Petra Diamonds Regulatory News (PDL)

1 Feb 2007 07:01

Petra Diamonds Ld01 February 2007 PETRA DIAMONDS LIMITED QUARTERLY ACTIVITIES REPORT FOR THE THREE MONTH PERIOD ENDED 31 December 2006 (dateline 31 January 2007) Petra Diamonds Limited ("Petra" or "the Company" or "the Group"), the AIM-quotedand ASX-listed diamond mining group (AIM and ASX: PDL), announces its quarterlyactivities report (unaudited) for the three month period ended 31 December 2006. Highlights • Trading overview - the revenue of US$8.2 million for the six months to December 2006 is marginally below management expectations due to weaker prices during the quarter; revenue in the six months to June 2007 is expected to be substantially higher due to: (i) a significant contribution from the Koffiefontein mine, which will commence operations shortly; and (ii) higher contributions from both Star and Sedibeng following the commissioning of new treatment and recovery plants for both operations in December 2006 and March 2007 respectively; and (iii) a recovery in diamond prices as seen from the January 2007 tender • Alto Cuilo, Angola - large diameter drilling operations continue in advance of plant treatment; 73 kimberlites now identified; first microdiamond results from drill cores sent for external specialist analysis have given encouraging microdiamond counts; analysis of drill core continues to give encouraging diamond indicator mineral chemistry ("minchem") results • Botswana -a 600 metre diameter negative gravity anomaly has been revealed by gravity data in the Kukama project area, over a previous identified kimberlite that returned a grade of 9.6 carats per hundred tonnes • Kono project, Sierra Leone - encouraging diamond recoveries from mini samples of 443 diamonds totaling 43.03 carats • South Africa - Petra announces acquisition of Koffiefontein mining and associated assets from De Beers and grant of mining licence in respect of the mine; production from the other South African mines increased to 36,326 carats for the quarter (quarter to September 2006: 35,602 carats) • Corporate - Petra acquires Calibrated Diamonds, giving the Company the ability to cut and polish its own production and significantly enhance revenues; Ken Axsel, formerly Country Head South Africa - International Diamond and Jewellery Group - ABN Amro Bank, joined CDIH in January 2007, alongside John Bond, founder and Technical Director of CDIH Angola - Project Alto Cuilo • Bulk sample drilling continued with the large diameter drill rig having extracted a circa 200 tonne mini bulk sample from AC16 and commenced drilling at AC63; the material from AC16 was stockpiled in advance of the commissioning of the 10 tonne per hour Dense Media Separation ("DMS") sample plant • The DMS sample plant was commissioned during December and in January 2007 commenced processing the mini bulk sample from AC16; there was a delay in the commissioning of the DMS plant due to unexpected problems incurred with transport of equipment to site; results from AC16 and AC63 are expected during the first quarter of 2007 • Taking into account the minchem results to date, the ranking of kimberlites has been revised for the large diameter drilling campaign • 73 kimberlitic occurrences now confirmed (September Quarterly Activities Report: 62) out of 82 targets drilled; the success rate of 89% remains exceptionally high by international exploration standards • Approximately 37,000 metres of core drilling has now been completed, illustrating the effectiveness of the three drills now working on site; a total of 240 holes have been drilled to date Botswana - Kalahari Diamonds • Gravity data in the new Kukama project area reveals a 600 metre diameter negative gravity anomaly located over the Go173 S kimberlite; previous test work on this kimberlite returned a grade of 9.6 carats per hundred tonnes ("cpht") from one drill hole, whilst another kimberlite, Go234, returned a sample grade of 11.9 cpht Sierra Leone - Kono project • Encouraging diamond recoveries continue to be made from mini sample treatment; 443 diamonds totaling 43.03 carats recovered (September Quarterly Activities Report; 224 diamonds totaling 23.91 carats) • Two bulk sampling shafts are at the first level of 30 metres; test shafts at