Petra Diamonds Limited

of our audited full year results for the 12 months ended 30 June 2024. I'm Richard Duffy, CEO of Petra Diamonds, and I'm joined again by Jacques Breitenbach, our CFO, who will cover the key financial metrics. After taking you through our announcement, we'll open up for Q&A. This will be hosted both verbally through the raised hand icon, and we will then move on to any typed questions moderated through the chat feature. We have also today released our annual report and financial statements, as well as our sustainability report. Please note that we will be recording this webcast and it will be available on our website later today. Moderator, could you please move to slide four? I start today with a slide that you may recall from our investor day in June, when we set out the resilience built into the business and Petra's compelling value proposition. In financial year 24, in response to weaker diamond prices, we reduced our operating cost base by around $19 million and capped it by approximately $80 million for the year, including some $75 million in deferrals. From financial year 25 onwards, operating costs will be sustainably reduced by around $44 million per annum. Relative to guidance we provided, for FY25 back in July 2023. And from FY25, we have smoothed future capital to around $100 million annually for our South African operations. Together, these actions are targeting the delivery of free cash flow through both capital and market cycles. During the year, we took the opportunity to repurchase $5 million of our 2026 second year loan notes on market and at a discount face value. This continued post-period end with the repurchase of our second year notes to date now totaling $12 million at a cost of $9 million, which will save us around 1.2 million in future annual interest costs. We intend to continue opportunistic open market repurchases. Our focus for the current financial year is on delivery of these cost savings and implementation of our smooth capital profile to generate positive cash flow from the current financial year, financial year 2025. This positions us well for a successful refinancing of our 2026 second year notes. Moderator, could we move to the next slide? Slide five please. Despite current market weakness, which has characterized much of financial year 2024, we are seeing some price stabilization on the back of actions taken by producers and the midstream in reducing supply to the market. As we've highlighted previously, the medium to longer-term supply-demand fundamentals for the natural diamond industry remain supportive. Supply, as shown in the top chart, is in structural decline and expected to halve by 2045 with the depletion of primary diamond mines and the lack of exploration investment. Only 2% of Kimberlites are economically viable, with any discovery taking at least 10 years to come on stream. Demand, as shown in the bottom left chart, is expected to increase over the next decade. Historically, natural diamond demand tracks GDP, with recent delayed recovery in China reflecting this. As mentioned, our product mix, with 80% of revenue coming from 20% of our product, is well geared for a recovery. as well as growing emerging middle class. On that point, India is now the world's second largest natural diamond consumer, with its natural market expected to expand threefold by 2030. In the West, the rise in the marketing of LGDs and the impact of Russian sanctions has made consumers more aware of prominence and traceability, a key area that the natural diamond market is addressing in terms of verifying and assuring provenance and sustainability credentials as part of a natural diamonds journey to the end consumer. We will be rolling out this technology to provide assurance to our customers and will highlight the benefits we are delivering to our employees, host communities, and other key stakeholders. Move to slide six, please. Safety is our number one priority, and this is reflected in seven fatality-free years. Our focus on remedial actions and behavior-based intervention programs resulted in a reduction of seven lost time injuries to a total of 10 in financial year 2024 and a reduction in our lost time injury frequency rate from 0.24 last year to 0.16 this year. We continue our health and well-being programs to support our culture and performance of ensuring safety and health remain our number one priority. Moving to slide seven, please. In looking at our operating and financial highlights, diamonds produced increased due to the earlier than expected and successful ramp up at Williamson. Diamonds sold increased on the back of the deferred parcels from FY23 into FY24, together with the increased contribution from Williamson. As a result, despite weaker pricing year on year, revenue increased from $325 to $367 million. This increase in revenue did not translate to higher EBITDA for the year, which reduced from $113 million, a more normal level for our business, to $66 million due to the release of inventory in a weaker market. CapEx reduced from $117 million to $84 million due to the deferral of certain capital projects during FY24. Operational free cash flow improved from a negative $65 million in FY23 to a negative $17 million in FY24. Although our net debt increased year on year, we saw an $11 million improvement from the first half of the year, level of $212 million, achieving what we had targeted at the time of publishing our H1 interim results earlier this year. I will now hand over to Jacques.

