Despite significant global economic uncertainties resulting from the
war in Ukraine, like-for-like rough diamond prices increased 41.5% for
the Year, driven in particular by record jewellery retail demand in the
US. Overall we saw strength of demand across our product mix, both
in white and coloured gem-quality stones, with some increased
demand for smaller diamonds in the final tender of the Year in June.
Tender 1 FY 2023
We have achieved strong sales in the first tender of FY 2023, realising
US$102.9 million due to a high proportion of high-value gem-quality
single stones particularly from the Cullinan Mine. This has resulted in
a 21% increase in our average realised price against Tender 6 in FY 2022,
more than offsetting the 4.5% softening of like-for-like prices.
company. The transaction remains subject to the parties first
agreeing definitive transaction agreements and then obtaining all
necessary Government, regulatory and lender approvals which are
also expected to be obtained in the first half of FY 2023.
Independent Grievance Mechanism and community
projects at Williamson
Petra has implemented remedial programmes and initiatives and is
establishing the Independent Grievance Mechanism (IGM) to address
the historical allegations of human rights abuses at Williamson. The
second phase of engagements with the Government of Tanzania and
local stakeholders on the IGM has been completed, and the focus is
now on updating the IGM processes and appointing the various
organs that will make up the IGM, with it expected to become
operational by the end of this calendar year.
The supportive structural supply deficit in the diamond market
Growth in demand was driven by mid-stream inventory restocking
and continued strong jewellery retail sales associated with a delayed
wedding boom, and a growing trend in diamonds being given as
meaningful gifts post COVID-19. While the diamond market is strong,
macroeconomic uncertainties caused by the rise in inflation are a
potential dampener of demand.
While the IGM is still being finalised, a mechanism has been set up to
enable community members to confidentially and securely register
alleged historical human rights grievances. This mechanism continues
to receive grievances, with a significant amount of grievances having
been registered to date. As the IGM is not yet operational (and
therefore unable to start investigating these grievances), it is too
early to evaluate the merits of these grievances.
Global supply is expected to remain broadly flat for the next ten
years at between 115 and 125 Mcts. This is driven by the reduction in
the number of producing mines, the long lead times for open-pit
mines to transition to underground mining, as well as the very limited
investment in exploration. Given that less than 1% of kimberlites
discovered are economic, we do not expect this to change in the
medium term.
Sustainability performance to benefit from new
Sustainability Framework
Petra is embedding its new Sustainability Framework so that
environmental, social and governance improvements are further
integrated throughout our operations. Objectives are published in our
FY 2022 Sustainability Report.
Our GHG target
Petra remains committed to reducing our GHG profile and to
generate zero emissions on a net basis for Scopes 1 and 2 (emissions
from sources we own and control directly and those through the
energy we purchase) by 2050. However, we aspire to reach this goal
by 2040 or earlier and have put in place a 2030 GHG reduction target
for Scope 1 and 2 emissions of 35 - 40% based on our 2019 base line.
Our emissions profile is heavily weighted to our Scope 2 emissions
which comprise 97% of our total emissions in South Africa and 92%,
including Tanzania. Scope 3 emissions comprise 2% of our total
emissions We continue to improve the mapping of Scope 3 emissions,
and will focus on reducing these once the roadmaps for reducing
Scopes 1 and 2 emissions are under implementation.
Framework Agreement with the Government
of Tanzania and MoU with Caspian
In December 2021, Petra announced that it had entered into two
agreements with the objective of reducing its exposure to Tanzania
while still retaining control of Williamson.
The Framework Agreement between Petra and the Government of
Tanzania will become effective after a number of conditions are
satisfied, including obtaining various Government approvals. The
agreement, which will result in the reduction of Petra’s indirect
shareholding in Williamson Diamonds Limited (WDL) from 75 to 63%,
and establish a sustainable future for Williamson, is progressing and
is now expected to become effective in the first half of FY 2023.
Petra expects to further reduce its indirect shareholding in WDL from
63 to 31.5% via a sale to Caspian Limited but with Petra retaining a
controlling interest in WDL, as Petra have the controlling vote on the
WDL board via its controlling interest in the intermediate holding
8
Petra Diamonds Limited Annual Report and Accounts 2022
A number of other initiatives are being put in place to provide
sustainable benefits to the communities located close to the mine,
funded by the £1 million escrow account established by Petra. Having
completed all planned activities in Q1 CY 2022, the Gender-Based
Violence initiative is now training young men as champions and first
responders, and setting up survivor self-help groups within the
surrounding communities. The medical services project has been
expanded to provide further services, including surgery, medication
and psychological support. Feasibility studies for income-generating
projects (agriculture businesses and artisanal mining) are also
progressing, and a radio programme to improve awareness and
understanding of the IGM and community projects amongst
the local community has been set up.
More information on the IGM, the community projects and illegal
incursions into the Williamson mine lease area can be found on
Petra’s website.
petradiamonds.com/our-operations/our-mines/williamson/
allegations-of-human-rights-abuses-at-the-williamson-mine/
Our purpose and culture
The turnaround of Petra includes the implementation of our new
Operating Model, incorporating continuous improvement and other
benefits from Project 2022.
We have also defined our new Purpose, Creating Abundance from
Rarity, that describes why we do what we do at Petra and the positive
impact we would like to have on our stakeholders. To support our
transformation towards realising our Purpose, we have been through
an inclusive process, involving all of our employees, to refresh our
culture which we have called our Petra Formula for Success.
This has resulted in our employees identifying a set of enablers –
what they would like us to do more of, and a set of disablers – what
they would like us to do less of. This will embed a ‘Petra way of
working’ that will drive delivery of our value-led growth strategy.
New dividend policy
The Board approved a dividend policy targeting an ordinary dividend
within the range of 15% to 35% of adjusted free cashflows after
interest and tax and having adjusted for any windfall earnings.
The Board would ordinarily look to the annual dividend being paid 1/3
following its interim results and 2/3 after its full year results. The
dividend policy will take effect from 1 July 2022 and the Board will
consider whether to pay a maiden dividend under this policy
following publication of Petra’s interim results for the six months
ending 31 December 2022. In a year where Petra generates windfall
earnings, the Board may consider paying a special dividend.
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Prior to declaring or recommending any dividend, the Board will
consider the Group’s capital commitments, including, amongst other
things, approved expansion projects and debt servicing and repayment
commitments and associated covenant requirements, to ensure that
the Group maintains a healthy balance sheet and sufficient liquidity
and headroom.
Debt tender offer
In September 2022, Petra launched a tender offer to bondholders to
purchase US$150 million of the Senior Secured Second Lien Notes due
in 2026 in line with our stated intent to further optimise our capital
structure through a reduction of gross debt. As at the date of this
report, the Company has, through this tender offer, reduced gross
debt by US$144 million and has extended the tender offer to reduce
its gross debt further by up to US$29 million. As per our stated
strategy, Petra will continue to consider opportunities to further
optimise its debt structure. This transaction will see Petra saving at
least US$14 million (and up to US$17 million) per annum in interest
expenses, while we remain confident that we will continue to fund
our ongoing capital programmes from existing and internally
generated cash resources. Further detail on the tender offer is
covered in separate announcements which can be found on
Petra’s website.
petradiamonds.com/investors/news/
Outlook
FY2023 - 2025 production, cost and capex guidance remains
unchanged. We continue to monitor the evolving macroeconomic
environment that has seen higher inflation and interest rates. Our
ability to absorb inflationary pressures is assisted by our disciplined
cost management, relatively low fuel consumption, and any
weakening of the South African Rand.
The backdrop of structural changes to the supply and demand
fundamentals in the diamond market remains unchanged and we
anticipate that it will continue to be supportive going forward,
notwithstanding possible volatility in the short term.
The implementation of our new Operating Model, that formed part
of Project 2022, has provided a more stable and resilient operating
platform supporting ongoing cash generation, enabling our self-funded
expansion programme, the successful tender offer for our 2nd lien
notes and the potential payment of dividends under our new
dividend policy.
Thank you to the Petra team
Finally, I want to thank the Petra team for all they have done to
realise our successes in FY 2022. They have honoured our values and
delivered these superb results, embracing our culture of continuous
improvement and driving our value-led growth strategy. Their
commitment and ambition sets us for an exciting future.
Richard Duffy
Chief Executive Officer
10 October 2022
Creating abundance from rarity
We have restated our purpose
focusing on our stakeholders and
the value that Petra generates.
We believe that Earth’s rare and
precious legacy can, through
responsible mining, create
abundant outcomes for our people,
communities, investors, customers
and all other stakeholders
in giving expression to life’s
special moments.
1 . Abundance for our people in
realising their full potential to
deliver extraordinary outcomes
2. Abundance for our communities
through partnering to provide
enduring benefit for future
generations
3. Abundance for our investors in
generating sustainable returns
4. Abundance for our customers in
celebrating love, friendship and
life’s achievements
Purpose statement pages 10 to 13
A view of Finsch mine from its surrounding protected nature reserve.
Annual Report and Accounts 2022 Petra Diamonds Limited
9
Strategic Report
Our Purpose, Values and Culture Change
Our purpose: creating abundance from rarity
I am confident that our clear and compelling new purpose "Creating
abundance from rarity" will engender a united vision of what we believe
our work at Petra can achieve. This aligns with a set of principles and
structures that guide our actions, and help us deliver our ambitions.
Thashmi Doorasamy Group HR & Public Affairs Executive
Having achieved significant and wide-ranging positive change in Petra over the last few years,
we have put in place a new Operating Model and Organisational Design that have business
improvement at their core. We have also embarked on a process which gives our people, who
are the heart of our business, a voice in shaping our culture to ensure the successful delivery of
our value-led growth strategy. In so doing, we aim to unite the entire Company, at every level,
through an understanding of Petra’s purpose which we have worked together to articulate.
Journey to craft our purpose statement
During the Year, we undertook to articulate a purpose statement
which would set our aspirations, acknowledge our key characteristics,
recognise what we mean for stakeholders, embrace our focus on
Africa, and link our product with the benefits it brings and the
expression of life’s special moments it gives.
The process, which was led from the top and rigorously engaged with
all Petra’s employees, comprised four phases to sign-off and will now
proceed to Group-wide communications.
THE PROCESS WE UNDERTOOK
1.
Exco workshop – articulate the fundamentals of our purpose
2.
Management enrolment – co-creation of our purpose
3. One-to-one interviews with leadership – shape our purpose
In parallel with the bottom-up co-creation of Formula for Success
4.
Agreement – Exco input and Board sign-off
5. Communication and awareness with employees – ongoing
Developing our culture and Formula for Success
Agreeing our purpose –
so that the entire
organisation is
contributing to its
attainment
Establish the critical
success factors –
factoring in what we
need more of, or less of,
to fulfil Petra’s purpose
Disseminate the
Formula for Success
throughout Petra
with ranking and
explanations of factors
Measurement and
innovation cycles to
ensure the culture is
gaining traction
The inclusive process (illustrated above) aims to identify the culture we need to reflect our ambitions, and to bring about a Formula for Success
which is relevant for everyone in Petra.
10
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Our values define the way in which we work
As part of our work on our culture and Petra’s Formula for Success, we will be carrying out a review of our values in FY 2023 to ensure that
they continue to underpin our culture in a practical sense, adding to all the spheres in which we operate and benefiting all our stakeholders.
LET’S DO NO HARM
Petra considers the health and safety of its employees, and care for the environment,
as its top priorities. Management’s focus on a zero harm environment requires a zero
tolerance approach for any action that results in potential injury to employees.
LET’S MAKE A DIFFERENCE
Petra strives to make a real and lasting contribution to its People, its Partnerships and
the Planet through responsible and reliable Production. This includes enhancing its
local environment to the benefit of employees and communities. The Company
achieves this through various initiatives which aim to stimulate local socio-economic
development, as well as by upholding high standards of environmental stewardship.
LET’S DO IT RIGHT
Petra places a high priority on ethical conduct. The Company believes in the responsible
mining and sale of its diamonds, and will only operate in countries which are members
of the Kimberley Process. As a legitimate diamond miner with operations in South
Africa and Tanzania, 100% of Petra’s production is fully traceable and conflict free.
LET’S TAKE CONTROL
Petra believes that employees who are empowered and accountable for their
actions work to the best of their ability, whilst fostering a culture whereby innovation
and creativity in the workplace are encouraged. We believe that no one knows our
operations better than our own employees, and the Company looks to leverage
its internal skills base wherever possible.
LET’S DO IT BETTER
Petra strives to generate efficiencies at its operations and applies a continuous
improvement approach in order to review and assess opportunities for improvement;
key focus areas are power and water usage, security and effective use of labour.
This approach is embedded in our operating model to promote a culture of continuous
improvement. Using past experience to improve future performance is integral to
the Company’s success.
Annual Report and Accounts 2022 Petra Diamonds Limited
11
Strategic Report
Our Purpose, Values and Culture Change continued
Organisational initiatives to reinforce our culture
We have embarked on a number of initiatives that are the building blocks for developing and
reinforcing a culture that is aligned to our values and enables the repositioning of the business.
The key initiatives are set out below.
1. Leadership alignment and development
Building capacity as leaders
It was imperative for the Executive team to invest in personal leadership effectiveness through a process of 360 Leadership Feedback which
was carried out in FY 2022. The intention has been to encourage connection within the leadership teams, as custodians and stewards of Petra
and its people, in the belief that there is a shared, purposeful and possible ambition. Organisational conversations about culture are planned
for each quarter going forward.
Creating a culture of management excellence
This initiative seeks to standardise the Petra approach in training for management excellence in the expectation that it will develop the
competencies needed to ensure that we optimise employee potential. Three focus areas align with differing needs across the business: Senior
Management development to deliver operational excellence; supervisory and junior manager development to drive team excellence; and
empowering individuals. Formal training sessions for each of these groupings will occur in FY 2023.
Petra’s Executive Committee
Richard Duffy, Chief Executive Officer
Jacques Breytenbach, Chief Financial Officer
Jaison Rajan, Chief Operating Officer
Juan Kemp, Chief Technical Officer
Thashmi Doorasamy, HR & Public Affairs Executive
Greg Stephenson, Sales & Marketing Executive
Ayoub Mwenda, Country & Mine Manager, Williamson
Rupert Rowland-Clark, General Counsel & Company Secretary
Presentation to the Board on the risk assessment of the Slimes Dam at the Cullinan Mine, May 2022.
2. Enhancing our safety culture within the organisation
Petra’s priority has always been safety, and to enhance focus on our value to do no harm,
a Production Bonus scheme for all employees, up to and including the supervisory level,
was implemented in July 2021. This scheme aims to align employees’ variable pay with
achievements that meet and exceed production expectations. The scheme is aligned to an
employee’s line of sight which enables discretionary effort and reduces absenteeism, and
focuses on adherence to safety standards. The scheme is moderated by various elements
including safety performance. No bonus is payable if there is a fatal accident during the
quarter. A deduction of 2% will be applicable for every Lost Time Injury (LTI) during the
quarter. If there are no LTIs in a quarter, the mine will qualify for an additional 5% bonus.
We believe our improved LTIFR for this year can, in part, be attributed to this emphasis
within our culture.
Cancer awareness day at the Cullinan Mine where prostate and
breast cancer screening is made available to employees, Oct 2021.
12
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
3. The new Organisational Design embeds the benefits of Project 2022
Lessons taken from Project 2022, which was initiated in 2019 and completed in June 2022, have been embedded in our new Operating
Model with continuous improvement and accountability at its core. We have put in place clear structures with well-defined roles that
include KPIs and an understanding of the necessary cross-functional work. This project aimed to eliminate inefficiencies and duplication of
effort, speed up decision-making and ensure the integration of workstreams. Honest, open and transparent communication and interaction
is central to achieving this, and is encouraged and supported by structured Results-Action-Review (RAR) sessions for all Senior Managers.
This Operating Model aligns with our strategy, engenders consistency across the business, and ensures we meet our regulatory and
governance commitments.
Case study – The legacy of Project 2022
Initiated in 2019, Project 2022’s scope was far-reaching and touched on every element of our business. Ideas were encouraged, reviewed
and ultimately developed as projects with cross-disciplinary project teams working together. Diagnostics and the road map to delivery
included the following major aspects:
Š Throughput in the mines
Š Operational expenditure efficiencies
Š Capital expenditure efficiencies
Š Organisation Design
Since the completion of the diagnostic and road map phase, the key has been to ensure that the benefits are fully integrated into our
business and embedded as part of our way of working, so that we really do continuously improve in everything we do. We have done
this in a variety of ways including:
Š Putting business improvement at the core of our Formula for Success culture
Š Rolling out weekly RAR meetings, introduced as part of Project 2022 to facilitate the execution of the project across Petra. At these
meetings we monitor performance, provide support and resourcing, and ensure accountability
Š Petra’s incentive and production bonus schemes have been aligned to support and reward the delivery of Project 2022 behaviours
and targets
We have now fully transitioned Project 2022 from project to operational norm.
Project 2022 was initiated in 2019 to significantly improve net free
cashflow (NFCF) and instil a culture of continuous improvement
YEAR 1 – FY 2020
Stabilise and generate
cash – existing assets
Š Operations: deliver
substantial part
of benefit in first
12 months
Š Overhead cost
optimisation
YEAR 0 – FY 2019
Identify the opportunity
Š A high level target
established
(US$100–150m NFCF)
Š Diagnostics on
key opportunities
Š Develop road map
YEAR 3 – FY 2022
Position the Company
to pursue further
growth opportunities
YEAR 2 – FY 2021
Instil a continuous
improvement culture
Š Establish systems and
processes (wiring) to
create demand for
improvement
Š Continuous
improvement in Petra
CONCLUSION – FY 2022
Project 2022 delivered US$265.4 million in net FCF
and is now established within the Company’s
Operating Model and culture
Annual Report and Accounts 2022 Petra Diamonds Limited
13
Strategic Report
Our Strategy
Our value-led growth strategy
for a sustainable future
One of the major benefits of our business transformation is that now, with a stronger
foundation for greater stability, resilience and further deleveraging, we can expand our
focus to executing our value-led growth strategy.
Richard Duffy
Chief Executive Officer
The backdrop to our strategy refresh
During the first half of the 2022 financial year, we undertook an extensive and structured strategy review with the aim of setting a strategy that
maximises value generation, while ensuring it is easily relatable to our stakeholders. It was important that it should be meaningful to employees
and align with the new culture and practical legacy from Project 2022. This is a critical aspect to ensuring successful delivery on our strategy.
The strategy review involved extensive discussions across the Group, including the Board, aimed at identifying our key strengths. We identified
eight strengths that we believe we can leverage in executing our growth strategy. They are our competitive advantages and, by exploiting
them, we increase the probability of success in achieving our intended outcomes.
See pages 18 to 19
On the other hand, we also identified areas of improvement as part of our drive for continuous improvement. This understanding of our
strengths and weaknesses contributed to the choices we made in determining our refreshed strategy.
Our value-led growth strategy
1
2
3
Current operations
Brownfield organic
expansion projects
Inorganic and
corporate opportunities
Š Maximise value from existing
operations including capital projects
at Cullinan Mine and Finsch
Š Develop further expansion projects
to extend life of existing assets to
beyond 2030
Š Assess orebodies either
in or near production
Š Pursue value-accretive
corporate opportunities
Enabled by our Operating Model and capital allocation framework
Our value-led growth strategy is summarised in three distinct areas:
3.
1.
2.
Current operations: our immediate focus is on maximising value
from current operations. This means safe and reliable production at
our existing mines, while pursuing continuous improvements to
enhance margins. We have also approved projects at Cullinan Mine
and Finsch to extend current operations to 2031 and 2030, respectively.
Brownfield organic expansion projects: given our large resource
base, we will continue to develop life of mine extension plans
beyond 2030. Our orebodies are well understood and we believe we
can continue to extract significant future value from these assets.
14
Petra Diamonds Limited Annual Report and Accounts 2022
Inorganic and corporate opportunities: we will look to grow
outside our current portfolio and consider value-accretive assets
or corporate level opportunities. Our primary focus is producing
or near-producing kimberlites in Africa, however, on an
opportunistic basis, we would also consider opportunities in
commodities that provide exposure to adjacent or synergistic
revenue streams to diamonds, and/or opportunities where we
can extract value through leveraging our key strengths.
We have determined that we will not:
Š Invest further development capital in Koffiefontein and, with the
sales process having been unsuccessful, we will continue to mine
Koffiefontein responsibly while considering other options
Š Pursue greenfield exploration for new kimberlite pipes
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Frameworks to ensure the discipline and successful execution of our strategy
As part of the strategy refresh, we developed guiding frameworks to facilitate successful execution of our strategy, and ensure a long-term
sustainable future for the business. These frameworks are:
1. Our Operating Model
Our Operating Model is structured to facilitate the provision of services to our operations. Structure and oversight is provided by Group
and the execution-focused support comes from the specific functions within Petra. This simple Operating Model provides clear accountability
and authority, with the appropriate number of organisational layers to ensure the right work is done at the right levels, empowering people
to deliver on the Company’s strategy. This Operating Model positions us to integrate future assets into our business, allowing for synergies,
standardisation and scale benefits to be unlocked.
ENABLED AND DRIVEN BY PEOPLE
GROUP
Š Develop the Petra Diamonds
Strategy and overall delivery
Š Portfolio management
Š Governance and Compliance
Š Business performance
management
Š Organisational transformation
Š Deliver safe and reliable
Š Achieve established targets on
HSE, costs and production
Š Maintain our social licences
to operate
OPERATIONS
production
Š Ensure operational performance
through effective and safe
management, in line with
medium and long-term
integrated planning
Š Develop policies, procedures,
standards and controls to
achieve standardisation
FUNCTIONS
Š Verify compliance to standards
Š Analyse performance and initiate
improvements in accordance
with strategy
Š Utilise functional capabilities
to enable operations to achieve
and exceed safety, production
and cost KPIs
Š Specialist work with mandated
authority and accountability
Š Drive integrated medium and
long-term planning and
improvement across the business
Š Define functional performance
metrics, measurement approach
and provide performance analysis
Š Organisational capability –
ensure capacity and strength
in functional talent pool
CLEAR ACCOUNTABILITY AND AUTHORITY
2. Our capital allocation framework
We apply a well-structured capital allocation framework that ensures the long-term stability of the business, while also allowing for a balanced
approach to discretionary capital allocation.
FIRST ORDER OF ALLOCATION
SECOND ORDER OF ALLOCATION
DISCRETIONARY ALLOCATION
(only after satisfying 1st and 2nd orders)
Operational and social licence
to operate (opex)
Expansions projects
at Cullinan Mine and Finsch
Further brownfield expansion
Optimum stay in
business capital
Service debt obligations
Further growth projects
(including inorganic)
Early debt redemption
Dividends to shareholders
Special dividends
Opportunistic growth
opportunities
Share
buybacks
Annual Report and Accounts 2022 Petra Diamonds Limited
15
Strategic Report
Our Strategy continued
Frameworks to ensure the discipline and successful execution of our strategy
continued
3. Our Sustainability Framework
We have developed a systematic Sustainability Framework, based on the four pillars of People, Partnerships, Planet and Production. This will
not only help us in day-to-day business decision-making but will also ensure that the execution of our strategy is in line with our sustainability
targets. This approach means that new projects and initiatives will contribute towards our sustainability ambitions while creating value for
stakeholders, and thus ensure Petra continues to be a responsible corporate entity.
The Sustainability Framework is covered in our Sustainability Report on pages 38 to 40
Instilling an inspirational
culture and embedding
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4. Our new culture and Formula for Success
The application of our strategy is underpinned by our culture reset and we refreshed those elements of our organisation that are critical for
enabling a sustainable long-term future. This includes a redefined purpose and a Formula for Success that we have developed through a
Group-wide inclusive and iterative process, thus ensuring that the whole organisation not only understands our united purpose, but will also
consciously contribute to its attainment.
MAIN ELEMENTS OF PETRA’S CULTURE RESET
Operating Model
(service delivery)
Organisational Structure
(reporting and level of work)
PETRA’S INSPIRATIONAL CULTURE
Š Driving zero-harm
Š Working together towards
Petra’s strategy
and business priorities
Š Empowered people with
clear accountabilities
Š Cross-functional,
high-performing teams
Š Values-driven leadership
Š Behaviours: “doing the
right thing”
Ways of working
Continuous
improvement mindset
An
inspirational
culture to drive
our business
forward
Role profiles with
clear accountabilities
Business process and
management practices
DESIRED OUTCOME
Risk and
Assurance Management
People effectiveness
and capability building
Leadership
and workforce
performance
Business impact
16
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Our strategy in action
We consider our short-term priorities to be those for the 2023 to 2025 financial years. Our medium to long-term priorities include those
beyond the 2025 financial year.
FY 2023
TO
FY 2025
FY 2025
AND
BEYOND
SHORT-TERM PRIORITIES
MEDIUM TO LONG-TERM PRIORITIES
Š Safe and reliable production from our operations
with continuous business improvement
Š Disciplined execution of approved expansion capital projects
Š Continued improvement of our balance sheet health
Š Pursue further opportunities to optimise our gross
debt position
Š Development of execution roadmaps for sustainability
targets, specifically the 2030 Scope 1 and 2 greenhouse
gases (GHG) reduction target, in line with our target to be
net zero by 2050 and aspiration to reach this goal by 2040
or sooner
Š Assessment of opportunistic growth opportunities
that are value accretive and in line with our capital
allocation guidelines
Š Position Petra to enable it to pay dividends to shareholders
Š Continue to mine Koffiefontein responsibly while considering
other options for the remaining short period of its mine plan
Š Maintenance of operational stability at mines
Š Completion of extension capital programmes at the Cullinan
and Finsch Mines
Š Continued improvement of balance sheet - 2L debt
restructured or settlement of current 2L debt in Mar 2026
Š Execution of 2030 GHG reduction roadmap
Š Development of further life extension projects for own
operations beyond 2030 and 2031
Š Continue to position Petra to enable it to pay dividends
to shareholders in accordance with the dividend policy
Annual Report and Accounts 2022 Petra Diamonds Limited
17
Strategic Report
Our Competitive Advantage
Our key strengths
Petra’s key strengths come to the fore when our business model is put
into action. It is these that set us apart, underpin our strategy and
generate value for our stakeholders.
Diamond mining
at scale
Sales and marketing
capabilities
Partnering credibility
Agile, entrepreneurial
mindset
Petra manages one of the
world’s largest diamond
Resources of c.227 Mcts
We focus on assets with
potential for significant
production, operating margin,
diamond resources and
remaining mine life. The
potential mine lives of our core
assets could be considerably
longer than the current mine
plans or could support higher
production rates
Assets with robust economics
can withstand fluctuations in
diamond prices and are highly
cash generative
Petra has developed marketing
and sales expertise in-house and
runs a competitive tender sales
process which provides a
competitive pricing environment
Petra believes in the responsible
mining and sale of its diamonds,
and will only operate in countries
which are members of the
Kimberley Process
100% of Petra’s production is
fully traceable and conflict free.
We are also a member of the
NDC which promotes the benefit
of natural diamonds
Petra’s supply chain department
enables production and
expansion plans by ensuring that
the right goods and services are
delivered to the right location at
the right time – and safely,
efficiently and according to the
highest level of ethical conduct
We source 100% of the goods
and services from the countries
in which we are located.
Preference is always given to
suppliers in close proximity
to our mines
Our support of local procurement
is a powerful lever for local
economic development and
community empowerment
Petra has an agile,
entrepreneurial mindset which is
value driven, has a track record
of performance and comes
with a deep understanding
of our industry
Our extensive in-house,
operational capabilities covering
the full diamond mining
spectrum – exploration,
development, production,
expansion, processing, sorting,
marketing and sales and is
backed up by an effective
corporate team
FY 2022 ACHIEVEMENT
The Board approved extension
projects at our major South
African mines, the Cullinan Mine
and Finsch, during the Year
FY 2022 ACHIEVEMENT
We have entered into
partnerships through which
we participate in the upside
of the polishing of three of
our rough diamonds
FY 2022 ACHIEVEMENT
59% and 89% of procurement
spend was with local suppliers in
South Africa and Tanzania
respectively
FY 2022 ACHIEVEMENT
We implemented a new
Operating Model which drives
continuous improvement as
learned through Project 2022
18
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Bulk mining skills
Experience operating
in challenging
environments
Established in the
African mining
ecosystem
Identifying and turning
around assets
We operate major underground
pipe mines and a large high-volume
open cast mine in Tanzania
Our strong operations team has
significant experience in the
management, mining and
development of hard rock
orebodies
Both Cullinan Mine and
Williamson are renowned as
sources of large, high-quality
gem diamonds, including
Type II stones
Cullinan Mine is the world’s most
important source of very rare
blue diamonds
Petra considers the safety of its
employees and care for the
environment as its top priorities
with a zero-tolerance approach
for any action that results in
potential injury to employees
We have an appropriate, robust
and effective risk management
framework and are evolving our
governance policies in line with
the growth of our business
We are in the process of completing
the Framework Agreement with
the Government of Tanzania and,
with the subsequent transaction
with Caspian (also yet to complete),
expect to reduce our risk exposure
while maintaining control
We operate in South Africa and
Tanzania where we have deep
expertise in the country-specific
regulatory, tax, legislative, social
and economic environments
We are supportive of the South
African Government’s policies of
addressing past economic
imbalances, and to this end, set
targets consistent with the
Mining Charter
Petra’s technical team has
decades of specialist experience
in the appraisal and valuation
of diamond orebodies and we
produce the full range of diamonds
from a diversified portfolio
Petra focuses on long-life assets
with the potential to generate
significant cashflow and
structures its operations with
the long-term viability of the
project in mind
Our prior strategy of optimising
our assets remains core to our
new strategy
FY 2022 ACHIEVEMENT
We recovered and sold
US$89.1 million Exceptional
Stones (each of greater value
than US$5 million)
FY 2022 ACHIEVEMENT
A non-judicial IGM is in
development and Restorative
Justice Projects are being
implemented in Tanzania
FY 2022 ACHIEVEMENT
Our new Sustainability
Framework is being fully
integrated and monitored across
our business
FY 2022 ACHIEVEMENT
We are now executing our plans
for extension at Cullinan Mine
and Finsch
Annual Report and Accounts 2022 Petra Diamonds Limited
19
Strategic Report
Our Business Model
Delivering long-term
value to our stakeholders
INPUTS
Responsible leadership
Š Sustainable operations
Š Uphold the high value placed on
diamonds by consumers
People and skills
Š Company culture
Š Value-led growth strategy
Š Productive workforce
Š Specialist skills
High-quality assets
Š Significant resources
Š Diverse product range
WHAT WE DO
Development
Central to our approach is the identification of the right
projects, where we can add value
Mining
Petra’s operations are focused on ‘hard rock’ kimberlite
pipe orebodies
HOW WE DIFFERENTIATE THE WAY WE DO IT
Š We apply decades of specialist experience in the appraisal and valuation
of diamond orebodies
Š Our mines produce a full range of diamonds
Š We focus on well-defined and understood orebodies with the potential
to generate significant cashflow
Š Our plans are are structured around the long-term viability of each project
Š Safety is our number one priority and ingrained in everything we do
Š Hard rock orebodies can generally provide for much better
predictability and long-term planning than alluvial deposits
Š We have a strong operations team, with significant experience in
the management, mining and development of diamond orebodies
Š Our technical competence enables us to meet and overcome challenges
as they arise
Š We focus on driving efficiencies, e.g. via Project 2022 and Business
Re-Engineering (BRE) projects initiated at Finsch and Koffiefontein
Sustainability Framework
Pages 38 to 40 of the Sustainability Report
Integrated Risk and Assurance Framework
Pages 65 to 70
Governance Framework
Pages 75 to 86
Formula for Success
Pages 10 to 17
VALUE CREATION OUTPUTS
Employees
Š Focus on safety
Š Culture of empowerment
Customers
Š Quality and consistent product offering
Š Confirmed provenance and heritage
Host Governments/regulators
Š Taxes and royalty payments
Š Positive impacts on our countries of operation
US$146.0m
PAID IN SALARIES AND OTHER BENEFITS
US$6.1m
EMPLOYEE TRAINING AND DEVELOPMENT
3.4 Mcts
DIAMONDS SOLD
100%
CONFLICT FREE
Sustainability Report pages 41 to 62
Pages 25 to 27
1. Using the accepted x10 multiplier effect for South Africa and Tanzania.
20
Petra Diamonds Limited Annual Report and Accounts 2022
US$57.6m
TAXES AND ROYALTIES PAID
c52,650
ESTIMATED NUMBER OF DEPENDENTS
ON OUR DIRECT EMPLOYEES1
FY 2022 Payments to Governments Report
petradiamonds.com/investors/results-
reports/
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
We believe that Earth’s rare and precious legacy can, through responsible mining,
create abundant outcomes for our people, communities, investors, customer and all
other stakeholders in giving expression to life’s special moments.
Financial capital
Š Responsible capital allocation
Š Access to diversified sources
of capital
Relationships
Š Mutually beneficial partnerships
Š Effective internal and external
stakeholder engagement
Š Licence to operate
Energy and water
Š Sustainable access to energy
and water
Technology
and equipment
Š Extension of mine lives
Š Optimisation of operations
Processing
Ore is passed through the processing plant to extract the
diamonds from the rock
Sorting and sales
Rough diamonds are sorted into parcels and then sold through
a competitive tender process
Š We are focused on value production, rather than volume
Š Plant processes are set to optimise revenue generation from each
individual mine’s orebody, by focusing on where the value lies
within its diamond population
Š We embrace innovation and continually stay abreast of the latest
diamond mining and processing technologies
Š Security is enhanced through maintaining automated,
‘hands-off’ processes
Š We have our own in-house marketing and sales expertise and do not
pay any sales commission to a third party
Š We utilise the competitive tender process, to ensure a competitive
pricing environment
Š South African production is normally sold in Johannesburg, thereby
enabling local participation. Tanzanian production is sold in Antwerp.
Petra has flexibility in the venue and timing of tenders
Š Our mines, particularly Cullinan Mine, produce world-class diamonds,
including very high-quality large white diamonds and incredibly rare
blue diamonds
Š We maximise the value of Exceptional Stones, including via dedicated
standalone tenders or by selling into partnerships
Sustainability Framework
Pages 38 to 40 of the Sustainability Report
Integrated Risk and Assurance Framework
Pages 65 to 70
Governance Framework
Pages 75 to 86
Formula for Success
Pages 10 to 17
Shareholders/Noteholders/lenders
Š Free cashflow generation
Local communities
Š Job opportunities and socio-economic upliftment
Š Efficient and responsible use of natural resources
Š Promoting environmental awareness
Š Community health initiatives
Š Active stakeholder engagement with independent
mechanism at Williamson for community grievances
Suppliers
Š Opportunities for local businesses and suppliers
Š Policy of sustainable local procurement and
supplier development
US$6.3m
PAID IN INTEREST
US$230m
OF FREE CASHFLOW GENERATED
US$0.4m
COMMUNITY TRAINING AND EDUCATION
US$339,898
SMME LOANS
US$138m
LOCAL DISCRETIONARY PROCUREMENT EXPENDITURE
US$59%; US$89%
LOCAL SUPPLIER PROCUREMENT SA; AND TANZANIA
Pages 61 to 64
Pages 39 to 40
Pages 39 to 40
Annual Report and Accounts 2022 Petra Diamonds Limited
21
Strategic Report
Our Markets
Demand outstrips supply in the diamond market
The significant interest shown at our recent tenders bears testament
to the ongoing strength of the rough diamond market. We have seen
pricing support across our product mix, with particular strength in the prices
of both white and coloured gem-quality stones over the last 12 months.
Gregory Stephenson
Sales and Marketing Executive
With recent reports in the US estimating that 87% of couples are opting
for diamond engagement rings, we expect to see continued strength.
Demand significantly higher than pre-COVID-19 crisis levels and predicted to grow
Following the COVID-19 crisis, demand recovered well in CY 2021 with
rough diamond prices increasing 21% according to Bain & Co, driven
by strong consumer demand early in the Year which led to inventory
restocking ahead of the key winter holiday season. Customers’ urge
for emotional gifting, increased savings, limited availability of
experience-based substitutes and restricted travel boosted diamond
jewellery purchasing. In the US, which accounts for more than 50% of
demand for diamonds, diamond jewellery sales rebounded 38%
versus CY 2020 and 23% versus pre-COVID-19 sales in CY 2019. This
was driven in part by an increase in engagements linked to COVID-19
lockdown restrictions and a delayed wedding boom that followed the
easing of restrictions. The number of weddings in the US increased
from a low of 1.3 million in CY 2020 to 2.5 million in CY 2021 and
is predicted to remain at an average of c2.4 million per year.
China, the second largest market with a 13% share, saw retail
diamond jewellery increase 19% in CY 2021 versus CY 2020 and 6%
against pre-COVID-19 levels in CY 2019. In China, the growing trend is
for diamonds to be associated with success and self-rewarding. The
National 14th Five-Year Plan unleashed large spending potential in
lower-tier cities and suburban areas. Retailers responded by adding
physical stores in lower-tier cities and switching to corner-store
formats in residential locations. Sales also rose in India in CY 2021,
largely driven by a 57% increase in weddings. Data for the first six
months of CY 2022 is not yet available, but the evidence of the
diamond prices realised in recent sales (covered below) implies
continued growth in demand.
Diamond demand (%)
22
51+51+
51
13
–– USA
–– China
–– Gulf
–– India
–– Rest of world
Rough diamond price index
196
100
8
0
0
2
1
Q
8
0
0
2
3
Q
9
0
0
2
1
Q
9
0
0
2
3
Q
0
1
0
2
1
Q
0
1
0
2
3
Q
1
1
0
2
1
Q
1
1
0
2
3
Q
2
1
0
2
1
Q
2
1
0
2
3
Q
3
1
0
2
1
Q
3
1
0
2
3
Q
4
1
0
2
1
Q
4
1
0
2
3
Q
5
1
0
2
1
Q
5
1
0
2
3
Q
6
1
0
2
1
Q
6
1
0
2
3
Q
7
1
0
2
1
Q
7
1
0
2
3
Q
8
1
0
2
1
Q
8
1
0
2
3
Q
9
1
0
2
1
Q
9
1
0
2
3
Q
0
2
0
2
1
Q
0
2
0
2
3
Q
1
2
0
2
1
Q
1
2
0
2
3
Q
2
2
0
2
1
Q
2
2
0
2
)
p
e
S
(
3
Q
Source: The Zimnisky Global Rough Diamond Price Index. Starting Index value 100 as of end-2007. More information can be
found at www.paulzimnisky.com/roughdiamondindex.
22
Petra Diamonds Limited Annual Report and Accounts 2022
13
13
+
+
5
5
+
+
9
9
+
+
22
+
22
+
K
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Supply significantly below pre-COVID-19 levels and industry-wide production is predicted to be broadly flat
Following the CY 2020 contraction in supply, in which the carat
output fell 22% from pre-COVID-19 levels of 138 Mcts, net production
recovered in CY 2021 at 120 Mcts but remained well below pre-COVID-19
levels. In part, this was due to the depletion and closure of the Argyle
mine in Australia in November 2020.
for open pit mines to transition underground; and very limited
investment in exploration. Given that less than 1% of kimberlites are
economic, we do not expect this to reverse in the medium term.
The sanctions on Russian producers, which supply approximately
one third of the world’s diamonds, the majority of which are smaller
diamonds, has resulted in some increased demand for Petra’s smaller
diamonds. Non-Russian producers continue to benefit from the
requirement for provenance on larger diamonds.
Supply is expected to remain broadly flat for the next ten years
at between 115 and 125 Mcts, for a number of reasons including:
a reduction in the number of producing mines; long lead times
Contraction in global diamond mining
DIAVIK
SNAP LAKE
EKATI
GAHCHO KUÉ
VICTOR
RENARD
GRIB
UDACHNIY
JUBILEE
AIKHAL
INTERNATIONAL
MIR
ZARNITSA
KOMSOMOLSKY
BOTUOBINSKY
NYURBINSKY
KEY*
Producing mine
Producing mine with mine life of <5 years
Placed on care and maintenance
or uncertain future
Mine now closed
* List of diamond mines is not exhaustive.
MIBA
WILLIAMSON
MUROWA
LETŠENG,
LIQHOBONG
CATOCA
KAROWE,
ORAPA,
JWANENG,
LETLHAKANE
GHAGHOO
VENETIA,
CULLINAN,
FINSCH,
KOFFIEFONTEIN,
KIMBERLEY
UNDERGROUND
ARGYLE
ELLENDALE
The structural supply deficit
From a fundamental perspective, the market has reached an
important multi-year inflection point where demand growth is
expected to outpace supply, which remains broadly flat, with the
industry operating at near full capacity and unable to meaningfully
respond to higher prices. This configuration also benefits from the
Diamond supply and demand
removal of excess inventories that had built up during the COVID-19
crisis due to the subsequent strength of the jewellery market. As such,
the low levels of inventory in both the midstream and upstream are
expected to underpin the supply deficit.
128
130
151
126
120
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
138
107
0
2
0
2
F
1
2
0
2
F
2
2
0
2
F
3
2
0
2
F
4
2
0
2
145
113
F
5
2
0
2
Source: The Wedding Report and Susannah Lovis, Morgan Stanley, Zimnisky State of the Diamond Market report; De Beers Diamond Insight report October 2021.
Supply
Demand (conservative scenario)
Annual Report and Accounts 2022 Petra Diamonds Limited
23
Strategic Report
Our Markets continued
Economic backdrop
Strong recovery in demand following the COVID-19 crisis, overlaid with macroeconomic uncertainty
Demand for diamond jewellery correlates with GDP
Retail demand for diamond jewellery tends to correlate with global
GDP and recovered strongly in FY 2022 following the easing of lockdown
restrictions. This positive economic backdrop, particularly the high
demand over the festive season, was evident in strong prices across
all sizes and quality categories of rough diamonds across the market,
including some record prices in early 2022.
Quite apart from the appalling humanitarian impact of the invasion
of Ukraine by Russia, the global economy has been severely affected
by rising inflation owing to the increase in commodity and oil prices
as a result of the war. This has been compounded by Pandemic-induced
constraints on supply and the lockdown in China. In July 2022, the
IMF predicted a slowdown in global growth for the calendar years
2022 and 2023 of 3.2% and 2.9% respectively, with risk to the downside.
Recovery from COVID-19 crisis
The world economy recovered strongly from the initial impact of the
COVID-19 pandemic during 2021, despite the rise in infection from the
Omicron variant, as vaccination programmes accelerated. Ahead of
the invasion of Ukraine by Russia, the International Monetary Fund
(IMF) predicted global growth for the calendar years 2021 and 2022
of 5.9% and 4.4% respectively.
Macro uncertainty
Since the invasion of Ukraine by Russia in late February, and the recent
COVID-19 lockdown in China, there has been increasing uncertainty,
although diamond prices continued to increase to the close of our
2022 financial year.
In line with this, real GDP in the US, which represents more than half
the world’s market for diamond jewellery, declined -1.9% for the first
six months of 2022, and the OECD Consumer Confidence Index has
also fallen sharply in 2022 to date.
Financial markets
This volatility has also affected financial markets. The MSCI World
Index rose 21.4% in 2021 while the MSCI Emerging Markets Index
declined 3.6%. However, as a result of a sharp sell-off following the
invasion of Ukraine, the MSCI World Index and the MSCI Emerging
Markets Index declined 12.4% and 9.7% respectively for the first
six months of 2022.
Sources: IMF, OECD Consumer Confidence Index, Bloomberg.
Peace of Mined – A story of provenance
In June 2022, Boodles launched its Peace of
Mined jewellery collection, featuring diamonds
exclusively sourced from Cullinan Mine –
providing customers with complete confidence
in the traceability of their diamonds.
24
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Industry-wide developments
COVID-19
Š Travel restrictions meant that customers could not attend tenders in
South Africa in the first half of FY 2022
Š Social distancing restrictions meant that offices could not be manned for
much of the Year, although our mines were permitted to continue producing,
albeit with onerous restrictions
Sustainability Report pages 97 to 99
Petra’s response
Š Tenders of South African diamonds were held in Antwerp until the sale
in February 2022. The Antwerp-based tenders of Williamson’s stones
were unaffected
Š We reduced the number of tenders in FY 2022 from seven to six with
no significant impact on the number of stones sold
Š At our mines, we have introduced new procedures and controls to restrict
contact and have provided screening and vaccination drives
Š We also made donations for assistance in our communities
Currency
Š 80–90% of our operating costs and 90–95% of our capital expenditure
is denominated in Rand, whereas 100% of sales are priced in US Dollars
Š A significant portion of our debt, comprising US$366 million notes due
in March 2026 is repayable in US$ and carry biannual US$ cash interest
payments of 9.75% commencing 1 July 2023 until maturity
Š During FY 2022, the ZAR depreciated c14.0% against the US$
Petra’s response
Š We continually monitor movement of the Rand against the US Dollar
and take expert advice from our bankers. Our policy is to actively manage
ZAR:US$ volatility through hedging up to 50% of expected 12 month
forward looking US Dollar sales proceeds
Š R300m mark-to-market exposure facilities in place as at 30 June 2022
Midstream
Š Cutters and polishers in the midstream segment of the diamond market can
impact rough diamond pricing and demand through inventory restocking
and destocking cycles
Š Midstream inventories have normalised following disruption caused by
COVID-19. Restocking may have been limited by strong jewellery demand
and shortages created by restrictions to Russian supply
Petra’s response
Š We continually monitor the midstream segment and only sell diamonds
on an open tender basis to enhance selling prices
Š We place reserve limits on certain stones which enables us to withhold those
where we expect a higher price may be obtained in the future
Š Through our partnership stone programme, Petra can negotiate the price
of a rough diamond, and share in 50% of any profit generated from the
additional value created through cutting and polishing
Accelerating demand for provenance
Š The need for greater transparency, in respect of provenance, has accelerated
following the sanctions imposed upon Russian diamonds and the refusal by
leading jewellery retailers to purchase them
Š The diamond mining industry has begun trialling tracking technologies
(including Blockchain and artificial intelligence) to improve traceability
Petra’s response
Š Petra’s diamonds are certified as conflict free through the Kimberley Process.
In addition, our tenders enable buyers to identify the mine from which our
diamonds were mined
Š Work continues with the Gemological Institute of America on its Origin
programme to provide confirmation of a diamond’s geographic origin. The
Company is also researching block chain technologies and how they might
be incorporated into its sales process
Lab-grown diamonds (LGD)
Š LGD annual production was 6-7 Mcts in CY 2020. This segment has been
growing fast due to technology and acceptance across the value chain
Š Typically priced on a cost-plus basis, advances in technology have led
to falling prices, including a 30% drop in CY 2021 to less than half that
of natural diamonds
Petra’s response
Š We have confidence in consumers’ affinity for natural diamonds based on
fundamental value owing to constrained supply, character and provenance.
Through our partnership with the NDC, the positive impact of mining natural
diamonds is highlighted to consumers
Š We consider that correct identification and classification enables natural
diamonds and LGD to coexist, with the latter establishing a smaller,
secondary market
Š We highlight the scarcity of natural diamonds as a store of value and the
growing price differential between natural diamonds and LGD reflecting this
important difference
Sources: Bain & Company The Global Diamond Industry report 2021-2022.
Annual Report and Accounts 2022 Petra Diamonds Limited
25
Strategic Report
Our Markets continued
Optimising Petra’s position in the market
Petra accounts for approximately 2% of global supply by value and 3% by volume.
We have one of the world’s largest diamond resources
We have the world’s third-largest resources which, combined with the significant size of our orebodies, suggests there is significant potential
to extend the lives of our mining operations through further development.
Global production by volume in 2021 (%)1
Reserves and resources (100% interest basis)²
–– ALROSA
–– De Beers
–– Petra
–– Rio Tinto
–– Others
De Beers
ALROSA
Petra Diamonds
Rio Tinto
Resources M&I,I
(inclusive of reserves)
(Mcts)
4,654.7
1,064
226.6
18.2
Reserves
(Mcts)
401.9
628.0
30.0
11.7
27
39
27+27+
27
5
3
1. Source: Company reports and Bain & Company.
2. Source: Company reports. Reserves and resources are shown on 100% interest basis.
Optimising Petra’s position
Our aim is to deliver sustainable long-term production from
our portfolio
Petra aims to deliver sustainable, long-term production from its
portfolio, and is focused on optimising its business and operations
to maximise returns to stakeholders. With the exception of Koffiefontein,
our mines are based on orebodies which are of significant size and,
collectively, contain the world’s third-largest diamond reserve and
resource. This highlights the potential to extend the lives of our
mining operations at a time when the overall outlook for world
diamond supply is expected to be constrained.
Given the nature of Petra’s portfolio, we are capable of producing
the full spectrum of diamond sizes and categories, from mass market
goods to highly sought-after special stones, including larger white
diamonds and a range of fancy colours.
Responsible mining in line with rising demand for
ethically-sourced diamonds
Our membership of the Kimberley Process provides important reassurance
to consumers in respect to the ethical source of our diamonds.
As a founder member of the Natural Diamond Council (NDC), Petra
commits to responsible and transparent business practices. The NDC
provides generic marketing to support natural diamond demand and
illuminates the benefits of diamond mining in helping local communities
to generate long-term sustainable development, and a lasting positive
legacy, as well as the relatively low environmental footprint of diamond
mining. In our case, three of our mines are underground which is
significantly less reliant on diesel than open pit mines. Furthermore,
unlike many other mined commodities, diamond mining does use not
use chemical reagents as part of processing kimberlite ores.
This is covered more fully in our ESG and Sustainability section on
pages 33 to 40 and on pages 35 and 98 of the Sustainability Report
Exceptional Stones
Petra’s mines produce some of the most beautiful and rare
diamonds in the world. The Cullinan Mine is believed to produce
80% of the world’s large blue diamonds. Following the closure of
Argyle, Williamson has become one of the world’s most important
source of large pink diamonds.
In FY 2022, we recovered and sold US$89.1 million’s worth of
Exceptional Stones, those valued at more than US$5 million.
Of these, US$75.3 million were mined at Cullinan Mine and
US$13.85 million at Williamson. The five-year average revenue
from Exceptional Stones is US$39.2 million per annum.
32.3 ct sold for US$13.8m
342.9 ct sold for US$10.0m and 50% profit
share
39.3 ct sold for US$40.2m
295.8 ct sold for US$13.9m
26
Petra Diamonds Limited Annual Report and Accounts 2022
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27
+
+
3
3
+
+
5
5
+
+
38
+
38
+
K
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Petra’s environmental footprint
The relatively small environmental footprint
of Petra’s underground mines
Š GHG: Scope 2 emissions account for more than 92% of our
overall GHG profile and are acquired largely through the
purchase of electricity
Š Chemical: no chemical reagents involved in ore processing
Š Water: well-developed management plan resulting in >80%
water recycle rate
Managing our fossil fuel intensity
Š South Africa: 100% of Petra’s electricity is provided by the
national grid, Eskom which is predominantly generated from
fossil fuels. Restrictions on self-generation have recently been
lifted and Petra is investigating options to integrate
renewables into its electricity mix
Š Tanzania: 95% of Williamson’s electricity is provided by the
national grid, Tanesco and the balance is self-generated
Š A variety of energy saving initiatives are in place and are
integrated into all expansion projects
Š With the easing of the self-generation allowance,
we are investigating the option of increasing
renewable energy
Petra abides by the
industry’s ethical standards
Kimberley Process (KPCS) –
the diamond industry’s regulatory framework
and international standards
Š Monitors diamond production process to the highest
ethical standards
Š Assures commitment to 100% conflict-free diamonds
Š 82 governments have enshrined the KPCS into law
The value and benefits of natural diamonds
are promoted by the NDC1
Š Messaging to reassure consumers on ethically
sourced diamonds
Š Petra is a founding member
Examples of benefits for Petra’s stakeholders, including our 5,265 employees
14%
SOUTH AFRICAN MINES OWNED BY
HISTORICALLY DISADVANTAGED SOUTH
AFRICANS AND 12% BY EMPLOYEES
1. Natural Diamond Council.
59%; 89%
OF PROCUREMENT SPEND
WITH LOCAL SUPPLIERS IN
SOUTH AFRICA; AND TANZANIA
c52,650
PEOPLE DEPENDENT
ON PETRA’S OPERATIONS
Zebras in the protected nature reserve at Cullinan Mine.
Annual Report and Accounts 2022 Petra Diamonds Limited
27
Strategic Report
Our Markets continued
Marketing Petra’s diamonds
Our typical sales process
Diamond sales are typically weighted 40% FY H1 and 60% FY H2 due
to the production cut-off in December around the festive
season’s holidays.
Petra adopts a flexible approach to diamond sales in order to achieve
the best possible route to market, subject to prevailing market
conditions and any COVID-19 related restrictions.
South African goods are prepared for sale (cleaned and sorted), and
we sell all accumulated production from these mines at tenders in
South Africa and those from our Tanzanian mine, Williamson, at
tenders in Antwerp. We offer up to 10% of our rough production to
the State Diamond Trader in South Africa, with fair market pricing
verified by the Government Diamond Valuator.
We carry out sales in-house through a competitive tender process
which allows us to achieve the best possible price at the time. Our
product mix is highly sought after and attracts a wide range of
clients which stimulates bidding. When diamonds are sold, they are
separately grouped per source mine, providing clear provenance for
purchasers. High-value stones are sold as individual lots and may be
subject to an independent sales process. Where we consider that bids
do not match our expectations of value, we may propose sharing any
profits generated through cutting and polishing with our customers
on a 50:50 basis through our Partnership Stones programme, or
withhold the sale until a future date.
Petra’s flexibility during the COVID-19 crisis
We reduced the number of tenders to six from seven, although this
had no impact on levels of sales. We also held the first three tenders
of South African diamonds in Antwerp as COVID-19 restrictions
prevented customers from attending in South Africa.
A typical year with seven tenders
H1
H2
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
1
2
3
4
5
6
7
A typical diamond tender with stones separated by their mine origin, size and quality.
28
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Prices achieved
There has been a rising trend for diamond prices at our tenders in
FY 2022 and at Tender 1 in FY 2023, noting there has also been volatility,
as evidenced by the spike in prices at Tender 4 which took place in
February 2022. This spike was largely due to the restocking of rough
diamond inventories following the exceptionally strong festive sales
and pent-up demand post the COVID-19 crisis. The Tender 4 sale
pre-dated the invasion of Ukraine, but high prices may also have been
influenced by uncertainty regarding potential supply disruptions,
given Russia accounts for nearly one third of world production.
Subsequent tender prices have maintained the upward trend
following an initial dip post Tender 4, with broad strength across all
categories with notable strength in smaller sizes (sub 1 carat) and
larger white and coloured stones. The recent trend for COVID-related
lockdowns in China has seen weakness in 0.75ct to 5ct range.
Petra Diamonds average price per carat (US$ per carat)
200
180
160
140
120
100
80
60
40
20
0
H1
FY 2021
H2
FY 2021
H1
FY 2022
T4
FY 2022
T5
FY 2022
T6
FY 2022
T1
FY 2023
Cullinan Mine1
Finsch
111
169
118
77
FY 2022
FY 2021
FY 2022
FY 2021
Koffiefontein
Williamson1
581
419
384
150
–– ROM
–– Exceptional Stones
–– Linear (ROM, excluding T4/FY 2022)
FY 2022
FY 2021
FY 2022
FY 2021
1. Prices for both Cullinan Mine and the Williamson mine include proceeds from the sale of Exceptional Stones, noting that there were a number of high-value Exceptional Stones from the
Cullinan Mine and a high-value Exceptional Stone at the Williamson mine in FY 2022.
Market outlook
Despite significant global economic uncertainties resulting
from the war in Ukraine, like-for-like rough diamond prices
increased 41.5% for the Year, driven in particular by record
jewellery retail demand in the US.
The most recent tender, the first of FY 2023, highlighted the
strength of demand across Petra’s product mix, both in white
and coloured gem-quality stones, with some increased demand
for smaller diamonds.
This growth in demand has been driven by mid-stream
inventory restocking, and continued strong jewellery retail
sales associated with a delayed wedding boom and a growing
trend in diamonds being given as meaningful gifts post
COVID-19. While the diamond market is strong, macro-
economic uncertainties caused by the rise in inflation, may
prove a dampener of demand.
The backdrop of structural changes to the supply and demand
fundamentals in the diamond market remains unchanged and
we anticipate it to remain supportive going forward, although
there may be some volatility in the short to medium term.
Annual Report and Accounts 2022 Petra Diamonds Limited
29
Strategic Report
Stakeholder Engagement
Section 172 statement
Section 172 statement by the Directors pursuant
to the UK Corporate Governance Code
While Petra is incorporated in Bermuda and is not subject to the UK
Companies Act, 2006, it is required, as a company with a premium
listing on the London Stock Exchange, to comply with the UK
Corporate Governance Code (the Code). The Code requires Petra to
describe how the interests of stakeholders and the matters set out
in Section 172 of the Companies Act, 2006, have been considered
in both Board discussions and decision-making.
We believe that considering our stakeholders in key business
decisions is not only the right thing to do, but is fundamental to our
ability to drive value creation in the long term. During FY 2022 and in
the midst of recovering from the COVID-19 pandemic, balancing the
needs and expectations of our stakeholders has been an even more
important task.
In FY 2022, the SED Committee of the Board adopted a comprehensive
Stakeholder Engagement and Management Policy which sets out
Petra’s approach in identifying and engaging with its stakeholders.
This ensures that stakeholder consideration is embedded throughout
Petra’s business, with our Executive Directors and Senior Management
actively engaged in initiatives to engage and communicate with
our stakeholders.
For further details, see pages 15 to 22 in our Sustainability Report
Some examples of how the Board considered the various elements
contained in Section 172(1) of the Companies Act are set out below
in its discussions and decisions in FY 2022.
Section 172(1)(a): the likely consequences of any decision
in the long term
The Board regularly considers the steps needed to take to provide
investors and stakeholders with a compelling value proposition and
resilient business in the medium to long term, recognising the
evolving environment in which Petra operates.
Some examples from FY 2022 of the Board’s consideration of the
longer-term consequences of its decisions in relation to Petra’s
stakeholders included:
Š Capital expenditure projects: in approving the major expansion
projects at the Cullinan Mine (CC1 East sub-level cave) and the
Finsch Mine (Lower Block 5 3-level sub-level cave), the Board
considered the long-term impact of these projects for Petra, noting
the robust economics of both projects (both having an IRR of more
than 30%), and the critical impact these projects would have on
Petra’s long-term viability by extending the mine plan at the
Cullinan Mine to 2031 and at the Finsch Mine to 2030. The Board
also took into account that pursuing both expansion projects would
give Petra a platform to consider further expansion opportunities
which have the potential to further extend both mine plans beyond
these dates. The Board also noted that both projects would have
significant positive long-term social and economic impacts on the
communities surrounding the mines, as well as positive long-term
fiscal impacts for the Government and were expected to be
self-funded. For further details of these expansion projects,
see pages 48 to 49
Š Board strategy session: in February 2022 and for the first time
since the start of the COVID-19 pandemic, an extensive in-person
Board strategy session was held. With the Board having been
focused on the Restructuring that completed in March 2021 and
30
Petra Diamonds Limited Annual Report and Accounts 2022
with several new appointments having been made to the Board at
the beginning of FY 2022, this was considered to be an appropriate
time to hold this session. The Board reviewed and provided its
input on a comprehensive value-led growth strategy for Petra to
2025 and beyond that had been prepared by management. This
included considering the external and internal environments and
opportunities for organic and inorganic growth. In addition, the
Board reviewed Petra’s proposed new Sustainability Framework,
noting the importance of this framework for Petra’s long-term
viability. During this session, the Board also identified key elements
of Petra’s value proposition which it will continue to review as a
standing agenda item. Subsequently, and as part of an external
Board evaluation that was carried out in Q4 of FY2022, the Board
identified a set of strategic priorities that it will continue to monitor
An outline of Petra’s value-led growth strategy for a sustainable
long-term future that was reviewed and approved by the Board
is set out on pages 14 to 17
Section 172(1)(b): the interests of the Company’s employees
Without a safe, healthy, skilled and productive workforce, Petra
is unable to implement its strategy and create shared value for all its
stakeholders. Recognising that Petra’s employees are at the heart of its
business, and that Petra’s success is dependent on attracting, retaining,
and motivating talented employees, the Board considered and assessed
the impact of its decisions on employees throughout FY 2022.
Some examples illustrating the Board’s inclusion of employee-related
issues in their discussions and decisions in FY 2022 included:
Š Regular updates on workforce engagement and employee
issues: the CEO and the employee engagement iNED, Octavia
Matloa, provided the Board with regular feedback on their various
engagements with the workforce during FY 2022. In addition to
this, employee-related issues were regularly discussed at Board and
Committee meetings. Areas which were discussed included (i) the
safety, health and wellbeing of employees, and in particular how
to mitigate the risks of the COVID-19 pandemic for employees; (ii)
the development and retention of talent; (iii) the remuneration
and incentives for employees at all levels; (iv) updates on a review
and resetting of Petra’s culture; (v) updates on the diversity of
Petra’s workforce; (vi) the workforce retrenchment process at the
Koffiefontein mine; and (vii) the appointment of key members
of management
Š Board site visits: in May, the Board conducted a planned site visit
to operations at the Cullinan and Finsch Mines (which included an
underground tour of the Cullinan Mine). A smaller subset of the
Board was also able to conduct site visits of operations at these
mines in October 2021 and the Williamson Diamond Mine (WDM)
in May 2022. The latter visit included reviewing security operations
at the mine and receiving updates on the establishment of the
Independent Grievance Mechanism (IGM) and the progress of
various community projects. Each of these site visits involved
operational updates, including during the May site visit, an update
on the expansion projects at CDM and FDM. The site visits enabled
the Board to have extensive engagements with the Group’s employees
on a range of matters. For example, at the May site visit, Petra’s
female Board members engaged with members of Petra’s Women
in Leadership (WiL) Committee to discuss challenges faced by
women in mining, and how to promote a more inclusive working
environment. For further details of the Board site visits, see page 73
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Š Capital expenditure: in approving the expansion projects at the
Cullinan and Finsch Mines highlighted above, a key consideration
for the Board was the impact these projects will have in motivating
and retaining Petra’s employees, particularly at the Cullinan and
Finsch Mines, noting that these projects are essential for extending
mine plans to 2031 and 2030 respectively, and enabling further
expansion opportunities at both mines to be considered
Section 172(1)(c): the need to foster the Company’s business
relationships with suppliers, customers and others
The delivery of Petra’s strategy requires strong and mutually
beneficial relationships with suppliers, customers and host
governments. Petra’s suppliers are critical to the development and
safe running of our operations, while its customers are the source of
Petra’s revenue.
Some examples illustrating the Board’s consideration of relationships
in FY 2022 included:
Š Framework Agreement: in December 2021, Petra entered into
a Framework Agreement (FWA) with the Government of Tanzania.
While it is yet to complete, the FWA provides, amongst other
things, for an overall sharing of economic benefits from the
Williamson Mine, increases the Government of Tanzania’s stake
in the mine and seeks to resolve a number of legacy issues. In
considering and approving the FWA, the Board recognised the
importance of the relationship with the Government of Tanzania
and how the FWA was a key step to establishing a foundation
for sustainable operations at Williamson
Š Partnership stones: in FY 2022, Petra increasingly made use
of partnership agreements with buyers for the sale of certain
Exceptional Stones recovered from the Cullinan Mine. This enabled
Petra to retain a 50% interest in the profit uplift of the proceeds
of polished stones, after taking into account all costs. This included
a partnership with Stargems (Pty) Ltd in relation to a 342.92 carat
Type IIa white diamond and as 18.30 carat Type IIb blue diamond,
as announced in August 2021. The Board considered the impact
such partnerships would have in strengthening Petra’s relationships
with key customers, as well as the ongoing potential for Petra to
retain more value from its higher value Exceptional Stones
Our approach
A proactive stakeholder engagement approach is critical in building relationships and upholding our social licence to operate. We continually
engage with our host Governments, at the national, regional and local level and also communities, business forums and organised labour,
on matters of mutual benefit and interest. The most tangible benefits of our proactive approach are:
Collaboration with stakeholders (including the municipality) on key issues such as Integrated Development Plans (including their
development and implementation), the roll-out and alignment of projects with the needs of the community, and collaboration with the
Government on funding developmental opportunities
Enabling and exploring possible synergies in community development initiatives and co-funding of projects with other mining houses
and/or Government departments
Involvement in community forums, aiming to address and manage the risk of mistrust and lack of clear communication, which has
provided a catalyst for social incidents in the past. The following issues are discussed: local procurement and enterprise development,
environmental impacts of mining, employment opportunities, illegal mining, corporate social investment opportunities, local economic
development (LED) projects and skills development (bursaries, internships and learnerships)
Engagement with organised labour on differing issues at various levels such as: accommodation and living conditions, skills
development, skills retention, health and safety, operational performance and achievement of targets relating to sustainability of the
business, labour unrest and productivity and mine closure
Management of issues relating to the environmental impact of mining, which remain the concern of all our local communities;
synergies are required between the environmental liability and the needs of the community
Regular and transparent engagement at all levels with authorities and regulators, especially concerning compliance with Social
and Labour Plan (SLP) commitments, Mining Charter requirements and specific mine targets (including, amongst others, transformation,
mine community development, housing and living conditions and procurement)
Annual Report and Accounts 2022 Petra Diamonds Limited
31
Strategic Report
Stakeholder Engagement continued
Section 172 statement by the Directors pursuant
to the UK Corporate Governance Code continued
Section 172(1)(d): the impact of the Company’s operations
on the community and the environment
The sustainability of Petra’s business in the medium to long term
requires that the interests of the environment in which Petra
operates (including communities and host governments) be aligned,
as far as possible, with Petra’s interests, and that we operate in a
way which minimises the adverse impact on these stakeholders.
The support of local communities, host governments and NGOs
is a critical component of Petra’s licence to operate.
Petra ensures it complies in all material aspects with all relevant
legislation in the countries in which it operates.
The Board, and in particular the HSE and SED Committees, regularly
assess the impact of Petra’s operations on the community and the
environment but set out below are some specific examples of how
these impacts were included in its discussions and decision-making
in FY 2022:
Š Oversight of IGM and community project implementation at
the Williamson Mine: following the settlement agreement that
was reached in May 2021 with Leigh Day in relation to the human
rights allegations at the Williamson Mine, the Board and relevant
Committees continued to oversee progress on the implementation
of the IGM and community projects required under the terms of
the settlement agreement with Leigh Day. For more details on the
IGM and these projects, see pages 33 to 34 of the Sustainability
Report. In addition to discussing the IGM and community projects,
the Board regularly discussed the incidence of illegal mining
incursions at the Williamson Mine, as well as its security operations,
and sought to understand in more detail the underlying factors
causing illegal mining at the Williamson Mine, noting the
importance of community and Government engagements as well
as community projects in seeking to address these issues. The Chair
and CEO undertook a site visit to Tanzania in May 2022, visiting the
Mwadui mine itself, including the medical support services and
security operations, and meeting the Regional Commissioner of
Shinyanga and the District Commissioner for the Kishapu District to
discuss these issues
Š Tailings Management Policy: in FY 2022, the Board approved
and adopted a revised Tailings Management Policy to ensure
compliance by the Group with the Global International Standard
on Tailings Management (GISTM). The Tailings Management Policy
commits Petra to implementing a Tailings Management System
which is based on international best practices, with Petra
undertaking to ensure full compliance with the GISTM by no later
than August 2023. Prior to the approval of the Policy, and as part
of the Board site visit in May, the Board visited the slimes dam at
the Cullinan Mine in order to better understand how risks
associated with this the slimes dam are assessed and managed
Section 172(1)(e): the desirability of the Company maintaining
a reputation for high standards of business conduct
The Board periodically reviews and approves material policies and
standards which apply to Petra and which embed high standards of
business conduct across the Petra Group. In FY 2022, the Board and
relevant Committees reviewed and adopted:
Š A revised Code of Ethical Conduct, updated to be more user-friendly,
incorporating key aspects of Petra’s anti-bribery policy and
explaining what is expected to ensure transparency, good
governance and ethical practice across Petra
Š An updated Whistleblowing Policy to ensure that those who raise
good faith concerns are protected from reprisal or victimisation
Š A new Gifts and Hospitality Policy. A new online Gifts and
Hospitality Register has also been created and will become
effective in FY 2023
Š A new Declaration of Interest Policy to identify and mitigate actual
and potential conflicts of interest across Petra. A new online
Declaration of Interest Register has also been created and will
become effective in FY 2023
Š A new Public Officials Expenditure Policy to ensure that all
expenditure related to Public Officials complies with applicable
laws and is made for legitimate business purposes. A new online
Public Official Expenditure register has also been created and will
become effective in FY 2023
Š An updated Human Rights Policy Statement
Š A new Respecting Human Rights Defenders Procedure, building on
the commitment in Petra’s Human Rights Policy Statement to protect
the interests of human rights defenders
Š A new Stakeholder Engagement and Management Policy
underscoring Petra’s commitment to meaningful engagement
with all its stakeholders
Section 172(1)(f): the need to act fairly as between members
of the Company
After weighing up all relevant factors, the Board considers the course
of action which best positions Petra to deliver its strategy in the long
term, taking into consideration the effect on all stakeholders.
Pertinent examples of the factors and engagement taken into
account by the Board are set out above.
In doing so, our Directors act fairly as between the Company’s
members, but are not necessarily required to balance the Company’s
interests with those of other stakeholders. This can sometimes mean
that certain stakeholder interests may not be fully aligned and in
some situations, may conflict.
In relation to the broader issue of stakeholder engagement see
pages 15 to 22 of the Sustainability Report.
32
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
ESG and Sustainability
Creating value for our stakeholders
and building a sustainable business
Creating a sustainable business is fundamental to achieving
long-term value for all of our stakeholders.
Our focus is on delivering diamonds that are assured of the highest
ethical standards, sourced as responsibly and efficiently as possible.
To achieve this we have integrated sustainability into our culture and
Operating Model. Underpinning this, we have developed a
Sustainability Framework formed on four pillars: our people, planet,
partnerships and production, which aims to build support for our
business strategy while meeting stakeholders’ needs.
Petra has reported in detail on its ESG and sustainability strategy
and performance since 2009 in its standalone Sustainability Reports,
all of which are available to view on the Company’s website.
petradiamonds.com/investors/results-reports/
A new Sustainability Framework
Our Sustainability Framework has been designed to drive the Group’s
sustainability agenda. Following an extensive engagement process,
the Group has identified four sustainability pillars, together with key
aspects and focus areas per pillar, which will determine strategic
decision-making, reduce risks, identify opportunities, inspire innovation,
improve business operations, and enhance our shared value proposition.
Petra’s Sustainability Framework was finalised following various
workshops held with Senior Management and Exco and approved by
the Board in September 2022. Implementation of the Framework has
begun, and we provide more detail our relevant SDGs, focus areas
and aspects in our Sustainability Report on page 38.
While our commitment to sustainability is defined and governed by the
Sustainability Framework, it is supported by our culture of continuous
improvement, robust governance practices, ethical behaviour and our
constructive and transparent stakeholder engagement processes.
Instilling an inspirational
culture and embedding
a continuous business
improvement mindset
e
d r
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.
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to ensure delivery of
our business objectives
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Production efficiency
Business processes improvements
Digitalisation and innovation
Continuous business improvement
While Petra supports all 17 UN SDGs, it identified the five most relevant SDGs where the Company can make the most contribution as follows:
Sustainability Report page 40
Promote inclusive and
sustainable economic
growth, employment
and improve
living standards
Encourages more
sustainable
consumption and
production patterns
(water, waste, energy)
Focuses on managing
forests sustainability,
reducing degraded
natural habitats and
ending biodiversity loss
Seeks to ensure health
and well-being for all,
at every stage of life
Aims at ensuring
inclusive and equitable
quality education and
promote lifelong learning
opportunities for all
Annual Report and Accounts 2022 Petra Diamonds Limited
33
Strategic Report
ESG and Sustainability continued
Stakeholder engagement
We aim to communicate effectively with all our stakeholders, thereby building strong relationships, which assist in maintaining their trust in
our business, upholding our social licence to operate and creating shared value. Stakeholder engagement is used to inform our Sustainability
Framework and material topics. Our stakeholder engagement processes allowed material concerns to be brought to management and the Board’s
attention, and responses provided. Our feedback and responses to these concerns are discussed on pages 15 to 22 of our Sustainability Report.
petradiamonds.com/investors/results-reports/
Assessing materiality
Petra defines a material topic as an environmental, social or governance issue that could significantly, positively or negatively, impact the
delivery of Petra’s business strategy and future performance, and/or could have a material impact on individuals, groups, communities or other
key stakeholders that are affected by our operations. When determining materiality, we consider our operating environment as well as
external micro and macro factors.
Petra conducts a formal materiality assessment every three years. In FY 2022, the Group’s current material topics were reviewed and amended
to include any major changes in the internal and external environment as well as key stakeholder concerns and interests. The results of this
review and the changes to the FY 2021 material topics are discussed on pages 23 & 24 of our Sustainability Report.
petradiamonds.com/investors/results-reports/
The next assessment is due in FY 2023.
Performance
The information below provides a high-level overview of performance progress according to our sustainability pillars as well as the objectives
looking ahead. Further detail on each of our pillar’s performance is available in our Sustainability Report.
petradiamonds.com/investors/results-reports/
Pillar: Valuing our people
Our people enable us to achieve our shared vision and strategy, and ensuring their safety, health and wellbeing in the working
environment is our priority. We invest in employing the right people for each role, developing them to reach their potential and retaining
them to our mutual benefit. Group-wide, we are driven by our diversity and unlocking benefits for all.
Workplace safety
Achievements
Š Petra achieved 10 million fatality-free shifts in
June 2022 – the last fatality occurred at Cullinan
Diamond Mine in April 2017
Progress against FY 2022 objectives
Zero fatalities, 20% reduction in LTIs and 10% reduction
in total injuries
Š Cullinan Diamond Mine achieved 365 days without
100% mandatory safety compliance
a Lost Time Injury (LTI) in April 2022
Š Achieved lowest LTI (15) in more than a decade
Š Achieved 83% safety KPIs
Š Williamson Mine achieved two million fatality-free
shifts (equal to 5.9 years) in June 2022 – last fatal
accident was in September 2016
Challenges
Š Resource challenges due to Restructuring processes
Maintain ISO 45001: 2018 certification
Continued safety awareness campaigns and
awareness programmes to improve health and
safety behaviour in the workplace
Continual improvement of management/worker
relationships and overall workplace conditions
FY 2023 objectives
Zero fatalities, 20% reduction in LTIs and a 20% total injuries (LTIs and NLTIs) reduction
90% achievement of all safety KPIs
Achieved/Good progress
In progress
Limited progress
34
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Pillar: Valuing our people continued
Health, hygiene
and wellness
Progress against FY 2022 objectives
Maintain rigorous application and enforcement of our
COVID-19 systems and promote awareness
100% compliance with medical certificate of
fitness schedule
Improve the compliance with chronic disease
monitoring (91% compliance in South Africa, 68%
at Williamson Mine)
Compliance with Department of Health HIV/AIDS
milestone (93% of HIV/AIDS cases diagnosed
confirmed to be on treatment)
Compliance with Department of Health TB
milestone (100% of diagnosed TB cases confirmed
to be on treatment)
Achievements
Š All health and wellness KPI targets were achieved
Š 8,643 medical examinations conducted (FY 2021: 8,132)
Š 100% compliance with medical certificate of fitness
Š Improved compliance with chronic disease
monitoring (91% compliance in South Africa, 68%
Williamson Diamond Mine)
Š One noise induced hearing loss (NIHL)
Š Project 2022 resulted in Finsch Diamond Mine and
Koffiefontein Diamond Mine occupational health
centres being outsourced, with notable cost savings
Š Compliance with Department of Health HIV/AIDS
milestone (93% of HIV/AIDS cases diagnosed
confirmed to be on treatment)
Š Compliance with Department of Health TB milestone
(100% of diagnosed TB cases confirmed to be
on treatment)
Challenges
Š Historical exposures are still resulting in suspected
occupational diseases
Š Take-up of the COVID-19 vaccination resulted in
64% of Petra’s South African employees and
contractors and 15% of Tanzanian employees and
contractors being partially or fully vaccinated
Š An increase in substance abuse (positive alcohol tests)
FY 2023 objectives
Annual medical reports compliance
Reduce the number of NIHL cases (>10% shift from baseline)
Reduce the number of occupational diseases to below seven cases
Improve the compliance with chronic disease monitoring – 90% of people diagnosed monitored
Conduct a mental health baseline assessment
Compliance with Department of Health HIV/AIDS and TB milestones
Annual Report and Accounts 2022 Petra Diamonds Limited
35
Strategic Report
ESG and Sustainability continued
Performance continued
Pillar: Valuing our people continued
Human Resources
Achievements
Š Finalised a three-year (FY 2022 to FY 2024) wage
agreement with our bargaining units for our
local operations
Progress against FY 2022 objectives
Continue to rebuild and implement the Petra culture
to support the values of the organisation and foster
a stable and cohesive workforce
Š Updated the Workplace Harassment Policy to align
with the Government Gazetted Code of Good Practice
Š Rolled out Petra’s housing solution to all operations
Challenges
Š Delays in finalising and implementing our refreshed
culture initiative
Š Finalising the Section 189 at Koffiefontein
Š Increased number of disputes emanating from
previous collective agreement
Š Finalising the three-shift configuration at Finsch
Implementation of employee engagement initiatives
Fully implement the Organisational Design review
outcomes, including accountability, focused job profiles,
job grading and market competitive remuneration
structures for all critical positions
Continued focus on improving relationships
with organised labour to ensure stable and
sustainable operations
FY 2023 objectives
Finalise our Organisational Design implementation for the Group
Roll out training on managing workplace harassment and bullying throughout the organisation
Implement a performance management process and system linked to Petra’s talent management framework
Finalise and implement Petra’s Formula for Success initiative
Finalise and implement our business re-engineering at Finsch and agree a three-shift configuration
Review and consolidate recognition agreements for all mines
Progress against FY 2022 objectives
Make further strides on overall transformation,
including our female diversity by continuing
development and support initiatives for graduates
from the Women in Leadership (WiL) programme,
and by focused targeted recruitment
Achievements
Š Established Petra’s Women in Leadership Committee
Š Increased female internships relating
to technical positions
Š Updated Petra’s Diversity and Inclusion Policy
Challenges
Š Improving our female workforce at mine level
Š Achieving HSDA diversity targets due to Restructuring
and a freeze on recruitment of certain positions
FY 2023 objectives
Ongoing focus on diversity and inclusion
Achievements
Š Launched our Interaction Management training
programme for all managers and supervisors
Š Developed Group-wide career development paths
and finalised career development plans for
identified high-potential employees as possible
successors to Petra’s Executive team
Š Re-launched and implemented the Petra’s Women
in Leadership Programme
Challenges
Š Delay in the identification of suitable management
and leadership development programmes aligned to
our value-led strategy
Progress against FY 2022 objectives
Implementation of a talent management framework
with formalised performance management, retention
and succession policies, linked to pay (variable and fixed)
To deliver on our targets for learnerships, internships
and development programmes
Review of our training and development framework,
regarding employee development and community
training, to ensure that it better supports our
operational outcomes
Contribute to the development of our local communities
FY 2023 objectives
Finalise suitable leadership and management development programmes
Cascade the succession planning process and career development plans to the rest of the organisation
Develop standard training programmes for identified critical and scarce technical skills
Diversity
and inclusion
Training,
development
and upskilling
Achieved/Good progress
In progress
Limited progress
36
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Pillar: Respecting our planet
Managing our environmental impact is a priority for Petra and, in so doing, we aim to align our interests with that of relevant stakeholders.
Responsible consumption and production are at the forefront of our operational planning, with a dedicated focus on improved energy and
water consumption, responsible waste management, and biodiversity protection and rehabilitation.
Climate change
Achievements
Š Committed to a net-zero Scopes 1 and 2 GHG
emissions target for 2050
Š Continually reviewing and updating our climate
change adaptation strategy
Š Reviewed and updated our TCFD disclosures
Challenges
Š Retro-fitting energy efficient processes
to established infrastructure
Š Reducing our diesel fleet carbon footprint
Š Expanding our Scope 3 mapping to include other
elements of our value chain
Progress against FY 2022 objectives
Continued implementation of the Group’s climate
change adaptation action plans
Maintain the Company’s carbon footprint in line with
FY 2019 baseline over a period of five years, while
continuing to explore available options to minimise
the Group’s carbon footprint
Support efforts to find sustainable carbon
sequestration methods
FY 2023 objectives
Continue to pursue energy efficiency initiatives
Initiate the roadmap development for our 2030 GHG reduction target
Expand the mapping of our Scope 3 emissions produced by our top ten suppliers
Investigate renewable energy options
Review and update our climate change adaptation strategy
Refresh our climate change scenario analyses
Water management Achievements
Š Water recycling initiatives resulted in 80% recycled
water used on mine
Š Critical controls for water management
implemented at all South African operations
Š Petra maintained its ‘B’ CDP disclosure score
Challenges
Š Managing surplus water in the production circuit
due to above normal rainfall
Š Cullinan Mine applied for an emergency discharge
due to excessive rainfall
Progress against FY 2022 objectives
Identify and implement measures to prevent regression
in water efficiency levels
Identify and implement measures to maximise
the volumes of water reused and recycled
FY 2023 objectives
Reduce the intake or improve the efficiency of fresh water used
Improve the percentage of water recycled
Review and update Petra’s water management strategy
Circular economy
Achievements
Š Recycled 85% of our waste at our local operations
Š Ongoing awareness campaigns and clean-up projects
Š Refined the delineation of waste streams at all
South African operations
Š Waste compactors installed at 75% of operations
Challenges
Š Lack of waste management resources at
Koffiefontein Mine
Š Availability of waste recycling facilities and safe
disposal areas for hazardous waste near our
Williamson Mine in Tanzania
Š Waste data accuracy at Williamson Mine
Progress against FY 2022 objectives
Improve management of mining waste facilities in line
with internationally recognised guidelines
Increase the percentage of business waste redirected
to the circular economy
FY 2023 objectives
Reduce the volumes of hazardous waste disposed by operations
Continue to increase the percentage of waste recycled by the Group
Improve waste practices (waste handling, separation and disposal) at Williamson
Annual Report and Accounts 2022 Petra Diamonds Limited
37
Strategic Report
ESG and Sustainability continued
Performance continued
Pillar: Respecting our planet continued
Biodiversity
Achievements
Š 56% of land owned by Petra is protected
Š Initiated a review of Petra’s mine rehabilitation
and closure strategy
Š 152,700 seedlings distributed amongst schools
and community members in Tanzania
Challenges
Š Theft and illegal poaching of wildlife from mine
owned areas
Progress against FY 2022 objectives
Implementation of annual rehabilitation plans
Establishment and monitoring of closure sign-off criteria
FY 2023 objectives
Embed concurrent rehabilitation as the norm for rehabilitation activities in Petra
Identify and describe the essential ecological services present at all Petra-managed areas
Identify relevant conservation initiatives
Environmental
management
Achievements
Š All South African operations certified according
to ISO 14001: 2015 International Standard
Š Petra reported no major environmental incidents
or environmental audit findings
Š Zero major findings during external
certification audits
Progress against FY 2022 objectives
No more than one legal instruction, compliance notice
or directive allowed per operation in the financial year
Zero major or high-rated environmental incidents
Retention of ISO 14001: 2015 certification
Š Zero major environmental incidents
Š Zero major or high-rated environmental incidents
Zero major environmental findings during external
certification audits
in 12 consecutive years
Š Zero environmental directives (i.e official
or authoritative instruction received from
a government body to address a specific
legislative non-compliance issue)
Challenges
Š Number of community complaints relating to
vibration and noise received at Cullinan Mine
Š Limited support from local Government
(municipalities) to ensure sound environmental
management in the areas where Petra operates
FY 2023 objectives
Zero significant environmental incidents
Retention of ISO 14001:2015 certification
Achieved/Good progress
In progress
Limited progress
38
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Pillar: Driving shared value partnerships
Petra understands the value of building sustainable partnerships, not only to improve business opportunities, but also to create positive
outcomes. We are committed to upholding high ethical business standards and safeguarding human rights for all but specifically for our
employees, suppliers, customers, contractors and our other stakeholders. Meaningful stakeholder engagement enables us to build trust
and inform our business strategy.