Yendema and Simbakoro in progress; two additional test shafts established and three additional exploration trenches completed; exploration and information processing activities is providing a clearer picture of the multiplicity of dykes and their potential in the Kono licence area South Africa - Helam, Sedibeng and Star mines • Production from the South African mines of 36,326 carats for the quarter (quarter to September 2006: 35,602 carats) • EBITDA on mine of US$92,513 delivered for the quarter (quarter to September 2006: US$490,691), the reduction being mainly due to weaker diamond prices during the quarter and the absence of the usual 'special' stones from Sedibeng. Average carat prices for the December quarter were an average of 10% lower than the quarter to September but prices so far achieved from the Sedibeng and Star goods tendered in January 2007 show an increase in prices of 26% over the average for those goods for the quarter to December • As is traditional in the diamond mining industry over the December period, the official tenders were held over until January and therefore stock levels were higher at US$3.4 million (September 2006: US$2.6 million), impacting revenue for the quarter • Petra has been maintaining the cave at Koffiefontein since July 2006 and the costs of this maintenance and drawing the corresponding ore has been expensed in the period; when production commences at the mine, which is expected to be shortly, and this stockpiled ore is processed through the plant, gross profit will be enhanced as a significant portion of the mining costs have already been expensed as care and maintenance costs (quarter to December 2006: US$932,000; quarter to September 2006: US$322,000) • Management remain confident that the capacity and engineering improvements being put in place at Helam, Sedibeng and Star will, over the period to June 2007, lead to improved production and cash flow generation. The commissioning of the refurbished plant at Star towards the end of the December quarter and the construction of the new plant at Sedibeng, expected to be completed in the quarter to March, are expected to yield improved recoveries and further enhance cost efficiencies South Africa - acquisition of Koffiefontein mine The Koffiefontein transaction is progressing well, with the signature of thesale agreement with De Beers in December 2006 to acquire the mining andassociated assets previously used by De Beers in the operation of theKoffiefontein diamond mine ("Koffiefontein"). The South African Department of Minerals and Energy ("DME") subsequently grantedthe Koffiefontein mining licence to Blue Diamond Mines ("BDM"), a wholly-ownedsubsidiary of Petra. The conditions to be met to complete the transaction arethe approval of the South African Competition Commission, as well as certainconditions pertaining to De Beers' environmental obligations and associatedguarantees regarding the Koffiefontein mine. It is expected that theKoffiefontein transaction will be finalised within the next few weeks, withproduction of rough diamonds commencing by the end of the current quarter. BDM has been, with permission from the DME, conducting care and maintenanceactivities for the last few months in order to maintain the condition of thecave to ensure the efficient commencement of mining activities on receipt of themining right. Koffiefontein is a key addition to Petra's asset base and is inline with the strategy of increasing the Group's production profile. Corporate - acquisition of Calibrated Diamonds In November 2006, Petra announced that it had acquired the entire issued sharecapital of Calibrated Diamonds Investment Holdings (Pty) Limited ("CDIH"). CDIHis focused on the cutting and polishing (beneficiation) of rough diamondsutilising a unique process developed by the CDIH group and which enables CDIH toproduce polished diamonds of a very high and consistent standard. The acquisition of CDIH represents a significant step forward in Petra'sobjective of growing its diamond revenues, as CDIH will provide Petra with thepotential to significantly enhance its overall revenues due to the value addedfrom the beneficiation of rough diamond production. In January 2007 Ken Axsel was appointed as Managing Director of