Thanks, Richard, and moderator. We'll move to slide nine.

Good morning, all. We have reported revenue of $367 million for the year. The year-on-year increase is mainly due to the deferral of sales from fiscal year 2023 to this year, fiscal year 2024, supported by increased contribution from our Williamson operation, but unfortunately offset by weaker diamond pricing compared to the previous year. Adjusted EBITDA reduced to $66 million, down from $130 million, representing an adjusted EBITDA margin of some 18%, driven by reduced rough diamond prices and impacted by a $71 million swing in diamond inventory movement year on year. Net loss after tax of some $107 million compared to the loss of $102 million in the prior year. And this number is stated after impairments totaling $78 million $45 million contributed to or attributed to French mine and $33 million to the Cullinan mine as a result of the revised live mine plans and lower pricing assumptions. Operational free cash flow improved from negative $65 million in FY23 to negative $17 million in FY24, reflecting an increase in cash from operations of some $90 million and a reduction of $29 million in our cash outflows for capital expenditure. of our capital projects at the end of the year. As at the end of June 2024, $25 million was drawn on our existing RCF and $246 million outstanding on our second-hand loan notes. And unrestricted cash balances were $28 million offset by an $8 million overdraft at our Williamson mine. Moderative even pledges like TENG At our ingress today, we provided more detailed insight into our diamond market, so today I will keep it brief. Prices achieved in fiscal year 2024 saw light-for-light prices down 12.4% compared to the prior year, with softness evident throughout the year, as also evident in the similar scale of diamond index. Our own prices were supported by product mix, resulting in fairly flat pricing over the last 18 months. As announced, we laid out a figure particularly weak market environment in August. All the market commentary suggests some signs of pricing stabilization, and as a result, we are maintaining our fiscal year 2025 final price assumptions, even at our investor day in June. Moving to slide 11. Overall, total online costs were in line with expectations, increasing some 11% compared to the prior year before 2023, largely due to the ramp-up at Williamson and cost deflation across our South African operations, partially offset by an 18% reduction in centralized costs supported by the changes to our operating model to affect these cost reductions. Adjusted mining processing costs were up 47%, largely a strike to the net movement in diamond inventory valuation, with the $37 million inventory released in fiscal year million dollar profit and loss statement swing year on year. We do not expect a recurrence of this in future years and year end reporting periods given our inventory levels have largely stabilized and our sales cycles should deliver similar inventory balances going forward. Moving to slide number 12. As previously announced, we exceeded our initial estimates of cost reductions for fiscal year 2024 against the guidance released in July 23 delivering some $10 million across the SA operations and centralized structures, which was at the upper end of our expectations in November 23, and a further $9 million at Williamson for the year. We also exceeded our official estimates of between $75 and $70 million of CAPEX savings, achieving $80 million in fiscal year 2024 in deferrals and savings. Sustainable cost savings will deliver $44 million for fiscal year 2025, costing $30 million across our S operations and the central structures, and a further $14 million at Williamson. We also expect CapEx to remain below the $100 million for FY 2025, in line with the smooth capital profile we announced at the time of our investor name. Moderator, if we can move to slide 13. Slide sets out the Cullinan mine Pinch contributions, which positively contributed to adjusted profits from mining activities, while Williamson posted a loss for FY2024 due to the ramp-up to fork production during the year. And now moving to slide 14. Looking at our balance sheet, diamond inventories reduced significantly from June 2023, with this level of inventory expected to be largely maintained. Consolidated net debt decreased from $212 million at the end of December 23 to $201 million at June 24, compared to $177 million that buy-in, largely due to the actions taken to reduce operating costs and deferrals of capex. As previously announced, and as a prudent measure, the group increased its commitments under the R1 billion, R54 million revolving credit facility with the APSA Bank, to 1.75 billion rand, which sums to $96 million, providing an additional $41 million of liquidity interim. As opposed to closed event in August and September, the group drew down some 855 million rand of our revolving credit facility as a result of deferral of our first SA tender to now close in October 2024. Moving to slide 15, Here I would like to highlight the key components of our debt, which comprises our first year in development credit facility with APSA Bank, $25 million drawn as of the end of June, and $246 million outstanding on our second year notes. During the year, as mentioned earlier as well, the group repurchased some $5 million of these notes, open market repurchase program, for a cash consideration of some $4 million, With a further $7 million, we purchased the post-beard end for a cash consideration of $5 million. These have been cancelled and will save around $1.2 million annually in interest payments going forward. Unrestricted cash of $28 million was offset by an $8 million overdraft at Williamson operation. Let's also mention that in business today, we are now focused on refinancing the loan loans and on charting the path to generating sustainable cash flow from FY25 onwards. Moving to slide 16, FY 2024, so an average exchange rate some 5% weaker than our fiscal year 2023 exchange rate. Post-fiscal year 2024, we are seeing improved self-strength due to improved global economic sentiment, stable power supplies in South Africa, and positive sentiment following the national elections in SA earlier this year. With that, I will now hand over to Richard to take his operational results.