Stakeholder
engagement and
community and
social investment
Achievements
Š Submitted our next five-year Social Labour Plans
(SLPs) for Finsch and Koffiefontein
Progress against FY 2022 objectives
Successful completion of our SIAs for each South African
operation to inform our new cycle of SLPs
Š South African discretionary procurement spend up
39% to US$138 million (FY 2021: US$84.7 million)
Š Robust and transparent stakeholder engagement
building trust between local communities and
the mine
Š Completed our social impact assessments (SIAs)
for all South African mines
Š Reviewed and updated our community engagement
plans to enhance engagement opportunities
Š Williamson continued to build strong relationships
with its communities
Challenges
Š Dissatisfaction from communities regarding Petra’s
frequency of engagement
Š Local economic development (LED) budgets not
spent according to plan
Š Collection of reportable contractors’ contributions,
per SLP requirements, into Petra’s Foundation,
for community projects
Š Increased community grievances driven
by socio-economic pressures
Improve communication with local communities
through continued engagement
Continue roll-out of community development
projects to meet the needs of local communities
Continue review and optimisation of the Group’s
stakeholder relations management software to
ensure that all issues raised are tracked, monitored
and closed out
Aim to build community confidence in the newly
established grievance mechanisms at each operation
through transparent engagements
Progress on restorative justice projects at Williamson:
Petra has committed funds in excess of £1 million to
community initiatives to provide sustainable benefits
to communities surrounding Williamson
Ongoing monitoring of the extent of any pit scaling
events at Cullinan Mine and regular engagement with
the local community
Appointment of a Group Sustainability Manager
to consolidate the Group’s extensive activity
in this important area
FY 2023 objectives
Enhance stakeholder engagement plans to allow for robust, proactive and transparent engagements
Respond to all grievances registered within the prescribed timeframe enabling social contracting with our communities
Increase contributions to the Petra Foundation, through reportable contractor spend contributions, for dissemination
into local
communities as part of our social commitment
Ensure compliance with local LED projects in South Africa and corporate social responsibility commitments in Tanzania
Annual Report and Accounts 2022 Petra Diamonds Limited
39
Strategic Report
ESG and Sustainability continued
Performance continued
Pillar: Driving shared value partnerships continued
Responsible
sourcing
Achievements
Š Local supplier spend for FY 2022 – 59% for
Progress against FY 2022 objectives
Appointed a new Group Supply Chain Manager
Develop and roll out a new Group supply chain
operating model
Achieve Mining Charter targets
Identify and implement ring-fenced opportunities
for SMMEs
South Africa (FY 2021: 63%) and 89% for Tanzania
(FY 2021: mine under care and maintenance)
Š 1,059 new suppliers on-boarded on our e-Procure
portal (FY 2021: 252)
Š Rolled out a new Group supply chain operating
model and centralised procurement
Š Launched our ‘Request for Quotation’ portal for all suppliers
Š Mining Charter targets exceeded in most procurement areas
Challenges
Š Increased unemployment in South Africa is burdening
the host communities’ dependence on our operations
for procurement opportunities
Š Continuing COVID-19 impact on the sustainability
of some suppliers
Š Ability to identify, access and reach potential supplier base
Š Identifying and ring-fencing procurement
opportunities for SMMEs
FY 2023 objectives
Reviewing and updating our tender specifications, general terms and conditions, and ensuring awareness training
on contract conditions
Identifying and increasing ring-fenced procurement opportunities for SMMEs
Increasing mine community supplier spend
Progressively improving our total supplier base compliance through vetting
Responsible sales
This is a new area for our Sustainability Report and therefore does not include any FY 2022 objectives
FY 2023 objectives
Pursue membership of the Responsible Jewellery Council (RJC) – membership application is currently with the RJC
Relocate and consolidate the sales and marketing departments
Investigate systems to improve traceability of diamonds after sales
Pillar: Reliable production
Petra monitors and manages each step in the diamond production process to ensure the highest ethical standards. We aim to achieve optimum
economic extraction of the available orebodies, while maximising the life of mining operations. This reliable production pillar is achieved
through accurate and precise mineral resource planning, responsible project and asset management, and optimising capex and opex efficiencies.
Mineral resource
management and
asset management
This is a new area for our Sustainability Report and therefore does not include any FY 2022 objectives
FY 2023 objectives
Continue to improve on our Diamond Value Management Framework throughout the organisation to further improve process
efficiencies and product security through mine planning, asset management and diamond value management systems,
as well as feasibility studies and subsequent LOM extension projects. Read more on page 103 of the Sustainability Report
Implement a Group-wide Tailings Management Standard aligned to the Global International Tailings Management Standard
Implement feasibility studies to extend the mine plan at Cullinan Mine beyond 2030
Enhance asset maintenance and management system integration and implementation
Capex and opex
efficiencies
This is a new area for our Sustainability Report and therefore does not include any FY 2022 objectives
FY 2023 objectives
Robust cost control:
Š Enhance management accounting through improved reporting, trend and variance analysis
Š Research potential technology enablers to improve governance
Supply chain:
Š Improve supply chain performance and metrics
Š Incorporate new digital technologies to optimise procurement and materials management
Project preparation and effective project controls:
Š Ensure that the optimum framework and capabilities are in place to deliver safe, predictable, and competitive projects
40
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
TCFD Disclosure (Listing Rule 14)
The table below sets out where Petra has made climate-related disclosures consistent with the Recommendations and Supporting
Recommended Disclosures (Recommended Disclosures) of the Task Force on Climate-related Financial Disclosures (TCFD). In FY 2022, Petra
adopted a new Sustainability Framework, which includes climate change as a key aspect. As such, certain of these Recommended Disclosures
are contained in the climate change section of our Sustainability Report at pages 67 to 70 as this provides for better alignment with how
Petra reports on its sustainability ambitions. The Sustainability Report will also be published at the same time as this Report.
While Petra has made disclosures on all of the TCFD Recommended Disclosures, we recognise that we are on a journey in relation to climate
change. As part of this journey, we have set out our FY 2023 objectives and the steps we intend taking to progress these objectives on this
journey (as outlined on page 37), which include initiating the development of our 2030 GHG emission reduction roadmap (as the first phase
of our net zero journey), as well as refreshing our scenario analysis with a view to further embedding this into our corporate strategy. This will
be complemented by Petra’s risk improvement project (as outlined on page 67) which will aid us in further defining climate change risks over
the short, medium and long term, along with associated mitigation plans for these risks.
Theme
Recommended disclosures
Reference
Governance
1.
Describe the board’s oversight of climate-related risks
and opportunities
Strategy
2.
Describe management’s role in assessing and managing
climate-related risks and opportunities
3.
4.
Describe the climate-related risks and opportunities
the organisation has identified over the short, medium,
and long term
Describe the impact of climate-related risks and
opportunities on the organisation’s business, strategy
and financial planning
5. Describe the resilience of the organisation’s strategy, taking
into consideration different climate-related scenarios,
including a 2°C or lower scenario
Risk management
6.
Describe the organisation’s processes for identifying
and assessing climate-related risks
7.
Describe the organisation’s processes for managing
climate-related risks
8. Describe how processes for identifying, assessing
and managing climate-related risks are integrated
into the organisation’s overall risk management
Metrics and targets 9. Disclose the metrics used by the organisation to assess
climate-related risks and opportunities in line with its
strategy and risk management process
10. Disclose Scope 1, Scope 2 and, if appropriate, Scope 3
greenhouse gas (GHG) emissions, and the related risks
11.
Describe the targets used by the organisation to manage
climate-related risks and opportunities and performance
against targets
Š Annual Report: 65-67; 98
Š Audit and Risk Committee Terms of
Reference: https://www.petradiamonds.
com/wp-content/uploads/ARC-Terms-of-
Reference-Feb-2022.pdf
Š Health, Safety and Environmental
Committee’s Terms of Reference: https://
www.petradiamonds.com/wp-content/
uploads/PDL-HSE-TOR-Amended-
Feb-2021.pdf
Š Remuneration Committee Terms of
Reference: https://www.petradiamonds.
com/wp-content/uploads/Petra-
Remuneration-Committee-Terms-of-
Reference.pdf
Š Sustainability Report: 69
Š Annual Report: 65-67; 98
Š Sustainability Report: 65; 68
Š Annual Report: 67; 70; 109-110
Š Sustainability Report: 69
Š Annual Report: 37; 100; 109-110
Š Sustainability Report: 69-70
Š Sustainability Report: 69
Š Annual Report: 65-67; 98
Š Sustainability Report: 65; 68
Š Annual Report: 65-67; 70; 98; 109-110
Š Sustainability Report: 65; 68
Š Annual Report: 65-67; 98
Š Sustainability Report: 65; 68
Š Annual Report: 44
Š Sustainability Report: 70-71; 111-113
Š Sustainability Report: 67-71; 111-113
Š Annual Report:44
Š Sustainability Report: 70-71; 111-113
Annual Report and Accounts 2022 Petra Diamonds Limited
41
Strategic Report
Key Performance Indicators
Petra uses a wide range of financial and non-financial metrics that are linked to our strategic
objectives to help evaluate the performance of the business. The following KPIs are considered
by management to be the most important.
ROUGH DIAMOND PRODUCTION1 (MCTS)
The number of diamonds recovered from Group operations
REVENUE1 ($USM)
Revenue from rough diamond and partnership sales
3.4 +3%
585.2 +44%
ADJUSTED EBITDA1,2 ($USM)
Earnings before interest, tax, depreciation
and amortisation
264.9 +103%
3.8
3.9
3.3
3.2
3.4
495.3
463.6
1.1
585.2
406.9
243.3
195.4
153.0
18
19
20
21
22
18
19
20
21
22
18
19
264.9
130.2
67.3
20
21
22
Strategic relevance
Adjusted EBITDA reflects our production
performance, sales, and cost optimisation.
The exclusion of exploration, the corporate
overhead and foreign exchange movements,
facilitates the consideration of comparable
performance.
Performance
The increase in Adjusted EBITDA and our
Adjusted EBITDA margin2 of 45% (FY 2021: 32%),
was driven by higher revenue, operational
efficiencies, and our efforts to mitigate the
impact of cost inflation.
Risk management
Our rigorous operational and financial discipline
is managed through a comprehensive,
Board-approved, annual budgeting process
and monitored monthly.
Link to Governance
We cover the link between this KPI and risks
on pages 101-107 and 110-111.
Outlook
We do not guide on EBITDA as it partially
depends on external factors over which we
have no control, such as diamond prices and
inflation. However, we are confident of our
effective management of our production and
costs, and our guidance for these for FY 2023
to FY 2025 remains unchanged.
Strategic relevance
Production targets, as stated in our annual
guidance, reflect our strategy of achieving
reliable production which enables us to achieve
our strategic objectives and ambitions.
Strategic relevance
Revenue depends on production and our
in-house sales and marketing capability.
It is relevant to our profitability and cash
generation.
Performance
Group rough diamond production increased
in line with our guidance, largely due to
Williamson resuming production following
its period of care and maintenance.
Cullinan Mine’s production was at the upper
end of our production guidance ranges on all
criteria except tailings. Finsch’s production
was just below guidance reflecting waste
ingress issues, which have now been largely
mitigated. Williamson came in within the
production guidance range. Koffiefontein
came in below guidance due to productivity
and staff morale challenges on account of
implementing a labour reduction process.
Risk management
Our realistic operational targets are based on
detailed mine production planning, and allow
us to monitor performance closely.
Loadshedding in South Africa is currently
having minimal impact on our operations.
We are not asked to curtail load at the lower
stages of loadshedding and, even when
asked to curtail load, our excess processing
capacity at both Cullinan Mine and Finsch
allows us to reduce processing energy draw,
while maintaining mining production and
catching up on processing when curtailment
is lifted.
Link to Governance
We cover the link between this KPI and risks
on pages 103-107 and 110-111 and remuneration
on pages 124-129.
Guidance
Production guidance for FY 2023 to FY 2025
remains unchanged.
Performance
Revenue from rough diamond sales increased
44% to US$584.1 million, benefiting from
positive diamond market fundamentals
supporting a 41.5% increase in like-for-like
rough diamond prices, the reopening of the
Williamson mine, and the recovery and sale
of US$89.1 million of Exceptional Stones.
Profit sharing from a partnership stone
yielded US$1.1 million in additional revenue.
Risk management
The key factors affecting revenue growth are
delivery on production targets, managing
grade volatility, product mix and the
recovery of Exceptional Stones.
Diamond prices are outside of the Group’s
control and we aim to maximise achieved
prices through the timing and competitive
nature of our tenders. We may withhold
stones until later tenders when demand
might be stronger, or propose a profit
sharing agreement to capture additional
value from cutting and polishing of certain
stones. We are investigating traceability
technologies as a means of capturing
additional premium.
Link to Governance
We cover the link between this KPI and risks
on pages 101-107 and 110-111 and
remuneration on pages 124-129.
Outlook
We do not guide on rough diamond prices
or revenue, but are encouraged by the
structural supply deficit in the diamond
market that is expected to remain supportive
for the foreseeable future. We recognise that
there may be volatility in the near term due
to macroeconomic uncertainties, the war in
Ukraine, sanctions on Russian producers and
the COVID-19 pandemic.
42
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
OPERATIONAL FREE CASHFLOW1, 2, 4 (US$ MILLION)
Cash generated from operations less acquisition of
property, plant and equipment
OPERATIONAL CAPEX1,3 (US$ MILLION)
Capital expenditure incurred by the operations,
comprising expansion and sustaining capex
SAFETY4 (GROUP LTIFR)
Lost time injury frequency rate
230.0 +91%
50.9 +123%
0.22 -50%
230.0
129.6
0.44
70.5
19
-61.3
18
-12.3
20
120.1
81.4
21
22
18
19
28.6
20
22.8
21
50.9
22
Strategic relevance
Operational Free Cashflow (OFC) is the
proportion of cash generation which is
available after funding our operations to
invest in delivering our strategy, including
capital projects, debt reduction, and
shareholder returns. This is in line with our
approach to Capital Allocation.
Performance
Strong OFC in FY 2022 reflects the sale of
a high number of Exceptional Stones and
stronger diamond prices, and was positively
impacted by net finance income and net
realised foreign exchange gains. This was
offset by income tax and dividend paid
to BEE Partners.
Risk management
Our strong financial and operational
management involves disciplined
cashflow forecasting.
Link to Governance
We cover the link between this KPI and risks
on pages 101-103, 106-107 and 111 and
remuneration on pages 124-129.
Outlook
We do not guide on the main drivers,
which are external factors, but are confident
that we are effectively managing internal
factors. While Project 2022 has concluded,
it has translated into a continuous business
improvement culture that is now fully
embedded in our Operating Model,
ensuring that production throughput
and cost efficiencies continue to drive
strong cash generation.
Strategic relevance
Our future plans are dependent in part on
investment. We estimate and monitor the
funds for sustaining our operations (sustaining
capex) and for investing in future capital
projects (expansion capex).
Performance
Operational capex came in at the lower end
of guidance as delivery of certain capital
items, amounting to around US$12 million,
was deferred to FY 2023.
The year-on-year increase in operational
capex included initial investments in the
expansion projects at Cullinan Mine
and Finsch.
Risk management
Our annual budgeting process includes
detailed capex requirements and is approved
by the Board. Capex is monitored and
cashflow implications continually reviewed.
Link to Governance
We cover the link between this KPI and risks
on pages 103-104 and 111 and remuneration
on pages 124-129.
Guidance
We have increased FY 2023 guidance to
include US$12 million of capital expenditure
deferred from FY 2022.
Expansion capex of US$115–125 million is
guided for FY 2023 which includes the CC1
East project at Cullinan Mine and the Lower
Block 5 3-level sub-level cave project at
Finsch. Sustaining capex is guided at
US$33–36 million. Guidance figures are
stated in FY 22 real terms and based on
an exchange rate of ZAR15:US$1.
0.23
0.21
0.29
0.22
18
19
20
21
22
Strategic relevance
The safety of our people is our number one
priority and our strong record has a positive
impact on our culture, operations, production
and reputation.
Performance
We met our LTIFR target with a substantial
decrease, in part reflecting FY 2021’s higher
base resulting from COVID-19.
On an absolute level, 15 LTIs compared
favourably with 25 in FY 2021. The majority
of accidents were behavioural in nature and
of low severity but considerable effort
continues to change behaviours associated
with LTIs.
Risk management
In addition to appropriate risk management
processes, Petra has strategies, systems,
effective risk-based mitigating controls
and training in place to promote a safe
working environment.
Link to Governance
We cover the link between this KPI and risks
on page 108 and remuneration on pages 124
and 127.
Target
We target a zero harm working environment,
with an aim to achieve a minimum of 20%
improvement in LTIFR annually.
Annual Report and Accounts 2022 Petra Diamonds Limited
43
Strategic Report
Key Performance Indicators continued
TOTAL SHAREHOLDER RETURN (PERCENTAGE CHANGE)
Share price performance
CARBON EMISSIONS5 (TCO2-E/CT)
Carbon emission intensity for Scopes 1 and 2
+21.8
0.139 +10%
WATER EFFICIENCY5 (M³/T)
Total fresh water used in production (ROM plus
tailings)
1.00 +82%
-37
-65
18
19
-91
20
21.8
-21
0.130
0.123
0.134
0.126
0.139
2.43
21
22
18
19
20
21
22
18
19
20
1.03
0.97
0.55
21
1.00
22
Strategic relevance
We aim to win the support of capital markets
to facilitate access to capital and reduce its
cost. Total Shareholder Return (TSR) reflects
the market’s recognition of the value
proposition of our business to shareholders
and, since the announcement of a new
dividend policy in September 2022, includes
returns to shareholders in the form of
dividends.
Performance
Total shareholder return increased by 21.8%
driven by our strong share price performance
since the announcement of our FY 2022
interim results and strategy reset in February
2022. The recognition of a tightening supply
side and pent-up demand may have aided in
an upward re-rating of rough diamond
producers.
Risk management
Our shares remains subject to the risk of
being under-valued and we aim to manage
this through a proactive and wide-reaching
investor relations programme to present
Petra’s investment case to existing and
potential investors. This is to be achieved
through focusing on management and asset
quality, the strength of our balance sheet,
the new Operating Model focused on cash
generation, the embedding of our
Sustainability Framework and our value-led
growth strategy.
Link to Governance
We cover the link between this KPI and risks
on pages 101-102, 106-107 and 111 and
remuneration on pages 125 and 128-129.
Commitment
We will continue to engage with capital
markets to ensure that our strategy,
performance and prospects are well
understood, and to ensure we take any
feedback on board.
Strategic relevance
In recognition of the impacts of climate
change, we support the Paris Agreement.
Our GHG targets (set out below) are aligned
to our Sustainability Framework, which we
are currently in the process of operationalising.
Performance
As expected, Petra’s carbon emissions
increased by 10% largely owing to the
resumption of production at Williamson
which was on care and maintenance in FY
2021. Williamson Mine is a heavier energy
user than our three underground mines and
is more reliant on vehicles.
Our emissions profile is heavily weighted to
Scope 2, particularly in South Africa, where
we are reliant on external energy. However,
recent reforms announced in South Africa
present an opportunity for us to
substantially de-carbonise our energy mix,
and support our path to net zero.
Risk management
We acknowledge the growing risk of
climate change to our Company and
our stakeholders. By evaluating and
understanding the risks and opportunities
that climate change represents, we commit
to managing our assets in an economically
and environmentally sustainable way.
Link to Governance
We cover the link between this KPI and risks
on pages 109-110 and remuneration on pages
124-129.
Target
We are committed to a GHG net zero target
for Scopes 1 and 2 by 2050, but aspire to
reach this goal by 2040 or sooner, and have
put in place a target to reduce Scopes 1 and 2
GHG by 35 - 40% off our 2019 baseline by 2030.
Relevance
Our operations are water intensive, and we
recognise the impact they could have on
natural water sources that sustain the
communities around our operations. We are
therefore committed to utilising fresh water
responsibly and efficiently, including using a
substantial amount of recycled water in our
production processes.
Performance
Petra’s total fresh water usage for
production increased significantly, owing to
higher overall production and the ramp-up
of Williamson, which is the Group’s largest
user of fresh water, after being in care and
maintenance in the prior year. The proportion
of recycled water used on our mines was
above 80%.
Risk management
We monitor and manage water consumption
and quality in alignment with our water
management strategy to develop and
implement water efficiency improvements.
Inspections and audits identify any
shortcomings.
Link to Governance
We cover the link between this KPI and risks
on pages 108-109 and remuneration on
pages 124 and 127.
Objective
Our objectives are to reduce the intake or
improve the efficiency of fresh water used;
to improve the percentage water recycled,
and to continuously review and update
Petra’s water management strategy.
44
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
STAFF TURNOVER4 (%)
Staff and fixed term contractors turnover
TRAINING SPEND4 (US$ MILLION)
Investment in employee training and development
9.8 +2%
6.1 +5%
SOCIAL SPEND4 (US$ MILLION)
Total social spend (compulsory and discretionary) on
local communities
0.94 +42%
10.8
8.1
8.1
9.6
9.8
9.5
6.6
5.8
5.8
6.1
1.00
1.00
1.38
0.94
0.66
18
19
20
21
22
18
19
20
21
22
18
19
20
21
22
Strategic relevance
Employees who enhance their skill-sets
contribute to the Company’s success and
have greater career satisfaction, which
improves morale, productivity and employee
retention.
Performance
Our staff turnover rate increased marginally
from 9.6% to 9.8%, with a higher incidence
of retrenchments, retirements and non-
renewal of fixed-term contracts. This is a
comparatively low staff turnover rate, on par
with the mining sector and industry in
general.
Risk management
The Group’s employment policies and
remuneration strategy are designed to
attract, incentivise and retain individuals
of the right calibre, as well as retain key
management for the longer term.
Strategic relevance
Achieving our Group-wide ambitions is
dependent on our employees’ talent and
commitment. Training is a critical driver of
loyalty among employees and a means of
ensuring they are capable of meeting
objectives and delivering results.
Performance
Our investment in employee training and
development increased, partly due to the
uptake in training following the lifting of
COVID-19 restrictions.
Risk management
We strengthen our business with training
in both the technical and non-technical
disciplines. Petra maintains compliance
with the regulatory framework and
supports a number of different training
and development programmes to reduce
risk overall.
Link to Governance
We cover the link between this KPI and risks
on page 107.
Link to Governance
We cover the link between this KPI and risks
on pages 106-108.
Objective
We aim to provide the structures and
support for our people to enable them
to be effective, committed and engaged.
Our near-term focus is to finalise and
implement the many initiatives undertaken
to improve our culture, including the Formula
for Success, and to embed continuous
improvement prioritising the insights
gained from Project 2022.
Target
Petra aims to achieve a training spend target
of 5% of annual payroll in ZAR terms.
The cultural Formula for Success that we
are embedding, has supporting initiatives,
including formal and informal opportunities
for training and development.
Strategic relevance
Apart from the direct benefits we can offer
in local communities, social spend builds a
positive reputation for the Company and
ensures local communities are supported and
supportive of our mines. Through our
ongoing social spend we also create and
build on our valuable resource of potential
employees.
Performance
The increase in social spend is largely
attributable to Williamson exiting care and
maintenance, but also to an increase in
Corporate Social Investment and Enterprise
Social Development in local communities.
Risk management
Petra maintains compliance with the
regulatory framework and continues
to evaluate the evolving Mining Charter
legislation in South Africa.
We also continually liaise and co-operate
with social and institutional stakeholders
to reduce the risks associated with poor
communication and to avoid the damage
that a reputation mismanagement can cause.
Link to Governance
We cover the link between this KPI and risks
on pages 104-105.
Target
Petra targets base case spend of 1% of net
profit after tax at asset level.
Notes:
1. For comparative purposes, the FY 21 production, diamond sales and cost figures have been restated to include Williamson as it is no longer a discontinued operation.
2. All Alternative Performance Measures (APMs) used are defined on page 207.
3. Excluding capitalised borrowing costs.
4. Figures for FY 2018 include the Kimberley Ekapa Mining JV operation (KEM JV); Petra divested of its stake in KEM JV in December 2018.
5. Certain environmental figures for FY 2021 relating to Petra’s carbon emissions and water consumption have been restated further to the independent verification of the Company’s 2021 GHG
Inventory by TikoTech.
Annual Report and Accounts 2022 Petra Diamonds Limited
45
Strategic Report
Operational Review
Introduction
We have met our production guidance
recovering a total of 3.35 Mcts, and I am
proud of how effectively we’ve mitigated the
operational challenges we faced. But, most
importantly, our LTIFR improved by 50%.
Jaison Rajan
Chief Operating Officer
Production and capital expenditure summary1
Production
ROM diamonds
Tailings diamonds
Total diamonds
Tonnages treated
ROM tonnes
Tailings tonnes
Total tonnes
On-mine cash costs
Capex
Expansion
Sustaining
Total
Unit
FY 2022
FY 2021
Variance
Carats
Carats
3,148,258
3,057,860
205,412
182,452
Carats
3,353,670
3,240,312
Mt
Mt
Mt
11.3
0.4
11.7
7.7
0.4
8.1
US$m
272.3
208.9
US$m
US$m
US$m
34.5
17.7
52.2
16.9
6.9
23.8
+3%
+13%
+3%
+47%
—
+44%
+30%
104%
157%
119%
1. For comparative purposes, the FY 21 production and cost figures have been restated to include Williamson as it is no longer a discontinued operation.
Production
Our operational performance reflects the re-commencement
of operations at Williamson from the first quarter of the Year.
Group diamond production increased 3% to 3,353,670 carats
(FY 2021: 3,240,312 carats), within our guidance range.
Read more on the performance of our mines on pages 50 to 56
Protecting our people
Our safety performance is critical throughout Petra, and we
celebrated a new record for the Cullinan Mine of 365 LTI free days in
April 2022. On a Group basis, we improved the LTIFR by 50% to 0.22
compared with 0.44 last year and, in absolute terms, LTIs were down
by 40% to 15 (from 25). These were mostly of low severity and
behavioural in nature.
The improving trends demonstrate the effectiveness of our
remedial actions and behaviour-based intervention programmes.
We nevertheless continue to focus on providing a zero harm working
environment and will continue to make every effort to reduce the
risk of harm in the workplace.
Read more on Health and Safety on pages 114 to 115
and pages 42 to 54 of the Sustainability Report
COVID-19 remains a risk, but one which we continue to manage
with minimal disruption to operations. We are focused on making
vaccinations easily available and encouraging uptake. In Petra’s
South African operations, 64% of the workforce have been vaccinated
which is well ahead of the South African-wide double-dose total of
approximately 51% of the population. We are encouraging take-up
at Williamson in Tanzania, where 16% of our employees are vaccinated.
46
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Improving our productivity and cashflow
We have now formally concluded Project 2022, which commenced
in July 2019, with the aim of identifying opportunities to increase
throughput across the business, drive efficiencies and facilitate
continuous improvement. We delivered our key objective of
improving operational free cashflow over three years by delivering
US$265.4 million of net free cashflow, well ahead of our target of
US$100 – 150 million.
Another legacy of Project 2022 is our new Operating Model which
supports clear accountability and authority. Linked to this, our
organisational design empowers our people to deliver our strategy.
Our culture is one of continuous improvement which we achieve
through the identification and prioritising of ideas to drive further
improvement. The key result is our relentless focus on operational
and capital cost efficiencies throughout our operations.
Read more on Project 2022 on page 13
New approved extension projects
During the Year, the Board approved extension projects at our major
South African mines: Cullinan and Finsch.
Š At the Cullinan Mine we will establish a CC1 East sub-level cave, on
the same level as the current C-Cut operation, extending the mine
plan to 2031. The capital investment is estimated at US$173 million
over the life of the project and is expected to deliver a project
internal rate of return (IRR) of more than 30% and incremental
project NPV of more than US$70 million. Capital expenditure began
during the Year and production is expected to begin in FY 2024,
ramping up to a steady state in FY 2026
Š At Finsch, we will extend the mine below the current area, creating
a Lower Block 5 3-level sub-level cave, extending the mine plan to
2030. The capital investment is estimated at US$216 million and
the IRR is also expected to be in excess of 30% with incremental
NPV of more than US$90 million. Capital expenditure for this
project will commence during FY 2023 and we expect production
to commence in FY 2025
Š The capex involved in these projects is expected to be self-funded
There are further opportunities beyond these mine plans, given the
significant scale of the orebodies at both Cullinan Mine and Finsch.
Resources
Petra manages one of the world’s largest diamond resources of
226.6 Mcts. This scale implies that the potential mine lives of our core
assets could be considerably longer than the current mine plans.
Petra manages one of the world’s largest gross diamond resources
(inclusive of reserves) of 226.6 Mcts, supporting a potential mine life
well beyond the current mine plans. The 2% reduction compared to
230.64 Mcts in 30 June 2021, was predominantly due to depletions
resulting from mining at all our assets in FY 2022.
Petra’s gross diamond reserves decreased 10% to 29.97 Mcts (30 June
2021: 33.33 Mcts) primarily due to mining depletions with minor
changes in mine plans and Williamson remaining on care and
maintenance until August 2021.
Read more on pages 58 to 60
Key operational guidance maintained
Total carats recovered (Mcts)
Cash on-mine costs and G&A1 (US$m)
Expansion capex1 (US$m)
Sustaining capex1 (US$m)
Loadshedding and energy reform in South Africa
The recent increase in loadshedding in South Africa is currently having
minimal impact on our operations. Our excess processing capacity at
both the Cullinan and Finsch Mines allows us to reduce our processing
energy draw to meet the prescribed load curtailment requirements,
whilst maintaining mining at full production and catching up on
processing when conditions return to normal.
The regulator in South Africa recently removed the cap for private
power generation without licencing. This has opened up opportunities
for high energy-users to integrate renewables on their own sites and
Petra is actively looking at options which are optimal from a financing
and partnering perspective that would enable us to integrate
renewables into our energy mix, lower our cost of energy, secure our
energy supply and support our target of achieving net zero GHG
emissions by 2050 or earlier.
Focus for FY 2023
Petra confirms its operational guidance for the FY 2023
to FY 2025 period.
Š Safety remains our number one priority and we will continue to
implement our remedial actions and behaviour-based intervention
programmes across all our operations
Š We are continuing to focus on invigorating our culture
of continuous improvement throughout our operations
Š Given the recent disruptions to global supply chains and the
potential for associated cost pressures, we are monitoring these
and, where possible, mitigating their impact on project timelines
and costs
Š Our ability to absorb the inflationary pressures we are seeing,
is assisted by our disciplined cost management, relatively low fuel
consumption, and any weakening of the South African Rand
The specific guidance for each of our mines is covered on the
following pages.
The team is highly motivated and excited by the opportunities
we are realising throughout our operations.
Jaison Rajan
Chief Operating Officer
10 October 2022
FY 23E
FY 24E
FY 25E
3.3 – 3.6
3.3 – 3.6
3.6 – 3.9
300 – 320
300 – 320
300 – 320
115 – 125
125 – 135
115 – 120
33 – 36
30 – 32
26 – 28
1. Opex and capex guidance is stated in FY 22 real terms and based on an exchange rate of ZAR15/USD1.
More detailed guidance is available on Petra’s website at petradiamonds.com/investors/analysts/analyst-guidance/
Annual Report and Accounts 2022 Petra Diamonds Limited
47
Strategic Report
Operational Review continued
Case study: The new project at Cullinan Mine
Current mining area – C-Cut
The sole source of our current tonnage is the C-Cut, a 5.7 Ha
area with potential for approximately 34 Mt additional
tonnage which is known to include high-value Type II stones,
large high quality, white or blue gem-stones.
New approved plan – CC1-East
During the Year, the CC1-East project was approved and the
capital spend has commenced. This new area is expected to
begin to contribute from FY 2024 and to ramp up to steady
state by FY 2026. It extends the mine plan to 2031. Whilst the
C-Cut mining block is known for its Type II diamonds, the CC1E
mining block has a higher grade than the C-Cut.
We expect to invest a total of US$173 million (in real terms)
achieving an IRR of more than 30% and incremental project
NPV in excess of US$70 million.
Plans beyond 2031 – C-Cut Centre and D-Cut
The significant opportunities for mine plan extensions beyond
2031 include additional tunnels to the east of the C-Cut, the
C-Cut Centre block which has not been mined.
The D-Cut and material below CC1-East depends on building a
new shaft. This western part of the orebody at deeper levels
should continue to produce high value stones.
Dumps
Plant
Shaft
t
f
a
h
S
w
e
N
927m Level
1,093m Level
1,153m Level (depth to base of resource)
C-Cut
C-Cut
centre
±14.5 Mt
D-Cut
centre
±47 Mt
CC1 East
±7.5 Mt
48
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Case study: The new project at Finsch
Current production – 4-level Upper Block 5 SLC
Production has been from the 4.8 Ha, 4-level Upper Block 5 SLC
(sub-level cave), which has been operating at steady state
since 2019. It predominately produces highly commercial
diamonds of +five carats and gem-quality smaller diamonds.
New approved plan – Lower Block 5 SLC
In extension of the mine plan to 2030, the Board has approved
the Lower Block 5 3-level project which is expected to commence
during FY 2023 with production contributions from
FY 2025 onwards.
We expect to invest a total of US$216 million (in real terms)
achieving an IRR of more than 30% and incremental project
NPV in excess of US$90 million.
Plans beyond 2030 – Block 6 and SWPC areas
The opportunities for mine plan extensions beyond 2030
include mining the areas below Lower Block 5 and the Upper
and Lower Precursor (SWPC) areas on the western side of the
orebody (left hand side of the illustration). Further resource
delineation work is required to reinforce our confidence
in the resource.
Plant
Shaft
Dumps
SWPC
±8.3 Mt
Lower Block 5
SWPC
±3.5 Mt
Block 6
(±12.2 Mt)
97 Level, deepest borehole
kimberlite intersection
(South West Precursor)
100 Level (depth to base of resource)
109 Level, deepest borehole kimberlite intersection
(main pipe)
Annual Report and Accounts 2022 Petra Diamonds Limited
49
Strategic Report
Operational Review continued
Cullinan Mine
South Africa
Renowned for very rare and highly valuable Type II blue diamonds
and very large high-quality Type II white stones
Mining method: Underground block cave and sub-level cave
Mine plan: to 2031 with potential to extend
FY 2022 performance in line with guidance
FY 2022
FY 2021
Variance
Sales
Revenue (US$m)
322.4
250.6
Diamonds sold (carats)
1,899,011
2,261,058
Average price per carat (US$)
169
111
Total production
Tonnes treated (tonnes)
4,865,065
5,060,339
Diamonds produced (carats)
1,814,975
1,943,942
+29%
-16%
+52%
-4%
-7%
Grade1
ROM (cpht)
Tailings (cpht)
Segment result2 (US$m)
Costs and capex
On-mine cash cost per total
tonne treated (ZAR/t)
Total capex (US$m)
36.2
49.6
154.4
312
35.0
38.2
41.0
-5%
+21%
76.8
+101%
260
16.8
+20%
+108%
1. Petra is not able to precisely measure the ROM/tailings grade split because ore from both
sources is processed through the same plant; the Company therefore back-calculates the
grade with reference to resource grades.
2. The segment result includes depreciation of US$52.5 million.
50
Petra Diamonds Limited Annual Report and Accounts 2022
GROSS RESOURCES MCTS
147.2 (FY 2021: 149.8)
EMPLOYEES AND CONTRACTORS
1,716 (FY 2021: 1,557)
LTIFR
0.12 (FY 2021: 0.43)
CARBON INTENSITY (TCO2-E/CT)
0.12 (FY 2021: 0.10)
WATER INTENSITY (M3/T)
0.13 (FY 2021: 0.09)
At the Cullinan Mine we came in at the upper end of our production
guidance ranges on all criteria except tailings. Diamonds produced
were 7% below last year’s, largely as a result of the convergence in
Tunnel 41 early in the Year, and the planned depletion of a mining
block which had contributed to production in FY 2021. The convergence
has now been effectively mitigated and factored into our guidance.
The Cullinan Mine’s revenue increased 29% to US$322.4 million due
to a 52% increase in the average price achieved per carat and the
US$75.2 million realised for Exceptional Stones. Together, these more
than offset the 16% reduction in diamonds sold, which was mainly
the result of a higher volume of sales in FY 2021 caused by the release
of the inventory build-up during the COVID-19 crisis into the market.
Additional revenue of US$1.1 million was generated from Petra’s 50%
share of profit from the sale of polished stones cut from the 18.30ct
Type II blue diamond sold as a partnership stone in August 2021.
The convergence of Tunnel 41 in the C-Cut impacted 18 of a total
of 187 draw points. Remedial action was focused on arresting
convergence by reinforcing the affected pillars and protecting the
tunnel, so that access can be re-established once the area has been
stabilised. We continue to monitor it to determine when we will be
able to re-access this tunnel.
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Grade was in line with guidance, notwithstanding the decline towards
the end of the Year due to a change in the composition of ore within
the C-Cut block cave resulting in a higher proportion of lower-grade
and greater-density ore. We are monitoring these changes together
with options to mitigate the grade differential.
During the Year, the efficiency of the X-Ray Luminescence technology
(XRL), introduced in FY 2021, to reduce the risk of damage to larger
stones in our processing circuit, was tested through the addition of a
modular X-Ray Transmission unit. This unit recovered only 11 additional
diamonds of low value, validating the decision to use XRL technology
in the recovery process.
The on-mine unit cash cost per total tonne treated increased to
ZAR312/t due to inflationary increases, increased social expenditure
and direct costs previously included under Group G&A costs. FY 2022
capex was US$35.0 million, the majority of which was spent on the
commencement of the newly approved CC1 East mine extension project.
The balance included spend on the projects already underway in the
current mining area, development of a crusher, and improved
long-term accessibility in an area of the C-Cut.
Guidance
FY 2023 to FY 2025 production, cost and capex guidance for the
Cullinan Mine remain unchanged noting that we recorded lower
grades toward the end of the Year and a study is underway to inform
our mine planning as a result of a higher proportion of ROM tonnes
from our more mature drawpoints.
Š Our production guidance for FY 2023 is between 4.1 and 4.3 Mt
ROM material to be treated, and ROM grade of between 36.5 and
38.5cpht, including the ore from the portions of the current mining
area, the C-Cut, that is lower grade and higher in density
Š Tailings production is expected to increase to between 0.56 and
0.59 Mt material treated. ROM production will be prioritised,
supplemented by low volumes of recovery tailings. The economic
evaluation of the Cullinan Mine’s substantial tailings resource will
be monitored continuously and could be included in future mine plans
dependent on market conditions and the pricing of smaller diamonds
Š The on-mine cash cost for FY 2023 guidance is between ZAR1,413
and ZAR1,486 million in real terms
Š We are guiding FY 2023 capex of between US$72 and US$79 million.
In addition to sustaining capex, it primarily relates to underground
development of the new CC1 East production areas of our
expansion project, explained above
Š We expect to commence mining from the higher grade CC1 East
section from FY 2024
For detailed guidance please see: petradiamonds.com/investors/
analysts/analyst-guidance
Cullinan Mine and orebody schematic page 48
and petradiamonds.com/operations/operating-mines/cullinan
A Caterpillar LHD loading and cleaning an end during rehabilitation activities at Cullinan Mine.
Case study: Mitigating
tunnel convergence
Petra has a good track record of resolving technical issues
in its mines. We are currently making good progress in
mitigating the tunnel convergence in the Cullinan Mine.
The background to tunnel convergence
We rely on tunnels to access and extract ore from draw-bells
within our underground block caves and thus face the
inevitable threat of tunnel convergence. While tunnels are
designed to withstand the significant structural stresses,
geology is neither consistent nor entirely predictable and,
where complex structures meet unfavourable geology,
there is a possibility of tunnel convergence. Typically, the
solution is to plug the affected area of the tunnel with
concrete to strengthen it, and protect the access routes
and surrounding draw-bell points.
Our mitigation approach
Our success in resolving the FY 2019 convergences at Tunnel
32 in the C-Cut in the Cullinan Mine, gives us confidence in
our expertise. We sealed off a section of the extraction
tunnel, as well as two draw points, and redistributed the
stresses in the tunnel. This meant we could re-open access
to the extraction tunnel, by removing the concrete plug and
installing supports, in March 2022. This complex
methodology involves drilling and blasting through the plug
with short advances, and installing primary and secondary
support and steel structures at short intervals through the
length of the affected area. Despite the hazardous nature of
this process, we did not incur a single safety incident or LTI.
We now have tried and tested methodology for the
reopening of sealed tunnels, and we expect to apply this
to the convergence in Tunnel 41 once geotechnical stresses
allow it to be done safely. We are monitoring closely when
this is likely and we can commence re-opening access.
Notwithstanding this, the mine plan for the C-Cut remains
on-track for FY 2023 and beyond.
Annual Report and Accounts 2022 Petra Diamonds Limited
51
Strategic Report
Operational Review continued
Finsch
South Africa
GROSS RESOURCES MCTS
36.4 (FY 2021: 37.7)
EMPLOYEES AND CONTRACTORS
1,687 (FY 2021: 1,582)
LTIFR
0.63 (FY 2021: 0.66)
CARBON INTENSITY (TCO2-E/CT)
0.12 (FY 2021: 0.12)
WATER EFFICIENCY (M3/T)
0.94 (FY 2021: 1.07)
Renowned for highly commercial diamonds of +five carats and rich gem-quality
smaller diamonds; large and very rare fancy yellow diamonds are also produced
Mining method: Underground sub-level cave
Mine plan: to 2030 with potential to extend
FY 2022 performance
FY 2022
FY 2021
Variance
We saw steady production in the final quarter of the Year leading
to an overall increase of 3%, just below guidance.
Sales
Revenue (US$m)
165.7
123.4
Diamonds sold (carats)
1,402,654
1,602,312
Average price per carat (US$)
118
77
Finsch revenue increased 34% to US$165.7 million due to a 53%
increase in the average price per carat which more than offset a 12%
reduction in diamonds sold. As with the Cullinan Mine, this reduction
was mainly the result of a higher volume of sales in FY 2021 which
was caused by the inventory build-up during the COVID-19 pandemic
being released into the market.
+34%
-12%
+53%
Total production
Tonnes treated (tonnes)
2,732,982
2,311,195
+18%
Grade - ROM1 (cpht)
46.7
53.5
Diamonds produced (carats)
1,275,323
1,237,219
-13%
+3%
Segment result1 (US$m)
Costs and capex
On-mine cash cost per total
tonne treated (ZAR/t)
Total capex (US$m)
34.8
(0.5) +7060%
493
12.0
536
4.0
-8%
+200%
1. The segment result includes depreciation of US$24.4 million.
While the previously reported waste ingress at Finsch has been
largely mitigated through the implementation of enhanced drill
and blast and draw controls, this requires continuous management.
The Business Re-engineering (BRE) project recommendations being
implemented at Finsch are designed to match its cost base to the
revised production levels, taking into account waste ingress issues.
Finsch has already reduced on-mine cash unit costs by 8% to
ZAR493/t due to the cost curtailment measures undertaken as part
of the BRE project and increased production volumes.
FY 2022 capex was US$12.0 million which was mainly spent on
underground projects. The expansion to the new 78-Level Phase 2
project has commenced, with ramp-up to full production in progress.
In addition, capital has been spent on early mobilisation to de-risk
the new Lower Block 5 3-Level sub-level cave project.
52
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Guidance
FY 2023 to FY 2025 production, cost and capex guidance for Finsch
remain unchanged noting that lower grades experienced at Finsch
in Q4 FY 2022 have continued into Q1 of this year, with ongoing
monitoring and mitigation plans to address this waste dilution.
Š FY 2023 production is planned at between 2.9 and 3.0 Mt ROM
including tonnage from the new section and with waste ingress
being continually monitored. Tailings production is expected
to be ca.0.6 Mt of treated material
Š Finsch’s underground ROM grade is expected to remain within
guidance of between 43.6 and 46.0 cpht. While tailings production
after FY 2023 does not form part of the current mine plan, lower
grade tailings material remains available to supplement Finsch’s
underground operations in the future. The total on-mine cash cost
for FY 2023 is guided at between ZAR1,293 and ZAR1,359 million
in real terms. We are continuing to implement the BRE project
outcomes to enhance margins at Finsch
Š FY 2023 capex is guided at between US$65 and US$71 million,
primarily relating to the new Lower Block 5 3-Level sub-level
cave project which was approved during the Year
Š We expect underground development to commence during
FY 2023 with production from the new Sub-Level Cave in FY 2025
We will continue to implement the BRE project recommendations
to align costs with production.
For more detailed guidance please see:
petradiamonds.com/investors/analysts/analyst-guidance
Finsch and orebody schematic page 49
and petradiamonds.com/operations/operating-mines/finsch
A Simba ME&c (Epiroc) production drill-rig used for drilling long hole blast rings
in the SLC at Finsch.
Case study: Mitigating waste
ingress
Petra has a good track record of resolving technical issues
in its mines. We are currently making good progress in
mitigating the waste ingress experienced at Finsch mine.
Background to waste ingress
Waste ingress is another challenge for underground mining
as it reduces the overall grade of recovered material. The
severity is exacerbated by the maturity of the cave, as the
highly depleted areas of the previous mining levels above
can channel waste and fines (fine grained kimberlite waste
which has the tendency to flow uncontrollably) prematurely
into new, lower loading points. We are currently experiencing
this at Finsch in the lower levels of the sub-level cave areas
where waste ingress contributed to a grade drop of 13%
in FY 2022.
Our mitigation approach
We have put in place a ‘grade and draw’ strategy to cut off
the waste and prevent further progression. The drilling and
blasting of production rings ensures that the ingress of
waste and fines can be arrested timeously, allowing the
next ring to be accessed to produce cleaner ore.
This approach aims to ensure the planned extraction
can continue for FY 2023 at an optimal grade recovery.
The implementation of the 78-Level Phase 2 extension to
the current cave will also assist in providing clean ore for
the remaining life of the current sub-level cave and enable
a smooth transition to the new, lower block 5 sub-level cave
from FY 2025 onwards.
Annual Report and Accounts 2022 Petra Diamonds Limited
53
Strategic Report
Operational Review continued
Williamson
Tanzania
GROSS RESOURCES MCTS
37.7 (FY 2021: 37.9)
EMPLOYEES AND CONTRACTORS
999 (FY 2021: 889)
LTIFR
0.06 (FY 2021: 0.00)
CARBON INTENSITY (TCO2-E/CT)
0.19 (FY 2021: 0.08)
WATER INTENSITY (M3/T)
2.06 (FY 2021: 1.45)
Renowned for ‘bubblegum’ pink diamonds and rounded white diamonds
of high quality
Mining method: Open pit
Mine plan: to 2030 with significant potential
Note: On care and maintenance during FY 2021
FY 2022 performance
Sales
Revenue (US$m)
Diamonds sold (US$m)
Average price per carat (US$)
Total production
Tonnes treated (tonnes)
Grade (cpht)
Diamonds produced (carats)
Segment result2 (US$m)
Costs and capex
FY 2022
FY 2021 1
75.9
197,756
384
4.6
30,339
150
3,591,099
6.4
228,070
0
0
0
22.2
(14.3)
On-mine cash cost per total tonne
treated (US$/t)
Total capex (US$m)
13.9
3.3
0
0.3
1. Williamson was on care and maintenance during FY 2021.
2. The segment result includes depreciation of US$5.0 million.
Operations at Williamson recommenced in August 2021, having been
on care and maintenance from April 2020. FY 2022 was a year of
improving the performance of the mine after this 17-month period
of shutdown and the operations are now fully ramped up.
Williamson’s production and grade were in line with guidance. Revenue
was US$75.9 million, compared with US$4.6 million in FY 2021 when
the only diamond sales were the final parcel recovered prior to the
mine being placed on care and maintenance. We benefitted from the
recovery of an exceptional 32.32 carat pink diamond which was sold
for US$13.8 million in the December 2021 tender.
The on-mine cash unit cost of US$13.9/t was in line with guidance.
FY 2022 capex was US$3.3 million, which included the costs of
preparing the mine for reopening and sustaining the operations.
Guidance
The focus will be the continued stabilisation of operations following
the period of care and maintenance, including increasing throughput
and diamond recovery, while ensuring waste-stripping is undertaken
at the required rate.
FY 2023 to FY 2025 production, cost and capex guidance remain
unchanged for Williamson.
Š We are guiding between 5.2 and 5.5 Mt of ROM material to be
treated during FY 2023 which reflects the fully ramped up production
Š The total on-mine cash cost for FY 2023 is guided at between
US$66 and US$69 million in real terms
Š Capex guidance for FY 2023 is approximately US$9 million and
relates to sustaining capital largely associated with waste stripping
and fines-residue infrastructure
54
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Case study: Significant progress in the development of the IGM
and the community and remedial programmes at the Williamson Mine
The Williamson mine is based in Mwadui, a rural town in the
Shinyanga province of northern Tanzania with a population of
approximately 23,000. As Tanzania’s most important diamond
producer, it is the primary economic contributor to the district
with approximately 9,990 people, taking into account the
employee-multiplier effect, dependent on its operations.
Williamson contributes directly towards community development
by assisting in the social, commercial, industrial, educational,
medical and administrative infrastructures. This includes a
community health programme and the ownership and
management of a primary school where subsidised English
education is provided. It is the only primary school in the district
which has formalised a computer centre and continues to be a
top achiever at national level.
Allegations of historical human rights abuses
The allegations associated with third party security operations
at the Williamson mine were first brought to Petra’s attention
in May 2020. They, and the findings of an independent Board
Sub-Committee, are deeply concerning to us. Our priority has
been to understand what has happened, to support the
provision of a balanced and fair remedy in the interests of all
parties, and to put in place preventative measures to address
the issues. Petra continued to implement remedial programmes
and initiatives during the Year.
More information can be found on our website at
petradiamonds.com/our-operations/our-mines/williamson/
allegations-of-human-rights-abuses-at-the-williamson-mine/
The Independent Grievance Mechanism (IGM)
Building on the Operational Grievance Mechanism for complaints
and grievances related to operational impacts, a non-judicial IGM
based on UN Guiding Principles on Business and Human Rights, is
being designed and implemented to provide remedies to those
who have suffered severe human rights impacts in connection
with security operations at the Williamson mine. This commenced
in August 2021 with a series of stakeholder engagements, at both
national Government and local level.
Ahead of the IGM becoming operational, which is expected by
the end of the calendar year, a mechanism has been set up to
enable community members to confidentially and securely
register alleged historical human rights grievances.
Restorative Justice Projects (RJP) and education
In addition, a number of RJP initiatives are being put in place
to provide sustainable benefits to the communities located close
to the mine, funded by a £1 million escrow account established
by Petra. These include:
Š A Sexual and Gender-based Violence Initiative to implement
various community action plans once reviewed by the
District Commissioner
Š A medical support services project, commenced in January 2022,
to provide physiotherapy screening and, in time, further services
Š Feasibility studies for income-generating projects related
to agriculture businesses and artisanal mining
The Williamson mine has partnered with a local broadcaster
to help raise awareness and understanding of these initiatives.
We have initiated proactive education programmes to prevent
illegal incursions onto the Williamson mine, including engagement
with local communities highlighting the dangers of illegal
mining, and we are also working with local authorities to target
individuals known to provide economic support to trespassers.
These programmes have significantly reduced illegal incursions
over the last year, and, combined with the initiation of income-
generating projects, are expected to offer a long-term solution.
Governance
We also require our third party security contractor, all security
personnel, and management at WDL, to remain up to date in their
Human Rights training and awareness, in line with the UN’s
Voluntary Principles on Security and Human Rights (VPSHR). Our
revised reporting structures and Formula for Success culture will
help to support continued improvement and timely, accurate and
transparent reporting of any incursions and incidents.
Sustainability Report pages 33 to 35
An SGBV training session for community
animators, who champion the SGBV
Action Plan.
Annual Report and Accounts 2022 Petra Diamonds Limited
55
Strategic Report
Operational Review continued
Koffiefontein
South Africa
GROSS RESOURCESOSS MCTS
5.2 (FY 2021: 5.2)
EMPLOYEES AND CONTRACTORS
661 (FY 2021: 689)
LTIFR
0.14 (FY 2021: 0.73)
CARBON INTENSITY (TCO2-E/CT)
1.56 (FY 2021: 0.83)
WATER INTENSITY (M3/T)
2.26 (FY 2021: 1.67)
Produces white stones of exceptional quality, with a regular proportion
of between five and 30 carats, and occasional fancy pink diamonds
Mining method: Underground sub level cave
Mine plan: to 2025 and currently considering options for a responsible exit
FY 2022 performance
Sales
Revenue (US$m)
Diamonds sold (carats)
Average price per carat (US$)
Total production
FY 2022
FY 2021
Variance
21.5
36,950
581
27.9
66,650
-23%
-45%
419
+39%
Tonnes treated (tonnes)
466,957
754,369
Diamonds produced (carats)
35,302
59,151
Grade (cpht)1
Segment result1 (US$m)
Costs and capex
On-mine cash cost per total
tonne treated (ZAR/t)
Total capex (US$m)
7.6
(13.8)
1,106
0.6
-38%
-40%
-3%
7.8
(8.1)
-70%
651
1.7
+70%
-65%
1. Segment result includes depreciation US$0.3 million, Williamson US$5.0 million.
Koffiefontein’s production metrics, except grade, were below
guidance. Revenue decreased 23% to US$21.5 million as the 39%
increase in the average price per carat was more than offset by the
45% decline in the number of diamonds sold.
56
Petra Diamonds Limited Annual Report and Accounts 2022
As Koffiefontein approaches the end of its mine plan, Petra has been
exploring options for a responsible exit. The sales process that Petra
announced in April 2022 has been unsuccessful in identifying a
potential buyer and so Petra is now evaluating its other options
and continues to operate the mine responsibly.
The BRE project at Koffiefontein, which is independent of the
evaluation of exit options, aims to provide for sustainable operations
until the mine’s closure and has resulted in a labour reduction process
to align the operation with the reduced tonnage profile. This process
was concluded and the mine started on a new shift configuration
with the reduced labour structure on 30 June 2022.
The on-mine cash unit cost increased to ZAR1,106/t, mainly due
to decreased tonnages and inflationary increases. FY 2022 capex
was US$0.6 million and this was spent mainly on the completion
of a workshop underground.
Guidance
Continue to mine Koffiefontein responsibly while considering other
options for the short remaining period of its mine plan.
FY 2023 to FY 2025 production, cost and capex guidance is
maintained and takes into account the lower production and cost
profile we have put in place.
Š The total on-mine cash cost for FY 2023 is guided at between
ZAR415 and ZAR437 million in real terms
Š FY 2023 capex guidance is between c.US$1 and US$2 million,
primarily relating to sustaining costs
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Petra’s focus on protecting our people and environment
We are committed to the responsible development of our assets to the benefit of all stakeholders, and our operations are planned
and structured with their long-term success in mind.
Cullinan Mine – delivering zero harm
Cullinan Mine celebrated 365 LTI-free days on 25 April 2022.
#ZeroHarm is a continual improvement aspiration and part of the Minerals Council of South
Africa’s Khumbul’ekhaya initiative to eliminate health and safety-related incidents, accidents,
and environmental impacts at all Petra operations. Through collective commitment from
every employee, we are contributing to Petra’s aspiration for a zero-harm environment,
and a safe and healthy workforce.
Read more about our focus on Health and Safety in the workplace and broader community on
pages 42 to 47 of our Sustainability Report
Finsch – Protecting our biodiversity
One of Petra’s environmental focus areas includes the management and monitoring of our
mine’s biodiversity, of which bees and other pollinators play a crucial part. At Finsch, Petra
has trained beekeepers who move beehives from our communities to safe areas like the
Bonza and Britz Game Farm near the mine, ensuring the bees are unharmed when hives are
moved. Morne Engelbrecht and William Dalhouzie, our beekeepers at Finsch, advocate for
chemical-free, natural beekeeping as an alternative to conventional beekeeping practices, and
promote honeybee genetics as key to the species’ long-term survival. This bee project has
now grown to over 50 beehives and the honey is sold to the local community.
Read more about how we contribute to the protection of our environment on
pages 78 to 82 of our Sustainability Report
Williamson – Medical Services project
As part of its RJPs, Petra has developed physiotherapy and rehabilitation services for the
communities in the vicinity of Williamson mine. These have improved the provision of these
services in Kishapu District, which were previously extremely limited, with the nearest
referral centres 170 km away.
This project is progressing well, with funds resourcing physiotherapy, certain surgeries,
medication and psychosocial support. So far, seven surgeries have been successfully
undertaken at Maduwi Hospital to ensure accessibility for community members.
Information regarding Williamson’s RJPs can be found on our website at
petradiamonds.com/our-operations/our-mines/williamson/allegations-
of-human-rights-abuses-at-the-williamson-mine and Petra’s focus on the
communities surrounding its mines is provided on page 55 and pages 33 to 34
of our Sustainability Report
Koffiefontein – Supporting personal development
Jayden Qalinge, was born and bred in Koffiefontein, and is one of Petra’s employees who was
assisted through the educational pipeline to develop his career as an engineer in the mining
sector. Having received a Petra Scholarship to complete his schooling, he won a Petra Bursary
to further his tertiary education in Mechanical Engineering. As part of this, Jayden completed
the required experiential training at Koffiefontein during 2020 and gained his diploma. Due
to changes in the university courses and disruptions from COVID-19, Jayden was unable to
register for his BTech/Advanced Diploma in Mechanical Engineering in 2021. To provide him
with relevant practical experience, preceding the new academic year, Koffiefontein employed
him as a Young Graduate.
“I would like to thank Koffiefontein for providing me with all the opportunities I have had
so far; without all the support I have received from the Company I would not be where I am
today. I would additionally like to thank all my colleagues who have trained me, and my
family who have supported me on this journey.”
We are looking forward to see Jayden completing his BTech or Advanced Diploma this year.
Read more about Petra’s training and development schemes on
pages 55 to 58 of our Sustainability Report
Annual Report and Accounts 2022 Petra Diamonds Limited
57
Strategic Report
FY 2022 Resource Statement
Petra manages one of the world’s largest diamond resources of ca. 227 million carats (Mcts). This major resource implies that the potential
mine lives of Petra’s core assets could be considerably longer than the current mine plans in place at each operation, or could support higher
production rates.
Gross resources
As at 30 June 2022, the Group’s gross diamond resources (inclusive of reserves) decreased 2% to 226.60 Mcts (30 June 2021: 230.64 Mcts),
predominantly due to depletions at all mining assets further to ore mined in FY 2022.
Gross reserves
The Group’s gross diamond reserves decreased 10% to 29.97 Mcts (30 June 2021: 33.33 Mcts) primarily due to mining depletions, with minor
changes in mine plans and Williamson remaining on care and maintenance until August 2021. The following table summarises the gross
reserves and resources status of the combined Petra Group operations as at 30 June 2022.
Group
Category
Reserves
Proved
Probable
Sub-total
Resources
Measured
Indicated
Inferred
Sub-total
Cullinan Mine
Category
Reserves
Proved
Probable
Sub-total
Resources
Measured
Indicated
Inferred
Sub-total
1. Resource bottom cut-off: 1.0mm.
2. Reserve bottom cut-off: 1.0mm.
Gross
Gross
Grade
(cpht)
—
28.9
28.9
—
47.1
5.8
14.1
Grade
(cpht)
—
38.6
38.6
—
59.2
10.1
37.8
Tonnes
(millions)
—
103.6
103.6
—
321.9
1288.2
1610.1
Tonnes
(millions)
—
34.5
34.5
—
219.6
169.5
389.1
Contained
diamonds
(Mcts)
—
29.97
29.97
—
151.59
75.01
226.60
Contained
diamonds
(Mcts)
—
13.31
13.31
—
130.04
17.19
147.23
3. B-Cut Resource tonnes and grade are based on block cave depletion modelling and include external waste. A portion of the Resources in these remnant blocks report into the current caving
operations as low grade dilution.
4. C-Cut Resource stated as in-situ.
5. Reserves based on PCBC simulations on C-Cut Phase 1 and PCSLC simulations for the CC1E.
6. Factorised grades and carats are derived from a calculated Plant Recovery Factor (PRF). These factors account for the efficiency of sieving (bottom cut-off), diamond liberation and recovery in the
ore treatment process.
7. The PRF has been revised in line with the current Resource model and production plant. The PRFs currently applied for the new mill plant per rock type are: Brown kimberlite = 73.8%, Grey
kimberlite = 67.9%, Black kimberlite = 70.6% and Coherent kimberlite = 68.0%.
8. US$/ct values of 110-120 for ROM, excluding Exceptional Stones, and 60-70 for tailings based on expected sales values (with reference to FY 2022 sales results and considering rough diamond
prices recovery after the COVID-19 pandemic), and production size frequency distributions.
58
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Finsch
Category
Reserves
Proved
Probable
Sub-total
Resources
Measured
Indicated
Inferred
Sub-total
Gross
Grade
(cpht)
—
55.1
55.1
—
69.0
47.3
55.6
Tonnes
(millions)
—
24.3
24.3
—
25.1
40.5
65.5
Contained
diamonds
(Mcts)
—
13.42
13.42
—
17.29
19.15
36.44
1. Resource bottom cut-off: 1.0mm.
2. Reserve bottom cut-off: 1.0mm.
3. Block 4 Resource tonnes and grade are based on block cave depletion modelling and include external waste. A portion of this remnant Resource reports into the current caving operations
as low grade dilution.
4. Pit scaling and waste ingress have been included in the Reserve models.
5. Block 5 and Block 6 Resource stated as in situ.
6. Remaining Block 5 Reserves are based on PCSLC and CA3D software simulations.
7. US$/ct values of 110-120 for ROM, based on expected sales values (with reference to FY 2022 sales results and considering rough diamond prices recovery after the COVID-19 pandemic),
and production size frequency distributions.
Williamson
Category
Reserves
Proved
Probable
Sub-total
Resources
Measured
Indicated
Inferred
Sub-total
Gross
Tonnes
(millions)
Grade
(cpht)
Contained
diamonds
(Mcts)
—
42.8
42.8
—
61.2
956.8
1018.0
—
7.2
7.2
—
4.9
3.6
3.7
—
3.09
3.09
—
2.98
34.71
37.69
1. Resource bottom cut-off: 1.15mm.
2. Reserve bottom cut-off: 1.15mm.
3. Resource depletions based on August 2021 (end of Care and Maintenance) and June 2022 pit surfaces.
4. Reserves stated to end of Mining Licence in 2030.
5. Reserve based on a production rate of 5.35Mtpa.
6. US$/ct values of 230-280 for ROM, based on expected sales values (with reference to FY 2022 sales results and considering rough diamond prices recovering to levels before the COVID-19
pandemic), and production size frequency distributions.
Annual Report and Accounts 2022 Petra Diamonds Limited
59
Strategic Report
FY 2022 Resource Statement continued
Koffiefontein
Category
Reserves
Proved
Probable
Sub-total
Resources
Measured
Indicated
Inferred
Sub-total
Gross
Tonnes
(millions)
Grade
(cpht)
Contained
diamonds
(Mcts)
—
1.9
1.9
—
16.1
121.4
137.5
—
7.7
7.7
—
8.0
3.3
3.8
—
0.15
0.15
—
1.28
3.96
5.24
1. Resource bottom cut-off (Koffiefontein underground and Ebenhaezer): 1.15mm.
2. Reserve bottom cut-off: 1.15mm.
3. Main Pipe resources above 490L are remnants of the front cave mining block and include external waste. A portion of this remnant Resource reports into the current caving operations as low
grade dilution.
4. Resources below 490L are stated as in situ.
5. Remaining 56–60L sub-level cave Reserves are based on PCSLC simulations.
6. US$/ct values of 500-550 for ROM, based on expected sales values (with reference to FY 2022 sales results and considering rough diamond prices recovery after the COVID-19 pandemic),
and production size frequency distributions.
General notes on reporting criteria
1. Resources are reported inclusive of Reserves.
2. Tonnes are reported as millions; contained diamonds are reported per million carats (Mcts).
3. Tonnes are metric tonnes and are rounded to the nearest 100,000 tonnes; carats are rounded to the nearest 10,000 carats; rounding off
of numbers may result in minor computational discrepancies.
4. Resource tonnages and grades are reported exclusive of external 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 2016).
7. The Petra 2021 annual Resource Statement as shown above, is based on information compiled internally within the Group under the
guidance and supervision of Andrew Rogers, Pr. Sci. Nat. (reg. No.120664). Andrew Rogers has 22 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 42 years’ relevant experience in the diamond mining industry, who was appointed as an independent consultant by the
Company for this purpose.
60
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Financial Review
Highlights
Š Revenue up 44% to US$585.2 million
Š Adjusted EBITDA up 103% to US$265 million
Š Adjusted basic earnings per share up 219% to
USc42.93
Š Operational free cashflow up 91% to US$230 million
Š Consolidated net debt of US$40.6 million,
with leverage of 0.15x
Revenue
Total revenue for FY 2022 amounted to US$585.2 million
(FY 2021: US$406.9 million), comprising revenue from rough diamond
sales of US$584.1 million (FY 2021: US$406.9 million) and additional
revenue from profit share agreements of US$1.1 million (FY 2021: nil).
FY 2022 revenue from rough diamond sales increased 44% to
US$584.1 million (FY 2021: US$406.9 million) driven by sales from
a higher than average number of Exceptional Stones contributing
US$89.1 million during the Year (FY 2021: US$62.0 million); supported
by the strong diamond market, and a 41.5% increase in like-for-like
diamond prices.
Mining and processing costs
The mining and processing costs for FY 2022 comprised 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.
Absolute on-mine cash costs in FY 2022 increased by c.30% compared
to FY 2021 and in line with expectations, due to:
Š The effect of translating ZAR denominated costs at the South
African operations at a stronger ZAR:USD average exchange rate
(1.4% increase)
Š Williamson mine resuming production in FY 2022 after being on
care and maintenance throughout FY 2021, and changes in volumes
at South African operations (18.3% increase)
Š Other cost movements, due to increased social expenditure and
costs previously included under Group technical, support and
marketing costs (1.2% increase)
Š Inflationary increases (c.6.8% increase), the impact of electricity
costs (0.9% increase), and annual labour increases and voluntary
separation payouts (1.4% increase)
Royalties increased to US$14.6 million (FY 2021: US$3.2 million) due
to increased profits net of capex across the South Africa operations
resulting in higher royalty percentages, as defined in the royalty
legislation of South Africa, and Williamson recommencing operations
during the Year.
Diamond
inventory
and
stockpile
movement
US$m
0.5
42.2
Group
technical,
support
and
marketing
costs 2
US$m
19.7
21.8
Adjusted
mining
and
processing
costs
US$m
307.1
276.1
Depreciation 3
US$m
84.4
80.0
Total
mining
and
processing
costs
(IFRS)
US$m
391.5
356.1
These results represent an important milestone
in our turnaround and particularly since the
Restructuring in FY 2021. This has delivered
significant improvement in our profitability and
cash generation, and enabled us to take two key
steps in creating value for shareholders: the first
is the launch of a tender offer for our Second
Lien Notes that has already reduced our gross
debt by US$144 million - and which has been
extended to reduce debt further by up to
US$29 million, and the second is our new
dividend policy.
Jacques Breytenbach
Chief Financial Officer
FY 2022
FY 20214
On-mine
cash costs 1
US$m
272.3
208.9
Diamond
royalties
US$m
14.6
3.2
Notes:
1. Includes all direct cash operating expenditure at operational level, i.e. labour, contractors, consumables, utilities and on-mine overheads.
2. Certain technical, support and marketing activities are conducted on a centralised basis.
3. Includes amortisation of right-of-use assets under IFRS 16 of US$2.3 million (FY 2021: US$0.6 million) and excludes exploration and corporate/administration.
4. For comparative purposes, the FY 2021 figures include Williamson as it is no longer held for sale at 30 June 2022.
Annual Report and Accounts 2022 Petra Diamonds Limited
61
Strategic Report
Financial Review continued
Profit from mining activities
Profit from mining activities increased 102% to US$277.3 million
(FY 2021: US$137.6 million), mainly due to improved diamond pricing
and the contributions from Exceptional Stones.
Adjusted corporate overhead – general and administration
Corporate overhead (before depreciation and share-based payments)
increased to US$13.0 million for the Year (FY 2021: US$7.4 million)
mainly attributable to the increase in corporate governance
structures, strategic developments and Board appointments
introduced during the Year.
Adjusted EBITDA
Adjusted EBITDA, being profit from mining activities less adjusted
corporate overhead, increased 103% to US$264.9 million (FY 2021:
US$130.2 million), representing an adjusted EBITDA margin of 45%
(FY 2021: 32%) driven by the stronger diamond market and resultant
improved diamond pricing coupled with the contribution from
Exceptional Stones.
Depreciation and amortisation
Depreciation and amortisation for the Period increased to
US$85.3 million (FY 2021: US$80.8 million), mainly due to production
recommencing at Williamson.
Impairment reversal/charge
As a result of the impairment reviews carried out at the Cullinan
Mine, Finsch, Koffiefontein and Williamson, and the Group’s other
receivables during the Year, the Board recognised an overall net
impairment reversal of US$19.6 million (FY 2021: US$38.4 million
impairment charge), comprising:
US$m
Asset class
Reversal of impairment - property, plant
and equipment (Refer note 7)
Impairment - property, plant
and equipment (Refer note 7)
Impairment (charge)/reversal - other
current receivables (refer note 7)
FY 2022
FY 2021
21.4
—
(0.3)
(38.7)
(1.5)
19.6
0.3
(38.4)
Impairment reviews carried out at the Cullinan Mine’s, Finsch’s and
Williamson’s operational assets did not result in an impairment
charge or reversal during the Year (FY 2021: US$38.7 million). Asset
level impairments at Koffiefontein amount to US$0.3 million (FY 2021:
US$38.7 million in respect of Finsch, Koffiefontein and Williamson)
of the Group’s carrying value of property, plant and equipment of
US$608.2 million (FY 2021: US$764.5 million) pre-impairment. There
was an impairment reversal of US$21.4 million relating to an IFRS 5
impairment adjustment for Williamson as the results for Williamson
have been re-consolidated.
Impairment of BEE loans receivable – expected credit
loss provision
The Group has applied the expected credit loss impairment model to
its BEE loans receivable. In determining the extent to which expected
credit losses may apply, the Group assessed the future free cashflows
to be generated by the mining operations based on the current mine
plans. This assessment indicated a net credit loss reversal/charge
of US$nil (FY 2021: US$5.8 million expected credit loss reversal);
refer to note 15 for further detail.
62
Petra Diamonds Limited Annual Report and Accounts 2022
Net financial (expense)/income
Net financial expense of US$73.1 million (FY 2021: US$220.7 million
income) comprises:
US$m
FY 2022
FY 2021
Net realised foreign exchange gain/
(loss) on settlement of forward
exchange contracts
Interest received on bank deposits
Net interest receivable/(payable) on the
BEE Partner loans and amortisation of
lease liabilities in accordance with IFRS 16
Net gain on extinguishment of Notes
Offset by:
Interest on the Group’s debt and
working capital facilities
Unwinding of the present value
adjustment for Group rehabilitation
costs
Acceleration of unamortised bank
facility and Notes costs
Net unrealised foreign exchange
(losses)/gains
Net financial (expense)/income
12.6
1.3
1.8
—
(6.1)
0.7
(3.0)
213.3
(45.3)
(51.5)
(5.4)
(1.6)
(36.5)
(73.1)
(4.6)
(2.7)
74.6
220.7
Tax credit/charge
The tax charge of US$37.8 million (FY 2021: US$23.0 million) comprising
deferred tax charge of US$30.5 million (FY 2021: US$22.7 million) and
a net current tax charge of US$7.3 million (FY 2021: US$0.3 million).
The Consolidated Income Statement deferred tax charge for the Year
reflects movements in deferred tax of US$35.5 million (30 June 2021:
US$3.4 million) in respect of property, plant and equipment and
associated capital allowances, US$2.5 million deferred tax credit
(30 June 2021: US$2.8 million) relating to provisions, and a US$2.6 million
deferred tax credit (30 June 2021: US$nil) due to the change in the
South African corporate tax rate from 28% to 27%, reducing the
deferred tax liabilities recognised at the Finsch and Cullinan Mine
at Year end.
The net current tax charge of US$7.3 million (30 June 2021: US$0.3 million),
includes a current tax charge of US$7.6 million at Finsch for the Year
(FY 2021: US$nil).
Profit on disposal of subsidiary including associated
impairment, net of tax
In FY 2021, the profit on disposal of subsidiary including associated
impairment, net of tax of US$14.7 million relates to the Group’s
disposal of its interests in Sekaka, its exploration operations in
Botswana, and is made up of a US$0.3 million disposal consideration,
net profit of US$1.3 million for the period 1 July 2020 to the 30
November 2020 disposal date, and the recycling of the foreign
currency translation reserve of US$13.3 million, offset by a net asset
disposal amount of US$0.2 million. Refer to note 34 for further detail.
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Operational free cashflow
During the Year, operational free cashflow of US$230.0 million
(FY 2021: US$120.1 million before Restructuring fees of US$15.5
million) reflects the impact from the sale of a high number of
Exceptional Stones and stronger diamond prices. This strong cashflow
performance was positively impacted by:
Š US$7.6 million inflow (FY 2021: US$12.1 million outflow) cash finance
expenses net of finance income and net realised foreign exchange
gains/(losses)
This was offset by:
Š Restructuring fees settled during the Year of US$nil (FY 2021:
US$29.9 million)
Š Income tax paid of US$7.8 million (FY 2021: US$0.3 million inflow)
Š US$3.5 million dividend paid to BEE Partners (FY 2021: US$7.0
million advances to BEE Partners, largely related to servicing of BEE
bank debt, with the advances recoverable against future BEE
Partner distributions)
Cash and diamond debtors
As at 30 June 2022, Petra had cash at bank of US$288.2 million
(FY 2021: US$163.9 million). Of these cash balances, US$271.9 million
was held as unrestricted cash (FY 2021: US$147.8 million), US$15.5 million
was held by Petra’s reinsurers as security deposits on the Group’s cell
captive insurance structure (with regards to the Group’s environmental
guarantees) (FY 2021: US$15.3 million), and US$0.8 million was held by
Petra’s bankers as security for other environmental rehabilitation
bonds lodged with the Department of Mineral Resources and Energy
in South Africa (FY 2021: US$0.8 million).
Diamond debtors at 30 June 2022 were US$37.4 million (FY 2021:
US$38.3 million).
Loans and borrowings
The Group had loans and borrowings (measured under IFRS) at Year
end of US$366.2 million (FY 2021: US$430.3 million) comprised of
US$366.2 million Notes (includes US$50.3 million accrued interest and
unamortised transaction costs of US$15.2 million), bank loans and
borrowings of US$nil (FY 2021: US$103.0 million). Bank debt facilities
undrawn and available to the Group at 30 June 2022 were
US$61.5 million (FY 2021: US$7.7 million).
Consolidated net debt at 30 June 2022 was US$40.6 million
(FY 2021: US$228.2 million).
Williamson
At the end of FY 2021, the Board had decided to review its strategic
options at Williamson and the asset was classified as an asset held
for sale.
In terms of the IFRS requirements to measure the assets of a disposal
group at the lower of carrying amount and fair value less costs to sell,
the determination of the fair value is complex and subject to considerable
judgement. Based on management’s best estimate of the fair value
at 30 June 2021, the following amounts were recognised as a result
of that reclassification:
Š An impairment charge of US$21.4 million in respect of property,
plant and equipment
Š A US$11.2 million charge attributable to Williamson’s net loss for
FY 2021
Š A US$19.5 million provision for unsettled and disputed tax claims
arising from the ordinary course of business
During H1 FY 2022, the Group entered into a Framework Agreement
with the Government of Tanzania regarding the Williamson mine
which will reduce Petra’s indirect shareholding from 75% to 63%.
Petra also entered into a non-binding Memorandum of Understanding
(MoU) to sell 50% less one share of the entity that holds Petra’s
shareholding in WDL to Caspian Limited. Upon completion of the
transactions contemplated by the MoU and the capital Restructuring
in the Framework Agreement becoming effective (expected in H1
FY 2023), Petra and Caspian will each indirectly hold a 31.5% stake in
WDL, but with Petra retaining a controlling interest in WDL, and the
Government of Tanzania holding the remaining 37%. These agreements
are in line with Petra’s objective of reducing its exposure in Tanzania
while retaining control, through its controlling interest in the entity
that holds Petra’s shares in WDL. The Williamson mine is therefore
no longer classified as an asset held for sale in FY 2022, and was
reconsolidated into the Group results for FY 2022. As a result the
Group also reversed a Group level impairment charge relating to
Williamson, previously recognised under IFRS 5, of US$21.4 million.
Refer to note 17 for additional detail.
Earnings per share
Basic profit per share from continuing operations of USc35.53 was
recorded (FY 2021: USc260.70, including gain on extinguishment
of Notes).
Adjusted profit per share from continuing operations (adjusted
for impairment charges, taxation credit on net unrealised foreign
exchange losses and net unrealised foreign exchange gains and losses)
of USc42.93 was recorded (FY 2021: USc36.20 loss (adjusted for
impairment charges, taxation charge on net unrealised foreign
exchange gains, and net unrealised foreign exchange gains and losses)).
The comparative basic profit per share and adjusted profit per share
have been adjusted to give effect to the share consolidation of one
new share for every 50 existing shares completed on 29 November
2021, with the Company’s resultant issued share capital now
consisting of 194,201,785 Ordinary Shares of 0.05 pence each.
Annual Report and Accounts 2022 Petra Diamonds Limited
63
Strategic Report
Financial Review continued
Covenant Measurements attached to banking facilities
The Company’s revised EBITDA-related covenants associated with its restructured banking facilities are outlined below:
Š To maintain a net debt:EBITDA ratio tested semi-annually on a rolling 12-month basis
Š To maintain an Interest Cover Ratio (ICR) tested semi-annually on a rolling 12-month basis
Š To maintain minimum 12-month forward looking liquidity requirement that consolidated cash and cash equivalents (excluding diamond
debtors) shall not fall below US$20.0 million
The Company’s new covenant levels for the respective measurement periods are outlined below:
FY22 H2
FY23 H1
FY23 H2
FY24 H1
FY24 H2
FY25 H1
FY25 H2
FY26 H1
Consolidated net debt:
EBITDA Leverage ratio
(maximum)
Interest Cover Ratio
(minimum)
4.00
1.85
4.00
1.85
4.00
1.85
3.50
2.50
3.50
2.50
3.25
2.75
3.25
2.75
3.00
3.00
For further detail on the Restructuring of the South African Lender facilities refer to note 8 below.
Going concern considerations
The Board has reviewed the Group’s forecasts with various
sensitivities applied, for the 18 months to December 2023, including
both forecast liquidity and covenant measurements. As per the first
lien agreements, the liquidity and covenant measurements exclude
contributions from Williamson’s trading results and only recognises
cash distributions payable to Petra upon forecasted receipt, or Petra’s
funding obligations towards Williamson upon payment. The review
took into account the Group’s intention to purchase up to US$150
million of the Senior Secured Second Lien Notes due in 2026 through
a tender offer to bondholders.
The Board has given careful consideration to potential risks identified
in meeting the forecasts under the review period. The following
sensitivities have been performed in assessing the Group’s ability to
operate as a going concern (in addition to the base case) at the date
of this report:
Š A 10% decrease in forecast rough diamond prices from July 2022
to December 2023
Š A 10% strengthening in the forecast South African Rand (ZAR)
exchange rate against the US Dollar from July 2022
to December 2023
Š A 10% increase in operating costs from July 2022
to December 2023
Š A US$15 million reduction in revenue contribution
from Exceptional Stones
Š A production disruption sensitivity assuming no carat production
across the Group for two weeks in February 2023 (could be due
to extreme weather conditions or supply chain disruptions or any
other unexpected event)
Š Combined sensitivity: Prices down 10% and ZAR stronger by 10%,
reduced contribution from Exceptional Stones and operating
costs up 5%
Under all the cases, the forecasts indicate that the Group’s liquidity
outlook over the 18-month period to December 2023 remains strong,
even when applying the above sensitivities to the base case forecast.
The forward-looking covenant measurements associated with the
new first lien (1L) facility do not indicate any breaches during the
18-month review period for the base case as well as all the above
sensitivities, except for the combined sensitivity, which shows
a covenant breach for the required ICR in the December 2023
measurement period. While the ICR is projected to be breached
64
Petra Diamonds Limited Annual Report and Accounts 2022
in this combined sensitivity, neither the Net Debt:EBITDA covenant
nor the liquidity covenant is projected to be breached, while the
Revolving Credit Facility (RCF) remains undrawn. It is therefore
assumed that the RCF remains available on the expectation that the
1L lender will agree to an ICR covenant waiver given that the Group
does not expect to utilise the RCF for servicing of its Second Lien (2L)
interest obligations. Furthermore, this potential ICR breach may be
cured by means of reducing our gross debt by utilising existing
available cash reserves and/or marginally increasing our projected
EBITDA for the preceding 12-month period.
As a result, the Board concluded that there are no material uncertainties
that would cast doubt on the Company continuing as a going concern.
See "Basis of preparation including going concern" in the Financial
Statements for further information.
Capex
Total Group capex for the Year increased to US$52.2 million
(FY 2021: US$23.8 million), comprising:
Š US$34.5 million expansion capex (FY 2021: US$16.9 million)
Š US$17.7 million sustaining capex (FY 2021: US$6.9 million)
Capex (US$m)
Cullinan Mine
Finsch
Williamson
Koffiefontein
Sub-total – capex incurred by
operations
Corporate
Total Group capex
FY 2022
FY 2021
35.0
12.0
3.3
0.6
50.9
1.3
52.2
16.8
4.0
0.3
1.7
22.8
1.0
23.8
Dividend
No dividend was declared for FY 2022 (FY 2021: US$nil).
Jacques Breytenbach
Chief Financial Officer
10 October 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Principal Risks and Uncertainties
The Group is exposed to a number of risks and uncertainties which could have a material
impact on its performance and long-term viability. The effective identification, evaluation,
management and mitigation of these risks and uncertainties is a core focus of management
and the Board, as this is key to the Company’s strategy and objectives being achieved.
Introduction and FY 2022 overview
At Petra, risk governance plays a pivotal part in the overall evaluation,
management and mitigation of risks.
The Board oversees Petra’s risk management and internal control
systems, with Board Committees providing an additional level of
oversight. The Risk, Assurance and Compliance function reviews,
analyses and reports on risk on a continuous basis, including
monitoring any emerging risks, and consolidates key risks and reports
on these on a quarterly basis to Exco, which is responsible for risk
management processes and systems, and drives a culture of
individual risk owner and employee accountability in implementing
these. Internal Audit provides assurance with regards to the effective
functioning of the internal control systems.
During FY 2022, a new Group Risk, Assurance and Compliance
Manager was appointed to oversee the continued implementation
of the Company’s Enterprise Risk Management (ERM) systems and
procedures. Following this appointment, a comprehensive review
of the Company’s ERM and Combined Assurance frameworks and
methodology was conducted, with certain improvements being
identified. The key improvements focus on incorporating leading risk
management practices and simplifying risk management processes
and software to make it more user-friendly and easily understood
by management. This risk improvement project is expected to be
completed by Q2 of FY 2023 and in addition to simplifying the
Company’s ERM and Combined Assurance frameworks,
methodology and software, consists of:
Š Revising risk governance processes to reflect the five lines
of defence outlined in the table on page 66
Š Revising the risk likelihood criteria to include governance,
compliance and internal control factors
Š Introducing Functional and Project risks as new risk categories,
which have also resulted in the addition of new Group principal
risks as set out below
Š Clarifying how each risk should be allocated between each of the
Company’s five risk categories: External, Strategic, Operational,
Functional and Project
Š Establishing further criteria and processes for management
to determine the effectiveness of their controls
Š Including risk management performance as Key Performance
Indicators for the business to support further integration of risk
management into the business
Š Amending risk assessments so that they take account of risk
velocity (i.e. the speed at which an exposure to risk impacts Petra)
These improvements are expected to result in a more focused
and prioritised approach to risk management within the Group.
The risk improvement project described above directly impacts
the Group’s residual risk assessments and how the Group’s risks
are classified. This in turn has meant that the Company has had
to put on hold various combined assurance initiatives until the risk
improvement project is completed. Notwithstanding this, the
Company’s Combined Assurance framework is currently being
updated to make it more user-friendly, to provide clearer structure
to the various assurance processes, and to clarify the allocation of
accountabilities and responsibilities between management, Internal
Audit and the Risk, Assurance & Compliance functions.
During FY 2022, Petra conducted an ethics and compliance risk
assessment across its operations which identified various areas for
improvement. In response, Petra has developed and is implementing
an Ethics and Compliance Programme that has seen the Board
approve a revised Code of Ethical Conduct and the SED Committee
approve new Gifts and Hospitality, Declaration of Interests and Public
Officials Expenditure Policies and a revised Whistleblowing Policy.