CDIH, joiningfrom the leading global diamond bank ABN AMRO, where he served as Country HeadSouth Africa - International Diamond and Jewellery Group. Mr Axsel will workwith Mr John Bond (Technical Director, CDIH), the founder of CalibratedDiamonds, in taking the CDIH business forward. Mr Bond has been involved in thecutting and polishing of diamonds for over 28 years and has been involved in thedevelopment of many of the technologies used in the global diamond industry. Thetechnologies he was instrumental in designing and which are used at CDIH areamong the most advanced diamond processing methods in the world. DIAMOND SALES SUMMARYQuarter to; Carats sold Price/carat (average) US$ Sales US$M31 December 2006 31,024 120.5 3.730 September 2006 33,916 133.5 4.512 Months to;30 June 2006 160,856 130.9 21.7 DIAMOND PRODUCTION SUMMARYQuarter to; Tonnes Carats Grade CPHT * Treated Recovered31 December 2006: ROM 65,200 33,065 50.731 December 2006: Tailings 45,879 3,261 7.130 September 2006: ROM 70,228 32,147 45.830 September 2006: Tailings 49,757 3,455 6.912 Months to:30 June 2006: ROM 288,397 155,614 53.930 June 2006: Tailings 192,086 19,398 10.1 * CPHT - carats per hundred tonnes CORPORATE SUMMARY OF TRADING RESULTS (UNAUDITED) 3 months to 3 months to 31 December 30 September 2006 2006 US$ US$Revenue 3,740,124 4,528,487EBITDA on mine - South African operations 92,513 490,691Care and maintenance - Koffiefontein (932,118) (321,808)Exploration expenses * (276,623) (137,860)Administration expenses * (628,119) (532,150)Net finance costs (172,116) (104,188)Loss before depreciation, amortisation and foreign (1,916,462) (605,315)exchange movementsLoss for the quarter ** (3,298,332) (6,434,022)CAPEX 1,332,019 606,680 * Expenses before depreciation, amortisation,interest and foreign exchange movements. ** Loss after non-cash flow items; unrealisedforeign exchange gain of US$1.2m, depreciation andamortisation of US$2.5m CASH AND STOCK SUMMARY 31 December 2006 30 September 2006 US$ million US$ millionCash balance 19.2 *** 5.3Diamond stock 3.4 2.3 (recorded at production cost)Total 22.6 7.6 Note; *** on 5 October 2006 Petra drew down the US$20 million Convertible. REVIEW OF OPERATIONS ANGOLA, PROJECT ALTO CUILO Kimberlite Exploration Core drilling Ongoing core drilling of the anomalies identified by the Midas low levelhelicopter aeromagnetic survey has now resulted in the discovery of 73kimberlites, illustrating the consistent solid progress being made. The three core rigs active on Alto Cuilo are currently drilling magneticanomalies in both the north western and the north eastern sectors of the projectarea. Core drilling now totals approximately 37,000 metres on 240 holes(September Quarterly Activities Report: 32,000 metres on 208 holes). The success rate of this accelerated drilling programme is very high compared tothe norms for global kimberlite exploration. The current success rate is 89% fortargets drilled to kimberlites confirmed. Currently 82 of the 249 magneticanomalies have been drilled. Bulk Sampling The RB40 large diameter drill ("LDD") rig has completed the mini bulk sample onAC16 and has now commenced drilling on AC63. The LDD rig is extracting mini bulksamples of approximately 200 tonnes from each ranked anomaly to give anindication of grade and value per carat. Priority targets have been identifiedand ranked for LDD drilling according to mineral chemistry, surface area andoverburden. The 10 tonne per hour DMS sample plant, which is a custom made closed circuitunit designed specifically for kimberlite bulk sampling, was commissioned at theend of December. The treatment of the stockpiled material recovered by the LDDrig on AC16 by the DMS plant commenced at the end of this reporting period.Although ranked relatively low in the list of priorities, AC16 was selected tocommission and test the LDD rig for logistical reasons and also to act as anindicator of the accuracy of the assumptions being made in the interpretation ofthe mineral chemistry of the kimberlites. Minchem and Microdiamond analysis Results from minchem analysis continue to guide the exploration programme andparticularly assist in the selection and prioritising of the kimberlites fromwhere mini bulk samples will be taken. A kimberlite re-ranking exercise