Petra Diamonds Regulatory News (PDL)

2 Oct 2006 07:02

Petra Diamonds Ld02 October 2006 For release 2 October 2006 Petra Diamonds Limited ("Petra", "the Company" or "the Group") Preliminary Results Announcement for the year ended 30 June 2006 (unaudited) Highlights Angola • Project Alto Cuilo ("Alto Cuilo") - exceptional exploration progress continued with a substantial increase in the number and surface area of kimberlite discoveries; analysis of drill core revealed exceptional indicator mineral chemistry, comparative to some of the world's major economic mines; as at 30 June 2006, funding of US$22.8 million advanced by BHP Billiton (budget of US$20 million approved for the year to June 2007, also to be funded by BHP Billiton) • Petra enters into Strategic Cooperation Agreement with AIM-quoted Xceldiam Limited ("Xceldiam") with regards to Project Luangue Botswana • Acquisition of Kalahari Diamonds Limited in September 2005 • Petra's operations in Botswana fully integrated into the Petra Group • Petra's technical team put in place a revised Kalahari exploration programme, with the focus on larger as well as smaller kimberlite identification Sierra Leone • Kono project in Sierra Leone commences small scale production in June 2006, on time and on budget • Petra has met its funding requirements to earn a 51% interest in the project • Work programme to accelerate in order to better determine the grade and extent of the resource, and to enable increased production South Africa • Production of 175,011 carats from the South African mines for the year to 30 June 2006 (2005: 143,673 carats), an increase of 21.8% • The South African mines generated an operating cash flow of US$677,000 for the year to June 2006 • Diamonds of 76 and 67 carats recovered from the Sedibeng mine, the stones being sold for US$465,000 and US$704,265 respectively Post year-end Highlights Corporate • Petra issued a US$20 million unsecured, interest free bond, convertible at 130 pence per share, to Al Rajhi Holdings W.L.L., a major Saudi Arabian based investment group; the financing strengthens Petra's treasury on an interest free basis, giving Petra the flexibility to act quickly on potential growth opportunities Angola • Project Alto Cuilo - identification of the 50th kimberlite; bulk sample drill and plant on site, with the bulk sample rig commissioned and drilling underway Adonis Pouroulis, Chairman, said; "I am delighted to report on the progress wehave made over the past year. Petra has continued to grow, strengthening ourposition within the market place whilst significantly expanding our prospects onthe ground. We continue to be very encouraged by the favourable prospects forthe diamond industry globally and believe that the diamond fields of Africaoffer some of the most exciting opportunities available. I am confident thatwith the range of our portfolio and the depth of the skills base now within thegroup, we are positioned to maintain our rate of growth." Summary of Results (unaudited) 2006 2005 US$ US$ Revenue * 20,868,757 2,275,245 Gross profit on mine - South African operations ** 3,320,887 768,258 Exploration expenses ** (2,056,395) (6,422,352) Administration expenses (6,481,669) (3,963,956) Loss before depreciation, amortisation (5,330,698) (9,954,745)and foreign exchange movements Loss for the year (18,864,456) (21,018,778) CAPEX 8,222,611 2,722,187 Cash at bank 7,019,644 27,591,394 * 2005 Revenue - June only, post Crown merger effective 31 May 2005** Gross profit and exploration expenses before depreciation and amortisation Loss per share (cents) (13.11) (28.43) Production (carats) *** 175,011 143,673 *** Production for the 12 months to 30 June 2005 For further information, please contact: Cathy Malins / Annabel Leather Telephone: +44 (0) 20 7493 3713Parkgreen Communications, London Chairman's Statement 2006 Dear Shareholder, It is with great pleasure that I present the 2006 financial statements. The pastfinancial year has seen your company grow into an established and integrateddiamond miner and explorer and we have continued to develop the various in-houseskills that will enable us to further increase our production base. These abilities are evident across all our mining operations - through ourproduction in South Africa, the development of complex diamond explorationprogrammes in Botswana, the progress made at Alto Cuilo in Angola and theestablishment of our mining operations in Sierra Leone. We have shown that Petraalso possesses the corporate depth and principals required to develop a solidworking relationship with a major, as is the case with BHP Billiton. Petra is now a well established mid-tier producer and explorer of diamonds. Ourfocus and expertise lie on the African continent, a continent that, althoughstill