The updated Code has had our previous anti-bribery policy
integrated into it, and the Code now serves as a useful guide and
summary of other internal policies, standards and procedures that
are relevant to the way Petra works and the ethical conduct that is
expected from all staff as well as other business partners who work
with us or act on Petra’s behalf. Compliance with these new policies
will be facilitated through online registers that enable employees
to declare and seek approval for gifts, hospitality, interests and
expenditure involving public officials. The updated Code of Ethical
Conduct and suite of new anti-bribery and corruption policies will
shortly be rolled out across the Group’s operations and will involve a
series of workshops attended by management and staff and training
that will be facilitated through an e-learning platform.
As part of the Ethics and Compliance Programme, Petra has
also started reviewing and updating its third party due diligence
procedures. We expect these new procedures to be implemented
in the first half of FY 2023. The new due diligence procedure will
apply to all third parties (e.g. customers, suppliers, social investment
beneficiaries etc.) and will involve an initial online screening of
ethics and compliance risks. On a risk-based basis, a due diligence
questionnaire will be issued to the third party to identify, assess and
address any compliance red flags, through an automated compliance
workflow management platform, prior to entering into a contract
with the third party. This third party due diligence automation will
also ensure that compliance screening is performed against sanctions,
watchlists and adverse media.
Following the Company’s new risk management software becoming
operational in the prior Year, there have been some significant
improvements, especially in the following areas: the monitoring and
tracking of risks and the recording of risk assessments and mitigating
actions by risk owners; and the aggregation and consolidation of risks
across the Group. As indicated above, this risk management software
is in the process of being updated to make it more user-friendly as
part of the risk improvement project, but overall it continues to serve
as an enabling tool in assisting management to undertake their risk
management responsibilities in a more efficient and effective manner.
This new risk management software includes a Legal and Regulatory
Compliance software solution which is an extension to and integrated
with the risk management software. The risk improvement project
outlined above is looking to adapt the way in which this software
solution is used by the business to make it more user-friendly and
to further strengthen legal compliance across our operations.
Annual Report and Accounts 2022 Petra Diamonds Limited
65
Strategic Report
Principal Risks and Uncertainties continued
Risk review process
Petra’s risk owners, management and Exco, together with the Risk,
Assurance & Compliance function, reviewed and updated the Group’s
principal risks with reference to the Group’s internal risk registers in
FY 2022. This risk review process was modified as part of the risk
improvement project described above and comprised a top-down,
bottom-up and cross-functional approach leading ultimately to the
identification of the Group’s principal risks outlined below. This
revised risk review process led to an additional five principal risks
being reported which is largely attributable to:
Š Improved resourcing within the Risk, Assurance & Compliance
function through the appointment of a new Group Risk, Assurance
and Compliance Manager, which resulted in the identification of
further material risks following additional risk assessments
Š Risks assessments being re-evaluated using the revised risk criteria
introduced by the risk improvement project
Š The centralisation of functions following the implementation of
the Company’s revised Operating Model which has created greater
visibility of certain material risks
Š A Group-wide ethics and compliance risk assessment conducted
by an external adviser identifying further material risks
Risk assessments conducted during FY 2022 included, among others,
information technology and communications, supply chain, climate
change, environment, ethics and compliance (as outlined above) and
the Company’s capital expansion projects at the Cullinan and
Finsch Mines.
These risks assessments identified various areas to improve, including
in relation to segregation of duties and user access to finance systems,
which will be addressed when the Company updates its Delegation of
Authority which is due to be completed in Q2 FY 2023. The Board’s
annual training programme will also incorporate a dedicated cyber-risk
training session (to be held in FY 2023) to keep Directors abreast of
the latest developments and risks relevant to this area, and overview
of how the Company performs in relation to this risk.
The Risk, Assurance & Compliance function already closely monitors
any outstanding mitigating actions by risk owners across the Group
and if necessary escalates these to the Exco to ensure they are closed
out timeously. The function is looking to enhance its monitoring in
FY 2023 by using the risk management software to monitor and report
on outstanding mitigating actions relating to risks identified through
independent external assurance assessments, such as external audits
of Financial Statements, ISO audits, regulatory audits, technical audits
(e.g. mineral resource and reserves and tailings dams).
Risk governance – Five lines of defense model
Fifth line
Board and sub-committees
(perform oversight and set tone)
Š Approves Enterprise Risk Management (ERM) Framework
Š Establishes risk appetite/tolerance and strategy
Š Leverages risk information into decision making
Š Evaluates the strategy and business’ performance on a risk-adjusted basis
Fourth line
External assurers
For example:
Š Regulatory audits (DMRE)
Š ISO certification audits
Š Technical audits (mineral resources and reserves)
Third line
Internal audit
(test and verify)
Planning and execution informed by ERM; aims to identify control weaknesses
Second
line
Regulatory/legal compliance Monitors compliance
with regulations
Š Informed by ERM
Š Risk-based compliance testing
Enterprise risk
management (ERM)
Š Designs Group’s ERM
framework
Š Monitors compliance
with framework and reports
on aggregated risks
First line
Business units
Š Management: identifies, owns, mitigates and reports on risks for ERM
66
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Risk appetite; timing of risks
Risk appetite is the level of risk that Petra is willing to accept in
pursuit of its strategy and objectives. As stated above, the risk
improvement project currently being undertaken by the Company
directly impacts the Group’s residual risk assessments and how the
Group’s risks are classified. As a result, in order to conduct a formal
risk appetite review for approval by the Audit and Risk Committee
(ARC) and the Board, the Company needs to have first implemented
its improved risk management processes. It is currently anticipated
that this risk appetite review, which will include a review of the risk
appetite, risk rating and nature of the risk headings outlined in the
principal risk summary table below, will be conducted by the ARC and
the Board in Q3 FY 2023. In addition, and specifically from a climate
change perspective, this review will enable Petra to better categorise
the timing of its climate change risks over the short, medium
and long term.
Risk governance
Petra deploys the five lines of defense model to ensure better risk
governance. A diagram that summarises how this model works is set
out in Figure 1 below. Risk governance refers to the actions, processes,
and hierarchy by which authority is exercised and decisions are taken
and implemented. Petra’s risk governance applies the principles of
good governance to the identification, assessment, management
and communication of risks.
System of internal control
The adequacy and effectiveness of the Group’s internal control
procedures and risk management systems are regularly reviewed by
the Audit & Risk Committee through regular reports from the Group’s
Internal Audit and Risk, Assurance & Compliance teams, and through
consideration of the external auditors’ Audit and Risk Committee
reports and face-to-face discussion between the Audit Partner and
the Chair of the Committee and Committee members, as well as, on
occasion, ad hoc reports from external consultants such as n relation
to the ethics and compliance risk assessment that was carried out in
FY 2022.
For FY 2022, the Group Internal Audit Manager and the Committee
remained satisfied that no material weaknesses in internal control
systems were identified. Whilst being satisfied that controls and risk
management remain appropriate for the Group’s activities, the Audit
& Risk Committee continues to assess the effectiveness and adequacy
of the system of internal control, risk management procedures,
Internal Audit resourcing and strategy to ensure that its practices
develop and remain appropriate in line with internal audit standards.
When internal control reviews identified necessary or beneficial
improvements, appropriate steps have been taken to ensure the
control environment is effective. This includes systems to monitor
the implementation by management of recommended remedial
actions and follow-up audits.
Principal risks
A summary of the risks identified as the Group’s principal external,
operational and strategic risks (in no order of priority) is listed below.
Please refer to pages 101 to 111 for a more detailed description of
Petra’s principal risks, including an outline of the description and the
impact of each principal risk, an outline of mitigating actions taken
and an outline of how such risks have developed and been managed
in FY 2022.
Risk
External risks
Risk appetite
Risk rating
Nature of risk
Change in FY 2022
1. Rough diamond prices
High
Medium
Long term
2. Currency
High
Medium
Long term
3. Country and political
High
Medium
Long term
4. COVID-19 pandemic
(operational impact)
Medium
Medium
Short to
medium term
Lower – like-for-like diamond prices increased 41.5% (FY 2021: 9%)
during FY 2022 which was largely attributable to mid-stream
inventory restocking and continued strong jewellery retail sales.
Lower global diamond production also resulted in a more positive
outlook for the diamond market, whilst macroeconomic
uncertainties caused by rising interest rates and inflation are
potential dampeners of demand. Post Year end, and as reported in
September 2022, Petra achieved strong sale in the first tender of
FY 2023.
No change – whilst initially stable, the ZAR:USD exchange rate
experienced significant volatility during FY 2022, closing the Year
at 16.27 ZAR:USD, compared to 14.27 ZAR:USD on 30 June 2021. The
impact of the war in Ukraine benefitted the Rand, though over the
longer term the Rand is expected to weaken as South Africa’s
inflation rate remains high.
Lower – while the risk of political instability remains in South
Africa, the outcomes of the ruling party’s policy conference were
positive and markets were encouraged by party support for the
President’s proposals. After the South African High Court
judgement in favour of the Minerals Council SA, the DMRE has
indicated it will seek legislative amendments of the Mineral and
Petroleum Resources Development Act, which could reverse
aspects of the judgement, in particular the legal status of the
Mining Charter. In Tanzania, the risk of political instability remains
lower under the new President and following entry by Petra into a
Framework Agreement with the Government that is yet to become
effective.
Lower – COVID-19 restrictions in South Africa and Tanzania have
been gradually lifted during the Year due to the decreasing
numbers of individuals contracting the virus which led, in South
Africa, to the termination of the national state of emergency.
The emphasis has shifted to continuing the promotion of the
administration of vaccinations, including booster shots, as this
remains the best protection against COVID-19.
Annual Report and Accounts 2022 Petra Diamonds Limited
67
Strategic Report
Principal Risks and Uncertainties continued
Principal risks continued
Risk
Risk appetite
Risk rating
Nature of risk
Change in FY 2022
Strategic risks
5. Group liquidity
Medium
Medium
Short to
medium term
6. Licence to operate:
regulatory, social impact
and community relations
Medium
Medium
Long term
Lower – a combination of higher diamond prices, robust
production levels in line with guidance, and record proceeds from
the sale of Exceptional Stones contributed to increased revenue,
strong free cashflow and a reduction in net debt to US$40.6
million as at 30 June 2022, thereby significantly strengthening the
balance sheet. The Company also completed the refinancing of its
First Lien debt facility which will deliver some US$5 million in
savings over the next two years as a result of reduced utilisation
and more favourable terms than the previous facility. Post Year
end, the Company successfully completed a tender offer for its
Second Lien Notes which has resulted in gross debt being reduced
by at least US$ 144 million.
No change – Petra continued to comply in all material respects
with relevant laws and regulations in the countries in which it
operates. In FY 2022, local operations conducted 451 (FY 21: 658)
social engagements which included internal (employees and
committees) and external (Government, communities, forums and
SMMEs) engagements. Stakeholder engagement plans (SEPs)
continue to be reviewed and updated to increase value-add
engagements at Government and community levels.
Following the Company’s May 2021 announcement on the alleged
human rights breaches in Tanzania, Petra has continued to progress
the design and implementation of the IGM for Williamson. This
has involved extensive stakeholder engagements with all levels
of Government and the local community to create awareness of
the IGM process and to obtain initial feedback on how the IGM
is envisaged to operate. The current target is for the IGM to
become operational by the end of this calendar year.
The Company has also progressed a number of projects to provide
sustainable benefits to the communities located close to the
Williamson mine, which include (1) a medical support project; (2)
an artisanal and small-scale mining project; (3) an agribusiness
development initiative; (4) improved delineation of the Williamson
mine boundaries, including access to the mine lease area for the
collection of firewood; and (5) an awareness initiative in respect
of sexual and gender-based violence.
68
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Risk
Risk appetite
Risk rating
Nature of risk
Change in FY 2022
Operational risks
7. Mining and production Medium
Medium
Long term
8. ROM grade and
product mix volatility
Medium
Medium
Short term
9. Labour relations
Medium
Medium
Short to
medium term
No change – positive throughput improvements supported by
Project 2022 (which completed in June 2022) continued to yield
good results. Group production for FY 2022 increased by 3% in
line with guidance, largely owing to the resumption of mining at
Williamson. Production at Cullinan Mine during Q4 FY 2022 was
lower due to the depletion of the current CC1E mining area and a
difference in the make-up of kimberlite in the C-Cut. When compared
with FY2021, production at the Finsch Mine stabilised in the second
half of FY 2022, although ROM grade was 13% lower as a result of
waste dilution, despite the implementation of controls which were
continuously monitored. Group production guidance for FY2023
to FY 2025 remains unchanged at this stage.
No change –the current mining blocks at the South African
operations are reaching maturity, and while the current orebody
footprints are still large enough to deliver relative consistency and
product mix, increasing levels of variability in terms of ROM Grade
and product mix can be expected going forwards, which will be
mitigated by the ramp-up of the new mining blocks at CDM
and FDM.
No change – stable labour relations were experienced during
FY 2022. The Company reached agreement with NUM on a new
three-year wage agreement for employees in the Paterson A and B
Bands at the South African operations. The Company also concluded
a three-year wage agreement for employees on the Paterson
C-Lower Band with both NUM and UASA.
Review of the collective bargaining agreement at WDL is ongoing
with the majority union (TAMICO).
10. Safety
Medium
Medium
Short to
medium term
Lower – Petra’s safety performance saw a 40% reduction in LTIs
to 15 for the Year and a corresponding 50% improvement in the
LTIFR for the Year.
11. Environment
Medium
Medium
Long term
The only metric on which Petra’s performance deteriorated was in
respect of NLTIs, which saw an increase of 11% but this was against
a backdrop of (i) an increased number of LTIs incurred in FY 2021
versus the low number of incurred NLTIs in FY 2021 and (ii) an
increased number of shifts worked in FY 2022 which meant Petra’s
NLTI Frequency Rate improved by 7%. The Cullinan Mine in particular,
had an exceptional year, celebrating a LTI-free year on 25 April 2022.
No change – implementation of waste management procedures,
and the setting of annual objectives to improve waste management,
has resulted in higher waste recycling (25% more waste was
recycled in FY 2022 than in the previous year) and lowered the risk
caused by landfilling. On land rehabilitation, Petra has positively
transformed 120 hectares of previously disturbed land during FY
2022. The implementation of annual objectives for improved water
efficiency has seen Petra reach internal water recycling figures
averaging 80% over the last four years.
Annual Report and Accounts 2022 Petra Diamonds Limited
69
Strategic Report
Principal Risks and Uncertainties continued
Principal risks continued
Risk
Risk appetite
Risk rating
Nature of risk
Change in FY 2022
Operational risks continued
12. Climate change
High
Medium
Long term
13. Supply chain
governance
Medium
Medium
Short to
medium term
14. Capital projects
Medium
High
Short to
medium term
No change – the Group’s Climate Change Adaption Policy and
strategy is currently in year 3 of the 5 year implementation plan.
Petra uses the World Bank Climate Change Knowledge Portal
(CCKP) to estimate physical climate change impacts on, and
opportunities for, our operations. Petra has initiated various
climate change projections and scenarios analysis to determine the
impact on its operations in the short, medium and long term.
During FY 2022, Petra started to develop mitigating action plans
for the top rated climate change risks that have been identified.
Climate related disclosures were further aligned to the TCFD
recommendations. Petra will report on how it has met the TCFD
Recommendations and Recommended Disclosures for the second time
in FY 2022.
Higher – a comprehensive review of the Supply Chain function’s
operating structure and people competencies in line with Petra’s
business strategy is currently underway. Processes and systems
across the supply chain function are further being reviewed with
the aim of improving internal controls and governance. A new Third
Party Due Diligence Policy and Procedure and online platform is
currently being finalised to ensure that supplier risks relating to
bribery and corruption, sanctions, trade restrictions and human
rights violations are adequately identified and mitigated accordingly.
Higher – the CC1E SLC and Lower Block 5 3-level SLC expansion
projects at the Cullinan Mine and Finsch were approved by the
Board in FY 2022, and as a result various governance initiatives
have been launched to ensure efficient and effective management
of these projects, including the identification and management of
key project risks. The Exco, Investment Committee and Board
continue to regularly monitor progress of both projects, including
tracking of spend against budgets and progress against the
approved baseline schedules.
70
Petra Diamonds Limited Annual Report and Accounts 2022
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Corporate Governance
Financial Statements
Supplementary Information
Corporate Governance
72
Chair’s Introduction to Governance
76 Board of Directors
78 Executive Committee (Exco)
79 Corporate Governance Statement
90 Report of the Audit and Risk Committee
99 Viability Statement
101 Risk Management
112
Report of the Nomination Committee
114
116
Report of the Health, Safety and Environment
(HSE) Committee
Report of the Social, Ethics & Diversity
(SED) Committee
120 Report of the Investment Committee
122 Directors’ Remuneration Report
Effective governance is key to Petra’s success and
involves a process of continuous improvement; we
need to review and adapt our processes to meet the
ever evolving expectations of our stakeholders.
Peter Hill
Chair
Annual Report and Accounts 2022 Petra Diamonds Limited
71
Corporate Governance
Chair’s Introduction to Governance
Effective governance is key to Petra’s
success and involves a process of continuous
improvement; we need to review and adapt
our processes to meet the ever-evolving
expectations of our stakeholders.
Peter Hill CBE
Non-executive Chair
72
Petra Diamonds Limited Annual Report and Accounts 2022
Dear shareholder,
Strong and effective corporate governance are essential to the
long-term success of the Company and sit at the heart of Petra’s
approach. I continue to be impressed by Petra’s high standards in this
area, which are led by the Board from the top down, and I am pleased
to report that the Board considers itself in full compliance with the
requirements of the UK Corporate Governance Code, 2018 (the Code).
During FY 2022, we have looked to further enhance our Board
strategy, structure and culture. Our aim is that by further embedding
these essential components at the very heart of the Company,
we can look to deliver optimal corporate governance.
Highlights for FY 2022 from a governance perspective are the following:
Board and Senior Management composition
As reported in the FY 2021 Annual Report, and with Gordon Hamilton
retiring, Deborah Gudgeon became Chair of the Audit and Risk
Committee with effect from 1 November 2021, having been
appointed to the Board as an iNED on 1 July 2021. Deborah is a
Chartered Accountant with over 30 years’ corporate experience,
including extensive experience in the mining sector, including in
executive and iNED roles and as audit committee Chair at several
UK-listed companies.
As reported in the FY 2021 Annual Report, we also welcomed
Ms Alex Watson and Mr Johannes Bhatt who were appointed as
Non-Independent NEDs on 1 July 2021, having been nominated by
Franklin Templeton and Monarch respectively. Monarch also exercised
their right under the Nomination Agreement between it and the
Company to appoint Mr. Marius Kraemer as their Board Observer
with effect from 1 July 2021.
On 1 March 2022, we welcomed Jon Dudas to the Board as our
newest iNED, and as a member of the Audit and Risk, Nomination,
Remuneration and Investment Committees. Jon has broad experience
across the mining and resources sectors, in operations, general
management, finance and strategy, and has held Board positions with
major companies, all of which will greatly assist in the strategic
development of the Company.
Mr Matthew Glowasky, who had been appointed as a Non-Independent
NED in March 2021 following his nomination by Monarch, and who
was a member of the Investment Committee, stepped down from the
Board on 17 May 2022. Monarch indicated it does not intend to
nominate a Director to replace Mr Glowasky, though it retains its
right to do so under the Nomination Agreement.
At a Senior Management level, Jaison Rajan was appointed to Petra’s
Exco as Chief Operating Officer (COO) with effect from February 2022.
Jaison had been the General Manager at the Cullinan Mine since 2019,
having been instrumental in stabilising operations, as well as the
delivery of Petra’s Operating Model. The role of COO was reintroduced
to ensure continuity of operations across all of Petra’s mines, and to
drive better integration and standardisation. As a result of this change,
General Managers at the Cullinan Mine and Finsch now report into
the COO rather than the CEO as they did previously. Further details
regarding the composition of Petra’s Exco can be found on page 78.
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Board site visits, strategy and performance
Whilst the COVID-19 pandemic continued to cause disruption to
Board and Committee meetings, particularly at the start of the Year,
the relaxation of travel restrictions allowed the Board to hold their
first full, physical meeting for over 18 months in November 2021, with
previous meetings over that period having been conducted virtually.
The relaxation of travel restrictions also allowed the full Board to
conduct its planned site visit, in May 2022, to operations at the
Cullinan Mine and Finsch (which included an underground tour at the
Cullinan Mine). A smaller subset of the Board was also able to conduct
site visits of operations at the Finsch and Cullinan Mine in October
2021 and the Williamson Mine earlier in May 2022. The latter visit
included visiting security operations at the mine and receiving
updates on the establishment of the IGM and the progress of various
community projects.
In February 2022, the Board held a session to review and approve Petra’s
strategy that was then outlined at the Investor Day on 22 February 2022.
The Board’s strategy session looked at macroeconomic factors impacting
Petra, including the robust diamond market that is supported by structural
supply shortages, and Petra’s strengthened financial platform. The
session then went on to review and approve the strategy, which included
the approach to be taken in Petra’s new Sustainability Framework
(further details of which are outlined at pages 38 to 40 in our Sustainability
Report), maximising value from Petra’s existing operations, including
the capital projects at the Cullinan and Finsch Mines that were
approved by the Board in November and February respectively,
and pursuing a value-led growth strategy encompassing organic
and inorganic opportunities.
In Q4 FY 2022, the Board undertook an externally facilitated
evaluation of its own performance and that of the Board Committees.
Even though an external Board evaluation had taken place recently,
in August 2020, it was felt that significant recent changes to the
composition of the Board and its Committees justified a further
evaluation being undertaken. I am pleased to say that the external
evaluator’s overall assessment was that the Petra Board is an effective
and high-performing board. A summary of how the evaluation was
carried out and certain areas identified for improvement are outlined
on page 84.
Culture, purpose and values
At the heart of all successful business operations is a culture, purpose
and set of values which all stakeholders carry with them in what they
give and take, to and from the Company. During FY 2022 and with
the support of a professional services company called Blueprints,
Petra commenced a key initiative to conduct a wholesale review of
our culture, purpose and values, with a view to building a collective
Formula for Success from the bottom up. Engagement at all
employee levels started in FY 2022 and has already resulted in a
revised purpose statement for Petra. For more information, see pages
10 to 13. Further work in reviewing Petra’s culture to build a Formula
for Success continues into FY 2023, and the outcome of this work will
be reported on in the 2023 Annual Report.
Diversity
Petra remains committed to improving diversity levels throughout
the workforce, management team and Board, noting the benefits a
broad mix of expertise, skills and diversity brings to our performance.
Petra has several initiatives aimed at developing women into
managerial positions, and in FY 2022, re-launched our Women in
Leadership (WiL) programme. For further information on the diversity
initiatives undertaken by Petra in FY 2022, see pages 59 to 62 of the
Sustainability Report.
At the date of this report, 40% of our Board Directors are women,
our Senior Independent Director (Ms Varda Shine) is a woman, 20%
of our Board are from an ethnic background which is not white and
five different nationalities are represented on our Board. We hope
that future Board appointments will demonstrate our continued
commitment to diversity.
Governance updates
Petra’s culture will always be underpinned by a commitment to
behaving ethically, and during the Year and as part of its Ethics and
Compliance Programme, Petra conducted a review of its Code of
Ethical Conduct as well as its anti-bribery and whistleblowing
policies. This saw the Board adopting a revised Code of Ethical
Conduct and new and updated anti-bribery and whistleblowing
policies, which will shortly be rolled out across the organisation
through awareness campaigns, workshops and training. Our Code of
Ethical Conduct is an essential guide and summary of Petra’s policies,
standards and procedures that are relevant to the way we work, and
the ethical conduct that is required from all staff as well as other
business partners who work with us, or act on our behalf.
Other important governance developments for the Group during
the Year included:
Š The Board’s approval of a new Tailings Management Policy that
aligns with the Global Industry Standard on Tailings Management
(GISTM) and that will provide a roadmap for Petra to achieve
compliance with the GISTM by FY 2023. Further details on this are set
out on our website at https://www.petradiamonds.com/sustainability/
environment/sustainability-environment-tailings-management/
Š The adoption and implementation of a new Stakeholder
Engagement and Management Policy which simplifies and clarifies
our stakeholder engagement processes. Further details on this are
set out in the Sustainability Report on pages 15 to 22
Š The Board has approved revisions to its Human Rights Policy
Statement to include protections for human rights defenders
and to reflect a new Human Rights Defenders Procedure that
has been adopted
Š The approval by the Board and implementation of a new Disclosure
Policy to ensure that the Company has in place adequate procedures,
systems and controls to identify inside information, and ensure
that any inside information identified is properly considered by the
Directors and, where required, disclosed to the market promptly
Š The approval by the Board and implementation of an amended
Share Dealing Code that requires Directors and the Company’s
employees to obtain clearances from the Company before dealing
in Petra shares, and prohibits Directors and employees from
dealing in Petra shares while they are in possession of inside
information about the Group
Annual Report and Accounts 2022 Petra Diamonds Limited
73
Corporate Governance
Chair’s Introduction to Governance continued
Stakeholder engagement, feedback
and workforce engagement
Positive relationships, involving consistent two-way communication
avenues with all of our stakeholders, are essential to the long-term
success of our business. As a Board, we regularly receive feedback on
the views and priorities of our key stakeholder groups, as set out on
pages 30 to 32, and stakeholder views are considered when making
strategic decisions.
We continually look to improve and strengthen our stakeholder
engagement processes (as exemplified by the adoption of a new
Stakeholder Engagement and Management Policy, as described
above) and are pleased to have made significant progress this Year
across a number of fronts.
Petra has long recognised the importance of understanding the views
of our workforce to ensure they are part of Board discussions and
factored into the Board’s decision-making. With the resumption of
international travel and in-person meetings, Ms Matloa, Chair of the
SED Committee and designated employee engagement iNED, has
been able to recommence face-to-face meetings with our workforce
and the Board has been able to recommence its site visits to the
Group’s operations, and these engagements are further described on
pages 81 to 82.
Furthermore, following the allegations of human rights breaches
in connection with security operations at the Williamson mine,
extensive engagements have taken place during the Year with
national and local Government, and local communities to create
awareness of the IGM and obtain feedback on how the IGM is
envisaged to operate. Further positive engagements have also taken
place with local communities through community projects such as
the medical support services, sexual and gender-based violence
awareness campaign and delineation and firewood projects, further
details of which are set out on page 55 and pages 33 to 34 of the
Sustainability Report.
Should any stakeholder like to speak to me or Ms Shine, the Senior
Independent Director, about any aspects of this Annual Report or the
Company’s performance, please do not hesitate to get in contact via
our Corporate Communications team based in London (see page 212
for contact details).
Peter Hill CBE
Non-executive Chair
10 October 2022
74
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Petra governance framework
(as at 30 June 2022)
Chair
Other members
Audit and Risk Committee
Overseeing the Group’s financial reporting, internal
and external audit, internal control, ICT and risk
management systems, and compliance, whistleblowing
and fraud policies.
Deborah Gudgeon
Remuneration Committee
Advising the Board on the remuneration of Executive
Directors and setting an overall policy for remunerating
the Group’s employees.
Varda Shine
Nomination Committee
Leading the process for Board appointments and
re-election and succession of the Directors and the Chair
of the Board.
Peter Hill
Octavia Matloa
Bernard Pryor
Varda Shine
Jon Dudas
Deborah Gudgeon
Octavia Matloa
Bernard Pryor
Jon Dudas
Deborah Gudgeon
Octavia Matloa
Bernard Pryor
Varda Shine
Jon Dudas
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HSE Committee
Overseeing the Group’s HSE systems and policies, and
monitoring of compliance.
Bernie Pryor
Johannes Bhatt
Richard Duffy
Varda Shine
SED Committee
Overseeing the Group’s social, ethics and diversity
systems and policies, and monitoring of compliance.
Octavia Matloa
Investment Committee
Monitoring of capital expenditure and other
significant investments.
Peter Hill
Executive Committee
Assisting the CEO in the performance of his duties
and in dealing with the day-to-day activities of the
Company’s business.
Richard Duffy
Alex Watson
Richard Duffy
Varda Shine
Alex Watson
Johannes Bhatt
Jacques Breytenbach
Richard Duffy
Deborah Gudgeon
Jon Dudas
Bernard Pryor
Jacques Breytenbach
Thashmi Doorasamy
Juan Kemp
Ayoub Mwenda
Jaison Rajan
Rupert Rowland-Clark
Greg Stephenson
Annual Report and Accounts 2022 Petra Diamonds Limited
75
Corporate Governance
Board of Directors
Board of Directors
(as at the date of this report)
Peter Hill, CBE
N I
Non-executive Chair
Richard Duffy
I
Chief Executive Officer
H S
E
Jacques Breytenbach
Chief Financial Officer
I
E
Appointment date: January 2020 and as Chair in
March 2020.
Qualifications: Chartered Engineer and Fellow of
the Institution of Materials, Minerals and Mining, BSc
in Mining Engineering (University of Nottingham),
MBA (London Business School) and South African
Mine Manager’s Certificate of Competency.
Skills: Mr Hill is a mining engineer who has held
numerous positions at Anglo American, Rio Tinto, BP
Minerals and Consolidated Gold Fields plc, following
which he was Chief Executive of Laird plc from 2002 to
2011. More recently he has held the role of non-executive
chairman and non-executive director for a number of
UK PLCs and UK Government organisations.
Experience: Mr Hill has extensive board experience
and has been directly involved in four UK plc takeovers,
a FTSE 100 merger, a FTSE 250 demerger and an IPO.
External appointments: Non-executive Chair of
Keller Group plc.
Interest in the Company as at 30 June 2022:
140,000 shares (30 June 2021: nil).
Appointment date: April 2019.
Appointment date: February 2018.
Qualifications: BCom (University of
the Witwatersrand) and MBA (Henley
Management College).
Skills: In addition to his business, strategic and
financial skills, Mr Duffy has extensive experience in
open pit and underground mining and a proven focus
on safety, productivity and community relations,
having led multiple large-scale mining operations
across Africa.
Experience: Mr Duffy has more than 30 years’ global
mining industry experience, initially with Anglo
American and then AngloGold Ashanti, where he
worked across business development, exploration and
corporate finance. Mr Duffy was previously CFO and
Executive Director of AngloGold Ashanti in 2013.
External appointments: Director of the
Natural Diamond Council and member of the
Board of St Mary’s School (Waverly) Foundation
(a non-profit organisation).
Interest in the Company as at 30 June 2022:
7,138 (30 June 2021: 240,000 shares - prior
to share consolidation).
Qualifications: CA (SA), BCompt (Hons) (University
of South Africa) and Postgraduate Diploma in Auditing
(University of the Witwatersrand).
Skills: Mr Breytenbach leads the financial
management of the Company and is responsible for
financial and management accounting and reporting,
business development, treasury, financial controls
and reporting.
Experience: Mr Breytenbach held the role of Finance
Manager for Operations at Petra from 2006, with
responsibility for financial management across the
Group’s operations, before being appointed Chief
Financial Officer in June 2016.
Prior to joining Petra, he held various roles,
culminating in Finance Manager for Capital Projects
at Anglo Platinum.
External appointments: None.
Interest in the Company as at 30 June 2022:
11,982 shares (30 June 2021: 243,750 shares - prior
to share consolidation).
R A N H S
Varda Shine
Senior Independent
Non-executive Director
Appointment date: January 2019.
Qualifications: MsC Executive coaching (Hult/
Ashridge) with various business and management
courses at Technicon (Israel), Templeton College
(Oxford), Cranfield and INSEAD.
Skills: Ms Shine is a non-executive director, executive
mentor and expert adviser in the diamond industry,
with significant experience and knowledge of
stakeholders across the supply chain and a track
record of delivering record sales and profits.
Experience: Ms Shine has 30 years’ experience in
the diamond industry, including eight years as the
CEO of De Beers Trading Company (2006–2014).
She is a trustee of the Teenage Cancer Trust.
External appointments: Director of Anglo Pacific
Group plc (listed on the London and Toronto Stock
Exchanges), Sarine Technologies Limited (Singapore
listed) and Niron Metals plc.
Interest in the Company as at 30 June 2022:
Nil (30 June 2021: nil).
Octavia Matloa
Independent Non-executive Director
S A R N
Bernard Pryor
Independent Non-executive Director
H A R N
I
Appointment date: November 2014.
Appointment date: January 2019.
Qualifications: CA (SA), BComm (Hons) (University
of Cape Town), Postgraduate Diploma in Accounting
(University of Pretoria) and Certificate in Theory
of Accountancy.
Skills: Ms Matloa is a Chartered Accountant and
brings broad business, financial and auditing
experience to the Board.
Experience: Ms Matloa has 17 years of corporate
experience of which 13 years is in the mining industry.
She completed her articles with PwC in South Africa
in 2000 and was appointed by court as the first
woman curator in the insurance industry. She has also
served on various public sector audit committees. Ms
Matloa has founded a number of businesses, including
Tsidkenu Chartered Accountants Inc. and Mukundi
Mining Resources.
External appointments: None.
Interest in the Company as at 30 June 2022:
Nil (30 June 2021: nil).
Qualifications: Metallurgical Engineer (Royal School
of Mines, Imperial College) and Chartered Engineer
(Institute of Mines and Metallurgy).
Skills: Mr Pryor has a wide skill-set encompassing
project acquisition, development and construction,
and international commercial and general
management, and has run large-scale, fully
operational mining assets.
Experience: Mr Pryor has over 35 years’ experience
in the mining industry and has acted as the CEO for a
number of mining companies, including Alufer Mining,
MC Mining African Minerals Limited and Q Resources
plc. Mr Pryor also held senior positions within Anglo
American and was COO at Adastra Minerals Inc.
External appointments: Managing Director
of Karo Mining Holdings.
Interest in the Company as at 30 June 2022:
13,000 shares (30 June 2021: nil).
76
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Deborah Gudgeon
Independent Non-executive Director
A R N I
Appointment date: July 2021.
Qualifications: BSc (Econ) (London School of
Economics and Political Science) and CA (ICAEW).
Skills: Ms Gudgeon is a Chartered Accountant with
a diverse skill-set, including corporate finance,
restructuring and debt management, performance
improvement and auditing.
Experience: Ms Gudgeon has 30 years’ corporate
experience. Following her qualification as a Chartered
Accountant, she spent eight years as Finance Executive
with the Africa-focused mining and trading group
Lonrho plc, and then held positions with Deloitte, BDO
and Gazelle Corporate Finance. She has also served
as an independent non-executive director and audit
committee Chair at Acacia Mining plc, Highland
Gold plc and EVRAZ plc.
External appointments: None.
Interest in the Company as at 30 June 2022:
Nil (30 June 2021: nil).
Johannes Bhatt
Non-Independent
Non-executive Director
IH
Alexandra Watson
Non-Independent
Non-executive Director
S
I
Appointment date: July 2021.
Appointment date: July 2021.
Qualifications: MA in Business Administration and
Economics (Universities of Augsburg and Stuttgart).
Skills: Mr Bhatt has a broad skill-set, including
corporate finance, treasury and sustainability with
many years of experience in the international mining
industry.
Experience: Prior to his current roles, Mr Bhatt
was a non-executive director of Zangezur Copper
Molybdenum Combine (formerly part of the Cronimet
Group) and Stemcor Global Holdings, a leading steel
trading company. He was previously with Scholz
Holdings GmbH, an international metals recycling
group for ten years, latterly as Chief Financial Officer.
His early career was with Deutsche Bank and Voith.
External appointments: Mr Bhatt is currently
Managing Director of Incomet Capital GmbH, an
investment company within the mining sector and
a director of ANS Exploration Ltd, a gold and copper
exploration company.
Interest in the Company as at 30 June 2022:
Nil (30 June 2021: nil).
Qualifications: BCom (Hons) (University of Cape
Town), CA (SA) and Emeritius Professor of Accounting
(the University of Cape Town).
Skills: Ms Watson is an experienced non-executive
director and chartered accountant and has a wide
skill-set encompassing corporate governance, financial
and other forms of corporate reporting, investment,
broad business and financial experience.
Experience: Ms Watson has 28 years’ experience
in corporate governance, accounting and reporting,
holding positions on listed boards for nearly 20
years. She is the Chair of the South African Financial
Reporting Investigations Panel, having been the
Vice-Chair of the Global Reporting Initiative, in 2019.
External appointments: Ms Watson is Chair
of Coronation Fund Managers in South Africa
and is an independent non-executive director of
Steinhoff International Holdings NV and Advtech
Limited. Ms Watson also chairs Steinhoff’s Audit
and Risk Committee.
Interest in the Company as at 30 June 2022:
Nil (30 June 2021: nil).
Committee key
A Audit and Risk Committee
N Nomination Committee
R Remuneration Committee
H Health, Safety and
Environment Committee
S Social, Ethics and Diversity Committee
I Investment Committee
E Executive Committee (Exco)
Chair
Board changes in FY 2022
With effect from 1 March 2022, Mr Dudas was
appointed to the Board, and as a member of the
Audit and Risk, Remuneration, Nomination and
Investment Committees.
On 17 May 2022, Mr Glowasky stepped down
from the Board.
Jon Dudas
A R N I
Independent Non-executive Director
Appointment date: March 2022.
Qualifications: BSc in Mining Engineering and MSc in
Mineral Economics (University of the Witwatersrand),
MBA (Heriot-Watt University) and South African Mine
Manager’s Certificate of Competency.
Skills: Mr Dudas has a wide skill-set encompassing
project acquisition, development and construction, and
international commercial and general management,
and has run large-scale, fully operational mining assets.
Experience: Mr Dudas has over 37 years’ experience
in the mining industry, and prior to his current roles,
was President and CEO of BHP’s aluminium division,
and Executive Chair of Worsley Alumina (Australia) and
Mozal Aluminium (Mozambique). He was previously the
non-executive Chair of the National Atomic Agency of
Kazakhstan. His early career was as a Graduate Mining
Engineer with Harmony Gold Mines, progressing to
General Manager of Winkelhaak Gold Mine.
External appointments: Chair of Samruk-Kazyna, the
sovereign wealth fund of the Republic of Kazakhstan.
Interest in the Company as at 30 June 2022:
Nil (30 June 2021: N/A).
Annual Report and Accounts 2022 Petra Diamonds Limited
77
Corporate Governance
Executive Committee (Exco)
Juan Kemp
Chief Technical Officer
Qualifications: BSc (Metallurgical Engineering)
(Potchefstroom University); and MA (Business
Administration) (North West University Business
School).
Experience: Juan joined Petra after the purchase of
the Cullinan Mine and became the Surface Manager
and Group Metallurgical Manager for all seven of
Petra’s treatment plants. He was subsequently
promoted to General Manager in 2011 and in July 2019
was appointed as Project Executive. Later that year, he
became Petra’s Chief Technical Officer. He has nearly
30 years’ experience, with a depth of knowledge of
both the Koffiefontein Mine (having worked in a broad
spectrum of operational roles before becoming Plant
Manager under De Beers’ tenure), as well as the
Cullinan Mine (where he acted as Metallurgical
Manager for several years) and was an integral member
of the team that re-engineered the De Beers South
Africa business model. Before being promoted into the
De Beers diamond mines, Juan worked at the East Rand
Gold and Uranium Division of Anglo American in
Johannesburg, where he worked as a Mineral
Processing Engineer.
Rupert Rowland-Clark
General Counsel and
Company Secretary
Qualifications: BSc (Economics and Politics) (Bristol
University) and Solicitor (England and Wales).
Experience: Rupert assumed the role of General
Counsel and Company Secretary in June 2021. He leads
Petra’s Legal, Company Secretary, Risk, Assurance
and Compliance functions and reports into the Chief
Executive Officer and Chair. He has over twenty
years’ legal and executive experience, most recently
at Tullow Oil plc, an African-focused FTSE 250 oil and
gas company, where he was General Counsel from
2015 to 2020. Prior to Tullow, Rupert was a mergers
and acquisitions lawyer at global law firm, Freshfields
Bruckhaus Deringer LLP, where he worked on a broad
range of significant transactions across multiple
sectors and jurisdictions.
Gregory Stephenson
Sales and Marketing Executive
Experience: Gregory has 35 years’ experience in
the buying and selling of diamonds. He has led the
Sales team at Petra Diamonds since 2008 where he
oversees the preparation, valuation and marketing
of Petra’s rough diamonds, as well as managing the
full sales process of the South African and Tanzanian
production. Prior to joining Petra, Gregory owned and
managed GDR Diamonds, Johannesburg, for ten years
where he purchased rough diamonds throughout
southern Africa, provided independent valuations in
Angola and acted as head valuator for a large Belgian
company in Moscow. His ability to do this stemmed
from his global experience at De Beers, London, where
he started his career as a trainee diamond buyer in
1988. This included two years of intensive training in
all facets and sizes of rough diamonds and time spent
at the Overseas Purchasing Division where, over the
span of eight years, he went on multiple tours and
secondments, which included Kinshasa, Brazzaville,
Mbuji-Mayi, Kahemba, Luanda, Johannesburg
and Antwerp.
Jaison Rajan
Chief Operating Officer
Thashmi Doorasamy
Group HR and Public Affairs Executive
Ayoub Mwenda
Country and Mine Manager: Tanzania
Qualifications: BSc (Mining Engineering) (University
of the Witwatersrand), MBA (Mineral Economics and
Business Administration) (University of Cape Town)
and Mine Manager’s Certificate of Competency
(South Africa).
Experience: Jaison has over 20 years’ industry
experience in various mineral commodities including
heavy minerals, diamonds, manganese and coal.
Jaison was appointed Chief Operating Officer at Petra
Diamonds in 2022, having been General Manager of
Cullinan Diamond Mine for the previous three years.
Prior to joining Petra he worked as General Manager
at Khutala Colliery having worked for eight years in
a variety of managerial roles at BHP Billiton at the
Wessels diamond mine and Hotazel Manganese mines
before this. Jaison also has an in depth understanding
of the Finsch Mine, having started his career at the
mine when it was owned by De Beers. During this
time he acted a section leader, ensuring safe control,
management, direction of underground excavations
and infrastructure within the Ore Extraction
Production area.
Qualifications: BAdmin (Hons) (Public Finance)
(University of Durban Westville).
Experience: Thashmi joined Petra in February 2020
as HR and Public Affairs Executive after spending
18 years at the Massmart Group, a leading retailer
in South Africa. Her pivotal role was HR Director
for Massbuild from 2003 to 2013. During this time,
Thashmi and her team oversaw the integration of the
newly purchased building supply company Builders
Warehouse, into the Massmart group. The merger
expanded successfully into the wider South African
and African market, leading to Thashmi’s promotion in
2013, to Group Compliance Officer for Massmart. Later
that year Massmart was purchased by the Walmart
Group. Thashmi led the integration of Massmart’s
South African businesses, into the Walmart Group
with a focus on compliance. In 2015, she joined the
Taste Group, overseeing the People Roll-Out plan for
Starbucks, following the recently purchased Starbucks
licence in South Africa.
Qualifications: BSc (Mining Engineering) (University
of Zambia) and registered Professional Engineer
(Tanzania).
Experience: Ayoub has worked at the Williamson
mine for 27 years in a number of technical and
managerial operating roles. Before joining Williamson,
Ayoub worked as a Mining Engineer at Chingola and
Mufulira copper mines in Zambia, before moving to
Tanzania as a Mining Engineer at Buckreef gold mine.
After joined Williamson in 1994 (as a Mining Manager),
he was promoted to Production Manager supervising
both the mining and processing plant. After assuming
the role of Assistant General Manager, Ayoub became
General Manager in November 2019. Ayoub has
overseen the restart of operations at Williamson,
following its period of care and maintenance.
78
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Corporate Governance Statement
UK Corporate Governance
Code compliance
Petra recognises the importance of maintaining high standards of corporate governance.
The Company looks to not only comply with all applicable governance regulations in the
jurisdictions in which it operates but also to meet best practice wherever possible.
Petra is not subject to a code of corporate governance in its country
of incorporation, Bermuda. However, as a London Stock Exchange
(LSE) Main Market company with a premium listing and its tax
domicile in the UK, Petra is required to comply with the UK Corporate
Governance Code 2018 (the Code) and to explain in this statement
any areas of non-compliance with the Code.
As at the date of this report, and for the financial year under review,
the Board considers that Petra has complied in full with the provisions
of the Code. A copy of the Code can be obtained from the Financial
Reporting Council’s website (https://www.frc.org.uk). This report,
together with the other reports in the “Corporate Governance” part
of this document, explains how the principles of the Code have been
applied by the Company.
Code Section 1: Board leadership and Company purpose Details on how the Board promotes the long-term success of the Company is provided in the Strategic
Report on pages 20 to 21. The Company’s recently updated purpose and values are set out on pages 10 to 11.
Petra’s strategy is outlined at pages 14 to 17. Our Section 172 statement is set out on pages 30 to 32.
Code Section 2: Division of responsibilities
Details of the Board and Exco, as well as Petra’s governance structure and Board activities for FY 2022,
are described at pages 75 to 80 and 85 to 86.
Code Section 3: Composition, succession and
evaluation
The findings of the FY 2022 Board Evaluation are set out at page 84. The report of the Nomination
Committee is at pages 112 to 113.
Code Section 4: Audit, risk and internal control
The report of the Audit and Risk Committee is at pages 90 to 98. A description of Petra’s principal risks
is set out at pages 101 to 111.
Code Section 5: Remuneration
Petra’s Directors’ Remuneration Report for FY 2022 is at pages 122 to 136.
Matters reserved for the Board
Š Vision and strategy
Š Financial Statements and reporting
(supported by the Audit and Risk
Committee) and trading updates
Š Financing strategy
Š Budgets, expansion projects, capital
Š Risk management and internal controls,
including consideration of the Viability
Statement (supported by the Audit and
Risk, Remuneration and HSE Committees)
Š Health, safety, social and environmental
matters (supported by the HSE and
SED Committees)
expenditure and business plans (supported
by the Investment Committee)
Š Material acquisitions and divestments
Š Corporate governance, ethics and culture
Š Appointments and succession plans
(supported by the Nomination Committee)
Š Executive Director remuneration (supported
by the Remuneration Committee)
Board experience (as at 10 October 2022)
MINING INDUSTRY
10/10
100+
FINANCE100+
10/10
3/10
GEOLOGY30+
AUDIT80+
8/10
10/10
CAPITAL MARKETS
100+
AFRICA100+
10/10
Board time in FY 20221
18
20
2020+
%
20
22
20
–– Strategy and risk
–– Corporate and finance
–– Operations and projects
–– Governance, social, ethics and diversity
–– Health, safety and environment
1. This split of Board time is an estimate only and is
calculated using the Board meeting agendas and
rough time split allocated to each item in advance.
20+
2/10
DIAMOND MARKETING
Annual Report and Accounts 2022 Petra Diamonds Limited
79
0
+
A
70
+
A
0
+
A
0
+
A
20
+
A
0
+
A
+
20
20
+
22
+
+
22
+
20
20
+
+
18
18
+
+
I
I
80
+
A
Corporate Governance
Corporate Governance Statement continued
The role of the Board
The Board is responsible for the long-term success of the Company. Petra’s Board should have the necessary combination of skills, experience
and knowledge, as well as independence (with regard to the iNEDs), to properly discharge its responsibilities and duties.
In order to fulfil its role, the Board:
Š Sets the Company’s strategic aims, ensures that the necessary
resources are in place for the Company to meet its objectives, and
reviews management performance in achieving such objectives
Š Provides leadership of the Company within a framework of
effective systems and controls which enable risks to be assessed
and managed
Š Develops the 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 other stakeholders are understood and met
Š Carries out all duties with due regard for the sustainability
and long-term success of the Company
The role of the Chair
Mr Hill:
The role of the Chief Executive Officer
Mr Duffy:
Š Leads the Board and is primarily responsible for the effective
Š Is primarily responsible for implementing Petra’s strategy
working of the Board
Š In consultation with the Board, ensures good corporate
governance and sets clear expectations with regards to
Company culture, values and behaviour
Š Sets the Board’s agenda and ensures that all Directors
are encouraged to participate fully in the activities
and decision-making process of the Board
Š Is the ultimate custodian of shareholders’ interests
Š Engages with shareholders and other governance-related
stakeholders, as required
Š Meets with the Senior Independent Director and with the
iNEDs without the Executive Directors present, in order to
encourage open discussions and to assess the Executive
Directors’ performance
Š Identifies induction and development needs of the Board
and its Committees
Š Chairs the Nomination Committee, thereby playing an
important part in assessing and advising on the appropriate
composition of the Board and its skill-set and also chairs the
Investment Committee
established by the Board and for the operational management
of the business
Š Leads and provides strategic direction to the Company’s
management team
Š Runs the Company on a day-to-day basis
Š Implements the decisions of the Board and its Committees,
with the support of Exco
Š Monitors, reviews and manages key risks
Š Ensures that the assets of the Group are adequately
safeguarded and maintained
Š Is the Company’s primary spokesperson, communicating with
external audiences, such as investors, analysts and the media
Š Leads by example in establishing a performance-orientated,
inclusive and socially responsible Company culture
Š Chairs the Exco and is a member of the HSE and SED
Committees, thereby having direct involvement in the strategic
management of Petra’s HSE and SED issues, including labour
relations, and is also a member of the Investment Committee
The role of the
Senior Independent Director
Ms Shine:
The role of the NEDs
Ms Shine, Ms Matloa, Mr Pryor, Ms Gudgeon,
Ms Watson, Mr Bhatt and Mr Dudas:
Š Provides a sounding board for the Chair and serves
as an intermediary for the other Directors as necessary
Š Is available to shareholders if they have concerns which
contact through the normal channels has failed to resolve,
or for which such contact is inappropriate
Š Leads the iNEDs in undertaking the evaluation of the Chair’s
performance
Š Is a member of Petra’s Audit and Risk, Remuneration,
Nomination, HSE and SED Committees, thereby having
oversight of the Group’s material risks, issues and
opportunities, and bringing her skill-set and independent
judgement to the benefit of these Committees
Š 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
Š Assess the performance of the Chair
Š Scrutinise the performance of the Executive Directors in terms
of meeting agreed goals and objectives
Š Ensure that the governance, financial information, controls
and systems of risk management within the Group are robust
and appropriate
Š Determine the appropriate levels of remuneration
of the Executive Directors
Š Provide a breadth of skills and experience to Board
Committees and, in the case of iNEDs, independence
80
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
How our Board operates
Board and Committee meetings
The full Board normally meets formally in person at least four times a
year for Board meetings and also speaks at other times as necessary
in order to discuss operational matters and ongoing performance
against the Group’s development and production plans, including
internal budgets and external guidance to the market. There is
frequent communication between Board members outside of the set
meeting dates, in order to stay abreast of business developments.
The formal Board and Committee meeting dates are scheduled to
address key events in the corporate calendar and are allocated
sufficient days to allow for considerable interaction by the members,
both inside and outside of the formal meetings. Rolling agendas have
been developed for the Board and for the Audit and Risk, Remuneration
and SED Committees to ensure the necessary standing items are
covered during the course of the Year, and sufficient time is allocated
to strategic discussions, with extra time factored in for ad hoc and
additional items. Agendas are agreed with the Chair (or with the Chair
of the relevant Committee) and timeframes set in advance for the
various meetings, thereby ensuring that the full agenda can be
covered in the time allotted. Site visits, dinners and other social
engagements are also attended by Board members outside of the
meeting times to allow for better understanding and more informal
discussion of issues; this assists in clarification and engagement,
meaning that consensus during the meeting is more easily attained.
Packs for the meetings are prepared by management following input
on the agendas formulated by the Company Secretary and the
respective Chairs, and made available electronically prior to the
meeting via a secure online Board portal, thereby allowing the
Directors adequate time to consider the variety of issues to be
presented and debated. In the minutes of the meetings, issues
identified for follow-up are set out, ensuring that matters raised by
the Directors are actioned and reported back in a timely manner.
In addition to formal Board and Committee meetings, the Chair holds
frequent meetings with NEDs during the Year, enabling free
discussions without the Executive Directors present.
Board Audit and Risk Remuneration
Committee
3 held
Committee
4 held
meetings
9 held
Nomination
Committee
2 held
HSE
Committee
4 held
SED
Committee
4 held
Investment Annual General
Meeting
Committee
1 held
3 held
Peter Hill
Richard Duffy
Jacques Breytenbach
Varda Shine
Octavia Matloa
Bernie Pryor
Deborah Gudgeon
Alexandra Watson
Johannes Bhatt
Jon Dudas4
Gordon Hamilton5
Matthew Glowasky6
9/9
9/9
9/9
8/9 1
9/9
8/9 1
8/9 1
9/9
9/9
4/4
1/1
5/7
n/a
n/a
n/a
2/4 2
2/4 3
4/4
4/4
n/a
n/a
1/1
2/2
n/a
n/a
n/a
n/a
3/3
3/3
3/3
3/3
n/a
n/a
1/1
2/2
n/a
2/2
n/a
n/a
2/2
2/2
2/2
2/2
n/a
n/a
1/1
1/1
n/a
n/a
4/4
n/a
4/4
n/a
4/4
n/a
n/a
4/4
n/a
n/a
n/a
n/a
4/4
n/a
4/4
4/4
n/a
n/a
4/4
n/a
n/a
n/a
n/a
3/3
3/3
3/3
n/a
n/a
3/3
3/3
3/3
3/3
n/a
n/a
2/2
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
1/1
n/a
1/1
1/1
1. Owing to the meeting being called on short notice and outside of the Board’s usual meeting cycle, Ms Shine, Mr Pryor and Ms Gudgeon were unable to attend the Board meeting on 18 January 2022,
at which the approval of the shareholder circular for the related party transaction (the Framework Agreement) was approved.
2. Owing to a personal emergency, Ms Shine was unable to attend the Audit and Risk Committee on 27 June 2022.
3. Owing to personal reasons, Ms Matloa was unable to attend two Audit and Risk Committee Meetings.
4. Mr Dudas was appointed to the Board as a member of the Audit and Risk, Nomination, Remuneration and Investment Committees with effect from 1 March 2022.
5. Mr Hamilton retired from the Board with effect from 19 November 2021.
6. Mr Glowasky stepped down from the Board with effect from 17 May 2022.
Site visits
Visiting Petra’s operations in person and interacting with Senior
Management and employees is very important for all Board
members. Annual site visits are usually arranged for the NEDs to
ensure that, in addition to papers presented at Board meetings, they
continue to stay informed of developments and progress at the
operations, as well as allowing for interaction with and feedback
from employees at a range of levels throughout the business and
assisting with the ongoing evaluation of Company culture. Whilst
COVID-19 travel restrictions impacted on the number of site visits
that could be undertaken during the first few months of the Year, the
Executive Directors visited the operations on a regular basis as part
of their day-to-day business, and the following site visits were
conducted by the iNEDs in FY 2022:
Š October 2021: Mr Hill and Mr Pryor visited the Cullinan Mine and
Mr Hill visited the Finsch Mine
Š Early May 2022: Mr Hill visited the Williamson Mine which included
visiting security operations at the mine and receiving updates on
the establishment of the Independent Grievance Mechanism and
the progress of various community projects
Š Late May 2022: the full Board visited the Head Office in
Johannesburg and the Finsch and Cullinan Mine. The Cullinan Mine
and Finsch visits involved extensive tours of operations at both
mines (including underground at the Cullinan Mine), operational
updates from management teams (including on the expansion
projects) and meetings with the Women in Mining groups
Annual Report and Accounts 2022 Petra Diamonds Limited
81
Corporate Governance
Corporate Governance Statement continued
How our Board operates continued
Employee engagement
Ms Matloa, Chair of the SED Committee, is the designated workforce
engagement iNED. The aim of the role is to help ensure the views and
concerns of the workforce are brought to the Board’s attention and
taken into account in deliberations and decisions, helping the Board
understand if employees are aligned to, and able to respond to, the
Company’s priorities. A formal document outlining the key principles
and parameters of the role was approved by the Board in FY 2021.
Whilst COVID-19 restrictions impacted engagements during the first
few months of the Year, Ms Matloa visited the Cullinan Mine in March
2022 to hold sessions with the workforce, unions and management at
the Mine. Ms Matloa reported back to the Board her observations
(which were generally positive) with areas of concern duly considered.
The Board normally has several opportunities throughout the Year
for employee engagements, with site visits (as outlined above),
as well as informal meetings in which the Board welcomes
feedback and open communication.
–– 0–3 years
–– 3–9 years
Board and Senior Management
composition by gender identity or sex
Number of Board members
–– Men
–– Women
–– Executive Directors
–– Independent Non-executive
Directors
–– Non-Independent
Non-executive Directors
–– South African
–– German
–– British
–– Israeli
–– Australian
60
20
20
50
50
%
%
Tenure of Directors1
Board composition1
5050+
2020+
3939+
11+
1. All statistics as at 30 June 2022.
13
%
99.9
0.1
1
5
1
1
5
Directors’ nationality1,2
Percentage of Petra shares held1
–– Directors
–– Other
2. Where Directors hold dual nationality,
both nationalities have been reflected.
82
Petra Diamonds Limited Annual Report and Accounts 2022
Number of senior positions on the
Board (CEO, CFO, SID and Chair)
–– Men
–– Women (SID)
1
3
40
60
4
%
6060+
7575+
8787+
8787+
%
8
12.5
87.5
7
1
–– Men
–– Women
–– Men
–– Women
Number in executive management (Exco)
Percentage of executive management (Exco)
+
50
50
+
0
+
0
+
+
I
I
+
60
+
60
+
20
20
+
+
I
I
+
8
+
8
+
38
+
38
+
8
+
8
+
7
7
+
+
I
I
+
99
99
+
+
I
I
+
40
40
+
0
+
0
+
+
I
I
+
25
+
25
+
0
0
+
+
I
I
+
13
+
13
+
0
0
+
+
I
I
+
13
+
13
+
0
0
+
+
I
I
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Board and Senior Management composition by ethnic background
Number of
Board
members
Percentage
of the Board
Number of
senior positions
on the Board
(CEO, CFO, SID
and Chair)
Number in
executive
management
(Executive)
Percentage
of executive
management
(Executive)
8
1
—
1
—
—
80%
10%
—
10%
—
—
4
—
—
—
—
—
5
—
2
1
—
—
62.5%
—
25%
12.5%
—
—
Process used in relation to Board membership, succession
planning and appointment process
Petra’s Nomination Committee is responsible for reviewing the skills,
expertise, composition and balance of the Board on an ongoing basis
as part of the Company’s succession planning. When considering new
appointments, a brief is prepared and an independent external search
agency is utilised to identify potential candidates. Read more about
the work of the Nomination Committee on pages 112 to 113.
Director induction, information, training and development needs
Detailed knowledge of the specialist world of diamonds (including
diamond marketing), the global mining industry, international capital
markets, applicable UK legislation/LSE regulation, Sub-Saharan Africa
(particularly South Africa), ESG matters and Petra’s unique business
and operations, is crucial to the Board’s ability to effectively lead
the Company.
Petra has an induction programme designed to bring new Directors
up to speed as quickly as practicable, following their appointment to
the Board. Such an induction would typically involve meetings with
the Board and various members of Senior Management and an
information pack of all necessary corporate documents, including the
Company’s latest Annual Report, Sustainability Report, the Bye-Laws,
Committee Terms of Reference and other key Group policies, such as
the Code of Ethical Conduct, enabling them to familiarise themselves
with the Group, its procedures and current activities. A site visit to
one or more of the Group’s key operations is held to provide the new
Director with further information on the operations, including
production/expansion plans and key ESG considerations.
In order to ensure that existing Board members retain the relevant
and up-to-date knowledge and skill-set to properly discharge their duties,
ongoing training and other professional development opportunities
are provided by the Company and/or the Directors attend external
courses and conferences on their own professional behalf. Training is
arranged as appropriate to suit each Director’s individual needs, and
covers topics such as industry developments, governance, technical
subjects related to diamond mining, communication strategies
and ESG matters. Board training on specific topics is requested
by the Board members and then provided by a specialist at the
Board meeting.
White British or other White (including minority-white groups)
Mixed/multiple ethnic groups
Asian/Asian British
Black/African/Caribbean/Black British
Other ethnic group, including Arab
Not specified/prefer not to say
Why our Board is effective
Director commitment
The Directors’ biographies and duties can be found on pages 76 to 77
and 80. During the Year, there were no significant changes to the iNEDs’
external commitments and they are considered to have sufficient
time to fulfil their duties, as confirmed by the external Board evaluation,
carried out in Q4 FY 2022. The Non-executive Chair is also considered
to have sufficient time to fulfil his duties.
Executive Directors may, subject to Board consent, accept external
appointments to act as non-executive directors of other companies.
However, the Board reserves the right to review such appointments
to ensure no conflicts of interest, and that the time spent on fulfilling
such obligations would not affect the respective Director’s contribution
to Petra. Any fees for such appointments would normally be retained
by the Director concerned. Currently, the Executive Directors’ external
appointments do not affect their contribution to Petra.
The Chair and NEDs are required to inform the Board of any proposed
new directorships and a similar review process would be undertaken
to ensure they can adequately fulfil their obligations as Directors
of the Company.
Assessment of Director independence
Upon his appointment on 1 January 2020 and at the time of assuming
the role of Non-executive Chair on 31 March 2020, Mr Hill was considered
to be independent, and continues to be independent, in accordance
with the Code.
The Board also considers Ms Shine, Ms Gudgeon, Ms Matloa, Mr Pryor
and Mr Dudas to be independent in accordance with the Code. All
iNEDs are independent of any relationship listed in the provisions of
the Code. None of the iNEDs received any fees from the Company in
FY 2022 other than their contractual iNED fees, as set out on page
130 of the Directors’ Remuneration Report.
Mr Bhatt and Ms Watson, having been nominated by Monarch and
Franklin Templeton, respectively, in accordance with the Nomination
Agreements between those entities and the Company, are not
considered to be independent in accordance with the Code.
Conflicts of interest
Whilst conflicts should be avoided, the Board acknowledges that
instances arise where this is not always possible. In such circumstances,
Directors are required to notify the Chair before the conflict arises
and the details are recorded in the minutes. If a Director notifies the
Board of such an interest, they may be, if requested by the Chair,
excluded from any related discussion and will always be excluded
from any formal decision.
Annual Report and Accounts 2022 Petra Diamonds Limited
83
Corporate Governance
Corporate Governance Statement continued
Why our Board is effective continued
Director induction, information, training and development needs
continued
During the Year, the Board received formal training by law firm
Ashurst on the their statutory duties and on the regulatory
framework for UK listed companies, including the UK’s corporate
governance requirements and culture, the UK’s Listing Rules, the UK’s
Market Abuse Regulation and the UK’s Takeover Code.
The Company’s Corporate Communications team acts as a conduit of
regular information to the Board and Senior Management, providing
regular briefings by email on relevant topics, such as key diamond
industry trends, peer group developments and socio-economic
information about Petra’s countries of operation, as well as internal
Company news.
The Company Secretarial function also provide the Board and Senior
Management with ongoing updates on legal and regulatory changes,
including in relation to corporate governance matters, and the Board
has continual access to the advice and services of the Company
Secretarial function, as required.
Evaluation of the Board’s performance
Board evaluation
An externally facilitated Board evaluation was undertaken in August 2020, the results of which were reported on in the FY 2020 and 2021
Annual Reports.
Owing to the significant changes to the composition of the Board and its committees in FY 2021 and early FY 2022, it was decided to hold
a new external Board evaluation in FY 2022. This evaluation was undertaken by Donata Denny, an independent and respected Leadership
Coach and Professional Development Adviser who had conducted the external evaluation in August 2020.
The evaluation took place in Q4 FY 2022 and consisted of each Director completing a focused questionnaire, followed by a one-on-one
confidential interview with the external facilitator, and then a facilitated Directors’ workshop held in June 2022 to discuss the results and
the actions to be taken forward during FY 2023. The views of external stakeholders who have regular interactions with the Board were
also sought.
The evaluation of the performance of the Chair was undertaken by Ms Shine, the Senior Independent Director, based on feedback obtained
by the external facilitator from the Board. The Chair then subsequently appraised the performance of each Non-executive Director by
meeting each Director individually to review their knowledge and effectiveness at meetings, and the overall time and commitment to their
role on the Board, using the feedback obtained by the external facilitator from the Board to support these appraisals.
The evaluator’s overall assessment was that the Petra Board is an effective and high performing board. The assessment identified areas
with scope for improvement that were discussed with the external facilitator in the June 2022 feedback session with the Board. The
Company Secretary then agreed an action plan with the Board for how to address these areas for improvement, also taking into account
feedback the Company Secretary had sought and received from the Board during Q4 FY 2022, on the quality of Board information and
meeting logistics.
Areas for improvement from these Board evaluations included:
Strategic focus
Following the focus in FY 2020 and FY 2021 on the Restructuring, the alleged breaches of human
rights arising from security operations at the Williamson mine and disruption caused by the COVID-19
pandemic, the Board needs to continue to reposition itself to being more strategic in outlook.
Board strategy session
Whilst the Board’s strategy session held in February 2022 was highly praised, there were various
suggestions for how it could be improved further ahead of the Board’s strategy session to be held
in FY 2023.
Value proposition
Continued focus on and increasing awareness of Petra’s value proposition, recognising that this was
a key focus at the Investor Day that was held in February 2022.
Management access
Continuing to improve the Board’s access to management, recognising how the easing of COVID-19
travel restrictions has already helped significantly with the Board being able to conduct site visits
in October 2021 and May 2022, as outlined on page 81.
Increased NED engagements
Increasing the number of informal engagements between Non-executive Directors between
Board and Committee meetings to enhance Board dynamics (which were assessed as being good)
and contributions.
Board papers and agendas
Further ways in which Board and Committee papers and agendas can be further enhanced to support
the Board’s focus on strategic objectives and risk management were identified, whilst recognising
improvements recently made to the papers and agendas, and through the new online Board portal.
Board training
Suggestions for Board training topics for FY 2023.
84
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Key Board and Board Committee activities in FY 2022
CATEGORY
Strategic
STAKEHOLDERS CONSIDERED
Shareholders, Financial
Stakeholders, Host
Governments, Employees,
Unions, Local Communities,
Suppliers
ACTIVITY
Š Approved expansion projects at the Cullinan Mine and Finsch to extend their
mine plans, involving capital expenditure of c.$390 million and projected IRRs
of over 30%
Š Held strategy session in February 2022, which approved the approach to be
taken in Petra’s new Sustainability Framework, and focusing on maximising value
from Petra’s existing operations whilst pursuing a value-led growth strategy
encompassing organic and inorganic opportunities
Š Approved Framework Agreement and MoU for Williamson that, once completed,
will see Petra reduce its exposure in Tanzania while retaining control and sharing
in the upside
Š Approved commencement of process for a responsible exit from Petra’s
investment in the Koffiefontein mine
Š Approved the refinancing of Petra’s First Lien debt facility
Š Reviewed and approved KPIs to deliver strategy during the Year and assessed
performance against KPIs on an ongoing basis
Š Received presentations from the Company’s advisers on strategic options
Operations
Š Received reports at every Board meeting from the CEO on operational
performance, including on mining, processing, security (including security
operations at the Williamson Mine), human resources and community relations
Š Received reports at every Board meeting from the CEO on the performance
Shareholders, Financial
Stakeholders, Regulators,
Employees, Unions, Local
Communities, Suppliers
of Project 2022
Š Received updates on the progress of the Business Re-engineering Projects
at the Finsch and Koffiefontein Mines
Š Received updates on the progress of the expansion projects at the Cullinan Mine
and Finsch after their approval by the Board
Š Conducted operational site visits at the Cullinan Mine and Finsch in October 2021
(involving subset of the Board) and May 2022 (involving full Board) and at the
Williamson Mine in May 2022 (involving subset of the Board)
Health and Safety
Š Received reports at every Board meeting from the CEO and the Chair of the
Finance, reporting
and risk
management
HSE Committee on Health and Safety performance across the Group, including
the management of COVID-19 infections and the roll-out of vaccinations
Š Approved a new Tailings Management Policy that aligns with the Global Industry
Standard on Tailings Management (GISTM) and that will provide a roadmap for
Petra to achieve compliance with the GISTM by FY 2023
Š Approved the Group’s preliminary results for FY 2021, interim results
for H1 FY 2022 and trading updates for FY 2022
Š Approved the FY 2021 Annual Report
Š Reviewed and approved the Group’s FY 2023 budget
Š Received reports at every Board meeting from the CFO regarding the Group’s
financial performance and on the diamond market
Š Reviewed the Group’s internal audit findings and principal risks on a quarterly basis
Š Received regular reports from the Chair of the Audit and Risk Committee
Employees, Local Communities,
Regulators
Shareholders, Financial
Stakeholders, Host
Governments, Regulators, NGOs
Annual Report and Accounts 2022 Petra Diamonds Limited
85
Corporate Governance
Corporate Governance Statement continued
Key Board and Board Committee activities in FY 2022 continued
CATEGORY
ACTIVITY
Governance
Sustainability
Š Approved the appointment of Jon Dudas to the Board
Š Engaged with significant shareholders
Š Conducted external evaluation of Board’s performance and internal evaluation
of Board information and meeting logistics
Š Approved a share consolidation of one new share for every 50 existing shares in
issue which was approved by the shareholders at Petra’s AGM in November 2021
Š Approved a shareholder circular in which Directors recommended the approval
of the Framework Agreement (see above) that constituted a related party
transaction for the purposes of the UK Listing Rules
Š Reviewed succession plans for Board and Senior Management and approved
principle relating to length of service for iNEDs
Š Approved awards under the PSP to Executive Directors and employees, and
annual bonuses and salary increases for Executive Directors
Š Approved a new Disclosure Policy and amended Share Dealing Code
Š Reviewed and updated Terms of Reference for the Audit and Risk, Remuneration
and Nomination Committees
Š Reviewed Directors’ independence and conflicts of interest
Š Approved the FY 2021 ESG & Sustainability Report
Š Approved the approach to be taken in Petra’s new Sustainability Framework
Š Received regular reports from the Chairs of the HSE and SED Committees,
including in relation to the IGM and Restorative Justice Projects at Williamson
Š Approved revisions to its Human Rights Policy Statement to include protections
for human rights defenders and to reflect a new Human Rights Defenders
Procedure that has been adopted
Š Adoption and implementation of a new Stakeholder Management Policy which
simplifies and clarifies Petra’s stakeholder engagement processes
Š Visited community projects near the Finsch and Williamson Mines during site
visits in October 2021 and May 2022
STAKEHOLDERS CONSIDERED
Shareholders, Employees, Host
Governments, Regulators, NGOs
Local Communities, Employees,
Host Governments, Regulators,
NGOs, Shareholders
Culture
Š Approved a revised Code of Ethical Conduct and new and updated anti-bribery
and whistleblowing policies
Š Received regular briefings on employee and community relations
Š Received regular reports from the Chair of the SED Committee
Š Considered Octavia Matloa’s employee engagement report for her CDM
meetings in March 2022
Š Met with Women in Mining groups on the site visits to the Cullinan Mine
and Finsch in May 2022
Employees, Local Communities,
Shareholders, Host Government,
NGOs
86
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Investor Relations strategy
Investor relations calendar for FY 2022
July 2021
FY 2021 Trading Update
Publication and conference calls
September
FY 2021 Preliminary Results
Participation in EM credit conference
Publication and conference calls
Virtual
October
November
2021 Annual & ESG and Sustainability Reports
Q1 FY 2022 Trading Update
Publication
Publication and conference calls
Annual General Meeting
Participation in diamond industry investor conference
Physical
Virtual
December
Sales Results for Tender 3 of FY 2022
Publication
January 2022
H1 FY 2022 Trading Update
Publication and webcast
February
March
April
May
June
Special General Meeting
H1 FY 2021 Interim Results
Investor roadshow
Participation in industry investor conference, Miami
Participation in high yield conference, Miami
Physical meeting & proxy voting
Publication, Investor Day and webcast
Virtual Investor one-on-one meetings
Physical
Physical
Sales Results for Tender 4 of FY 2022
Analyst lunch
Publication
Physical
Q3 FY 2022 Trading Update
Publication and conference calls
Sales Results for Tender 5 of FY 2022
Cullinan Mine site visit for analysts and investors
Participation in industry investor conference, Cape Town
Publication
Physical
Physical
Investor roadshow, London
Participation in ESG EM investor conference
Sales Results for Tender 6 of FY 2022
Physical
Virtual conference
Publication
The purpose of Investor Relations (IR) is to improve Petra’s access to,
and reduce the cost of, capital in support of Petra’s overall strategy.
Our IR strategy is to rebuild trust in Petra’s business model, strategy,
sustainability credentials and financial performance. To achieve this,
the IR programme informs the market on our business and the
diamond market through effective use of communication channels
to investors, most importantly research analysts, and proactively
engaging with potential and existing shareholders.
Our approach is to report with a high level of transparency on
our historical, current and future operations, ensure consistent
information and messages across a number of communication
channels, and to be clear in explaining Petra’s investment narrative.
We welcome and enable an open dialogue with shareholders and
other financial stakeholders, thereby ensuring that their objectives,
expectations and views of Petra’s strategy and performance are
understood and reported internally including to the Board which
places a high emphasis on shareholder engagement.
Petra’s corporate website (https://www.petradiamonds.com),
provides investors with information to aid their investment decisions,
as well as meeting our regulatory compliance requirements. We also
provide a wide range of information to assist other stakeholders and
our Sustainability Report (in addition to the Annual Report), is
available on the website. The website is regularly reviewed and
updated with new information.
Recognising the growing importance of social media, both in terms of
news dissemination and in providing an alternative communications
channel to stakeholders, Petra continues to develop its presence
through its LinkedIn and Twitter channels. The Company also
publishes updates focused primarily on employee and other local
community stakeholders on Facebook and Instagram.
Petra has a dedicated in-house IR and corporate communications
team based in London to ensure that investor queries or concerns
are dealt with effectively and in a timely manner and to provide
feedback to management and the Board on shareholder and analyst
communication. An IR report covering Petra’s trading relative to its
peers, investor feedback, analyst forecasts, share register
movements, bond performance, and an overview of IR activity is
distributed to the Board monthly, with a presentation made at
regular Board meetings.
Annual Report and Accounts 2022 Petra Diamonds Limited
87
Corporate Governance
Corporate Governance Statement continued
IR strategy continued
As part of Petra’s proactive approach to shareholder engagement,
the CEO, CFO and IR team hold regular meetings, either scheduled
or ad-hoc, in person or via telephone with shareholders, bondholders
and potential investors. Regular meetings are also arranged with
research analysts and brokers’ sales teams. We plan four annual
roadshows, two of which coincide with the publication of Petra’s
interim and year end results and, in addition, we attend investor
conferences. We hold live webcasts to present quarterly trading
updates and twice-yearly results and to allow financial market
participants opportunities to question Petra’s CEO and CFO.
These recordings then remain available to access on our website.
petradiamonds.com/investors/financial-events-calendar/
In addition, the Chair is available to meet with shareholders as
required and the iNEDs are normally provided with opportunities
to meet with shareholders throughout the Year. Petra’s Senior
Independent Director is available to shareholders to address concerns
that contact with the Chair, CEO or CFO failed to resolve, or for which
such contact was inappropriate.
As part of the Company’s commitment to ensuring effective
shareholder communications, the Chair and Senior Independent
Director normally carry out a governance roadshow every two years.
This did not occur in FY 2021 due to COVID-19 restrictions, but took
place in October 2021 with meetings being held with approximately
55% of shareholders.
Petra also normally hosts one formal investor and analyst site visit
per year, with additional smaller informal visits arranged as required
or requested. Such visits are considered an essential part of the
Company’s IR programme, as seeing the operations in person is the
best way for an investor or analyst to understand the scope and scale
of Petra’s assets as well as the depth of operational expertise on site
and the passion of Petra’s people.
FY 2022 investor engagement
During FY 2022, the Company’s Senior Management and corporate
communications team held nearly 250 meetings with investors and
analysts during five investor conferences in the US, UK and South Africa
(one of which was ESG focused), three roadshows and dedicated events
with included an investor day, an analyst lunch, and a site visit to the
Cullinan Mine. During FY 2022, the Company also began disclosing its
tender results via press release, so as to allow greater visibility on pricing,
sales volumes and demand conditions for rough diamonds.
The main recurring themes and issues raised by shareholders during
the Year centred on:
Š Petra’s operational performance, particularly with regards to
tunnel convergence at the Cullinan Mine and progress with waste
ingress at the Finsch Mine
Read more on pages 48 to 53
Š Petra’s business efficiency programme, Project 2022, and its ability
to meet its targets
Š Petra’s balance sheet and intentions to reduce debt, along with the
possible timing of a Restructuring of its loan notes
Š capital structure and issues such as overhang and liquidity caused
by bondholders owning a large portion of the Company’s equity
Š ability to generate free cashflow over the next few years given a
step-up in capital expenditure from FY 2023 following the
approval of extension projects at the Cullinan and Finsch Mines
Š Petra’s ability to reduce reliance on Eskom as an electricity
provider, including the potential to reduce GHG emissions by
switching to solar power
Read more on page 27
Š the large contribution to revenues from exceptional stones from
the C-Cut at the Cullinan Mine in FY 2022 and how this will change
as mining progresses towards the CC1E section
Š high inflation rates and the impact on Petra’s costs, and ways to
mitigate these cost increases
Read more on pages 61 to 64
Š diamond pricing and the trends the Company is seeing for its product
mix, as well as the specific impact of sanctions on Russian diamonds
Read more on pages 22 to 25
Š lab-grown gem diamonds and how these affect the market for
natural diamonds
Read more on page 25
Reporting
Petra’s objective with regards to external reporting (via its Annual
Report and Sustainability Report and supported by its website) is to
provide a high level of transparency to set out a clear picture of the
Group’s past performance and its potential future prospects.
To this end, Petra has aimed to provide a high level of disclosure,
particularly across the area of ESG and sustainability, having produced
detailed standalone Sustainability Reports for the last ten years.
Investor and analyst Cullinan Mine site visit, May 2022
88
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Annual General Meeting (AGM)
The FY 2021 AGM was held at the offices of Ashurst LLP, London Fruit and Wool Exchange, 1 Duval Square, London at 9am on
19 November 2021.
Results of our FY 2021 AGM
A summary of the proxy voting for the AGM was made available via the London Stock Exchange and on the corporate website as soon
as reasonably practicable on the same day as the meeting.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Statutory accounts
Approve Directors’ Remuneration Report
Re-appointment of BDO LLP as auditors
Authority to fix the remuneration of the auditors
Re-election of Mr Hill
Re-election of Mr Duffy
Re-election of Mr Breytenbach
Re-election of Ms Shine
Re-election of Ms Matloa
Re-election of Mr Pryor
Election of Mr Glowasky
Election of Ms Gudgeon
Election of Ms Watson
Election of Mr Bhatt
Approval of share consolidation
Approval of increase in authorised capital
Authority to allot relevant securities
Approval of the 2021 PSP
Disapplication of pre-emption provisions
Total votes
for (as a %
of votes cast)
99.99
95.11
99.99
99.99
96.38
96.38
99.99
99.99
99.99
99.99
99.99
99.99
99.99
99.99
99.99
99.99
99.99
99.99
93.68
Total votes
Votes withheld
against (as a % (as a % of total shares
with voting rights)
of votes cast)
0.01
4.89
0.01
0.01
3.62
3.62
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
6.32
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
Total number of
votes withheld
307,053
307,053
307,053
307,053
307,053
307,053
307,053
307,053
307,053
307,053
307,053
307,053
307,053
307,053
307,053
307,053
307,053
307,053
307,053
Annual Report and Accounts 2022 Petra Diamonds Limited
89
Corporate Governance
Report of the Audit and Risk Committee
Members of the Audit and Risk Committee
Deborah Gudgeon (Chair), iNED
Gordon Hamilton, iNED1
Varda Shine, iNED
Octavia Matloa, iNED
Bernard Pryor, iNED
Jon Dudas, iNED²
1. Mr Hamilton was a member of the Audit and Risk Committee until the
conclusion of the FY 2021 AGM on 19 November 2021 when he retired from
the Board. Ms Gudgeon assumed the role of Chair of the Audit and Risk
Committee from 1 November 2021.
2. Mr Dudas was appointed to the Board and the Committee with effect
from 1 March 2022.
The Committee plays a vital role at Petra by ensuring
that the Group has effective and appropriate risk
management and internal control systems, backed up
by comprehensive financial, governance, Internal Audit
and reporting functions.
Deborah Gudgeon
Chair of the Audit and Risk Committee
Audit and Risk Committee Terms of Reference
petradiamonds.com/about-us/
corporate-governance/board-committees
90
Petra Diamonds Limited Annual Report and Accounts 2022
The Audit and Risk Committee (the Committee) continued
to focus on its key responsibilities as set out in its Terms
of Reference during FY 2022. In particular:
Š Ensuring the integrity of the Group’s interim and annual
financial reporting including compliance with financial
reporting standards and governance requirements, the
material areas where significant accounting judgements
have been made, the critical accounting policies and
substance, consistency and fairness of management
estimates, the clarity of disclosures and whether the Annual
Report, taken as a whole is fair, balanced and understandable
Š Overseeing and monitoring the Group’s internal control
framework and enterprise-wide risk management structure
including the development and implementation of the new
ERM and Combined Assurance Plan
Š Ongoing consideration of controls systems to ensure they
remain effective, relevant and appropriate to the business
and the associated risks thereto
Š Monitoring the ongoing effectiveness and independence of
the external auditors as well as making recommendations to
the Board on the re-appointment of the external auditors
Dear shareholder,
The Committee plays a vital role at Petra by ensuring that the
Group has effective and appropriate risk management and
internal control systems, backed up by comprehensive financial,
governance, Internal Audit and reporting functions. As Chair
of the Committee, I am pleased to have this opportunity to
summarise some of the key developments during the Year,
as well as our ongoing responsibilities and objectives.
The following issues are deemed to be significant and were
considered by the Committee in respect of the Group’s FY 2022
Financial Statements, based upon its interaction with both
Management and the external auditors during the Year:
Š The Group’s capital structure, First Lien debt facilities
refinancing, banking covenants, tender offer to Noteholders,
going concern and the Viability Statement
Š Reviewing LOM estimates and key assumptions leading
to impairments
Š Williamson accounting treatment under IFRS 10 and
impairment reversal considerations as a result of entering
into the Framework Agreement with the Government of
Tanzania and the Memorandum of Understanding (MoU)
with Caspian Limited to sell 50% less one share in the entity
through which Petra holds its stake in WDL
Š Tanzanian legislative environment and the impact on the
Blocked Diamond Parcel and recovery of VAT receivables
Š Grievances at Williamson further to the settlement
agreement entered into between Petra and Leigh Day
in May 2021
Š The accounting treatment of Koffiefontein under IFRS 5
given that during the Year the Board approved a plan to
commence a sales process for Koffiefontein
For further detail on the significant issues mentioned above,
see pages 94 to 97.
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
The Committee’s responsibility towards risk
management
The Committee continued to execute its risk management oversight
responsibilities ensuring that both operational and corporate level
risk reviews were both carried out and appropriately reported on
during the Year. In addition, the Committee had oversight of the Risk,
Assurance and Compliance function which completed a comprehensive
review of the Company’s Enterprise Risk Management and Combined
Assurance frameworks and which has resulted in a number of
improvements being identified which are primarily focused on
simplifying risk management processes at Petra. The Company also
performed an ethics and compliance risk assessment which also
identified a number of improvements. The improvements from the
risk management review are in the process of being implemented as
part of a risk improvement project and the improvements from the
ethics and compliance risk assessment are in the process of being
implemented as part of an Ethics & Compliance programme, with
further details of both set out on page 65.
The risk review process at Petra was modified in FY 2022 as part
of this risk improvement project and comprised an enterprise-wide,
‘top-down’, ‘bottom-up’ and ‘cross-functional’ approach and aggregation
process leading ultimately to the identification of the Group’s principal
risks on pages 101 to 111. This process has led to the identification of
an additional five principal risks, being Safety, Environment, Climate
Change, Supply Chain Governance and Capital Projects, further details
of which are set out on pages 108 to 111. More details on the Company’s
approach to risk management can be found on pages 65 to 70.
Committee composition
On 1 November 2021, Gordon Hamilton stepped down from his role
as Chair of the Committee and I assumed that role. With effect from
the conclusion of the AGM on 19 November 2021, Gordon retired from
the Board and as a member of the Committee. I would like to thank
Gordon for his exceptional contribution to Petra and the Committee
over the years. On 1 March 2022, we welcomed Jon Dudas to the
Board and as a member of the Committee. Jon has broad experience
across the mining and resources sectors, in operations, general
management, finance and strategy, and has held Board positions
with major companies and his background and experience will
therefore be greatly relevant to Petra and the Committee.
Committee experience and skill-set
The members of the Audit and Risk Committee are considered to
possess the appropriate skills and experience to monitor and ensure
the integrity of the Group’s financial reporting, Internal Audit, internal
financial control and risk management systems and to support
Petra’s governance.