wasundertaken utilising the ongoing mineral chemistry results. A total of 73 kimberlites have been intersected to date and the minchem resultsreceived in respect of 35 of those kimberlites. A second technical targetprioritisation meeting was held where all drilling and minchem results werereviewed, resulting in the identification of new high-interest kimberlites. Twowere included in a revised ranking for large diameter drilling. The revisedranking is as follows: Kimberlite Current Ranking Previous Ranking Surface area (hectares) estimated from aeromagnetic signaturesAC63 1 - 20AC60 2 1 30AC98 3 2 175AC71 4 - 32 Over the past eight months, core samples of Alto Cuilo kimberlites with primarytextural characteristics (tuffisitic or volcaniclastic kimberlite) have beensubmitted to SGS Lakefield in Ontario, Canada, for caustic fusion andquantitative recovery of contained diamonds larger than 0.105 mm square-meshsieve ("microdiamond analysis"). SGS Lakefield is accredited to the ISO/IEC17025 standard by the Standards Council of Canada as a test facility for thistype of analysis and has reported diamond recoveries by size fraction astabulated below. Weight Diamond count larger than square mesh sieve (in mm)Kimberlite (kg) 0.105 0.15 0.212 0.3 0.425 0.6 0.85 1.18 2.36 TotalAC98 141.1 151 82 26 9 4 0 0 0 0 272AC63 202.0 12 7 2 5 2 0 1 0 1 30AC60 109.0 13 8 5 2 1 0 0 0 0 29AC15 201.6 5 3 0 1 0 0 0 0 0 9AC171 204.4 2 1 0 2 0 0 0 0 0 5AC31 195.4 3 1 0 0 0 0 0 0 0 4AC16 206.6 1 2 1 0 0 0 0 0 0 4AC43 197.7 2 2 0 0 0 0 0 0 0 4AC05 200.3 2 1 0 0 0 0 0 0 0 3AC45 161.0 2 0 0 0 1 0 0 0 0 3AC34 133.8 0 0 1 0 0 0 0 0 0 1AC01 205.0 0 0 0 0 0 0 0 0 0 0 Petra is encouraged by the recovery of diamonds greater than 0.425 mmsquare-mesh sieve from all three kimberlites prioritised for further work (AC98,AC63 and AC60). The high priority assigned to kimberlite AC63 based on minchemresults is corroborated by the presence of diamonds larger than 0.85 mmsquare-mesh sieve. Based on the relationship between minchem and microdiamondresults, AC63 has now been ranked as priority number 1 in the LDD campaign. A number of microdiamond samples returned low-interest results characterised bylow total recoveries (less than 10 diamonds in total) in smaller size fractions(predominantly less than 0.425 mm square-mesh sieve). The Company derivesfurther encouragement from these results in that low-interest minchem resultswere also obtained for corresponding samples from the same kimberlites. Themicrodiamond tests conducted to date are demonstrating that the project has thecapacity to rapidly prioritise high-interest kimberlites amongst the targetsdrilled to date and that resources will be deployed appropriately on selectedhigh-interest kimberlites that remain to be drilled at Alto Cuilo. It must be noted that the kimberlites tested so far have complex, morphologicalinternal structures making modelling of these bodies difficult. Petra and BHPBilliton will ensure that any appropriate scientific procedures are applied toensure accurate measurement and will continue to use international best practiseand techniques in the exploration process at Alto Cuilo. Alluvial Exploration The alluvial exploration programme continues to further evaluate the potentialfor economically viable alluvial deposits. The alluvial trenching and pitting programme has been extended to other areas inorder to obtain additional data. The programme is focused on the Mussunuigeriver to the west of the Luangue river and has already started yielding resultsthat will be used to further assess the characteristics of the nearbykimberlitic bodies as well as the feasibility of mining the alluvial deposits. BHP Billiton Joint Venture As at 31 December 2006, BHP Billiton had advanced funding of US$32.9 million (30September 2006: US$28.2 million) in respect of exploration at Alto Cuilo. BOTSWANA, KALAHARI DIAMONDS Kukama project area An orientation survey comprising ground geophysics was completed over four knownkimberlites in the Kikao block. Ground follow-up of the Kikao block consisted of: Survey method Number of targets surveyedGround magnetics and Gravity 11Geochemical sampling 0Heavy mineral sampling 4Selected for drilling 0 The heavy mineral samples have been sent to the Helam laboratory