mired in poverty, in 2005 produced around 62% by value of the world'srough diamond output. It is one of our main goals to create sustainable economicdevelopment by investing in projects with long economic lives. The economicbenefit of discovering a large, economic kimberlite is substantial, not only toa company like Petra but also to the economy of the African countries in whichwe operate. The refocusing of international exploration dollars in Africa,whatever the commodity, makes for an exciting and often vibrant environment inwhich to work. It is pleasing to see Africa gaining mining and explorationmomentum and that the investing community worldwide acknowledges Africa'snatural resource wealth. We also welcome the wide reaching reforms currentlysweeping the diamond industry which promise to give more autonomy to Africa'sproducer nations and more direct employment down the diamond beneficiationchain, from mine to market. Petra is the proud employer of over 2,000 people and actively contributes to theeconomic development of the African countries in which it operates. Petra onlyoperates in countries that are committed to the Kimberley process for themarketing of diamond production; such sound, environmentally aware andresponsible investment in the African diamond industry will only assist in thedevelopment of countries in which we operate and the continent as a whole. Petra achieved a great deal during the year and some of the highlights arecovered below. Angola Kimberlite Exploration Alto Cuilo once again delivered excellent exploration results. The number ofkimberlite occurrences discovered surpassed the 50 mark, a significantmilestone. The rate of these discoveries increased as additional core drillingequipment was commissioned on site. To date it is estimated that the surface area of kimberlite discovered at AltoCuilo is in excess of 1,500 hectares. Furthermore, we have achieved anexceptional success rate of 83% of magnetic anomalies drilled being confirmed askimberlitic. Of the total of 249 magnetic anomalies identified so far, 60 havenow been drilled and a total of 50 have been confirmed as kimberlitic. Thisserves as a reminder of the size and extent of the project, together with thestandard of exploration results. There are very few kimberlite projects anywherein the world that have had such success in identifying kimberlites, but when thesurface area of the discoveries at Alto Cuilo is taken into account, the resultsare even more remarkable. At the same time, analysis of kimberlite core delivered some highly encouragingdiamond indicator mineral results together with a favourable mantle geothermconducive for diamond formation. Diamond indicator mineral chemistry is crucialin terms of assessing a kimberlite's likelihood of hosting diamonds. The resultsat Alto Cuilo are very exciting because they are comparable to other majoreconomic kimberlite deposits around the world. The large diameter drill rig has now been commissioned on site in anticipationof the mini-bulk sample programme scheduled for later this year. The results ofthis sampling campaign will give a better understanding of the kimberlitedeposits and will start yielding critical data relating to grade and price percarat. Accompanying the drill rig is a 10 tonne per hour Dense Media Separation("DMS") plant that will be used solely for the processing of kimberlite materialretrieved from the large diameter drill rig. This rig will initially stockpile200 tonne bulk samples and the DMS plant, which is a custom made closed circuitunit designed specifically for kimberlite bulk sampling, will start treating thesamples. A ranking of priority kimberlite targets for large diameter drillinghas been drawn up and may be revised as more results become available. Theranking is based on mineral chemistry results, the surface area of the variouskimberlites and the logistics of plant access to the various targets. Initialbulk sampling results are anticipated by December 2006. Petra and BHP Billiton are working together at Alto Cuilo, with BHP Billitonfunding the exploration and related costs. As at 30 June 2006, BHP Billiton hadadvanced funding of US$22.8 million to the project, and a budget of US$20million has been approved for the year to June 2007, also to be funded by BHPBilliton. This is a substantial exploration spend for any mineral commodity, andwe look forward to working with BHP Billiton to further develop Alto Cuilo overthe coming year. On 30 May 2006 the Company also announced a strategic cooperation alliance withXceldiam Limited, an AIM listed diamond explorer with exploration rights atProject Luangue just north of Alto Cuilo. The projects share a common border andPetra notes with interest the early drilling success at Project Luangue asannounced on 