Ms Gudgeon, who succeeded Mr Hamilton on 1 November 2021 as
Committee Chair, joined the Committee on 1 July 2021 and she fulfils
the requirements of the Code with regards to the required level of
financial and audit experience. Ms Gudgeon qualified as a chartered
accountant with PwC before going on to hold a range of roles at
Deloitte, BDO and within a number of listed mining companies. More
recently, she has extensive experience as a non-executive director
and chair of the audit committees of Highland Gold Mining Limited,
Acacia Mining plc and Evraz plc.
In terms of the other Committee members, and in line with updated
FRC Guidance, Ms Matloa is a qualified Chartered Accountant and
registered auditor who brings relevant business and audit experience
as she has audit committee experience for other organisations in
South Africa. Mr Pryor is a metallurgical engineer with 35 years of
experience in the international mining industry. Ms Shine, brings deep
knowledge of the diamond industry, as well as significant experience
in the South African and UK corporate environments. Mr Dudas, who
joined the Committee on 1 March 2022, has broad experience across
the mining and resources sectors, in operations, general management,
finance and strategy, and has held Board positions with major companies.
New members of the Audit and Risk Committee receive the required
induction to ensure they are properly equipped to discharge their
duties; this includes the standard Board induction process (as set out
on page 83), as well as information specific to the Committee such
as its Terms of Reference, Internal Audit Charter, previous internal
and external auditor reports, Committee meeting minutes and past
Committee papers. The Committee members receive appropriate
ongoing training and development, as well as regular updates
from the Group’s external auditors on relevant financial reporting,
governance and regulatory developments.
The Committee may, if considered necessary, take independent
advice at the expense of the Company. Other than BDO LLP, as
the external auditors, no other external consultants assisted
the Committee during FY 2022.
Deborah Gudgeon
Audit and Risk Committee Chair
10 October 2022
Annual Report and Accounts 2022 Petra Diamonds Limited
91
Corporate Governance
Report of the Audit and Risk Committee continued
Committee meetings
Four meetings were held in FY 2022 and the Committee invited the
Group Chair, the Executive Directors, members of Senior Management
(including other Executive members, the Group Risk, Assurance &
Compliance Manager and the Group Security Manager) and the Group
Internal Audit Manager to attend these meetings, as appropriate. In
addition, the Chair of the Committee met separately with the BDO
LLP Audit Partner regularly without Management present to discuss
significant audit and accounting matters, together with relevant
financial reporting and governance developments. Committee
members also met with the auditors without the Executive Directors.
The Committee recognises the importance of allocating significant
time to fulfil its duties effectively. In advance of each Committee
meeting, a formal agenda and information pack is circulated allowing
each member time to review the information and prepare for the
Committee meetings. During the formal meetings, the members then
engage in robust and open debate and assessment of relevant matters.
Ms Gudgeon, as Chair of the Committee, allocates a significant
amount of time to this role. In addition to chairing formal meetings
of the Committee and attending sessions with the external auditors,
Ms Gudgeon regularly met with the CFO, the Group Internal Audit
Manager as well as the Group Risk, Assurance & Compliance Manager
in order to discuss and monitor the financial controls, audit and risk
management activities of the Group on a timely basis.
Site visits to the Group’s various operations were arranged for
Committee members during the Year. For further detail on this, see
page 81. Other informal discussions enabled the Committee and the
Chair of the Committee to maintain a comprehensive understanding
of corporate and finance developments and activities and any
associated risks, as well as the operational risks and issues and
controls in place at Petra.
Committee role and activities
The principal functions of the Audit and Risk Committee are listed below, along with the corresponding activity and performance in FY 2022.
SUMMARY OF ROLE
ACTIVITIES IN FY 2022
OUTCOMES
To monitor the integrity of the
interim and preliminary full
year results announcements, as
well as the Annual Report and
Accounts published by the
Company, reviewing significant
financial reporting judgements
contained therein.
The Committee formally considered the Group’s interim results, preliminary full year
results and FY 2022 Annual Report and Accounts and considers that they present a fair,
balanced and understandable assessment of the Group’s performance and prospects.
The Committee, on behalf of the Board, has a specific process of review that enables it
to make this assessment, which includes a detailed appraisal by each member. The
Committee then met with the Executive Directors to discuss any questions and
comments.
In accordance with the Code, the Directors
consider that the Annual Report and
Accounts taken as a whole is fair, balanced
and understandable and provides
information necessary for shareholders to
assess the Company’s performance, business
model and strategy.
In particular, the Committee assessed the balance of information reported against its
understanding of the Group, as well as the tone and language used in the reporting,
ensuring that it should be comprehensible to readers of various backgrounds.
Outside of formal Committee meetings, accounting matters were also discussed by the
Chair of the Committee and the CFO. Key auditing, financial reporting and governance
matters, which typically focused on areas of significant judgement, estimation or
accounting policy selection, were discussed with the Audit Partner ahead of Committee
meetings and then during the Committee meetings.
To review and challenge, where
necessary, application of
accounting policies and
practices, decisions requiring a
major element of judgement,
the clarity of disclosures,
compliance with accounting
standards, and compliance
with regulatory and legal
requirements.
As part of its work to approve the Group’s Financial Statements, the Committee
reviewed the key financial reporting judgements and accounting policies therein.
These judgements were assessed through discussions with the Group’s auditors
and presentations by Management in which the Committee, where appropriate,
challenged the basis for such judgements and estimates.
Details of the significant matters considered by the Committee in respect of the
FY 2022 Annual Report are set out on pages 94 to 97.
The Committee considers that the
accounting policies used, reporting
disclosures, compliance with accounting
standards and other requirements are
appropriate to the Group in all regards,
taking account of the specialised nature
of its business.
To review the effectiveness of
Petra’s risk management
systems, internal financial
controls and other internal
controls.
The Committee assesses the Company’s risk management systems, internal controls and
internal financial controls on an ongoing basis. As part of this, the Committee invites the
Executive Directors, other Executive members, the Group Internal Audit Manager, the
Group Risk, Assurance & Compliance Manager and Group Security Manager and other
members of the Senior Management team to attend the meetings as appropriate.
During these meetings, the Committee was provided with updates on the Group’s
activities and the members considered the risk and control implications on an ongoing
basis. Additionally, the Board as a whole received presentations and reports by
Management on operational and financial performance each quarter that allowed for an
assessment of risk and internal controls.
The Committee meetings during FY 2022 included presentations by BDO LLP regarding
the results of the FY 2021 audit, the interim review for H1 FY 2022 and the FY 2022 Audit
and Risk Committee Planning Report, with a presentation by BDO LLP of the results of
the FY 2022 audit subsequent to the Year end. These presentations included the
auditors’ observations and recommendations in respect of internal controls that the
Committee incorporated into its overall assessment of the effectiveness of risk
management and controls.
The Committee considers that Petra’s
internal controls, including its internal
financial controls, continue to be robust
and defensible.
The Committee will continue to review and
assess the development of risk management
and internal control systems, assisted by the
work of the Internal Audit team and the
Risk, Assurance & Compliance function.
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Supplementary Information
SUMMARY OF ROLE
ACTIVITIES IN FY 2022
OUTCOMES
To monitor and review the
effectiveness of the Internal
Audit function, review and
approve the Internal Audit
Plan, review and recommend
the Internal Audit Charter to
the Board for approval and
ensure the Internal Audit
function is adequately
resourced.
On a quarterly basis, the Committee receives internal audit reports detailing any
significant findings, progress on the resolution of outstanding findings and progress
against the Internal Audit Plan approved by the Committee. The Internal Audit Charter
was updated and reviewed by the Committee and recommended to the Board for
approval, having been approved by the Board in FY 2019. The Committee continued to
assess the effectiveness, independence, resourcing and quality of Internal Audit during
the Year and a formal assessment by the Committee of the effectiveness of Internal
Audit will be performed in FY 2023. A peer review of the Internal Audit function is also
scheduled for FY 2023 and it is currently intended to carry out an independent quality
review of the Internal Audit function in FY 2024.
The Group Internal Audit Manager and
Group Risk, Assurance & Compliance
Manager, and supporting teams, will
continue to work with the Committee
to ensure the integrity and effectiveness
of the Group’s internal control procedures
and risk management systems.
To consider and recommend
to the Board the appointment,
re-appointment or removal
of the external auditors, to
recommend their remuneration
(whether audit or non-audit
fees) and approve their terms
of engagement and 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 their
independence or objectivity.
To review the effectiveness of
the Company’s whistleblowing
system, its fraud detection
procedures and the systems
and controls in place for
bribery prevention.
In advance of the FY 2022 audit, the Committee reviewed and approved the external
auditors’ audit planning presentation and assessed the appropriateness of the audit
strategy, scoping, materiality and audit risks.
The Committee approved the audit fee as part of the audit planning process. The
Committee also reviewed audit-related fees incurred in relation to the interim review and
agreed upon procedures over the Company’s Sustainability Report, assessed the extent
of such non-audit fees and the possible impact on the external auditors’ independence
and confirmed that such non-audit fees are in compliance with the FRC’s Revised Ethical
Standard 2019. For further detail related to audit and non-audit fees refer to pages 97
to 98 under the section headed “External Auditors”.
The Committee considered and updated the Group’s policy on non-audit fees, the level
of challenge provided to management and the safeguards in place to protect their
independence. Having considered all these matters, the Committee ascertained that
BDO LLP continue to be independent and approved the services.
The Committee has taken appropriate steps
to assess the independence of its auditors,
recognising the importance of audit
independence to the audit process.
The Committee has reviewed and gained
a thorough understanding of the external
auditors’ strategy and has satisfied itself
that it is robust and that the auditors
remain independent.
As part of the Committee’s oversight of risk management, an ethics and compliance risk
assessment was performed by an external consultant in FY 2022, that resulted in the
Committee reviewing the adequacy of the various policies and systems in place across the
Group that cover the whistleblowing system and the systems and controls in place for
bribery prevention.
This ethics and compliance risk assessment identified various areas for improvement that
are being addressed through the implementation of an Ethics and Compliance Programme.
This has resulted in, amongst other things, the Group’s Code of Ethical Conduct and
whistleblowing procedure being reviewed and updated and various new anti-bribery
policies and procedures being adopted during the Year, with the roll-out and implementation
of such updated and amended policies to begin shortly. For more details, see pages 31 and
32 of the Sustainability Report. The independent, external whistleblowing and fraud hotline
remains in place and continues to be offered to all employees as well as other stakeholders.
In FY 2022, Petra received 43 reports
involving alleged irregularities considered
necessary to investigate, relating mostly
to fraud, involving recruitment scams,
procurement irregularities, non-compliance
of procedures, theft and corruption. The SED
Committee was provided with quarterly
overviews of these reports and investigations
into them, focusing on the most material
reports. Of the 43 reports in total under
review, 36 were resolved and closed, with
most of these found to be unsubstantiated,
and appropriate actions instituted where
warranted. Seven remain under investigation.
Further information is included in the
Sustainability Report on page 32.
Annual Report and Accounts 2022 Petra Diamonds Limited
93
Corporate Governance
Report of the Audit and Risk Committee continued
Significant issues considered by the Committee in FY 2022
The following are considered by the Committee to be the significant
issues that were considered by the Committee in respect of the
Group’s Financial Statements, based upon its interaction with both
Management and the external auditors during the Year. These issues
align with those disclosed in the Independent Auditors’ Report on
pages 139 to 145.
The Committee considered a number of key areas warranting specific
focus, in particular going concern and viability, the accounting treatment
of Williamson and the impairment of goodwill and non-current assets.
The Committee assessed that all matters were adequately covered
during the FY 2022 external audit.
SIGNIFICANT MATTERS CONSIDERED
OUR RESPONSE TO THESE MATTERS
Capital structure, tender offer to Noteholders, going concern, debt Restructuring, banking covenants and
viability statement
Notwithstanding the positive cash generated by the
Company and refinancing of the First Lien debt facilities,
the Committee continued to focus on going concern,
liquidity and covenant compliance coupled with facility
availability, taking into account the tender offer to bondholders.
Management’s base case forecasts as at the date of this
report indicate that the Group will maintain sufficient
liquidity and operate within its covenants across the period
to 31 December 2023. However, the Group’s forecasts under a
worst case combined sensitivity, shows a covenant breach of
the interest cover ratio in December 2023. While the interest
cover ratio is projected to be breached in this combined
sensitivity, both the Net Debt:EBITDA covenant and the
liquidity covenant do not show breaches, the First Lien
facility remains undrawn under the worst case sensitivity
scenario; however, if any covenant breach occurs there are
sufficient funds available to settle any amount drawn on the
First Lien debt facility.
Management forecasts to FY 2026 contained within the
viability statement indicate on a base case scenario that
there will be a part-settlement of the US$336 million loan
notes due in 2026 (the Loan Notes).
The Committee members critically reviewed the forecast cashflow and banking covenant models
presented by Management against forecast Group liquidity requirements and required covenant
ratios in relation to the new First Lien debt facility, carried out a detailed and robust review of the
sensitivity of the cashflow to a sustained decline in rough diamond prices of 10%, a sustained 10%
strengthening in the forecast South African exchange rate against the US Dollar, an increase in
operating costs and operational disruption at the South African mines.
The Committee also reviewed the assumption pertaining to the annual contribution from the sale of
Exceptional Stones. Exceptional Stones are those stones which are sold for more than US$5.0 million
each. The Committee reviewed the historical trends and based on the review considered the
reduction in revenue of US$15.0 million from Exceptional Stones to be an appropriate sensitivity.
The Committee members considered the results under the base case scenario, noting the continued
availability of the First Lien debt facility as it remained undrawn. The Committee noted the forecasts
indicate that the Company will be able to operate within covenants set out in accordance with the
revised First Lien agreements and maintain sufficient liquidity.
The Committee noted that the First Lien liquidity and covenant measurements exclude contributions
from Williamson’s trading results and only recognises cash distributions payable to the Group upon
forecasted receipt, or Petra’s funding obligations towards Williamson upon payment.
The results of the stress testing indicated that in the event of a combination of all tested scenarios,
the interest cover ratio covenant associated with the First Lien debt facility is breached in December
2023. No breach is projected on an individual stress test basis. The Committee noted that at the time
of any covenant breach in December 2023 resulting from a combination of all test scenarios, projected
cash balances exceed outstanding debt under the First Lien debt facility, and if a balance existed on
the facility the Group would be in a position to settle the outstanding facility amount prior to the
breach occurring and maintain adequate liquidity. The forecasts indicate that under the sensitivity
scenarios, the Group is not reliant on the First Lien debt facility.
Having considered the cashflow forecast, risks and sensitivity analysis, the Committee was satisfied with
Management’s forecast and judgement that the going concern basis of preparation remained appropriate.
The Committee reviewed the assumptions in the viability base case, as well as individual stress tested
scenarios, considering the expected remaining LOMs of the Cullinan, Koffiefontein and Finsch Mines,
Williamson’s cash distributions payable to the Group under the economic benefit sharing principle,
as disclosed, under the FWA, coupled with expected levels of cashflow generation available to
proceed with the tender offer to Noteholders and the settlement of the Loan Notes. The Committee
reviewed the stretched downside scenario, which incorporates a combination of production disruptions,
price and foreign exchange stressors, noting that liquidity is projected to be tight limiting capital
repayment of the existing Loan Notes in March 2026. In such a downside scenario, given the Group’s
positive cashflow generation during FY2022, improved trading results and the current tender offer,
the Noteholders at the time are anticipated to view a refinancing of the notes in a favourable manner,
subject to the terms and conditions of such a refinance. Should this not be the case, the Company
may resort to an equity raise or asset sales should a refinancing be unsuccessful. A successful equity
raise would be dependent upon feasibility studies that support accessing the deeper levels of the
orebodies at both the Cullinan and Finsch Mines and extending the LOMs beyond 2030.
Having considered the assumptions and projections of the Group’s viability for the four-year period
to FY 2026 and the possibility of an equity raise in the future, the Committee was satisfied that it
has a reasonable expectation that the Group will be able to continue to operate and meet its
liabilities as they fall due over the review period.
The Committee also considered the impact of the sales results for the first tender of FY 2023 and
the tender offer in relation to the Company’s Second Lien Notes (which has resulted in a reduction
of gross debt of at least US$ 144 million) in forming its judgement around going concern and viability.
The Committee assessed the disclosures in the FY 2022 Annual Report and Financial Statements
in respect of going concern, viability and covenant compliance and concluded that they were
appropriate. Refer to note 1.1 on pages 151 to 152 for further details.
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Supplementary Information
SIGNIFICANT MATTERS CONSIDERED
OUR RESPONSE TO THESE MATTERS
Carrying value of mining assets
The carrying values of the mining assets at all of the operations
were key focus areas for the Committee in FY 2022 given the
recovery in the diamond market and its sustainability, the
current global economic environment and volatility in the
ZAR/US Dollar exchange rate.
The current market conditions in the global rough diamond market, as well as volatility of and
variability in product mix are all factors impacting the rough diamond prices achieved by Petra
during the Year. These factors and the impact of rising inflation concerns leading up to Year end,
were all key indicators to be considered by the Committee in assessing the carrying value of the
mining assets.
At Koffiefontein, impairment indicators were identified and
an impairment charge of US$0.3 million was recognised.
No impairment indicators were identified at the Cullinan and
Finsch Mines and no reversal of previous impairments were
deemed appropriate.
The Committee critically reviewed the key assumptions and parameters (diamond price forecasts
versus historical pricing trends, foreign exchange rates against current and forward rates, and the
basis for production, cost forecasts and the determination of the discount rate) in the LOM plans
for the Cullinan, Finsch, Koffiefontein and Williamson Mines that supported the impairment tests
performed by Management.
An impairment reversal of US$21.4 million relating to
Williamson previously recognised under IFRS 5 was
recognised and is discussed below.
The impairment tests include significant estimates and
judgements and therefore represented a key focus for the
Committee, as covered in note 7 on pages 157 to 160.
The Committee also noted Management’s assumption for the Cullinan Mine to increase the annual
contribution from Exceptional Stones to revenue from US$25.0 million to US$35.0 million. The Committee
considered the average annual contribution from Exceptional Stones during the previous 3 year, 5 year
and 13 year periods and concurred with Management’s assumption.
In addition, the Committee reviewed, for all the operations, the sensitivity analysis performed by
Management on key parameters of potential impairments or impairment reversals under various
scenarios. The Committee has also reviewed the assumptions around pricing, the inflation increase
percentage applied in the short-term and the assumptions that inflation rates will normalise over
the longer-term. Analyst reports, media sources and public statements from other diamond
companies were also critical to the Committee’s review of the impairment models.
The changes to the underlying operational plans, costs and capital expenditure assumptions did not
materially change the valuation of these assets compared to earlier reviews of this nature and thus
did not indicate any impairment on a standalone basis. The revised Koffiefontein mining plan with
reduced capex resulting in a shorter remaining LOM assumption is still appropriate. Koffiefontein
operational assets’ carrying values were partially impaired to reflect the latest assessment of their
recoverable value.
The Committee further reviewed the relevant disclosure in the Financial Statements to ensure
compliance with reporting standards.
Williamson accounting treatment and impairment reversal considerations
The carrying values of the mining assets at Williamson
and the accounting treatment was a key focus area for the
Committee in FY 2022 on the back of the signing of an MoU
with Caspian Limited.
Williamson was reconsolidated into the results of the Group
as it no longer met the criteria as an asset held for sale under
IFRS 5 as a result of the MoU with Caspian and the Group
retaining control of Williamson.
At Williamson, a Group level impairment charge relating
to Williamson, previously recognised under IFRS 5, of
US$21.4 million was reversed as Williamson is no longer
considered an asset held for sale as Williamson met the
control criteria under IFRS 10.
The impairment tests include significant estimates and
judgements and therefore represented a key focus for the
Committee, as covered in note 34 on pages 201 to 202.
Given the signing of the MoU with Caspian, the Committee critically reviewed the key criteria
required under IFRS 5 to consider if Williamson still met the criteria to be classified as an asset held
for sale. The Committee also critically reviewed the key control criteria required under IFRS 10 for
Williamson to be reconsolidated into the Group results. For Williamson to meet the IFRS 10 control
criteria, all of the following criteria have been met: Management must have power over the investee;
exposure, or rights, to variable returns from its involvement with the investee; and the ability to use
its power over the investee to affect the amount of the investor’s returns.
The Committee reviewed the terms and conditions within the MoU, noting that the Group will retain
control of the WDL board and its intermediate holding company through the majority appointment
of directors thus controlling the strategy and decisions of WDL. The Committee was satisfied that
Williamson met the criteria under IFRS 10. The Committee also reviewed the assumptions around the
impairment reversal in respect of the Williamson assets. Under IFRS 10, the Group is required to
assess the carrying values and the recoverable amount (fair value less costs to sell) under IAS 36
Impairment of assets. The Committee reviewed the carrying value of the Williamson assets and
challenged Management’s assumptions and judgement around the fair value used to calculate the
write down. The Committee also considered the current status of the MoU conditions precedent and
the latest LOM plan.
Based on its enquiries and assessment the Committee was of the opinion that the Williamson
operation met the criteria under IFRS 10 to be reconsolidated into the results of the Group and that
the determination of the recoverable amount was appropriate. The Committee further reviewed the
relevant disclosure in the Financial Statements to ensure compliance with reporting standards.
Annual Report and Accounts 2022 Petra Diamonds Limited
95
Corporate Governance
Report of the Audit and Risk Committee continued
Significant issues considered by the Committee in FY 2022 continued
SIGNIFICANT MATTERS CONSIDERED
OUR RESPONSE TO THESE MATTERS
Tanzanian legislative environment
At Williamson, ongoing risks arising from legislative changes
and political uncertainties, alongside the remaining uncertainty
around the recovery of VAT receivables and the blocked
diamond parcel (due for export in FY 2018) continued to
represent a significant area of focus for the Committee
in FY 2022.
Grievances at Williamson
Further to the settlement agreement entered into between
Petra and Leigh Day in May 2021, Petra is establishing an
Independent Grievance Mechanism (IGM) to address
historical allegations of human rights abuses at Williamson
and while the IGM is being finalised, a mechanism has been
set up to enable community members to register alleged
historical human rights grievances. A significant amount
of grievances have been registered to date and so this has
required the Committee to consider the financial impact
of the risks associated with such grievances and whether
the raising of a provision is appropriate.
The Committee reviewed the FWA, updates to legislative changes, reviewed associated commentary
from legal bodies and discussed with Management and the Company’s legal counsel the potential
impact of the legislative changes on the Williamson LOM plan and impairment test. Consideration
of the MoU with Caspian Limited was also taken into account.
During FY 2018, an investigation into the Tanzanian diamond sector by a parliamentary committee in
Tanzania was undertaken to determine if diamond royalty payments were being understated. In
connection with this, Petra announced on 11 September 2017 that a parcel of diamonds (71,654.45
carats) from the Williamson mine had been blocked for export to Petra’s marketing office in Antwerp
(the Blocked Parcel).
The assessment of the recoverability of the Blocked Parcel required significant judgement. In making
such a judgement, the Committee considered the Group’s ongoing discussions with the Government
of Tanzania, verbal confirmation that the Government of Tanzania still holds the diamond parcel in
the course of the ongoing discussions held with the Government of Tanzania, an assessment of the
internal process used for the sale and export of diamonds confirming such process is in full compliance
with legislation in Tanzania and the Kimberley Process, and legal advice received in prior periods
from the Group’s external in-country attorneys which supports the Group’s position.
The Committee also received confirmation that all subsequent parcels of diamonds have been
exported from Tanzania for eventual sale at the Company’s marketing office in Antwerp. The FWA
refers to the Blocked Parcel as the “Government Diamond Parcel” and states that the proceeds from
the sale of the Blocked Parcel will flow to Williamson. While a resolution has not yet been reached
with regards to the sale mechanism of the Blocked Parcel based on the above judgements and
assessment thereof, the Committee agrees with Management’s assessment that the Blocked Parcel
will be released by Government of Tanzania and will be available for future sale.
The Committee reviewed the VAT legislation amendment which now allows for VAT input credit to be
claimed on the export of raw materials. The amendment became effective on 17 June 2020. The Committee
considered the impact of this legislative change on the recovery of VAT receivables pre-July 2017 and
VAT receivables post 1 July 2020. Further consideration was undertaken by the Committee of Management’s
assessment that the pre-July 2017 VAT is legally valid and remains recoverable by reviewing the historical
in-country legal advice and confirming that no change to the legal opinion was implemented. The
Committee also considered relevant wording in the FWA which states that upon satisfaction of the
conditions precedent, Government of Tanzania shall pay Williamson the VAT amounts outstanding for
the pre-July 2017 period, and if such amounts are not paid then they shall be offset against Government
of Tanzania imposed charges until they are discharged. The Committee also noted that a total of
US$26.9 million in VAT relating to the July 2017-June 2020 period was written off during FY 2022,
although there was no income statement impact given this amount was fully provided for in prior
periods. No additional refunds relating to the Pre July 2017 and post June 2020 were received
during the Year.
The Committee considered Management’s discounting provision based on Management’s analysis
of the expected timing of receipts and suggested risk adjusted discount rate.
Additionally, the terms contained in the FWA, and ongoing discussions with Government of Tanzania
were reviewed by the Committee.
The Committee reviewed the relevant disclosure in the Financial Statements to ensure compliance
with reporting standards and the provision of US$6.0 million (FY 2021: US$28.8 million) is appropriately
disclosed under non-current assets in the Group’s balance sheet at Year end.
The Committee noted the number of grievances that had been registered with the IGM and noted that
as the IGM is not yet operational, the IGM is unable to start investigating these grievances and it is
therefore too early to evaluate the merits of these grievances.
The Committee reviewed management’s assumptions of not recognising a provision under IAS 37
(Provisions, contingent liabilities and contingent assets) at Year end for the registered grievances.
In order for a provision to be recognised, there must be a present obligation from a past event, the
outflow of economic benefits to satisfy the obligation must be more than 50% probable and the
amount of the economic benefits required to satisfy the obligation must be reliably estimated.
The Committee considered Management’s approach, based on the information presented, to be
appropriate and confirmed that a provision for the additional claims was not appropriate due to it
not being possible to investigate the grievances until the IGM was operational, thus the requirements
under IAS 37 were not met given the outflow of economic benefits was not probable and could not
be reliably estimated. The Committee also confirmed that the disclosure in the Annual Report for
compliance with reporting standards had been reviewed and considered appropriate.
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Financial Statements
Supplementary Information
SIGNIFICANT MATTERS CONSIDERED
OUR RESPONSE TO THESE MATTERS
Accounting treatment of Koffiefontein
During the Year the Board approved a plan to commence
a sales process for Koffiefontein, and an Information
Memorandum was distributed to potential bidders. With the
commencement of the sales process, the Committee had to
assess the requirements under IFRS 5 as to whether Koffiefontein
should be treated as an asset held for sale and to consider if
the accounting treatment of Koffiefontein at Year end
was appropriate.
The Committee critically reviewed the key criteria required under IFRS 5 to consider if Williamson still
met the criteria to classify as an asset held for sale.
For Koffiefontein to meet the IFRS 5 criteria, all of the following criteria have to have been met:
Management must have committed to a plan to sell; the operation must be available for sale; an active
search for a buyer is in place; a transaction is highly probably within 12 months of classifying the asset
as held for sale.
The Committee considered whether there was an active plan to sell Koffiefontein and locate a buyer,
whether the operation was immediately available for sale and the timing of any potential sale,
including whether a sale was likely within a 12 month period.
Whilst a sales process had commenced during the Year, the Committee noted that the sales process
was in the early stages and the non-binding bids from potential bidders were only received during July
2022 (post Year end). Following discussions with Management, the Committee considered that at Year
end there was significant uncertainty whether a successful sales transaction would be entered into and
should a successful bidder not be found, Petra would continue to mine Koffiefontein responsibly while
evaluating its other options.
The Committee agreed with Management’s assessment that not all the requirements under IFRS 5
were met as the timings of any potential sale were uncertain and as at the Year end, Board had yet to
approve any sale. Therefore it was concluded that Koffiefontein was not to be classified in the FY 2022
Annual Report as an asset held for sale. The accounting treatment for Koffiefontein in the Group
accounts will be as a continuing operation.
The Committee considered Management’s approach based on the information presented, to be
appropriate and reviewed the disclosure in the FY 2022 Annual Report and Accounts for compliance
with reporting standards.
It is also noted that the sales process that Petra announced during the Year has been unsuccessful in
identifying a potential buyer and so Petra is now evaluating its other options and continues to operate
the mine responsibly.
Each of these areas, also represented key audit matters or otherwise
areas of audit focus for BDO LLP and, accordingly, the Committee was
provided with detailed written and oral presentations by the audit
team on each of these matters. On the basis of their work, BDO LLP
reported to the Committee no inconsistencies or misstatements that
were material in the context of the Financial Statements as a whole.
External auditors
During the Year, the Committee fully considered the effectiveness,
objectivity, skills, capacity and independence of BDO LLP considering
all current ethical guidelines, and was satisfied that all these criteria
were met. The auditors’ fees were approved as part of this process.
The effectiveness of the external auditors was reviewed, giving
consideration to recent FRC guidance on assessing audit quality. The
Committee places considerable importance on the following attributes:
African mining sector experience (given the specialised nature of the
industry), service levels, audit quality, sound auditor judgement, the
willingness and ability to challenge Management and provision of
value for money.
In forming its assessment of the effectiveness of the audit and prior
to the audit, the Committee considered the FRC’s Audit Quality Review
report on BDO LLP, received formal presentations regarding the proposed
audit strategy, met separately with the Audit Partner without members
of management present and the Chair met separately with the Audit
Partner to discuss the audit strategy in detail, with the Chair reporting
back to the Committee after doing so. These forums enabled the
Committee to assess the extent to which the audit strategy was
considered to be appropriate for the Group’s activities and addressed
the risks the business faces, including factors such as: independence,
materiality, the auditors’ risk assessment versus the Committee’s own
risk assessment, the extent of the Group auditors’ participation in the
subsidiary component audits and the planned audit procedures to
mitigate risks.
Following the audit, BDO LLP presented their findings to the Committee,
met separately with the Committee without members of management
present and met separately with the Committee Chair to discuss key
audit judgements and estimates, with the Chair reporting back to the
Committee after doing so. This provided an opportunity to assess the
audit work performed, understand how Management’s assessments
had been challenged and assess the quality of conclusions drawn.
The Committee also made enquiries of Senior Management to obtain its
feedback on the audit process and considered this feedback in its
assessment. Each of the key attributes for audit effectiveness was
considered to be appropriately met for FY 2022 by the Group’s auditors.
Auditors’ remuneration
US$ million
Audit services1
Audit-related assurance
services2
Non-audit related services3
Total
FY 2022
FY 2021
0.9
0.1
—
1.0
1.0
0.1
0.4
1.5
1. Audit services are in respect of audit fees for the Group.
2. Audit-related services are in respect of the interim review of US$0.1 million (FY 2021: US$0.1
million) and specific agreed upon procedures in relation to the Sustainability Report, under the
International Standard on Related Services 4400 as issued by the International Auditing and
Assurances Standards Board, of US$5.0k (FY 2021: US$5.0k).
3. Non-audit related services were US$nil (FY 2021: US$0.4 million relating to the Restructuring).
The Committee requires that any non-audit services to be performed
by BDO LLP are formally approved by the Committee. Audit-related
services encompass actions necessary to perform an audit, including
areas such as: internal control testing procedures; providing comfort
letters to Management and/or underwriters; and performing regulatory
audits. BDO LLP provided audit-related services in the Year in relation
to the interim review and specific agreed upon procedures on the
Company’s Sustainability Report.
Annual Report and Accounts 2022 Petra Diamonds Limited
97
Corporate Governance
Report of the Audit and Risk Committee continued
External auditors continued
The provision of any non-audit service requires Committee pre-approval
and is subject to careful consideration, focused on the extent to which
provision of such non-audit service may impact the independence or
perceived independence of the auditors. The auditors provided details
of their assessment of the independence considerations, as well as
measures available to guard against independence threats and to
safeguard the audit independence. There were no non-audit services
provided by BDO LLP during the Year.
Internal controls (including the system of internal
financial controls) and risk management
The Board, with assistance from the Committee, is responsible for the
Group’s system of internal control and for reviewing its effectiveness.
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, at least
annually, including financial, operational and risk management.
This review is supported by the work undertaken by the Internal
Audit and Risk Management functions, as outlined below.
The Group’s Internal Audit function
The Group’s Internal Audit function is staffed by the Group’s Internal
Audit Manager, supported by two Senior Internal Audit Managers.
The Group Internal Audit Manager reports directly to the Chair of
the Committee. For FY 2022, the Group’s Internal Audit function carried
out its Internal Audit Plan which included audits in relation to the
following areas:
Š The Group’s Enterprise Risk Management systems, processes
and procedures
Š Monitoring of health and wellness across the Group’s employees
Š Local economic development projects at Koffiefontein the Group’s
attraction, recruitment and retention of critical skills
Š The Group’s employee training and development policies and plans
Š Compliance with Social and Labour Plan requirements at the Cullinan,
Finsch and Koffiefontein Mines
Š Policies, standards, procedures and processes in relation to slimes
dams at the Cullinan, Finsch and Koffiefontein Mines
Š Risks and processes relating to geotechnical critical infrastructure
at the Cullinan, Finsch and Koffiefontein Mines
Š Supply chain and procurement processes and procedures at the
Cullinan and Finsch Mines, including in relation to payment systems
and contractor management
Š Systems, policies and procedures relating to payroll and overtime
at the Cullinan, Finsch and Koffiefontein Mines
The FY 2023 Internal Audit Plan was presented and approved by the
Committee during September 2022.
The Group’s Risk Management function
During the Year, the Risk, Assurance & Compliance function, which has
been strengthened by the appointment of a new Group Risk, Assurance
& Compliance Manager, completed a comprehensive review of the
Company’s Enterprise and Risk Management and Combined Assurance
frameworks that resulted in a number of improvements being identified
which are primarily focused on simplifying risk management processes
at Petra.
The Company also performed an ethics and compliance risk assessment
which also identified a number of improvements which are primarily
focused on strengthening the Company’s anti-bribery policies and
procedures. The improvements from the risk management review are
in the process of being implemented as part of a risk improvement
project and the improvements from the ethics and compliance risk
assessment are in the process of being implemented as part of an
Ethics & Compliance programme, with further details of both set out
on page 65.
The risk review process in FY 2022 was modified as part of this risk
improvement project described above and comprised an enterprise-
wide, ‘top-down’, ‘bottom-up’ and ‘cross-functional’ approach and
aggregation process leading ultimately to the identification of the
Group’s principal risks outlined below on pages 101 to 111. Petra’s risk
owners, Management and the Exco, together with the Risk, Assurance
& Compliance function, reviewed and updated the Group’s principal
risks with reference to the Group’s internal risk registers regularly in
FY 2022 and these principal risks were then reported to and reviewed
by the Committee on a quarterly basis with an in depth analysis of the
principal risks for FY 2022 taking place shortly after Year end. Note
that this revised risk review process has led to the identification of
an additional five principal risks, being: Safety, Environment, Climate
Change, Supply Chain Governance and Capital Projects, further details
of which are set out below on pages 108 to 111.
As explained on page 65, the risk improvement project currently being
undertaken by the Company directly impacts the Group’s residual risk
assessments and how the Group’s risks are classified. As a result, in order
to conduct a formal risk appetite review for approval by the Committee
and the Board, the Company needs to have first implemented its
improved risk management processes. It is currently anticipated that
this risk appetite review will be conducted by the Audit & Risk
Committee and the Board in Q3 FY 2023.
More details on the Company’s approach to risk management can be
found on pages 65 to 70.
System of internal control
The Committee regularly reviews the adequacy and effectiveness of
the Group’s internal control procedures and risk management systems
through regular reports from the Group’s Internal Audit and Risk,
Assurance & Compliance teams and through consideration of the
external auditors’ Audit and Risk Committee reports and face-to-face
discussions between the Audit Partner and the Chair of the Committee
and Committee members, as well as, on occasion, ad hoc reports from
external consultants such as in relation to the ethics and compliance
risk assessment that was carried out at the end of FY 2022.
For FY 2022, the Group Internal Audit Manager and the Committee
remained satisfied that no material weaknesses in internal control
systems were identified. Whilst being satisfied that controls and risk
management remain appropriate for the Group’s activities, the
Committee continues to assess the effectiveness and adequacy of the
system of internal control, risk management procedures, Internal Audit
resourcing and strategy to ensure that its practices develop and remain
appropriate in line with internal audit standards. When internal control
reviews identified necessary or beneficial improvements, appropriate
steps have been taken to ensure the control environment is effective.
This includes systems to monitor the implementation by management
of recommended remedial actions and follow-up audits.
98
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Viability Statement
The UK Corporate Governance Code requires that the Directors assess
the viability of the Group over an appropriate period of time selected
by them. The Board has concluded that currently the most relevant
time period for this assessment is the four-year period ending June
2026, reflecting the March 2026 maturity date of the Group’s Senior
Secured Second Lien Notes (the 2L Notes), the peak capex years of
the recently announced expansion projects at the Cullinan and Finsch
Mines and the current mine plan at the Koffiefontein Mine leading to
rehabilitation and closure (during FY 2026), as well as the potential
impact of the principal risks that could affect the viability of the
Group. Last year, the Board extended the assessment period from
three to five years following the successful Restructuring during the
Year. For FY 2022, the assessment period is maintained to June 2026,
with a view to returning to performing viability assessments over the
standard three years. This assessment is carried out annually before
the approval of the annual Financial Statements and informed by
continuous business planning processes conducted throughout
the Year.
The review of the Group’s viability is led by the Executive Directors
and involves all relevant functions including operations, sales and
marketing, finance, treasury and risk. The Board actively participates
in the annual review process by means of structured Board meetings.
As part of this review, the Board considered detailed forecasts in
respect of liquidity and the covenants related to the Group’s banking
facilities, restructured 2L Notes and their maturity date, and the
principal risks of the Group.
Capital structure
During the Year, the South African banking facilities held with the
Group’s previous consortium of South African lenders were settled
and cancelled, comprising the Revolving Credit Facility (RCF) of
ZAR404.6 million (US$24.9 million) (capital plus interest) and the term
loan of ZAR893.2 million (US$54.9 million) (capital plus interest). The
Group entered into a new ZAR1 billion senior RCF in June 2022. The
Group will benefit from reduced interest rates compared to the
previous facilities coupled with more appropriate leverage-based
covenants (net debt:EBITDA, interest cover ratio and minimum
liquidity). This new facility has a longer tenure, with the facility
expiring on 7 January 2026. As at 30 June 2022, the RCF remains
undrawn, with the Group having access to the full ZAR1 billion
(US$61.5 million).
The 2L Notes (US$336.7 million maturing in March 2026) continued to
accrue Payment In Kind (PIK) interest and will continue to do so until
8 March 2023, after which cash interest will start to accrue, with the
first cash payment due in June 2023.
Post Year end, Petra launched a tender offer to bondholders to
purchase US$150 million of the 2L Notes in line with our stated intent
to further optimise our capital structure through a reduction of gross
debt. As at the date of this report, the Company has, through this
tender offer, reduced gross debt by US$144 million and has extended
the tender offer to reduce its gross debt further by up to US$29
million. This transaction will see Petra saving at least US$14 million
(and up to US$17 million) per annum in interest expenses, while we
remain confident that we will continue to fund our ongoing capital
programmes from existing and internally generated cash resources.
Impact of COVID-19
Petra’s COVID-19 measures helped it avoid interruptions to its day-to-day
operational/business activities during the Year. During FY 2022,
we successfully reverted back to hosting all of our tenders for our
South African goods in South Africa, while the Williamson goods
continue to be auctioned in Belgium (as per our normal tender
process for Williamson goods).
Robust rough diamond market
The Year witnessed a robust price recovery across all our product
offerings, with diamond prices strengthening over FY 2022, with
a 41.5% increase on a like-for-like basis compared to the preceding
12-month period.
The diamond price recovery was aided by three major tailwinds
experienced during the Year: continued demand recovery for rough
diamonds; a structural supply side shortage of rough diamonds; and
sanctions placed on Russian diamonds likely created some upward
price pressure on account of further perceived supply shortages,
as well as non-Russian goods attracting some premium (although
difficult to quantify) amongst some buyers.
In addition, the Cullinan Mine’s run of Exceptional Stone recovery
and sales continued with a total of US$75.2 million realised in the Year.
Williamson also benefitted from the sale of a pink Exceptional Stone
at its first tender after restarting operations, yielding US$13.8 million
and significantly de-risking Williamson’s own liquidity profile.
These factors, coupled with the settlement of the previous First Lien
facilities and the Group’s tight control of capex, operating costs and
corporate overhead, resulted in solid progress towards stabilising the
Group’s balance sheet and strengthening cash reserves to the date
of this report.
Post Year end, Petra announced the results of its first rough diamond
tender for FY 2023. The tender realised a total of US$102.9 million in
revenue, due to a high proportion of high-value gem-quality single
stones particularly from the Cullinan Mine. This resulted in a 21%
increase in our average realised price against Tender 6 in FY 2022,
more than offsetting the 4.5% softening of like-for-like prices. We
have seen strong support in fancy-coloured and large white stones
while pricing of smaller stones has continued its recent upward trend.
Subdued demand in China has led to relative pricing pressure on
0.75ct up to 5ct size ranges. Although prices on a like-for-like basis
were ahead of our internal assumptions for this tender, we expect
continued volatility in pricing in the short term given the ongoing
macro-economic situation. We have, therefore, retained our diamond
pricing assumptions in our viability assessments.
Steady operations
Production at both the Cullinan Mine and Finsch was generally in
line with guidance. The Group’s overall production also benefitted
with the restart of operations at Williamson during Q1 FY 2022
following a 17-month period of care and maintenance, with Williamson
approaching steady-state operations. During the Year, the Group also
announced expansion capital projects at both the Cullinan Mine and
Finsch, which will extend their Life of Mine plans to 2031 and 2030
respectively. The expansion project at the Cullinan Mine is progressing
well, while the expansion project at Finsch is slightly behind schedule
due to delays in the delivery of long-lead items, given the global
disruption in supply chains experienced over the past six months.
Both projects, however, remain within guidance for cost and schedule,
as mitigation steps have been identified and are being implemented
to address schedule delays at Finsch.
Koffiefontein experienced operational challenges and did not achieve
its guidance metrics during the Year. Petra implemented a labour
reduction process to align the operation with a reduced tonnage
profile and the mine started on a new shift configuration with the
reduced labour structure effective 30 June 2022. As Koffiefontein
approaches the end of its mine plan, Petra has been exploring options
for a responsible exit. The sales process that Petra announced in
April 2022 has been unsuccessful in identifying a potential buyer
and so Petra is now evaluating its options while it continues to
operate the mine responsibly.
Annual Report and Accounts 2022 Petra Diamonds Limited
99
Corporate Governance
Viability Statement continued
Williamson updates
The Group announced entering into a Framework Agreement (the FWA)
with the Government of Tanzania in December 2021, which sets out
key principles on the economic benefit sharing amongst shareholders,
treatment of outstanding VAT balances, as well as agreement reached
on the blocked parcel of diamonds and settlement of historical
disputes, amongst others. The FWA should provide important fiscal
stability for the mine and its investors and is expected to become
effective during the first half of FY 2023, pending satisfaction of
certain customary conditions precedent. Also in December 2021, Petra
announced entering into a Memorandum of Understanding (MoU)
to sell 50% (less one share) of Petra’s stake in Williamson to Caspian
Limited for a purchase consideration of US$15 million. This transaction
is also expected to become effective in the first half of FY 2023 and
will see Petra’s stake in WDL reduce to 31.5% whilst retaining control.
As noted above, Williamson is now approaching steady-state operations
and is benefitting from the robust demand and price recovery for
rough diamonds. Williamson has remained cashflow positive for the
Year, aided by the recovery and sale of a US$13.8 million Exceptional
Stone. As a result, the Group has not had to fund any of the operational
activities for Williamson during the Year and does not anticipate
any such contribution in the near future. In addition, Williamson is
continuing its efforts to secure a dedicated working capital facility
of up to US$25 million from a local Tanzanian bank, while pledging
its own assets as security.
Sustainability ambitions
During the Year, the Group introduced a new Sustainability
Framework, which will inform balanced day-to-day decision making,
while supporting a long-term future for Petra. The Group is currently
identifying targets for the various elements within our Sustainability
Framework, after which execution roadmaps for these targets will
be developed. These roadmaps will then be incorporated into the
Group’s future operating plans and consequently in future
viability assessments.
Climate change, specifically, is an area of focus, with the Group
announcing its net zero ambition during the Year. Post Year end, the
Group has also finalised its 2030 emissions reduction target of 35–40%
off our 2019 baseline and is now in the process of developing an
execution roadmap for this 2030 target. Given that >90% of our
emissions are due to imported electricity (Scope 2), the Group
believes that this 2030 target will present opportunities to not only
improve on our environmental footprint, but also source cheaper and
more reliable renewable energy. Specific plans to implement this
roadmap, including capital, if any, will be included in future assessments.
Risks and stress tests
For the purpose of assessing the Group’s viability, the Board focused
its attention on the Group’s principal risks. In order to determine
those risks, the Board assessed the Group-wide principal external,
operational and strategic risks by undertaking consultations with
Senior Management.
For an overview of these risks see pages 101 to 111
Through this analysis, the Board also identified low probability, high
loss scenarios – ‘singular events’ – with the potential magnitude
to severely impact the solvency and/or liquidity of the Group. The
scenarios tested considered the Group’s revenue, underlying EBITDA,
cashflows and covenant ratios, as well as the impact on facility
availability over the four-year period, excluding repayment of the 2L
Notes (for more details on this repayment, refer below) and included:
Š A 5% decrease in forecast rough diamond prices throughout the period
to June 2026
Š A 5% strengthening in the forecast South African Rand/US Dollar
exchange rate throughout the period to June 2026
Š A 5% increase in operating costs throughout the period to June 2026
Š A 5% increase in expansion capital costs throughout the period to
June 2026
Š A US$15 million reduction in revenue contribution from Exceptional Stones
Š A production disruption scenario assuming no carats produced for
two weeks in February 2023 and February 2025 (which could be due
to extreme weather conditions or supply chain events or any other
unexpected events)
Š A combination scenario, consisting of a 5% price drop, 5% operating
costs increase and 5% strengthening of the ZAR/US$ exchange rate,
in each case throughout the period to June 2026
Under the base case as well as all the scenarios described above, the
forecasts indicate that the Company will be able to operate within
the covenants set out in the respective financing agreements while
also maintaining sufficient liquidity up to the March 2026 2L Notes
settlement date. The Group’s base case, as well as individual stress
tested scenarios, indicate that it would be able to settle the majority
of outstanding 2L Notes at maturity, with an expectation that it would
be able to raise debt finance (in the event of no other management
interventions providing the required relief) to settle the remaining
outstanding balance.
If the Group is unable to raise the necessary residual debt capital on
account of the willingness of existing 2L Noteholders and/or the
terms and conditions of such a refinance/new debt instrument, the
Group may have to resort to an equity raise or asset sales to settle its
obligations. A successful equity raise would likely be dependent upon
successful completion of feasibility studies over the next two to three
years to access the deeper levels of the orebodies at both the Cullinan
Mine and Finsch and extending their current LOMs beyond 2030.
Owing to this, the Group will identify and implement interventions
ahead of the forecast cash shortfall to satisfy its obligations of the
current bond settlement date in March 2026.
Conclusion
The Board is of the view that the longer-term fundamentals of the
diamond market remain sound and that the Group will continue to
benefit from the newly embedded Operating Model throughout the
review period.
Based on its assessment of the forecasts, principal risks/uncertainties
and mitigating actions considered available to the Group in the event
of downside scenarios, the Board confirms that it has a reasonable
expectation that the Group will be able to continue to operate and
meet its liabilities as they fall due over the review period.
100
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Risk Management
Identifying, managing and mitigating risk
Risk management is the overall responsibility of the Board at Petra, but the Board Committees, Exco and Senior Management also play important
roles in terms of the identification, management and ongoing mitigation of risks, including emerging risks, within their realm of responsibilities.
Please refer to pages 65 to 67 for further details on how Petra manages risks.
EXTERNAL RISKS
1. Rough diamond prices
Risk change in FY 2022
Lower
Strategic objectives
Continued improvement of our balance sheet health; positioning Petra to enable it to pay dividends to shareholders.
KPIs
Revenue; Adjusted EBITDA; Operational free cashflow; TSR
Responsibility
Exco
Description and impact
The Company’s financial performance is closely linked to rough diamond prices, which are influenced by numerous factors beyond the Company’s
control, including international economic conditions, world production levels and consumer trends.
Long term
Growth in the laboratory-grown diamonds (LGD) market also impacts diamond prices. The Company is closely monitoring the war in Ukraine and
sanctions on Russian companies and its impact on the global diamond market. Whilst the long-term fundamentals of the diamond market remain
positive, some volatility in rough diamond pricing may be experienced whilst macroeconomic uncertainties remain.
Low diamond prices may have a negative impact on cashflow, profitability, the overall performance of the business and the Company’s ability to meet
its financial obligations when they fall due as well as the viability of capital programmes going forward.
Mitigation
Petra undertakes a robust, market-driven tender process and aims to achieve full realisable value. The Company participates in profit sharing
agreements with the aim of realising additional value from selected diamonds.
Petra continues to maintain regular dialogue with its client base to keep abreast of diamond market demand fundamentals and to be able to react in a
timely manner to changes in rough diamond prices. The Company also continues to monitor the global diamond market through external publications
such as, among others, the Global Diamond Industry Report by Bain & Co.
Petra is a founding member of the NDC which aims to maintain and enhance consumer demand for, and confidence in, diamonds by a range of
methods, including via advertising campaigns across multiple digital channels. The Company continues to monitor LGD developments and its impact
on the diamond market. The diversified nature of the Group’s production profile also acts as a mitigant in that Petra produces the full spectrum of
diamond sizes and qualities, to minimise reliance on the price performance of any one diamond category.
FY 2022 risk developments and management
Despite significant global economic uncertainties resulting from the war in Ukraine, like-for-like rough diamond prices increased 41.5% for the full year
to 30 June 2022, driven in particular by record jewellery retail demand in the US. The tender in June 2022 highlighted the strength of demand across
Petra’s product mix, both in white and coloured gem-quality stones, with some increased demand for smaller diamonds. This growth in demand is
driven by mid-stream inventory restocking and continued strong jewellery retail sales associated with a delayed wedding boom and a growing trend
in diamonds being given as meaningful gifts post COVID-19.
Lower global production is also resulting in a more positive outlook for the diamond market. While the diamond market remained strong,
further macroeconomic uncertainties caused by rising interest rates and inflation are potential dampeners of demand. The sale of a high
number of Exceptional Stones recovered from Cullinan Mine and one from Williamson contributed a record US$89.1 million compared to
US$62.0 million in FY 2021; this compares to an average contribution from Exceptional Stones from the Cullinan Mine of US$50.7 million and
US$39.2 million over 3 and 5 years, respectively.
During Q4 FY 2022, polished stones cut from the 18.30ct Type II blue partnership stone were sold, with the most notable stone being a 7.09ct
radiant cut stone which sold for US$5.8 million. Petra sold the 18.30ct rough diamond in August 2021 into a partnership for US$3.5 million,
while retaining a 50% share of profits. The final polished stones realised a net profit to the partnership of US$2.13 million, contributing
additional revenue of US$1.065 million for Petra’s 50% profit share recognised in FY 2022. Post Year end and as reported in September 2022,
Petra achieved strong sales in the first tender of FY 2023.
Petra continues to work with the NDC in its activities to support rough diamond demand.
Read more
Our Markets pages 22 to 29
2. Currency
Risk change in FY 2022
No change
Strategic objectives
Continued improvement of our balance sheet health
KPIs
Revenue; Adjusted EBITDA; Operational free cashflow; TSR
Responsibility
Exco
Long term
Annual Report and Accounts 2022 Petra Diamonds Limited
101
Corporate Governance
Risk Management continued
Identifying, managing and mitigating risk continued
EXTERNAL RISKS CONTINUED
2. Currency continued
Description and impact
Currency fluctuations may have a significant impact on the Group’s performance.
Long term
With Petra’s operations mainly in South Africa, but diamond sales based in US Dollars, the volatility and movement in the Rand can have a significant
impact on the Group.
Mitigation
The Group continually monitors the movement of the Rand against the US 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 indicates it is appropriate. Such contracts are generally short
term in nature.
The Company looks to actively manage its exposure to the ZAR:USD rate in order to safeguard Group cashflow against a volatile currency outlook.
FY 2022 risk developments and management
The ZAR/USD exchange rate saw significant volatility in FY 2022, with the Rand averaging ZAR15.22/USD1 for the 12-month period to 30 June 2022
and closing the Year at ZAR16.27/USD1, compared to ZAR14.27/USD1 on 30 June 2021.
The initial impact of the war in Ukraine benefitted the ZAR, with South Africa and Brazil being seen as safe havens by developed economies for Foreign
Direct Investment.
Although SA’s inflation is currently lower than the US and most European countries, over the longer term the Rand is expected to continue to weaken
as long as SA’s inflation rate remains significantly higher than that of its main trading partners which is further compounded by the international
economic environment.
To mitigate volatility, the Company continued with its approach to focus on short-dated hedge positions. Management was mandated by the Board
to cover up to 50% of expected 12-month forward looking USD sales proceeds.
Read more
Financial Review pages 61 to 64
Note 8 to the Financial Statements page 160
Long term
3. Country and political
Risk change in FY 2022
Lower
Strategic objectives
Continued improvement of our balance sheet health
KPIs
Profitability; Adjusted EBITDA; TSR
Responsibility
Exco; HSE Committee; SED Committee
Description and impact
Petra’s mining operations are located in South Africa and Tanzania. Emerging market economies are generally subject to greater risks, including legal,
regulatory, tax, economic and political risks, and these risks are potentially subject to rapid change.
Mitigation
The Petra team is highly experienced at operating in Africa. Petra routinely monitors political, regulatory and legal developments in its countries of
operation at both regional and local level and through continuous engagement with the local authorities, including in South Africa with the Minerals
Council acting on behalf of the mining sector.
FY 2022 risk developments and management
Whilst the risk of political instability remains in South Africa, as evidenced by the civil unrest experienced at the beginning of the Year, the outcomes
of the ruling party’s policy conference were positive and markets were encouraged by party support for the President’s proposals which bodes well
for his re-election in December 2022. It is hoped that the adoption of market-friendly policies benefits the domestic currency and creates some stability.
Regulatory uncertainty has reduced in South Africa due to the publication of the 2018 Mining Charter, although certain aspects of the new Mining
Charter were subject to judicial review. In FY 2022, the High Court of South Africa handed down its judgement on this judicial review, finding in favour
of the Minerals Council SA. Whilst the DMRE have decided not to appeal this judgement, they have indicated that they will seek to introduce a
legislative amendment of the Mineral and Petroleum Resources Development Act to Parliament which would have the effect of reversing certain
aspects of the judicial review, in particular the legal status of the Mining Charter. The timing and outcome for such a legislative amendment is unclear
and if pursued is likely to take years to implement.
Since the appointment of the new Tanzanian President in 2021, pledges to encourage economic growth and promote foreign investment in Tanzania
have been well received by the market.
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Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Short to medium term
4. COVID-19 pandemic (operational impact)
Risk change in FY 2022
Lower
Strategic objectives
Safe and reliable production from our operations with continuous business improvement
KPIs
Rough diamond production; Revenue; Adjusted EBITDA; Operational free cashflow
Responsibility
Exco; HSE Committee; SED Committee
Description and impact
The COVID-19 pandemic continued throughout FY 2022 with new variants such as Omicron surfacing during the Year. The impact of COVID-19
infections on our operations was minimal. The mass roll-out of vaccinations has played an important role in reducing the rate of serious illness
and fatalities caused by the disease.
Mitigation
Petra supported the Governments of South Africa and Tanzania by installing vaccination stations and campaigns at each operation which has resulted
in 64% of Petra’s South African workforce being fully or partially vaccinated and 16% of the Williamson workforce being vaccinated.
During the Year, Petra ran campaigns at each operation and various employee engagement campaigns to encourage vaccination uptake.
Petra also continued to implement comprehensive systems and strategies to help prevent and/or contain the spread of the virus at our operations
in South Africa and Tanzania.
Areas of focus included awareness and training, identification of those employees with underlying health conditions who may be at greater risk and
whilst restrictions applied, wearing of masks, regular sanitising and screening, testing, ensuring adequate ventilation and the handling of suspected
positive cases identified.
Petra’s mitigation activities extend beyond its workforce to help support its local communities in a number of ways. Petra has also adopted a flexible
sales approach in order to bring its goods to market at the optimal time and location based on prevailing market conditions.
FY 2022 risk developments and management
COVID-19 restrictions in South Africa and Tanzania have been gradually lifted during the Year due to the decreasing numbers of individuals contracting
the virus which led, in South Africa, to the termination of national state of emergency.
The emphasis then shifted to continuing the promotion of the administration of vaccinations, including booster shots as this remains the best
protection against COVID-19.
Initially, Petra maintained a flexible sales approach during the Year to maximise client attendance at its sales by continuing to hold rough diamond
tenders for the South African goods in Antwerp (having fulfilled its regulatory obligation to offer a portion of goods for sale to the State Diamond
Trader and local beneficiation groups in South Africa), rather than in Johannesburg. However, as travel restrictions have been lifted, rough diamond
tenders for the South African goods have resumed in Johannesburg.
Read more
Operational Review pages 46 to 57
Employee health and wellness page 47 to 50 of the Sustainability Report
STRATEGIC RISKS
5. Group Liquidity
Risk change in FY 2022
Lower
Strategic objectives
Continued improvement of our balance sheet health; assessment of options to refinance Second Lien Notes to more favourable terms and tenure
KPIs
Rough diamond production; Adjusted EBITDA; Operational capex
Responsibility
Exco, Investment Committee
Description and impact
Whilst the Restructuring that was completed in FY 2021 significantly reduced Petra’s third party debt, the Group’s gross debt position as at 30 June 2022
was US$366.2 million. Petra is subject to interest payments on this debt and a set of covenants in relation to both its first lien and second lien debt.
Failure by Petra to deliver on its business plan could have a material negative impact on cashflow and Petra’s ability to further reduce its debt and
to continue strengthening its balance sheet, which may affect its ability to meet its financial obligations when they fall due.
Short to medium term
The Group’s strategic, self-funded capital projects at Cullinan Mine and Finsch may create additional pressure in funding working capital requirements
and meeting the Group’s capital and interest repayment commitments. In addition, significant global economic uncertainties resulting from the war
in Ukraine have resulted in a significant rise in inflation which has the potential to impact Petra’s cost base.
Whilst Management prepares detailed projections based on operational plans and sales estimates, actual cashflow results may differ from these
projections. The Group’s financial position will remain sensitive to operational performance, operating cost inflation and the diamond pricing
environment and product mix available for sale.
Annual Report and Accounts 2022 Petra Diamonds Limited
103
Corporate Governance
Risk Management continued
Identifying, managing and mitigating risk continued
STRATEGIC RISKS CONTINUED
5. Group Liquidity continued
Mitigation
The Company closely monitors and manages its liquidity risk, including regularly reviewing its covenant levels and cashflow forecasting to ensure
operational plans are adequately financed. The Group also explored options to reduce its gross debt through a tender offer to bondholders to purchase
up to US$175 million of the Senior Secured Second Lien Notes due in 2026.
Short to medium term
Petra’s enhanced Operating Model, brought about by Project 2022, provides a platform for greater stability and resilience, enabling further cash
generation to fund our capex requirements and support further deleveraging.
Available levers to manage working capital are considered and employed to manage short-term cashflow requirements. The Company also has some
flexibility in the roll-out of its future capital spend. The Company’s Investment Committee makes recommendations to the Board on capex and
investment proposals and monitors progress of major capital investments.
The Company initiated Business Re-Engineering Projects at Finsch and Koffiefontein with the aim of reducing costs. This resulted in a labour reduction
process at Koffiefontein to align the operation with the reduced tonnage profile. Separately and independent of this labour reduction process, the
Company announced a potential exit from its investment in Koffiefontein which is nearing the end of its life of mine. While this sales process has been
unsuccessful in identifying a potential buyer, Petra is now evaluating other options and will continue to operate the mine responsibly.
The Company is monitoring cost increases across the Group’s operations very closely, but Petra’s relatively low fuel consumption, disciplined cost management,
three-year labour agreements to June 2024, and exposure to a weaker South African Rand will assist the Company in better absorbing these cost pressures.
FY 2022 risk developments and management
A combination of higher diamond prices, robust production levels in line with guidance, and record proceeds from the sale of Exceptional Stones
contributed to increased revenue of US$585.2 million (FY 2021: US$406.9 million), strong free cashflow generation and a reduction in net debt
to US$40.6 million as at 30 June 2022 (US$228.2 million as at 30 June 2021), thereby significantly strengthening the balance sheet.
The Company also completed a refinancing of its First Lien debt facility which will deliver some US$5 million in savings over the next two years as
a result of more favourable terms than the previous facility. The new First Lien facility with ABSA comprises a ZAR1 billion (US$61.5 million) Revolving
Credit Facility which remains undrawn and available at 30 June 2022.
During the Year, the previous first lien facility, comprising a Revolving Credit Facility of ZAR404.6 million (US$24.9 million) and a term loan of
ZAR893.2 million (US$54.9 million) was fully settled reducing the Group’s gross debt. Post Year end, the Company launched a tender offer to bondholders
to purchase up to US$175 million of the Senior Secured Second Lien Notes due in 2026. As at the date of this Report, Petra has, through this tender
offer, reduced gross debt by US$144 million and with the extension of the tender offer, may reduce its gross debt further by up to US$29 million.
This transaction ill see Petra saving at least US$ 14 million (and up to US$ 17 million) per annum in interest expenses. As per our stated strategy,
Petra will continue to consider opportunities to further optimise its debt structure.
The Group’s strong balance sheet has resulted in a credit ratings upgrade by Moody’s and S&P Global to Stable and Positive, respectively.
Read more
Financial Review pages 61 to 64
Going Concern Statement page 64
6. Licence to operate: regulatory and social impact & community relations
Risk change in FY 2022
No change
Strategic objectives
Safe and reliable production from our operations with continuous business improvement; continue to mine Koffiefontein responsibly while considering
other options for the remaining short period of its mine plan
KPIs
Rough diamond production; Revenue; Adjusted EBITDA; Social spend
Responsibility
Exco; Audit and Risk Committee; SED Committee
Description and impact
In order to maintain our mining licences, Petra must comply with stringent legislation. Failure to comply with relevant legislation in our countries of
operation could lead to litigation proceedings, sanctions, delays or suspension of our mining activities.
Long term
Petra’s licence to operate is dependent on the retention and support of its employees and its continued acceptance in the communities in which it
operates. Factors influencing this risk include:
Š Historical allegations of human rights abuses relating to security operations at Williamson pertaining to illegal mining activities
Š The announcement of the potential sale of Koffiefontein that has raised community concerns and tensions regarding the Group’s ability to continue
meeting its obligations in relation to SLP projects
Š The lack of a focused and prioritised stakeholder engagement strategy addressing the social transformation agenda preventing stakeholder
expectations and transformation objectives from being met. This is exacerbated by the widening socio-economic inequalities in South Africa
following the COVID-19 pandemic
Š Non-compliance with the Group’s SLP and Mining Charter targets
Š Non-compliance with mine community development and employment equity targets and partial compliance with procurement, enterprise
development and human resource development targets
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Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Mitigation
At Williamson, the implementation of the IGM will provide a mechanism for complainants who have suffered severe human rights impacts in
connection with security operations at the mine. Various community projects are underway or being assessed, with the potential to provide
sustainable benefits to the communities located close to the mine.
The Stakeholder Engagement and Management Policy is in the process of being implemented, having been approved by the SED Committee. Social
Impact Assessments (SIA) finalised for Finsch and Koffiefontein will provide the Company with a greater insight of relevant and fit for purpose
community projects to address social imbalances.
Social and Labour Plans with Mine community Development Projects that takes into consideration the outcomes of the SIA and Integrated Development
Plans requirements. Increased focus on stakeholder engagement strategies, embracing stakeholder capitalism and responsible business practices.
FY 2022 risk developments and management
Petra continued to comply in all material aspects with relevant laws and regulations in the countries in which it operates. We strive to establish
partnerships with our employees, communities, Governments, local business forums, NGOs and educational institutions to optimise the impact of our
initiatives. The structure of our community engagement and development programmes is guided by the Company’s stakeholder engagement and
management approach. In addition to the above, each mine also considers the following when developing their engagement programmes:
Š Initial SIAs based on participatory processes prior to drafting SLPs
Š Stakeholder engagements and committee feedback
Š Internal and external grievances registered
Š Applicable legislation relating to diversity/employment equity
Š Environmental impact assessments and ongoing monitoring
Š Local community development programmes based on local communities’ needs
Š SEPs based on stakeholder mapping
Š Local municipality’s integrated development plans (IDPs)
Š Broad-based local community consultation committees and processes that include vulnerable groups
Š Worker representation bodies that provide input to our initiatives and projects
Our local operations continue to review their SEPs, to increase value-add engagements at Government and community levels. In FY 2022, local operations
conducted 451 (FY 21: 658) social engagements which included internal (employees and committees) and external (Government, communities, forums
and SMMEs) engagements. Considering the length of the potential mine lives of our operations, we focus on investing in long-term projects, which
will have a lasting positive impact and address the socio-economic needs of the communities where we operate. Our approach to social investment is
therefore developmental in nature and aimed at creating sustainability in communities beyond the life of active diamond mining and to ensure we are
adhering to our SLP commitments. Further information on the Company’s community programmes for the Year can be found on pages 33 to 34 and
88 to 92 of the Sustainability Report.
Following the Company’s May 2021 announcement on the alleged human rights breaches in Tanzania, Petra has continued to progress the design and
implementation of the IGM. This has involved extensive stakeholder engagements with all levels of Government and the local community to create
awareness of the IGM process and to obtain initial feedback on how the IGM is envisaged to operate. The current target is for the IGM to become
operational by the end of this calendar year. The Company has also progressed a number of projects to provide sustainable benefits to the communities
located close to the mine. These projects are being funded by £1 million which was paid into an escrow account established by Petra. The projects
include (1) a medical services project, (2) an artisanal and small-scale mining project (at the feasibility stage), (3) an agribusiness development initiative
(at the feasibility stage), (4) improved delineation of the Williamson mine boundaries, including access to the mine lease area for the collection of
firewood and (5) an awareness initiative in respect of sexual and gender-based violence.
The risk of illegal mining at Williamson is ongoing, although the number of illegal incursions has reduced significantly during FY 2022. During FY 2022,
there was a total of 429 reported incidents of illegal incursions onto the Williamson mine lease area, with 55 illegal miners and 13 security officers
sustaining minor injuries and 161 illegal miners being apprehended. WDL is also continuing its extensive engagements with communities around the
mine to highlight the dangers of illegal mining, thereby seeking to reduce illegal incursions onto the mine lease area, with a particular focus on seeking
to reduce or eliminate the involvement of minors in illegal mining.
Furthermore, WDL continues its engagement with local authorities to actively target those individuals that are known to be providing economic
support to disaffected youth and the wider community to trespass onto the mining area. WDL is also continuing its extensive engagements with
communities around the mine to highlight the dangers of illegal mining, thereby seeking to reduce illegal incursions onto the mine lease area,
with a particular focus on seeking to reduce or eliminate the involvement of minors in illegal mining.
Furthermore, WDL continues its engagement with local authorities to actively target those individuals that are known to be providing economic
support to disaffected youth and the wider community to trespass onto the mining area.
Read more
Our response to human rights abuse allegations in Tanzania pages 33 to 34 of the Sustainability Report
Our response to human rights abuse allegations in Tanzania petradiamonds.com/our-operations/our-mines/williamson/allegations-of-human-
rights-abuses-at-the-williamson-mine/
ESG and Sustainability pages 15 to 22, 55 to 62 and 82 to 96 of the Sustainability Report
Annual Report and Accounts 2022 Petra Diamonds Limited
105
Corporate Governance
Risk Management continued
Identifying, managing and mitigating risk continued
Long term
OPERATING RISKS
7. Mining and production
Risk change in FY 2022
No change
Strategic objectives
Safe and reliable production from our operations with continuous business improvement; maintenance of operational stability of our mines; disciplined
execution of approved capital expansion projects
KPIs
Rough diamond production; Revenue; Adjusted EBITDA; Operational free cashflow; TSR; Training
Responsibility
Exco, Investment Committee
Description and impact
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, access to energy
and inclement or hazardous weather conditions.
Mitigation
Petra’s work to extend the lives of its assets is classified as resource extension and brownfields exploration, meaning that the existing knowledge of the
deposits, which have long histories of production, allows management to eliminate some of the risk associated with developing a new diamond mine.
The Group’s Management team is comprised of key personnel with a substantial and specialist knowledge of kimberlite mining and diamond recovery,
and this skills base enables the Company to manage mining and production risks, including through geotechnical modelling, planned maintenance
and regular inspections.
Whilst waste ingress issues at Finsch is being managed through the implementation of drill, blast and draw controls, ongoing monitoring and
mitigation plans are required to address these issues.
FY 2022 risk developments and management
Production for the Year increased 3% to 3,353,670 carats, in line with guidance, largely owing to the resumption of mining at Williamson. Production
for Q4 FY 2022 was down 6% to 745,790 carats largely due to lower tons treated at the Cullinan Mine following depletion of the current CC1E mining
area and a difference compared to Q4 FY 2021 in the makeup of kimberlite in the C-Cut. However, production guidance for FY 2023 to FY 2025 remains
unchanged at this stage.
When compared with FY 2021, production at the Finsch Mine stabilised in the second half of FY 2022, although ROM grade was 13% lower as a result
of waste dilution despite the implementation of controls which were continuously monitored.
The Board has also approved two major projects which are (i) the CC1E SLC at the Cullinan Mine which involves estimated capex of US$173 million and
extends the mine plan to 2031 and (ii) Lower Block 5 3 level SLC at Finsch which involves estimated capex of US$216 million and extends the mine plan
to 2030.
Read more
Operational Review pages 46 to 57
8. ROM grade and product mix volatility
Risk change in FY 2022
No change
Strategic objectives
Safe and reliable production from our operations with continuous business improvement; maintenance of operational stability of our mines; disciplined
execution of approved capital expansion projects
KPIs
Rough diamond production; Revenue; Adjusted EBITDA; Operational free cashflow; TSR
Responsibility
Exco
Description and impact
Current mining blocks at all South African operations are reaching maturity or moving towards the end of life. While the current orebody footprints are
still large enough to deliver relative consistency and product mix, increasing levels of variability in terms of ROM grade and product mix can be expected
going forwards which will be mitigated by the ramp up of the new mining blocks at the Cullinan Mine and the Finsch Mine.
Short term
Some level of variability in terms of ROM grade and product mix occurs depending on the mix of ore produced from the current mining areas at each
operation and the level of dilution experienced from waste rock ingress. It can also be impacted by the inclusion of production from surface resources
at some of the mines.
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Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Mitigation
Petra’s work to extend the lives of its assets is classified as resource extension and brownfields exploration, meaning that the existing knowledge of
the deposits, which have long histories of production, allows management to eliminate some of the risk associated with grade and product mix.
Technical teams are developing plans to address recent lower grades seen at the Cullinan and Finsch Mines.
FY 2022 risk developments and management
At CDM, the C-Cut has been established across the orebody. The closure of Tunnel 41 (T41) has had some impact on grade and product mix. Whilst the
Q4 FY 2022 ROM production at the Cullinan Mine was largely in line with the previous quarter, diamonds produced were 22% below the very strong
Q4 FY 2021. This is attributable to a lower ROM grade resulting from the higher grade CC1E not contributing to Q4 FY 2022 production and a change in
the ore make-up of the C-Cut block cave footprint as the production progresses from SW to NE due to cave maturity. Production guidance for FY 2023
to FY 2025 remains unchanged. However, recent early waste ingress on the C-Cut related to the temporary closure of T41, probable permanent closure
of some drawpoints (16 maximum) and the subsequent smaller production footprint is currently being evaluated, together with mitigation measures.
At Finsch Diamond Mine, some grade and mix volatility is expected as the current SLC nears its end of life with mining concentrated on 78L. There was
a 24% reduction in Q4 FY 2022 ROM grade against Q4 FY 2021 which is largely attributable to the significantly lower levels of ROM tons mined in Q4
FY 2021 to manage the waste ingress and improve grade.
Read more
Operational Review pages 46 to 57
Short to medium term
9. Labour relations
Risk change in FY 2022
No change
Strategic objectives
Safe and reliable production from our operations with continuous business improvement; maintenance of operational stability of our mines; disciplined
execution of approved capital expansion projects
KPIs
Rough diamond production; Staff turnover; training
Responsibility
Exco; SED Committee
Description and impact
The Group’s production, and to a lesser extent its project development activities, is dependent on a stable and productive labour workforce. The mining
labour relations environment in South Africa has been volatile over the years, but much less so specifically in the diamond sector, where there is a higher
incidence of mechanisation and skilled workers.
Mitigation
Petra remains highly focused on managing labour relations, and on maintaining open and effective communication channels with its employees
and the appropriate trade union representatives at its operations, as well as local communities.
A key part of Petra’s labour relations strategy is the IPDET, which is one of the Company’s core BEE Partners, and owns a 12% interest in each
of the South African operations.
FY 2022 risk developments and management
Stable labour relations were experienced throughout the Year. The Company announced that it had reached agreement with NUM on a new three-year
wage agreement for employees in the Paterson A and B Bands at the South African operations. The Company also concluded a three-year wage
agreement for employees on the Paterson C-Lower Band with both NUM and UASA.
Review of the Collective Bargaining Agreement (CBA) at Williamson Diamonds Limited (WDL) is ongoing with the majority union (TAMICO).
Read more
Labour relations pages 52 to 54 of the Sustainability Report
Annual Report and Accounts 2022 Petra Diamonds Limited
107
Corporate Governance
Risk Management continued
Identifying, managing and mitigating risk continued
OPERATING RISKS CONTINUED
10. Safety
Risk change in FY 2022
Lower
Strategic objectives
Safe and reliable production from our operations with continuous improvement
KPIs
LTIFR
Responsibility
Short to Medium term
Exco; HSE Committee
Description and Impact
The impact of safety-related incidents directly affects the wellbeing of Petra’s staff and given the inherent risk in any mining operations, the Group
is exposed to various safety-related risks across all its operations. Petra seeks to make its commitment to a zero harm working environment visible
throughout its operations and Petra seeks to remain vigilant, proactive and act timeously to matters that contribute to a safe working environment.
Significant safety-related incidents could cause Petra’s operations to shut down and directly impact production.
Mitigation
Petra conducts regular self-assessments on its compliance with safety laws, regulations, policies and procedures, and undertakes remedial action
where areas of non-compliance are noted. The Group’s safety policies and procedures are well established, and implemented with employees and
contractors receiving regular training and updates on safety protocols and requirements. Regular updates to these policies and procedures are
conducted as a result of gaps identified during the risk identification and mitigation processes.
Petra plays an active role in providing oversight, monitoring and reporting of safety compliance, and regularly engages external service providers
to conduct independent and objective reviews and inspections.
FY 2022 developments and management
Petra’s safety performance saw a 40% reduction in LTIs to 15 for the Year and a corresponding 50% reduction in the LTIFR for the Year. The only metric
on which Petra’s performance deteriorated was in respect of NLTIs which saw an increase of 11%, but this was against a backdrop of an increased
number of shifts worked in FY 2022 which meant that Petra’s NLTIR decreased by 7%. The Cullinan Mine in particular, had an exceptional year,
celebrating a LTI-free year on 25 April 2022.
Whilst LTIs were of low severity and mostly behavioural in nature, Petra continues to target a zero harm working environment.
In contrast to the safety improvement at the Cullinan Mine, the Finsch Mine’s safety performance remained somewhat static between FY 2021 and
2022 with a similar number of injuries. Given this performance, the Finsch Mine now accounts for the majority of injuries Group wide and will require
further attention in FY 2023.
Read more
Safety pages 42 to 46 of the Sustainability Report
Long term
11. Environment
Risk change in FY 2022
No change
Strategic objectives
Safe and reliable production from our operations with continuous improvement
KPIs
Water efficiency
Responsibility
Exco; HSE Committee
Description and Impact
The impact of our mining and processing operations have a significant impact on our environment, including local communities if not managed
appropriately. Key environmental risks identified include the following:
Š Water resources, both through inefficient use and potential contamination of natural water sources
Š Inappropriate waste management activities may cause water and soil contamination
Š Permanent changes in topography, land use and land capability due to the final disposal of mining waste on surface
Š Depletion of non-renewable sources due to inefficient consumption
Š Biodiversity loss due to the spread of invasive vegetation, as well as increasing mining footprints
Š Legacy from previous mine owners effecting perception of current management (sub-standard environmental management practices)
Š Non-compliance with rehabilitation schedules and closure commitments
Š Non-compliance with material environmental legislation
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Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Mitigation
Our mitigation initiatives pertaining to the environmental risk consist of various strategies that include:
Š Conditions attached to the Cullinan and Finsch Mines’ water use licences are under review. The Koffiefontein water use license has already been amended
Š Performance reviews, legal inspections as well as audits conducted on an ongoing basis
Š Concurrent rehabilitation taking place
Š Annual waste audits conducted at the Cullinan, Finsch and Koffiefontein Mines
Š Environmental Management Programme Reports for all operations contain management options for mining waste disposal
Š The Finsch Mine has an updated tailings deposition plan with an update planned for the Cullinan Mine in FY 2023
Š The setting of water efficiency KPIs for each of the Cullinan, Finsch and Koffiefontein Mines, all of which were achieved in FY 2022
Š The Cullinan, Koffiefontein and Finsch Mines have annual schedules to remove invasive plants while Williamson removes invasive plants as part
of their concurrent rehabilitation plan
Š Implementation of Water Conservation and Water Demand Management Plans at all local mines
FY 2022 developments and management
Petra uses external water resources for diamond processing. This removes water that may be used by agriculture or the community. In the processing
circuit, minerals are liberated from the host rock that has the potential to contaminate the water impacting on the downstream ecosystem.
Depending on the specific operation, as each kimberlite has its own unique signature, the minerals that are liberated are salt-forming e.g. fluoride,
sodium and nitrate. All see page and effluent from Petra’s operations has a pH of 7 or above, thus it is not acid forming. Petra does not cause acid mine
drainage.
The implementation of Waste Management Procedures and the setting of annual objectives to improve waste management practices has resulted in
higher waste recycling figures and lowered the risk caused by landfilling. 25% more (per volume) waste was recycled in FY 2022 than in the previous
year. The change in topography and land capability is an expected impact of mining. The implementation of annual rehabilitation schedules and mine
closure plans address this by increasing the production potential of mining affected land, so creating a positive legacy. Petra has positively
transformed 120 hectares of previously disturbed land during FY 2022.
Electricity and water are the key material non-renewable resources consumed. Their consumption is not efficient in all instances due to the age of
operational technology and infrastructure. The introduction of Energy Management Plans at all operations bodes well for future electricity and diesel
efficiency improvements. The implementation of annual objectives for improved water efficiency already saw Petra reaching internal water recycling
figures averaging 80% for the last four years.
Alien and invader plant species are strong competitors for resources that push indigenous vegetation out, thus leading to a loss of indigenous
biodiversity. The implementation of alien vegetation eradication programmes reduced the impact on our natural resources. All operations have
Ecological Management Plans for their game farms and open areas.
Read more
Environment pages 72 to 81 of the Sustainability Report
12. Climate change
Risk change in FY 2022
Long term
No change
Strategic objectives
Development of execution roadmaps for sustainability targets, specifically the 2030 greenhouse gas (GHG) reduction target in line with our target
to be net zero by 2050, aspiring to reach this goal by 2040
KPIs
Carbon emissions
Responsibility
Exco; HSE Committee; Audit and Risk Committee; Remuneration Committee
Description and Impact
The key climate change risks the Group is exposed to include the following:
Š Increased financial burden due to legislative changes aimed at water use efficiency or redistribution of natural resources
Š High cost to construct additional water storage facilities at South African operations
Š Changing emissions reporting obligations may increase costs due to potential fines and judgements
Š Catastrophic dam wall failure at our tailings storage facilities (TSF)
Š Increased financial costs of meeting new standards (e.g. new global tailings standard) and escalating insurance costs related to climate change events
Š Escalating carbon tax
Mitigation
The Group Climate Change Adaption Policy and strategy is being implemented. We are currently in Year three of five of the implementation plan.
Further to this, the strategy is set for review in FY 2023 to include firmer references to transitional risks and the financial impact to the Company.
Continuous monitoring against annual targets set for on-mine water and electricity consumption and efficiency.
Petra’s membership with the Environmental Policy Committee (Minerals Councils SA) aides in proving advance knowledge of upcoming changes to
environmental legislation, including climate change and emissions reporting standards.
Annual Report and Accounts 2022 Petra Diamonds Limited
109
Corporate Governance
Risk Management continued
Identifying, managing and mitigating risk continued
OPERATING RISKS CONTINUED
12. Climate change continued
FY 2022 developments and management
Petra uses the World Bank Climate Change Knowledge Portal (CCKP) to estimate physical climate change impacts on, and opportunities for, our operations.
The Company has initiated various climate change projections and scenarios analysis to determine the impact on its operations in the short, medium
and long term. During FY 2022, Petra started to develop mitigating action plans for the top rated climate change risks that have been identified.
Long term
Climate related disclosures were further aligned to the Taskforce on Climate Related Financial Disclosures (TCFD) recommendations. This process is set
to continue in FY 2023. Petra has reported on how it has disclosed against the TCFD Recommendations and Recommended Disclosures for the second
time in FY 2022, as detailed on page 41 and as set out in the Sustainability Report.
Read more
Climate change pages 67 to 71 of the Sustainability Report
13. Supply chain governance
Risk change in FY 2022
Higher
Strategic objectives
Safe and reliable production from our operations with continuous improvement
KPIs
Rough diamond production; Revenue; Adjusted EBITDA
Short to medium term
Responsibility
Exco; Audit and Risk Committee; SED Committee
Description and Impact
Petra’s new Operating Model has resulted in the centralisation of the Group Supply Chain Function with a greater focus on the function. This centralisation,
which has also resulted in a revision of our organisational structures within the function, has resulted in the identification of certain internal control
shortcomings which include, among others, non-adherence to procurement policies and procedures. Other key risks identified include:
Š Lack of adequate Supply Chain procurement policies and procedures and inadequate management of conflicts of interest
Š Insufficient due diligence and vetting performed on suppliers during their initial on-boarding and then during the term of their contracts, leading
to increased potential legal, financial and reputational risks
Š Inadequate segregation of duties between roles and inappropriate audit trails contributing to weaknesses in the internal control environment
Š Ineffective and unclear functioning of a tender committee for awarding contracts to suppliers contributing to a lack of segregation of duties
and possible conflicts of interest
Š Ineffective systems and data transparency on procurement processes with instances of stock outages and subsequent material shortages
for projects, potentially impacting standing time claims
Mitigation
A new Conflicts of Interest Policy has been approved by the SED Committee which will be rolled out as part of a comprehensive anti-bribery and
corruption implementation plan. Online Registers are being developed to enable staff to lodge and record conflicts of interests, including appropriate
approvals by line management.
The Group’s Supply Chain policy is being reviewed to align to the revised operating model and with a view to improving compliance, governance
and risk management within the Supply Chain function. In addition, improved procurement, tender and supplier registration procedures are being
developed to address other risks noted. The new Supply Chain structure is being filled with critical roles identified for execution.
A review of stockholding levels at the operations’ stores is currently underway and the intention is to build lead times into Material Requisition Process
runs, including visible reporting of Supply Chain performance metrics to all operations.
An external service provider has been engaged to provide an improved due diligence platform for contracting with third parties, including the Group’s
suppliers, and for carrying out periodic screening of suppliers.
FY 2022 developments and management
The appointment of the new Group Supply Chain Manager was recruited in FY2022 who has a direct reporting line to the CFO, elevating the function
to this level in the organisation. This appointment has resulted in a comprehensive review of the operating structure and people competencies in line
with the business strategy. Processes and systems across the Supply Chain function with the aim of improving internal controls and governance
are to be enhanced.
A new Third Party Due Diligence Policy and Procedure is currently being finalised which will then be approved and implemented. The purpose of this
policy is to ensure that risks relating to bribery and corruption, sanctions, trade restrictions and human rights violations are adequately identified
and mitigated accordingly. The Group’s stance is that it does not do business with any entity or organisation that is subject to trade restrictions
or sanctions.