in Swartruggensfor processing. Ground follow-up geophysical results conducted during the quarter have been verysuccessful in identifying the previously known kimberlites, specifically Go173Nand S, Go211 and Go234. Virtually all samples previously treated (approx 100tonnes) from this locality have been diamondiferous. The above confirms our contention that a well designed regional ground gravitysurvey may well assist in the discovery of previously undetected diamondiferouskimberlites in this locality. The feasibility of conducting a regional ground gravity survey as well as alow-level hi-res Xcalibur magnetic gradiometer survey covering the historicalnorth-west trending kimberlite indicator mineral ("KIM") belt will beinvestigated early next quarter. If the outcome is positive, this data togetherwith historical data will be used to conduct an in-house target generationexercise. Mabutsane/Tshwaane In the Mabutsane block, a second borehole was drilled into anomaly Mab 306 totest a possible intrusive, pipe like model as derived from Falcon gravity andmagnetic data. Weathered mafic rock (dolerite) was intersected at a depth of 133metres and the borehole was stopped in fresh dolerite at a depth of 198 metres.No further work is envisaged for the immediate future. Gope block Ground follow-up of the Gope West block consisted of: Survey method Number of targets surveyedGround magnetics and Gravity 5Geochemical sampling 0Heavy mineral sampling 1Selected for drilling 0 The samples for heavy mineral determination have been sent to the Helamlaboratory for processing. Drilling of nine planned boreholes remaining from the current (Gope West)campaign is underway. Results of another two separate target generatingexercises undertaken by external consultants have been received at quarter end.Targets for ground follow-up will be selected in-house from the above early inthe next quarter. The 9 remaining targets to be drilled will be put up for re-ranking together with our newly obtained information relative to this area. Orapa South Heavy mineral sampling results received for five of the anomalies followed upwith ground geophysics have resulted in one anomaly being earmarked fordrilling. Orapa North A large 12,000 line kilometre Hi-Res regional magnetic gradiometer Xcalibursurvey over the entire licence holdings in this area will commence early nextquarter. SIERRA LEONE, KONO PROJECT Sample Treatment To date, 443 diamonds totaling 43.03 carats have been recovered (SeptemberReport: 224 diamonds totaling 23.91 carats). The samples processed to datecomprise mixed diluted and hard rock material from the various explorationactivities and, whilst very encouraging, are not large enough to arrive at arepresentative grade. Bulk shafts and test trenches Shaft sinking at the two bulk sampling shafts, both of which are on kimberlitefissure, have reached the applicable mini stoping depth of 30 metres. At BlackRock Shaft the fissure has a well developed fracture cleavage, but the fissurenarrowed down to 5 centimetres at a depth of 30 metres. The implication is thatthe fissure has been squeezed by residual pressure from the adjacent graniteexfoliation dome. Based on this evidence it is contemplated that a robustfissure should exist, displaced either vertically or horizontally from thepresent shaft bottom. 50 metres of horizontal on-fissure development away fromthe exfoliation dome, is presently being executed. At Lost Shaft, the fissure with a width of 25 centimetres pinched at a depth of30 metres. It then stepped 3 metres to the north west and development againexposed it. In the on-fissure drive, it maintains a width of 40 centimetres forapproximately 12 metres and then pinches out toward the north east. Four test shafts have been established and are in various stages of development.At Yendema at Bakar Shaft, sinking of the shaft is well underway at a depth of17 metres. The mini sample extracted during shaft sinking up to now hasdelivered 177 diamonds totaling 16.26 carats, the largest being stones of 1.6carats, 0.85 carats and 0.75 carats. Sample extraction and processing is ongoingas the shaft sinking progresses. At Simabakoro (Pol K Shaft), sinking of the shaft is well underway at a depth of10 metres. The mini sample extracted