Thanks. You can go to slide 18. Thanks, Jacques. For all of our operations, we provide an in-depth look at the life of mine for these operations at our investor day, and you can see all of that on our website. For now, reflecting on financial year 24, Cullen and mine remained at the upper end of guidance with regards to tunnels mined. However, run-of-mine grades were below expectations, exacerbated by a reliance on diluted run-of-mine ore. due to some of the capital deferrals which delayed access to our fresher ore areas. Our focus in financial year 25 is to transition and ramp up our sub-level K production from the CC1 East project. The smooth capital development results in Cullinan mine stepping down to 3.7 million tonnes from financial year 27 onwards and maintaining that going forward. But importantly, with carrot production remaining at similar levels as in FY26 as a result of higher grade from our CC1 East area. If you could turn to slide 19, please. At Finch, a number of operating challenges were addressed this past year, and we are on track for further operating stability and improvement in run-of-mine grades in financial year 25 as we complete our transition from a 2.8 million ton to a 2.2 million ton a year operation. Currently, the majority of tunnels to access the fresher ore at 78 level phase two have now been commissioned. And FY25's focus will be to optimize the current two-shift configuration to deliver more predictable and stable operations. Turn to slide 20, please. Williamson successfully ramped up through the year, which you can see across all of the metrics and performance. Financial year 25 will see a focus on waste stripping to provide sufficient access to the ore body to maintain the run rate in our life at one plan and provide materials for construction of the new TSF, which commenced in quarter one of financial year 25. Turning to slide 22. In conclusion, steps taken in FY24 to mitigate the impact of diamond market weakness has enhanced our resilience and with our new smooth capital profile and reduced cost base, we are now well positioned to generate free cash flow through the cycle. We believe that prices will stabilize towards the end of this calendar year before showing some improvement in calendar year 25. Through the actions taken, we are targeting net debt to EBITDA below one and a half times from financial year 2026. Finally, we have a high quality long life asset base set up to deliver value to our stakeholders through market cycles and well positioned to benefit from expected price movement in calendar year 25 and a supportive market in the medium to longer term. This concludes the formal part of our presentation. Before handing over to Patrick to lead our Q&A, I would just like to note that this is Jacques' last results presentation. I would like to thank him for his significant contribution over the last 18 years to Petra Diamonds and wishing every success in the future. Patrick.

Thank you, Richard. We will first take verbal questions. To ask a question, please click on the raised hand icon. We will then run through any questions written in the chat.

And we'll just give it a minute for questions to come through.

As a reminder, if you would like to ask a verbal question, please raise your hand. We have one question from Pete Malin-Jones. I'll just unmute you. Please carry on.

Pete? Hi, Pete. It doesn't seem to be unmuted. IT team, if you can assist. Sorry, Pete, just give us a sec. We're trying to sort out your mic. the it team assistant uh pete you should be able to unmute yourself now pete you want to try again otherwise we're going to have to revert to to written unfortunately we have another question from stefano Let's see if Stefano has any more success.

Hi, guys. Can you hear me?

Yes, we can hear you.