25 July 2006. Core drilling at Project Luangue returned excellentfirst results, with drilling on the first target intersecting kimberlite. Thisnews supports Petra's belief that Project Luangue may host kimberlite geologysimilar to that of Alto Cuilo and Petra looks forward to further developmentsfrom Project Luangue. The agreement with Xceldiam puts Petra in a position tosignificantly increase its exploration interests in the area, should it chooseto do so. Alluvial Exploration The alluvial programme continues in order to further evaluate the potential foreconomically viable alluvial deposits. A feasibility study has been commissionedon a small alluvial block of ground adjacent to the existing 65 tonne per hourDMS plant. Petra's initial investment in plant and earth moving equipment willserve as the infrastructure to process and mine these alluvial deposits.Alluvial exploration also continues elsewhere in the project area. As shareholders may be aware, to date over 1500 carats of kimberlite andalluvial diamonds have been recovered from the sampling operations. It isbelieved that apart from production of diamonds, invaluable explorationinformation will also be gleaned from these alluvial programmes. I wish to acknowledge the important role BHP Billiton has played in theevolution of Alto Cuilo. We have found their work to be of the highest standardand their spirit of partnership to be one where all partners benefit. At thesame time our Angolan partners have also been of the utmost assistance in takingAlto Cuilo to the next level and I thank both Endiama and Moyoweno for theirongoing support. South Africa The South African operations increased production by 21.8% from 143,673 caratsfor the year to June 2005 to 175,011 carats for the year to June 2006. TheCompany is targeting to increase production from its existing operations againthis year. The year also saw some exceptionally large and beautiful stones being mined.Diamonds of 76 and 67 carats were recovered from the Sedibeng mining complex andthe stones sold for US$465,000 and US$704,265 respectively. Tight costs and increased efficiencies were achieved on the operations asfurther investments in mining mechanisation were made which will result inincreased efficiencies for the coming year. Although two of the three mines operated well, technical difficulties wereexperienced at the Star mine. These problems, mainly the construction of the newventilation shaft, will be overcome in the coming year and it is anticipatedthat Star will achieve its production target and contribute to group results. Botswana Kalahari Diamonds Limited, which was acquired effective 30 September 2005, isnow a fully integrated part of the Petra group giving your company a primeposition in Botswana, the world's largest diamond producer by value. TheKalahari ground is situated in what we believe to be highly prospective diamondterritory and the period under review has seen encouraging exploration results. Field exploration in Botswana gained momentum whilst a shift was made inphilosophy to include the search for those kimberlites less than 20 hectares insize. Anomalies were identified in the Gope, Orapa and Mabutsane/Thswaaneblocks. The coming year will see follow up ground work including drilling ofvarious anomalies in these areas. Concurrently, existing kimberlite deposits onour ground will be further examined for possible economic viability. Sierra Leone Developments on the Kono project moved ahead apace during the year. In justunder a year of establishing a foothold in Sierra Leone, Petra commenced trialmining operations. This entailed the construction in-house of a 75 tonne perhour DMS as well as the sinking of shafts to access the diamond bearingkimberlite fissures. All of this was done within budget and on time. Konoproduced its first diamonds from the project on schedule in June of this year. In terms of Petra's joint venture agreement with Mano River Resources, Petra hasmet the requirement to spend US$3million on the project to earn a 51% interest,and the parties are now funding project expenditure on a 51/49 basis. The coming year will see an increased rate in shaft sinking which will allowincreased access to different kimberlite dyke faces. This will in turn enablea better determination of grade and quality and ultimately lead to an increasein diamond production. The aggressive rolling exploration and trenching methodhas proven to be both very effective and cost efficient and it is envisaged thatsix additional trenches will be opened, the fissure penetrated and the resultsevaluated by December 2006. This approach will provide Petra with a betterunderstanding of the diamondiferous fissures available, their potential and theproject strategy ahead. The relationship between Petra