Read more
Supply chain governance pages 31 and 94 to 96 of the Sustainability Report and Modern Slavery Statement at petradiamonds.com/about-us/
corporate-governance/modern-slavery-act-statement/
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Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
14. Capital Projects
Risk change in FY 2022
Higher
Strategic objectives
Safe and reliable production from our operations with continuous business improvement; disciplined execution of approved expansion capital projects
KPIs
Rough diamond production; Revenue; Adjusted EBITDA; Operational free cashflow; Operational capex; TSR
Responsibility
Š Exco; Investment Committee; Audit and Risk Committee
Description and Impact
The CC1E SLC and Lower Block 5 3-level SLC expansion projects at the Cullinan and Finsch Mines respectively, involve significant capex commitments
which makes the Group more exposed to other principal risks, particularly diamond prices, Group liquidity and currency fluctuations.
Short to Medium term
Other risks associated with these projects include, amongst others:
Š Cost overruns and delayed execution due to inadequate governance and controls, procurement (including excess reliance on particular contractor(s))
and contract management, which includes delays in procuring trackless mining equipment (TME) and critical spares, including shortage of skills to
maintain and operate TME
Š Unanticipated price increases resulting from macroeconomic conditions Inadequate management of geotechnical and mining risks such as fall of
ground and flooding
Š The mine being operated whilst the project is being built and the management of interface between mine operations and project development,
including, for example kimberlite production taking priority over project when underground materials handling infrastructure is under strain
Mitigation
Petra’s enhanced Operating Model provides a platform for greater stability and resilience, enabling further cash generation to fund our capex
requirements and support further deleveraging. A Project Management Framework incorporating governance requirements/controls is under
consideration for effective management of projects. The continual tracking of project spend against approved project budgets is performed by an
external service provider, to assist management in timeously identifying major deviations from budget. The project budgets include a 6% escalation to
cater for price fluctuations, while supply chain are working closely with the project team to implement a long-term demand plan to ensure better
pricing for longer off-take agreements.
Overall projects risks are identified, assessed and mitigated with support from external service provider. The Exco, Investment Committee and Board
continue to monitor progress of both projects, including tracking of spend against budgets and progress against the approved baseline schedule.
Over-reliance on particular contractors has been mitigated through contract tenders and through additional initiatives.
FY 2022 developments and management
These projects are now managed through the appointment of a dedicated Project Lead. Various governance initiatives have been launched, such as the
development of the Project Management Framework comprising initiation, planning, execution, management and review, including the identification
and management of key project risks.
A prolonged conflict in the Ukraine may result in protracted inflationary pressures impacting the costs of goods and services for the projects, although
Petra’s relatively low fuel consumption, disciplined cost managed, three-year labour agreements to June 2024 and exposed to a weaker Rand should
assist it in absorbing some of these cost pressures. This risk is monitored closely.
The delivery of certain capital items planned for FY 2022 was deferred largely due to increased lead times. As a result, around US$12 million of capex
that was due to be incurred in FY 2022 is now expected to be incurred in FY 2023. A corresponding adjustment has been made to expansion and
sustaining capex guidance for FY 2023, with no expected impact on the anticipated project timing or overall capex spend.
Read more
Capital projects pages 48 to 49 and 120 to 121
Annual Report and Accounts 2022 Petra Diamonds Limited
111
Corporate Governance
Report of the Nomination Committee
Members of the Nomination Committee
Peter Hill (Chair)
Gordon Hamilton1
Deborah Gudgeon
Octavia Matloa
Bernard Pryor
Varda Shine
Jon Dudas2
1. Mr Hamilton ceased to be a member of the Nomination Committee when he
resigned from the Board on 1 November 2021.
2. Mr Dudas became a member of the Nomination Committee with effect from
1 March 2022, upon his appointment to the Board.
The Company’s Board of Directors continued to
evolve during the Year, in line with the Nomination
Committee’s focus on succession planning,
encompassing the priorities set out in our
Diversity and Inclusion Policy.
Peter Hill
Chair of the Nomination Committee
Nomination Committee Terms of Reference
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I would like to present the third Report of the Nomination Committee
since I assumed the role of Non-executive Chair of the Company and
Chair of the Nomination Committee (the Committee).
Board and committee composition
The Petra business has evolved significantly over recent years, as the
Company has transitioned initially from its phase of heavy capital
investment, then to that of steady-state operations with a new
capital structure and debt profile, and now with the Company
embarking on expansion projects at the Cullinan Mine and Finsch
whilst pursuing a value-led growth strategy. The Company’s Board
of Directors and its Board Committees have continued to develop
to reflect this.
As reported in the FY 2021 Annual Report, and with Gordon Hamilton
retiring, Deborah Gudgeon became Chair of the Audit and Risk
Committee with effect from 1 November 2021, having been
appointed to the Board as an iNED on 1 July 2021. Deborah is a
Chartered Accountant with over 30 years’ corporate experience,
including extensive experience in the mining sector, including in
executive and iNED roles and as audit committee Chair at several
UK-listed companies.
As reported in the FY 2021 Annual Report, we also welcomed
Ms Alex Watson and Mr Johannes Bhatt who were appointed as
Non-Independent NEDs on 1 July 2021, having been nominated by
Franklin Templeton and Monarch respectively. Monarch also exercised
their right under the Nomination Agreement between it and the
Company to appoint Mr Marius Kraemer as their Board Observer
with effect from 1 July 2021.
During the Year, the Committee’s main focus was the identification
and appointment of a new iNED with a mining industry background.
On the basis of its global reach, experience and strong understanding
of the mining industry, Eghon Zehnder was appointed as the
executive search firm supporting Petra on this appointment. A job
specification was drawn up for the role, with the following criteria
being included as priorities: broad mining industry background,
operational and African experience and having a strategic mindset.
A shortlist of candidates was then generated and the Company
was given the opportunity to interview candidates. Accordingly,
Mr Jon Dudas was appointed as an iNED and as a member of the
Audit and Risk, Remuneration, Nomination and Investment Committees,
in each case with effect from 1 March 2022. Jon has broad experience
across the mining and resources sectors, in operations, general
management, finance and strategy, and has held Board positions
with major companies, all of which will greatly assist in the
strategic development of the Company.
Mr Matthew Glowasky stepped down from the Board (and as a
member of the Investment Committee) on 17 May 2022. Mr Glowasky
had been appointed to the Board in March 2021 under the terms of a
Nomination Agreement between the Company and Monarch that was
entered into as part of the Restructuring. Monarch has indicated that
it does not intend to nominate a Director to replace Mr Glowasky,
though it retains its right to do so under the Nomination Agreement.
The Committee thanks Mr Glowasky for his contribution to Petra
during his tenure as a Director of Petra and wishes him every success
in his future endeavours.
Succession planning
Independence is central to the ability of iNEDs in providing robust
challenge and oversight of management. Recognising this, and to
ensure a consistent approach is taken by Petra and that iNEDS do
not assume that their length of service is automatically the nine year
minimum referred to in the Code, the Committee formally adopted
a principle that iNEDs be expected to retire (unless exceptional
circumstances apply) during the course of their ninth year of service
on the Board. This principle remains subject to the Committee’s
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
responsibility for reviewing the Board’s structure, size and composition and continuing to reserve the right to recommend to the Board that
iNEDs step down earlier if this is felt to be conducive to a more efficient operation of the Board, including for example with regard to the size
of the Board.
Board evaluation
As indicated in the FY 2021 Annual Report, the Board undertook an externally facilitated independent evaluation of its own performance and that
of its Committees during FY 2022. This was carried out by Donata Denny, an independent and highly respected Leadership Coach and Professional
Development Adviser, and consisted of each Director completing a focused questionnaire, a one-on-one confidential interview with each Director
and a facilitated Directors workshop to discuss the outcomes and findings. The results of the evaluation are set out on page 84.
Diversity
Increasing diversity is important in terms of facilitating the Board’s ability to function effectively to the benefit of the business as a whole
and all of its stakeholders.
The overall percentage of women employed in the Company remained at 20%. From FY 2023 onwards, Petra will be required by the UK’s
Listing Rules to disclose whether it has met the diversity targets specified by the FCA and failing compliance with these targets, provide an
explanation for such non-compliance. The targets are set out below. I am pleased to report that Petra has either met or exceeded these
targets for FY 2022 as described in more detail on page 83 and as highlighted below:
Š 40% of Petra’s Board are women (target: 40%)
Š Our Senior Independent Director (Ms Varda Shine) is a woman (target: one of the Chair, CEO, CFO or SID should be a woman)
Š Two members of our Board (20%) are from an ethnic background other than white (target: one Board member should be from an ethnic
background other than white)
We have a number of initiatives in place to further increase female representation in the Company and we were pleased to report further
improvement in FY 2022. Petra has expanded its reporting on wider employee diversity, as well as gender diversity. You can read more about
this at pages 59 to 62 of the Sustainability Report.
Nomination Committee role and activities
The principal functions of the Nomination Committee are listed below, along with the corresponding activity and performance in FY 2022.
In addition to the below, the Committee carried out its annual review of its Terms of Reference and made appropriate amendments.
ROLE
ACTIVITIES IN FY 2022
OUTCOMES
To review the structure, size and composition
of the Board (including appropriate skills,
knowledge, experience and diversity), and
to make recommendations to the Board
with regard to any changes.
The Committee reviewed the composition of the
Board and its Committees, including discussions
around diversity and the effective functioning
of the Board and its Committees.
This resulted in the appointment of a new iNED,
a NED stepping down from the Board and changes
to the composition of certain Committees.
The Committee will continue to make recommendations
regarding the Board and its Committees and Senior
Management composition and structures.
To identify, nominate and recommend, for the
approval of the Board, appropriate candidates
to fill Board and Committee vacancies as and
when they arise.
Mr Dudas was appointed as an iNED (as a member
of the Committee, Audit and Risk, Remuneration
and Investment Committees) with effect from
1 March 2022.
The Board expects to make additional changes during
FY 2023 and will receive recommendations from the
Nomination Committee in this regard.
To satisfy itself, with regards to succession
planning, that plans are in place with regards to
both Board and Senior Management positions.
The Committee continued to focus on succession
planning, reviewing the programmes which the
Company has in place to grow talent within Petra.
As part of our succession practices, the Nomination
Committee will continue to review programmes in place
to assimilate talent into leadership and specialist positions.
To recommend to the Board the re-election by
shareholders at the AGM of any Director under
the retirement and re-election provisions of
the Company’s Bye-Laws.
An external Board evaluation exercise took place
during Q4 of FY 2022.
The overall result of this evaluation was positive, with
the evaluator concluding that Petra has an effective and
high performing Board as well as highlighting certain
areas for further improvement. See page 84.
Each Director was considered to remain effective and
will be proposed by the Committee for re-election to the
Board at the Annual General Meeting.
Peter Hill CBE
Nomination Committee Chair
10 October 2022
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113
Corporate Governance
Report of the Health, Safety and Environment (HSE) Committee
I am pleased to present Petra’s HSE report for FY 2022, which is my
fourth as Chair of the Committee.
The purpose of the HSE Committee
The role and purpose of the HSE Committee is to assist the Board
in discharging its oversight responsibilities relating to HSE matters.
It achieves this by overseeing the Group’s HSE systems and policies
and evaluating how these translate into HSE performance, as well
as by monitoring compliance with all applicable regulations.
Activity during the Year
In FY 2022, the HSE Committee continued to monitor all key
HSE-related indicators.
As reported in FY 2021, an action plan was put in place to address a
rise in LTIs and a deterioration in the Group’s LTIFR, via the continued
embedding and enforcement of the Group-wide Health and Safety
pledge, further implementation of the Group’s safety behaviour-
based intervention campaign initiatives to mitigate accidents at each
operation, and the continual review of safety practices and
implementation of proactive interventions.
I am pleased to report that in FY 2022, the beneficial outcomes of
these steps were reflected in Petra’s safety performance, with a 40%
improvement in LTIs to 15 and corresponding 50% improvement in
the LTIFR for the Year. The only metric on which Petra’s performance
deteriorated was in respect of NLTIs, which saw an increase of 11%,
but this was against the backdrop of an increased number of shifts,
which meant Petra’s NLTIFR decreased by 7%. The Cullinan Mine in
particular, had an exceptional year, celebrating a LTI-free year on 25
April 2022.
Overall Petra improved on 83% of measured safety KPIs in FY 2022
(FY 2021: 73%). The Group reported 10.08 million fatality-free shifts,
and a 19% decrease in Total Injuries recorded. There was a 17%
decrease in days lost due to LTIs and a 30% decrease in the Group’s
Injury Severity Rate. This is a notable achievement given that the
South African mining industry as a whole saw increases in fatalities
and injuries across 2021 and 2022.
Our focus on the management of the COVID-19 pandemic continued
in FY 2022. While the majority of those who do contract COVID-19
may only experience mild symptoms, very sadly, and as reported in
our FY 2021 Annual Report, 14 employees have tragically lost their
lives to COVID-19. Subsequent to these sad losses, Petra has not
recorded any COVID-19 related deaths. I would like to reiterate the
Board and Management’s sincere condolences to the family and
friends of the deceased.
The Committee maintained its oversight of the strict systems and
mitigating measures we have put in place to protect all of our
workers and contractors as well as the continued roll-out of the
COVID-19 vaccination programme for employees, with 64% of Petra’s
South African workforce having received vaccinations and 16% of the
Tanzanian workforce having received vaccinations. As with all safety
matters, it is important to show leadership from the top, and Exco
and Senior Managers therefore had the vaccine and publicly
promoted this to our workforce to demonstrate its safety, bearing
in mind a major hurdle to vaccination throughout South Africa is
misinformation about the safety of COVID-19 vaccines.
Other key achievements include the retention of the ISO 14001:2015
and ISO 45001:2018 certifications at our South African operations,
as well as improvements in workplace conditions, including dust
and noise reduction at all operations.
Looking at Petra’s environmental performance in FY 2022, we again
reported no ‘major’ or ‘high’ environmental incidents within the
Company for the 12th consecutive year and achieved a record year
with no medium environmental incidences. The development of the
Sustainability Framework with the inclusion of environmental specific
focus areas was of key importance in FY 2022. The objectives set
towards the reduction of climate change impact, Improved Water
Members of the HSE Committee
Bernard Pryor (Chair), iNED
Varda Shine, iNED
Richard Duffy, CEO
Johannes Bhatt, NED
The health and safety of Petra’s people
remains our top priority, along with safeguarding
our environment for future generations. The
Company is taking measures to continuously
improve our performance in this area, working
towards our primary goal of zero harm.
Bernard Pryor
Chair of the HSE Committee
HSE Committee Terms of Reference
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Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Management, Contributions towards the Circular Economy and the Safeguarding of our Biodiversity will undoubtedly lead to further
improvements to our already strong environmental performance. Petra’s commitment to net zero carbon emissions by 2050 is supported by
our electricity efficiency that improved by 19% in FY 2022, and our Carbon Footprint measured in tonne CO2-e/tonne of ore processed, that
improved from 0.050 tCO2-e/t in FY 2021 to 0.043 tCO2-e/t in FY 2022. The relaxation of COVID-19 restrictions and the Williamson Mine
coming back on-line in FY 2022, led to an increase in total Greenhouse Gas production across all Scopes. The most noticeable of these was the
increase in Scope 3 emissions due to an increase in business travel. Our strong performance in water management continued with our water
recycling remaining at an average of 80%.
Petra continued to show high levels of performance in its environmental reporting in FY 2022, with its CDP score on climate change reporting
of ‘B’ being higher than average for the Company’s sector and region of reporting,. In addition, Petra’s CDP score in relation to Water Security
improved from ‘B-’ to ‘B’.
Further information on HSE matters can be found on pages 42 to 50 of the Sustainability Report.
HSE Committee role and activities
The principal functions of the Committee are listed below, along with the corresponding activity and performance in FY 2022.
ROLE
ACTIVITIES IN FY 2022
OUTCOMES
To evaluate the effectiveness of the Group’s
policies, standards and systems for identifying
and managing health, safety and environmental
risks within the Group’s operations.
The Group’s significant HSE hazards and associated
risks were reviewed as part of a discovery process as
per ISO 14001 and ISO 45001 standards requirements
and implemented into the operations.
Material impacts on health, hygiene and safety
related legislative requirements were integrated
into existing policies.
Various legislative updates during the COVID-19
pandemic resulted in updates to Company reviews
on risk assessments and policies during the Year.
Processes were reviewed during 2022 and are up to date
compliant to international standards requirements and
certified by BSI through third party audits.
To assess compliance obligations with applicable
legal and regulatory requirements with respect
to health, safety and environmental aspects.
To ensure, on behalf of the Board, that an
internationally recognised Health and Safety
Management System and an Environmental
Management System are implemented
and maintained.
To assess the performance of the Group with
regards to the impact of health, safety and
environmental decisions and actions upon
employees, communities and other stakeholders.
Changes in legislation were evaluated for potential
impact on HSE systems and policies.
No material changes in environmental legislation were
identified that required systems or policies to be updated.
Processes are up to date, compliant to international
standard requirements and certified by BSI through third
party audits.
Outcomes of external certification audits for ISO
45001:2018 and ISO 14001:2015 were evaluated.
All South African operations successfully retained ISO
14001:2015 and ISO 45001:2018 certification through BSI.
The Williamson mine remains uncertified but conforms
to industry-wide HSE management principles and
Tanzanian legislation (the Occupational Safety and
Health Act).
Monitoring of HSE performance throughout the Year
and review of annual Group occupational HSE
objectives and KPIs.
COVID-19 brought significant challenges regarding
return-to-work policies and processes. The
implementation of these, as well as general
performance against the processes, were monitored.
The achievement of HSE objectives was noted.
The Group’s performance was satisfactory.
The decisions and actions leading from COVID-19 specific
policies, codes of practice and procedures did not have
a negative effect on any stakeholders including
communities and employees.
To review management’s investigation of any
fatalities and/or serious HSE-related accidents
or incidents within the Group and the efficacy
of the resultant remedial actions implemented.
Health and safety incidents, investigation outcomes
and detailed trending were reported to and reviewed
by the Committee on a quarterly basis.
Environmental incidents classified as ‘significant’
were discussed in detail.
Zero fatalities occurred in FY 2022.
The 20% LTI reduction target was achieved and
exceeded in FY2022, with a reduction in LTIs of 40%
and an improvement in the LTIFR of 50%.
No significant environmental incidents occurred during
FY 2022. More details can be found in the Company’s
Sustainability Report.
Bernard Pryor
HSE Committee Chair
10 October 2022
Annual Report and Accounts 2022 Petra Diamonds Limited
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Corporate Governance
Report of the Social, Ethics & Diversity (SED) Committee
Purpose of the Committee
The purpose of the SED Committee is to provide the Group with
strategic direction on matters relating to its social, ethics and
diversity (SED) impacts, as well as providing oversight of the Group’s
performance in meeting its SED obligations and objectives. The aim
is to position Petra as a responsible corporate citizen, to promote
a diverse organisation in a sustainable and beneficial way,
and to contribute to operational stability and sustainability.
SED Committee membership changes
Ms Watson joined as a member of the SED Committee on 1 July 2021.
Ms Watson’s extensive experience in audit, risk and reporting (including
sustainability reporting) was, and continues to be, of great benefit
to the SED Committee.
Social
Following the settlement agreement reached with Leigh Day in
May 2021, a focus for the Committee in FY 2022 was its continued
oversight of the Group’s implementation of the Independent
Grievance Mechanism (IGM) and Restorative Justice Projects (RJPs).
Further detail of Petra’s performance in this regard can be found at
page 55 and pages 33 to 34 of the Sustainability Report. I am pleased
to report that good progress has been made in relation to the IGM,
with Government and local community engagements having been
completed and the focus now on updating the IGM processes and
appointing the various organs that will make up the IGM, with the
current target for the IGM to become operational by the end of the
calendar year. On the RJPs, feasibility studies for income generating
projects (agriculture businesses and artisanal mining) are progressing,
the medical services project has been expanded to provide further
services and the gender based violence initiative completed all planned
initiatives in Q3 CY 2022 and has now turned to new activities.
In FY 2022, the SED Committee also continued its oversight of Petra’s
UN Voluntary Principles on Security and Human Rights (VPSHR)
training, with VPSHR training being conducted at all of Petra’s
operations. Petra also concluded a Memorandum of Understanding
with the Tanzanian Police Force (TPF) which requires the TPF to
comply with the VPSHR in performing their security operations at the
Williamson Mine. Related to the above, the SED Committee approved
the new Respecting Human Rights Defenders Procedure, reflecting
the commitment in Petra’s Human Rights Policy Statement to “…
respect…the rights of human rights defenders and anyone opposing
or raising concerns about our activities and not tolerating any threats,
intimidation, physical or legal attacks, or retaliation against them”.
Petra’s three South African mines completed Social Impact Assessments
(SIAs) which were used to compile the Finsch and Koffiefontein Mines’
next generation Social Labour Plans (SLPs) which were submitted to
South Africa’s Department of Mineral Resources and Energy (DMRE)
in June 2022. The Cullinan Mine’s SLP was approved by the DMRE in
2021 and Petra is currently working on its next generation SLP, which
is due in June 2023. In addition, the application by Finsch under
Section 102 of the Mineral and Petroleum Resources Development
Act to request a deviation in spend from the SLP, was approved by
the DMRE. The SIAs will also be used to update the mines stakeholder
engagement plans to enable more proactive and robust community
engagement processes.
Petra continues to experience delays in implementing its Local
Economic Development (LED) projects, mainly due to local external
circumstances around resource constraints as well as delays in project
approvals by relevant structures.
In August 2021, Petra concluded a three-year wage negotiation
(FY 2022 to FY 2024) with its recognised South African trade unions.
Williamson Mine, in Tanzania, also concluded a one-year wage
agreement of an 8% increase for all employees.
Members of the SED Committee
Octavia Matloa, NED (Chair)
Varda Shine, iNED
Richard Duffy, CEO
Alex Watson, NED1
1. Ms Watson was appointed to the Committee on 1 July 2021.
The Committee has had another busy year in
overseeing the Group’s progress on social,
diversity and ethics issues – with a continuing
focus on the implementation of the IGM and
community projects at Williamson.
Octavia Matloa
Chair of the SED Committee
SED Committee Terms of Reference
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Corporate Governance
Financial Statements
Supplementary Information
Petra has long recognised the importance of understanding the views
of its workforce to ensure they are part of our Board discussions and
factored into the Board’s decision-making. With the resumption of
international travel and in-person meetings, I have, as designated
employee engagement iNED and Chair of the Committee, been able
to recommence face-to-face meetings with the workforce and the
Board has been able to recommence its site visits to the Group’s
operations and these engagements are further described on
pages 81 to 82.
Recognising the critical importance of Petra’s stakeholder
relationships to its licence to operate, the SED Committee also
adopted a Stakeholder Engagement and Management Policy,
underscoring its commitment to meaningful engagement, as
envisaged in the guidance issued by the OECD. The intention of this
Policy is to ensure stakeholder engagement which is “…proactive,
inclusive, accountable, transparent and responsive…” so as to enable
stakeholders to meaningfully participate in the decisions which affect
them. The Committee looks forward to providing oversight and
guidance in relation to the continued implementation and application
of this policy in FY 2023.
More detail on Petra’s approach to stakeholder engagement can be
found at pages 15 to 22 of the Sustainability Report
Please also see Petra’s statement in terms of Section 172 of the UK
Companies Act (pages 30 to 32) for further detail on how the Board
(including the Committee) have considered stakeholder interests in
their decision-making and discussions.
Following the process previously reported in relation to the adoption
of the Sustainability Framework, I am also pleased to report that the
final Sustainability Framework has been formally adopted by the
Board shortly following the end of FY 2022. While Petra supports all
17 UN Sustainable Development Goals (SDGs), it has identified the
five most relevant SDGs where Petra believes it can make the
greatest contribution, being:
For more information on the Sustainability Framework,
see pages 38 to 40 of the Sustainability Report
The SED Committee looks forward to overseeing Petra’s performance
against relevant aspects of the Sustainability Framework and
providing strategic oversight in relation thereto in FY 2023.
Ethics
In FY 2022, the SED Committee continued to receive regular updates
in relation to the status of the tip-offs received through the
Company’s whistleblowing platform and tracked the progression of
these reports to conclusion, including the remedial actions proposed
and undertaken in relation to such tip-offs.
In FY 2022 and as part of its commitment to comply with the UK
Bribery Act (2010), the UK Criminal Finances Act 2017, the UK Modern
Slavery Act 2015 and international sanctions and trade restrictions,
the Company commissioned an external consultant to facilitate and
conduct a series of ethics & compliance risk assessments, focusing on
risks of bribery and corruption, other financial crime, and human
rights and labour conditions. This risk assessment resulted in a
number of recommendations which management has addressed
through the implementation of a new ethics and compliance
programme. In FY 2022 and as part of this programme, the SED
Committee reviewed and approved the following new or revised
policies replacing existing policies for these areas:
Š Gifts and Hospitality Policy, including the creation of an online
gifts and hospitality register
Š Declarations of Interest Policy, with a view to enabling all staff
to proactively identify and manage actual or perceived conflicts
of interest
Š Whistleblowing Policy, to ensure those raising concerns in good
faith are protected from reprisals
Š Public Officials Expenditure Policy to ensure any expenditure
related to public officials complies with applicable laws, and is
for legitimate business purposes and is recorded through an
online register
In addition to the above and as part of this new ethics and
compliance programme, Petra’s Board also approved a revised Code
of Ethical Conduct. This Code is an essential guide and summary of
Petra’s policies, standards and procedures that are relevant to the
way we work and the ethical conduct that is required from all staff as
well as other business partners who work with us or act on our behalf
and it has been published on Petra’s website.
petradiamonds.com/about-us/corporate-governance/business-ethics/
Diversity
The Committee continued its oversight of the implementation of the
Group’s Diversity and Inclusion Policy which requires that leadership
at all levels across the organisation broadly consider diversity in all its
different forms to support the Group in realising its strategic objectives.
For an overview of Petra’s performance in relation to diversity,
see pages 59 to 62 of the Sustainability Report
All current HR initiatives, such as targeted recruitment, training and
development, talent management, and reward and recognition, focus
on the promotion of a diverse workforce to achieve the targets set.
With this in mind, the Company has undertaken the creation of a
Petra Diamonds South Africa Employment Equity Plan, with the aim
of aligning the Group’s employment equity targets in South Africa
with other sector specific targets. Achieving diversity targets form
part of Management’s overall performance scorecard, thereby
directly impacting on reward and recognition.
On gender diversity, the SED Committee notes that the percentage of
women in Petra’s workforce remained at 20%.
For more details, see page 61 of the Sustainability Report
In addition, female representation at top management level improved
by 3% compared to FY 2021, with four new women appointed at a
Senior Management level, and with three of the women promoted
participating in Petra’s Women in Leadership Programme.
In South Africa, the Mineral and Petroleum Resources Development
Act, No. 28 of 2002 and the Employment Equity Act, No.55 of 1998
legislate the Government’s drive to address historic inequalities.
Compliance with this legislation is mandatory, and the SED Committee
received regular updates throughout FY 2022 on Petra’s compliance
with these. While Petra continues to perform well in relation to the
employment of historically disadvantaged persons in its workforce
(with a slight increase to 85% in FY 2022 (FY 2021: 84%)), particularly
at a senior management level (46% in FY 2022, compared to 38% in
FY 2021), the number of historically disadvantaged persons at an
executive level (33%) remains comparably low. Petra is striving to
improve this through implementing employment equity plans for all
operations aligned to South Africa’s Mining Charter targets, including
targeted recruitment and prioritising training and development for
high potential individuals who are historically disadvantaged persons.
Annual Report and Accounts 2022 Petra Diamonds Limited
117
Corporate Governance
Report of the Social, Ethics & Diversity (SED) Committee continued
SED Committee role and activities
The principal functions of the SED Committee are listed below, along with the corresponding activities and performance in FY 2022.
ROLE
ACTIVITIES IN FY 2022
OUTCOMES
To assess the policies and systems within
Petra for ensuring compliance with
material local and international legal and
regulatory requirements with respect to
SED aspects, including organisational
ethics, corporate citizenship, social
sustainable development, stakeholder
relationships and diversity.
To monitor technical developments in the
fields of SED management and practice
and, where appropriate, to oversee the
assessment of their impact on Petra and
to provide appropriate strategic guidance.
To assess Petra’s performance regarding
the impact of SED decisions and actions
upon employees, communities and
other stakeholders.
To assess the impact of such decisions
and actions on the reputation of the
Petra Group as a whole.
Approval of a new Respecting Human Rights
Defenders Procedure and revision of the
Human Rights Policy Statement to reflect the
commitment to respect the rights of human
rights defenders and anyone opposing or
raising concerns about the Group’s activities,
and not tolerating any threats, intimidation,
physical or legal attacks, or retaliation
against them.
Adoption of a new Stakeholder Engagement
and Management Policy.
Following a risk assessment (see below),
review and revision of the Group’s
anti-bribery and corruption and
whistleblowing policies.
Implementation commenced of the
Group’s Diversity and Inclusion Policy, which
amalgamates the Group’s employment equity
and diversity strategies and objectives.
Revision of operational procedures to ensure
effective and accountable processes.
Continued monitoring of the status of the
new Mining Charter in South Africa.
Continued engagement, via its membership
of the Minerals Council SA, on various
industry matters, including the draft
amended Mineral and Petroleum Resources
Development Act (MPRDA) in South Africa.
Monitoring of the implementation
of the Company’s community projects.
Evaluation of the Company’s Social
Compliance Matrix.
Monitoring of the risk of pit scaling at the
Cullinan Mine and its impact on the
local community.
Monitoring of the independent
whistleblowing hotline with regards to SED
issues, including fraud and corruption.
Implementation of a grave relocation project
at Koffiefontein, whereby a number of burial
sites within the mine licence area, (including
within tailing storage facilities), believed to
date back to the mine’s early beginnings
around the 1880s, are to be relocated.
The following documents were reviewed
and approved:
Š Respecting Human Rights
Defenders Procedure
Š Human Rights Policy Statement
Š Stakeholder Engagement and
Management Policy
Š Gifts and Hospitality Policy
Š Declarations of Interest Policy
Š Public Officials Expenditure Policy
Š Whistleblowing Policy
Š Sustainability Framework (approved by
the Board but noted by SED Committee)
Š Code of Ethical Conduct (approved by
the Board but noted by SED Committee)
Š Investigations Framework (noted)
The SED Committee monitored the
potential impact of the new Mining
Charter on the Group, noting the judicial
review found in favour of the Minerals
Council SA and the DMRE’s statement
that it will not appeal this judgement but
will seek to implement the Mining Charter
through legislative changes. Petra will
provide its input via the Minerals Council SA.
Continued engagement with the local
stakeholders involved in the ASM
initiative at Koffiefontein.
An SEP was put in place to guide
communication with the local community
at the Cullinan Mine in relation to pit
scaling and a Relocation Action Plan was
approved and successfully implemented
in relation to affected persons and
their houses.
The grave relocation project has been
awarded a permit under the National
Heritage Resources Act. The Company
will continue to engage with all relevant
stakeholders as the project progresses.
To monitor and evaluate Petra’s
organisational culture against the
Company’s purpose and to advise on
issues of general diversity, as well as
more specifically gender diversity, as a
strategic imperative for Petra.
Employment equity profiling and regular
review of the diversity performance of the
Group at all levels of the business, as well as
monitoring of other employee-related
measures related to workforce culture.
Revision of the Group’s diversity targets
to ensure the Group has one plan and
to ensure targets are aligned to the
Employment Equity Act and the Mining
Charter requirements.
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Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
ROLE
ACTIVITIES IN FY 2022
OUTCOMES
To ensure an appropriate Stakeholder
Engagement Management System is in
place and is maintained.
Evaluation of the Company’s Stakeholder
Engagement Module.
Reviewed Operational Grievance Mechanism
standards and controls and monitoring
thereof across the Group’s operations.
Ongoing evaluation, implementation and
roll-out of SRM software platform to
capture and assess historical and ongoing
stakeholder engagement, commencing
with the South African operations.
To evaluate the effectiveness of Petra’s
framework, policies and systems for
identifying and managing SED risks.
Identifying and/or ratifying those
material issues related to SED
which could impact the continued
sustainability of the Company.
Communicate, where applicable,
its material SED risks to the
Audit & Risk Committee.
Improvement of reporting to the SED
Committee on these mechanisms.
The SED Committee regularly monitored the
Group’s principal and emerging SED risks and
these were also communicated to the Audit
& Risk Committee.
The Company performed assessment of risks
relating to bribery and corruption, other
financial crime, and human rights and labour
conditions and implementing ethics and
compliance programme.
To ensure systems are in place to record
and submit statistical data that may be
required for legal, regulatory and other
external reporting.
Review of internal and external reporting
requirements; gap analysis to evaluate how
Petra could improve its ESG disclosures.
Submission of statutory documents.
The SED Committee discussed and
provided feedback on the Group’s
principal and emerging SED risks.
The Group’s anti-bribery and corruption
and whistleblowing policies (outlined
above) were reviewed and approved.
Monitoring of SED-related data and
information at SED Committee level.
Reporting on employment equity and SLP
progress to the South African Department
of Labour and the DMRE.
Monitoring of SED-related statutory
documents per the SED Annual Plan.
Octavia Matloa
SED Committee Chair
10 October 2022
Annual Report and Accounts 2022 Petra Diamonds Limited
119
Corporate Governance
Report of the Investment Committee
Members of the Investment Committee
Peter Hill (Chair)
Richard Duffy
Jacques Breytenbach
Deborah Gudgeon
Alex Watson
Johannes Bhatt
Bernard Pryor
Jon Dudas1
Gordon Hamilton2
Matthew Glowasky3
1. Mr Dudas became a member of the Investment Committee upon
appointment to the Board on 1 July 2021. Messrs Hamilton and Glowasky
were members of the investment Committee until they resigned from the
Board on 19 November 2021 and 17 May 2022 respectively.
2. Mr Hamilton ceased to be a member of the Investment Committee when he
resigned from the Board on 19 November 2021.
3. Mr Glowasky ceased to be a member of the Investment Committee when he
stepped down from the Board on 17 May 2022.
Investment Committee Terms of Reference
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Petra Diamonds Limited Annual Report and Accounts 2022
As Chair of the Investment Committee (the Committee) I would like
to present the second report of the Investment Committee since
its formation in March 2021.
Monitoring and approving capital allocation
and other investments
As a condition of the capital Restructuring which completed in
March 2021, Petra’s Board formed the Committee, which includes
Directors appointed pursuant to shareholder nomination rights, to
monitor significant capital and other investments and recommend
their adoption to the Board.
The Committee’s members have been appointed by the Board
and include the Chair of the Board, the Chair of the Audit and Risk
Committee, the Chief Executive Officer and the Chief Financial Officer.
The Committee is required to meet at least twice a year.
The role and responsibilities of the Committee are to:
Š Consider and approve all capital expenditure and investment
proposals from US$7.5 million to US$15.0 million
Š Consider and make recommendations to the Board for all capital
expenditure and investment proposals above US$15.0 million
Š Consider and make recommendations to the Board for the disposal
of operating subsidiaries, operating mines and/or mining rights or
assets exceeding US$7.5 million in either gross book value or
reasonably expected market value
Š Monitor the progress of major capital investments by way
of the investment progress schedule together with
post-implementation reviews
Š Approve internal processes relating to capital expenditure
and investment proposals, including all documentation required
to be completed
Š Consider and make recommendations to the Board related
to Group capital expenditure and related policies
In FY 2022, the Committee considered the proposed major capital
expansion projects at the Cullinan and Finsch Mines. In relation
to divestments, the Committee considered the transactions
contemplated by the Memorandum of Understanding (MoU) to be
entered into with Caspian Limited (Caspian). In addition, and as a
requirement of Petra’s financing arrangements, the Committee was
required to approve certain consequential amendments to Petra’s
First Lien documents as a consequence of the refinancing of these.
The Investment Committee’s mandate is to monitor
the Company’s capital allocation decisions taking
into account the interests of the Company and all
its stakeholders.
Peter Hill
Chair of the Investment Committee
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
MoU with Caspian
As set out above, the Committee has a mandate to consider and
make recommendations in relation to the disposal of assets or
interests in assets with a value in excess of $7.5 million.
The Committee considered the entry by Petra into the non-binding
MoU with Caspian pursuant to which Petra agreed to sell 50%
(less one share) of its indirect interest in Williamson Diamonds Limited
(WDL) to Caspian for total consideration of $15 million. The Committee
noted that upon completion of the transactions contemplated by the
MoU, Petra’s equity interest in WDL would reduce to 31.5% (but with
Petra retaining control of WDL) which was aligned with the Board’s
objective of reducing Petra’s exposure to the Williamson mine, whilst
retaining exposure to the mine’s upside.
After due consideration, the Committee unanimously recommended
to the Board the transactions contemplated by the MoU be approved
and that Petra enter into the MoU. The MoU was entered into by
Petra and Caspian Limited on 15 December 2021, and the parties are
in the process of negotiating definitive transaction agreements that
will, subject to the relevant conditions precedent being satisfied, give
effect to the MoU.
Peter Hill CBE
Investment Committee Chair
10 October 2022
CC1 East Project at the Cullinan Mine
In November 2021, the Committee considered and unanimously
recommended for approval by the Board, its first major capital
project which was the 3-level sub-level cave at CC1 East at the
Cullinan Mine (the CC1E Project). For more details on this project,
see page 48.
The estimated capital expenditure associated with the CC1E Project is
US$173 million.
In determining whether to recommend this project, the Committee
considered its long-term impact for Petra, noting its robust
economics (having an IRR of more than 30%) and the critical impact
it has for Petra’s long-term viability by extending the mine plan at
the Cullinan Mine to 2031.
The Board also took into account that pursuing this project would
give Petra a platform to consider further expansion opportunities
that have the potential to further extend the mine plan at the
Cullinan Mine beyond 2031, noting in particular:
Š Adding additional tunnels to the east of T41 in the C-Cut block
Š Mining the C-Cut centre block between the C-Cut and the CC1E
Š Mining D-Cut and material below CC1E
The Committee also noted that the CC1E Project would not only have
significant positive long-term social and economic impacts on the
surrounding communities and positive long-term fiscal impacts
for the Government, but was also expected to be self-funded.
Lower Block 5 3-Sub-Level Cave Project
at the Finsch Mine
In February 2022, the Committee considered and unanimously
recommended for approval by the Board its second major capital
project which was the Lower Block 5 3-level sub-level cave at the
Finsch Mine (the Lower Block 5 3-SLC Project). For more details
on this project, see page 49.
The estimated capital expenditure associated with the Lower Block 5
SLC Project is US$216 million.
In determining whether to recommend this project, the Committee
considered its long-term impact for Petra, noting its robust economics
(having an IRR of more than 30%) and the critical impact it has for
Petra’s long-term viability by extending the mine plan at the Finsch
Mine to 2030.
The Board also took into account that pursuing this project would
give Petra a platform to consider further expansion opportunities
that have the potential to further extend the mine plan at the Finsch
Mine beyond 2030, noting in particular:
Š Mining of the area below Lower Block 5
Š Mining of the Upper and Lower Precursor on the western side
of the orebody
Š Further resource delineation work required to improve
resource confidence
Annual Report and Accounts 2022 Petra Diamonds Limited
121
Corporate Governance
Directors’ Remuneration Report
Letter from the Chair
Members of the Remuneration Committee
Varda Shine, Chair
Bernard Pryor, iNED
Gordon Hamilton, iNED1
Octavia Matloa, iNED
Deborah Gudgeon, iNED
Jon Dudas, iNED2
1. Mr Hamilton ceased to be a member of the Committee when he retired
from the Board on 19 November 2021.
2. Jon Dudas joined the Committee on 1 March 2022.
This was a year of significant achievement for Petra.
We made progress in further transforming the business,
combined with excellent financial results.
Varda Shine
Chair of the Remuneration Committee
Remuneration Committee Terms of Reference
petradiamonds.com/about-us/ corporate governance/
board-committees
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Petra Diamonds Limited Annual Report and Accounts 2022
Key highlights
Š Petra had an exceptional year in FY 2022 with revenue
increasing by 44% to US$585 million and operational free
cashflow up 91% to US$230 million. In addition to much
improved financials the Directors also performed well
against their personal KPIs. As a result, the Executive
Directors will receive annual bonuses of 77.6 – 78.6%
of maximum in respect of FY 2022
Š Performance Share Plan (PSP) awards vested at 40.9% of
maximum following the end of the three-year performance
period to June 2022, reflecting the operational performance
over the period and progress in our key strategic projects
Š ESG metrics have been a part of the Company’s annual
bonus for several years. To supplement the short-term ESG
targets in the annual bonus and considering the importance
of ESG, the Committee has decided to introduce long-term
ESG metrics to the PSP scorecard for FY 2023
Š The Committee is proposing to make an Enhanced PSP Award
for FY 2023 to retain our high calibre Executive Directors,
recognise their exceptional performance to date and to align
them with delivering Petra’s long-term strategic ambitions
Dear shareholder,
As Chair of the Remuneration Committee (the Committee) I am
pleased to present our Directors’ Remuneration Report for the
financial year ended 30 June 2022.
Context and Company performance in FY 2022
Our Board’s overriding priority continues to be the health, safety and
wellbeing of all of our people. It was therefore pleasing that, in terms
of safety performance, and following the implementation of various
measures during the Year, there was a 40% reduction in LTIs for the Year
and a corresponding 50% reduction in the Lost Time Injury Frequency
Rate (LTIFR) for the Year. The only safety metric on which Petra’s
performance deteriorated was in respect of NLTIs, which saw an
increase of 11%. However, this was against a backdrop of an increased
number of shifts worked in FY 2022 which meant that overall Petra’s
NLTIFR actually decreased by 7%. The Cullinan Mine, in particular, had
an exceptional year, celebrating a LTI-free year on 25 April 2022. The
Company also remained highly focused on the application of the
operating procedures and implementation of the vaccination programme
at each of the Group’s operations to help to mitigate the risk to our
people of COVID-19.
Read more on pages 114 to 115
This was a year of significant achievement for Petra. We made
progress in further transforming the business, combined with
excellent financial results. Highlights include:
Š Adjusted EBITDA more than doubling to US$264.9 million, driven by
strong revenue growth and our measures to improve profitability
Š Further strengthening our balance sheet through substantial cash
generation which enabled net debt to reduce by 82% to US$40.6 million,
further enabling the successful completion of our Second Lien tender
offer which has reduced gross debt by at least US$144 million
Š Adjusted EPS rose 219% to a record US¢42.93, reversing last years’ loss
Š Operational free cashflow rose 91% to US$230 million
Š Approval of our new dividend policy
Š Good safety results with a 50% reduction in the LTIFR
Š We implemented systems across all our operations aimed at
preventing and containing the spread of COVID-19 and continued
the roll-out of vaccinations for employees
Š Sustainability is being integrated across our business through
the implementation of our new Sustainability Framework
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
The turnaround of Petra includes the implementation of our new
Operating Model. Following an inclusive process, we have also defined
a new Purpose – Creating Abundance from Rarity – which describes
why we do what we do at Petra and the positive impact we would
like to have on our stakeholders. We are going through an inclusive
process, involving all of our employees, to refresh our culture.
Remuneration outturns for FY 2022
The outcome of the Group’s annual bonus scorecard was 81.5% of
maximum reflecting the Group’s achievements against free cashflow,
revenue, production, health and safety and ESG targets. The
Executive Directors also performed strongly against their individual
strategic targets for the Year, including the development of the
Company’s new strategy which was outlined at the Investor Day in
February 2022, the execution of the Framework Agreement with the
Government of Tanzania and the Memorandum of Understanding
with Caspian Limited which, once completed, will see the Company’s
shareholding in Williamson reduce to 31.5%. Individually, the Directors
also achieved significant progress on the implementation of the
Independent Grievance Mechanism (IGM) and community projects at
Williamson, the completion of the First Lien refinancing and
completion of the tender offer for the Second Lien notes.
The Committee was satisfied that the overall bonus outcomes for the
Executive Directors of 78.6% and 77.6% of maximum were a fair and
balanced reflection of the results for the Year.
As a result of the strong operational progress made during the
performance period, the formulaic outcome of the PSP scorecard
was 40.9% of maximum for the awards relating to the three-year
performance measurement period FY 2020 to FY 2022. Despite
good progress in many SED areas over the performance period, the
Committee determined that the outturn for the SED element should
be 0% to reflect the historical human rights allegations at the
Williamson mine announced by the Company in 2020. Page 8 in the
CEO’s letter outlines the progress we have made in establishing the
Independent Grievance Mechanism and on the community projects at
the Williamson mine. The Committee considered the overall formulaic
outcome of 40.9% to be fair and reasonable. The PSP awards were
granted prior to the Company’s Restructuring that completed in
March 2021. The value of participants’ awards was significantly, and
appropriately, impacted by the fall in share price resulting from the
Restructuring, aligning with shareholders’ experience. Taking into
account the vesting level and the fall in share price, the value of the
vested shares is c.5% of the maximum face value at the time of grant.
The Committee considers that the Remuneration Policy operated as
intended in respect of FY 2022, and consider that the improved levels
of incentive outturns align with Petra’s performance.
Salary increases
Whilst the Committee determines the pay for Senior Executives
at the Company, we also have oversight for the pay and policies
of the wider workforce. We are cognisant of the challenges posed
by increasing bills and the cost-of-living crisis. Management have
invested heavily in the fixed pay of the workforce with a focus
on lower paid staff and those most impacted by rising costs. The
average increase to fixed pay for the South African workforce was
10.1%, with an average increase for the lowest paid South African
employees of 14.7%.
During the Year the Committee undertook an annual review of
Executive Director salaries. As part of the review the Committee took
into account the performance of both Directors, and the performance
of Petra. As set out above, this was a year of significant achievement
for Petra, and Mr Duffy and Mr Breytenbach have successfully
navigated Petra through its recent challenges and this exceptional
performance was noted in the external Board evaluation which was
carried out in Q4 of FY 2022. Taking into account the performance of
both Mr Duffy and Mr Breytenbach in their respective roles, as well
as the very strong performance of the Company, the Committee
decided to award salary increases of 5%. This is significantly below
both the average increase for the workforce and the increases
awarded to our lowest paid employees. The increase recognises the
considerable achievements to date and the continued importance of
both Executive Directors to the ongoing execution of Petra’s strategy.
Performance measures for FY 2023
Annual bonuses for FY 2023 will continue to be based on a balanced
scorecard linked to the financial, operational and strategic objectives
of the Group, and a portion of the Executive Directors’ bonuses will
continue to be linked to the achievement of individual strategic
targets. The Committee reviews the metrics and weightings on an
annual basis and has made minor adjustments to the weightings
for FY 2023 to ensure that they are aligned with Petra’s strategic
priorities for the Year. Further details are on page 124.
The Committee has reviewed the operation of the PSP and made
a number of changes to the performance measures for awards
for FY 2023. Considering the importance of ESG to Petra and our
stakeholders, a portion of the PSP will now be based on our long-term
ESG performance (see below for more details). The Committee also
believes that FY 2023 is an appropriate time to reintroduce relative
TSR as a performance metric. Relative TSR was used historically at
Petra but discontinued in light of the challenges facing our share
price. Taking into account that our share price has now stabilised the
Committee considers that it is the right time to re-introduce relative
TSR to our forward-looking PSP awards. Therefore, in addition to the
existing absolute TSR targets, TSR will once again be measured relative
to a sector peer group of international miners. Targets for both the
absolute and relative TSR measures will be set with reference to the
30-day VWAP to the date the awards are granted. For simplicity and
to align with typical market practice, PSP performance will now be
assessed on a straight-line basis between threshold and maximum
with the removal of the previously used ‘target’ performance.
ESG metrics
We recognise the importance of responsible ESG management to
our stakeholders, as well as its positive impact on the financial and
operational performance of our Company. As a result, ESG metrics
have formed part of the annual bonus scorecard for a number
of years. The Committee has refined our bonus scorecard and for
FY 2023 bonuses will be partly based on the following ESG metrics:
Š Safety and health: safety statistics and employee health and wellness
Š Governance and social: human rights, stakeholder engagement
(including resolution of grievances), commitments related to our
Social and Labour Plans in South Africa, diversity and inclusion
Š Environment: environmental incidents, water and energy
efficiency, concurrent rehabilitation
In order to align rewards with the delivery of our longer-term ESG
priorities, the Committee has also introduced ESG metrics into the
PSP scorecard. For FY 2023, the scorecard will include a metric linked
to achieving our ambitions on reducing greenhouse gas emissions.
This will include the development of an execution roadmap and an
assessment of the Group’s performance against Board approved
targets by FY 2025.
Executive Directors – Enhanced PSP Award
FY 2022 was a year of significant achievement at Petra, and this
turnaround would not have been possible without the exceptional
performance of our management team, in particular the leadership
shown by our Executive Directors. In its determinations for this Year,
the Remuneration Committee was very conscious about the
marketability of a management team with a track record of
turnaround. We recognise that one of the Committee’s key
responsibilities is ensuring that management is incentivised and
retained to deliver on Petra’s future growth ambitions.
Annual Report and Accounts 2022 Petra Diamonds Limited
123
Corporate Governance
Directors’ Remuneration Report continued
Executive Directors – Enhanced PSP Award continued
The Committee carefully considered how to achieve this and have
concluded that the most appropriate route would be via an Enhanced
PSP Award. This approach seeks to achieve two important objectives:
it increases lock-in of our well-regarded management team, while at
the same time, and importantly, it aligns to continued Petra performance
and hence our shareholders’ interests. Our PSP awards last year were
150% of salary for both the CEO and the CFO, out of a maximum of
200% that is permitted under the Directors’ Remuneration Policy.
Our proposed Enhanced PSP Award for FY 2023 will be 300% of
salary for the CEO and 225% of salary for the CFO. This enhanced
award level will apply for FY 2023 only. We consider these to be
appropriate levels to retain our high-calibre Executive Directors, to
recognise their exceptional performance and to align them with
delivering Petra’s long-term strategic ambitions. The vesting of PSP
awards is subject to stretching financial, operational, ESG and TSR
targets, with full vesting requiring exceptional performance and
resulting in significant value for shareholders. We believe that the
enhanced awards are appropriate and in the interests of Petra’s
shareholders and wider stakeholders.
In order to make the enhanced award, at the AGM shareholders are
being asked to vote on an amendment to the shareholder-approved
Directors’ Remuneration Policy and the Performance Share Plan rules.
The Committee greatly values the input of our shareholders and
therefore we are consulting with our largest shareholders so that
their views are taken into account. No awards will be made until this
consultation process is undertaken.
To ensure that the wider Exco team is aligned and subject to the
shareholder consultation process above, an Enhanced Award for FY
2023 will be extended to all Exco members.
Non-Executive Director Fees
Mr Hill was appointed as Petra’s Chair in March 2020 and his fee has
been unchanged since appointment. Since joining Petra, Mr Hill has
made significant contributions, particularly in relation to the
Restructuring, addressing the human rights allegations at Williamson
and more recently in relation to the development of the Company’s
new strategy. In light of these contributions and Mr Hill’s significant
time commitments as Petra’s Chair, the Committee determined that it
was in the Company’s shareholders’ interests that his fees be
increased by 9.1% to £180,000.
Fees for NEDs are determined by the Chair and the Executive Directors
and are reviewed on an annual basis. Following their review, the Chair
and Executive Directors determined that it would be appropriate to
increase NED fees for FY 2023. The overall fee increases represent an
increase in NED fees of 5.4%, which is below the average increase for
the workforce. Further details are provided on page 130.
AGM
Last year the Committee was pleased to note that 95.11% of
shareholders voted in favour of the Directors’ Annual Remuneration
Report, and 99.99% of shareholders voted in favour of our new
Performance Share Plan.
We hope that our shareholders will continue to support our approach
to Directors’ remuneration at the Company’s upcoming AGM.
This report explains how the Group’s Remuneration Policy was implemented during FY 2022 and how it will be applied for FY 2023:
Overview of policy and how it will be applied for FY 2023
Varda Shine
Remuneration Committee Chair
10 October 2022
Salary
Influenced by role, individual
performance, experience and
market positioning.
Benefits
Provision of an appropriate level of
benefits for the relevant role and
local market.
Annual bonus
Linked to key financial, operational, ESG
and strategic goals of the Company,
which reflect critical factors of success.
During the Year, the Remuneration Committee reviewed the salaries of Executive Directors and determined to award the
following increases for FY 2023. Further context is set out in the Letter from the Chair of the Remuneration Committee.
With effect from 1 July 2022, Executive Director base annual salaries are as follows:
Š Richard Duffy – £456,750 (FY 2022: £435,000)
Š
Jacques Breytenbach – £304,500 (FY 2022: £290,000)
The average fixed pay increase for the workforce in South Africa for FY 2023 is around 10.1% in local currencies. Taking into
account cost of living pressures the budgeted increases have been focused on the lower end of the organisation, with an
average effective fixed pay increase for these populations in South Africa of 14.7%.
Executive Directors receive:
Š A benefits allowance of 10% of salary in lieu of both pension and other benefits and, at the Directors’ election, the
option to participate in the Company’s defined contribution pension fund, up to the maximum contribution in line with
the wider workforce, funded from this allowance
Š Group life, disability and critical illness insurance
Maximum opportunity for FY 2023 of 150% of salary.
The Committee has reviewed the annual bonus targets for FY 2023 to ensure that they continue to be aligned to our
strategic priorities.
The bonus scorecard for FY 2023, which will have an overall weighting of 70%, will be linked to:
Š ESG objectives (incorporating both HSE and SED measures) (30%)
Š Free cashflow generation (20%)
Š Cost and capital management (40%)
Š Carats produced and revenue realised (10%)
The remaining 30% of the Executive Directors’ bonuses will be linked to the achievement of individual strategic targets.
Annual bonus will be subject to a clawback provision, which may apply for up to two years following the end of the
performance period.
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Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Performance Share Plan
Aligned with shareholders
and motivating the delivery
of long-term objectives.
For FY 2023 the Remuneration Committee intends to grant enhanced PSP awards for the reasons set out in the Letter from
the Remuneration Committee Chair. Subject to consulting further with shareholders and receiving approval at the AGM,
the Committee intends to grant an award of 300% of salary to the CEO and an award of 225% of salary to the CFO.
Performance for the FY 2023 award will be measured over a three-year period to 30 June 2025, subject to the following
performance measures:
Š
Absolute total shareholder return (TSR) performance (15%)
Š TSR relative to FTSE 350 mining companies and listed diamond mining peers (15%)
Š
Š
Š
Cashflow generation and net debt movement, set with reference to approved business plans (30%)
Operational and efficiency measures, set with reference to approved business plans (25%)
Sustainability performance, linked to our greenhouse gas reduction ambitions (15%)
PSP awards are subject to a two-year holding period post-vesting to further align executive remuneration
to shareholder interests.
The PSP is subject to a clawback provision, which applies for up to two years following the end of the relevant
performance period.
Shareholding guidelines
Aligned with shareholders.
Shareholding guidelines of 200% of salary.
Post-employment shareholding requirements apply.
The following table provides details of how the Remuneration Policy addresses the factors set out in Provision 40 of the 2018 UK Corporate
Governance Code:
Clarity
Remuneration arrangements should
be transparent and promote effective
engagement with shareholders and
the workforce.
Simplicity
Remuneration structures should
avoid complexity and their rationale
and operation should be easy
to understand.
Risk
Remuneration arrangements should
ensure reputational and other risks
from excessive rewards, and
behavioural risks that can arise
from target-based incentive plans,
are identified and mitigated.
Predictability
The range of possible values of rewards
to individual Directors, and any other
limits or discretions, should be
identified and explained at the time of
approving the policy.
Proportionality
The link between individual awards, the
delivery of strategy and the long-term
performance of the Company should be
clear. Outcomes should not reward
poor performance.
Alignment to culture
Incentive schemes should drive
behaviours consistent with Company
purpose, values and strategy.
The Committee is mindful of ensuring that our remuneration arrangements are clear and transparent for both participants
and shareholders.
When considering changes to our Remuneration Policy the Committee engaged with major shareholders and key proxy
bodies and took their comments into account.
Petra’s remuneration framework is simple, consisting of fixed remuneration, an annual bonus and a single Long Term
Incentive Plan.
The Committee takes risk factors into account when setting and assessing remuneration arrangements. The performance
framework includes a balanced range of measures which include production, financial and ESG measures.
The remuneration framework provides the Committee with discretion to adjust incentive outturns or to clawback
remuneration in certain circumstances.
Our Policy provides details of the maximum opportunity for elements of variable pay.
The scenario charts on page 124 of the 2020 Directors’ Remuneration Policy in the Company’s 2020 Annual Report provide
four illustrations of the application of our Policy for differing levels of performance.
In order to align Executive pay with performance, two of the overarching principles of our Policy are that remuneration
packages should be weighted towards performance-related pay and that performance targets should be suitably demanding.
The Committee has a strong track record of applying discretion to amend awards where they do not consider them to be
appropriate in the context of performance.
The Company’s values, purpose and culture are reflected in remuneration outcomes. Salary increases for Executives
typically take account of the wider workforce. Pension benefits are aligned to the workforce. From FY 2023, both the
annual bonus and PSP include metrics linked to Petra’s ESG and sustainability strategy, including health, safety, social and
environmental performance.
Annual Report and Accounts 2022 Petra Diamonds Limited
125
Corporate Governance
Directors’ Remuneration Report continued
Single figure of total remuneration
The following table gives a breakdown of the remuneration received by the Executive Directors for FY 2022 and FY 2021. 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.
Salary
Benefits1
Retirement benefits1
Total fixed remuneration
Annual bonus – paid in cash
Annual bonus – deferred to shares
Long-term incentives2,3
Total variable remuneration
Total
Richard Duffy
Chief Executive Officer
Jacques Breytenbach
Chief Financial Officer
2022
2021
2022
2021
435,000
370,800
290,000
265,200
53,533
44,165
—
—
24,157
11,532
22,770
8,818
488,533
414,965
325,689
296,788
384,649
292,998
253,170
209,555
128,216
37,970
97,666
—
84,390
14,101
69,852
—
550,835
390,664
351,661
279,407
1,039,368
805,629
677,350
576,195
£
£
£
£
£
£
£
£
£
£
1. Executive Directors are provided with a 10% benefits allowance and may use a portion of such allowance, limited to 7.5% of salary, to contribute to the Company’s outsourced defined contribution
pension plan which is also available to the Group’s South African workforce. No additional retirement benefits are provided. In addition, the Executive Directors are members of the Group’s
management life insurance scheme (which includes disability and critical illness cover).
2. The performance period for the PSP awards granted in October 2019 ended on 30 June 2022. The awards will vest at 40.9% of maximum (see page 128). The values included in the table above
are based on the three-month volume weighted average share price to 30 June 2022 of 114.4 pence. As this is below the share price at grant (adjusted for the 50:1 share consolidation that became
effective in November 2021) none of the amounts in the table above are attributable to share price appreciation.
3. Mr Duffy was granted a PSP award on appointment that was subject to a consolidated net debt:consolidated EBITDA ratio targets. See page 128 for further details. The value included in the
table above is based on the three-month volume weighted average share price to 30 June 2022 of 114.4 pence. As this is below the share price at grant (adjusted for the 50:1 share consolidation
that became effective in November 2021) none of the amount in the table above is attributable to share price appreciation.
Additional notes to the remuneration table
Salary
During the Year, the Remuneration Committee reviewed the salaries of Executive Directors and gave particular consideration to the salary
increases throughout Petra in light of the current cost-of-living pressures. The following table sets out details of the workforce increases
effective for FY 2023:
Average fixed pay increase (entire South African workforce)
Average fixed pay increase (lowest paid levels of the South African workforce)
10.1%
14.7%
Taking into account the exceptional performance of both Mr Duffy and Mr Breytenbach in their respective roles, the Committee decided to award
salary increases of 5%. This is significantly below both the average increase for the South African workforce and the increases awarded to our
lowest paid employees, as set out in the table above. The Committee determined that the following base salaries would apply for FY 2023:
Richard Duffy
Jacques Breytenbach
Base
salary to
1 July 2021
£
435,000
290,000
Base
salary from
1 July 2022
£
456,750
304,500
Benefits
In lieu of pension plan participation and other benefits, the Executive Directors receive a benefit cash supplement of 10% of salary. Other than
membership of the Group management life insurance scheme (which includes disability and critical illness), Executive Directors are not
provided with any further benefits and may elect, at their own discretion, to participate in the Company’s defined contribution pension
scheme that applies to the Group’s South African workforce.
Annual bonus
The annual bonus plan is designed to reward and incentivise performance over the financial year. The bonus framework uses a balanced
scorecard approach, linked to the financial, operating and strategic objectives of the Company (with a weighting of 70% of Executive
Directors’ bonus award), and individual strategic performance measures with a weighting of 30%. The maximum bonus for Executive Directors
for delivery of exceptional performance is capped at 150% of base salary. Prior to determining the final bonus outcomes, the Committee
considers all-round performance to ensure that actual bonuses are appropriate.
126
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
For FY 2022, the Committee’s assessment of performance against the balanced scorecard of key measures and milestone achievements during
the Year included the following key achievements and targets. The Committee and the Board have considered the retrospective disclosure of
targets and have disclosed targets where this is not considered to be commercially sensitive.
PERFORMANCE METRICS
PERFORMANCE AND TARGETS
Operational performance and profitability
(including free cashflow generation,
revenue, capex and cost management)
ESG measures (including health, safety,
social and environmental performance)
Free cashflow (US$m)
Revenue (US$m)
Carats
Cost and capex
Threshold
FY 2022
Target Maximum performance
58.5
386.6
2,952
6
68.9
454.8
3,473
8
75.7
500.3
3,820
10
230.0
585.2
3,354
8.5
LTIFR1
TIFR1
ESG scorecard2
Threshold
FY 2022
Target Maximum performance
0.41
0.79
6
0.37
0.72
8
0.30
0.58
10
0.22
0.51
8.5
1. The outcome of the health and safety measures for FY 2022 was also subject to
maintaining zero fatalities for the Year which was achieved.
2. The ESG scorecard includes an assessment of performance against environmental,
social and diversity, and inclusion targets. The outcome was also subject to there
being no major environmental incidents nor any major social incidents, which were
both achieved.
WEIGHTING
VESTING
OUTCOME
70%
56.1%
30%
25.4%
Bonus Award – Group Scorecard (70% weighting)
Bonus Award to Executive Directors – Group Scorecard Contribution
Personal Performance Measures – Executive Directors
Performance metrics
Portfolio strategy
Williamson Framework Agreement
and memorandum of understanding
Capital structure
Personal Performance Measures
TOTAL BONUS AWARD FY 2022
Weighting
(CEO)
Weighting
(CFO)
15%
10%
5%
30%
100%
15%
5%
10%
30%
100%
Performance
assessment
outcome
80%
70%
50%
100%
70%
81.5%
57.1%
CEO
12.0%
7.0%
2.5%
21.5%
78.6%
CFO
12.0%
3.5%
5.0%
20.5%
77.6%
Post Year end, the Committee carefully considered the formulaic annual bonus outturns to ensure that they are appropriately aligned with
the underlying performance of the Company and the Directors. Overall, the Committee considered that the annual bonus outturn of 78.6%
and 77.6% of maximum for the CEO and CFO, respectively, were appropriate in respect of FY 2022 and did not apply further discretion.
Annual bonus for FY 2023
For FY 2023, the Committee will continue to use a scorecard framework to determine annual bonuses, as set out below. In line with the
approach used for FY 2022, 30% of the Executive Directors’ bonuses will be linked to the achievement of individual strategic targets.
Performance measure
Operational performance and profitability (including free cashflow generation, carat production,
revenue, capex and cost management)
ESG Measures (including environmental efficiencies, social & community, diversity and inclusion,
and health and safety performance)
Scorecard weighting
70%
30%
As noted above, the bonus framework includes both measurement against pre-defined targets and the exercise of judgement, within a scoring
framework which uses measurable and defined objectives.
Annual Report and Accounts 2022 Petra Diamonds Limited
127
Corporate Governance
Directors’ Remuneration Report continued
Long-term incentives – Performance Share Plan
Annual long-term share awards are granted under the Performance Share Plan, with vesting conditional on the achievement of both
shareholder return and operational measures. The plan was originally approved by shareholders at the January 2012 AGM and therefore
expired during FY 2022. Shareholders approved a revised set of rules at the 2021 AGM. The resolution was passed with 99.9% votes in favour.
FY 2020 to FY 2022 award – vesting outcome
The long-term incentive outturn post-period-end relates to the awards granted under the PSP in October 2019 subject to performance
measures assessed over three years. These awards were linked to total shareholder return (50%) and to operational performance and project
delivery (50%). Following the end of the performance period, the Committee assessed performance achieved against the pre-determined
measures and targets.
Total shareholder return (50%)
Performance measure
Ranked TSR vs FTSE 350
mining companies and
diamond mining peers
Absolute TSR growth
(share price)
Weighting
25%
0% of
element vests
25% of
element vests
75% of
element vests
100% of
element vests
Actual
performance
n/a
Median 1
n/a
Upper quartile
Below median
(0% vested)
Below threshold
(0% vested)
25%
£8.00 1
£12.50
£17.50
£25.00
1. No portion of an element vests for performance below this threshold level.
The TSR targets were set in FY 2020 prior to the Company’s Restructuring. The absolute TSR share price targets have been increased to reflect
the 50:1 share consolidation that became effective in November 2021. The Committee is comfortable that the restated targets are no easier
or harder to achieve than the original targets. Both elements linked to TSR lapsed in full, reflecting both internal challenges and external
macro factors.
Operational performance and project delivery (50%)
Operational performance/efficiency
and project delivery
Free cashflow generation (Project 2022)
1. No portion of an element vests for performance below this threshold level.
Weighting
25% of
element vests 1
80% of
element vests
100% of
element vests
Actual
performance
25%
25%
6/10
8/10
10/10
Overall 6.3/10
US$150m
US$200m
US$250m
US$265.4m
Operational performance was measured considering an assessment of performance against HSE, SED (Social, Ethics and Diversity), revenue,
costs and capex objectives. The objectives are approved by the Committee and the Board. Despite good progress in many SED areas the
Committee determined that the outturn for the SED element should be 0% of maximum to reflect the historical human rights allegations at
the Williamson mine that the Company announced in 2020. Further details of performance at each site are set out in the Operational Review
on pages 46 to 57.
Following the assessment of operational performance and project delivery, this element can be varied by up to 15% (upwards or downwards)
to reflect operational efficiency, including factors such as operating cashflow generation, production, revenue, costs and profitability, overall
mine management and other metrics considered appropriate by the Committee. The Committee made no further adjustment to the award
and the final vesting of the operational performance and project delivery metrics was 40.9% (out of 50%).
On the basis of the above performance the total vesting for the PSP awards was 40.9% of maximum. The FY 2020 PSP awards were granted
prior to the Company’s Restructuring that completed in March 2021. As a result of the Restructuring, the value of participants’ awards was
significantly impacted by the fall in share price, in-line with the experience of shareholders. Taking into account the vesting level and the fall
in share price, the value of the vested shares is 5.3% of the maximum face value at the time of grant.
Appointment award for the Chief Executive Officer – vesting outcome
On appointment, Mr Duffy was granted a PSP award equivalent to c.40% of salary. Vesting of this award was subject to the Company
achieving a consolidated net debt:consolidated EBITDA ratio of not more than 2.5 times. The Company’s consolidated net debt:consolidated
EBITDA ratio for the Year ended 30 June 2022 was 0.15 times and therefore this award vested in full. The Committee considered that this
outcome was appropriate and did not apply discretion to the award. The award was granted prior to the Company’s Restructuring that
completed in March 2021. As a result of the Restructuring, the value of the award was significantly impacted by the fall in share price, in-line
with the experience of shareholders. Taking into account the 100% vesting level offset by the fall in share price, the value of the vested shares
is 12.2% of the maximum face value at the time of grant.
128
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
FY 2023 awards
The following tables set out the performance measures and targets that will apply for FY 2023 awards, which are linked to the Company’s
long-term strategic priorities.
Summary of performance targets: FY 2023–FY 2025 awards
PERFORMANCE MEASURES
WEIGHTING
Absolute TSR performance
15%
Š This element is based on the following absolute share price growth targets
Absolute TSR performance
25% of
element vests 1
100% of
element vests
10% CAGR
25% CAGR
1. No portion of an element vests for performance below this threshold level. CAGR reflects targeted Compound Annual
Growth Rate over the three year period.
Relative TSR vs FTSE 350 mining
companies plus diamond mining peers
15%
Š This element is linked to relative TSR measured against other mining peers
Relative TSR vs FTSE 350 and diamond
mining companies
1. No portion of an element vests for performance below this threshold level.
25% of
element vests 1
100% of
element vests
Median
Upper quartile
Cashflow generation and net debt
30%
Š This element is linked to the Company’s ability to generate positive operational free cashflow (after capex)
and the resultant improvement in the net debt:EBITDA ratio over the three-year measurement period
Š The targets were set with reference to the Company’s internal projections
Weighting of
this element
25% of
element vests 1
100% of
element vests
Operational free cashflow
Net debt/(Net cash): EBITDA ratio
50%
50%
US$110.6m
US$271.7m
1.0x
-0.2x
1. No portion of an element vests for performance below this threshold level.
Operational performance
and efficiencies
25%
Š This element is linked to the management of the Company’s cashflow generation and resultant net debt profile
Š The assessment at the end of the period is based on an agreed framework with vesting based on
performance against approved three-year business plans for both production measures (tonnes and carats),
and the weighted average score out of ten across all mines for opex and capex efficiency measures; the
objectives for each mine are approved by the Board
Weighting of
this element
25% of
element vests 1
100% of
element vests
Cumulative tonnes treated (million)
Cumulative carats recovered
(million)
Opex and capex efficiencies
35%
35%
30%
1. No portion of an element vests for performance below this threshold level.
37.3
9.8
6
43.5
11.5
10
ESG and sustainability
15%
Š This element is linked to the Company’s progress against our long-term GHG reduction ambitions
Š The assessment at the end of the period will be based on the successful development and implementation
of an execution roadmap to 2030 as well as absolute GHG reduction performance in relation to
Board-approved targets
Committee discretion
Š The Remuneration Committee retains discretion to adjust outturns if they are not considered to be
appropriate, taking into account the underlying performance of the Company and Executive Directors over
the performance period
Annual Report and Accounts 2022 Petra Diamonds Limited
129
Corporate Governance
Directors’ Remuneration Report continued
Non-executive Director remuneration
The fee for Mr Hill, Petra’s Chair, has been unchanged since his appointment in March 2020. Mr Hill has made a significant contribution since
joining Petra, particularly in relation to the Restructuring, and the response and remedial actions following the human rights allegations at
Williamson, as well as his contribution since joining to the development of the Company’s new strategy. In light of these contributions and
Mr Hill’s significant time commitments as Petra’s Chair, the Committee determined that it was in the Company’s shareholders’ interests to
make a step change increase to his fee. With effect from 1 July 2022, the Committee has increased his fee from £165,000 to £180,000 per annum.
As Chair, Mr Hill also receives the benefit of membership of the Group’s life insurance scheme.
The other NEDs receive a fixed basic fee for their normal services rendered and fees for other responsibilities such as chairmanship of
Committees and the Senior Independent Director. All fees are payable in cash.
Fees for the NEDs are determined by the Chair and the Executive Directors and are reviewed on an annual basis. The last change to NED fees
was in FY21 when the additional fees for the Senior Independent Director and the Audit and Risk, Remuneration, HSE and SED Committee Chair
fees were reduced in recognition of the position of the business at that time. The basic NED fee was last increased in July 2016. An assessment
of the NED roles shows that there has been a significant increase in the time commitment required to appropriately fulfil their responsibilities.
Taking this into account, the Chair and Executive Directors determined that it would be appropriate to make the following increases for FY 2023:
Š Increasing basic annual fees for NEDs from £56,650 to £58,350
Š Increasing annual fees for the Senior Independent Director, the Audit and Risk Committee Chair and Remuneration Committee Chair from
£10,000 to £12,000. Note that this remains below the level in place prior to the reduction in FY21
Š Increasing annual fees for the HSE Committee Chair and SED Committee Chair from £7,500 to £10,500. Note that this remains below the
level in place prior to the reduction in FY 2021
The fee increases above represent an overall increase in NED fees of 5.4%, which is below the average increase for the workforce.
Independent NEDs do not participate in the Company’s bonus arrangements, share schemes or pension plans, and for FY 2022 (in accordance
with the Company’s normal policy), did not receive any other remuneration from the Company outside of the fee policy outlined above.
Single figure of total remuneration
The following table gives a breakdown of the remuneration received by the NEDs for FY 2022 and FY 2021. 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.
Peter Hill
Chair of the Board of Directors
Varda Shine
Senior Independent Director and Remuneration Committee Chair
Gordon Hamilton
iNED and ARC Chair (retired 19 November 2021)1
Octavia Matloa
iNED and SED Committee Chair
Bernard Pryor
iNED and HSE Committee Chair
Deborah Gudgeon
iNED and ARC Chair (effective 1 July 2021)
Jon Dudas
iNED (effective 1 March 2022)
Matthew Glowasky
NED (stood down 17 May 2022)2
Alex Watson
NED (effective 1 July 2021)3
Johannes Bhatt
NED (effective 1 July 2021)4
Year
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Fees
£
165,000
165,000
76,650
73,835
27,771
68,510
64,150
65,427
64,150
75,427
63,317
—
18,883
—
49,823
17,649
56,650
—
56,650
—
Benefits
£
1,503
1,552
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
£
166,503
166,552
76,650
73,835
27,771
68,510
64,150
65,427
64,150
75,427
63,317
—
18,883
—
49,823
17,649
56,650
—
56,650
—
1. Mr Hamilton retired from the Board at the conclusion of the 2021 AGM on 19 November 2021.
2. Mr Glowasky was appointed to the Board as a non-independent NED pursuant to the nomination rights of Monarch on 10 March 2021, with fees being paid to Monarch directly. Mr Glowasky
stood down as a NED on 17 May 2022.
3. Ms Watson was appointed to the Board as a non-independent NED pursuant to the nomination rights of Franklin Templeton on 1 July 2021.
4. Mr Bhatt was appointed to the Board as a non-independent NED pursuant to the nomination rights of Monarch on 1 July 2021.
130
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Directors’ shareholding and share interests
It is the Company’s policy that each of the Executive Directors holds a meaningful number of Petra shares. The guideline is a minimum
of two years’ basic salary for the applicable Director. Executive share ownership and alignment with shareholders is further supported
by the Company’s bonus deferral and share incentive schemes.
The share interests of the Directors as at 30 June 2022 are detailed below. Mr Breytenbach and Mr Duffy were appointed to the Board
effective 19 February 2018 and 1 April 2019 respectively, and are expected to build their shareholding over the five-year period from
appointment, in line with our policy on shareholding guidelines.
Peter Hill
Richard Duffy2
Jacques Breytenbach3
Varda Shine
Gordon Hamilton4
Octavia Matloa
Bernard Pryor
Deborah Gudgeon
Jon Dudas
Matthew Glowasky5
Alex Watson
Johannes Bhatt
Chair
Chief Executive Officer
Chief Financial Officer
Senior iNED
iNED
iNED
iNED
iNED
iNED
NED
NED
NED
Shareholding as at
30 June 2022
Shareholding as at
30 June 2021
Shareholding
guideline 1
140,000
7,138
11,982
—
—
—
13,000
—
—
—
—
—
—
4,800
4,875
—
4,940
—
—
—
—
—
—
—
n/a
760,490
508,877
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1. Shareholding guideline of 200% of salary based on three-month VWAP to 30 June 2022 of 114.4 pence per share.
2. Post Year end, 17,234 awards made in respect of FY 2020 to FY 2022 under the Company’s PSP and 15,957 awards granted pursuant to the Company’s PSP on Mr Duffy’s appointment are expected
to vest, adding to Mr Duffy’s shareholding.
3. Post Year end, 12,326 awards made in respect of FY 2020 to FY 2022 under the Company’s PSP are expected to vest, adding to Mr Breytenbach’s shareholding.
4. Mr Hamilton retired from the Board at the conclusion of the 2021 AGM on 19 November 2021.
5. Mr Glowasky stood down as a NED on 17 May 2022.
Post-employment shareholding guidelines
Executive Directors are expected to maintain a shareholding for a period of two years post cessation of employment. The expected shareholding
will be the lower of the Executive Directors’ shareholding guideline of two year’s basic salary or their actual relevant shareholding at the date
of termination if lower. This requirement will only apply to shares delivered from incentives from the date of the new Policy. The Committee
may, in exceptional circumstances, allow an Executive Director to reduce this holding guideline to 50% after at least one year from the date
of cessation.
Directors’ interests
As at 30 June 2022, the Directors’ interests in share plans of the Company were as follows:
Breakdown of share plan interests as at 30 June 2022
Richard Duffy
Jacques Breytenbach
Shares
Options
Unvested and
subject to
performance 1
Unvested and
not subject to
performance 2
1,449,544
988,750
112,747
80,638
Vested but
not exercised
Lapsed
in the Year
—
—
—
—
1. This comprises awards made in respect of Mr Duffy’s appointment in 2019 and in respect of FY 2020, FY 2021 and FY 2022 under the Company’s PSP.
2. This comprises outstanding deferred share awards in respect of FY 2021.
Annual Report and Accounts 2022 Petra Diamonds Limited
131
Corporate Governance
Directors’ Remuneration Report continued
Directors’ interests continued
As at 30 June 2022, Executive Directors held the following interests in the 2012 PSP:
Date of
award
Outstanding
at 1 July
2021
Awarded
during
the Year
Vested
during
the Year
Lapsed Outstanding
at 30 June
during
2022 5
the Year
Performance
period 6
Richard Duffy
Total
01/04/2019 1
24/10/2019 2
12/01/2022 3
12/01/2022 4
15,957
42,136
—
—
—
—
638,196
753,255
58,093
1,391,451
Jacques Breytenbach
24/10/2019 2
30,136
—
Total
12/01/2022 3
12/01/2022 4
—
—
456,444
502,170
30,136
958,614
—
—
—
—
—
—
—
—
—
—
—
—
—
15,957
FY 2020–FY 2022
42,136
FY 2020–FY 2022
638,196
FY 2021–FY 2023
753,255
FY 2022–FY 2024
— 1,449,544
—
—
—
—
30,136
FY 2020–FY 2022
456,444
FY 2021–FY 2023
502,170
FY 2022–FY 2024
988,750
1. On appointment, Mr Duffy was granted a PSP award equivalent to ca. 40% of salary. Vesting of this award was subject to the Company achieving a consolidated net debt:consolidated EBITDA
ratio of not more than 2.5 times. Following Year end this award vested at 100%.
2. The performance measures applicable to the awards consist of: (a) TSR relative to FTSE 350 mining and listed diamond companies (25%); (b) absolute TSR (25%); and (c) operational performance
and project delivery (50%). The share price on 24 October 2019 was 7.0 pence; the six-month average share price used to determine these awards was 17.6 pence, as opposed to the 30-day average
price, being 7.5 pence, used historically. Following Year end this award vested at 40.9%.
3. The performance measures applicable to the awards consist of: (a) absolute TSR (one-third); (b) cashflow generation and net debt (one-third); and (c) operational performance and efficiencies
(one-third). The closing share price on 12 January 2022 was 74 pence; the 60-day VWAP used to determine these awards was 86.5 pence. The awards are capped at 400% of annual salary.
4. The performance measures applicable to the awards consist of: (a) absolute TSR (one-third); (b) cashflow generation and net debt (one-third); and (c) operational performance and efficiencies
(one-third). The closing share price on 12 January 2022 was 74 pence; the 60-day VWAP used to determine these awards was 86.5 pence.
5. Interests in this column have been adjusted to reflect the 50:1 share consolidation that became effective in November 2021.
6. Performance periods with respect to operational performance metrics are measured on respective financial years’ results, whilst the relevant TSR measurements are based on returns from date
of award to date of final vesting.
External non-executive directorships
Neither of the Company’s Executive Directors hold a directorship at another listed company.
Other disclosures
Performance graph
The graph below shows a comparison between the TSR for Petra shares for the ten-year period to 30 June 2022 and the TSR for the companies
comprising the FTSE 350 Mining Index over the same period. This index has been selected to provide a relevant sector comparator to Petra.
The TSR measure is based on a 30-day trading average.
Total shareholder return
300
200
100
0
June
12
June
13
June
14
June
15
June
16
June
17
June
18
June
19
June
20
June
21
June
22
X Petra Diamonds
X
FTSE 350 Mining Index
Source: Datastream.
132
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Table of historical data for the Chief Executive Officer
Before the Company stepped up to the Main Market, Petra operated a different remuneration structure. Prior to FY 2012, the Company
granted share options, rather than the more conventional PSP awards with set performance criteria. Therefore, it is not possible to provide
fully comparable data for awards across this ten-year period.
FY 2013
FY 2014
FY 2015
FY 2016
FY 2017
FY 2018
FY 2019 2
FY 2020
FY 2021
FY 2022
Johan
Dippenaar
Richard
Duffy
Single figure of total
remuneration (£)
Annual bonuses as
a % of maximum
Long-term
incentives (PSP
vesting) as a %
of maximum1
Long-term
incentives (LTSP
vesting) as a %
of maximum
804,361 1,075,225
999,034 1,137,521
545,687
550,801
449,172 145,222 384,256
805,629 1,039,368
72.5%
85.5%
40.0%
55.0%
11.4%
17.6%
23.7%
29.6%
0.0%
58.9%
78.6%
—
62.2%
57.0%
55.0%
24.9%
17.5%
16.6%
n/a
n/a
n/a
40.9%3
—
n/a
42.5%
42.3%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1. Prior to FY 2012, the Company granted share options to Executive Directors. For the purposes of the single figure for FY 2013 in the table above, these options have been split into three equal
tranches and valued based on the notional gain as at the first, second and third anniversaries of the original grant date.
2. Mr Dippenaar departed effective 31 March 2019 and the table reflects his remuneration (excluding payment in lieu of notice) for the nine-month period to date of his departure. Mr Duffy joined
as Chief Executive effective 1 April 2019 and the above table reflects his remuneration for the three-month period to 30 June 2019.
3. The vesting outcome for FY 2022 reflects the percentage vesting for FY 2020 to FY 2022 PSP awards only. In addition, Mr Duffy was granted a PSP award equivalent to ca. 40% of salary
on appointment. Vesting of this award was subject to the Company achieving a consolidated net debt:consolidated EBITDA ratio of not more than 2.5 times for the Year ended 30 June 2022.
This was achieved and the award vested in full post Year end.
Annual Report and Accounts 2022 Petra Diamonds Limited
133
Corporate Governance
Directors’ Remuneration Report continued
Annual percentage change in remuneration of the Directors
The following table sets out the annual percentage change in salary, benefits and bonus in respect of each Director and the average
for the Company’s employees (on a full-time equivalent basis).
Average Company employee1
5.0%
13.0%
10.0%
2.4%
0%
100%
10.1%
7.0% 25.7%
FY 2020 Year-on-year change
in pay
FY 2021 Year-on-year change
in pay
FY 2022 Year-on-year change
in pay
Salary
Benefits
Bonus
Salary
Benefits
Bonus
Salary Benefits
Bonus
Executive Directors
Mr Duffy
Mr Breytenbach
Non-executive Directors
Chief Executive
Officer
Chief Financial
Officer
Mr Hill
(appointed 1 April 2020)
Non-executive
Chair
Ms Shine
Senior
Independent
Director
Mr Hamilton (retired
19 November 2021)
Ms Matloa
Mr Pryor
Ms Gudgeon
(appointed 1 July 2021)
iNED
iNED
iNED
iNED
Jon Dudas
(appointed 1 March 2022)
iNED
Mr Glowasky
(stepped down
17 May 2022)
Alex Watson
(appointed 1 July 2021)
Johannes Bhatt
(appointed 1 July 2021)
NED
NED
NED
(8.3%) 2
(2.4%)
(100%)
0% 2
0.6%
100%
17.3%
21.2% 31.3%
(6.5%) 2
0.9%
(100%)
0% 2
0.6%
100%
9.4%
13.0% 20.8%
n/a
n/a
n/a
0% 3
n/a
n/a
0%
(3.2%)
n/a
(2.0%)
n/a
n/a
33.0% 4
n/a
n/a
3.8%
n/a
n/a
(8.9%)
5.7%
(6.3%)
n/a
n/a
n/a
n/a
n/a
n/a
(11.5%)
(0.7%)
18.4% 5
n/a
n/a
n/a
n/a
n/a
n/a
(1.1%)7
(2.0%)
(15.0%)6
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
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
n/a
n/a
2.7%7
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
n/a
n/a
n/a
1. Average employee compensation is calculated using all South African employees in the Group (excluding Executive Directors), as the parent company employs only a small number of employees.
The results were calculated by dividing the actual salaries, benefits and bonuses paid out during the Year by the average number of employees.
2. The base salaries for Mr Duffy and Mr Breytenbach of £370,800 and £265,200 respectively remained unchanged during FY 2021 and FY 2020.