on this kimber line yielded veryencouraging results. Based on the surface evidence from local artisanalworkings, the area could host two parallel running kimberlite fissures. At Bardu (Bardu Shaft), pre-sink and site establishment has been completed. Thistest shaft is also on the south western extension of the fissures from the Koidukimberlite blows. The mini sample extracted on this kimber line yielded veryencouraging results. Based on the surface evidence from local artisanal workingsthe area could host two parallel running kimberlite fissures. At Ndoyogbo (Palm Shaft), pre-sink and site establishment has been completed.This test shaft is on a kimberlite fissure with a strike direction ofapproximately 40 degrees (similar to Black Rock direction). The initialexploration sampling conducted by Mano River Resources yielded very encouragingresults. In summary, an immense amount of information has been gathered relative to thekimberlites of the Koidu locality. It has been ascertained that there are atleast three different strike directions of fissures, with implication that thereare 3 different ages of intrusion. All are diamondiferous but many are devoid ofilmenite - this has been the mineral that survives best in this saprolitizedenvironment. The shaft sinking has revealed that in certain localities, fissuresthat are devoid of ilmenite have had all indicator minerals destroyed to depthsof up to 17 metres. A similar situation can thus be expected to prevail for anyilmenite deficient kimberlite pipes or blows that may exist in the area. Thiswould have decreased their chances of discovery during the previous vigorousexploration activities of the 1960's to the 1980's. Based on the above, the joint venture partners are investigating the possiblefunding of a specifically designed low level electro magnetic and gradientmagnetics survey to take advantage of the previously mentioned information andcheck for pipes or blows. SOUTH AFRICA- HELAM, SEDIBENG & STAR The combined operations produced a total of 36,326 carats for the quarter(quarter to September 2006: 35,602 carats). Revenue was adversely impacted by unfavourable market conditions, with anoverall decrease of 10% in average US$ price per carat achieved. This waspartially off set by increased quality stones at both Helam and Star. AtSedibeng, the full impact of the market conditions coupled with the absence ofany special stones resulted in a 23% decrease in US$ revenue per carat sold,which led to a US$560,000 reduction in total revenue. Average per carat pricesachieved for the quarter to December were US$78 (Helam), US$209 (Sedibeng) andUS$144 (Star), but it is important to note that in January 2007 average tenderprices of US$258 (Sedibeng) and US$211 (Star) were achieved, these beingsignificantly higher than the previous quarter Management remain confident that the capacity and engineering improvements beingput in place at Helam, Sedibeng and Star will, over the medium term, lead toimproved production and cash flow generation. Helam Mine A total of 26,142 Run of Mine ("ROM") fissure tonnes were delivered to the plantfor 19,007 carats, yielding a grade of 73 cpht for the quarter. In addition1,040 carats were produced from the tailings operation. This resulted in atotal of 20,047 carats for the combined operation. Production at Helam was adversely impacted by the following; (i) the distances between production panels and hoisting infrastructure over which ore has to be manually transported. This is being addressed through fast-tracked development with a raise bore to be commissioned towards the end of the current quarter, thereby establishing panels closer to mechanical hoisting infrastructure; and (ii) ongoing problems with availability of key labour as well as intermittent power supplies at Helam mine. These are being managed to minimise the impact thereof on production of the mine. Sedibeng Mine A total of 30,491 ROM fissure tonnes were delivered from the mining operation,which yielded 9,594 carats at a ROM grade of 31 cpht. In addition 1,558 caratswere produced from the Dancarl tailings operation at a grade of 5 cpht. Thisresulted in a total of 11,152 carats for the Sedibeng operation. The new DMS diamond recovery plant at Sedibeng is currently being