management and the various relevant authoritiesin Sierra Leone, in particular in the Kono district, remains strong and we thankthe Sierra Leonean authorities for being openly accommodative of foreigninvestment. Also, our joint venture partner, Mano River Resources Inc, has beenvery supportive in our efforts and I thank them for their valuable assistance. Results As the principal functional currency of the Group's business transactions inAngola, Botswana and Sierra Leone is US Dollars and in South Africa diamondsales are made in US Dollars, the Group has decided to adopt US Dollars as itsreporting currency with effect from 1 July 2005. The gross profit on mine from the South African mines operations for the year to30 June 2006 was US$3,320,887 (2005: US$768,258). After exploration expenses,Group administration expenses and financing costs, the loss before depreciation,amortisation and foreign exchange movements for the year was US$5,330,698 (2005:US$9,954,745). After unrealised foreign exchange losses on intercompany loans ofUS$6,114,780 (2005: US$892,065), amortisation of intangibles of US$2,832,355(2005: US$8,186) and depreciation of US$5,706,977 (2005: US$1,125,260), the lossafter tax for the year to 30 June 2006 was US$18,864,456 (2005: US$21,018,778). Group net cash outflow for the year is stated after taking account of theinvestment in Xceldiam Limited of US$1,271,410 (2005: Nil), repayment of alloutstanding convertible loan notes of US$1,239,403, cash inflow from theacquisition of Kalahari Diamonds of US$5,560,464 as well as the settlement inJuly 2005 of the Helam mine acquisition costs and various term loans. A charge of US$2,832,355 has been recognised in respect of the amortisation oflicences during the year, being the write down in accordance with IFRS ofintangible assets of US$17,620,258, which were brought into the balance sheetfollowing the acquisition of Kalahari Diamonds Limited in September 2005. The results from the Crown South African production operations acquired wereconsolidated into the Petra Group results from 1 June 2005. Therefore, thecomparative period to June 2005 includes results of the South African operationsacquired for one month and the period to 30 June 2006 includes a full 12 monthsresults. The results for the year to 30 June 2005 have been restated, as with effect from1 July 2005 the Company has complied with IRFS 2, Share Based Payments, inrespect of share options granted to management. Funding On 18 September 2006, Petra announced the issue of a US$20 million unsecured,interest free convertible bond, convertible at 130 pence per share, to Al RajhiHoldings W.L.L., a major Saudi Arabian based investment group. This financingstrengthens Petra's treasury on an interest free basis, without dilution toexisting shareholders, and gives Petra the ability to actively consider revenueand production growth opportunities that have the potential to fast-trackPetra's development and further entrench the Company as a mid-tier diamondproducer. The financing will also serve to underpin our funding should we decideto expand our exploration interests by exercising our warrants as part of theXceldiam cooperation agreement. Nabera Both Petra and Nabera continue to work with Alexkor and the South AfricanGovernment with regards to the "value add" and management fees that are due tothe Nabera consortium, in which Petra is a 29.5% shareholder. Whilst, forreasons outside of Petra's control, progress has been disappointing, the Boardremains focused on an acceptable resolution to the outstanding claims. Objectives and Strategy Petra's objective is to become an independent world class gemstone diamondproducer. This will be achieved by holding a highly prospective explorationportfolio ensuring future growth, organically expanding the Group's productionprofile and by geographically diversifying the country spread and risk. Ourfocus however will remain on the African continent. Our strategy is therefore to explore and develop our projects in Angola,Botswana and Sierra Leone whilst increasing production from the South Africanoperations. Production is expected to slowly build-up from Sierra Leone asgreater knowledge is gained from the various kimberlite fissures. We will alsocontinue to analyse other opportunities, which meet our strict acquisitioncriteria, for future inclusion to enhance the growth of the business. The diamond industry remains robust on the fundamentals of supply and demand.With an increase in demand and without the commensurate increase in globalproduction the outlook for any new diamond mine is good. Whilst operating on theAfrican continent key partnerships are vital and we as a group will foster ourexisting partnerships further and seek to strengthen new ones. Social development