3. Mr Hill’s base fees as Non-executive Chair for FY 2022, FY 2021 and FY 2020 (pro rata) was £165,000.
4. Ms Shine assumed the role of Senior Independent Director on 17 November 2020.
5. Mr Pryor received an additional fee of £10,000 in FY 2021 as chair of the Tunajali Committee.
6. Mr Pryor ceased to receive a fee as Chair of the Tunajali Committee when it was disbanded in May 2021 which explains the reduction in his fees for FY 2022 compared to FY 2021.
7. FY2022 Year-on-year change in pay for Mr Hamilton and Mr Glowasky are pro-rata based on their respective termination dates.
134
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Relative importance of spend on pay
The following table sets out the percentage change in payments to shareholders and overall expenditure on pay across the Group.
Payments to shareholders
Group employment costs
Service contracts
Director
Role
FY 2022
US$m
Nil
146.0
FY 2021
US$m
Nil
103.5
Date current
engagement
commenced
Expiry of
current term
Executive Directors
Mr Duffy
Mr Breytenbach
Non-executive Directors
Mr Hill
Ms Shine
Mr Hamilton
Ms Matloa
Mr Pryor
Ms Gudgeon
Mr Dudas
Mr Glowasky
Ms Watson
Mr Bhatt
Chief Executive Officer
Chief Financial Officer
1 April 2019
19 February 2018
n/a
n/a
Non-executive Chair
Senior Independent Director
1 January 2020
1 January 2022
31 December 2022
31 December 2024
Independent Non-executive Director
29 November 2020
19 November 20211
Independent Non-executive Director
10 November 2020
9 November 2023
Independent Non-executive Director
1 January 2022
31 December 2024
Independent Non-executive Director
1 July 2021
30 June 2024
Independent Non-executive Director
1 March 2022
29 February 2024
Non-Independent Non-executive Director
1 July 2021
17 May 20223
Non-Independent Non-executive Director
1 July 2021
Non-Independent Non-executive Director
1 July 2021
n/a2
n/a2
Change
%
—%
41.1%
Notice period
by Company
or Director
12 months
12 months
1 month
1 month
—
1 month
1 month
1 month
1 month
—
n/a 2
n/a 2
1. Mr Hamilton retired from the Board at the conclusion of the 2021 AGM.
2. Mr Bhatt was nominated as a Non-Independent, Non-executive Director by Monarch in accordance with the Nomination Agreement between it and the Company. Similarly, Ms Watson was
nominated as a Non-Independent, Non-executive Director by Franklin Templeton Investment Management Limited in accordance with the Nomination Agreement between it and the Company.
The term for each of Mr Bhatt and Ms Watson as Non-Independent, Non-executive Directors expires with immediate effect when the applicable Nomination Agreement terminates. The applicable
Nomination Agreement terminates when the nominating shareholder holds less than 5% of the shares in Petra.
3. Mr Glowasky stepped down from the Board on 17 May 2022.
Membership of the Committee
The Committee members for FY 2022 were Ms Shine, Mr Hamilton (retired 19 November 2021), Mr Pryor, Ms Matloa, Ms Gudgeon
and Mr Dudas (effective 1 March 2022).
The Committee is responsible for determining on behalf of the Board and shareholders:
Š The Company’s general policy on the remuneration of the Executive Directors, the Chair and the Senior Management team
Š The total individual remuneration for the Chair, Executive Directors and Senior Management including base salary, benefits, performance
bonuses and share awards
Š The design and operation of the Company’s share incentive plans
Š Performance conditions attached to variable incentives
Š Service contracts for Executive Directors
Š Oversight of Group-wide workforce remuneration
The full Terms of Reference for the Remuneration Committee have been approved by the Board and are available on the Company’s website
at https://www.petradiamonds.com/about-us/corporate-governance/board-committees.
Where appropriate, the Chair and Executive Directors attend Committee meetings to provide suitable context regarding the business.
Individuals who attend meetings do not participate in discussions which determine their own remuneration.
Annual Report and Accounts 2022 Petra Diamonds Limited
135
Corporate Governance
Directors’ Remuneration Report continued
External advisers
The Committee engages the services of Deloitte LLP (Deloitte) to provide independent advice to the Committee relating to remuneration
matters. Deloitte is a member of the Remuneration Consultants Group and, as such, voluntarily operates under the code of conduct in relation
to executive remuneration consulting in the UK. The Committee is satisfied that the advice it has received from Deloitte during the Year has
been objective and independent. The fees paid to Deloitte for work carried out in FY 2022 for the Committee totalled £38,450 (FY 2021: £66,900)
and were based on a time and materials basis.
During the Year, Deloitte also provided unrelated tax and general advisory services to the Company. BDO LLP remains the Group’s auditors.
Statement of shareholder voting
The voting outcomes for the 2021 Directors’ Remuneration Report and 2020 Directors’ Remuneration Policy Report were as follows:
2021 Directors’ Remuneration Report
4,941,886,501
95.11% 253,834,305
4.89%
5,195,720,806
307,053
2020 Directors’ Remuneration Policy1
255,716,046
99.98%
40,422
0.02%
255,756,468
9,010
1. The voting figures in respect of the 2020 Directors’ Remuneration Policy were prior to the share consolidation effective 29 November 2021.
For
% for
Against
% against
Total
votes cast
Withheld
Varda Shine
Remuneration Committee Chair
10 October 2022
136
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Financial Statements
138 Directors’ Responsibilities Statement
139 Independent Auditor’s Report
146 Consolidated Income Statement
147 Consolidated Statement
of Other Comprehensive Income
148 Consolidated Statement
of Financial Position
149 Consolidated Statement of Cashflows
150 Consolidated Statement
of Changes in Equity
151 Notes to the Annual Financial Statements
Annual Report and Accounts 2022 Petra Diamonds Limited
137
Financial Statements
Directors’ Responsibilities Statement
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. The Directors have elected to prepare the Group
Financial Statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.
In preparing the Financial Statements, the Directors are required to:
Š Select suitable accounting policies and then apply them consistently
Š Make judgements and accounting estimates that are reasonable and prudent
Š State whether they have been prepared in accordance with IFRS as adopted by the European Union, subject to any material departures
disclosed and explained in the Financial Statements
Š 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 proper accounting records that are sufficient to ascertain with reasonable accuracy at any time the
financial position of the Company and to ensure that the Financial Statements comply with the Bermuda Companies Act 1981 (as amended).
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.
The Directors are responsible for ensuring that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess the Group’s performance, business model and strategy.
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
In accordance with Chapter 4 of the Disclosure and Transparency Rules issued by the Financial Conduct Authority in the United Kingdom
the Directors confirm to the best of their knowledge:
Š The Group’s Financial Statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair view of the
assets, liabilities, financial position and profit and loss of the Group
Š The Annual Report includes a fair review of the development and performance of the business and the financial position of the Group,
together with a description of the principal risks and uncertainties that it faces
Fair, balanced and understandable
The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess Petra’s position, performance, business model and strategy, as well as the principal risks and uncertainties
which could affect the Group’s performance.
Auditors
As far as each of the Directors are aware at the time this report was approved:
Š There is no relevant available information of which the auditors are unaware
Š 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 1981 (as amended), a resolution to confirm the re-appointment of BDO LLP
as auditors of the Company is to be proposed at the 2022 AGM to be held on 16 November 2022.
The Financial Statements were approved by the Board of Directors on 10 October 2022 and are signed on its behalf by:
Richard Duffy
Chief Executive Officer
10 October 2022
138
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Š We have obtained an understanding of the impact of COVID 19
and the Russia / Ukrainian conflict to date, together with potential
future risks and uncertainties, considering the impact on the labour
force, energy prices (fuel and electricity), supply chain, tenders,
diamond prices and access to finance.
Š We have obtained and reviewed the Directors’ stress test scenarios
in respect of strengthening of the South African Rand exchange
rate from July 2022 to December 2023, increasing in operating
costs from July 2022 to December 2023, US$ 15.0 million reduction
in revenue contribution from exceptional stones; production
disruption and a combination scenario and confirmed that liquidity
was maintained under such scenarios. Where potential covenant
breaches arose under the combined worse case sensitivity, the
Directors’ have responses over the extent to which adequate
liquidity would be available to mitigate the covenant breaches.
We further assessed the impact of the tender offer and concluded
there to be no covenant breaches.
Š We have assessed the mitigating actions identified by the Directors,
including operational cash conservation measures, that form part of
their assessment of going concern. In doing so, we made inquiries of
the Directors and the Board and obtained supporting evidence in
drawing conclusions.
Š We have considered adequacy of the going concern disclosures in
Note 1.1.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group’s
ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In relation to the Group’s reporting on how it has applied the UK
Corporate Governance Code, we have nothing material to add or
draw attention to in relation to the Directors’ statement in the
financial statements about whether the Directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect
to going concern are described in the relevant sections of this report.
Independent Auditor’s Report
To the members of Petra Diamonds Limited
Opinion on the financial statements
In our opinion the financial statements:
Š give a true and fair view of the state of the Group’s affairs as at
30 June 2022 and of the Group’s profit for the year then ended;
Š have been properly prepared in accordance with IFRSs as adopted
by the European Union; and
Š have been prepared in accordance with the requirements of the
Bermuda Companies Act 1981.
We have audited the financial statements of Petra Diamonds Limited
(the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year
ended 30 June 2022 which comprise the Consolidated Income
Statement, the Consolidated Statement of Other Comprehensive
Income, the Consolidated Statement of Financial Position, the
Consolidated Statement of Cashflows, the Consolidated Statement of
Changes in Equity and Notes to the Financial Statements, including a
summary of significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable
law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union.
Basis for our opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for
the audit of the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Independence
We remain independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. The non-audit services
prohibited by that standard were not provided to the Group.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the
Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s ability
to continue to adopt the going concern basis of accounting included:
Š We have critically reviewed the Directors’ base case cashflow and
covenant forecasts and evaluated the Directors’ assumptions in
respect of diamond prices, sales of exceptional stones, production,
operating costs, foreign exchange rates and capital expenditure. In
doing so, we considered historic performance, trading to date in Q1 FY
2023 and external market data but also the extent to which risks, and
uncertainties have been appropriately considered and reflected in the
forecasts. Additionally, we benchmarked each material cash flows in
the Directors’ base case cashflow forecast to the life of mine model.
Annual Report and Accounts 2022 Petra Diamonds Limited
139
Financial Statements
Independent Auditor’s Report continued
To the members of Petra Diamonds Limited
Overview
Coverage
90% (2021: 90%) of Group profit before tax
100% (2021: 100%) of Group revenue
98% (2021: 98%) of Group total assets
Key audit matters
2022
2021
KAM 1
KAM 2
The risk that the life of mine estimates are
inappropriate, and assets require impairment.
The risk that the life of mine estimates are
inappropriate and assets require impairment.
The risk in relation to the legislative
environment in Tanzania.
The risk in relation to the legislative environment
in Tanzania.
KAM 3
N/A
The risk that the going concern assumption is not
appropriate and the risk that viability period or the
disclosure required under the UK Corporate
Governance Code’s longer-term viability statement
is not appropriate.
KAM 3 is no longer considered to be a key audit matter due to the stabilisation of profits and the strengthening of the
cash flows.
Materiality
Group financial statements as a whole
US$6.2 million (2021: US$5.0 million) based on 5% of profit before tax (2021: 1.25% of revenue).
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control,
and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal
controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.
Our involvement with component auditors
For the work performed by component auditors, we determined the level of involvement needed in order to be able to conclude whether
sufficient appropriate audit evidence has been obtained as a basis for our opinion on the Group financial statements as a whole.
Whilst Petra Diamonds Limited is a London Stock Exchange listed company, the Group’s operating mines are located in South Africa and
Tanzania. We assessed there to be three significant components being the Finsch and Cullinan mines which operate in South Africa and
the Williamson mine in Tanzania.
Group audit performed in accordance with ISAs (UK)
BDO UK
Williamson
Non-BDO firm
South African Operations
BDO member firm in South Africa
Full scope audits for Group reporting purposes were performed on-site on the two significant South African reporting components by the BDO
member firm in South Africa. The BDO member firm in South Africa also performed specified audit procedures on the South African non-significant
components for Group reporting purposes. A full scope audit of the one significant component in Tanzania was performed by a non-BDO firm in
Tanzania. The Group audit team performed specified audit procedures of Petra Diamonds Limited as a standalone entity, along with the audit of
the head office component, and the consolidation. The remaining non-significant holding companies were principally subject to analytical
review procedures.
As part of our audit strategy, as Group auditors we performed the following procedures:
Š Detailed Group reporting instructions were sent to the component auditors, which included the significant areas to be covered by the audits (including
areas that were considered to be key audit matters as detailed below) and set out the information required to be reported to the Group audit team.
Š The Group audit team performed procedures independently over key audit risk areas, as considered necessary, including the key audit matters below.
Š The Group audit team was actively involved in the direction of the audits performed by the component auditors for Group reporting
purposes, along with the consideration of findings and determination of conclusions drawn.
Š The Statutory Auditor or his representative in the Group audit team visited all of the operating mines, attended clearance meetings for all
significant components and spent significant periods of time with the component auditors responsible for the significant components
during their fieldwork and completion phases.
140
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current Period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified,
including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts
of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
What we considered to be a
key audit matter
The risk that the life of mine estimates are
inappropriate, and assets require impairment.
The risk in relation to the legislative environment
in Tanzania.
Why it represented a key
audit matter
Management was required to exercise significant
judgement and estimation in assessing the
recoverable amount of the mining operations.
There was a high level of inherent uncertainty and
critical judgements, and estimates are applied by
Management in the assessment. The appropriate
disclosure of such judgements and estimates was
also a focus for our audit.
Management was required to exercise significant
judgement and estimation relating to the blocked
parcel inventory, VAT recoverability, human rights
settlement obligations and the settlement
negotiations with the GoT. These were further
impacted by the uncertainties associated with
the legislative environment of Tanzania. The
appropriate disclosure of such judgements and
estimates was also a focus for our audit.
Relevant information in Financial
Statements and Report of the
Audit and Risk Committee
Note 7.
Notes 5, 17, 18, 23 and 35.
Report of the Audit and Risk Committee page 95.
Report of the Audit and Risk Committee pages 95
to 96.
1. The risk that the life of mine estimates are inappropriate, and
Š In respect of short-term pricing assumptions, our testing included
assets require impairment
The carrying values of the mining assets at all of the operations were
key focus areas for our audit given the recovery in the diamond
market and its sustainability, the current global economic
environment and volatility in the ZAR/US Dollar exchange rate.
As detailed in Note 7, as at 30 June 2022, the Group recognised an asset
level impairment charge of US$0.3 million being Management’s estimate
of the decrease in the value of the Koffiefontein assets to its recoverable
amount. No impairment indicators were identified at the Cullinan and
Finsch Mines and no reversal of previous impairments were deemed
appropriate. The Group also reversed a Group level impairment charge
relating to Williamson, previously recognised under IFRS 5, of US$21.4
million as Williamson is no longer considered an asset held for sale. The
appropriateness of judgements and estimates applied in determining the
recoverable amounts represented a significant risk for our audit,
particularly given the sensitivity of the recoverable amount to
assumptions including the status of the global rough diamond market
and associated diamond prices, the ongoing impact of the COVID-19
pandemic together with the conflict between Ukraine and Russia,
inflation, and foreign exchange rates.
How we addressed the matter:
Š We obtained an understanding of the controls operating in respect
of the Group’s impairment reviews, including confirming that the
impairment models utilised the Board approved life of mine plans.
Š We evaluated Management’s impairment models against approved
LOM plans and our understanding of the operations, and critically
challenged the key estimates and assumptions used by
Management for each of the mining operations.
Š We compared the trading performance against budget/plan for FY
2022 in order to evaluate the quality of Management’s forecasting
and where under performance against budget/plan was
highlighted evaluated the impact on the forecasts.
evaluation of Management’s diamond price forecasts against prices
achieved during the Year and post Year end, comparing the price
increase achieved in FY 2022 against Management’s previous
forecasts and evaluated the near-term diamond price recovery
forecasts against market analyst commentary and trends observed
at other diamond producers.
Š In respect of long-term pricing, we considered the appropriateness of
the lower starting price and level of escalation above a long-term US
inflation rate of 2% per annum from FY 2024 to FY 2030 used by
Management. In evaluating whether Management’s estimate was
within an acceptable range we compared the price escalator to market
guidance and historical market pricing trends. In addition, we searched
for alternative views on the long-term outlook and challenged
Management’s forecasts using a variety of information sources,
including market analyst commentary, and demand and supply side
factors that would be expected to impact market pricing.
Š We held meetings with mine management (mine managers,
geologists, mining engineers) to understand and challenge the
production, operating cost, and capital expenditure forecasts. In
doing so we assessed the reasonableness of the inflation rate used
in the model and we challenged Management assumptions over
the labour and electricity forecasts by comparing them with
reliable market sources, including consideration of the risks of
uncertainties due to the Russia / Ukraine conflict and the
associated impact on the life of mine plans.
Š On the other key assumptions, our testing included comparison of
foreign exchange rates to market spot and forward rates;
recalculation of discount rates in conjunction with our internal
specialists and evaluation of the appropriateness of risk premiums
therein; and critical review of the forecast cost, capital expenditure
and production profiles against approved mine plans, reserves and
resources reports and empirical performance.
Annual Report and Accounts 2022 Petra Diamonds Limited
141
Financial Statements
Independent Auditor’s Report continued
To the members of Petra Diamonds Limited
Key audit matters continued
1. The risk that the life of mine estimates are inappropriate, and
assets require impairment continued
Š We engaged modelling specialists from a BDO member firm in South
Africa to perform a review of the mathematical integrity of the models.
Š We reviewed Management’s sensitivity analysis for the impairment
models and performed additional sensitivity analysis on the
impairment models where considered necessary. We held discussions
with the Audit and Risk Committee to consider the recoverable
amount under the forecasts, including risks and sensitivity around
pricing, production, foreign exchange rates, and discount rates.
Š We reviewed the appropriateness and adequacy of disclosures in
note 7.
Observations:
In respect of the recoverable amount of the mining assets, we found
the Group’s conclusion to be appropriate and that the Board’s
assessment of the recoverable amount at 30 June 2022 considered
both the Group’s plans, recent performance and continued risks and
uncertainties. We found the disclosures in note 7 to be appropriate.
2. The risk in relation to the legislative environment in Tanzania
At Williamson, ongoing risks arising from legislative changes and political
uncertainties, alongside the remaining uncertainty around the recovery
of VAT receivables and the blocked diamond parcel (due for export in FY
2018) continued to represent a significant risk to the Group and required
Management to exercise judgement in respect of a number of areas:
Inventory
As detailed in note 18, Parcel 1 from FY 2018 of 71,654 cts held at
US$12.5 million being the lower of cost and net realisable value, was
confiscated by the GoT and is being prevented from export and sale,
although subsequent parcels have been released for export. Given
the circumstances and continued confinement of the parcel,
determination that the inventory remained recoverable required the
Board to consider whether it continued to retain legal title to the
parcel, the likelihood and form of recovery, together with the timing
thereof. As such, the recoverability of Parcel 1 inventory was
considered to represent a key focus for our audit.
Recoverability of VAT receivable
As detailed in note 17, Williamson’s gross VAT receivable decreased
from US$29.5 million in FY 2021 to US$8.6 million at the end of FY
2022. A provision of US$6.0 million was recorded against the VAT
receivables and US$26.9 million was written off.
Management exercised judgment in determining the extent of
provisions, which required consideration of discussions with relevant
authorities in Tanzania and the wider operating environment, the
validity of the VAT under relevant legislation for each of the three
periods and the ultimate timing of recovery of eligible VAT.
Given these circumstances, the carrying value and presentation
of VAT was considered to represent a key risk for our audit.
Alleged human rights abuses claim and settlement
In FY 2020, the Group received notification of claims in relation
to various alleged human rights abuses at the Williamson mine in
Tanzania. In May 2021, the Group announced that they had reached
a settlement, on a no admission of liability basis, in relation to the
alleged human rights claims at the Williamson mine. Management
recognised total costs and provisions of US$12.7 million in FY 2021
in respect of the settlement and associated legal costs as detailed
in note 5. There was no additional provision recognised in FY 2022.
142
Petra Diamonds Limited Annual Report and Accounts 2022
The determination of the total costs and provision required a level of
estimation, whilst the disclosure of the matter was considered to be
important to users of the Financial Statements. Accordingly, this area
was considered to represent a key risk for our audit.
Framework agreement with Government of Tanzania
As detailed in note 35, the Company signed an agreement
in principle with the Government of Tanzania relating to the
Williamson operations. In FY 2021 management recorded a provision
of US$19.5 million in respect of unsettled and disputed tax claims.
The Framework Agreement is subject to a number of conditions,
and was therefore not yet effective as at 30 June 2022. However,
this area required Management to exercise judgement and was
considered to represent a key risk for our audit.
How we addressed the matters:
Inventory
Š During our prior year audits, we reviewed the shipping
documentation and export approvals for the parcel, together with
documents demonstrating that relevant GoT authorities seized the
parcel and obtained confirmation from the GoT that the parcel was
held by the GoT and remained unsold. We performed procedures to
assess the steps undertaken in the export process to assess
Management’s conclusion that legislative requirements were
appropriately followed. In the current year, we reviewed the
conditions precedent in the Framework Agreement which indicate
that the GoT will release the parcel and that the consideration will
flow to the Group. We confirmed with Management and the Board
that there have been no indications that the parcel is no longer
held by the GoT during their correspondence with the GoT.
Š We obtained all correspondence with the GoT in relation to the
blocked parcel and made enquiries of in-house counsel to identify
any indicators that the Group’s entitlement to the inventory is
disputed. We evaluated the consistency of Management’s
judgement regarding the ultimate release of the parcel against
correspondence between the parties regarding sale of the parcel
and receipt of resulting proceeds by Williamson.
Š We reviewed the carrying value of the inventory, held at historic
cost, against the recent tender values achieved in FY 2022.
Š We challenged Management regarding the method, likelihood and
timing of recovery and discussed the judgement with the Audit and
Risk Committee. In doing so, we considered representations regarding
the status of discussions with GoT representatives, including GoT
representatives on the Williamson Board. We obtained written
representations from the Petra Board in respect of the judgement.
Recoverability of VAT receivable
Š We examined the Group’s correspondence with the tax authorities
in respect of the US$1.8 million pre-2017 legislation VAT for
indicators that such taxes were irrecoverable under local tax rules
or subject to dispute. In addition, we made enquiries of the Board
and Management and reviewed minutes of meetings to identify
indicators that VAT is disputed or may be irrecoverable. We
obtained and reviewed correspondence with the TRA for evidence
of any disputes regarding the validity of the balance.
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Key audit matters continued
2. The risk in relation to the legislative environment in Tanzania
continued
Recoverability of VAT receivable continued
Š In respect of the undisputed VAT balances of US$6.8 million post July
2020, we considered and challenged Management’s assessment of the
provision for discounting including the estimates regarding the timing
of recovery and risk adjusted discount rate applied in the calculation
and performed sensitivity analysis to consider alternative scenarios.
This included consideration of the payment history, apparent fiscal
constraints on the GoT and political developments, the nature of
ongoing correspondence and other ongoing legislative changes.
Š We reviewed the disclosures in the Financial Statements to satisfy
ourselves that the judgements and estimates have been
appropriately disclosed.
Alleged human rights abuses claim and settlement
Š We obtained and reviewed the claim letters, responses and
settlement agreement and held discussions with both Management
and the Group’s external legal advisors to obtain an understanding
of the developments in the Period and terms of the settlement.
Š We agreed the settlement value to the general ledger and
payments to bank.
Š We challenged Management and their legal advisors as to the
extent of any further legal or constructive obligations that the
Group may be exposed to in relation to the alleged human rights
abuses claim and associated settlement terms.
Framework agreement with GoT
Š We made inquiries of Management including in-house legal counsel
regarding the status of the Conditions Precedent (“CPs”) and
obtained all correspondence with the GoT in relation to the
Framework Agreement. We also obtained evidence from
Management to support CPs that have been met. We note that
some of these CPs were met after year end.
Š We considered each of the elements of the Framework Agreement
to assess Management’s conclusions regarding whether they have
an impact on the carrying value of the VAT, Parcel 1 or otherwise
give rise to a provision or contingent liability at 30 June 2022.
Š We reviewed the professional advice obtained by the Group in respect
of any tax claims and involved our own tax specialists, to assess the
strength of the Group’s position and conclusions under IFRS.
Observations:
Inventory
In relation to Parcel 1, we found the Group’s conclusion that they are
entitled to the return of the parcel to be acceptable and suitably
supported by historic independent advice and in the current year the
conditions precedent within the settlement agreement. Additionally,
we found that the estimation of the carrying value of the Parcel to
be appropriate. We found the judgements and estimates regarding
the valuation, likelihood, method, and timing of recovery to have
been appropriately considered and disclosed in note 18.
Recoverability of VAT receivable
In relation to the recoverability of the VAT receivable, based
on our procedures, we found Management’s provisioning level
to be appropriate. In addition, we found the disclosures included
in the Financial Statements in note 17 to be appropriate.
Leigh Day – alleged human rights claim and settlement
In relation to the alleged human rights claim and settlement,
based on our procedures performed, we found that no additional
provisioning by Management’s in FY 2022 to be appropriate.
In addition, we found the disclosures included in the Financial
Statements in notes 5 and 23 to be appropriate.
Framework agreement with GoT
Based on our procedures we found Management’s conclusion to be
appropriate. In addition, we found the disclosures included in the
Financial Statements in note 35 to be appropriate.
Our application of materiality
We apply the concept of materiality both in planning and performing
our audit, and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including
omissions, could influence the economic decisions of reasonable users
that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that
any misstatements exceed materiality, we use a lower materiality
level, performance materiality, to determine the extent of testing
needed. Importantly, misstatements below these levels will not
necessarily be evaluated as immaterial as we also take account of the
nature of identified misstatements, and the particular circumstances
of their occurrence, when evaluating their effect on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:
Materiality
2022
US$6.2 million
2021
US$5.0 million
Basis for determining materiality
5% of Group Profit Before Tax
1.25% of Group revenue
Rationale for the benchmark applied
Revenue has historically been the benchmark
due to the instability of the Group profit
before tax. Given the Group is delivering
relatively steady state production and
normalised earnings, profit before tax is
deemed the most appropriate benchmark for
the current financial year.
We considered revenue to be an appropriate
benchmark for materiality given the Group had
substantially completed its capital expansion
programmes and was delivering relatively steady
state production.
Performance materiality
75% of materiality
75% of materiality
Basis for determining performance
materiality
75% of materiality considering the nature of
activities and historic audit adjustments.
75% of materiality considering the nature of
activities and historic audit adjustments.
Annual Report and Accounts 2022 Petra Diamonds Limited
143
Financial Statements
Independent Auditor’s Report continued
To the members of Petra Diamonds Limited
Our application of materiality continued
Component materiality
Whilst materiality for the financial statements as a whole was US$6.2 million (FY 2021: US$5.0 million), each significant component of the
Group was audited to a lower materiality as detailed in the overview section.
We set materiality for each component of the Group based on a percentage of between 26% and 86% of Group materiality dependent
on the size and our assessment of the risk of material misstatement of that component. Component materiality ranged from US$1.6 million
to US$5.3 million. In the audit of each component, we further applied performance materiality levels of 75% of the component materiality
to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit and Risk Committee that we would report to them all individual audit differences in excess of US$0.1 million
(FY 2021: US$0.1 million). We also agreed to report differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the information included in the Annual Report and Accounts
2022 other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to
read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or our
knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the parent company’s compliance with the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements, or our knowledge obtained during the audit.
Going concern and longer-term
viability
Other Code provisions
Š The Directors’ statement with regards to the appropriateness of adopting the going concern basis of
accounting and any material uncertainties identified (set out on pages 151 to 152); and
Š The Directors’ explanation as to their assessment of the Group’s prospects, the period this
assessment covers and why the period is appropriate (set out on pages 99 to 100); and
Š The Directors’ statement on whether they have a reasonable expectation that the Group will be able
to continue in operation and meets its liabilities as they fall due (set out on pages 151 to 152).
Š Directors’ statement on fair, balanced and understandable (set out on page 92);
Š Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks
(set out on pages 65 to 70);
Š The section of the annual report that describes the review of effectiveness of risk management and
internal control systems (set out on pages 92 to 93); and
Š The section describing the work of the audit committee (set out on pages 90 to 98).
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, 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.
In preparing the financial statements, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
144
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Auditor’s responsibilities for the audit of the
financial statements continued
Extent to which the audit was capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
Š We held discussions with Management, the Audit and Risk
Committee and the legal counsel to consider any known or
suspected instances of non-compliance with laws and regulations
or fraud identified by them;
Š We gained an understanding of the legal and regulatory
framework applicable to the Group and the industry in which it
operates through discussion with Management and the Audit and
Risk Committee and our knowledge of the industry. We considered
the risk of acts by the Group which were contrary to those laws
and regulations, including fraud. We considered the significant laws
and regulations of South Africa, Tanzania, Bermuda, and the UK to
be those relating to the industry, financial reporting framework,
tax legislation and the Listing Rules;
Š We assessed the susceptibility of the Group’s financial statements
to material misstatement, including how fraud might occur by
obtaining an understanding of the controls that the Group has
established to address risks identified by the entity, or that
otherwise seek to prevent, deter, or detect fraud;
Š We addressed the fraud risk in relation to revenue recognition,
testing a sample to supporting documentation, including testing
the cut-off of revenue transactions in the period proceeding and
preceding year end;
Š We addressed the risk of management override of internal controls,
including testing a risk-based selections of journals and evaluating
whether there was evidence of bias in Management’s estimates
that represented a material misstatement due to fraud.
Specifically:
Š We tested the appropriateness of journal entries made through
the year by applying specific criteria to detect possible irregularities
and fraud;
Š We performed a detailed review of the Group’s year end
adjusting entries and investigated any that appear unusual as
to nature or amount and agreeing to supporting documentation;
Š For significant and unusual transactions, particularly those
occurring at or near year end, we obtained evidence for the
rationale of these transactions and the sources of financial
resources supporting the transactions;
Š We assessed whether the judgements made in accounting
estimates were indicative of a potential bias (refer to key
audit matters above);
Š We extended inquiries to individuals outside of management
and the accounting department to corroborate Management’s
ability and intent to carry out plans that are relevant to
developing the estimate set out in the key audit matters
section above;
Š We reviewed the whistleblowing register and obtained
an understanding of a sample of reports;
Š We reviewed minutes from Board meetings of those charges with
governance to identify any instances of non-compliance with laws
and regulations;
Š Our tests included, but were not limited to, agreement of the financial
statement disclosures to underlying supporting documentation,
review of correspondence with regulators, review of correspondence
with legal advisers, enquiries of management, review of significant
component auditors’ working papers and review of internal audit
reports in so far as they related to the financial statements;
Š We also communicated relevant identified laws and regulations
and potential fraud risks to the component audit team and
all engagement team members, and remained alert to any
indications of fraud or non-compliance with laws and
regulations throughout the audit;
Š In respect of the component auditors, we communicated
our consideration of where the financial statements could be
susceptible to material misstatement, including how fraud might
occur, and communicated specific procedures to be performed in
relation to testing the appropriateness of journal entries made
throughout the year by applying specific criteria to select journals
which may be indicative of possible irregularities and fraud and
also by assessing the judgements made by Management when
making key accounting estimates and judgements, and challenging
Management on the appropriateness of these judgements. As part
of our Group audit, we performed a review of the component
auditors’ file, which included the areas detailed above. In addition,
as part of their audit, the component auditors assessed compliance
with local legislation, including mining regulations in South Africa
and Tanzania. Their procedures involved making enquiries of local
management to understand their awareness of any non-compliance
of laws or regulations, enquiring about the policies that have been
established to prevent non-compliance with laws and regulations,
enquiring about the Company’s methods of enforcing and monitoring
compliance with such policies, and reviewing Board minutes to
identify any instances of non-compliance.
Our audit procedures were designed to respond to risks of material
misstatement in the financial statements, recognising that the risk of
not detecting a material misstatement due to fraud is higher than the
risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery, misrepresentations
or through collusion. There are inherent limitations in the audit
procedures performed and the further removed non-compliance with
laws and regulations is from the events and transactions reflected in
the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a
body, in accordance with Bermuda Companies Act 1981. Our audit
work has been undertaken so that we might state to the Parent
Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Parent Company and the Parent Company’s
members as a body, for our audit work, for this report, or for the
opinions we have formed.
Scott Knight
For and on behalf of BDO LLP, Statutory Auditor
London, UK
10 October 2022
BDO LLP is a limited liability partnership registered in England and
Wales (with registered number OC305127).
Annual Report and Accounts 2022 Petra Diamonds Limited
145
Financial Statements
Consolidated Income Statement
For the Year ended 30 June 2022
US$ million
Revenue
Mining and processing costs
Other direct (expense)/income
Corporate expenditure including settlement costs
Other corporate income
Impairment reversal/(charge) of non-financial assets
Impairment (charge)/reversal of other receivables
Impairment of other receivables – expected credit loss release
Total operating costs
Profit on disposal of subsidiary
Financial income
Financial expense
Gain on extinguishment of Notes net of unamortised costs
Profit before tax
Income tax charge
Profit for the Year
Profit for the Year attributable to:
Equity holders of the parent company
Non-controlling interest
Earnings per share attributable to the equity holders of the parent during the Year
From continuing operations:
Basic earnings per share – US$ cents
Diluted earnings per share – US$ cents
Notes
2022
Restated 2021 ¹
2
3
4
5
7
15
34
8
8
8
9
11
11
585.2
(391.5)
(0.8)
(14.1)
0.6
21.1
(1.5)
—
(386.2)
—
19.0
(92.1)
—
125.9
(37.8)
88.1
69.0
19.1
88.1
35.53
35.53
406.9
(356.1)
6.8
(40.8)
—
(38.7)
0.3
5.8
(422.7)
14.7
81.6
(74.2)
213.3
219.6
(23.0)
196.6
187.1
9.5
196.6
260.70
260.70
1. Comparative results have been restated with the operating results of Williamson which were previously classified under loss on discontinued operations (for further detail refer to note 36) and the
basic and diluted profit per share have been restated and adjusted for the 50 for 1 share consolidation which became effective in November 2021, in accordance with IAS 33 "Earnings per Share"
(refer to note 11 for further detail).
The notes on pages 151 to 206 form part of these Financial Statements.
146
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Consolidated Statement of Other Comprehensive Income
For the Year ended 30 June 2022
US$ million
Profit for the Year
Exchange differences on translation of the share-based payment reserve
Exchange differences on translation of foreign operations1,2
Exchange differences on non-controlling interest1
Total comprehensive income for the Year
Total comprehensive income for the Year attributable to:
Equity holders of the parent company
Non-controlling interest
2022
88.1
(0.3)
(46.8)
(0.4)
40.6
21.9
18.7
40.6
Restated 2021
196.6
0.2
64.2
(1.2)
259.8
251.5
8.3
259.8
1. Exchange differences arising on translation of foreign operations and non-controlling interest will be reclassified to profit and loss if specific future conditions are met.
2. In FY 2021, the Company disclosed the net assets of the Williamson operation under non-current assets held for sale and liabilities directly associated with non-current assets held for sale
in the Statement of Financial Position.
The notes on pages 151 to 206 form part of these Financial Statements.
Annual Report and Accounts 2022 Petra Diamonds Limited
147
Financial Statements
Consolidated Statement of Financial Position
At 30 June 2022
US$ million
ASSETS
Non-current assets
Property, plant and equipment
Right-of-use asset
BEE loans receivable
Other receivables
Total non-current assets
Current assets
Trade and other receivables
Inventories
Cash and cash equivalents (including restricted amounts)
Total current assets
Non-current assets classified as held for sale
35, 36
Total assets
EQUITY AND LIABILITIES
Equity
Share capital
Share premium account
Foreign currency translation reserve
Share-based payment reserve
Other reserves
Accumulated losses
Attributable to equity holders of the parent company
Non-controlling interests
Total equity
Liabilities
Non-current liabilities
Loans and borrowings
Provisions
Lease liability
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Loans and borrowings
Lease liability
Trade and other payables
Provisions
Total current liabilities
20
20
20
20
20
20
16
21
23
14
24
21
14
22
23
Liabilities directly associated with non-current assets classified as held for sale
35, 36
Notes
2022
2021
13
14
15
17
17
18
19
633.2
21.9
44.6
2.6
702.3
49.8
70.6
288.2
408.6
—
696.8
1.2
46.6
—
744.6
50.7
59.9
163.8
274.4
59.6
1,110.9
1,078.6
145.7
959.5
(448.9)
1.9
(0.8)
(183.6)
473.8
4.7
478.5
353.9
97.7
19.2
71.3
542.1
12.3
3.2
74.8
—
90.3
—
145.7
959.5
(402.1)
1.8
(0.8)
(253.3)
450.8
(10.5)
440.3
400.0
71.3
0.5
48.9
520.7
30.3
0.5
49.1
4.2
84.1
33.5
Total liabilities
Total equity and liabilities
632.4
1,110.9
638.3
1,078.6
The notes on pages 151 to 206 form part of the Financial Statements.
The Financial Statements were approved and authorised for issue by the Directors on 10 October 2022.
As at 30 June 2022 the Williamson assets and liabilities have been re-consolidated; for further detail refer to note 35.
In FY 2021, the Company disclosed the net assets of the Williamson operation under non-current assets held for sale and liabilities directly
associated with non-current assets held for sale in the Statement of Financial Position; for further detail refer to note 36.
148
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Consolidated Statement of Cashflows
For the Year ended 30 June 2022
US$ million
Notes
2022
Restated 2021
Profit before taxation for the Year
Depreciation of property, plant and equipment
Amortisation of right-of-use asset
Unrealised gain on lease liability
Impairment (reversal)/charge – non-financial assets
Impairment charge/(reversal) – other receivables
Impairment of BEE loans receivable – expected credit loss release
Gain on extinguishment of Notes net of unamortised costs
Profit on disposal of subsidiary
Movement in provisions
Dividend received
Financial income
Financial expense
Loss/(profit) on sale of property, plant and equipment
Share-based payment provision
Operating profit before working capital changes
Increase in trade and other receivables
Increase in trade and other payables
(Increase)/decrease in inventories
Cash generated from operations
Net realised gains/(losses) on foreign exchange contracts
Finance expense paid
Income tax (paid)/received
Net cash generated from operating activities
Cashflows from investing activities
Acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Loans repayment from/(advanced to) BEE Partners
Dividend paid to BEE Partners
Dividend received from BEE Partner
Repayment of loans from KEM JV
Finance income
Net cash utilised in investing activities
Cashflows from financing activities
Cash transaction costs settled – Debt Restructuring
Principal paid on lease liabilities
Increase in borrowings
Repayment of borrowings
Net cash utilised in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the Year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at the end of the Year1
125.9
82.8
2.5
—
(21.1)
1.5
—
—
—
1.6
(0.6)
(19.0)
92.1
1.5
1.1
268.3
(7.1)
24.5
(1.7)
284.0
12.6
(6.3)
(7.8)
282.5
(54.0)
—
0.2
(3.5)
0.6
2.5
1.3
219.6
76.2
4.6
(3.7)
38.7
(0.3)
(5.8)
(213.3)
(14.7)
24.3
—
(81.6)
74.2
(0.6)
0.5
118.1
(26.9)
5.5
42.8
139.5
(6.1)
(6.7)
0.3
127.0
(19.4)
0.3
(7.0)
—
—
—
0.7
(52.9)
(25.4)
—
(3.2)
—
(98.2)
(101.4)
128.2
156.9
(13.2)
271.9
(29.9)
(0.7)
30.0
(7.4)
(8.0)
93.6
53.6
9.7
156.9
7
7
15
8
34
8
8
37
19
1. Cash and cash equivalents in the Consolidated Statement of Financial Position includes restricted cash of US$16.3 million (30 June 2021: US$16.1 million) and unrestricted cash of US$271.9 million
(30 June 2021: US$147.7 million (excludes unrestricted cash attributable to Williamson of US$9.2 million)).
The Consolidated Statement of Cashflows for FY 2021 has been restated with the operating results of Williamson which were previously
classified under loss on discontinued operations; for further detail refer to note 36.
Notes to the Consolidated Statement of Cashflows are set out in note 28.
The notes on pages 151 to 206 form part of the Financial Statements.
Annual Report and Accounts 2022 Petra Diamonds Limited
149
Financial Statements
Consolidated Statement of Changes in Equity
For the Year ended 30 June 2022
1.8
—
—
1.1
(0.7)
1.9
1.1
—
0.2
—
0.5
—
1.8
US$ million
At 1 July 2021
Profit for the Year
Other comprehensive expense
Dividend paid to Non-controlling
interest shareholders
Equity-settled share-based payments
Transfer between reserves
At 30 June 2022
145.7
959.5
(448.9)
Share
Foreign
currency
premium translation
reserve
account
Share-
based
payment
reserve
Share
capital
145.7
959.5
(402.1)
(46.8)
(0.3)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Other
reserves
Accumulated
losses
Attributable
Non-
to the controlling
interest
parent
Total
equity
(0.8)
(253.3)
450.8
(10.5)
440.3
—
—
—
—
—
69.0
—
—
—
0.7
69.0
(47.1)
19.1
(0.4)
88.1
(47.5)
—
1.1
—
(3.5)
(3.5)
—
—
1.1
—
(0.8)
(183.6)
473.8
4.7
478.5
Share
Foreign
Share-
based
currency
premium translation payment
reserve
reserve
account
Share
capital
Other
reserves
Accumulated
losses
Attributable
Non-
to the controlling
interest
parent
US$ million
At 1 July 2020
Profit for the Year
Other comprehensive expense
Recycling of foreign currency translation reserve
on disposal of Sekaka (refer note 36)
Equity-settled share-based payments
133.4
790.2
(453.0)
—
—
—
—
—
—
—
—
—
64.2
(13.3)
—
—
Allotments during the Year (refer note 21)
12.3
169.3
(0.8)
—
—
—
—
—
(440.4)
187.1
—
—
—
—
30.5
187.1
64.4
(13.3)
0.5
181.6
(18.8)
9.5
(1.2)
—
—
—
Total
equity
11.7
196.6
63.2
(13.3)
0.5
181.6
At 30 June 2021
145.7
959.5
(402.1)
(0.8)
(253.3)
450.8
(10.5)
440.3
The Company disposed of the Botswana exploration operation and recognised a foreign currency translation gain of US$13.3 million which has
been recycled through the Consolidated Income Statement as part of the profit on disposal of subsidiary (refer to note 34).
The notes on pages 151 to 206 form part of these Financial Statements.
150
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Notes to the Annual Financial Statements
For the Year ended 30 June 2022
1. Accounting policies
Petra Diamonds Limited (Petra or the Company), a limited liability company listed on the Main Market of the London Stock Exchange, is
registered in Bermuda and domiciled in the United Kingdom. The Company’s registered address is 2 Church Street, Hamilton, Bermuda. The
Financial Statements incorporate the principal accounting policies set out below and in the subsequent notes to these Financial Statements,
which are consistent with those adopted in the previous year’s Financial Statements, apart from the adoption of new standards and
interpretations where applicable as detailed in note 1.4.
1.1 Basis of preparation
The Financial Statements of the Company and its subsidiaries, jointly controlled operations and associates (the Group) are prepared in
accordance with International Financial Reporting Standards (IFRS) (IFRS and IFRIC interpretations) issued by the International Accounting
Standards Board (IASB), as adopted by the European Union.
Going concern
The 12-month period to 30 June 2022 delivered US$264.9 million in EBITDA and US$230.0 million in operational free cashflow for the Group,
while consolidated net debt reduced from $228.2 million as at 30 June 2021 to US$40.6 million at 30 June 2022.
Production
Production at both CDM and FDM were generally in line with guidance. The Group’s overall production also benefited from the restart of
operations at Williamson during Q1 FY 2022 following a 17-month period of care and maintenance, with Williamson ramping up towards
steady-state operations. During the Year, the Group also announced expansion capital projects at both the Cullinan and Finsch mines, which
will extend their Life of Mine plans to 2031 and 2030 respectively. The expansion project at Cullinan Mine is progressing well, while the
expansion project at Finsch is slightly behind schedule on account of delay in delivery of long-lead items given the global disruption in supply
chains experienced over the past six months. Both projects, however, remain within guidance for cost and schedule, as mitigation steps have
been identified and are being implemented to catch up on the schedule delays at Finsch.
Diamond prices and diamonds market
Diamond prices strengthened over FY 2022, with a 41.5% increase on a like-for-like basis compared to the preceding 12-month period. In
addition, CDM’s run of Exceptional Stone recovery and sales continued with a total of US$75.2 million realised in the Year. Williamson also
benefited from the sale of an exceptional pink diamond at its first tender after restarting operations, yielding US$13.8 million and significantly
de-risking Williamson’s own liquidity profile.
The market witnessed robust price recovery and prices are now close to those last seen during pre-COVID-19 levels. In general, the market
is supported by a fundamental supply deficit, with robust demand recovery experienced post-COVID-19. While some of the price recovery
may have been helped by sanctions on Russian goods, it appears that these goods have continued to flow into the market. From a demand
perspective, the Chinese lockdown has moderated demand for certain categories of polished goods, while the rising inflation and interest
rate cycles may impact disposable income and therefore further moderate/reduce short-term demand for diamonds. This may lead to some
short-term price volatility, but the medium to long-term supply/demand fundamentals are expected to support the diamond price outlook.
COVID-19
Petra’s approach to managing COVID-19 has seen the Group not experiencing interruptions to our day-to-day operational/business activities
specifically related to COVID-19 during the Year. During FY 2022, we successfully reverted to hosting all of our tenders for our South African
goods in South Africa, while the Williamson goods continue to be auctioned in Belgium (as per our normal tender process for Williamson goods).
Williamson Framework Agreement and MoU
The Group announced reaching a Framework Agreement with the Government of Tanzania in December 2021, which sets out key principles on
the economic benefit sharing amongst shareholders, treatment of outstanding VAT balances, as well as agreement reached on the blocked
parcel of diamonds and settlement of historical disputes, amongst others. This agreement should provide important fiscal stability for the
mine and its investors and is expected to become effective during the first half of FY 2023, pending completion of certain suspensive
conditions. At the same time, Petra also announced entering into a Memorandum of Understanding (MoU) with Caspian Ltd to sell 50% less
1 share of Petra’s stake in Williamson to this Tanzanian company for a purchase consideration of US$15.0 million, which is also expected to be
effective in the first half of FY 2023.
South African banking facilities
During the Year, the South African banking facilities held with the Group’s previous consortium of South African lenders were settled and
cancelled, comprising the Revolving Credit Facility of ZAR404.6 million (US$24.9 million) (capital plus interest) and the Term Loan of
ZAR893.2 million (US$54.9 million) (capital plus interest).
The Group entered into a new ZAR1 billion senior Revolving Credit Facility (RCF) in June 2022. The Group will benefit from reduced interest
rates compared to the previous facilities coupled with more appropriate leverage-based covenants (net debt:EBITDA, interest cover ratio and
minimum liquidity). This new facility has a longer tenure, with the facility expiring on 7 January 2026. As at 30 June 2022, the RCF remains
undrawn, with the Group having access to the full ZAR1 billion (US$61.5 million).
The factors above, coupled with the further significant progress towards stabilising the Group’s balance sheet and strengthening cash reserves
as at the date of this report, position the Group well for this going concern period.
Annual Report and Accounts 2022 Petra Diamonds Limited
151
Financial Statements
1. Accounting policies continued
1.1 Basis of preparation continued
Forecast liquidity and covenants
The Board has reviewed the Group’s forecasts with various sensitivities applied for the 18 months to December 2023, including both forecast
liquidity and covenant measurements. As per the First Lien agreements, the liquidity and covenant measurements exclude contributions from
Williamson’s trading results and only recognise cash distributions payable to Petra upon forecasted receipt, or Petra’s funding obligations
towards Williamson upon payment.
Debt tender offer
In September 2022, Petra launched a tender offer to bondholders to purchase US$150 million of the Senior Secured Second Lien Notes due
in 2026 in line with our stated intent to further optimise our capital structure through a reduction of gross debt. As at the date of this report,
the Company has, through this tender offer, reduced gross debt by US$144 million and has extended the tender offer to reduce its gross debt
further by up to US$29 million. As per our stated strategy, Petra will continue to consider opportunities to further optimise its debt structure.
This transaction will see Petra saving at least US$14 million (and up to US$17 million) per annum in interest expenses while we remain confident
in our liquidity outlook to continue to fund our ongoing capital programmes from existing and internally generated cash resources.
The Board has given careful consideration to potential risks identified in meeting the forecasts under the review period. The following sensitivities
have been performed in assessing the Group’s ability to operate as a going concern (in addition to the base case) at the date of this report:
Š A 10% strengthening in the forecast South African Rand (ZAR) exchange rate from July 2022 to December 2023
Š A 10% increase in operating costs from July 2022 to December 2023
Š A US$15.0 million reduction in revenue contribution from Exceptional Stones
Š A production disruption sensitivity assuming no carat production across the Group’s operations for a period of two weeks in February 2023
(could be due to extreme weather conditions or supply chain events or any other unexpected event)
Š Combined sensitivity: prices down 10%, ZAR stronger by 10%, Exceptional Stones contributions reduced by US$15.0 million and operating
costs up 5%
Under all the cases, the forecasts indicate the Group’s liquidity outlook over the 18-month period to December 2023 remains strong, even
when applying the above sensitivities to the base case forecast.
The forward-looking covenant measurements associated with the new First Lien facility do not indicate any breaches during the 18-month
review period for the base case as well as all the above sensitivities, except for the worst case combined sensitivity, which shows a covenant
breach for the required interest cover ratio in December 2023. While the ICR is projected to be breached in this combined sensitivity, both the
net debt:EBITDA covenant and the liquidity covenant remain healthy, while the RCF remains undrawn. It is therefore assumed that the RCF
remains available, with the 1L lender assumed to agree to an ICR covenant waiver, given that the Group does not expect to utilise the RCF for
servicing of its 2L interest obligations. Furthermore, this potential ICR breach may be cured by means of reducing our gross debt by utilising
our cash reserves and/or marginally increasing our EBITDA for the preceding 12-month period.
Conclusion
The Board is of the view that the longer-term fundamentals of the diamond market remain sound and that the Group will continue to benefit
from the recently embedded new Operating Model throughout the review period and beyond.
Based on its assessment of the forecasts, principal risks and uncertainties and mitigating actions considered available to the Group in the
event of downside scenarios, the Board confirms that it is satisfied the Group will be able to continue to operate and meet its liabilities as they
fall due over the going concern period to December 2023. Accordingly, the Board has concluded that the going concern basis in the preparation
of the Financial Statements is appropriate and that there are no material uncertainties that would cast doubt on that basis of preparation.
Currency reporting
The functional currency of the Company is Pounds Sterling (GBP). The functional currency of the Group’s business transactions in Tanzania is US Dollars
(US$). The functional currency of the South African operations is South African Rand (ZAR or R) with diamond sales being made in US Dollars.
The Group Financial Statements are presented in US Dollars (US$). ZAR balances are translated to US Dollars at ZAR16.27 as at 30 June 2022
(30 June 2021: ZAR14.27) and at an average rate of ZAR15.22 for transactions during the Year ended 30 June 2022 (30 June 2021: ZAR15.41).
Financial Statements of foreign entities
Assets and liabilities of foreign entities (i.e. those with a functional currency other than US$) 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.
Exchange differences arising from the translation of foreign entities are recorded in the Consolidated Statement of Other Comprehensive
Income and recycled to the Consolidated Income Statement on disposal of the foreign entity.
152
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022 Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
1. Accounting policies continued
1.1 Basis of preparation continued
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. Such unrealised gains and losses are recycled through the Consolidated Income Statement
on disposal of the Group’s shares in the entity.
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.
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 is included in share capital and share premium at the prevailing US$/GBP spot rate at the date
of the transaction.
Comparative results
Comparative results in notes 2, 3, 4, 5, 8, 9, 10, 11 and 12 have been restated to reflect the results of Williamson, which were previously
classified under loss on discontinued operations, as per the requirements of IFRS 5 (refer to note 36).
Significant judgements and estimates relevant to the basis of preparation
Net investments in foreign operations
Management assesses the extent to which intra-group loans to foreign operations that give rise to unrealised foreign exchange gains and
losses are considered to be permanent as equity or repayable in the foreseeable future. The judgement is based upon factors including the life
of mine (LOM) plans, cashflow forecasts and strategic plans. The unrealised foreign exchange gains or losses on permanent as equity loans are
recorded in the foreign currency translation reserve until such time as the operation is sold, whilst the foreign exchange on loans repayable in
the foreseeable future is recorded in the Consolidated Income Statement.
1.2 Basis of consolidation
Subsidiaries
Subsidiaries are those entities over whose financial and operating policies the Group has the power to exercise control. Control is achieved
where the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee. 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 date control ceases. Where necessary, the accounting policies of subsidiaries are changed to ensure consistency with the
policies adopted by the Group.
Subsidiaries are deconsolidated from the date control ceases. The interest of non-controlling shareholders in the acquiree is initially measured
at the non-controlling shareholders’ proportionate share of the acquiree’s identifiable net assets (after any relevant fair value adjustments to
the assets, liabilities and contingent liabilities recognised as part of the business combination).
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.
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 are eliminated to the extent of the Group’s interest in the
enterprises and 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.
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 shareholders’ share
of changes in equity since the date of the combination. The non-controlling interests’ share of losses, where applicable, is 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.
Annual Report and Accounts 2022 Petra Diamonds Limited
153
Financial Statements
1. Accounting policies continued
1.3 Key estimates 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. 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 in the relevant sections of this report and summarised as follows:
Key estimate or judgement
Going concern
Net investments in foreign operations judgements
Life of mine and ore reserves and resources estimates and judgements
Impairment review estimates and judgements
Taxation
Depreciation judgements
BEE guarantee and expected credit loss assessment for BEE receivables
Recoverability of VAT in Tanzania
Recoverability of confiscated diamond parcel in Tanzania
Provision for rehabilitation estimates
Pension scheme estimates
Post-retirement medical fund estimates
Carrying value of assets held for sale
Note
1.1
1.1
7
7
9 and 24
13
15
17
18
23
30
31
36
1.4 New standards and interpretations applied
The IASB has issued new standards, amendments and interpretations to existing standards with an effective date on or before 1 July 2021;
these new standards are not considered to have a material impact on the Group during the Year under review.
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 on or after 1 July 2022 or in later periods, which the Group has decided not to adopt early.
IFRS 3
IAS 16
IAS 37
IAS 16
Amendments to IFRS 3 "Business Combinations"
Amendments to IAS 16 "Property, Plant and Equipment"
Effective period
commencing
on or after
1 January 2022
1 January 2022
Amendments to IAS 37 "Provisions, Contingent Liabilities and Contingent Assets"
1 January 2022
Amendments to IAS 16 "Property, Plant and Equipment" – Proceeds before
intended use
1 January 2022
1 June 2022
1 January 2023
1 January 2023
1 January 2023 2
Improvements to IFRSs
Amendments to IAS 8
Improvements to IFRS 1, IFRS 9, IFRS 16 and IAS 41
Amendments to IAS 8 – Definition of accounting estimates
Amendments to IAS 1 and IFRS Practice
Statement 2
Amendments to IAS 1 and IFRS Practice Statement 2 – Disclosure
of accounting policies
Amendments to IAS 12
Amendments to IAS 12 – Deferred tax related to assets and liabilities arising
from a single transaction
Amendments IAS 1
Amendments to IAS 1 – Classification of liabilities as current or non-current
1 January 2023 ¹
1. Not yet endorsed.
2. Endorsed 11 August 2022.
The only new standards, amendments and interpretations to existing standards which has been published that is mandatory for the Group’s
accounting periods beginning on or after 1 July 2022 or in later periods which will be significant or relevant to the Group are:
154
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022 Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
1. Accounting policies continued
1.4 New standards and interpretations applied continued
New standards and interpretations not yet effective continued
Amendments to IAS 1: Classification of liabilities as current or non-current
Amendments to IAS 1 are intended to clarify the requirements that an entity applies in determining whether a liability is classified as current or
non-current. The amendments are intended to be narrow scope in nature and are meant to clarify the requirements in IAS 1 rather than modify
the underlying principles. The amendments include clarifications relating to:
Š How events after the end of the reporting period affect liability classification
Š What the rights of an entity must be in order to classify a liability as non-current
Š How an entity assesses compliance with conditions of a liability (e.g. bank covenants)
Š How conversion features in liabilities affect their classification
An entity that classifies a liability as non-current would be required to disclose information that enables users of financial statements to assess
the risk the liability would become payable within 12 months. An entity will also present separately, in the statement of financial position,
liabilities classified as non-current for which the entity’s right to defer settlement for at least 12 months after the reporting period is subject
to compliance with certain conditions within 12 months after the reporting period.
The amendments were originally effective for periods beginning on or after 1 January 2022 which was deferred to 1 January 2023 by the IASB
in July 2020; retrospective restatement is required.
Amendments to IAS 8: Definition of accounting estimates
Amendments to IAS 8 is to prescribe the criteria for selecting and changing accounting policies, together with the accounting treatment and
disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors. The Standard is intended to enhance
the relevance and reliability of an entity’s financial statements, and the comparability of those financial statements over time and with the
financial statements of other entities. The Group does not anticipate any change to its accounting estimates, accounting policies and
disclosures under IAS 8.
2. Revenue
Significant accounting policies relevant to revenue
Revenue comprises gross invoiced diamond sales to customers excluding VAT. Revenue is split between rough diamond sales and revenue from
interest in polished diamonds, when applicable. Diamond sales are made through a competitive tender process or private sales and recognised
when point of control passes to the buyer, costs can be measured reliably and receipt of future economic benefits is probable. The performance
obligation for tender sales is met at the point at which the tender is awarded. The performance obligation for private sales is met at the point
at which the agreement on pricing and terms of sale are confirmed between both parties. Where the Group makes rough diamond sales to
customers and also retains a right to an interest in their future sale as polished diamonds, the Group records the sale of the rough diamonds
but such contingent revenue on the onward sale is only recognised at the date when the polished diamonds are sold. Revenue on rough
diamond sales, where the Group retains an interest, is recognised when point of control passes to the buyer, costs can be measured reliably
and receipt of future economic benefits is probable. The performance obligation is met at the point at which the control of the rough diamond
passes to the buyer. The onward sale of the polished diamonds contains elements of variable consideration, as the Group’s right to consideration
is contingent on the occurrence of the future sale by the buyer. The variable consideration is not recognised as the Group is unable to ascertain
the future sale amount of the polished diamonds and cannot determine that it is highly probable that its inclusion will not result in a
significant revenue reversal in the future when the uncertainty has been subsequently resolved.
US$ million
Revenue from diamond sales
2022 ¹
Restated 2021
585.2
406.9
1. The Group’s revenue comprises the sale of rough diamonds and polished stones. The sale of rough diamonds contributed US$581.9 million (30 June 2021: US$406.6 million) with polished stones
contributing US$3.3 million (30 June 2021: US$0.3 million). Included in the US$3.3 million sale of polished stones is the uplift of US$1.1 million generated by a profit share agreement. The
disaggregation of revenue is disclosed per segment as per note 33.
Annual Report and Accounts 2022 Petra Diamonds Limited
155
Financial Statements
3. Mining and processing costs
Refer to notes 10, 13, 18 and 26 for the Group’s policies, relevant to the significant cost lines below, on employment costs, depreciation,
inventories, share-based payments and related key judgements and estimates.
US$ million
Raw materials and consumables used
Employee expenses
Depreciation of mining assets
Amortisation of right-of-use asset
Diamond royalty
Changes in inventory of finished goods and stockpiles
2022
Restated 2021
152.9
139.8
82.2
2.3
14.6
(0.3)
391.5
125.4
105.5
75.5
4.4
3.2
42.1
356.1
1. Included in mining and processing costs for FY 2021, are COVID-19 TERS payments received from the South African Government of US$1.4 million. These amounts are attributable to the mining
operations; for amounts directly attributable to the corporate expenditure, refer to note 5. There were no COVID-19 TERS payments received from the South African Government during FY 2022.
4. Other direct expense/(income)
US$ million
Loss/(profit) on disposal of fixed assets
Other income
2022
Restated 2021
1.5
(0.7)
0.8
(0.6)
(6.2)
(6.8)
1. Included in other income for FY 2021, are COVID-19 TERS payments received from the South African Government of US$1.8 million and a gain on lease liability of US$3.7 million. These amounts are
attributable to the mining operations; for amounts directly attributable to the corporate expenditure, refer to note 5. There were no COVID-19 TERS payments received from the South African
Government during FY 2022.
5. Corporate expenditure
Corporate expenditure includes:
US$ million
Depreciation of property, plant and equipment
Amortisation of right-of-use asset
London Stock Exchange and other regulatory expenses
Unsettled and disputed tax claims at Williamson¹
Settlement (reversal)/costs – human rights claims at Williamson2
Share-based expense – Directors
Salaries and other staff costs
Total staff costs
2022
Restated 2021
0.6
0.2
1.5
—
(0.8)
1.1
5.1
6.2
0.6
0.3
1.5
19.5
12.7
0.5
2.3
2.8
1. During FY 2021 the Company provided for costs in respect of unsettled and disputed tax claims in respect of Williamson as set out in the Framework Agreement.
2. During FY 2021 the settlement costs for the human rights claims at Williamson comprised US$4.8 million for the part settlement of the claimant’s legal costs and for distribution to the claimants
and US$1.3 million to invest in programmes dedicated to providing sustainable support to the communities living around the Williamson mine as a condition of the settlement reached with Leigh
Day. The Company incurred and provided for additional total costs of US$6.6 million relating to this matter, the majority of which relate to legal, consultant, investigation and expert fees.
3. Included in corporate expenditure in FY 2021 are COVID-19 TERS payments received from the South African Government of US$0.3 million. These amounts are attributable to the corporate
expenditure; for amounts directly attributable to the mining operations, refer to notes 3 and 4.
6. Auditors’ remuneration
US$ million
Audit services1
Audit-related assurance services²
Non-audit services3
Total
1. Audit services are in respect of audit fees for the Group.
2022
0.9
0.1
—
1.0
2021
1.0
0.1
0.4
1.5
2. Audit-related services are in respect of the interim review of US$0.1 million (FY 2021: US$0.1 million), and specific agreed upon procedures in relation to the Sustainability Report, under the
International Standard on Related Services 4400 as issued by the International Auditing and Assurances Standards Board, of US$5.0k (FY 2021: US$5.0k).
3. Non-audit services comprise fees paid to the auditors in respect of the Company’s Debt Restructuring of US$nil (FY 2021: US$0.4 million).
156
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
7. Impairment of operational assets and other assets
Significant accounting policies relevant to 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 determined on the
fair value less cost to develop basis.
In assessing the recoverable amount, which is determined on a fair value less cost to develop basis, the expected future post-tax cashflows
from the asset are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset. Discounting the future cashflows to their present value using a pre-tax rate would not materially
change the outcome. The mine plan for each mine is the approved management plan at the reporting date for ore extraction and its associated
capital expenditure. The capital expenditure included in the impairment model does not include capital expenditure to enhance the asset
performance outside of the existing mine plan. The ore tonnes included in the Resource Statement, which Management considers economically
viable, often include ore tonnes in excess of those used in the mine model and therefore the impairment test.
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. Each mine represents a separate cash-generating unit. An impairment loss is
recognised in the Consolidated Income Statement whenever the carrying amount of the cash-generating unit exceeds its recoverable amount.
Significant judgements and estimates relevant to impairment of non-financial assets
Life of mine and ore reserves/resources
There are numerous risks inherent in estimating ore reserves and resources and the associated current mine plan. The mine plan for each mine
is the current approved management plan for ore extraction that considers specific ore reserves and resources and associated capital expenditure.
The mine plan frequently includes fewer tonnes than the total reserves and resources that are set out in the Group’s Resource Statement and
which Management may consider to be economically viable and capable of future extraction.
Management must make a number of assumptions when making estimates of reserves and resources, including assumptions as to exchange
rates, rough diamond and other commodity prices, extraction costs and recovery and production rates. Any such estimates and assumptions
may change as new information becomes available. Changes in exchange rates, rough diamond and commodity prices, extraction and recovery
costs and production rates may change the economic viability of ore reserves and resources and may ultimately result in the restatement of
the ore reserves and resources and potential impairment to the carrying value of the mining assets and mine plan.
The current mine plans are used to determine the ore tonnes and capital expenditure in the impairment tests.
Ore reserves and resources, both those included in the mine plan and certain additional tonnes contained within the Group’s Resource
Statement, which form part of reserves and resources considered to be sufficiently certain and economically viable, also impact the
depreciation of mining assets depreciated on a units-of-production basis (refer to note 13). Ore reserves and resources further impact the
estimated date of decommissioning and rehabilitation (refer to note 23).
Impairment reviews
While conducting an impairment review of its assets using the fair value less cost to develop basis, the Group exercises judgement in making
assumptions about future exchange rates, rough diamond prices, contribution from Exceptional Diamonds, volumes of production, ore
reserves and resources included in the current mine plans, feasibility studies, future development and production costs and macroeconomic
factors such as inflation and discount rates. Changes in estimates used can result in significant changes to the Consolidated Income Statement
and the Consolidated Statement of Financial Position. The key inputs and sensitivities are detailed on pages 158 to 160.
30 June 2022
The current market conditions in the global rough diamond market, volatility of and variability in product mix are all factors impacting the
rough diamond prices achieved by Petra during the Year, resulting in Management taking a critical review of the Group’s business models
and operational assets. 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 further impaired or an impairment reversal may apply, its recoverable
amount is estimated. The recoverable amount is determined on a fair value less cost to develop basis.
The operations of Cullinan Mine, Finsch, Koffiefontein and Williamson are held at recoverable value as a result of FY 2021 impairments.
During the Year under review, the Group reviewed the carrying value of its investments, loan receivables and operational assets for indicators
of impairment. Following the assessment, no further impairment of property, plant and equipment was considered appropriate for Cullinan
Mine, Finsch and Williamson, nor was any impairment reversal considered appropriate in the current Year. The Group recognised an asset level
impairment charge of US$0.3 million, being Management’s estimate of the decrease in the value of the Koffiefontein assets. The Group also
reversed a Group level impairment charge relating to Williamson, previously recognised under IFRS 5, of US$21.4 million as Williamson is no
longer considered an asset held for sale. Details of the impairment test assessments for the operations are shown in note 7.1.
30 June 2021
During the year ended 30 June 2021, the Group impaired the Finsch and Koffiefontein operational assets by an amount of US$17.3 million.
Williamson was classified as held for sale as at 30 June 2021; refer to note 36.
Annual Report and Accounts 2022 Petra Diamonds Limited
157
Financial Statements
7. Impairment of operational assets and other assets continued
7.1 Impairment testing assumptions
(a) Impaired continuing operations
The key assumptions used in determining the recoverable value calculations, determined on a fair value less cost to develop basis, are listed
in the table below:
Key assumptions
Explanation
Current mine plan and
recoverable value of reserves
and resources
Economically recoverable reserves and resources are based on Management’s expectations based on the availability
of reserves and resources at mine sites and technical studies undertaken in-house and by third party specialists.
The end of life of mine based on current mine plans for the operations are as follows:
Cullinan Mine: FY 2031 (FY 2021: FY 2031)
Finsch: FY 2030 (FY 2021: FY 2030)
Koffiefontein: FY 2025 (FY 2021: FY 2023)
Williamson: FY 2030
Resources remaining after the current current mine plans have not been included in impairment testing
for the operations.
Current mine plan reserves
and resources
Cullinan Mine: current mine plan over the next nine years; total resource processed 36.4 Mt (FY 2021: current
mine plan over the next nine years; total resource processed 38.6 Mt).
Finsch: current mine plan over the next eight years; total resource processed 23.2 Mt (FY 2021: current mine
plan over the next nine years; total resource processed 26.8 Mt).
Koffiefontein: current mine plan over the next three years; total resource processed 1.9 Mt (FY 2021: current
mine plan over the next three years; total resource processed 2.2 Mt).
Williamson: current mine plan over the next eight years, total resource processed 43.3 Mt (FY 2021: Williamson
was on care and maintenance).
Management has estimated the timing and quantum of the capital expenditure based on the Group’s current
mine plans for each operation. There is no inclusion of capital expenditure to enhance the asset beyond
exploitation of the current mine plan orebody.
Cullinan Mine: Management included a residual value of US$11.6 million (30 June 2021: US$nil) property, plant
and equipment to be used beyond the current mine plan given the significant resource base estimated to be
available at the end of the current mine plan. The residual value is included after providing for the time value
of money applying the discount rate used for the South African operations.
No residual values were included in the impairment assessments of the other mining operations.
The diamond prices used in the impairment test have been set with reference to recently achieved pricing and
market trends, and long-term diamond price escalators are informed by industry views of long-term market
supply/demand fundamentals. Given the current market uncertainty, the assessment of short-term diamond
prices and the rate and extent of pricing recovery, together with the longer-term pricing escalators,
represented a critical judgement.
The 30 June 2022 impairment testing models starting price assumptions have been adjusted to reflect the
improved pricing achieved during the Year when compared to the 30 June 2021 impairment models. Diamond
prices (excluding Exceptional Stones) have been assumed to remain unchanged during FY 2023, then increase
by 3.9% from FY 2024 onwards. The long-term models incorporate normalised diamond price escalation of
1.9% above a long-term US inflation rate of 2.0% per annum from FY 2024 to FY 2030. Estimates for the
contribution of Exceptional Diamonds sold for more than US$5.0 million each are determined with reference to
historical trends. Based on the historical trends, Management has increased the contribution from Exceptional
Stones at Cullinan Mine from US$25.0 million to US$35.0 million per annum.
The 30 June 2021 impairment testing models starting price assumptions were updated to reflect the improved
pricing achieved during the Year when compared to the 30 June 2020 impairment models. Diamond prices have
been assumed to increase from FY 2022 and then 4% from FY 2024, returning to pricing levels achieved before
the impact of COVID-19, representing an increase of 25–30% from pricing achieved at the lowest point during
FY 2020. The long-term models incorporate normalised diamond price escalation of 1.9% above a long-term
US inflation rate of 2.0% per annum from FY 2025 to FY 2030. Estimates for the contribution of Exceptional
Diamonds sold for more than US$5.0 million each are determined with reference to historical trends.
A discount rate of 13.0% (30 June 2021: 12.0%) was used for the South African operations and a US$ discount rate of
14.00% (30 June 2021: 13.25%) for Williamson. Discount rates were calculated based on a nominal weighted cost of
capital including the effect of factors such as market risk and country risk as at the Year end. US$ and ZAR discount
rates are applied based on respective functional currency of the cash-generating unit. As Williamson was held for
sale as at 30 June 2021, the discount rate was applied to cashflows expected from a disposal transaction.
Long-term inflation rates of 3.5–7.8% (30 June 2021: 3.5–7.8%) above the long-term US$ inflation rate were used for
opex and capex escalators. Management has taken into account the current short-term pressures in the inflation
environment and the impact on opex and capex costs, allowing for the inflation rate to normalise over the longer term.
Current mine plans –
capital expenditure
Residual value
Diamond prices
Discount rate
Cost inflation rate
158
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022 Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
7. Impairment of operational assets and other assets continued
7.1 Impairment testing assumptions continued
(a) Impaired continuing operations continued
Key assumptions
Exchange rates
Valuation basis
Williamson
Explanation
Exchange rates are estimated based on an assessment of current market fundamentals and long-term
expectations. The US$/ZAR exchange rate range used for all South African operations commenced at ZAR16.04
(30 June 2021: ZAR14.50) for FY 2023 reflecting the current volatility, inflationary pressures and quantitative
tightening by central banks, and ZAR16.24 for FY 2024 and thereafter devaluing at 3.5% per annum. Given the
volatility in the US$/ZAR exchange rate and the current levels of economic uncertainty, the determination of
the exchange rate assumptions required significant judgement.
Discounted present value of future cashflows for the South African operations.
During the Year, Williamson recommenced production. For impairment testing at Williamson, management has
used the above assumptions. During FY 2021, Williamson was classified as an asset held for sale; for further
detail refer to note 36.
Asset class
Carrying value
pre-impairment
Impairment
Carrying value
post-impairment
Impairment of non-financial assets
Impairment
US$ million
Impairment – operations:
Finsch
Cullinan Mine
Koffiefontein
Williamson
Sub-total
Property, plant and equipment
Property, plant and equipment
Property, plant and equipment
Property, plant and equipment
Impairment – Financial receivables
and non-financial receivables:
Other – current receivable
KEM JV receivable (refer to note 17)
Other – current receivable
Other receivables (refer to note 17)
Other – non-current
Tanzania VAT receivable (refer to note 17)
Sub-total
Total
30 June 2021
Impairment
US$ million
Impairment – operations:
Finsch
Cullinan Mine
Koffiefontein
Williamson
Sub-total
Impairment – Financial receivables
and non-financial receivables:
Property, plant and equipment
Property, plant and equipment
Property, plant and equipment
Property, plant and equipment
Other – charge current
Other – charge current
Tanzanian VAT receivable reversal (refer note 17)
Other receivables (refer to note 17)
Sub-total
Total
419.9
157.9
1.1
29.3
608.2
(1.2)
0.3
6.8
5.9
614.1
—
—
(0.3)
21.4
21.1
2.9
(0.3)
(4.1)
(1.5)
19.6
419.9
157.9
0.8
50.7
629.3
1.7
—
2.7
4.4
633.7
210.6
497.9
3.3
52.7
764.5
—
0.6
0.6
765.1
(15.1)
—
(2.2)
(21.4)
(38.7)
0.7
(0.4)
0.3
(38.4)
195.5
497.9
1.1
31.3
725.8
0.7
0.2
0.9
726.7
Asset class
Carrying value
pre-impairment
Impairment
Carrying value
post-impairment
Annual Report and Accounts 2022 Petra Diamonds Limited
159
Financial Statements
7. Impairment of operational assets and other assets continued
7.1 Impairment testing assumptions continued
Sensitivity analysis
The impairment impact of applying sensitivities on the key inputs is noted below:
US$ million
Cullinan Mine
Finsch
Koffiefontein
Williamson
Additional impairment charge
Increase in discount rate by 2%
Reduction in pricing by 5% over mine plan
Reduction in short-term production by 10%
Increase in opex by 5%
Reduction in Exceptional Stones contribution by US$10.0 million
per annum
Strengthening of the ZAR from US$/ZAR16.04 to US$/ZAR15.23
8. Net financing expense
9.2
44.1
10.9
22.0
41.4
n/a
20.2
44.5
12.6
23.3
n/a
0.6
13.3
36.4
32.4
32.4
n/a
32.4
0.5
19.8
n/a
24.3
n/a
n/a
Significant accounting policies relevant to net financial expense
Finance income comprises income from interest and finance-related exchange gains and losses. Interest is recognised on a time-apportioned
basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is probable that such income will
accrue to the Group.
All borrowing costs have been expensed to the Consolidated Income Statement in the current and the prior year due to the expansion projects
being completed during prior years. Refer to notes 11, 23 and 32 for the Group’s policy on foreign exchange, unwinding of rehabilitation
provisions and derivative instruments together with key estimates and judgements.
US$ million
Net unrealised foreign exchange gains1
Interest received on BEE loans and other receivables
Interest received on bank deposits
Realised foreign exchange gains on the settlement of foreign loans and forward exchange contracts
Financial income
Interest on senior secured second lien notes, bank loans and overdrafts
Other debt finance costs, including BEE loan interest, facility fees and IFRS 16 charges
Unwinding of present value adjustment for rehabilitation costs
Net unrealised foreign exchange losses1
Acceleration of unamortised Notes costs
Realised foreign exchange losses on the settlement of foreign loans and forward exchange contracts
Financial expense
Loss on substantial modification of Notes2
Gain on extinguishment of Notes – debt for equity conversion2
Net gain on extinguishment of Notes
Net financial expense
2022
Restated 2021
—
4.1
1.3
13.6
19.0
(45.3)
(2.3)
(5.4)
(36.5)
(1.6)
(1.0)
(92.1)
—
—
—
(73.1)
74.6
5.4
0.7
0.9
81.6
(51.5)
(8.4)
(4.6)
—
(2.7)
(7.0)
(74.2)
(7.7)
221.0
213.3
220.7
1. The Group predominantly enters into hedge contracts where the risk being hedged is the volatility in the South African Rand, Pound Sterling and US Dollar exchange rates affecting the proceeds in
South African Rand of the Group’s US Dollar denominated diamond tenders. The fair value of the Group’s hedges as at the end of the Year are based on Level 2 mark-to-market valuations performed by
the counterparty financial institutions. The contracts are all short dated in nature and mature within the next 12 months. A significant weakening of the South African Rand against the US Dollar from
ZAR14.27 (30 June 2021) to ZAR16.27 (30 June 2022) resulted in an unrealised loss of US$36.5 million (30 June 2021: US$74.6 million unrealised gain) comprising an unrealised loss on foreign exchange
contracts held at Year end of US$0.7 million (30 June 2021: US$12.4 million unrealised gain) and losses on inter-group foreign denominated loans of US$35.8 million (30 June 2021: US$62.2 million
unrealised gain); and a net realised foreign exchange gain of US$12.6 million (30 June 2021: US$6.1 million loss) in respect of foreign exchange contracts closed during the Year is included in the net
finance and expense amount. For additional information on the Company’s ZAR credit facilities refer to note 21.
2. The loss on substantial modification and gain on extinguishment of Notes in FY 2021 arose from the Restructuring completed by the Group on 10 March 2021. Refer to note 37 for further detail.
9. Taxation
Significant judgements and estimates relevant to taxation
The Group operates in South Africa and Tanzania, and accordingly it is subject to, and pays annual income taxes under, the various income tax
regimes in the countries in which it operates. From time to time the Group is subject to a review of its income tax filings and in connection
with such reviews, disputes can arise with the taxing authorities over the interpretation or application of certain rules to the Group’s business
conducted within the country involved. Management evaluates each of the assessments and recognises a provision based on its best estimate
of the ultimate resolution of the assessment, through either negotiation or through a legal process. Refer to note 37 for charges recorded
in Tanzania.
160
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022 Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
9. Taxation continued
Significant accounting policies relevant to taxation
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.
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.
US$ million
Current taxation:
– Current tax charge
Deferred taxation:
– Current period (origination and reversal of temporary differences)
Reconciliation of tax rate:
– Profit before taxation (including loss on discontinued operation)
Tax at South African corporate rate of 28% (30 June 2021: 28%)
Effects of:
– Tax charge at different rates in foreign jurisdictions
– Non-deductible expenses
– Non-taxable income (FY 2021: includes US$59.7 million attributable to gain on extinguishment of Notes)
– Tax losses and temporary differences not recognised
– Prior year under provision of deferred tax
– Tax rate change
Total tax charge
2022
Restated 2021
7.3
30.5
37.8
125.9
35.2
0.5
5.2
(7.2)
6.6
0.2
(2.7)
37.8
0.3
22.7
23.0
219.6
61.5
(0.5)
23.7
(71.0)
9.0
0.3
—
23.0
In the current Year the impact of unrecognised tax losses and temporary differences totalled US$6.6 million (30 June 2021: US$9.0 million). 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
available but not utilised as at 30 June 2022 amount to US$202.1 million (30 June 2021: US$161.3 million) and primarily arise in South Africa and
Tanzania; amounts stated provide tax benefit at 28%, being the tax rate in South Africa, and 30%, being the tax rate in Tanzania. Gross reversal
of other deductible temporary differences as at 30 June 2022 amount to US$117.8 million (30 June 2021: US$80.9 million originating) and arise
in South Africa. The reduction of the South African corporation tax rate from 28% to 27% was substantively enacted on 24 February 2021 and
will be effective for companies with years of assessment commencing on or after 1 April 2022. As a result, the relevant deferred tax balances have
been re-measured at Year end at the effective rate that will apply to the Group’s South African operations (27%) from FY 2023. There is no
taxation arising from items of other comprehensive income and expense.
10. Director and employee remuneration
Significant accounting policies relevant to remuneration
The cost of all short-term employee benefits is recognised during the period in which the employee renders the related service. The provisions
for employee entitlements to wages, salaries and annual leave represent the amount which the Group has a present obligation to pay as a
result of employees’ services provided to the reporting date. Provisions are calculated based on current wage and salary rates.
Refer to note 26 for the Group’s policy in respect of share-based payments and related key judgements and estimates.
Staff costs (excluding the Non-executive Directors) during the Year were as follows:
US$ million
Wages and salaries – mining
Wages and salaries – administration
Number of employees (excluding the Non-executive Directors and contractors)
2022
Restated 2021
139.8
6.2
146.0
Number
3,474
105.5
2.8
108.3
Number
3,517
Annual Report and Accounts 2022 Petra Diamonds Limited
161
Financial Statements
10. Director and employee remuneration continued
Key management personnel
Key management is considered to be the Non-executive Directors, the Executive Directors and the Executive Committee (Exco). The Exco
comprises the Chief Technical Officer, the Chief Operating Officer, the Group Head of Human Resources and Public Affairs, the Group Head of
Legal and the Group Head of Sales and Marketing (30 June 2021: key management comprised the Non-executive Directors, the Executive
Directors and the Exco; the Exco comprised the Chief Technical Officer, the General Managers of each mining operation, the Group Head of
Human Resources and Public Affairs, the Group Head of Health and Safety, the Group Head of Risk and the Group Head of Sales and
Marketing). Remuneration for the Year for key management is disclosed in the table below:
US$ million
Salary
Benefits
Annual bonus – paid in cash
Annual bonus – deferred to shares
Share-based payment charge
11. Earnings per share
2022
2021
2.9
0.2
1.5
0.3
1.1
6.0
3.2
0.2
0.8
0.2
0.5
4.9
Significant accounting policies relevant to earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the Year attributable to ordinary equity holders of the parent by the
weighted average number of Ordinary Shares outstanding during the Year. Diluted profit per share amounts are calculated by dividing the net
profit attributable to ordinary equity holders of the parent by the weighted average number of Ordinary Shares outstanding during the Year
plus the weighted average number of Ordinary Shares that would be issued on conversion of all the dilutive potential Ordinary Shares into
Ordinary Shares.
Numerator
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
Effect of 50 for 1 share consolidation November 2021
As at 30 June
Dilutive effect of potential Ordinary Shares
Total
30 June
2022
US$
Total
30 June
2021
US$
68,995,537
187,021,893
Shares
Shares
9,710,089,272
865,431,343
—
2,721,433,209
(9,515,887,487)
(3,515,127,261)
194,201,785
71,737,291
Shares
—
Shares
—
Weighted average number of Ordinary Shares in issue used in diluted EPS
194,201,785
71,737,291
Basic profit per share
Diluted profit per share
US$ cents
US$ cents
35.53
35.53
260.70
260.70
The number of potentially dilutive Ordinary Shares, in respect of employee share options and Executive Director and Senior Management share
award schemes, is nil (30 June 2021: nil).
For the 12 months ended 30 June 2021, the basic and diluted profit per share have been restated and adjusted for the 50 for 1 share
consolidation which became effective in November 2021, in accordance with IAS 33 "Earnings per Share".
There have been no significant post-balance sheet changes to the number of options and awards under the share schemes to impact the
dilutive number of Ordinary Shares.
162
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
12. Adjusted earnings/(loss) per share (non-GAAP measure)
In order to show earnings/(loss) per share from operating activities on a consistent basis, an adjusted earnings/(loss) per share is presented
which excludes certain items as set out below. It is emphasised that the adjusted earnings/(loss) per share is a non-GAAP measure. The Petra
Board considers the adjusted earnings/(loss) per share to better reflect the underlying performance of the Group. The Company’s definition
of adjusted earnings/(loss) per share may not be comparable to other similarly titled measures reported by other companies.