constructed,with the crushing section already commissioned, and is on schedule to becommissioned during the quarter to March 2007. The new plant, planned to befully operational by April 2007, will replace the current plants at both Messinaand Dancarl sections, and will yield improved recoveries and further enhancecost efficiencies. Star Mine A total of 8,567 ROM fissure tonnes were delivered to the plant for 4,464carats, yielding a grade of 52 cpht for the quarter. In addition 5,260 tonnesof tailings were processed for 663 carats. This resulted in a total of 5,127carats for the Star operations. Both the raise boring of the ventilation shaft as well as the refurbishment ofthe processing plant has been completed. Management is confident that theseimprovements will aid Star's turnaround to becoming a cash generative assetwithin the coming months. The refurbished plant has been commissioned during the quarter under review,with initial results indicating improved recoveries coupled with increasedthroughput capacity. JOHAN DIPPENAAR CHIEF EXECUTIVE OFFICER Notes 1. The information in this update that relates to Exploration Results, MineralResources or Ore Reserves is based on information compiled by Jim Davidson, Pr.Sci Nat (reg No 400031/06), who is a Member of the Geological Society of SouthAfrica, a 'Recognised Overseas Professional Organisation' ('ROPO'), included ina list promulgated by the ASX from time to time. Jim Davidson is a full-timeemployee of the Company and has sufficient experience which is relevant to thestyle of mineralisation and type of deposit under consideration and to theactivity which he is undertaking to qualify as a Competent Person as defined inthe 2004 Edition of the 'Australasian Code for Reporting of Exploration Results,Mineral Resources and Ore Reserves'. Jim Davidson has given his written consentto the inclusion in this announcement of the matters based on his information inthe form and context in which it appears. Jim Davidson is the Qualified Personfor the purposes of the AIM Guidance Note on Mining, Oil and Gas Companies datedMarch 2006 2. It should be noted that the potential quantity in this report is conceptualin nature, there has been insufficient exploration to define a Mineral Resourceand it is uncertain if further exploration will result in the determination of aMineral Resource. For further information, please contact: Cathy Malins / Annabel Leather Telephone: +44 (0) 20 7851 7480Parkgreen Communications, London Kevin Skinner Telephone: +61 (0) 8 8234 9555Field PR, Adelaide Mobile: +61 (0) 414 822 631 Rule 5.3 Appendix 5B Mining exploration entity quarterly report* Introduced 1/7/96. Origin: Appendix 8. Amended 1/7/97, 1/7/98,30/9/2001. Name of entityPetra Diamonds Limited ACN or ARBN Quarter ended ("current quarter") 114474574 31 December 2006 Consolidated statement of cash flows* Current quarter Year to dateCash flows related to operating activities US$'000 US$'000 6 Months1.1 Net loss before taxation (2,928) (7,652)1.2 Adjustments for: - Depreciation and amortisation 1,507 2,833 - Foreign exchange loss/(gain) (313) 2,636 - Other non cash items 215 3421.3 Operating (loss)/profit before working capital changes (1,519) (1,841)1.4 (Increase)/Decrease in trade and other receivables 112 511.5 (Decrease)/Increase in trade payables (1,418) (2,119)1.6 (Increase)/Decrease in inventories (1,214) (1,988) Cash (utilised)/generated in operations (4,039) (5,897)1.7 Interest paid (187) (357) Net Operating Cash Flows (4,226) (6,254) Cash flows related to investing activities 1.8 Payment for a) development expenditure (667) (1,926) b) property plant and equipment (1,332) (1,939) c) acquisition of subsidiary net of cash 9 9 d) increase in investments (2,214) (2,214)1.9 Proceeds from sale of: (a) prospects (b) equity investments (c) other fixed assets - -1.10 Interest received 15 881.11 Other (457) (517) Net investing cash flows (4,646) (6,499) 1.12 Total operating and investing cash flows (carried forward) (8,872) (12,753) 1.12 Total operating and investing cash flows (brought (8,872) (12,753) forward) Cash flows related to financing activities 1.13 Proceeds from issue of shares - net of costs 327 2,0721.14 Proceeds from Joint Venture partner - 7831.15 Net proceeds from