Petra believes it important to improve the lives of the communities in the areasin which we operate. For example, at Alto Cuilo we have assisted in theintroduction of primary and secondary health care, education, sustainable jobcreation, health and safety training and social awareness programmes. The localpopulation has access to a fully funded and well equipped clinic where all firstline consultations are available, the clinic being staffed by Angolan doctorsand nurses as well as expatriate trauma paramedics. A local primary school hasbeen built and currently there are around 100 learners from the communityattending. Local farmers have also been assisted to produce agriculturalproducts using more modern methods and then giving them a market in terms of theproject's consumption and requirements. Such development is not only applicable to our Angolan operations and there aresimilar examples of other similar social development projects in other countriesin which the Group operates. Staff I wish to thank our staff for their continued dedication and hard work. The coreteam of your company (both Petra and Crown pre-merger) has remained intact and Iam grateful for this. It is with this staff continuity that we have managed togrow the business and withstand the ups and downs of the resources sector. Weall share the same goal of seeing Petra become an independent, strong voice andcontributor to the diamond industry. Without the employees of Petra this is notpossible. Some of our people work in difficult situations, as often deposits arefound in remote parts of the world. They do this with an enthusiasm and pride intheir work and I am extremely proud to be a part of this flourishing and dynamicbusiness. I would like to thank two directors who left the Company during the past year.Charles Finkelstein made a significant contribution over the years as anon-executive director; he not only assisted your company through difficulttimes in its formative stages but was also a window into the ever changingdiamond world. I would also like to thank Kevin Dabinett for the dedication andsupport he gave to your Company and wish him every success for the future. Adonis PouroulisChairman2 October 2006 CONSOLIDATED INCOME STATEMENTFOR THE YEAR ENDED 30 JUNE 2006(Unaudited) Notes Restated 2006 2005 US$ US$Revenue 20,868,757 2,275,245Cost of Sales 4 (23,178,587) (1,970,087) Gross (loss) / profit (2,309,830) 305,158Exploration expenditure 5 (4,924,437) (7,063,678)Operating expenditure - other 6 (12,596,449) (4,856,021)Impairment of goodwill - (8,972,587)Financial income 411,107 36,462Financial expense (565,201) (402,177)Net financing costs 7 (154,094) (365,715)Loss before tax (19,984,810) (20,952,843)Income tax expense 1,120,354 (65,935)Loss for the year (18,864,456) (21,018,778)Basic and diluted loss per share - US cents 8 (13.11) (28.43) CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFOR THE YEAR ENDED 30 JUNE 2006 Restated 2006 2005 US$ US$Loss for the year (18,864,456) (21,018,778)Exchange adjustments on translation of subsidiary and branchundertakings recognised directly in equity 1,561,653 1,161,255Total recognised income and expense relating to the year (17,302,803) (19,857,523) CONSOLIDATED BALANCE SHEETFOR THE YEAR ENDED 30 JUNE 2006(Unaudited) Notes Restated 2006 2005 US$ US$ASSETSProperty, plant and equipment 66,045,627 73,467,724Intangible assets 13,105,561 335,947Investment in associates - -Investments - listed 1,271,410 -Investments - unlisted 4,785,697 -Trade and other receivables 164,402 161,442Total non-current assets 85,372,697 73,965,113 Inventories 2,197,605 1,405,165Trade and other receivables 2,760,378 2,806,105Cash and cash equivalents 7,019,644 27,591,394Total current assets 11,977,627 31,802,664Total assets 97,350,324 105,767,777 EQUITY AND LIABILITIESEquityIssued capital 27,031,103 23,500,190Share premium account 9 123,189,903 101,775,127Foreign currency translation reserve 9 2,541,087 4,102,740Share based payment reserve 9 972,962 354,670Accumulated loss 9 (81,608,667) (62,748,364)Total equity 72,126,388 66,984,363 LiabilitiesInterest-bearing loans and borrowings 2,914,960 429,753Trade and other payables 867,823 2,000,507Provisions 1,697,756 1,716,998Deferred tax liabilities 9,932,634 11,930,797Total non-current liabilities 15,413,173 16,078,055 Interest-bearing loans and borrowings 1,149,646 11,600,585Trade and other payables 6,658,735 9,061,468Provisions 2,002,382 2,043,306Total current liabilities 9,810,763 22,705,539Total liabilities 25,223,936 38,783,414Total equity and liabilities 97,350,324 105,767,777 CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 30 JUNE 2006(Unaudited) Restated 2006 2005 US$ US$Loss after taxation for the year (18,864,456) (21,018,778)Depreciation of property plant