Profit for the Year
Adjustments:
Net unrealised foreign exchange losses/(gains)1
Present value discount – Williamson VAT receivable
Profit on disposal of subsidiary
Impairment (reversal)/charge – operations1
Impairment (reversal)/charge – other receivables
Reversal of BEE loans receivable – expected credit loss provision
Taxation (credit)/charge on unrealised foreign exchange (gain)/loss1
Taxation credit on impairment charge1
Gain on extinguishment of Notes
Total
30 June
2022
US$
Total
30 June
2021
US$
68,995,537
187,021,893
34,851,735
(59,819,931)
4,076,760
(763,537)
—
(14,696,171)
(21,206,735)
34,989,716
(2,544,704)
439,236
—
(5,824,201)
(1,618,908)
17,228,580
—
—
(3,308,166)
(213,349,503)
Transaction costs – acceleration of unamortised costs on restructured loans and borrowings
1,628,757
—
Transaction (reversal)/costs – human rights settlement agreement and provisions for unsettled
and disputed tax claims
Adjusted profit/(loss) for the Year attributable to parent
1. Portion attributable to equity shareholders of the Company.
Weighted average number of Ordinary Shares used in basic EPS:
As at 1 July
Effect of shares issued during the Year
Effect of 50 for 1 share consolidation November 2021
As at 30 June
Dilutive effect of potential Ordinary Shares
(816,270)
32,110,891
83,366,172
(25,971,193)
Total
30 June
2022
US$
Total
30 June
2021
US$
9,710,089,272
865,431,343
—
2,721,433,209
(9,515,887,487)
(3,515,127,261)
194,201,785
71,737,291
Shares
—
Shares
—
Weighted average number of Ordinary Shares in issue used in diluted EPS
194,201,785
71,737,291
Adjusted basic profit/(loss) per share
Adjusted diluted profit/(loss) per share
US$ cents
US$ cents
42.93
42.93
(36.20)
(36.20)
For the 12 months ended 30 June 2021, the basic and diluted profit per share have been restated and adjusted for the 50 for 1 share
consolidation which became effective in November 2021, in accordance with IAS 33 "Earnings per Share".
13. Property, plant and equipment
Significant accounting policies relevant to property, plant and equipment
Capital expenditure
Property, plant and equipment are stated at historical 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. 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. Assets under
construction, such as the Group’s expansion projects, start to be depreciated once the asset is ready and available for use and commercially
viable levels of production are being obtained.
Annual Report and Accounts 2022 Petra Diamonds Limited
163
Financial Statements
13. Property, plant and equipment continued
Significant accounting policies relevant to property, plant and equipment continued
Capital expenditure continued
Subsequent expenditure relating to an item of property, plant and equipment is capitalised when it is probable that future economic benefits
from the use of that asset will be increased. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.
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.
Stripping costs
Costs associated with the removal of waste overburden at the Group’s open cast mine are classified as stripping costs within property, plant
and equipment or inventory, depending on whether the works provide access to future ore tonnes in a specific orebody section or generate
ore as part of waste removal. When costs provide both benefits, they are allocated, although the stripping to date has not generated
inventory ore. The stripping asset is depreciated on a units-of-production basis over the tonnes of the relevant orebody section to which
it provides future access.
Depreciation
The Group depreciates its mining assets using a units-of-production or straight-line basis, depending on its assessment of the most appropriate
method for the individual asset. When a units-of-production basis is used, the relevant assets are depreciated at a rate determined as the
tonnes of ore treated (typically production facility assets) or hoisted (typically underground development and conveying assets) from the
relevant orebody section, divided by the Group’s estimate of ore tonnes held in reserves and resources which have sufficient geological and
geophysical certainty and are economically viable. The relevant reserves and resources are matched to the existing assets which will be utilised
for their extraction. The assets depreciated in the units-of-production method are existing assets. Future capital expenditure is only subject to
depreciation over remaining reserves and resources once incurred. Where an operation is on care and maintenance, non-mining assets are depreciated
over their useful life. The Group depreciates its assets according to the relevant sections of the orebody over which they will be utilised. A key
estimate involves determination of future production units assigned to on-mine shared infrastructure, which is an ongoing assessment given
the mining plan and development projects. Shared infrastructure is defined as common infrastructure enabling ore extraction, treatment and
related support services, shared across more than one section of the orebody (such as the mine shaft or processing plant).
In applying the Group’s policy, assets associated solely with specific sections of the orebody are depreciated over reserves associated with that
section of the orebody. Examples include underground development associated with accessing a specific orebody section. By contrast, shared
infrastructure, including shared surface and underground infrastructure, is utilised for the extraction of multiple sections of the orebody or is
considered to have a life in excess of the ore tonnes included in the current approved current mine plan given the substantial residual resources
that exist at deeper levels in certain of the Group’s kimberlite pipe mines. When the shared infrastructure assets provide benefit over multiple
sections of the orebody they are depreciated over the reserves of the relevant sections of the orebody. When the shared infrastructure is
expected to be utilised to access or process ore tonnes from deeper areas of the mine, which frequently represent ore resources that are
outside of the current approved current mine plan but for which the Group considers there to be sufficient certainty of future extraction,
such assets are depreciated over those reserves and resources.
Where the Group has assets with a residual value, the depreciable amount is the cost of an asset, or other amount substituted for cost, less its
residual value. The residual value of an asset is the estimated amount that an entity would currently obtain from disposal of the asset, after
deducting the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. The
residual value and the useful life and depreciation method of an asset shall be reviewed at least at each financial year end and, if expectations
differ from previous estimates, the change(s) shall be accounted for as a change in an accounting estimate in accordance with IAS 8
"Accounting Policies, Changes in Accounting Estimates and Errors".
The depreciation rates are as follows:
Mining assets
Plant, machinery and equipment
Units-of-production method or 4–33% straight-line basis depending on the nature of the asset
Mineral properties
Units-of-production method
Other assets
Plant and machinery
10–25% straight-line basis
Refer to notes 7, 8 and 23 for the Group’s policy on impairment, borrowing cost capitalisation and rehabilitation provisions and associated
decommissioning assets.
Judgement is applied in making assumptions about the depreciation charge for mining assets as noted above. Judgement is applied when
using the units-of-production method in estimating the ore tonnes held in reserves and resources which have sufficient geological and
geophysical certainty of being economically viable and are extractable using existing assets. The relevant reserves and resources include those
included in current approved current mine plans and, in respect of certain surface and underground shared infrastructure, certain additional
resources which also meet these levels of certainty and viability. The Group depreciates its assets according to relevant sections of the orebody
over which these will be utilised and a key judgement exists in determining the future production unit assigned to on-mine shared infrastructure
which is utilised over more than one section of the orebody or is used to access ore tonnes outside the current approved current mine plan as
noted above. Judgement is also applied when assessing the estimated useful life of individual assets and residual values. The assumptions are
reviewed at least annually by management and the judgement is based on consideration of the current mine plans and structure of the
orebody, as well as the nature of the assets. The assessment is determined by the Group’s capital project teams and geologists.
164
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
13. Property, plant and equipment continued
Significant accounting policies relevant to property, plant and equipment continued
Depreciation continued
US$ million
Cost
Balance at 1 July 2020
Exchange differences
Additions
Transfer of assets under construction
Change in rehabilitation asset
Non-current assets held for sale2
Disposals
Balance at 30 June 2021
Balance at 1 July 2021
Exchange differences
Additions
Transfer of assets under construction
Reconsolidation of non-current assets held for sale2
Disposals
Balance at 30 June 2022
Depreciation and impairment
Balance at 1 July 2020
Exchange differences
Disposals
Non-current assets held for sale2
Impairments3
Provided in the Year
Balance at 30 June 2021
Balance at 1 July 2021
Exchange differences
Disposals
Reconsolidation of non-current assets held for sale2
Impairments3
Provided in the Year
Balance at 30 June 2022
Net book value
At 30 June 2021
At 30 June 2022
Plant and
machinery
Mineral
properties
Assets under
construction 1
1,209.5
254.9
0.3
14.1
6.8
(181.3)
(68.5)
1,235.8
1,235.8
(173.3)
—
29.8
181.3
(47.6)
1,226.0
570.3
125.2
(68.3)
(131.8)
15.1
72.7
583.2
583.2
(97.2)
(45.6)
131.8
0.3
79.2
651.7
652.6
574.3
54.1
11.5
—
—
—
(4.8)
—
60.8
60.8
(8.1)
—
—
4.8
—
57.5
35.7
7.8
—
(1.6)
—
3.5
45.4
45.4
(6.1)
—
1.6
—
3.6
44.5
15.4
13.0
18.2
3.4
23.5
(14.1)
—
—
—
31.0
31.0
(5.3)
52.2
(29.8)
—
—
48.1
—
—
—
—
2.2
—
2.2
2.2
—
—
—
—
—
2.2
28.8
45.9
Total
1,281.8
269.8
23.8
—
6.8
(186.1)
(68.5)
1,327.6
1,327.6
(186.7)
52.2
—
186.1
(47.6)
1,331.6
606.0
133.0
(68.3)
(133.4)
17.3
76.2
630.8
630.8
(103.3)
(45.6)
133.4
0.3
82.8
698.4
696.8
633.2
1. During the Year, assets under construction comprising stay-in-business and expansion capital expenditure of US$29.8 million (30 June 2021: US$14.1 million) were commissioned and transferred to
plant and machinery. Included within assets under construction are amounts mainly for expansion projects at the Finsch and Cullinan mines. Borrowing costs of US$nil (30 June 2021: US$nil) have
been capitalised to assets under construction.
2. Williamson assets were reconsolidated into the Group’s assets in the current Year while in FY 2021 the Williamson assets were classified as non-current assets held for sale (refer to note 36).
3. Refer to note 7 for additional detail on the impairment assumptions for FY2022 (30 June 2021: US$17.3 million impairments for Finsch and Koffiefontein and note 36 for additional detail on the
Williamson impairment of US$21.4 million). The impairment reversal of US$21.4 million for Williamson in the current Year is included under reconsolidation of non-current assets held for sale
(30 June 2021: US$21.4 million impairment for Williamson included under non-current assets held for sale).
Capital commitments
The Group’s total commitments of US$49.5 million (30 June 2021: US$10.2 million), mainly comprising Cullinan Mine US$25.2 million (30 June
2021: US$8.1 million), Finsch US$23.7 million (30 June 2021: US$1.5 million), Koffiefontein US$0.3 million (30 June 2021: US$0.6 million) and
Williamson US$0.3 million (30 June 2021: US$nil).
Annual Report and Accounts 2022 Petra Diamonds Limited
165
Financial Statements
14. Leases
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the
Group’s incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of
the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element
will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate. On initial
recognition, the carrying value of the lease liability also includes:
Š Amounts expected to be payable under any residual value guarantee
Š The exercise price of any purchase option granted in favour of the Group if it is reasonably certain to assess that option
Š Any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised
Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:
Š Lease payments made at or before commencement of the lease
Š Initial direct costs incurred
Š The amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset
Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and
are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over
the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.
Included in profit or loss for the Year are: US$2.5 million (30 June 2021: US$0.9 million) of amortisation of right-of-use assets, US$1.2 million
(30 June 2021: US$0.1 million) of finance expense on lease liabilities and a gain of US$nil (30 June 2021: US$0.3 million).
Information for leases for which the Group is a lessee is presented below:
Right-of-use assets
US$ million
Cost
Balance at 1 July 2020
Additions
Balance at 30 June 2021
Balance at 1 July 2021
Additions
Balance at 30 June 2022
Depreciation and impairment
Balance at 1 July 2020
Exchange differences
Lease terminations
Non-current assets held for sale
Provided in the Year
Balance at 30 June 2021
Balance at 1 July 2021
Exchange differences
Provided in the Year
Balance at 30 June 2022
Net book value
At 30 June 2021
At 30 June 2022
166
Petra Diamonds Limited Annual Report and Accounts 2022
Buildings
Plant and
machinery
Total
10.1
0.7
10.8
10.8
23.5
34.3
(5.2)
0.2
(0.4)
(3.3)
(0.9)
(9.6)
(9.6)
(0.3)
(2.5)
8.2
—
8.2
8.2
22.3
30.5
(4.9)
—
—
(3.3)
—
(8.2)
(8.2)
—
(1.9)
(10.1)
(12.4)
—
20.4
1.2
21.9
1.9
0.7
2.6
2.6
1.2
3.8
(0.3)
0.2
(0.4)
—
(0.9)
(1.4)
(1.4)
(0.3)
(0.6)
(2.3)
1.2
1.5
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
14. Leases continued
Lease liabilities
US$ million
Balance at 1 July 2020
Exchange differences
Additions
Lease liabilities directly associated with non-current assets held for sale
Finance charges
Lease payments
Lease terminations
Balance at 30 June 2021
Balance at 1 July 2021
Exchange differences
Additions
Finance charges
Lease payments
Balance at 30 June 2022
US$ million
Current
Non-current
As at 30 June
Buildings
Plant and
machinery
1.1
0.2
0.7
—
0.1
(0.7)
(0.4)
1.0
1.0
(0.1)
1.3
0.1
(0.7)
1.6
3.6
—
—
(3.6)
—
—
—
—
—
—
22.2
1.1
(2.5)
20.8
2022
3.2
19.2
22.4
The Group does not face a significant liquidity risk with regard to its lease liabilities. Lease liabilities are monitored within the Group’s
treasury function.
Amounts recognised in profit and loss
US$ million
Amortisation on right-of-use assets
Finance expense on lease liabilities
Loss on discontinued operations
2022
(2.5)
(1.2)
—
(3.7)
Total
4.7
0.2
0.7
(3.6)
0.1
(0.7)
(0.4)
1.0
1.0
(0.1)
23.5
1.2
(3.2)
22.4
2021
0.5
0.5
1.0
2021
(0.9)
(0.1)
0.3
(0.7)
15. BEE loans receivable and payable
Significant accounting policies relevant to BEE loans receivable and payable
IAS 32 prescribes rules for the offsetting of financial assets and financial liabilities. It specifies that a financial asset and a financial liability
should be offset and the net amount reported when, and only when, an entity:
Š Has a legally enforceable right to set off the amounts
Š Intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously
During FY 2021 the BEE payables of US$138.8 million (including foreign exchange movements and accrued interest) were offset with BEE loans
receivables of US$185.4 million (including foreign exchange movements, discretionary advances, reversal of expected credit loss provision and
accrued interest) resulting in a net BEE loan receivable of US$46.6 million.
Refer to note 32 for the Group’s policy in respect of financial instruments, which include BEE receivables and payables.
Annual Report and Accounts 2022 Petra Diamonds Limited
167
Financial Statements
15. BEE loans receivable and payable continued
Significant judgements and estimates relevant to BEE loans receivable and payable
Refer below for significant judgements in respect of the BEE loans receivable related to the recognition of the BEE Lender facility guarantee
payable in loans and borrowings, a receivable for reimbursement of the BEE Lender facility guarantee and expected credit loss provision
recorded in respect of BEE receivables.
US$ million
Non-current assets
BEE loans receivable1
2022
44.6
2021
46.6
1. Interest on the BEE loans receivable is charged at the prevailing South African JIBAR plus an interest margin of 5.25%. The movement in the Year includes advances, repayments, accrued interest
and foreign exchange retranslation. The loans are repayable from future cashflows, attributable to the loan holders, generated from the underlying mining operations.
BEE loans receivable
The non-current BEE loans receivable represents those amounts receivable from the Group’s BEE Partners (Kago Diamonds and the IPDET)
in respect of advances historically provided to the Group’s BEE Partners to enable them to discharge interest and capital commitments under
the BEE Lender facilities, advances to the BEE Partners to enable trickle payment distributions to both Kago Diamonds shareholders and to
the beneficiaries of the IPDET (Petra Directors and Senior Managers do not qualify as beneficiaries under the IPDET Trust Deed), and financing
of their interests in the Koffiefontein mine. In addition, US$42.0 million (30 June 2021: US$45.4 million) has been recorded as part of the gross
receivable (before expected credit loss provisions) in respect of amounts to be reimbursed to the Group in respect of the guarantee under
the BEE Lender facilities. Judgement was required in determining the extent to which reimbursement is applicable based on the terms of
the agreements, South African legislation and discussions with the BEE Partners.
As a result of historical delays in the Cullinan Mine plant ramp-up and the Finsch SLC ramp-up, the Group has historically elected to advance
the BEE Partners’ funds using Group treasury to enable the BEE Partners to service their interest and capital commitments under the BEE
Lender facilities (refer below). These BEE receivables, including interest raised, will be recoverable from the BEE Partners’ share of future
cashflows from the underlying mining operations.
As part of the in-principle agreement reached during FY 2021 as part of the Restructuring, Petra assumed the BEE Lender facility obligations
under the terms outlined in note 37.
The Group has applied the expected credit loss impairment model to its financial assets and the BEE loans receivable. In determining the
extent to which expected credit losses may apply, the Group assessed the future free cashflows to be generated by the mining operations,
based on the current LOM plans. In assessing the future cashflows, the Group considered a probability weighted range of diamond price
outlooks. Based on the assessment, the analysis generated a reversal of the expected credit loss provision totalling US$nil (30 June 2021:
US$5.8 million expected credit loss reversal), comprising US$nil (30 June 2021: US$5.8 million) in respect of Cullinan Mine and Finsch and US$nil
(30 June 2021: US$nil) in respect of Koffiefontein.
US$ million
As at 1 July
Foreign exchange movement on opening balances
Discretionary advance – capital and interest commitment (BEE Lender facility)
Discretionary advance – distributions to beneficiaries
Interest receivable
Reversal of BEE loans receivable – expected credit loss provision
Repayment of loan from BEE Partners
BEE payable restructuring – offset against BEE receivable
As at 30 June
2022
46.6
(5.9)
—
—
4.1
—
(0.2)
—
44.6
2021
137.0
30.7
4.7
2.0
5.2
5.8
—
(138.8)
46.6
BEE loans payable
BEE loans payable represent those loans advanced by the BEE Partners to the Group to acquire their interest in Cullinan Mine and Finsch.
Details of the movements are set out below.
US$ million
As at 1 July
Foreign exchange movement on opening balances
Interest payable
BEE payable restructuring – offset against BEE receivable
As at 30 June
168
Petra Diamonds Limited Annual Report and Accounts 2022
2022
—
—
—
—
—
2021
108.6
23.2
7.0
(138.8)
—
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
15. BEE loans receivable and payable continued
BEE loans payable continued
The IPDET holds a 12% interest in each of the Group’s South African operations, with Petra’s commercial BEE Partners holding the remaining
14% interest through their respective shareholdings in Kago Diamonds, in which Petra has a 31.46% interest. The effective interest percentages
attributable to the remaining operations for the Group’s shareholders are disclosed in the table below:
Mine
Cullinan Mine
Finsch
Koffiefontein
BEE
Partner
Kago Diamonds and IPDET
Kago Diamonds and IPDET
Kago Diamonds and IPDET
BEE
interest
%
Resultant Group’s
effective interest
%
26.0
26.0
26.0
78.4
78.4
78.4
Group guarantee provided to BEE Lenders
The BEE Partners obtained bank financing from Absa, RMB and Investec (the BEE Lenders) to refinance amounts owing by the BEE Partners to
Petra, which had provided funding to the BEE Partners to enable them to acquire their interests in Cullinan Mine and Finsch. As part of historical
refinancing arrangements the Group provided a guarantee to the BEE Lenders over the repayment of loans advanced to the Group’s BEE Partners.
The BEE Partners were expected to settle their loan obligations with the BEE Lenders from their share of future operational cashflows from
the South African operations, either through repayment of the amounts owing to the BEE Partners by Petra or through recoverable advances
provided by Petra from Group treasury.
During the prior year, the Group completed its Restructuring, the BEE Lender facility was included as part of the Group’s restructured banking
facilities and the guarantee provided by the Group on behalf of the BEE Partners was extinguished (refer to note 37 for further detail).
Further details of the transactions with the BEE Partners are included in note 27.
16. Non-controlling interests
The non-controlling interests of the Group’s partners in its operations are presented in the table below:
US$ million
Effective interest %
Country
As at 1 July 2021
Profit/(loss) for the Year
Dividend paid to Non-controlling interest shareholders
Foreign currency translation difference
At 30 June 2022
Cullinan Mine
Finsch
Koffiefontein
Tarorite
Williamson 1
Total
21.6
21.6
21.6
17.8
25.0
South Africa South Africa South Africa South Africa
Tanzania
(3.0)
18.5
—
(2.5)
13.0
24.0
4.0
(3.5)
(2.3)
22.2
(31.6)
(3.4)
—
4.4
(30.6)
0.1
—
—
—
0.1
—
—
—
—
—
(10.5)
19.1
(3.5)
(0.4)
4.7
1. Non-controlling interest at Williamson is not recognised as the GoT will not contribute in respect of accumulated losses. The finalisation of the FWA will result in future non-controlling interest at
Williamson being recognised.
During the Year, Finsch declared and paid a dividend out of profits generated in FY 2021 to its non-controlling interests (30 June 2021: US$nil).
The BEE Partners received a total net dividend payment of US$2.5 million comprising Kago US$1.3 million and IPDET US$1.2 million. For additional
information on total assets, total liabilities and segment results for each operation in the table above refer to note 33.
17. Trade and other receivables
Significant accounting policies relevant to trade and other receivables
Refer to note 32 for the Group’s policy in respect of financial instruments, which include trade and other receivables.
Significant judgements and estimates relevant to VAT receivable at Williamson
The Group has net VAT receivable of US$2.6 million (30 June 2021: US$0.7 million) (after providing for the time-value of money and risk
adjustments for various factors) in respect of the Williamson mine, all of which are past due and have therefore been classified as non-current
given the potential delays in receipt. Williamson’s non-current assets were classified as assets held for sale in FY 2021.
The VAT receivable can be split into three identifiable component time periods as set out below:
US$ million
July 2017 to June 2020
Pre-July 2017 and Post-June 2020
VAT receivable
Provision
Written off
Carrying value
26.9
8.6
35.5
—
(6.0)
(6.0)
(26.9)
—
(26.9)
—
2.6
2.6
Annual Report and Accounts 2022 Petra Diamonds Limited
169
Financial Statements
17. Trade and other receivables continued
Significant judgements and estimates relevant to VAT receivable at Williamson continued
July 2017 to June 2020
A further US$26.9 million (30 June 2021: US$26.9 million) of VAT is receivable which relates to VAT under the legislation, effective from
July 2017 to 30 June 2020.
In prior periods Management considered the amendment to the VAT legislation for the period July 2017 to July 2020 and based on legal
advice and the confirmed application of the legislation by the TRA considered that the input VAT was not recoverable and a full provision
was recorded in prior periods. Further to this, the Framework Agreement provisions do not allow for offsetting of these historically disputed
amounts and as such the full US$26.9 million has been written off. There has been no Consolidated Income Statement impact as a result
of this write-off as the US$26.9 million was fully provided for in prior periods.
Pre-July 2017 and Post-June 2020
An amount of US$8.6 million (30 June 2021: US$2.6 million) of VAT is receivable for the periods pre-July 2017 and post 1 July 2020. During
FY 2021, the Group received US$10.0 million in VAT refunds from the Tanzanian Revenue Authority in respect of the pre-July 2017 period and
US$1.2 million was disallowed by the Tanzanian Revenue Authority. The Group is considering various alternatives in pursuing payment in
accordance with legislation. A provision of US$6.0 million, given the uncertainty around the timing of receipts of the amount outstanding,
has been provided for against the US$8.6 million receivable resulting in a carrying value of US$2.6 million.
While the remaining pre-July 2017 and post-1 July 2020 VAT balance is considered receivable, significant uncertainty exists regarding the
timing of receipt. A discount rate of 14.00% (30 June 2021: 16.25%) has been applied to the expected cash receipts inclusive of estimated
country credit risk. A 1% increase in the discount rate would increase the provision by US$0.04 million and a one-year delay would increase
the provision by US$0.1 million.
The provision against the VAT balance is US$6.0 million (30 June 2021: US$28.8 million). The provision relates to US$6.0 million that is recorded
against the pre-July 2017 and post-June 2020 amount. The full disputed July 2017 to June 2020 amount of US$26.9 million, which was fully
provided for as at 30 June 2021, has been written off. During the Year, an impairment charge of US$4.1 million (30 June 2021: US$0.7 million)
was recognised in the Consolidated Income Statement.
US$ million
Current
Trade receivables1, 2
Other receivables1, 3
Less: expected credit loss provision of KEM JV receivables3
Less: expected credit loss provision of other receivables3
Other receivables – net
Income tax receivable
Prepayments1
Non-current
Other receivables4
Less: impairment provision
2022
2021
37.4
10.4
(2.0)
(0.3)
8.1
—
4.3
49.8
8.6
(6.0)
2.6
38.3
16.9
(8.4)
(0.4)
8.1
1.2
3.1
50.7
—
—
—
1. In FY 2021 trade receivables, other receivables and prepayments exclude amounts classified as non-current assets held for sale of US$2.9 million (refer to note 36).
2. Included in the opening balance of trade receivables are trade receivables in respect of diamond revenue of US$38.3 million (1 July 2021: US$4.8 million).
3. Included in current trade and other receivables is an amount relating to the balance of the KEM JV purchase consideration of US$1.7 million (30 June 2021: US$1.3 million). During FY 2022, the Group
received payments of US$2.5 million (FY 2021: US$0.4 million) from the KEM JV as part settlement of the outstanding purchase consideration. The Group has applied the expected credit loss
impairment model to the KEM JV receivables, taking into account various factors, and the expected credit loss was deemed to be US$2.0 million (30 June 2021: US$8.4 million). The decrease in the
expected credit loss is attributable to the repayment received during the Year and to the movement in the foreign exchange rates during the Year. The Group raised an impairment provision of
US$0.3 million (30 June 2021: US$0.4 million) in respect of certain sub-tenants which occupied office space in its London offices as the amounts are past due.
4. Other non-current receivables comprised the VAT receivable at Williamson. In FY 2021, the non-current receivables were classified as non-current assets held for sale (refer note 36).
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade
receivables and the 12-month approach, unless a specific risk exists, for other receivables. To measure expected credit losses on a collective
basis, trade receivables and other receivables are grouped based on similar credit risk and ageing.
As at 30 June 2022 trade receivables of US$37.4 million (30 June 2021: US$38.3 million) comprised diamond debtors, all of which had settled
post Year end and as such have lifetime expected credit losses of US$nil.
In assessing the credit risk loss and recoverability of other receivables, Management considered the historical trading performance of the third
parties, the current diamond market and outlook, the current economic climate and outlook, payment history, recent press coverage involving
the third parties and ongoing legal discussions. Such assessment resulted in impairment provisions totalling US$0.3 million (30 June 2021:
US$0.4 million) in respect of certain sub-tenants which previously occupied office space in the Group’s London offices.
Included in trade and other receivables are amounts due from related parties (refer to note 27).
170
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
18. Inventories
Significant accounting policies relevant to 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. Net realisable value also incorporates costs of processing in the
case of the ore stockpiles. 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.
Significant judgements and estimates relevant to diamond inventories
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. The Group uses empirical data
on prices achieved, grade and expenditure in forming its assessment.
Recoverability of diamond parcel in Tanzania
The Group holds diamond inventory, classified as non-current assets held, valued at lower of cost and net realisable value of US$12.5 million
(30 June 2021: US$10.6 million) in the Statement of Financial Position in respect of the Williamson mine’s confiscated diamond parcel. During
FY 2018, an investigation into the Tanzanian diamond sector by a parliamentary committee in Tanzania was undertaken to determine if
diamond royalty payments were being understated. In connection with this, Petra announced on 11 September 2017 that a parcel of diamonds
(71,654.45 carats) from the Williamson mine in Tanzania (owned 75% by Petra and 25% by the GoT) had been blocked for export to Petra’s
marketing office in Antwerp.
The assessment of the recoverability of the diamond parcel requires significant judgement. In making such a judgement, the Group considered
the Framework Agreement that was signed with the GoT on 13 December 2021, confirming that it held the diamond parcel of 71,654.45 carats
and ongoing discussions held with the GoT. The Group has made an assessment of the internal process used for the sale and export of
diamonds and has confirmed that in the event that the parcel is recovered, a sale would be possible to execute in full compliance with
legislation in Tanzania and the Kimberley Process with certain rectification steps. The Group has obtained legal advice from the Group’s
in-country attorneys which supports Management’s position that the Group retains the legal right to the parcel.
The Framework Agreement which refers to the diamond parcel as the “Government Diamond Parcel” sets out that the proceeds from the sale
of the Parcel will flow to Williamson. The Company is aware of media reports suggesting that the blocked parcel of 71,654 carats of diamonds
from the Williamson mine in Tanzania has been nationalised by GoT.
The Company remains in discussions with the GoT on this matter.
During FY 2018, Petra received authorisation from the GoT to resume diamond exports and sales from Williamson and all subsequent parcels
of diamonds have been exported from Tanzania for eventual sale at the Company’s marketing office in Antwerp. While a resolution has not
yet been reached with regard to the mechanism to sell the parcel of diamonds that was blocked from export, based on the above judgements
and assessment thereof, Management remains confident that based on the signed Framework Agreement, and the legal advice received from
the Group’s in-country attorneys, the diamond parcel will be made available for future sale, and that WDL will derive future economic benefit
from the sales proceeds.
US$ million
Diamonds held for sale
Work in progress stockpiles
Consumables and stores
Provision for redundant consumables and stores
Consumables and stores
2022
52.7
4.5
16.6
(3.2)
13.4
70.6
2021
45.1
4.8
11.5
(1.5)
10.0
59.9
1. In FY 2021, inventories exclude amounts classified as non-current assets held for sale of US$15.5 million (refer to note 36).
As at 30 June 2022, diamonds held for resale with a cost value of US$2.7 million (30 June 2021: US$2.7 million) have been written down by
US$1.2 million (30 June 2021: US$0.7 million) to a fair value less costs to sell of US$1.5 million (30 June 2021: US$2.0 million) (due to the fair
value less costs to sell being below cost) within the overall carrying value of US$52.7 million (30 June 2021: US$45.1 million).
Annual Report and Accounts 2022 Petra Diamonds Limited
171
Financial Statements
19. Cash
Significant accounting policies relevant to cash
Cash and cash equivalents comprise cash-on-hand, deposits held on call with banks and investments in money market instruments, net of
bank overdrafts, all of which are available for use by the Group unless otherwise stated. Restricted cash represents amounts held by banks, the
Group’s insurance cell captive and other financial institutions as guarantees in respect of environmental rehabilitation obligations in respect of
the Group’s South African mines.
US$ million
Cash and cash equivalents – unrestricted
Cash – restricted
2022
271.9
16.3
288.2
2021
147.7
16.1
163.8
1. In FY 2021, cash excludes amounts classified as non-current assets held for sale of US$9.2 million (refer to note 36).
The Group’s environmental rehabilitation insurance product, which currently includes the Finsch, Cullinan and Koffiefontein mines, has secured
cash assets of US$16.3 million (30 June 2021: US$16.1 million) held in a cell captive and by Petra’s bankers. In the prior year, the Company deposited
US$1.5 million into an Escrow account to meet its obligations under the settlement reached with Leigh Day in respect of the human rights claims
at Williamson. The Group has a commitment to pay insurance premiums over the next year of US$2.2 million (30 June 2021: US$2.5 million) to
fund the environment rehabilitation insurance product for the South African operations. The rehabilitation provisions are disclosed in note 23.
20. Equity and reserves
Share capital
Significant accounting policies relevant to share capital
Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial liability.
The Group’s Ordinary Shares are classified as equity instruments.
When the Group issues equity to settle outstanding debt, the value attributed to the Ordinary Shares issued is based on the fair value of the
equity at the date of settlement to extinguish the debt. The fair value is derived by reference to the closing share price at the date of the
conversion; it is considered to be a Level 1 fair value measurement. Costs identified as being directly associated with the debt for equity
conversion are taken directly to share premium.
US$ million
Number of shares
2022
Number of shares
2021
Authorised – Ordinary Shares of 0.05 pence (30 June 2021: 0.001
pence) each
At 1 July
Issued and fully paid
At 1 July
Allotments during the Year
50 for 1 share consolidation November 2021
At 30 June
10,000,000,000
164.3
10,000,000,000
164.3
9,710,089,272
145.7
865,431,343
—
(9,515,887,487)
—
—
8,844,657,929
—
194,201,785
145.7
9,710,089,272
133.4
12.3
—
145.7
During the Year, the Company’s shareholders approved at the FY 2021 Annual General Meeting a 50 for 1 share consolidation.
Admission of the Company’s New Ordinary Shares took place on 29 November 2021. As a result of the share consolidation, the Company’s
shares in issue comprise 194,201,785 Ordinary Shares of 0.05 pence each.
In FY 2021, as part of the Restructuring and subsequent to the approval by shareholders at a special general meeting held on 13 January 2021,
the Company allotted 8,844,657,929 Ordinary Shares to the Noteholders valued at US$194.0 million (comprising Ordinary Shares valued at
US$12.3 million and share premium of US$181.7 million before capitalised costs), based on the share price at 9 March 2021 (the date upon which
all implementation steps for the Debt Restructuring were met). The allotment was pursuant to the Debt for Equity Conversion, announced on
22 December 2020, which resulted in the Noteholders holding 91% of the enlarged share capital of the Company in the following proportions:
Š 56.0% of the enlarged share capital was issued to all Noteholders, including the New Money Noteholders, pro rata to their holdings of
existing Notes at the Scheme Record Time (to the extent any Noteholder did not take up their equity entitlement, such entitlement was
allocated to the remaining Noteholders who did not opt out of their equity entitlement, on a pro rata basis)
Š 35.0% of the enlarged share capital was issued to the New Money Noteholders only, pro rata to their contribution of the New Money (to the
extent any such Noteholders did not take up their equity entitlement, such entitlement was allocated to the remaining Noteholders who
contributed to the New Money and who did not opt out of their equity entitlements, on a pro rata basis)
As a consequence of the Debt for Equity Conversion, 9% of the enlarged Company’s share capital remains with the previous shareholders
(subject to dilution as a result of standard management equity incentive arrangements). The costs associated with the allotment of the new
Ordinary Shares of US$12.3 million were capitalised against share premium. For additional information regarding the Debt Restructuring refer
to note 37.
172
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
20. Equity and reserves continued
Share capital continued
Significant accounting policies relevant to share capital continued
The Group’s equity and reserve balances include the following:
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 entities with a functional
currency other than US Dollars and foreign exchange differences on net investments in foreign operations.
Share-based payment reserve
The share-based payment reserve comprises:
Š The fair value of employee and Director options as measured at grant date and spread over the period during which the employees
or Directors become unconditionally entitled to the options
Š The fair value of shares awarded under the 2012 Performance Share Plan measured at grant date (inclusive of market-based vesting conditions)
with estimated numbers of awards to vest due to non-market-based vesting conditions evaluated each period and the fair value spread
over the period during which the employees or Directors become unconditionally entitled to the awards
Š Foreign exchange retranslation of the reserve
Š Amounts transferred to retained losses in respect of exercised and lapsed options
Š Amounts derecognised as part of cash settlement of vested awards originally planned for equity settlement
Other reserves
The other reserves comprise the cumulative gains or losses arising from other listed financial assets of US$0.8 million (30 June 2021: US$0.8 million).
Accumulated losses
The accumulated losses comprise the Group’s cumulative accounting losses incurred since incorporation.
Non-controlling interest
Non-controlling interest comprises amounts attributable to BEE (in South Africa) and Government (in Tanzania) shareholders in the Finsch,
Cullinan Mine, Koffiefontein and Williamson mines together with foreign exchange retranslation of the reserve. The non-controlling interest
share of total comprehensive income includes US$15.2 million total comprehensive expense (30 June 2021: US$8.3 million expense) for the Year.
Refer to note 16 and the Statement of Changes in Equity for further detail.
21. Interest-bearing loans and borrowings
Significant accounting policies relevant to loans and borrowings
Bank borrowings are recognised initially at fair value less attributable transaction costs. Such interest-bearing liabilities are subsequently
measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment
is at a constant rate on the balance of liability carried in the Consolidated Statement of Financial Position. ‘Interest expense’ in this context
includes initial transaction costs, as well as any interest or coupon payable while the liability is outstanding.
Accounting policy for substantial modification of financial liabilities
When the Group’s borrowings are refinanced, and the refinancing is considered to be a substantial modification, the difference between the
carrying amount of a financial liability (or part of a financial liability) extinguished or transferred to another party and the consideration paid,
including any non-cash assets transferred or liabilities assumed, is recognised as a charge in the income statement.
Under the quantitative test, the modification is classed as substantial if the present value of the modified cashflows is at least 10% different
to the present value of the remaining original cashflows. There may be circumstances where the 10% test is not met, but other qualitative
factors indicate there has been a substantial modification.
Annual Report and Accounts 2022 Petra Diamonds Limited
173
Financial Statements
21. Interest-bearing loans and borrowings continued
Accounting policy for substantial modification of financial liabilities continued
The following table summarises the Group’s current and non-current interest-bearing borrowings:
US$ million
Current
Loans and borrowings – senior secured lender debt facilities
Loans and borrowings – senior secured second lien notes
Non-current
Loans and borrowings – senior secured second lien notes
Loans and borrowings – senior secured lender debt facilities
2022
—
12.3
12.3
353.9
—
353.9
366.2
2021
30.3
—
30.3
327.3
72.7
400.0
430.3
(a) US$336.7 million senior secured second lien notes
A wholly owned subsidiary of the Company, Petra Diamonds US$ Treasury Plc, issued debt securities consisting of US$336.7 million five-year
senior secured second lien Loan Notes, with a maturity date of 8 March 2026. The Notes carry a coupon from:
Š 9 March 2021 to 31 December 2022 of 10.50% per annum, which is capitalised to the outstanding principal amount semi-annually in arrears
on 31 December and 30 June of each year
Š 1 January 2023 to 30 June 2023 of 10.50% per annum on 37.7778% of the aggregate principal amount outstanding, which is capitalised to
the outstanding principal amount semi-annually in arrears on 31 December and 30 June of each year and 9.75% per annum on 62.2222% of
the aggregate principal amount outstanding which is payable in cash semi-annually in arrears on 31 December and 30 June of each year
Š 1 July 2023 to 31 December 2025 of 9.75% per annum on the aggregate principal amount outstanding which is payable in cash semi-annually
in arrears on 31 December and 30 June of each year
Š 1 January 2026 to 8 March 2026 (final coupon payment) of 9.75% per annum on the aggregate principal amount outstanding which is
payable in cash
The costs associated with issuing the Notes of US$20.7 million have been capitalised against the principal amount and US$18.5 million
remains unamortised as at 30 June 2022 (30 June 2021: US$19.4 million). Interest of US$50.3 million has been accrued as at 30 June 2022
(30 June 2021: US$11.1 million).
The Notes are guaranteed by the Company and by the Group’s material subsidiaries and are secured on a second-priority basis on the assets of
the Group’s material subsidiaries (refer to note 29 for further detail). The Notes are listed on the Irish Stock Exchange and traded on the Global
Exchange Market. On or after 9 March 2023, the Company has the right to redeem all or part of the Notes at the following redemption prices
(expressed as percentages of the principal amount), plus any unpaid accrued interest:
Period of 12 months from 9 March 2023
Period of 12 months from 9 March 2024
Period of 12 months from 9 March 2025
The Notes are secured on a second-priority basis to the senior secured lender debt facilities by:
Š The cession of all claims and shareholdings held by the Company and certain of the guarantors within the Group
Š The cession of all unsecured cash balances held by the Company and certain of the guarantors
Š The creation of liens over the moveable assets of the Company and certain of the guarantors
Š The creation of liens over the mining rights and immovable assets held and owned by certain of the guarantors
Redemption price
104.88%
102.44%
100.00%
174
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
21. Interest-bearing loans and borrowings continued
(b) Senior secured lender debt facilities
During June 2022, the Group restructured its existing banking facilities providing for more favourable terms than the Group’s previous 1L facilities
which resulted in Absa Corporate and Investment Banking (Absa) becoming the Group’s new banking partner under the new banking facilities.
A new Revolving Credit Facility (RCF) with Absa replaces the existing RCF and Term Lending arrangements with the previous South African
lender syndicate comprising Absa, Nedbank, RMB and NinetyOne. The new terms include, inter alia:
Š Improved structure with a single ZAR1.0 billion RCF replacing the existing amortising Term Loan of ZAR1.2 billion and the ZAR408.8 million RCF
Š More appropriate covenant package resulting in improved headroom and flexibility on the balance sheet
Š Extended tenure for the RCF with a maturity date of December 2025 and a bullet payment at maturity
Š Reduced financing costs with improved margin and commitment fees. The costs associated with restructuring of the banking facilities of
US$0.5 million have been expensed in the Consolidated Income Statement under net finance charges
The Group performed an assessment under its accounting policies and the requirements of IFRS 9 as to whether the restructuring of the Senior
Secured Lender Facilities represented a substantial modification. As the net present value of the cashflows under the original terms and the
modified terms was less than 10% different and there were no substantial qualitative changes to the terms, the modification was not considered
to be substantial.
The revised terms under the RCF are:
Š Maturity date December 2025 with a 60-day buffer between the redemption of the Notes and the maturity of the RCF
Š To maintain a net debt:EBITDA ratio tested semi-annually on a rolling 12-month basis
Š To maintain an interest cover ratio tested semi-annually on a rolling 12-month basis, which if breached will give rise to an event of default
under the new bank facilities
Š Interest rate of SA JIBAR + 4.15% per annum (with the margin to be reconsidered annually based on Petra’s credit metrics with a view
of further optimising the margin to be achieved)
As at the date of this report, the RCF was undrawn and ZAR1.0 billion (US$61.5 million) remained available for draw-down. On 24 January 2022,
the Company paid ZAR404.6 million (US$24.9 million) (capital plus interest) to settle the previous RCF and on 18 March 2022 the Company paid
ZAR893.2 million (US$54.9 million) (capital plus interest) to settle the Term Loan.
30 June 2021
The Group’s South African Lender Group comprised Absa Corporate and Investment Banking (Absa), FirstRand Bank Limited (acting through its
Rand Merchant Bank division) (RMB), Nedbank Limited and NinetyOne Limited.
As part of the Restructuring in FY 2021, the existing banking facilities were amended on a first lien basis and on the following terms: the
creation of a new Term Loan of ZAR1.2 billion (US$76.6 million) comprising ZAR500.0 million (US$35.0 million) under the existing WCF and
ZAR683.1 million (US$41.6 million) relating to the BEE Partner debt facilities; and the rollover of the existing RCF increasing by ZAR160.0 million
(US$11.2 million) to ZAR560 million (US$39.2 million). The costs associated with restructuring of the banking facilities of US$1.7 million and
US$0.7 million cash transaction costs allocated based on the total Restructuring costs were capitalised against the principal amount.
The Group performed an assessment under its accounting policies and the requirements of IFRS 9 as to whether the restructuring of the Senior
Secured Lender Facilities represented a substantial modification. As the net present value of the cashflows under the original terms and the
modified terms was less than 10% different and there were no substantial qualitative changes to the terms, the modification was not substantial.
The terms under the Term Loan were:
Š Maturity date 8 March 2024
Š Scheduled amortisation of 9% of principal per quarter (starting in June 2021) with a final 10% of principal repayment at maturity
Š 1.3x debt service cover ratio tested semi-annually on a rolling 12-month basis, which if breached will give rise to an event of default under
the new bank facilities
Š Interest rate of SA JIBAR + 5.25% per annum (with an upfront fee of 1% of the Term Loan amount capitalised)
The terms under the RCF were:
Š Maturity date 8 March 2024
Š Scheduled amortisation of 9% of principal per quarter (starting in June 2021) with a final 10% of principal repayment at maturity
Š 1.3x debt service cover ratio tested semi-annually on a rolling 12-month basis, which if breached will give rise to an event of default under
the new bank facilities
Š Interest rate of SA JIBAR + 5.25% per annum (with an upfront fee of 1% of the RCF amount capitalised and a commitment fee based on
undrawn balances)
As at 30 June 2021, the RCF, as amended, was drawn down by an amount of ZAR400.0 million (US$28.0 million) with ZAR109.6 million
(US$7.7 million) available for draw-down and the Term Loan of ZAR1.1 billion (US$77.1 million) was fully drawn.
Annual Report and Accounts 2022 Petra Diamonds Limited
175
Financial Statements
21. Interest-bearing loans and borrowings continued
(c) BEE Partner debt facilities
During FY 2021, the BEE Partner debt facilities have been restructured and formed part of the Term Loan (refer to (b) 30 June 2021 above).
As at 30 June 2022, the Group’s debt and hedging facilities are detailed in the table below:
Institution
Type
Total facility
(ZAR million)
Total facility
(US$ million)
Draw-down ZAR
facility (US$ million)
at 30 June
Draw-down
(US$ million) at 30 June
Interest rate (ZAR)
Interest rate (US$)
Interest rate at Year
end (ZAR)
Interest rate at Year
end (US$)
Interest repayment
period
Latest date available
for draw-down
Capital repayment
profile
Final repayment date
(US$ million)
Final repayment date
(ZAR million)
Bank loan – secured
Bank loan – secured
Bank loan – secured
Senior second lien notes – secured
2022
2021
2022
2021
2022
2021
2022
2021
Absa
FirstRand, Absa, Nedbank,
NinetyOne
FirstRand, Nedbank, Absa
Bond holders
Revolving Credit Facility
Term Loan facility
Revolving Credit Facility
Bond notes
1,000.0 1
n/a
— 2
1,109.4 3
—
—
—
SA JIBAR
plus 4.15%
n/a
n/a
n/a
n/a
—
n/a
9.16%
n/a
—
n/a
—
—
—
—
—
—
—
—
1,109.4
—
SA JIBAR
plus 5.25%
—
8.70%
—
Monthly
n/a
—
n/a
—
—
Quarterly
Fully drawn
down
— 2
—
—
—
—
—
—
—
—
—
509.6 4
—
—
—
336.7
336.7
400.0
—
—
—
336.7
336.7
SA JIBAR
plus 5.25%
—
—
10.50% up
to 2023 then
9.75% from
2023 to 2026
10.50% up
to 2023 then
9.75% from
2023 to 2026
—
8.93%
—
—
—
10.50%
10.50%
Capitalised
semi-
annually
until June
2023/
bi-annual
interest
payment
Capitalised
semi-annually
until June
2023/
bi-annual
interest
payment
Quarterly
8 March
2024
Fully
drawn down
Fully
drawn down
Final capital
repayment
60 days prior
to 8 March
2026
n/a
Repaid
Amortising
at 9%
per quarter
Amortising
at 9%
per quarter
Repaid
—
n/a
—
—
—
—
Single
payment
8 March
2026
Single
payment
8 March
2026
60 days prior
to 8 March
2026
n/a
Repaid
8 March
2024
Repaid
8 March
2024
—
—
176
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
21. Interest-bearing loans and borrowings continued
(c) BEE Partner debt facilities continued
1. The facility also comprised a ZAR300 million foreign exchange settlement line not included above. No additional fees are charged on the foreign exchange settlement line.
2. On 24 January 2022, the Company paid ZAR404.6 million (US$24.9 million) (capital plus interest) to settle the previous RCF and on 18 March 2022 the Company paid ZAR893.2 million (US$54.9
million) (capital plus interest) to settle the Term Loan.
3. On 30 June 2021, the Company settled a portion of the Term Loan (capital plus interest) of US$7.9 million with its lender group.
4. On 30 June 2021, the RCF principal amount of ZAR560.0 million reduced by ZAR50.4 million to ZAR509.6 million based on the amortising profile of 9% per quarter. The facility also comprised a
ZAR150 million foreign exchange settlement line not included above. No additional fees were charged on the foreign exchange settlement line.
The RCF facility is secured on the Group’s interests in Finsch, Cullinan Mine and Koffiefontein.
Covenant ratios
30 June 2022
As part of the revised RCF entered into with Absa, the Company is required:
Š To maintain a net debt:EBITDA ratio tested semi-annually on a rolling 12-month basis
Š To maintain an interest cover ratio tested semi-annually on a rolling 12-month basis
Š To maintain a minimum 12-month forward-looking liquidity requirement that consolidated cash and cash equivalents (excluding diamond
debtors) shall not fall below US$20.0 million
30 June 2021
As part of the Term Loan and Revolving Credit Facilities entered into with the previous South African Lender Group, the Company was required:
Š To maintain a 1.3x debt service cover ratio tested semi-annually on a rolling 12-month basis
Š To maintain liquidity requirements being the aggregate of the undrawn amounts available under the RCF and consolidated cash and cash
equivalents (excluding diamond debtors) shall not fall below ZAR200 million (US$14.0 million)
The Company’s new covenant levels for the respective measurement periods are outlined below:
FY22 H2
FY23 H1
FY23 H2
FY24 H1
FY24 H2
FY25 H1
FY25 H2
FY26 H1
Consolidated net debt:EBITDA leverage ratio (maximum)
Interest cover ratio (minimum)
4.00
1.85
4.00
1.85
3.50
2.50
3.50
2.50
3.25
2.75
3.25
2.75
3.00
3.00
3.00
3.00
1. Fees, comprising commitment fees of 1.25% per annum of the principal amount.
2. Consolidated net debt for covenant measurement purposes is bank loans and borrowings plus Loan Notes, less cash and diamond debtors.
There are no significant differences between the fair value and carrying value of loans and borrowings.
22. Trade and other payables
Significant accounting policies relevant to trade and other payables
Refer to note 32 for the Group’s policy in respect of financial instruments, which include trade and other payables, together with note 9 for
the Group’s policy on taxation.
US$ million
Current
Trade payables
Accruals and other payables1, 2
Income tax payable
2022
36.9
37.6
74.5
0.3
74.8
2021
16.8
32.3
49.1
—
49.1
1. In FY 2021, trade and other payables excludes amounts classified as non-current assets held for sale of US$5.6 million (refer to note 36).
2. Included within accruals and other payables are amounts in respect of foreign exchange gains on hedging contracts of US$0.7 million (30 June 2021: US$0.4 million losses).
Included in trade and other payables are amounts due to related parties (refer to note 27).
Annual Report and Accounts 2022 Petra Diamonds Limited
177
Financial Statements
23. Provisions
Significant accounting policies relevant to 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 obligation to restore environmental damage caused through mining is raised as the relevant mining takes place. Assumptions are made
as to the remaining life of existing operations based on the approved current mine plan and assessments of extensions to the mine plans to
access resources in the Resources Statement that are considered sufficiently certain of extraction.
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. In circumstances where the decommissioning asset has been fully
amortised, reductions in the provision give rise to other direct income.
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 9.7–10.8% (30 June 2021: 5.3–13.1%), estimated rehabilitation timing of 3 to 24 years
(30 June 2021: 2 to 25 years) and an inflation rate range of 7.7–9.5% (30 June 2021: 3.3–8.5%). The Group estimates the cost of rehabilitation
with reference to approved environmental plans filed with the local authorities. Reductions in estimates are only recognised when such
reductions are approved by local legislation and are consistent with the Group’s planned rehabilitation strategy. Increases in estimates
are immediately recognised.
US$ million
Balance at 1 July 2020
Increase/(decrease) in provisions
Provisions directly associated with non-current
assets held for sale (refer to note 36)
Increase in rehabilitation provision –
change in estimate
Unwinding of present value adjustment
of rehabilitation provision
Exchange differences
Balance at 30 June 2021
Balance at 1 July 2021
(Decrease)/increase in provisions
Provisions previously directly associated
with non-current assets held for sale
Increase in rehabilitation provision –
change in estimate
Unwinding of present value adjustment
of rehabilitation provision
Exchange differences
Balance at 30 June 2022
Non-current
Provisions for
unsettled and
disputed tax claims,
and severance
payments
Human rights
settlement claims
Pension and
post-retirement
medical fund
Rehabilitation
—
4.2
—
—
—
—
4.2
4.2
(4.0)
—
—
—
(0.2)
—
—
—
—
—
—
—
—
—
—
(0.3)
21.7
—
—
—
21.4
21.4
10.3
0.9
—
—
—
2.2
13.4
13.4
0.6
—
—
—
(1.7)
12.3
12.3
45.3
(0.1)
(6.4)
5.8
4.3
9.0
57.9
57.9
—
6.4
2.0
5.4
(7.7)
64.0
64.0
Total
55.6
5.0
(6.4)
5.8
4.3
11.2
75.5
75.5
(3.7)
28.1
2.0
5.4
(9.6)
97.7
97.7
178
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022 Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
23. Provisions continued
Employee entitlements and other provisions
The provisions relate to provision for an unfunded post-retirement medical fund, pension fund and retrenchment costs. The Group’s policy
in respect of the post-retirement medical and pension schemes and related key judgements and estimates are disclosed in notes 30 and 31.
Additional information on the provision for post-retirement medical and pension funds is also described in notes 30 and 31.
Rehabilitation
The provision is the estimated cost of the environmental rehabilitation at each site, which is based on current legal requirements, existing
technology and the Group’s planned rehabilitation strategy. The Group estimates the present value of the rehabilitation expenditure at each
mine as follows:
Total
Cullinan Mine
Finsch
Koffiefontein
Williamson1
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Decommissioning period (years)
24
25
8
9
Estimated rehabilitation cost (US$ million)
64.0
57.9
23.4
23.2
26.2
26.5
3
7.7
2
8.2
8
6.7
9
—
1. In FY 2021, environmental rehabilitation costs exclude amounts classified as non-current assets held for sale of US$6.4 million (refer to note 36).
The vast majority of the rehabilitation expenditure is expected to be incurred at the end of mining activities.
The movements in the provisions during the Year are attributable to the unwinding of discount, the reconsolidation of Williamson as it is no
longer an asset held for sale, provisions relating to disputed and unsettled tax claims and unrealised foreign exchange on retranslation from
functional to presentational currency.
The movements in the provisions during FY 2021 were attributable to the unwinding of discount, the reclassification of Williamson to
non-current assets held for sale, the change in estimates of Cullinan Mine’s estimated time of rehabilitation from 45 years to 25 years,
and unrealised foreign exchange on retranslation from functional to presentational currency.
Cash and cash equivalents have been secured in respect of rehabilitation provisions, as disclosed in note 19.
Human rights settlement and grievances
In May 2021, Petra announced the findings of the Tunajali Committee in relation to alleged breaches of human rights at the Williamson mine
in Tanzania raised by the UK law firm Leigh Day and the NGO RAID. The mine is operated by WDL, which is 25% owned by the Government
of Tanzania and 75% owned by Petra. Petra acquired its majority interest in WDL in 2009.
Based on the conclusions of the Tunajali Committee, the Company acknowledged that past incidents have taken place that regrettably
resulted in the loss of life, injury and mistreatment of illegal diggers, within the WDL SML. The incidents in question involved WDL’s third party
security provider Zenith Security as well as the Tanzania Police Force. During the investigation, no evidence emerged that WDL personnel were
directly involved in these actions.
The Company took immediate precautionary measures to address the concerns raised, ahead of and after the findings of the investigation and
in order to mitigate the risks of future incidents, including, amongst others, the appointment of a new third party security contractor, the
training of all security personnel and internal management at WDL on human rights and their obligations in terms of the Voluntary Principles
on Security and Human Rights and committed to the launch of an Independent Grievance Mechanism (IGM).
During FY 2022, Petra has implemented remedial programmes and initiatives and is establishing the IGM to address the historical allegations
of human rights abuses at Williamson. The second phase of engagements with the Government of Tanzania and local stakeholders on the IGM
has been completed and the focus is now on updating the IGM processes and appointing the various organs that will make up the IGM, with
the current target for the IGM to become operational in Q4 of CY 2022.
While the IGM is still being finalised, a mechanism has been set up to enable community members to confidentially and securely register
alleged historical human rights grievances. This mechanism continues to receive grievances, with a significant amount of grievances having
been registered to date. As the IGM is not yet operational (and therefore unable to start investigating these grievances), it is too early to
evaluate the merits of these grievances.
Judgement was applied by Management in assessing the grievances that have been registered by the community and specifically whether
they required provisions to be included in the accounts at the Year end. Management at the time considered that as the grievances received
were not yet able to be investigated due to the IGM not being operational it was of the opinion that the outcome of the claims remained
uncertain at 30 June 2022 and so no provisions were required.
Further to the findings of the Tunajali Committee in FY 2021, additional measures were put in place to address issues identified, including the
revision of reporting structures to enable the more timely, accurate and transparent reporting of all incursions and incidents, the overhaul of
stakeholder engagement at the mine, as well as ongoing work Group-wide and the establishment of an independent Tier 2 IGM which aims to
investigate and resolve complaints alleging severe human rights impacts in connection with security operations at the Williamson mine. This
will be done through an independent panel of Tanzanian experts applying Tanzanian law and with complainants having access to free and
independent advice from local lawyers.
Annual Report and Accounts 2022 Petra Diamonds Limited
179
Financial Statements
23. Provisions continued
Human rights settlement and grievances continued
Petra also announced on 12 May 2021 that it had reached a settlement, on a no admission of liability basis, in relation to claims brought in
London by Leigh Day, on behalf of the anonymous claimants, in relation to alleged breaches of human rights associated with third party
security operations at the Williamson mine.
The agreed total settlement figure announced in FY 2021 was £4.3 million (US$6.1 million), which included the sum to be distributed to the
claimants by Leigh Day, a contribution to the claimants’ legal expenses and significant funds which Petra committed to invest in programmes
dedicated to providing sustainable support to the communities living around the mine. The Company also announced that its settlement
agreement with Leigh Day included a framework pursuant to which an additional payment will be made by Petra in respect of up to 25
additional potential claimants who came forward in the final stages of the settlement negotiations. A settlement, on a no admission of
liability basis, in relation to these 25 additional claims was reached with Leigh Day in early FY 2022.
In addition to the £4.3 million (US$6.1 million) payment described above, the Company incurred and provided for additional total costs of
US$6.6 million related to this matter in its FY 2021 accounts, the majority of which relate to legal, consultant, investigation and expert fees
and which also cover the settlement of the 25 additional claims with Leigh Day. Of the total US$12.7 million included in the FY 2021 accounts,
US$4.2 million remained as a provision for legal, consulting and settlement costs and expert fees. During the Year, the Company settled the
FY 2021 provision, with no additional provision raised in the current Year.
Unsettled and disputed tax claims
The Framework Agreement records an important US$20.0 million settlement between the parties concerning long-standing historic disputes
with the Government of Tanzania. The Group raised a provision of US$19.5 million (30 June 2021: US$19.5 million) (adjusted for time-value of
money) in respect of the aforementioned settlement. This settlement payment shall be made in instalments, with the first instalment of
US$5.0 million to be paid when the Framework Agreement becomes effective and upon receipt of proceeds by WDL from the sale of the
confiscated diamond parcel. The subsequent annual instalments of the settlement amount are to be made annually at amounts between
US$3.0 million and US$5.0 million depending on WDL’s ability to pay, as determined by WDL’s board of directors.
24. Deferred taxation
Significant accounting policies relevant to deferred taxation
Deferred tax is provided using the balance sheet liability method, based on temporary differences. Temporary differences are differences
between the carrying amounts of assets and liabilities for financial reporting purposes and their tax base. The amount of deferred tax
provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted
or substantively enacted at the balance sheet date. Deferred tax is charged to the Consolidated Income Statement except to the extent that it
relates to a transaction that is recognised directly in other comprehensive income or a business combination that is an acquisition. The effect
on deferred tax of any changes in tax rates is recognised in the Consolidated Income Statement, except to the extent that it relates to items
previously charged or credited directly to other comprehensive income. A deferred tax asset is recognised to the extent that it is probable that
future taxable profits will be available against which the associated unused tax losses and deductible temporary differences can be utilised.
Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Significant estimates and judgements related to deferred tax assets
Judgement is applied in making assumptions about recognition of deferred tax assets. Judgement is required in respect of recognition of such
deferred tax assets including the timing and value of estimated future taxable income and available tax losses, as well as the timing of
rehabilitation costs and the availability of associated taxable income.
In FY 2022, deferred tax assets of US$nil (30 June 2021: US$nil) were recognised in respect of tax losses and other temporary differences to be
utilised by future taxable profits at Cullinan Mine and Finsch. Management has made assumptions in the recognition of deferred tax assets
including the timing and value of estimated future taxable income, available tax losses and capital allowances at Williamson. If the available
tax losses and capital allowances are not allowed under the ongoing discussions with GoT, it would result in the Group recognising an additional
deferred tax liability of US$11.4 million (30 June 2021: US$10.3 million). Management made assumptions based on the probability of the tax
losses and capital allowances not being allowed, the current status and all associated elements of the ongoing discussions with GoT. Based on
the assumptions and the uncertain outcomes, Management deemed it appropriate not to recognise the deferred tax liability of US$11.4 million
as at 30 June 2022.
US$ million
Balance at the beginning of the Year
Income statement debit
Tax rate change
Foreign currency translation difference
Balance at the end of the Year
Comprising:
Deferred tax asset
Deferred tax liability
180
Petra Diamonds Limited Annual Report and Accounts 2022
2022
48.9
33.0
(2.7)
(7.9)
71.3
—
71.3
71.3
2021
17.2
22.7
—
9.0
48.9
—
48.9
48.9
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
24. Deferred taxation continued
Significant estimates and judgements related to deferred tax assets continued
The deferred tax assets and liabilities are offset to determine the amounts stated in the Consolidated Statement of Financial Position when
the taxes can legally be offset and will be settled net.
Deferred taxation comprises:
US$ million
Deferred tax liability
– Property, plant and equipment
Deferred tax asset
– Capital allowances
– Provisions and accruals
– Tax losses
– Tax rate change
Net deferred taxation (asset)/liability
US$ million
Deferred tax liability
– Property, plant and equipment
Deferred tax asset
– Capital allowances
– Provisions and accruals
– Tax losses
Net deferred taxation (asset)/liability
Total
157.4
157.4
(86.7)
(36.0)
(59.0)
(2.7)
(184.4)
(27.0)
Total
188.8
188.8
(159.1)
(28.6)
(13.4)
(201.1)
(12.3)
2022
Recognised
2022
Unrecognised
157.4
157.4
(63.6)
(19.8)
—
(2.7)
(86.1)
71.3
—
—
(23.1)
(16.2)
(59.0)
—
(98.3)
(98.3)
2021
Recognised
2021
Unrecognised
188.8
188.8
(119.7)
(20.2)
—
(139.9)
48.9
—
—
(39.4)
(8.4)
(13.4)
(61.2)
(61.2)
Movements in deferred tax include amounts recognised in the Consolidated Income Statement, tax rate change and foreign exchange
retranslation. The Consolidated Income Statement deferred tax charge for the Year reflects movements in deferred tax of US$35.5 million
(30 June 2021: US$3.4 million credit) in respect of property, plant and equipment and associated capital allowances, a US$2.4 million deferred
tax credit (30 June 2021: US$2.8 million) comprised of provisions and a US$2.6 million deferred tax credit (30 June 2021: US$nil) on taxable
temporary differences recognised at Finsch and Cullinan Mine due to the change in the South African corporate tax rate from 28% to 27%
and US$nil (30 June 2021: US$22.1 million) in respect of utilised tax losses recognised at Cullinan Mine and Finsch. The US$35.5 million
(30 June 2021: US$3.4 million credit) movement in respect of property, plant and equipment arises from deductible temporary differences
related to the impairments of property, plant and equipment of US$nil (30 June 2021: US$4.2 million) and other taxable temporary differences
of US$35.5 million (30 June 2021: US$7.6 million).
25. Contingent assets/liabilities
Significant accounting policies relevant to contingent assets/liabilities
Contingent assets and liabilities refer to potential receivables or obligations arising on the Group as a result of past events. Items are disclosed
when considered to be probable receivables or possible obligations and are recognised as assets when virtually certain, or provisions or
liabilities if they are considered probable.
Revenue
In FY 2016, the Group sold two pink rough diamonds into polishing partnerships, retaining a 20% and 10% interest in the value uplift
(net of expenses) of the polished sale of the diamonds respectively. The polished stones from both pink diamonds are yet to be sold but are
expected to be sold in the foreseeable future and only then will Petra’s share of any value uplift in the retained interest be recognised as
revenue. During the Year, the Group entered into a diamond polishing partnership, retaining a 50% interest in the value uplift (net of expenses)
of the polished sale of two rough diamonds from the Cullinan Mine, being a 342.92 carat white stone and an 18.30 carat blue stone.
Annual Report and Accounts 2022 Petra Diamonds Limited
181
Financial Statements
25. Contingent assets/liabilities continued
Environmental
The controlled entities of the Company provide for all known environmental liabilities. The Company recognises that its operations remain
vulnerable to climate change induced events. The Directors acknowledge that climate change presents both risks and opportunity within the
organisation. At the date of this report, the Group has not completed its risk analysis and the effect climate change will have on its environmental
liabilities. While the Directors believe that, based upon current information, the 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.
Grievances at Williamson
Details of grievances are disclosed in note 23.
26. Share-based payments
Significant accounting policies relevant to share-based payments
Employee and Director share option scheme
The fair value of options granted to employees or 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 employees or Directors 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 applicable
to the option strike price. As the Company has not created the present obligation to settle in cash, the Company has the option to settle the
options granted either through the issue of equity or cash settlement.
The LTIP award fair value is recognised annually at the date of grant as an employee expense with reference to the Company share price
and award quantum. The amount recognised as an expense is then adjusted to reflect the final number of LTIPs which vest once the final
performance conditions and weighted average share price are determined. Measurement of the expense is calculated on a straight-line basis
(LTIP award multiplied by the vesting percentage, multiplied by the Company’s share price, multiplied by the foreign exchange rate).
2012 Performance Share Plan (PSP) and 2016 Long Term Incentive Plan (LTIP)
Share-based awards granted under the PSP are valued using the Monte Carlo model at the date of grant and the associated expense recognised
over the vesting period during which the associated vesting conditions are satisfied unconditionally by the beneficiaries with a corresponding
increase in reserves.
Where the awards are subject to non-market-based performance conditions, the expense will be adjusted subject to the actual vesting
outcome of those specific performance conditions.
The PSP performance conditions are a combination of market-based (i.e. movement/growth in Company share price) and non-market-based
conditions. The vesting conditions attributable to market-based conditions are valued by taking into account the considered likelihood of
meeting the vesting conditions at the date the fair value is calculated. Unlike non-market conditions, no adjustment is made for changes in the
likelihood of the market conditions being met. In the event that vesting conditions were not met the charge would be reversed.
The LTIP performance conditions are non-market based (i.e. HSE, production, project delivery and adjusted EBITDA) with vesting conditions
measured on a three year measurement period.
Company schemes
The total share-based payment charge of US$1.1 million (30 June 2021: US$0.5 million) for the PSP share plan comprises US$1.1 million
(30 June 2021: US$0.5 million) charged to the Consolidated Income Statement.
There was no charge for the LTIP share plan to the Consolidated Income Statement (30 June 2021: US$nil).
Share grants to Directors and Senior Management: PSP and deferred awards
The share-based payment awards are considered to be equity settled, albeit they can be cash settled at the Company’s option. The PSP
granted during the current Year comprised the PSP with duration from FY 2021 to FY 2023 and FY 2022 to FY 2024. The fair value of the PSP
granted during the current and prior Year and the assumptions used in the Monte Carlo model are as follows:
PSP – market and non-market-based performance conditions
2022
(FY 2022–FY 2024)
2022
(FY 2021–FY 2023)
Fair value (PSP absolute TSR/PSP relative TSR/PSP non-market)
1.8p/42.2p/87.5p
1.8p/42.2p/74.0p
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)
182
Petra Diamonds Limited Annual Report and Accounts 2022
12 January 2022
12 January 2022
74.0p
85.0%
3 years
—
3 years
19.8%
0.5%
74.0p
85.0%
3 years
—
3 years
19.8%
0.5%
2021
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022 Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
26. Share-based payments continued
Share grants to Directors and Senior Management: PSP and deferred awards continued
The expected volatility is based on historical volatility of the Group’s share price, adjusted for any extreme changes in the share price during
the historical period. During the Year, 2,261,670 (30 June 2021: nil) PSP shares were awarded under the FY 2021–FY 2023 PSP and 2,897,083
(30 June 2021: nil) were awarded under the FY 2022–FY 2024 PSP to the Executive Directors and Senior Management at a fair value price of
74.0 pence (30 June 2021: nil pence). The correlation factor used above is based on analysis of historical correlation rates between the Company
and mining companies within the FTSE 350. The grant date fair values incorporate the effect of the relevant market-based conditions. The
awards have no exercise price.
On 12 January 2022, the Executive Directors of the Company were granted a total of 193,385 (30 June 2021: nil) deferred share awards over
Ordinary Shares in the Company. The deferred share awards comprised 112,747 deferred awards to Richard Duffy and 80,638 deferred awards
to Jacques Breytenbach. The deferred share awards were fair valued using the market price of the share awards which approximated the fair
value in a Black-Scholes model. The awards in the current Year represented 25% (30 June 2021: nil) of the total bonus in respect of performance
for the financial Year ended 30 June 2021. The awards vest on 30 June 2023 and vesting is subject to continued employment. These awards
have no exercise price. No deferred share awards are granted to Senior Management.
Further information on the terms of the awards (including their vesting conditions) can be found in the Directors’ Remuneration Report on
pages 125 to 136.
Senior Management LTIP 2016
The LTIP 2016 scheme is a cash-based reward scheme linked to the share price performance. Upon vesting, no shares will be issued to Senior
Management under the LTIP 2016 scheme. To align Senior Management to the Company objectives for Project 2022, the Remuneration
Committee approved an alternate approach for the LTIP 2016 scheme. Previous awards will be aggregated with current awards, subject to an
alternative measurement period of three years (FY 2020 to FY 2022) and a revised vesting period of FY 2022. The vesting of awards has been
aligned to the performance criteria of the Executive Directors. The Senior Management LTIP awards will be cash settled. During the Year there
were no LTIP shares awarded for the FY 2020–FY 2022 measurement period. These awards had no exercise price.
27. Related parties
Subsidiaries and jointly controlled operations
Details of subsidiaries are disclosed in note 29.
Directors
Details relating to Directors’ emoluments are disclosed in note 10 and in the Directors’ Remuneration Report on pages 125 to 136. Details
relating to Directors’ shareholdings in the Company are disclosed in the Corporate Governance Report on page 131. Key management
remuneration is disclosed in note 10.
BEE Partners and related party balances
Details relating to the Group’s interests in its BEE Partners are disclosed in note 15.
The Group’s related party BEE Partner, Kago Diamonds, and its gross interests in the mining operations of the Group are disclosed in the
table below.
Mine
Cullinan Mine
Finsch
Koffiefontein
Partner and respective interest
as at 30 June 2022
Partner and respective interest
as at 30 June 2021
Kago Diamonds (14%)
Kago Diamonds (14%)
Kago Diamonds (14%)
Kago Diamonds (14%)
Kago Diamonds (14%)
Kago Diamonds (14%)
Annual Report and Accounts 2022 Petra Diamonds Limited
183
Financial Statements
27. Related parties continued
BEE Partners and related party balances continued
The non-current loans receivable, finance income and finance expense due from and due to the related party BEE Partner and other related
parties are disclosed in the table below:
US$ million
Non-current receivable
Kago Diamonds1
Current trade and other receivables
KEM JV2
Impairment provision2
Finance income
Kago Diamonds1
Finance expense
Kago Diamonds1
Dividend paid
Kago Diamonds3
2022
26.6
26.6
3.7
(2.0)
1.7
2.1
2.1
—
—
1.3
1.3
2021
33.5
33.5
9.7
(8.4)
1.3
3.7
3.7
3.8
3.8
—
—
1. The Kago Diamonds receivable decreased by US$6.9 million (30 June 2021: US$38.6 million) mainly attributable to amounts advanced to Kago Diamonds during the Year totalling US$nil (30 June
2021: US$3.8 million), a foreign exchange decrease of US$4.1 million (30 June 2021: US$15.4 million) and offset by the reversal of a prior period expected credit loss provision of US$nil (30 June
2021: US$4.2 million) and the loan payable of US$nil (30 June 2021: US$62.1 million) by the Group to Kago against the Kago loan receivable.
2. Included in current trade and other receivables are amounts advanced to KEM JV in respect of a working capital facility and equipment finance facility of US$1.7 million (30 June 2021: US$1.0 million) and
the balance of the KEM JV purchase consideration of US$nil (30 June 2021: US$0.3 million). During FY 2022 the Group received payments of US$2.5 million (30 June 2021: US$nil) from the KEM JV
as settlement of the outstanding purchase consideration; this resulted in an expected credit loss reversal of US$2.9 million (30 June 2021: US$nil) during the Year. The Group has applied the expected
credit loss impairment model to the KEM JV receivables, taking into account various factors, and the expected credit loss reversal was deemed to be US$2.0 million (30 June 2021: US$8.4 million).
The increase in the expected credit loss is attributable to the movement in the foreign exchange rates during the Year.
3. During the Year, Finsch declared and paid a dividend out of profits generated in FY 2021 to its shareholders. The BEE Partners received a total net dividend payment of US$2.5 million comprising
Kago of US$1.3 million and IPDET of US$1.2 million.
Interest on the BEE loans receivables is charged at South African JIBAR plus 5.25% (30 June 2021: South African JIBAR plus 5.25%).
Kago Diamonds is one of the BEE Partners which obtained bank financing from the BEE Lenders to acquire its interests in Cullinan Mine and Finsch.
Rental income receivable
The Group received US$nil (30 June 2021: US$0.1 million) from Alufer Mining Ltd. Bernard Pryor is a Director of Alufer Mining Ltd.
Shareholders
The principal shareholders of the Company are detailed in Supplementary Information on page 213.
184
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
28. Notes to the cashflow statement
Significant non-cash transactions
(a) Operating and investing activities
US$ million
Operating activities
Depreciation of property, plant and equipment
Amortisation of right-of-use asset
Unrealised gain on lease liability
Impairment (reversal)/charge
Impairment charge/(reversal) for other receivables
Impairment of BEE loans receivable – expected credit loss release provision
Profit on disposal of subsidiary
Movement in provisions
Other finance expense – unwinding of present value adjustment for rehabilitation costs
Other finance expense – post-retirement pension fund
Net unrealised foreign exchange losses/(gains)
Loss/(profit) on sale of property, plant and equipment
Share-based payment provision
Investing activities
Non-cash rehabilitation asset adjustment – change in estimate
Non-cash rehabilitation provision adjustment
Non-cash pension and post-retirement fund adjustment – change in estimate
Non-cash interest receivable from BEE loans on investing activity
Financing activities
Non-cash transaction costs on 1L facilities and Notes (at time of the Restructuring) unamortised
Non-cash interest payable on BEE loans on investing activity
2022
Restated 2021
82.8
2.5
—
(21.1)
1.5
—
—
1.6
5.4
1.0
36.5
1.5
1.1
112.8
(2.0)
—
(0.5)
4.1
1.6
(1.6)
—
(1.6)
76.2
4.6
(3.7)
38.7
(0.3)
(5.8)
(14.7)
24.3
4.6
1.0
(74.6)
(0.6)
0.5
50.2
(5.8)
(0.1)
0.7
5.2
—
2.7
7.0
9.7
Annual Report and Accounts 2022 Petra Diamonds Limited
185
Financial Statements
28. Notes to the cashflow statement continued
Significant non-cash transactions continued
(b) Financing activities – change in loans and borrowings (per note 21) and change in lease liability (per note 14)
Senior
secured
second
lien
notes
2022
Senior
secured
lender
debt
facilities
2022
BEE
Lenders
guarantee
recognised
Lease
liability
Total
2022
Senior
secured
second
lien
notes
2021
Senior
secured
lender
debt
BEE
Lenders
facilities guarantee
2021 recognised
US$ million
Loans and borrowings
1.0
—
431.2
—
676.9
30.0
—
(103.7)
(3.2)
(3.2)
23.5
23.5
—
—
—
—
—
—
(415.0)
(299.2)
306.7
(20.8)
—
—
—
—
—
—
—
52.1
—
(14.1)
—
—
—
—
—
—
—
—
(1.7)
(1.6)
2.7
—
—
—
—
—
—
—
—
—
—
40.0
—
(4.7)
—
—
—
—
—
—
—
—
—
—
—
—
45.4
(45.4)
1.2
(0.1)
45.6
(3.2)
46.0
—
6.8
14.4
22.4
388.6
327.3
102.9
4.7
5.4
—
At 1 July
327.3
102.9
Cash draw-downs
Cash repayments
(capital and interest)
Lease payments
Non-cash
– Initial recognition
of lease liability
– Gain on lease liability
– Lease terminations
– Loss on discontinued
operation
Debt for equity conversion
Extinguishment of
remaining Notes
Issue of new Notes
Transaction costs
Unamortised transaction
costs
– Guarantee obligation
transferred/recognised
(refer to notes 16 and 23)
– Interest accruing during
the Year
– Effect of foreign exchange
At 30 June
—
—
—
—
—
—
—
—
—
—
—
—
—
38.9
—
366.2
—
(103.7)
—
—
—
—
—
—
—
—
—
(1.6)
—
5.5
(3.1)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
186
Petra Diamonds Limited Annual Report and Accounts 2022
Lease
liability
Total
2021
4.7
—
—
(0.7)
0.7
—
(0.4)
773.7
30.0
(18.8)
(0.7)
0.7
—
(0.4)
(3.6)
(3.6)
—
—
—
—
—
—
0.1
0.2
1.0
(415.0)
(299.2)
(306.7)
(22.5)
2.7
—
57.6
20.0
431.2
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022 Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
29. Subsidiaries and jointly controlled interests
Significant accounting policies relevant to subsidiaries
At 30 June 2022 the Group held 20% or more of the allotted share capital of the following significant subsidiaries:
Blue Diamond Mines (Pty) Ltd1
Cullinan Diamond Mine (Pty) Ltd1
Ealing Management Services (Pty) Ltd1
Finsch Diamond Mine (Pty) Ltd1
Kalahari Diamonds Ltd
Mwadui Mining Holdings Ltd²
Petra Diamonds Belgium BV
Petra Diamonds Holdings SA (Pty) Ltd1
Petra Diamonds Jersey Treasury Ltd1
Petra Diamonds Netherlands Treasury B.V.1
Petra Diamonds Southern Africa (Pty) Ltd1
Petra Diamonds UK Services Ltd
Petra Diamonds UK Treasury Ltd1
Petra Diamonds US$ Treasury Plc1
Tarorite (Pty) Ltd1
Willcroft Company Ltd1
Williamson Diamonds Ltd
Country of
incorporation
Direct
percentage
held
capital held 30 June 2022
Class
of share
Direct
percentage
held
30 June 2021
Nature of business
South Africa
Ordinary
South Africa
Ordinary
South Africa
Ordinary
South Africa
Ordinary
United Kingdom
Ordinary
United Kingdom
Ordinary
Belgium
Ordinary
South Africa
Ordinary
Jersey
Ordinary
Netherlands
Ordinary
South Africa
Ordinary
United Kingdom
Ordinary
United Kingdom
Ordinary
United Kingdom
Ordinary
South Africa
Ordinary
Bermuda
Ordinary
Tanzania
Ordinary
74%
74%
100%
74%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
74%
100%
75%
74% Mining and exploration
74% Mining and exploration
100%
Treasury
74% Mining and exploration
100%
—
100%
100%
100%
100%
100%
100%
100%
100%
74%
100%
Investment holding
Investment holding
Services provision
Investment holding
Treasury
Treasury
Services provision
Services provision
Treasury
Treasury
Beneficiation
Investment holding
75% Mining and exploration
1. The companies are guarantors to the senior secured second lien notes.
2. Mwadui Mining Holdings Ltd was incorporated on 7 June 2022.
30. Pension scheme
Significant accounting policies relevant to pensions
Defined contribution scheme
Obligations for contributions to defined contribution pension schemes are recognised as an expense in the Consolidated Income Statement
as incurred.
Defined benefit scheme
The defined benefit liability or asset recognised in the Consolidated 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. Changes in the defined
benefit valuation are recorded in the Consolidated Income Statement when they refer to current service costs, past service costs or net
interest calculated on the net deficit. All other changes in the defined benefit valuation are recorded within other comprehensive income.
The actuarial calculation is performed by a qualified actuary using the projected unit credit method on an annual basis.
Significant judgements and estimates relevant to pensions
The pension charge or income for the defined benefit scheme is regularly assessed in accordance with the advice of a qualified actuary using
the projected unit credit method and was updated for 30 June 2022. The most important assumptions made in connection with the scheme
valuation and charge or income are the return on the funds, the average yield of South African Government long-dated bonds, salary increases,
withdrawal rates, life expectancies and the current South African consumer price index. The details of these assumptions are set out below.
The Company operates a defined benefit scheme and defined contribution scheme. The defined benefit scheme was acquired as part of the
acquisitions of Cullinan Mine and Finsch 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.
Annual Report and Accounts 2022 Petra Diamonds Limited
187
Financial Statements
30. Pension scheme continued
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 are the average yield of South African
Government long-dated bonds of 12.19% (30 June 2021: 10.98%), and that salaries will be increased by 8.73% (30 June 2021: 7.61%), based on
the current South African consumer price index of 7.73% (30 June 2021: 6.61%). Estimated future benefit payments to members for the
12-month period ending 30 June 2023 are US$1.2 million.
2022
2021
(8.9)
8.9
—
(0.1)
0.1
—
10.3
(1.3)
0.4
(0.7)
0.2
8.9
(10.3)
1.1
0.7
0.1
(1.0)
—
0.5
(8.9)
8.6%
31.9%
23.9%
6.0%
29.6%
100%
(10.3)
10.3
—
(0.1)
0.1
—
7.6
1.8
1.6
(0.9)
0.2
10.3
(7.6)
(1.8)
0.9
(0.1)
(1.0)
—
(0.7)
(10.3)
7.6%
30.3%
22.0%
7.3%
32.8%
100.0%
US$ million
Defined benefit obligations
Present value of funded obligations
Fair value of plan assets
Recognised deficit for defined benefit obligations
Expense recognised in the income statement
Current service cost
Net interest on deficit
Change in the fair value of the defined benefit assets
At 1 July
Foreign exchange movement on opening balances
Return on plan assets – net of actuarial movements
Benefits paid to members
Contributions by Group – net
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 expense
Contributions by members
Actuarial gain/(loss)
At 30 June
Analysis of plan assets
Cash
Equity
Bonds
Property
Other – offshore and hedge funds
188
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
30. Pension scheme continued
Defined benefit scheme continued
US$ million
Plan assets
Plan liabilities
Deficit
2022
8.9
(8.9)
—
2021
10.3
(10.3)
—
2020
7.6
(7.6)
—
2019
10.9
(10.9)
—
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 2022 is as follows:
Male
Female
2022
15.92
20.02
2021
15.92
20.02
Further to the assumption of assets and liabilities associated with the defined benefit fund when the Group acquired its interest in Cullinan
Mine and Finsch, the Group has no experience adjustments.
The valuation is subject to risks. The key sensitivities are changes in discount rates and mortality assumptions. A 0.5% change in the discount
rate changes the pension obligation by approximately US$0.4 million (30 June 2021: US$0.5 million). A two-year change in mortality changes
the pension obligation by approximately US$0.3 million (30 June 2021: US$0.4 million).
31. Post-retirement medical fund
Significant accounting policies relevant to medical funds
The Group’s post-retirement medical fund is unfunded and therefore recognised as a liability on the Consolidated Statement of Financial
Position within provisions. The actuarial calculation is performed by a qualified actuary using the projected unit credit method every second
year unless the actuarial assumptions are considered to have materially changed since the previous external valuation, in which case the
valuation is revisited earlier.
Significant judgements and estimates relevant to medical funds
The benefit liability for the post-employment healthcare liability scheme is regularly assessed in accordance with the advice of a qualified
actuary using the projected unit credit method. The most recent actuarial valuation was at 30 June 2022. The most important assumptions
made in connection with the scheme valuation and charge or income are the healthcare cost of inflation, the average yield of South African
Government long-dated bonds and salary increases, withdrawal rates and life expectancies. The details of these assumptions are set out on
page 190.
The post-employment healthcare liability scheme was acquired as part of the acquisitions of Cullinan Mine and Finsch and is closed to new
members. All new employees will be responsible for funding their own post-employment healthcare liability costs.
The benefit liability for the post-employment healthcare liability scheme is regularly assessed in accordance with the advice of a qualified
actuary using the projected unit credit method. The Group’s post-employment healthcare 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 healthcare cost of inflation will be 9.0% (30 June 2021: 8.0%), based on the average yield of relevant
South African Government long-dated bonds of 12.50% (30 June 2021: 11.50%), and that salaries will be increased by 7.5% (30 June 2021: 6.50%).