Thank you so much for the opportunity to ask a question. And Jacques, congrats on your retirement, I guess. I hope you're all the best. So I've got a couple to ask. The first one is, I was wondering if you could... Sorry, we've lost Stefano. Sorry, can you hear me? Yes. Okay, brilliant. So I was wondering if you could first give maybe some shorter guidance for the fiscal year 25, more specifically, at which point should we expect that free cash flow inflection point? Is it going to be towards the late end of the year, assuming a recovery down on prices? Or do you think that we can achieve this in the next couple of quarters, especially considering where down on prices are? That's the first question. And then on the second question, it's more about the refinancing plans. I see, you know, you've got a lot of kind of like conviction going out to the market and buying from the secondary market the bonds. But I was wondering if there's been more progress on the conversations you've had with the banks and more specifically, in case you're not able to refund by the end of this year, would they be able to maybe to kind of like waive the liquidity covenant that exists for, you know, March 25? Thank you.

Thanks. I'll start off. I think with regard to cash flow in FY25, what we've indicated is we're targeting net cash generation for the full year. We also indicated that in this financial year 25 and financial year 26, we would be looking at modest cash generation, given that we're still ramping up our projects at both Cullinan Mine and Finch. but that we would expect to see significant growth from financially at 27 in the order of half a million carats of incremental production. So relatively tight years, FY25 and 26 in terms of cash generation. We haven't provided specific guidance around the shape of that, but we're obviously targeting net cash generation over the full year. So there may be some ups and downs during the year, but with objective as stated of net cash generation for full year.

Maybe just to that point, typically our sales is weighted to our second half. We typically would sell five months worth of production in H1 and seven months worth of production in H2. And that's just purely due to the timing of our tenders to the Christmas holiday breaks on the SA side.

Thanks, Jacques. I mean, our revenue obviously is not matched to our monthly costs, so there is some lumpiness in the cash flow over the year, as Jacques has highlighted, and with typically more sales in the second half than in the first half of the year. On the refinancing, I think what we have indicated is that we have continued discussions with banks around refinancing of the loan notes. We do still have some time to complete that and we've indicated that we would look to have at least a plan in place by the end of this calendar year and that remains the objective. In the interim, we will continue to opportunistically repurchase on-market loan notes as we have done previously, but you should expect us to revert by the end of the calendar year on the full refinancing of those loan notes.

Thank you. And as a follow-up, is it possible to use the RCF to buy the second lien notes from the secondary market? Or is that not kind of like allowed by the banks?

Nicolas, yes, it is possible. We do have an approved basket in our first lien financing arrangements with EPSOM Bank. With the arrangements currently, we have $25 million per fiscal year available for these purposes, and we are allowed to use the undrawn balances on the RCF to affect that.

Thank you so much, Claire.

Should we try Pete again? Pete, do you want to have a go and see if we can hear you this time? Otherwise, revert to the recording.

Marvellous. I think my system is now working. It was a very quick one. It was really around the cost savings, the 44 million. I was just wondering, is this sort of where you've got to now and there's a little bit more to come that that 44 might go up for sort of FY26 or are we now getting... so far into the sort of efficiency drives that really are starting to impact muscle rather than trim fat?

Yeah, I think just to comment on the cost savings, I think the 44 million is against guidance on guidance, as we mentioned. 30 of that in South Africa and in our corporate and group structures and 14 at Williamson. And we're confident that we will deliver that. We've already delivered a portion of that in FY24. And obviously, what we will continue to do is to look for opportunities to improve efficiencies and further reduce costs. That will continue to be a focus of the team. But I don't think that we will see anything near the order of magnitude improvement in costs than we saw in the 44 million. And that's also because it included significant redundancies at Finch mine and also at Groupon and corporate. So yes, we would expect to see some improvements in efficiency. We will focus on further cost efficiencies as well, but certainly not the order of magnitude of what we see in 44.

Thank you very much. That was it for me.

Thanks, Pete. As a reminder, please raise your hand if you'd like to ask a verbal question or a written one via the chat.

Patrick, are there any written questions that we can perhaps take?

No written ones, no. Maybe give it another second or two on the raised hand function.

It doesn't appear as if we have any more questions, Patrick. So my suggestion is if anyone does have any follow-up questions, please direct them to Patrick or any one of us and we'll get back to you. But otherwise, just to say thank you very much for your participation and we look forward to talking again in the near future. So thank you very much.