and equipment - 35,687 633,140explorationDepreciation of property plant and equipment - mining 5,630,717 463,100Depreciation of property plant and equipment - other 40,573 29,020Amortisation of intangible assets 2,832,355 8,186Loss/(profit) on sale of property plant and equipment 26,717 (1,607)Impairment of intangible assets - 136,872Impairment of goodwill - 8,972,587Interest received (411,107) (36,462)Interest paid 565,201 402,177Present value adjustment on rehabilitation provision 140,783 -Foreign exchange loss 6,114,780 892,065Operating loss before working capital changes (3,888,750) (9,519,700)Decrease / (increase) in trade and other receivables 140,515 (1,011,327)(Decrease) / increase in trade and other payables (3,604,742) 1,953,312(Increase) in inventories (792,440) (51,792)Cash utilised in operations (8,145,417) (8,629,507)Interest paid (565,201) (402,177)Taxation movement (1,120,354) -Net cash utilised by operating activities (9,830,972) (9,031,684)Cash flows from investing activitiesProceeds from sale of property, plant and equipment 41,447 1,607Acquisition of subsidiary net of cash acquired 5,560,464 103,527Interest received 411,107 36,462Increase in investments (1,271,410) -Acquisition of property, plant and equipment (4,152,748) (2,538,654)Development expenditure (4,069,863) (183,533)Net cash from investing activities (3,481,003) (2,580,591)Cash flows from financing activitiesNet proceeds from the issue of share capital 469,404 32,494,444(Decrease) in long term borrowings (7,605,319) (392,723)Net cash from financing activities (7,135,915) 32,101,721Net (decrease) / increase in cash and cash equivalents (20,447,890) 20,489,446Cash and cash equivalents at beginning of the year 27,591,394 6,808,208Effect of exchange rate fluctuations on cash held (123,860) 293,740Cash and cash equivalents at end of the year 7,019,644 27,591,394 NOTES TO THE ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2006(Unaudited) 1. BASIS OF PREPARATION The Group financial statements are prepared on the historical cost basis and arepresented in US Dollars. For the year to 30 June 2005 the Group reported inPounds Sterling and during the current year the Group adopted the US Dollar asits functional currency. The principal functional currency of the Group'sbusiness transactions in Angola, Botswana and Sierra Leone is US Dollars; inSouth Africa diamond sales are made in US Dollars. In order to providecomparatives in US Dollars the audited financial statements as at 30 June 2005were translated at a rate of US$1.79 to £1 for balance sheet items and anaverage rate of US$ 1.86 to £1 for income statement items. The preparation of financial statements in conformity with IFRS requiresmanagement to make judgements, estimates and assumptions that affect theapplication of policies and reported amounts of assets and liabilities, incomeand expenses. The estimates and associated assumptions are based on historicalexperience and factors that are believed to be reasonable under thecircumstances, the results of which form the basis of making judgements aboutcarrying values of assets and liabilities that are not readily apparent fromother sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimate is revised if the revision only affects that period, or in the periodof revision and future periods if the revision affects both current and futureperiods. The accounting policies set out below have been applied consistently to allperiods presented in these financial statements by all Group entities. During the period the Company adopted IFRS 2 with respect to the treatment ofemployee share options. In order to comply with IFRS 2, the Company now expensesthe fair value of share-based employee options with a corresponding increase inequity. The fair value is measured at grant date and spread over the periodduring which the employees become unconditionally entitled to the options. Thecomparative numbers have been appropriately restated. 2. SEGMENT INFORMATION Segment information is presented in respect of the Group's business andgeographical segments. The primary format is based on the Group's management andinternal reporting structure. Segment results, assets and liabilities include items directly attributable to asegment as well as those that can be allocated on a reasonable basis.Unallocated items comprise mainly income earning assets and revenue,interest-bearing borrowings and expenses and corporate assets and expenses.Segment capital expenditure is the total cost incurred during the period toacquire segment assets that are expected to be used for more than one period.Eliminations comprise of those inter-group transactions associated withacquisitions of business combinations. Business and Geographical segments The Group comprises the