Annual Report and Accounts 2022 Petra Diamonds Limited
189
Financial Statements
31. Post-retirement medical fund continued
Significant judgements and estimates relevant to medical funds 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 Consolidated Statement of Financial Position
Net liability for the post-retirement medical fund obligation as at 1 July
Foreign exchange movement on opening balances
Net expense recognised in the income statement
Membership changes
Benefit payments
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
Net expense recognised in the income statement
Membership changes
Benefit payments
Liabilities at fair market value at 30 June
Principal actuarial assumptions
Discount rate
Healthcare cost inflation
Future salary increases
Net replacement ratio
Net discount rate
Normal retirement age (years)
Fully accrued age (years)
US$ million
Determination of estimated post-retirement medical fund expense
for the Year ended 30 June 2023
Current service cost
Finance expense
Benefit payments
190
Petra Diamonds Limited Annual Report and Accounts 2022
2022
12.3
12.3
13.4
(1.8)
1.5
(0.2)
(0.6)
12.3
0.2
1.3
1.5
0.2
1.3
1.5
13.4
(1.8)
1.5
(0.2)
(0.6)
12.3
2022
12.5%
9.0%
7.5%
75.0%
3.21%
60.0
60.0
2022
0.2
1.3
(0.6)
2021
13.4
13.4
10.3
2.2
1.6
(0.1)
(0.6)
13.4
0.2
1.4
1.6
0.2
1.4
1.6
10.3
2.2
1.6
(0.1)
(0.6)
13.4
2021
11.50%
8.00%
6.5%
75.0%
3.24%
60.0
60.0
2021
0.2
1.4
(0.5)
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
31. Post-retirement medical fund continued
Significant judgements and estimates relevant to medical funds continued
US$ million
Actuarial accrued liability
Unfunded status
Sensitivity analysis
2022
12.3
2021
13.4
2010
10.3
2019
11.7
Healthcare inflation rate
The effect of a 1% increase or decrease in the healthcare 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 2022
1% increase
1% decrease
12.3
—
13.9
13.0%
11.0
(10.6%)
30 June 2021
1% increase
1% decrease
13.4
—
15.2
13.4%
11.9
(11.1%)
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 2022
12.3
—
30 June 2021
13.4
—
Retirement
one year
earlier
Retirement
one year
later
12.7
3.3%
Retirement
one year
earlier
13.8
3.0%
11.9
(3.3%)
Retirement
one year
later
12.9
(3.7%)
32. Financial instruments
Significant accounting policies relevant to financial instruments
The Group classifies its financial assets (excluding derivatives) into the following category and the Group’s accounting policy for the category
is as follows:
Financial assets
Amortised cost
These 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 where the objective is to hold these assets in order to collect contractual cashflows and the contractual cashflows
are solely payments of principal and interest. 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.
Impairment
Impairment provisions for current trade receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix
in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables
is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected
credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account
with the loss being recognised within cost of sales 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.
Impairment provisions/reversals for receivables from related parties, BEE Partners, KEM JV and other third parties are recognised based on
a forward-looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there
has been a significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not increased
significantly since initial recognition of the financial asset, 12-month expected credit losses along with gross interest income are recognised.
For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised.
For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.
Annual Report and Accounts 2022 Petra Diamonds Limited
191
Financial Statements
32. Financial instruments continued
Significant accounting policies relevant to financial instruments continued
Financial assets continued
Impairment continued
The Group’s financial assets measured at amortised cost comprise non-current receivables, trade and other receivables and cash and cash
equivalents in the Consolidated Statement of Financial Position.
The financial assets classified at amortised cost included in receivables are as follows:
US$ million
Current trade receivables
Other receivables (excluding taxation, VAT and prepayments)
Non-current receivables (excluding VAT)
Total
2022
37.4
5.4
44.6
87.4
Statement of
Financial Position
2021
Non-current
assets held for sale
2021
38.3
2.7
46.6
87.6
—
1.1
—
1.1
Total
2021
38.3
3.8
46.6
88.7
The trade receivables are all due within normal trading terms. Trade receivables are due within two days of awarding the rough diamond sales
tender to the successful bidder. The trade receivables relating to the Year end tender have all been received post Year end. No trade
receivables are considered to be subject to credit loss or impaired.
The carrying values of financial assets held at amortised cost are denominated in the following currencies:
US$ million
Euro
Pound Sterling
South African Rand
US Dollar
Total
2022
9.1
0.7
75.3
2.3
87.4
Statement of
Financial Position
2021
Non-current
assets held for sale
2021
—
0.6
46.4
40.6
87.6
—
—
—
1.1
1.1
Total
2021
—
0.6
46.4
41.7
88.7
Financial liabilities
The Group classifies its financial liabilities (excluding derivatives) into one category: other financial liabilities. The Group’s accounting policy
is as follows:
Other financial liabilities
Trade payables, other payables, leases and long-term BEE liabilities
Trade payables, other payables, leases and long-term BEE liabilities, which are initially recognised at fair value, are subsequently carried
at amortised cost using the effective interest rate method.
The other financial liabilities included in trade and other payables (which exclude taxation) are as follows:
US$ million
Trade payables
Other payables (excluding taxation, VAT and derivatives)
Lease liability
Non-current lease liability
Statement of
Financial Position
2021
Liabilities directly
associated with
non-current assets
held for sale
2021
16.8
31.7
0.5
0.5
49.5
4.4
1.5
—
—
5.9
Total
2022
36.9
38.6
3.2
19.2
97.9
Total
2021
21.2
33.2
0.5
0.5
55.4
192
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
32. Financial instruments continued
Other financial liabilities continued
Trade payables, other payables and long-term BEE liabilities continued
The carrying values of other financial liabilities are denominated in the following currencies:
US$ million
Euro
Pound Sterling
South African Rand
US Dollar
Statement of
Financial Position
2021
Liabilities directly
associated with
non-current assets
held for sale
2021
—
1.5
36.8
11.2
49.5
—
—
—
5.9
5.9
Total
2022
0.1
14.1
10.8
72.9
97.9
Interest-bearing borrowings
Refer to note 21 for the Group’s policy on interest-bearing borrowings.
The details of the categories of financial instruments of the Group are as follows:
US$ million
Financial assets
Held at amortised cost:
– Non-current trade and other receivables (excluding VAT)
– Trade receivables
– Other receivables (excluding taxation, prepayments and VAT)
– Cash and cash equivalents – restricted
– Cash and cash equivalents – unrestricted
Financial liabilities
Held at amortised cost:
– Non-current lease liability
– Non-current loans and borrowings
– Current loans and borrowings
– Trade and other payables (excluding taxation, VAT and derivatives)
– Lease liability
Total
2022
Statement of
Financial Position
2021
Non-current
assets/liabilities
held for sale
2021
44.6
37.4
5.4
16.3
271.9
375.6
19.2
353.9
12.3
75.5
3.2
464.1
46.6
38.3
2.7
16.1
147.7
251.4
0.5
400.0
30.3
49.0
0.5
480.3
—
—
1.1
—
9.2
10.3
—
—
—
5.9
—
5.9
Total
2021
—
1.5
36.8
17.1
55.4
Total
2021
46.6
38.3
3.8
16.1
156.9
261.7
0.5
400.0
30.3
54.9
0.5
486.2
There is no significant difference between the fair value of financial assets and other financial liabilities and the carrying values set out in the
table above, noting that non-current loan receivables and payables bear interest.
Annual Report and Accounts 2022 Petra Diamonds Limited
193
Financial Statements
32. Financial instruments continued
Interest-bearing borrowings continued
The currency profile of the Group’s financial assets and liabilities is as follows:
US$ million
Financial assets
Euro
Pound Sterling
South African Rand
US Dollar
Financial liabilities
Euro
Pound Sterling
South African Rand
US Dollar
Total
2022
Statement of
Financial Position
2021
Non-current
assets/liabilities
held for sale
2021
9.1
5.0
278.0
83.5
375.6
0.1
14.0
6.6
443.4
464.1
0.1
55.9
114.1
81.3
251.4
0.3
12.8
107.8
359.4
480.3
—
—
—
10.3
10.3
—
—
—
5.9
5.9
Total
2021
0.1
55.9
114.1
91.6
261.7
0.3
12.8
107.8
365.3
486.2
Further quantitative information in respect of these risks is presented throughout these Financial Statements.
Exposures to currency, liquidity, market price, credit and interest rate risk arise in the normal course of the Group’s business. This note
describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. The Group uses
financial instruments, in particular forward currency option contracts, to help manage foreign exchange risk. The Directors review and agree
policies for managing each of these risks.
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 significant concentrations of credit risk in respect of the BEE loans receivable. The maximum exposure to
credit risk is represented by the carrying amount of the financial assets in the Consolidated Statement of Financial Position. The material
financial assets are carried at amortised cost, with no indication of impairment. The Group considers the credit quality of loans and receivables
to be good with expected losses incurred as disclosed in notes 15 and 17.
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 19 for restricted cash secured in respect of
rehabilitation obligations. At Year end the Group had undrawn borrowing facilities of US$61.5 million (30 June 2021: US$7.7 million).
Derivatives
The fair values of derivatives are recorded on the Consolidated Statement of Financial Position within ‘Trade and other receivables’ or ‘Trade
and other payables’. Derivatives are classified as current or non-current depending on the date of expected settlement of the derivative.
The Group utilises derivative instruments to manage certain market risk exposures. The Group does not use derivative financial instruments
for speculative purposes; however, it may choose not to designate certain derivatives as hedges for accounting purposes. Such derivatives are
classified as ‘non-hedges’ and fair value movements are recorded in the Consolidated Income Statement. At Year end the Group had a derivative
liability of US$0.7 million (30 June 2021: US$0.4 million derivative liability) recorded in the Consolidated Statement of Financial Position and a
net realised foreign exchange gain of US$12.6 million (30 June 2021: US$6.1 million loss) and an unrealised foreign exchange loss on hedges of
US$0.7 million (30 June 2021: US$12.5 million loss) recorded in the Consolidated Income Statement.
Management considered the impact of a change in the US$/ZAR exchange rates to the Group’s financial results. In the current Year the impact
of a 10 percentage point increase/decrease would result in a financial loss/gain of US$0.07 million (30 June 2021: US$0.04 million).
The derivative financial liabilities were valued using Level 2 of the financial instrument valuation hierarchy. The valuation is provided by the
Group’s bankers, which act as the instrument’s counterparty, and was prepared using a Black-Scholes model. The inputs include the strike price
range, spot price at Year end, volatility and discount rate.
The use of derivative instruments is subject to limits and the positions are regularly monitored and reported to the Board.
194
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
32. Financial instruments continued
Foreign exchange risk
Foreign exchange risk arises because the Group has operations located in parts of the world where the functional currency is not 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.
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, having converted US Dollar diamond revenues to local currencies. 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:
Š The currency in which the revenue expected to be generated from the commissioning of the capital expenditure will be denominated
Š 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
Š 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 sensitivity analysis to foreign currency rate changes is as follows:
US$ million
Financial assets
Euro
Pound Sterling
South African Rand
US Dollar
Financial liabilities
Euro
Pound Sterling
South African Rand
US Dollar
US$ million
Financial assets
Euro
Pound Sterling
South African Rand
US Dollar
Financial liabilities
Euro
Pound Sterling
South African Rand
US Dollar
30 June 2022
Year end
US$ rate
Year end
amount
US$
strengthens 10%
US$
weakens 10%
0.9540
0.8214
0.0615
1.0000
0.9540
0.8214
0.0615
1.0000
9.1
5.0
278.0
83.5
375.6
0.1
14.0
6.6
443.4
464.1
8.2
4.5
250.2
83.5
346.4
0.1
12.6
5.9
443.4
461.9
10.0
5.5
305.8
83.5
404.8
0.1
15.4
7.3
443.4
466.2
30 June 2021
Year end
US$ rate
Year end
amount
US$
strengthens 10%
US$
weakens 10%
0.8435
0.7232
0.0701
1.0000
0.8435
0.7232
0.0701
1.0000
0.1
55.9
114.1
91.6
261.7
0.3
12.8
107.8
365.3
486.2
0.1
50.3
102.7
91.6
244.7
0.3
11.5
97.0
365.3
474.1
0.1
61.5
122.5
91.6
275.7
0.3
14.0
118.6
365.3
498.2
The tables above reflect the impact of a 10% cumulative currency movement over the next 12 months and are shown for illustrative purposes.
Annual Report and Accounts 2022 Petra Diamonds Limited
195
Financial Statements
32. Financial instruments continued
Liquidity risk
Liquidity risk arises from the Group’s management of working capital, capital expenditure, 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. The maturity analysis of the actual cash payments due in respect of loans and borrowings is set out
in the table below. The maturity analysis of trade and other payables is 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 24, as reflected under non-current.
Maturity analysis
The below maturity analysis reflects cash and cash equivalents and loans and borrowings based on actual cashflows rather than carrying values.
30 June 2022
US$ million
Cash
Cash and cash equivalents – unrestricted
Cash – restricted
Total cash
Loans and borrowings
Bank loan – secured
Senior secured second lien notes
Lease liabilities
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
Senior secured second lien notes
Lease liabilities
Cashflow of loans and borrowings
Notes
Interest
rate
Total
3 months
6-12
or less months months
3-6
19
19
21
21
14
0.1-5.1%
271.9
271.9
0.1-5.1%
16.3
—
288.2
271.9
9.16%
—
10.50%
532.4
5.98%
23.0
555.4
—
—
1.2
1.2
—
—
—
—
—
1.2
1.2
—
—
—
—
12.3
2.5
14.8
1-2
years
2–5
years
—
—
—
—
40.1
4.7
44.8
—
16.3
16.3
—
480.0
13.4
493.4
Notes
Interest
rate
3 months
or less
3-6
months
6-12
months
Total
1-2
years
2–5
years
30 June 2021
19
19
21
21
21
14
0.1-4.1%
0.1-4.1%
147.7
16.1
147.7
—
163.8
147.7
8.93%
8.70%
34.9
86.2
10.50%
532.4
5.98%
1.1
0.6
9.3
—
0.2
654.6
10.1
—
—
—
0.6
9.1
—
0.2
9.9
—
—
—
1.3
17.7
—
0.2
19.2
—
—
—
2.5
33.4
12.3
0.4
48.6
—
16.1
16.1
29.9
16.7
520.1
0.1
566.8
Interest rate risk
The Group has borrowings that incur interest at fixed and floating rates. The Group’s fixed rate borrowings comprise the senior secured second
lien notes which incur interest at a fixed interest rate of 10.50%. Management constantly monitors the floating interest rates so that action
can be taken should it be considered necessary. Management considered the impact of a change in the floating interest rate to the Group’s
financial results as the quantum of borrowings at floating rates is US$nil (30 June 2021: US$103.0 million). In the current Year, the impact of a
100 basis point increase/decrease would result in a financial loss/gain of US$nil (30 June 2021: US$1.0 million).
196
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
32. Financial instruments continued
Other market price risk
The Group predominantly generates revenue from the sale of rough and polished diamonds, as well as occasionally from polished stones.
The significant number of variables involved in determining the selling prices of rough diamonds, such as the uniqueness of each individual
rough stone, the content of the rough diamond parcel and the ruling US$/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:
Š To safeguard the ability of the entity to continue as a going concern
Š 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 US$ Loan Notes (less transaction costs), bank loans and borrowings 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 2022 and 30 June 2021 are as follows:
US$ million
Total debt
Cash and cash equivalents
Net debt
Total equity attributable to equity holders of the parent company
Net debt to equity ratio
2022
366.2
(288.2)
78.0
473.8
0.16:1
2021
430.3
(163.8)
266.5
450.8
0.6:1
The Group manages its capital structure by the issue of Ordinary Shares, raising debt finance where appropriate and managing Group cash
and cash equivalents.
33. Segment information
Significant accounting policies relevant to segmental 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.
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.
Corporate – administrative activities in the United Kingdom.
Beneficiation – beneficiation activities in South Africa.
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 exploration activities in Botswana and
South Africa, and reviewing the corporate administration expenses in the United Kingdom. Each segment derives, or aims to derive, its
revenue from diamond mining and diamond sales, except for the United Kingdom 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, depreciation and other income and expenses. Unallocated items
comprise mainly interest-earning assets and revenue, interest-bearing borrowings and expenses and corporate assets and expenses. Segment
capital expenditure is the total cost incurred during the Year to acquire 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 South Africa 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 of US$627.9 million (30 June 2021: US$712.1 million), Tanzania of US$73.8 million
(30 June 2021: US$32.0 million), and the United Kingdom of US$0.6 million (30 June 2021: US$0.5 million).
The Group’s property, plant and equipment included in non-current assets are located in South Africa of US$582.4 million (30 June 2021:
US$665.4 million), Tanzania of US$50.7 million (30 June 2021: US$31.3 million), and the United Kingdom of US$0.1 million (30 June 2021:
US$0.1 million).
Annual Report and Accounts 2022 Petra Diamonds Limited
197
Financial Statements
33. Segment information continued
Significant accounting policies relevant to segmental reporting continued
South Africa – mining activities
Tanzania
– mining
activities
Cullinan
Mine
2022
Finsch Koffiefontein
2022
2022
Williamson
2022
322.4
165.7
154.4
34.8
21.5
(13.8)
(0.3)
—
0.2
75.9
22.2
21.4
(4.1)
0.1
United
Kingdom
Corporate
and
treasury
2022
—
(14.1)
—
2.6
0.6
Operating segments
US$ million
Revenue
Segment result1
Impairment charge - operations
Impairment reversal/(charge) – other
receivables
—
—
—
—
Other direct income
(0.7)
(0.4)
Operating profit/(loss)2
153.7
34.4
(13.9)
39.6
(10.9)
Financial income
Financial expense
Income tax charge
Non-controlling interest
Profit attributable to equity holders
of the parent company
South
Africa
Inter-
Beneficiation 4
2022
segment Consolidated
2022
2022
2.2
0.4
—
—
—
0.4
(2.5)
(4.3)
—
—
—
(4.3)
585.2
179.6
21.1
(1.5)
(0.2)
199.0
19.0
(92.1)
(37.8)
(19.1)
69.0
Segment assets3
Segment liabilities3
Capital expenditure
463.9
384.0
35.0
229.8
111.2
12.0
6.0
17.1
0.6
123.2
3,575.2
75.1
3.3
2,430.1
1.6
5.1
5.9
—
(3,292.3)
1,110.9
(2,391.0)
(0.3)
632.4
52.2
1. Total depreciation of US$82.8 million included in the segmental result comprises depreciation incurred at the Cullinan Mine of US$52.5 million, Finsch of US$24.4 million, Koffiefontein
of US$0.3 million, Williamson of US$5.0 million and Corporate and treasury of US$0.6 million.
2. Operating profit is equivalent to revenue of US$585.2 million less total costs of US$386.2 million as disclosed in the Consolidated Income Statement.
3. Segment assets and liabilities include inter-company receivables and payables which are eliminated on consolidation.
4. The beneficiation segment represents Tarorite, a cutting and polishing business in South Africa, which can on occasion cut and polish select rough diamonds.
198
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
33. Segment information continued
Significant accounting policies relevant to segmental reporting continued
South Africa – mining activities
Tanzania
– mining
activities
Botswana
Operating segments
US$ million
Cullinan
Mine
2021
Finsch
2021
Koffiefontein Williamson
2021
2021
Exploration 4
2021
Revenue
250.6
123.5
Segment result1
76.8
(0.5)
27.9
(8.1)
4.6
(14.3)
Impairment charge –
operations
Impairment charge –
other receivables
Impairment of BEE loans
receivable – expected
credit loss release
Expenditure for unsettled
and disputed tax claims
Other direct income
(15.1)
(2.2)
(21.4)
—
—
—
0.7
—
—
0.6
—
—
1.0
—
—
0.1
—
(19.5)
5.1
(49.4)
United
Kingdom
Corporate
and
treasury
2021
—
(21.2)
—
(0.4)
5.8
—
—
—
—
—
—
—
—
—
—
South
Africa
Inter-
Beneficiation 5
2021
segment
2021
Consolidated
2021
0.3
(1.6)
—
(1.6)
—
—
—
—
—
—
—
—
—
—
Operating profit/(loss)2
77.4
(14.6)
(10.2)
(15.8)
(1.6)
(1.6)
Financial income
Financial expense
Gain on extinguishment
of Notes and unamortised
costs
Profit on disposal
of subsidiary
Income tax charge
Non-controlling interest
Profit attributable to
equity holders of the
parent company
Segment assets3
Segment liabilities3
Capital expenditure
559.0
559.2
16.8
249.9
119.7
4.0
6.9
22.1
1.7
59.6
33.5
0.3
—
—
—
3,488.7
2,134.7
1.0
4.5
5.5
—
(3,290.0)
(2,236.4)
—
406.9
29.5
(38.7)
0.3
5.8
(19.5)
6.8
(15.8)
81.6
(74.2)
213.3
14.7
(23.0)
(9.5)
187.1
1,078.6
638.3
23.8
1. Total depreciation of US$76.2 million included in the segmental result comprises depreciation incurred at Cullinan Mine of US$52.2 million, Finsch of US$23.0 million, Koffiefontein of US$ 0.1 million,
Williamson of US$0.3 million and Corporate and treasury of US$0.6 million.
2. Operating loss is equivalent to revenue of US$406.9 million less total costs of US$422.7 million as disclosed in the Consolidated Income Statement.
3. Segment assets and liabilities include inter-company receivables and payables which are eliminated on consolidation.
4. The operating results in respect of Botswana have been reflected in note 34. In FY 2021, Petra sold its exploration assets in Botswana to Botswana Diamonds PLC via the sale of its interest
in Sekaka Diamonds Exploration (Pty) Ltd (refer to note 34).
5. The beneficiation segment represents Tarorite, a cutting and polishing business in South Africa, which can on occasion cut and polish select rough diamonds.
Annual Report and Accounts 2022 Petra Diamonds Limited
199
Financial Statements
34. Disposal of operations
Significant accounting policies relevant to disposal of operations
Where an operation within the Group is disposed of, the assets are measured at the lower of their carrying amount and fair value less costs to
sell. An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain is recognised
for any subsequent increases in fair value less costs to sell of an asset but not in excess of any cumulative impairment loss previously recognised.
A gain or loss not previously recognised by the date of the sale of the non-current asset is recognised at the date of derecognition.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale (the Botswana exploration assets
met the criteria of IFRS 5 and were classified as held for sale in FY 2020) and that represents a separate major line of business or geographical
area of operation, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired
exclusively with a view to resale. The results of discontinued operations are presented separately in the statement of profit or loss.
Unrealised foreign exchange gains and losses on historical retranslation of the subsidiaries’ results into US Dollars are recycled to the Consolidated Income
Statement upon completion of the disposal. The non-controlling interest attributable to minority shareholders is recycled to the Consolidated Income
Statement upon completion of the disposal. The Group designates the results of discontinued activities, including those of disposed subsidiaries,
separately in accordance with IFRS and reclassifies the results of the operation in the comparative period from continuing to discontinued operations.
The Group does not consider mines held on care and maintenance to be discontinued activities unless the mine is abandoned and the discontinued
criteria are met.
There were no disposals of operations during the Year.
30 June 2021
Botswana (exploration)
On 20 July 2020 the Company announced that it had entered into an agreement to dispose of its exploration assets in Botswana via the sale
of 100% of its holding in Sekaka Diamonds Exploration (Pty) Ltd (previously known as Petra Diamonds Botswana (Pty) Limited) (Sekaka) to
Botswana Diamonds PLC for a total consideration of US$300,000 and a 5% royalty on future diamond revenues should any of the prospects
within the exploration licences be brought into production.
The assets of Sekaka include the Company’s three existing prospecting licences in Botswana, which include the KX36 project, a 3.5 hectare
kimberlite that was a new discovery by Petra in 2010, as well as a bulk sampling plant. These assets have been classified as ‘Assets held for
sale’ since 30 June 2018 following a decision by the Board to dispose of its Botswana exploration assets; the disposal of Sekaka was not a
result of the recent sales process, as announced on 26 June 2020, undertaken by the Group with respect to the Restructuring.
The purchase price of US$300,000 will be payable in two equal instalments of US$150,000 each, on or before 20 November 2021
and 20 November 2022 respectively. On 16 November 2021, the Company received the first instalment of US$150,000 from Botswana
Diamonds PLC. Petra is also entitled to a 5% royalty on the sale of diamonds commercially produced from any kimberlite which falls within
the licence areas covered in the sale. Botswana Diamonds has the option to buy out the royalty for a cash payment of US$2.0 million.
The disposal completed during November 2020.
Effect of the transaction
The transaction had the following effect on the Group’s assets and liabilities:
(i) Net assets:
US$ million
Mining property, plant and equipment
Trade and other receivables
Total assets
Trade and other payables
Total liabilities
Net assets disposed
At
November 2020
0.2
—
0.2
—
—
0.2
200
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022 Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
34. Disposal of operations continued
30 June 2021 continued
Effect of the transaction continued
(ii) Post-tax loss on disposal of Sekaka:
US$ million
Fair value consideration receivable on disposal
Less: net assets disposed of
Add: foreign currency translation recycled on disposal
Profit on disposal of discontinued operation
Add: net profit for the Period2
Profit on disposal including associated impairment, net of tax
Period ended
30 November 2020
0.3 1
(0.2)
13.3
13.4
1.3
14.7
1. The Company has attributed US$nil fair value to the 5% royalty given the uncertainty and time taken to convert an exploration project to a commercially viable mine.
2. The Company incurred US$0.1 million in cash costs and unrealised foreign exchange gains of US$1.2 million during the period.
35. Williamson
Framework Agreement
On 13 December 2021, the Company signed an agreement in principle with the Government of Tanzania relating to the Williamson operations.
Williamson resumed operations and sales during the Period, having been on care and maintenance since April 2020.
The Framework Agreement provides for a capital Restructuring of Williamson Diamonds Limited (WDL), the entity that owns the Williamson
mine, including the 16% free carried interest that the Government of Tanzania is entitled to receive in WDL and its shareholder loans under
Section 10 of the Tanzanian Mining Act, 2017 and Regulation 10 of the Tanzanian Mining (State Participation) Regulations, 2020. The capital
Restructuring will include:
Š A WDL share issue with the effect of reducing Petra’s indirect shareholding from 75% to 63% and consequently increasing the Government
of Tanzania’s shareholding from 25% to 37%
Š A contribution to the Government of Tanzania of 16% of the principal outstanding value of the Group’s shareholder loans payable by WDL,
with the remaining 84% of such principal outstanding loans continuing to be owed to the Group
Š The transfer of the WDL shares held by the Group to another member of the Petra Group (either Petra itself or a special purpose subsidiary).
Petra has registered Mwadui Mining Holdings Ltd, a subsidiary registered in the United Kingdom, for this purpose
The Framework Agreement also provides for an overall 55:45 economic benefit sharing ratio between the Government of Tanzania and
Petra in relation to future economic benefits from the Williamson mine. This arrangement is intended to capture the parties’ entitlements
as shareholders as well as, with respect to the Government of Tanzania, the revenue it collects from WDL arising from taxes, royalties, duties,
fees and other fiscal levies (Government Imposed Charges). The Framework Agreement also provides that WDL shall be entitled to offset its
undisputed unpaid and overdue VAT receivables against future Government Imposed Charges, whereby such Government Imposed Charges
will be offset and treated as paid for the purposes of the economic benefit sharing ratio.
The Framework Agreement provides that Petra and the Government of Tanzania will provide financial assistance for the restart of operations
at the Williamson mine. The Government of Tanzania has agreed to allocate the sales proceeds of the 71,654.45 carat diamond parcel from the
Williamson mine that was previously confiscated and blocked for export. The original value of this parcel was assessed in September 2017 at
approximately US$15 million, as previously disclosed, although Petra has not had the parcel independently valued.
The Framework Agreement records an important US$20.0 million settlement between the parties concerning long-standing historical disputes
with the Government of Tanzania. For FY 2021, as at 30 June 2021, the Group raised a provision of US$19.5 million (adjusted for time-value of
money) in respect of the aforementioned settlement. This settlement payment shall be made in instalments, with the first instalment of
US$5.0 million to be paid when the Framework Agreement becomes effective and upon receipt of proceeds by WDL from the sale of the
confiscated diamond parcel. The subsequent annual instalments of the settlement amount are to be made annually at amounts between
US$3 million and US$5 million depending on WDL’s ability to pay, as determined by WDL’s board of directors.
The Framework Agreement is subject to a number of conditions, including Tanzanian regulatory approvals and the consent of Petra’s First
Lien lender, and is therefore not yet effective as at 30 June 2022. Whilst Petra entered into the Framework Agreement with the Government
of Tanzania in the latter’s capacity principally as a regulator and collector of taxes in Tanzania. The Government of Tanzania is also a related
party to Petra for the purposes of the UK Listing Rules, due to the Government’s shareholding in WDL. As a result and due to the size of the
transactions contemplated in the Framework Agreement, the Framework Agreement could not become legally binding on the parties until
approval was obtained from Petra’s shareholders. On 9 February 2022, Petra received shareholder approval of the Framework Agreement.
Notwithstanding, the Government of Tanzania’s right to a 16% free carried interest under the Tanzanian Mining Act, 2017 is an entitlement as
a matter of Tanzanian law, and is not of itself ultimately subject to any approval or condition in any respect. Accordingly, Petra acknowledges
that arrangements to reflect this will need to be implemented regardless of the Framework Agreement becoming effective.
Annual Report and Accounts 2022 Petra Diamonds Limited
201
Financial Statements
35. Williamson continued
Memorandum of Understanding with Caspian Limited (MoU)
On 15 December 2021, the Company announced that it had signed a non-binding Memorandum of Understanding (MoU) to sell 50% less one
share of the entity that holds the Group’s shareholding in Williamson Diamonds Limited (WDL), along with a pro rata portion of shareholder
loans owed by WDL, to Caspian Limited or its nominee (Caspian) for a total consideration of US$15.0 million. Caspian is the long-term technical
services contractor at the Williamson mine.
Upon completion of the transactions contemplated by the MoU and the capital Restructuring in the aforementioned Framework Agreement
becoming effective, Petra and Caspian will each indirectly hold a 31.5% stake in WDL but Petra retains a controlling interest in WDL.
Caspian’s purchase will be funded through the settlement of US$11.1 million of past technical services payments owed by WDL to Caspian,
including services rendered during the restart of operations in early FY 2022 following the care and maintenance period, with the remaining
amount being funded by Caspian rendering US$3.9 million of technical services to WDL in order to ramp up operations at the Williamson mine.
The transactions in the MoU are subject to Petra and Caspian agreeing definitive transaction agreements, including a share purchase agreement
and a shareholders’ agreement, with the parties still seeking to agree those transaction agreements. The sale to Caspian is subject to the parties
first agreeing definitive transaction agreements and then obtaining all necessary Governmental, regulatory and lender approvals, including
approvals from the Tanzanian Mining Commission, the Tanzanian Fair Competition Commission and The Bank of Tanzania, and a binding ruling
from the Tanzania Revenue Authority on the tax treatment of the transaction. These are expected to be obtained in the first half of FY 2023.
As at 30 June 2021, the criteria for classification of Williamson as an asset held for sale was met. Refer to note 36 of the FY 2021 Annual Report
Financial Statements disclosures. Subsequently, the transactions contemplated by the Framework Agreement and the MoU will, when they
complete, result in Petra retaining its controlling interest in WDL and will see Petra consolidating WDL’s operating and financial results, with
an appropriate recognition of non-controlling interest attributable to both Caspian and the Government of Tanzania. As neither agreement
mentioned above is effective as at 30 June 2022, WDL has been consolidated in the same proportions as prior to its asset held for sale
classification, being 75% Petra and 25% Government of Tanzania.
36. Non-current assets held for sale – 30 June 2021
Williamson
Significant judgements and estimates relevant to non-current assets held for sale
The Group applies judgement when determining whether an asset should be classified as held for sale. For this to be the case, the asset must be
available for immediate sale in its present condition and its sale must be highly probable. The following factors were considered by Management
in determining whether a sale is highly probable: Management must be committed to a plan to sell the asset; an active programme to locate a
buyer and complete the plan must have been initiated; the asset must be actively marketed for sale at a reasonable price; and any transaction
should be expected to be completed within 12 months of classification of the asset as held for sale.
Judgement was required when determining whether a component of an entity classifies as a discontinued operation. Judgement was required
when determining whether the component represents a separate major line of business or geographical area of operation. This was applied to
the classification of the Williamson mine as a discontinued operation. The Williamson mine is considered a major geographical area of operation
which has been reported as a separate segment in the past, and as such Management determined the classification of a discontinued operation
to be appropriate. In terms of the measurement requirements of IFRS 5, once classified as held for sale, the assets were required to be measured
at the lower of their carrying amount and fair value less costs to sell. Judgement was required in order to determine the fair value of the
disposal group. In determining the fair value used to calculate the appropriate write-down, Management took into consideration discussions
with vendors, the latest LOM plan assessment and the best available information at the time.
Significant accounting policies relevant to non-current assets held for sale
Where an operation within the Group is separately identified or forms part of a separate reporting structure, the Group will classify the asset as
held for sale, in accordance with IFRS 5, if Management has committed to a plan to sell, the operation is available for sale, an active search for a
buyer is in place, the disposal is highly probable within 12 months of classifying as held for sale and completion of the disposal is unlikely to
significantly change. An impairment loss is recognised for any initial or subsequent write-down of the asset to fair value less costs to sell. A gain is
recognised for any subsequent increases in fair value less costs to sell of an asset but not in excess of any cumulative impairment loss previously
recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset is recognised at the date of derecognition.
Non-current assets classified as held for sale and the assets of an operation classified as held for sale are presented separately from the other
assets in the Consolidated Statement of Financial Position. The liabilities of an identified operation classified as held for sale are presented
separately from other liabilities in the Consolidated Statement of Financial Position.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate
major line of business or geographical area of operation, is part of a single co-ordinated plan to dispose of such a line of business or area of
operation, or is a subsidiary acquired exclusively with a view to resell. The results of discontinued operations are presented separately in the
statement of profit or loss.
Unrealised foreign exchange gains and losses on historical retranslation of the subsidiaries results into US Dollars are recycled to the
Consolidated Income Statement upon completion of the disposal. The Group designates the results of discontinued activities, including those
of disposed subsidiaries, separately in accordance with IFRS and reclassifies the results of the operation in the comparative period from
continuing to discontinued operations. In FY 2021, the Board reviewed its strategic options at Williamson and the asset was classified as an
asset held for sale. As a result, the assets and liabilities of the Williamson mining operation (being Petra’s 75.0% interest) were classified as held
for sale in the Consolidated Statement of Financial Position at 30 June 2021, in accordance with IFRS 5. The financial results of the Williamson
operation for FY 2021 were disclosed in the Consolidated Income Statement. The Williamson mining operation is a separate operating segment
for the purposes of the Group’s segmental reporting.
202
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022 Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
36. Non-current assets held for sale – 30 June 2021 continued
Williamson continued
Significant accounting policies relevant to non-current assets held for sale continued
Net assets of Williamson:
US$ million
Mining property, plant and equipment
Non-current trade and other receivables
Trade and other receivables
Inventory
Cash and cash equivalents
Non-current assets held for sale
Environmental liabilities, provisions and other non-current trade and other payables2
Trade and other payables and provisions2
Non-current liabilities associated with non-current assets held for sale
Net assets
Result of Williamson:
US$ million
Revenue
Cost of sales
Gross loss
Impairment charge – operations
Impairment reversal/(charge) - other receivables
Provisions for unsettled and disputed tax claims
Financial income
Financial expense
Loss before tax
Income tax charge
Loss after tax before impairment charge
Impairment charge1
Net loss for the Year
Attributable to:
Equity holders of the parent
Non-controlling interest
Book value prior to
reclassification of as
held for sale
Impairment
30 June 2021
52.7
0.7
2.9
15.5
9.2
81.0
(22.9)
(10.6)
(33.5)
47.5
(21.4)¹
—
—
—
—
(21.4)
—
—
—
(21.4)
31.3
0.7
2.9
15.5
9.2
59.6
(22.9)
(10.6)
(33.5)
26.1
1 July 2020–
30 June 2021
4.6
(13.8)
(9.2)
—
0.7
(19.5)
—
(2.7)
(30.7)
—
(30.7)
(21.4)
(52.1)
(52.1)
—
(52.1)
1. The US$21.4 million impairment loss recorded on the Williamson assets represented the difference between the assets measured at the lower of their carrying amount and fair value less costs to
sell considering the best available information at the present time with reference to ongoing discussions with a potential investor. The impairment charge of US$21.4 million was recognised to
reduce assets of Williamson to equal the fair value less costs to sell.
2. Included in environmental liabilities, provisions and other non-current trade and other payables are provisions for lump sum severance amounts upon death, ill-health retirement and compulsory
retirement for employees, provision for the estimated cost of the environmental rehabilitation at Williamson, which is based on current legal requirements, existing technology and the Group’s
planned rehabilitation strategy and provision for unsettled and disputed tax claims.
The Consolidated Cashflow Statement includes the following amounts relating to Williamson:
US$ million
Operating activities
Investing activities
Net cash utilised in discontinued operations
1 July 2020–
30 June 2021
(5.2)
(0.3)
0.6
Annual Report and Accounts 2022 Petra Diamonds Limited
203
Financial Statements
36. Non-current assets held for sale – 30 June 2021 continued
Consolidated Statement of Financial Position reconciliation – Williamson (30 June 2022)
Consolidated
(excluding WDL)
30 June 2022
Williamson
30 June 2022
Consolidated
(including WDL)
30 June 2022
582.5
1.6
44.6
—
628.6
37.3
45.1
259.4
341.8
970.4
145.7
959.5
(449.5)
1.9
(0.8)
(248.2)
408.6
4.7
413.3
353.9
(1.7)
69.6
71.3
493.2
12.3
0.4
51.3
64.0
557.2
970.4
50.7
20.3
—
2.7
73.7
12.5
25.5
28.8
66.8
633.2
21.9
44.6
2.7
702.3
49.8
70.6
288.2
408.6
140.5
1,110.9
—
—
0.6
—
—
64.6
65.2
—
65.2
—
20.9
28.1
—
49.0
—
2.8
23.5
26.3
75.3
140.5
145.7
959.5
(448.9)
1.9
(0.8)
(183.6)
473.8
4.7
478.5
353.9
19.2
97.7
71.3
542.1
12.3
3.2
74.8
90.3
632.4
1,110.9
US$ million
ASSETS
Non-current assets
Property, plant and equipment
Right-of-use assets
BEE loans and receivables
Other receivables
Total non-current assets
Current assets
Trade and other receivables
Inventories
Cash and cash equivalents (including restricted amounts)
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity
Share capital
Share premium account
Foreign currency translation reserve
Share-based payment reserve
Other reserves
Accumulated losses
Attributable to equity holders of the parent company
Non-controlling interest
Total equity
LIABILITIES
Non-current liabilities
Loans and borrowings
Lease liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Loans and borrowings
Lease liabilities
Trade and other payables
Total current liabilities
Total liabilities
Total equity and liabilities
204
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022 Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
36. Non-current assets held for sale – 30 June 2021 continued
Consolidated Income Statement reconciliation – Williamson (30 June 2022)
US$ million
Revenue
Mining and processing costs
Other direct income
Corporate expenditure including settlement costs
Other corporate income
Expenditure for unsettled and disputed tax claims
Impairment reversal/(charge) of non-financial assets
Impairment (charge)/reversal of other receivables
Impairment of BEE loans receivable – expected credit loss release
Total operating costs
Profit on disposal including associated impairment, net of tax
Financial income
Financial expense
Profit before tax
Income tax charge
Profit for the Period
Attributable to:
Equity holders of the parent
Non-controlling interest
Consolidated
(excluding WDL)
1 July 2021–
30 June 2022
Williamson
1 July 2021–
30 June 2022
Consolidated
(including WDL)
1 July 2021–
30 June 2022
509.3
(339.3)
(0.9)
(14.1)
0.6
—
(0.3)
2.6
—
(351.4)
—
17.5
(90.6)
84.8
(37.8)
47.0
75.9
(52.2)
0.1
—
—
—
21.4
(4.1)
—
(34.8)
—
1.5
(1.5)
41.1
—
41.1
585.2
(391.5)
(0.8)
(14.1)
0.6
—
21.1
(1.5)
—
(386.2)
—
19.0
(92.1)
125.9
(37.8)
88.1
69.0
19.1
88.1
37. Restructuring of the US$650 million Loan Notes – FY 2021
On 10 March 2021, the Company announced it had completed the implementation of the Debt Restructuring project with the Noteholders
and the South African Lender Group. The key features of the Restructuring of the US$650 million Notes and the senior secured lender debt
facilities of ZAR1.6 billion were as follows:
Š Conversion of Notes debt valued at US$415.0 million into equity, which resulted in the Noteholder group acquiring 91% of the enlarged
share capital of the Company (refer to (a) below)
Š The remainder of the Notes exchanged for the issue of US$295.0 million new Notes and the contribution by holders of the existing
Notes of US$30.0 million in new money, each to take the form of new Notes (refer to (a) below)
Š Restructuring of the first lien facilities to provide for a Term Loan of ZAR1.2 billion and a Revolving Credit Facility (RCF) of ZAR560 million
provided by the South African Lender Group (refer to (b) on page 204)
a) Debt for equity conversion and the issue of new Notes
i) Debt for equity swap
The Company completed a debt for equity conversion consisting of the partial repayment of the US$650 million Loan Notes by issuing 8,844,657,929
new Ordinary Shares with a nominal value of 0.001 pence per share in the Company to the existing Noteholders. The fair value of the shares at the
date of the conversion was 1.58 pence per share, giving a total consideration of U$194.0 million. As the fair value was derived by reference to the
closing share price at the date of the conversion, it is considered to be a Level 1 fair value measurement. The carrying value of the liability at the
date of the conversion was US$415.0 million, after capitalisation of the May 2020 and November 2020 coupons and adjusting for the issue of
new Notes. In FY 2021, the resultant gain, before Restructuring costs, of US$221.0 million was recognised in the Consolidated Income Statement as
part of the gain on extinguishment of the Notes. Restructuring costs identified as being directly associated with the debt for equity conversion, of
US$12.3 million, were taken directly to share premium. The debt for equity conversion resulted in the Noteholders acquiring 91% of the enlarged
share capital of the Company.
Annual Report and Accounts 2022 Petra Diamonds Limited
205
Financial Statements
37. Restructuring of the US$650 million Loan Notes – FY 2021 continued
a) Debt for equity conversion and the issue of new Notes continued
ii) Issue of new Notes
The new Notes of US$336.7 million were issued and allocated as follows:
Š US$30.0 million allocated only to those Noteholders that subscribed, and funded that subscription, to the New Money, pro rata to their New
Money contribution (the New Money Noteholders)
Š US$150.0 million allocated only to those New Money Noteholders, pro rata to each holder’s contribution to the New Money
Š US$145.0 million allocated to all Noteholders (including the New Money Noteholders), pro rata to their holdings of existing Notes at the
close of the Restructuring
Š A further amount in new Notes as consideration to certain Noteholders, in remuneration for the commercial risks and other commercial
considerations borne by those Noteholders whilst restricted for the purposes of negotiations with other stakeholders and work performed
in connection with the Restructuring. The quantum of new Notes issued for this purpose was US$11.7 million, which was capitalised as part
of the Notes liability and shall be amortised over the term of the Notes
iii) Substantial modification
The Restructuring of the terms of the Loan Notes represented a substantial modification as the net present value of the cashflows under
the original terms and the modified terms was greater than 10%. As such, the carrying value of the Loan Notes of US$299.0 million was
derecognised and the amended new Notes with a nominal value of US$306.7 million were recognised on the balance sheet at the date
of modification. The loss arising on substantial modification of the Loan Notes of US$7.7 million has been recognised in the Consolidated
Income Statement as part of the gain on extinguishment of the Notes. The acceleration of unamortised costs associated with the substantial
modification was expensed and included within net finance income (refer to note 8).
a) First lien facilities
The previous facilities held with the South African Lender Group, included the ZAR500.0 million working capital facility (WCF), the ZAR400.0
million RCF, the financing arrangements in respect of the Group’s BEE Partners (the BEE Facilities) of ZAR683.1 million and the Group’s general
banking facilities, were restructured through the extinguishment of the existing facilities and the replacement of such facilities with a new
Term Loan and RCF, as part of the Restructuring.
A new Term Loan was made available to the Group for a principal amount of ZAR1.2 billion, in order to refinance the previous drawn
ZAR500.0 million WCF and the outstanding principal amounts of the BEE Facilities (ZAR683.1 million). Transaction costs of ZAR17.4 million
(US$1.7 million) and cash transaction costs of US$0.7 million directly associated with the Term Loan were capitalised to the liability to be
amortised over the period of the loan. The Term Loan is fully drawn.
A new RCF was made available comprising a rollover of the previous ZAR400.0 million RCF but increased by a further ZAR160.0 million.
An amount of ZAR400.0 million remains drawn at Year end under the RCF with the RCF reducing at Year end to ZAR509.6 million in line with
the amortisation profile, with ZAR109.6 million still available for draw-down. For the terms of the new first lien facilities refer to note 21.
Transaction costs
During FY 2021 a total of US$33.7 million (FY 2020: US$3.8 million included under prepayments) was incurred during the Year for the
Restructuring. The transaction costs have been apportioned to equity, the Notes and bank facilities based on each component’s contribution
to the total Restructuring. Cash costs incurred in FY 2021 amounted to US$29.9 million (FY 2020: US$3.8 million included under prepayments).
38. Events after the reporting period
Tender offer to Senior Secured Second Lien Noteholders
On 13 September 2022, the Company announced its intention to reduce its gross debt through a tender offer to bondholders to purchase up
to US$150 million of the Senior Secured Second Lien Notes due in 2026 in line with its stated intent to further optimise its capital structure
through a reduction of gross debt. On 27 September 2022, the Company announced that the notional principal amount of Notes that have
been validly tendered by Noteholders prior to the Early Participation Deadline and are accepted for payment by the Offeror is $125,590,338
(corresponding to an actual principal amount after application of the Pool Factor of $143,627,622.34). The total cash purchase price to be paid
by the Company to Noteholders pursuant to the tender offer on the Early Settlement Date (that is, the Total Consideration for all Notes validly
tendered multiplied by the Pool Factor) is $145,063,898.63. Furthermore, the Company amended the terms of the tender offer and increased
the purchase offer from the initial US$150.0 million to US$175.0 million.
Koffiefontein sales process
As Koffiefontein approaches the end of its mine plan in 2025, Petra has been exploring options for a responsible exit. The sales process that
Petra announced in April 2022 has been unsuccessful in identifying a potential buyer and so Petra is now evaluating its other options and
continues to operate the mine responsibly.
206
Petra Diamonds Limited Annual Report and Accounts 2022
Notes to the Annual Financial Statements continuedFor the Year ended 30 June 2022 Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Alternative Performance Measures
In addition to GAAP figures reported under International Financial Reporting Standards (IFRS), Petra provides certain Alternative Performance
Measures (APMs). These APMs are used internally in the management, planning, budgeting and forecasting of the business and are also
considered to be helpful in terms of the external understanding of the Group’s underlying performance. As these are non-GAAP measures, they
should not be considered as replacements for IFRS measures. The Company’s definition of these non-GAAP measures may not be comparable
to other similarly titled measures reported by other companies.
The use of APMs by listed companies to better explain performance and provide additional transparency and comparability is common.
However, APMs should always be considered in conjunction with IFRS reported numbers and not used in isolation. Commentary within the
Annual Report, including the Financial Review, as well as the Consolidated Financial Statements and the accompanying notes, should be
referred to in order to fully appreciate all the factors that affect our business. We strongly encourage readers not to rely on any single financial
measure, but to carefully review our reporting in its entirety.
APM
Adjusted EBITDA
Adjusted EPS from continuing
operations
Method of calculation
Relevance
Adjusted EBITDA is stated before depreciation,
amortisation of right-of-use assets, costs and fees
relating to investigation and settlement of human
rights abuse claims, share-based expense, net
finance expense, tax expense, impairment charges,
expected credit loss release/(charge), gain on
extinguishment of Notes net of unamortised costs,
profit on disposal of subsidiary and net unrealised
foreign exchange gains and losses.
Adjusted EPS from continuing operations is stated
before impairment charge, expected credit release/
(loss) provision, gain on extinguishment of Notes
net of unamortised costs, profit on disposal of
subsidiary, costs and fees relating to investigation
and settlement of human rights abuse claims and
net unrealised foreign exchange gains and losses,
and excluding taxation (charge)/credit on net
unrealised foreign exchange gains and losses and
excluding taxation credit on impairment charge.
Adjusted EBITDA excludes the impact of certain
non-cash items and one-off items (i.e. loss/profit
on discontinued operations) and is used to provide
further clarity on the ongoing, underlying financial
performance of the Group.
This is used to assess the Group’s operational
performance from continuing operations per
Ordinary Share. It removes the effect of items that
are not directly related to operational performance.
Adjusted mining and processing
costs
Mining and processing costs stated before
depreciation and share-based expense.
This removes the impact of non-cash items from
the actual operational cost.
Adjusted net profit/(loss) after tax Adjusted net profit/(loss) after tax is net profit/
(loss) after tax stated before impairment charge,
expected credit release/(loss) provision, gain on
extinguishment of Notes net of unamortised costs,
profit on disposal of subsidiary and net unrealised
foreign exchange gains and losses, and excluding
taxation (charge)/credit on net unrealised foreign
exchange gains and losses and excluding taxation
credit on impairment charge.
By removing the impact of items that are not
directly related to operational performance, as well
as the effect of any discontinued operations, this is
one of the indicators used to assess the underlying
performance of the business.
Consolidated net debt:EBITDA
Consolidated net debt:EBITDA is consolidated net
debt divided by adjusted EBITDA.
This ratio is used by creditors, credit rating
agencies and other stakeholders.
Bank loans and borrowings plus US$ Loan Notes,
less cash and diamond debtors.
This consolidated figure is used by the lender group,
analysts, rating agencies and other stakeholders.
Consolidated net debt
Operational free cashflow
Cash generated from operations less capital
expenditure for the Year as per the Consolidated
Cashflow Statement.
Net debt
The US$ Loan Notes (gross), bank loans and
borrowings, net of cash at bank (including
restricted cash).
Free cashflow reflects the cash generated from
operations after capital expenditure requirements
have been met. This measure reflects the
Company’s ability to generate cash from profit,
reflecting strong working capital management
and capital expenditure discipline.
Net debt combines the various funding sources
that are included in the Consolidated Statement
of Financial Position and the accompanying notes.
It provides an overview of the Group’s net
indebtedness, providing transparency on the
overall strength of the balance sheet.
Profit from mining activities
Revenue less adjusted mining and processing costs
plus other direct income.
Provided to demonstrate the Group’s ability to
achieve profit from its core operating activities.
Annual Report and Accounts 2022 Petra Diamonds Limited
207
Supplementary Information
Five-year Summary of Consolidated Figures
For the Year ended 30 June 2022
US$ million
Income statement
Revenue (gross)1
Adjusted mining and processing costs2
Profit from mining activity3
Adjusted EBITDA3
Adjusted net profit/(loss) after tax3
Net profit/(loss) after tax – Group
Statement of financial position
Current assets
Non-current assets
Non-current assets held for sale
Total assets
Borrowings (short and long term)
Current liabilities (excluding borrowings)
Liabilities directly associated with non-current assets held for sale
Total equity
Movement in cash
Net cash generated from operating activities
Net cash utilised in investing activities
Net cash (utilised in)/generated from financing activities
Net increase/(decrease) in cash and cash equivalents
Ratios and other key information
2022
2021
2020
2019
2018
585.2
(307.1)
277.3
264.9
102.0
88.1
408.6
702.3
—
1,110.9
366.2
74.8
—
478.5
284.0
(52.9)
(101.4)
128.2
402.3
(261.2)
142.8
135.4
(16.1)
196.6
274.4
744.6
59.6
1,078.6
430.3
49.1
33.5
440.3
139.5
(25.4)
(8.0)
93.6
243.3
(169.3)
75.0
67.3
(54.7)
(223.0)
191.1
851.3
0.3
463.6
(301.7)
161.1
153.0
(13.2)
(258.1)
495.3
(291.4)
205.1
195.4
1.6
(203.1)
206.7
1,087.5
0.6
413.5
1,329.2
46.5
1,042.7
1,294.8
1,789.2
769.0
52.5
0.1
11.7
27.0
(51.0)
52.4
(6.7)
650.6
54.9
—
326.1
156.4
(137.9)
(102.7)
(141.6)
754.8
130.8
27.8
566.6
67.9
(201.9)
169.7
35.7
Basic earnings/(loss) per share attributable to the equity holders of the
Company – US$ cents
Adjusted basic earnings/(loss) per share from continuing operations
attributable to the equity holders of the Company – US$ cents3
Capex
Cash at bank (including restricted)
35.53
260.70
(21.96)
(20.18)
(15.85)
42.93
52.2
288.2
(36.20)
23.8
163.8
(5.04)
36.4
67.6
(2.63)
86.9
85.2
0.83
145.5
236.0
The Group uses several non-GAAP measures above and, as these are non-GAAP measures, they should not be considered as replacements for IFRS measures. The Company’s definition of these
non-GAAP measures may not be comparable to other similarly titled measures reported by other companies.
1. Revenue (gross) excludes revenues for Williamson for FY 2021 and FY 2020 and the KEM JV for FY 2019 to FY 2017. Under IFRS, these revenues were classified in the Consolidated Income Statement
as part of the loss from discontinued operations.
2. Adjusted mining and processing costs are mining and processing costs (excluding Williamson for FY 2021 and FY 2020 and KEM JV for FY 2019 and FY 2018) stated before depreciation and
share-based expense. Under IFRS, the adjusted mining and processing costs were classified in the Consolidated Income Statement as part of the loss from discontinued operations.
3. For definitions of these non-GAAP measures refer to page 207.
208
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
FY 2022 Summary of Results and Non-GAAP Disclosures
US$ million
Revenue
Adjusted mining and processing costs1
Other direct income
Profit from mining activities2
Other corporate income
Adjusted corporate overhead
Adjusted EBITDA3
Depreciation and amortisation of right-of-use asset
Share-based expense
Net finance expense
Adjusted net profit/(loss) before tax5
Tax expense (excluding taxation credit/(charge) on impairment charge and unrealised foreign exchange
gain/(loss)) 4
Adjusted net profit/(loss) after tax4
Impairment charge – operations and other receivables6
Impairment of BEE loans receivable – expected credit loss provision7
Gain on extinguishment of Notes net of unamortised costs
Profit on disposal of subsidiary8
Recovery/(costs) and fees relating to investigation and settlement of human rights abuse claims
Provision for unsettled and disputed tax claims
Net unrealised foreign exchange (loss)/gain
Taxation credit/(charge) on unrealised foreign exchange gain/(loss)4
Taxation credit on impairment charge
Net profit after tax
Earnings per share attributable to equity holders of the Company – US$ cents
Basic profit per share – from continuing operations
Adjusted profit/(loss) per share – from continuing operations9
2022
585.2
(307.1)
(0.8)
277.3
0.6
(13.0)
264.9
(85.3)
(1.1)
(36.6)
141.9
(39.9)
102.0
19.6
—
—
—
0.8
—
(36.5)
2.2
—
88.1
35.53
42.93
2021 10
406.9
(276.1)
6.8
137.6
—
(7.4)
130.2
(80.8)
(0.5)
(67.2)
(18.3)
(7.2)
(25.5)
(38.4)
5.8
213.3
14.7
(12.7)
(19.5)
74.6
(19.9)
4.2
196.6
260.70
(36.20)
The Group uses several non-GAAP measures above and throughout this report to focus on actual trading activity by removing non-cash or non-recurring items. These measures include adjusted
mining and processing costs, profit from mining activities, adjusted EBITDA, adjusted net profit after tax, adjusted earnings per share, adjusted US$ Loan Notes and net debt. As these are non-GAAP
measures, they should not be considered as replacements for IFRS measures. The Company’s definition of these non-GAAP measures may not be comparable to other similarly titled measures
reported by other companies.
1. Adjusted mining and processing costs are mining and processing costs stated before depreciation and share-based expense.
2. Profit from mining activities is revenue less adjusted mining and processing costs plus other direct income.
3. Adjusted EBITDA is stated before depreciation, amortisation of right-of-use asset, share-based expense, net finance expense, tax expense, impairment reversal/charges, expected credit loss
release/(charge), gain on extinguishment of Notes net of unamortised costs, profit on disposal of subsidiary, costs and fees relating to investigation and settlement of human rights abuse claims,
provision for unsettled and disputed tax claims and net unrealised foreign exchange gains and losses.
4. Tax expense/credit is the tax (expense)/credit for the Year excluding taxation credit/charge on impairment charge and unrealised foreign exchange gain/(loss) generated during the Year;
such exclusion more accurately reflects resultant adjusted net profit/(loss).
5. Adjusted net profit/(loss) after tax is net profit/(loss) after tax stated before impairment reversal/charge, expected credit release/(loss) provision, gain on extinguishment of Notes net of
unamortised costs, costs and fees relating to investigation and settlement of human rights abuse claims, profit on disposal and net unrealised foreign exchange gains and losses, and excluding
taxation (charge)/credit on net unrealised foreign exchange gains and losses and excluding taxation credit on impairment charge.
6. Impairment reversal of US$19.6 million (30 June 2021: US$38.4 million charge) was due to the Group’s impairment review of its operations and other receivables. Refer to note 7 for further details.
7. Reversal of impairment of BEE loans receivable of US$nil (30 June 2021: US$5.8 million impairment charge) is due to the Group’s expected credit loss assessment of its BEE loans receivable.
Refer to note 15 for further details.
8. The profit on disposal of subsidiary of US$14.7 million in FY 2021 includes the reclassification of foreign currency translation reserve, net of tax of Sekaka Diamonds (Pty) Ltd.
9. Adjusted EPS is stated before impairment charge, expected credit release/(loss) provision, gain on extinguishment of Notes net of unamortised costs, profit on disposal of subsidiary, acceleration
of unamortised costs on restructured loans and borrowings, costs and fees relating to investigation and settlement of human rights abuse claims, provision for unsettled and disputed tax claims
and net unrealised foreign exchange gains and losses, and excluding taxation (charge)/credit on net unrealised foreign exchange gains and losses and excluding taxation credit/charge on
impairment reversal/charge.
The comparative basic profit per share and adjusted profit per share have been adjusted to give effect to the share consolidation of one new share for every 50 existing shares completed
on 29 November 2021 with the Company’s resultant issued share capital now consisting of 194,201,785 Ordinary Shares of 0.05 pence each.
10. The results for FY 2021 have been restated with the operating results of Williamson which were previously classified under loss on discontinued operations. For further detail refer to note 36.
Annual Report and Accounts 2022 Petra Diamonds Limited
209
Supplementary Information
Petra’s Partners
The Company’s partnerships are key in terms of stakeholder sustainability and the long-term success of its operations.
In South Africa, the Company has partner shareholders in its operations which represent the interests of BEE shareholders. These BEE Partners
include various commercial BEE entities (including women’s groups), as well as, importantly, the Itumeleng Petra Diamonds Employee Trust.
In Tanzania, at Williamson, Petra’s partner is the Government of the United Republic of Tanzania. In December 2021, Petra announced that it
had entered into two agreements with the objective of reducing its exposure to Tanzania while still retaining control of Williamson. The
Framework Agreement will, once effective, see Petra’s indirect interest in Williamson reduce to 63%. Once the MoU transaction with Caspian
Limited become effective, Petra’s indirect interest in Williamson will reduce further to 31.5%.
An overview of the ownership of Petra’s mines and BEE Partner structures is set out below, whilst a more detailed illustration of Petra’s Group
structure can be found on the next page, and all these schematics can be found on Petra’s website at https://www.petradiamonds.com/
about-us/who-we-are/group-structure/.
Summary of mine ownership
Finsch
Cullinan
74%
74%
74%
Koffiefontein
74%
Tarorite
(Beneficiation)
12%
14%
12%
14%
12%
14%
26%
Itumeleng Petra Diamonds Employee Trust
Kago Diamonds (Pty) Ltd
Itumeleng Petra Diamonds Employee Trust
Kago Diamonds (Pty) Ltd
Itumeleng Petra Diamonds Employee Trust
Kago Diamonds (Pty) Ltd
Kago Diamonds (Pty) Ltd
Petra
Diamonds
Holdings SA
(Pty) Ltd
Petra
Diamonds
Limited
Williamson
75%
25%
Government of the
United Republic of Tanzania
BEE Partner structures
Petra Diamonds Holdings
SA (Pty) Ltd
31.46%
Kago Diamonds (Pty) Ltd
16.10%
5.26%
14.20%
0.55%
32.43%
Umnotho weSizwe Group
Lexshell 844 (Pty) Ltd
Namoise Mining (Pty) Ltd
Thari Resources (Pty) Ltd
Sedibeng Mining (Pty) Ltd
210
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Petra’s detailed Group structure
South
African
companies
100%
100%
74%
Petra Diamonds
Southern Africa (Pty) Ltd
Group administration and
diamond sales and marketing
Ealing Management
Services (Pty) Ltd
Treasury company
Tarorite (Pty) Ltd
(Beneficiation)
Diamond beneficiation and
diamond dealer licence holder
26%
Kago Diamonds (Pty) Ltd
Petra Diamonds
Limited
100%
Petra Diamonds
Holdings SA
(Pty) Ltd
Holding company
74%
Finsch Diamond Mine
(Pty) Ltd
Diamond mining
Johannesburg
Diamond Trading
Company Pty Ltd
Mining and
exploration
74%
Cullinan Diamond
Mine (Pty) Ltd
Diamond mining
100%
Premier Transvaal
Diamond Mining
(Pty) Ltd
Mining and exploration
74%
Blue Diamond
Mines (Pty) Ltd
Koffiefontein
Diamond Mine
Diamond mining
12%
14%
12%
14%
Itumeleng Petra Diamonds
Employee Trust
Kago Diamonds (Pty) Ltd
Itumeleng Petra Diamonds
Employee Trust
Kago Diamonds (Pty) Ltd
12%
Itumeleng Petra Diamonds
Employee Trust
Kago Diamonds (Pty) Ltd
14%
100%
Willcroft Company Ltd
Holding company
75%
Williamson
Diamonds Ltd
Diamond mining
25%
Government of Tanzania
100%
Kalahari
Diamonds Ltd
Holding company
100%
Mwadui Mine
Holdings Limited
Holding company
100%
Petra Diamonds
Jersey Treasury Ltd
Treasury
Petra Diamonds
Belgium
Diamond sales
and marketing
Petra Diamonds
Netherlands
Treasury BV
Treasury
100%
100%
United
Kingdom
Tanzania
South Africa
Bermuda
Jersey
Belgium
Netherlands
B-BBEE
Shareholders
BVI
Main business
100%
100%
Petra Diamonds UK
Services Ltd
Administration
Petra Diamonds US$
Treasury PLC
Treasury
100%
Petra Diamonds UK
Treasury Ltd
Treasury
100%
Petra Diamonds Angola
Holdings Ltd
Annual Report and Accounts 2022 Petra Diamonds Limited
211
Supplementary Information
Shareholder and Corporate Information
Petra Diamonds Limited
Registered office
Clarendon House
2 Church Street
Hamilton HM11
Bermuda
Group management office
15–17 Heddon Street
London W1B 4BF
Tel: +44 20 7494 8203
info@petradiamonds.com
www.petradiamonds.com
Solicitors
Bermuda: Conyers Dill & Pearman Limited
Clarendon House
2 Church Street
Hamilton HM11
Bermuda
Tel: +1 441 295 1422
United Kingdom: Ashurst LLP
London Fruit & Wool Exchange
1 Duval Square
London E1 6PW
Tel: +44 20 7638 1111
Corporate brokers
BMO Capital Markets
95 Queen Victoria Street
London EC4V 4GH
Tel: +44 20 7236 1010
www.bmocm.com
Peel Hunt
100 Liverpool Street
London EC2M 2AT
Tel: +44 20 7418 8900
www.peelhunt.com
212
Petra Diamonds Limited Annual Report and Accounts 2022
Corporate communications team
Tel: +44 20 7494 8203
Email: investorrelations@petradiamonds.com
Company registration number
EC 23123
Company Secretary
Rupert Rowland-Clark
15–17 Heddon Street
London W1B 4BF
Tel: +44 20 7494 8203
Email: companysecretary@petradiamonds.com
Registrar
Link Market Services (Jersey) Limited
First Floor
IFC5
The Esplanade
St. Helier
Jersey JE2 3BY
Tel: UK: 0371 664 0300 (calls are charged at the standard
geographic rate and will vary by provider. Calls outside the United
Kingdom will be charged at the applicable international rate; lines
are open 9.00am–5.30pm GMT Mon–Fri)
International: +44 371 664 0300
Website: www.linkgroup.co.uk
Email: enquiries@linkgroup.co.uk
Transfer agent
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
Tel: UK: 0371 664 0300 (calls are charged at the standard
geographic rate and will vary by provider. Calls outside the United
Kingdom will be charged at the applicable international rate; lines
are open 9.00am–5.30pm GMT Mon–Fri)
International: +44 (0) 371 664 0300
Website: www.linkgroup.co.uk
Email: enquiries@linkgroup.co.uk
Auditors
BDO LLP
55 Baker Street
London W1U 7EU
Tel: +44 207 486 5888
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Standard financial calendar
Accounting period end
Annual Report published
Annual General Meeting
Interim accounting period end
Interim results announced
30 June
October
November
31 December
February
Stock exchange listing
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 (as defined below) themselves are not
admitted to CREST, but dematerialised depositary interests representing
the underlying Ordinary Shares issued by Link Market Services Trustees
Limited can be held and transferred through the CREST system. The
rights attached to the Ordinary Shares are governed by the Companies
Act 1981 (Bermuda) (as amended) (the Act) and the Company’s Bye-Laws
as adopted on 28 November 2011 (the Bye-Laws).
Dividend
The Company has not resolved to declare any dividend for FY 2022.
Substantial shareholdings
The interests in the table below reflect TR-1 notifications received by
the Company as at 30 June 2022 indicating shareholdings of more
than 3% of the issued share capital of the Company.
Share capital
The Company has one class of shares of 0.05 pence 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 20 to the Financial Statements.
Power to issue shares
At the AGM held on 19 November 2021 (the 2021 AGM), authority was
given to the Directors to allot:
i)
ii)
Relevant Securities (as defined in the Bye-Laws) up to a maximum
aggregate nominal amount of £32,366.96 (being 64,733,928
Ordinary Shares)
Equity securities (as defined in the Bye-Laws) for cash (a) on a
non-pre-emptive basis pursuant to a rights issue or other offer
to shareholders and (b) in any case up to a maximum aggregate
nominal amount of £4,855.04, representing approximately 5% of
the issued share capital of the Company as at 19 November 2021
Shareholder
Vontobel Holding AG
Monarch Master Funding 2 (Luxembourg) S.a r.l.
Bank of America Corporation
Franklin Templeton Investment Management Limited
The Terris Fund, SPC
Azvalor Asset Management SGIIC SA
Invesco Ltd.
Percentage
of voting
rights held
17.83%
9.98%
6.54%
6.37%
5.51%
5.27%
4.73%
Shares in issue
There were a total of 194,201,785 Ordinary Shares in issue at
30 June 2022.
Company Bye-Laws
The Company is incorporated in Bermuda and the UK City Code on
Takeovers and Mergers (the City Code) therefore does not apply to
the Company. However, the Company’s Bye-Laws incorporate
material City Code protections appropriate for a company to which
the City Code does not apply.
The Bye-Laws also require that all Directors stand for re-election
annually at the Company’s Annual General Meeting.
The Bye-Laws of the Company may only be amended by a resolution
of the Board and by a resolution of the shareholders. The Bye-Laws
of the Company can be accessed here: www.petradiamonds.com/
about-us/corporate-governance.
Share rights
In accordance with the Company’s Bye-Laws, 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 regard
to the control of the Company.
The Company’s 2022 AGM will be held at 9.00am on Wednesday
16 November 2022 at One Heddon Street, London W1B 4BF. Details
of the AGM are included in the accompanying Notice of AGM.
Shareholder voting
The Company utilises a digital approach to voting and therefore
requests that all shareholders vote electronically. The Company will
not be sending paper proxy forms and, instead, shareholders should
vote either via the Shareholder Portal (www.signalshares.com) or, for
CREST holders, via the CREST network. You will require your username
and password in order to log in and vote using the Shareholder
Portal. If you have forgotten your username or password, you can
request a reminder via the Shareholder Portal. If you have not
previously registered to use the Shareholder Portal, you will require
your investor code (IVC) which can be found on your share certificate.
Voting in this way is cost effective and efficient and mitigates the
risk of lost items via postal systems thus ensuring your vote is
received and recorded.
Annual Report and Accounts 2022 Petra Diamonds Limited
213
Supplementary Information
Shareholder and Corporate Information continued
Restriction on transfer of shares
There are no restrictions on the transfer of Ordinary Shares other than:
Š The Board may at 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
During the Year, the Board did not place a lien on any shares nor
did it refuse to transfer any Ordinary Shares.
The Board shall refuse to register a transfer if:
Š It is not satisfied that all the applicable consents, authorisations
and permissions of any governmental body or agency in Bermuda
have been obtained
Š Certain restrictions on transfer from time to time are imposed by
laws and regulations
Š So required by the Company’s share dealing code pursuant to
which the Directors and employees of the Company require
approval to deal in the Company’s Ordinary Shares
Š Where a person who holds default shares (as defined in the
Bye-Laws) which represent at least 0.25% of the issued shares
of the Company has been served with a disclosure notice and
has failed to provide the Company with the requested information
in connection with the shares
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.
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 minimum 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 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 than 14 clear 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.
Financial instruments
The Group makes use of financial instruments in its operations
as described in note 32 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.
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 Company operates a website which can be found at
www.petradiamonds.com. This site is regularly updated to provide
relevant information about the Group. In particular all of the
Company’s regulatory announcements and public presentations
are made available and there is a dedicated Investors section at
www.petradiamonds.com/investors.
The maintenance and integrity of the Company’s website (as well
as the integrity of the Financial Statements contained therein) is the
responsibility of the Directors.
Shareholder enquiries
Any enquiries concerning your shareholding should be addressed to
the Company’s registrar. The registrar should be notified promptly
of any change in a shareholder’s address or other details.
The Company also has a frequently asked questions section to assist
shareholders available on its website at: www.petradiamonds.com/
investors/shareholders/faqs.
Shareholder Portal
The Company has set up an online Shareholder Portal,
www.signalshares.com, which offers a host of shareholder services online.
Investor relations
Requests for further copies of the Annual Report and Accounts, or
other investor relations enquiries, should be addressed to the investor
relations team in the London office on +44 20 7494 8203 or
investorrelations@petradiamonds.com.
eCommunications
Shareholders have the flexibility to receive communications from
Petra electronically, should they so choose, and can update their
preferences at any time either by contacting Link Group or by logging
in to the Shareholder Portal.
214
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
Share price information
The latest information on the Ordinary Share price is available in the
Investors section of the corporate website at www.petradiamonds.com/
investors/share-price. Closing share prices for the previous business
day are quoted in most daily newspapers and, throughout the
working day, time delayed share prices are broadcast on the text
pages of the principal UK television channels.
Share dealing services
The sale or purchase of shares must be done through a stockbroker
or share dealing service provider. The London Stock Exchange
provides a ‘Locate a broker’ facility on its website which gives
details of a number of companies offering share dealing services.
For more information, please visit the Private Investors section at
www.londonstockexchange.com.
Please note that the Directors of the Company are not seeking to
encourage shareholders to either buy or sell shares. Shareholders in
any doubt about what action to take are recommended to seek
financial advice from an independent financial adviser authorised
pursuant to the Financial Services and Markets Act 2000.
Shareholder security
Shareholders are advised to be wary of any unsolicited advice, offers
to buy shares at a discount, or offers of free reports about the
Company. Details of any share dealing facilities that the Company
endorses will be included in Company mailings or on our website.
More detailed information can be found at www.fca.org.uk/
consumers/scams/investment-scam.
Annual Report and Accounts 2022 Petra Diamonds Limited
215
Supplementary Information
Glossary
“1L”
“2L”
“AGM”
“alluvial”
“APM”
“ARC”
“ASM”
“BEE”
first lien
second lien
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
alternative performance measure
Audit and Risk Committee
artisanal small-scale mining
black economic empowerment, a policy of the South African Government to redress past economic
imbalances
“BEE Partners”
the Group’s black economic empowerment partners, who hold minority interests in the Group’s South African
operations, as set out in ‘BEE Structure’ at https://www.petradiamonds.com/about-us/who-we-are/group-structure/
“beneficiation”
the refining of a commodity; in the case of diamonds, refers to the cutting and polishing of a rough stone
“block cave”
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’
“bottom cut-off”
refers to the smallest size of recoverable diamond in a resource or reserve estimate that is considered
economic to extract. It is generally defined by the bottom screen aperture size of the diamond sample plant
used in a resource estimate, or the production plant considered in a reserve estimate
“BRE”
“BSI”
“C-Cut”
“CAGR”
“capex”
business re-engineering project
British Standards Institute
the C-Cut area of the Cullinan Mine orebody
compound annual growth rate
capital expenditure
“carat” or “ct”
a measure of weight used for diamonds, equivalent to 0.2 grams
“CC1-E”
“CCKP”
“CDM”
“CDP”
“CEO”
“CFO”
“Code”
the CC1 East area of the Cullinan Mine orebody
World Bank Climate Change Knowledge Portal
Cullinan Mine
Carbon Disclosure Project, a global disclosure system that enables companies, cities, states and regions
to measure and manage their environmental impacts
Chief Executive Officer
Chief Financial Officer
the UK Corporate Governance Code 2018
“conflict free”
i.e. not ‘conflict diamonds’, which are defined by the Kimberley Process as ‘rough diamonds used to finance
wars against Governments’
“COO”
“COVID-19”
“Cpht”
“CY”
“DMRE”
Chief Operating Officer
COVID-19 is an infectious disease caused by the coronavirus
carats per hundred metric tonnes
calendar year
the South African Department of Minerals Resources and Energy
“drawpoint”
an opening through which ore from a higher level can fall and subsequently be loaded
216
Petra Diamonds Limited Annual Report and Accounts 2022
Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
“EBITDA”
“effluent”
“EPS”
“ERM”
“ESG”
earnings before interest, tax, depreciation and amortisation
mine effluent is a regulated discharge from a point source like a treatment plant or dam spillway
earnings per share
enterprise risk management
environmental, social and governance
“Exceptional Stones”
rough diamonds that sell for US$5 million or more each
“Exco”
“FDM”
“FRC”
“FWA”
“FY”
“G&A”
“GAAP”
“GDP”
“GHG”
“GISTM”
“GoT”
“grade”
Executive Committee
Finsch
the UK’s Financial Reporting Council
the Framework Agreement Petra entered into in December 2021 with the Government of Tanzania
Petra’s financial year (1 July to 30 June)
general and administrative
Generally Accepted Accounting Principles, issued by the Financial Accounting Standards Board
gross domestic product
greenhouse gases
Global International Standard on Tailings Management
Government of the United Republic of Tanzania
the content of diamonds, measured in carats, within a volume or mass of rock
“H1” or “H2”
first half, or second half, of the financial year
“Ha”
“hard rock”
hectares
hard rock diamond mining is based on kimberlite or lamproite primary orebodies, as opposed to alluvial
mining (i.e. deposits of diamonds which have been removed from the primary kimberlite source)
“HIV/AIDS”
human immunodeficiency virus infection and acquired immune deficiency syndrome
“HSE”
“IASB”
“ICR”
“IFRIC”
“IGM”
“IMF”
“iNED”
health, safety and environment
International Accounting Standards Board
interest cover ratio
International Financial Reporting Interpretations Committee
the non-judicial independent grievance mechanism which will have the capacity to investigate and resolve
allegations of severe human rights violations in connection with security operations at Williamson in Tanzania
through an independent panel of Tanzanian experts applying Tanzanian law and with complainants having
access to free and independent advice from local lawyers
International Monetary Fund
independent Non-executive Director
“Indicated Resource”
“Inferred Resource”
“inventory”
“IPDET”
that part of a resource for which quantity, grade or value, density, shape and physical characteristics of the
deposit are estimated with sufficient confidence to allow the application of Modifying Factors in sufficient
detail to support mine planning and evaluation of the economic viability of the deposit
that part of a diamond resource for which quantity, grade and average diamond value are estimated on the
basis of limited geological evidence and sampling. Geological evidence is sufficient to imply, but not verify,
geological and grade continuity
diamonds held with the ultimate goal of resale
Itumeleng Petra Diamonds Employee Trust, which is a registered trust holding a 12% interest in each of
Petra’s South African operations, through which the current and certain former employees (with some
exceptions in both cases) of Petra’s South African operations participate
“IRR”
internal rate of return
Annual Report and Accounts 2022 Petra Diamonds Limited
217
Supplementary Information
Glossary continued
“ISO 14001”
an international standard on environmental management; it specifies a framework of control for an
Environmental Management System against which an organisation can be certified by a third party
“KEM JV”
former joint venture; Petra disposed of its interest in KEM JV during FY 2019
“Kimberley Process”
the Kimberley Process is a joint Government, industry and civil society initiative to remove conflict diamonds
from the global supply chain
“KPCS”
“kimberlite”
“KPI”
“LED”
“LGD”
“like-for-like”
“Loan Notes”
“LOM”
“LTI”
“LTIFR”
“M3/T”
“Mcts”
Kimberley Process Certification Scheme
an ultramafic igneous rock consisting mainly of olivine, often with phlogopite mica and pyroxenes. Kimberlite
is generated at great depth in the Earth’s mantle, and may or may not contain diamonds
key performance indicator
local economic development
laboratory/lab-grown diamond
refers to the change in realised diamond prices between tenders and excludes revenue from all single stones
and Exceptional Stones, while normalising the product mix impact
the Company’s US$336.7 million senior secured second lien notes due in March 2026, of which at least US$144
million have been repurchased through the tender offer launched by the Company on 13 September 2022
life of mine
lost time injury; a work-related injury resulting in the employee/contractor being unable to attend work on
the day following the injury
lost time injury frequency rate; the number of LTIs multiplied by 200,000 and divided by the number of
hours worked
metric used for measuring water efficiency
million carats
“Measured Resource”
that part of a resource for which quantity, grade or value, density, shape and physical characteristics of the
deposit are estimated with sufficient confidence to allow the application of Modifying Factors to support
detailed mine planning and final evaluation of the economic viability of the deposit
“Minerals Council SA”
the Minerals Council of South Africa
“Modifying Factors”
considerations used to convert mineral resources to mineral reserves. These include, but are not restricted
to, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and
governmental factors
“MoU”
“Mt”
“Mtpa”
“NDC”
“NED”
the Memorandum of Understanding entered into by Petra in December 2021 with Caspian Limited
million tonnes
million tonnes per annum
Natural Diamond Council
Non-executive Director
“new Mining Charter”
the Broad-Based Socio-Economic Empowerment Charter for the Mining and Minerals Industry in South Africa,
commonly known as the Mining Charter, has a core objective to facilitate meaningful participation of HDSAs
in the mining industry, by deracialising the ownership of the industry, expanding business opportunities for
HDSAs, and enhancing the social and economic welfare of employees and mine communities
“New Money”
US$30.0 million contribution by holders of the Company’s previous loan notes to the FY 2021 Restructuring
“NFCF”
“NGO”
“NIHL”
“NPV”
“NUM”
net free cashflow
non-governmental organisation
noise induced hearing loss
net present value
National Union of Mine Workers in South Africa
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Strategic Report
Corporate Governance
Financial Statements
Supplementary Information
“OECD”
“OFCF”
“open pit”
“opex”
“orebody”
“pa”
Organisation for Economic Co-operation and Development
operational free cashflow
mining in which ore that occurs close to the Earth’s surface is extracted from a pit or quarry
operating costs
a continuous well-defined mass of material of sufficient ore content to make extraction feasible
per annum
“Paterson A, B and C-Lower
Bands”
the Paterson grading system is an analytical method of job evaluation, used predominantly in South Africa,
and is comprised of grades A to F, with A being the lowest skilled and F being the highest
“PCBC”
“PCSLC”
“Period”
“PIK”
GEOVIA PCBC™ is a highly sophisticated software package designed specifically for the planning and
scheduling of block cave mines
a highly sophisticated software package designed specifically for the planning and scheduling of SLCs
1 July 2021 to 30 June 2022
payment in kind. In relation to a bond, loan note or debt instrument, if an instrument is PIK, it means that its
interest is satisfied by issuing further bonds rather than being settled in cash. Until 30 June 2023, the interest
payable on Petra’s Loan Notes is PIK
“PRF”
Plant Recovery Factor
“Probable Reserves”
the economically mineable part of an indicated, and in some circumstances, a measured diamond resource
“Proved Reserves”
the economically mineable part of a measured resource
“Project 2022”
business improvement programme launched in July 2019 with the aim of identifying opportunities to increase
throughput across the business, drive efficiencies and facilitate continuous improvement
“PSP”
“Q”
Performance Share Plan
quarter of the financial year
“RAR meetings”
results action review meetings; weekly Project 2022 review meetings
“RCF”
Revolving Credit Facility
“rehabilitation”
the process of restoring mined land to a condition approximating to a greater or lesser degree its original state
“Restructuring”
the capital restructuring carried out by the Group and completed in FY 2021
“RJC”
“RJP”
“ROM”
Responsible Jewellery Council
Restorative Justice Projects
run of mine, relating to production from the primary orebody
“SAMREC”
South African Code for Reporting of Exploration Results, Mineral Resources and Mineral Reserves
“SDGs”
“SED”
“SEP”
“Severity Rate”
“shaft”
“SIA”
“SLC”
“SLP”
the United Nations Sustainable Development Goals
social, ethics and diversity
stakeholder engagement plan
indicates the severity of work-related injuries (number of days lost due to injuries) where individuals were
booked off from work impacting on workforce effectiveness. The rate calculus is as follows: number of days
off from work due to injury x 200 000 ÷ total man-hours worked
a vertical or inclined excavation in rock for the purpose of providing access to an orebody. Usually equipped
with a hoist at the top, which lowers and raises a conveyance for handling workers and materials
social impact assessment
sub-level cave
social and labour plans
Annual Report and Accounts 2022 Petra Diamonds Limited
219
Financial Statements
Glossary continued
“slimes dam”
an embankment dam, usually created from waste material, used to store sand-like fines residue (less than 1mm)
waste products from mining operations
“SMMEs”
small, medium and micro enterprises
“South African Lender Group” previous providers of the Group’s first lien debt facilities, being Absa Corporate and Investment Banking,
FirstRand Bank Limited (acting through its Rand Merchant Bank division) and Nedbank Limited
“SRM”
“stockpile”
“stripping”
“sub-level cave”
“tailings”
“TB”
“TCFD”
“tCO2-e/ct”
“tender”
“TIFR”
“tonnage”
“TPF”
“TSF”
“TSR”
“Tunajali Committee”
“Type II diamonds”
stakeholder relationship management
a store of unprocessed ore
the removal of waste overburden at an open pit mine
follows the same basic principles as the block caving mining method; however, work is carried out on
intermediate levels and 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
material left over after processing ore
tuberculosis
Task Force on Climate-related Financial Disclosures; the Financial Stability Board created the TCFD to improve
and increase reporting of climate-related financial information
total CO2 equivalent per carat produced
Petra sells all its rough diamond production by method of open tender
total injury frequency rate
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
Tanzanian Police Force
tailings storage facility
total shareholder return
a sub-committee of the Board comprised of independent NEDs established for the purpose of carrying out
the independent investigation into the allegations of human rights abuses at Williamson in Tanzania and
which was disbanded in May 2021 upon the conclusion of the investigation
Type II diamonds have no measurable nitrogen impurities, meaning they are often of top quality in terms
of colour and clarity
Š Type IIa diamonds make up 1–2% of all natural diamonds. These diamonds are almost or entirely devoid of
impurities, and consequently are usually colourless. Many large famous diamonds, such as the Cullinan and
the Koh-i-Noor, are Type IIa
Š Type IIb diamonds make up about 0.1% of all natural diamonds. In addition to having very low levels
of nitrogen impurities comparable to Type IIa diamonds, Type IIb diamonds contain significant boron
impurities which is what imparts their blue/grey colour. All blue diamonds are Type IIb, making them
one of the rarest natural diamonds and very valuable
“underground pipe mines”
Petra’s underground kimberlite pipe mines, being Cullinan, Finsch and Koffiefontein
“US$”
“VPSHR”
“waste ingress”
“WDL”
“WiL”
“XRL”
“Year”
“ZAR”
US Dollar
the Voluntary Principles on Security and Human Rights
waste and fines (fine grained kimberlite waste which has the tendency to flow uncontrollably) that are
channelled from highly depleted areas of the previous mining levels prematurely into new lower loading points
Williamson Diamonds Limited, the owner and operator of Williamson in Tanzania
Women in Leadership
X-Ray luminescence, a method of sorting in the diamond recovery process
1 July 2021 to 30 June 2022
South African Rand
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Petra Diamonds Limited Annual Report and Accounts 2022
CBP015071
Petra Diamonds’ commitment to environmental issues is reflected
in this Annual Report, which has been printed on Arena Smooth Extra
White, an FSC® certified material. This document was printed by
Park Communications using its environmental print technology,
which minimises the impact of printing on the environment, with
99% of dry waste diverted from landfill. Both the printer and the
paper mill are registered to ISO 14001.
Supplementary Information
15–17 Heddon Street
3rd Floor
London W1B 4BF
United Kingdom
Tel: +44 207 494 8203
Email: info@petradiamonds.com
www.petradiamonds.com
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Petra Diamonds Limited Annual Report and Accounts 2022