borrowings/Convertible loan note 22,515 22,0141.16 Repayment of borrowings - -1.17 Dividends paid - -1.18 Transaction deal costs - - Net financing cash flows 22,842 24,869Net (decrease) increase in cash held 13,970 12,1161.19 Cash at beginning of quarter/year to date 5,303 7,0201.20 Exchange rate adjustments to item 1.20 (27) 1101.21 Cash at end of quarter 19,246 19,246 Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the relatedentities Current quarter US$'000 1.22 Aggregate amount of payments to the parties included in item 1.1 N/A 1.23 Aggregate amount of loans to the parties included in item 1.17 N/A 1.24 Explanation necessary for an understanding of the transactions N/A Non-cash financing and investing activities 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows N/A 2.2 Details of outlays made by other entities to establish or increase their share in projects in which the reporting entity has an interest N/A Financing facilities available Add notes as necessary for an understanding of the position. Amount available Amount used US$'000 US$'0003.1 Loan facilities 3,970 3,2603.2 Credit standby arrangements Nil Nil Estimated cash outflows for next quarter US$'000 4.1 Exploration and evaluation 4104.2 Development 540 Total 950 Reconciliation of cash Reconciliation of cash at the end of the quarter Current quarter Previous quarter(as shown in the consolidated statement of cashflows) to the related items in the accounts is as US$'000 US$'000follows. 5.1 Cash on hand and at bank 764 852 5.2 Deposits at call 19,189 5,150 5.3 Bank overdraft (707) (699) 5.4 Other (provide details) Total: cash at end of quarter (item 1.22) 19,246 5,303 Changes in interests in mining tenements Tenement Nature of interest Interest at Interest at reference beginning of end of (note (2)) quarter quarter6.1 Interests in mining tenements relinquished, reduced or lapsed N/A 6.2 Interests in mining tenements acquired or increased N/A Issued and quoted securities at end of current quarter Description includes rate of interest and any redemption or conversion rightstogether with prices and dates. Total number Number quoted Issue price per Amount paid up per security security (see note 3) (pence) (see note 3) (pence)7.1 Preference +securities (description) 7.3 +Ordinary securities 150,692,607 150,692,607 - - 7.4 Changes during 200,843 200,843 85p quarter (a) Increases through new issue - - (b) Decreases through returns of capital, buy-backs - - 7.5 +Convertible debt - - - - securities 7.6 Changes during quarter (a) Increases through issues 1 US$20.0mil (b) Decreases through conversion and repayment - - - - 7.7 Options (description and conversion factor - see details below) 7,412,000 - See below 7.8 Issued during quarter 773,625 - Various 7.9 Exercised during - - Various quarter 7.10 Expired during 8,000 - Various quarter Options 238,875 Employee Incentive Options expiring various dates, exercisable at $A1.12 each 72,500 Employee Incentive Options expiring various dates, exercisable at $A1.36 each 400,000 Director incentive Options expiring 11 April 2007 with exercise prices from 30p to 45p each 1,500,000 Director incentive Options expiring 5 September 2013 with exercise price of 44p each 2,000,000 Director incentive Options expiring 16 June 2015 with exercise price of 85p each 377,000 Employee incentive Options expiring 5 September 2013 with exercise price of 44p each 50,000 Employee incentive Options expiring 13 September 2014 with exercise price of 56.75p each 500,000 Employee incentive Options expiring 27 November 2015 with an exercise price of 65.75p 1,000,000 Director incentive Options expiring 31 May 2016 with an exercise price of 79.5p 500,000 Employee incentive Options expiring 31 May 2016 with an exercise price of 79.5p 573,625 Employee incentive Options expiring 31 July 2016 with an exercise price of 96p 200,000 Employee incentive Options expiring 31 October 2016 with an exercise price of 122.5p 1000,000 Employee incentive Options expiring 24 November 2016 with an exercise price of 134.5p Warrants over ordinary shares Exercise Expiry Price 1,500,000 30p 31 December 2007 1,000,000 100p 31 December 2007 2,000,000 130p 18 September 2009 This information is provided by RNS The company news service from the London Stock Exchange