following business segments: Mining - the extraction and sale of rough diamonds from mining operations inSouth Africa. Exploration - exploration activities in Angola, Botswana, Sierra Leone and SouthAfrica. Business segments Mining Exploration Eliminations Consolidated 2006 2006 2006 2006 US$ US$ US$ US$Revenue from external customers 20,868,757 - - 20,868,757Segment result (2,309,829) (14,968,544) - (17,278,373)Operating loss (4,862,172) (14,968,544) - (19,830,716)Net financing income/(costs) (1,178,884) 1,024,790 - (154,094)Income tax 1,120,354 - - 1,120,354Loss for year (4,920,702) (13,943,754) - (18,864,456) Segment assets 64,677,253 32,673,071 - 97,350,324Total assets 64,677,253 32,673,071 - 97,350,324 Segment liabilities 19,436,688 5,787,248 25,223,936Total liabilities 19,436,688 5,787,248 25,223,936 Cash flows from operations 677,480 (10,508,452) - (9,830,972)Cash flows from investing (3,529,914) 1,544,211 (1,495,300) (3,481,003)Cash flows from financing (712,276) (6,423,639) - (7,135,915)Capital expenditure 8,118,313 104,298 - 8,222,611Depreciation and amortisation 5,630,717 2,908,615 - 8,539,332Impairment losses - - - - Geographical segments Angola Botswana South Africa Sierra Leone Jersey Consolidated 2006 2006 2006 2006 2006 2006 US$ US$ US$ US$ US$ US$Revenue from external - - 20,868,757 - - 20,868,757customersSegment assets 4,785,697 13,380,911 74,777,905 4,405,811 - 97,350,324Cash flows from operations - (357,262) (9,473,710) - - (9,830,972)Cash flows from investing - - (3,529,914) (4,069,864) 4,118,775 (3,481,003)Cash flows from financing - 357,254 (712,276) 4,069,864 (10,850,757) (7,135,915)Capital expenditure - 60,472 4,092,276 4,069,863 - 8,222,611Impairment losses - - - - - - 2. SEGMENTAL INFORMATION (continued) Business segments Mining Exploration Eliminations Consolidated 2005 2005 2005 2005 US$ US$ US$ US$Revenue from external customers 2,275,245 - - 2,275,245Segment result 305,158 (20,440,219) - (20,135,061)Operating profit/(loss) 69,459 (20,656,587) - (20,587,128)Net financing income/(costs) 133,804 (499,519) (365,715)Income tax expense (65,935) - (65,935)Profit/(loss) for year 137,328 (21,156,106) - (21,018,778) Segment assets 80,873,782 80,501,594 (55,607,599) 105,767,777Total assets 80,873,782 80,501,594 (55,607,599) 105,767,777 Segment liabilities 33,296,165 5,848,510 (361,261) 38,783,414Total liabilities 33,296,165 5,848,510 (361,261) 38,783,414 Cash flows from operations 630,346 (9,662,028) - (9,031,684)Cash flows from investing (43,388) (2,537,203) - (2,580,591)Cash flows from financing (381,066) 32,482,787 - 32,101,721Capital expenditure 350,939 2,187,715 - 2,538,654Depreciation and amortisation 463,100 670,346 - 1,133,446Impairment losses (8,972,587) (136,872) - (9,109,459) Geographical segments Angola Botswana South Africa Sierra Leone Jersey Consolidated 2005 2005 2005 2005 2005 2005 US$ US$ US$ US$ US$ US$Revenue from externalcustomers - - 2,275,245 - 2,275,245Segment assets 5,167,883 - 100,263,947 335,947 105,767,777Cash flows from operations (5,704,479) - (3,327,205) - (9,031,684)Cash flows from investing (2,168,720) - (325,493) (189,905) 103,527 (2,580,591)Cash flows from financing 8,716,035 - (9,789,503) 183,536 32,991,653 32,101,721Capital expenditure 2,187,715 - 350,939 - 2,538,654Impairment losses - - (9,109,459) - (9,109,459) The Group commenced activities in Botswana effective 1 October 2005 on theacquisition of Kalahari Diamonds Limited. Therefore there are no comparativenumbers for the year to 30 June 2005. 3. ACQUISITION OF SUBSIDIARY The Company acquired the issued share capital of Kalahari Diamonds Limited ("Kalahari") for US$ 21,997,991 effective 30 September 2005. The consideration wassatisfied by the issue of 16,166,529 Petra shares. Kalahari, through itswholly-owned Botswana subsidiary, Sekaka Diamonds (Pty) Limited, is the holderof a substantial numbers of diamond prospecting licences in Botswana. In thenine months to 30 June 2006, Kalahari recorded an exploration loss, beforeforeign exchange losses, depreciation and amortisation, of US$ 2,177,756. Effect of the acquisition The acquisition had the following effect on the Group's assets and liabilities. Kalahari's net assets at acquisition date: Book Values Fair Value Carrying Values Adjustments US$ US$ US$Consolidated fair value of net assets of entityacquired:Plant and equipment 176,384 176,384Prospecting licences 1,283,470 16,336,788 17,620,258Cash assets 5,560,464 5,560,464Receivables 95,394 95,394Accruals and payables (1,454,509) (1,454,509)Consideration amount satisfied in shares 5,661,203 16,336,788 21,997,991 The fair value adjustment of US$16,336,788 arose as a result of the revaluationof the Prospecting licences purchased from Sekaka Diamonds (Pty) Limited. 4. COST OF SALES 2006 2005 US$ US$ Raw materials and consumables used 6,292,071 735,256Employee expenses 12,214,540 873,419Depreciation of mining assets 5,630,717 463,100Changes in inventory of finished goods (958,741) (101,688) 23,178,587 1,970,087 5. EXPLORATION EXPENDITURE Employee expenses 313,182 1,846,344Depreciation of exploration assets 35,687 633,140Amortisation of intangible assets 2,832,355 8,186Drilling costs 1,277,973 1,770,286Equipment hire 207,689 1,058,999Other exploration costs 257,551 1,746,723 4,924,437 7,063,678 6. OTHER OPERATING EXPENDITURE Auditors' remuneration- Current auditors - audit services - -- Previous auditors - audit services 368,132 218,735 - non audit services - -Depreciation of property plant and equipment 40,573 29,020Foreign exchange losses 6,114,780 892,065Operating lease rentals 222,257 348,767Employee expenses 1,804,326 1,796,198Corporate activity expenditure 359,743 -Impairment of intangible assets - 136,872Loss/(profit) on disposal of property plant and equipment 26,717 (1,608)Administration expenses - mining operations 1,421,192 90,778Other charges 2,238,729 1,345,194 12,596,449 4,856,021 In addition to the above, the 2006 audit fees payable by the Group toits newly appointed auditors is $172,549 7. NET FINANCING COSTS On bank loans and overdrafts (412,485) (54,584)Other debt finance costs (152,716) (347,593)Financial expense (565,201) (402,177)Interest received 411,107 36,462 (154,094) (365,715) 8. LOSS PER SHARE 2006 2005 US$ US$ Loss for the year 18,864,456 21,018,778 Shares SharesBasic weighted average number of ordinary shares in issue 143,916,416 73,937,847 US cents US centsBasic loss per share - cents (13.11) (28.43)Due to the Group's loss for the year, the diluted loss per share isthe same as the basic loss per share Weighted average number of ordinary sharesAs at 1 July 2005 73,937,847 67,849,976Effect of shares issued during the period 69,978,569 6,087,871Weighted number at 30 June 2006 143,916,416 73,937,847 9. RESERVES Share Foreign Share based Accumulated premium currency payment loss account translation reserve reserve US$ US$ US$ US$ At 1 July 2004 34,041,633 2,962,470 - (42,615,103)Implementation of IFRS 2 (refer note 11) - - 140,833 (140,833)Restated balance at 1 July 2004 34,041,633 2,962,470 140,833 (42,755,936)Loss for the period - - - (21,018,778)Transfer from reserves of subsidiary - - - 233,194Equity based share options - - 213,837 (213,837)Exchange differences - adoption of US$reporting currency (241,084) (20,985) - 1,006,993Exchange differences - 1,161,255 - -Premium allotments during the year 70,888,365 - - -Share issue costs (2,923,175) - - -Convertible notes issued 9,388 - - -At 30 June 2005 101,775,127 4,102,740 354,670 (62,748,364) 9. RESERVES (continued) Share Foreign Share based Accumulated premium currency payment loss account translation reserve reserve US$ US$ US$ US$ At 1 July 2005 101,775,127 4,102,740 - (62,393,694)Implementation of IFRS 2 (refer note 11) - - 354,670 (354,670)Restated balance at 1 July 2005 101,775,127 4,102,740 354,670 (62,748,364)Loss for the period - - - (18,864,456)Equity based share options - - 618,292 -Exchange differences - (1,561,653) - 4,153Premium allotments during the year 20,550,930 - - -Share issue costs (57,472) - - -Convertible notes issued 921,318 - - -At 30 June 2006 123,189,903 2,541,087 972,962 (81,608,667) 10. DIVIDENDS The Directors do not recommend the payment of a dividend for the year. 11. ADOPTION OF IFRS 2 (EMPLOYEE SHARE OPTIONS) During the period, the Company adopted IFRS 2 with respect to the treatment ofemployee share options. In order to comply with IFRS 2, the Company now expensesthe fair value of share-based employee options with a corresponding increase inequity. The fair value is measured at grant date and spread over the periodduring which the employees become unconditionally entitled to the options. Thecomparative numbers have been appropriately restated. The effect of the changeis as follows: Gross Taxation Net US$ US$ US$Increase in net loss due to share-based option charge to personnelcosts: - 30 June 2004 (140,833) - (140,833) - 30 June 2005 (213,837) - (213,837)Restatement of opening accumulated losses in respect of prior yearadjustment (354,670) - (354,670) 12. ANNUAL REPORT AND ACCOUNTS The results for the year ended 30 June 2006 are unaudited and do not constitutestatutory accounts. The Report and Accounts for the year ended 30 June 2005,which includes an unqualified Audit Report, are available from the Company'sheadquarters at Elizabeth House, 9 Castle Street, St. Helier, Jersey, JE4 2QP.Copies of the audited Report and Accounts for the year ended 30 June 2006 willbe posted to shareholders in October 2006. This information is provided by RNS The company news service from the London Stock Exchange