Petra Diamonds Regulatory News (PDL)

8 Oct 2007 09:32

Petra Diamonds Ld08 October 2007 For release 8 October 2007 AIM: PDL Petra Diamonds Limited ("Petra", "the Company" or "the Group") Preliminary Results Announcement for the year ended 30 June 2007 (unaudited) Highlights and Trading Update Results • Revenue to 30 June 2007: US$17.0 million (June 2006: US$20.9 million); revenue post year end for 3 months to 30 September 2007: US$15.9 million, substantial growth and only US$1.1 million short of entire revenue for year to June 2007; revenue jump in 3 months to September 2007 due to Koffiefontein coming on stream in this period • Group revenue and cash flows expected to be substantially higher in year to June 2008 as Petra has sound foundations for growth in place • Group cash balances at 30 June 2007: US$44 million (30 June 2006: US$7 million); cash balances 30 September 2007: US$65 million South Africa • Resource update - increase of 101% to 9.33 million carats attributable (last statement May 2005: 4.64 million carats); in-situ value of US$1.5 billion attributable • Production of 180,474 carats for the year to 30 June 2007 (June 2006: 175,011 carats); 250,000 carats expected to June 2008; in excess of 400,000 carats expected to June 2009 • First sales from Koffiefontein - 28,246 carats sold for US$11.7 million in quarter to 30 September 2007, average of US$414 per carat, excellent values for a kimberlite mine; Koffiefontein expected to add 90,000 carats to annual production • Petra to acquire Kimberley Underground Mines from De Beers which will add in excess of 100,000 carats to annual production in the year to June 2009 Angola Alto Cuilo • Next phase of exploration underway with mini bulk sampling programme; kimberlite AC63 records intersections of 22.7 cpht over 90 metres, peaking at 35.5 cpht over 30 metres; other high grade zones identified • October 2007: kimberlite AC98 records further high grade areas, including intersections of 33.13 cpht over 33 metres • As at 30 September 2007, BHP Billiton, Petra's joint venture partner, had spent US$52.2 million on exploration development at Alto Cuilo Luangue • February 2007: Petra acquired an interest in Luangue, a highly prospective project bordering Alto Cuilo in north eastern Angola, consolidating the Group's position in the diamond belt of Angola; Petra subsequently (August 2007) entered into a joint venture with BHP Billiton to develop Luangue; the deal will effectively fast track project development, with the BHP Billiton earn-in requiring funding to a BHP Billiton pre-feasibility Botswana • Positive results from Kalahari drilling programme; discovery of a new kimberlite using Xcalibur magnetics; identification of 20 prospective targets in the Orapa North licence block • Kukama Project; geophysical indications that diamondiferous kimberlite 173S could be 25 hectares in size • Discovery of kimberlite X25 in the Gope area - highly significant development as area has been explored thoroughly by other exploration companies in the past; vindicates Petra's belief that new exploration technologies and methodologies can identify significant new kimberlites in Botswana • New exploration licences granted to Petra over 2 known diamondiferous kimberlites in the Jwaneng locality Sierra Leone • Development programme making solid progress at the Kono project, with test shafts delivering highly encouraging results due to consistent kimberlite fissure and good fissure widths encountered • Trial mining commenced on three shafts, where in-situ grades of between 50 and 80 carats per hundred tonnes have been achieved • Petra believes that the test shafts have a high likelihood of developing into producing operations; appropriate infrastructure and equipment already in place to make seamless transition to full production Beneficiation • Acquisition of Calibrated Diamonds gives Petra the ability to cut and polish its own production, transforming Petra into a vertically integrated group and enabling the Company to add value to its rough production • Production build up underway; expected that 2,500 carats per month of rough will be processed by mid 2008 Adonis Pouroulis, Chairman, said; "This last year has been the most gratifyingin the Company's history as we have developed the critical mass, the in-housecapabilities and, most importantly, the credibility to take the business to thenext level. We have delivered, with Koffiefontein and Kimberley Underground, onour promise to shareholders to introduce assets to the Group which willsubstantially increase our current production and return significant cash flows.We have also seen exciting developments with our major exploration assets inAngola. Bulk sampling and drilling at Alto Cuilo is returning very encouragingresults and our second joint venture in Angola with BHP Billiton at neighbouringLuangue consolidates our position in this highly prospective diamond region.Calibrated Diamonds is on track and we expect to cut and polish 2,500 carats ofrough per month by mid-2008." "The development of the Group over the past year has been quite outstanding andI look forward to further building on this success in 2008." Summary of Results (unaudited) 12 months to 12 months to 30 June 2007 30 June 2006 US$ million US$ million Revenue (note 1) 17.0 20.9 Production (carats) (note 1) 180,474 175,011 Gross profit on mine - South African operations (note 2) 1.3 3.3 Loss before depreciation, amortisation and foreign exchange 7.8 5.3movements Loss for the year 20.9 18.8 Cash at bank (note 3) 44.1 7.0 Notes: 1. The Koffiefontein acquisition was expected to have been completed (withall conditions being met) by June 2007, but completion only occurred in July2007, post year end. Had this occurred pre 30 June, Petra would have been ableto (in accordance with the conditions of the Koffiefontein purchase agreement)sell diamonds from the processed ore and Group revenue to June 2007 would havebeen $9.9 million higher. Although Petra was maintaining the cave for manymonths and processing ore from May 2007, diamonds could not be sold until allconditions were met, therefore Koffiefontein production of 44,423 carats to June2007 (Group accounting policy is that diamonds in ore mined but not processedare included in closing stock) has been included in diamond inventory at a costof US$3.5 million; the corresponding gross profit of US$6.4 million (being salesrevenue less US$3.5 million and associated plant recovery costs) was recorded inthe 3 months to September 2007 when the diamonds were sold and will beaccordingly realised in the financial year ending 30 June 2008. 2. Gross profit stated before depreciation and amortisation. 3. In August 2007 Petra received US$22.35 million from BHP Billitonrelating to the disposal of 25% of Frannor Investments and Finance Limited.Petra's cash at bank as at 30 September was US$65 million. For further information, please contact: Louise Goodeve / Justine Howarth Telephone: +44 (0) 20 7851 7480Parkgreen Communications, London Adrian Hadden Telephone: +44 (0) 20 7523 8000Collins Stewart, London Chairman's Statement 2007 Dear Shareholder, It is with great pleasure that I present the results for 2007, a period whichmarks Petra's 10th anniversary on AIM. Over the past year, we have developedthe critical mass, the in-house capabilities and, most importantly, thecredibility to take the business to the next level. We started the period under review with a portfolio combining the producingfissure mines in South Africa with the "blue sky" potential of our operations inAngola and Botswana, and advanced stage exploration in Sierra Leone. Ourobjectives for the year were to deliver solid exploration results at Alto Cuiloand, at the same time, to add significant production to the Group. We havedelivered on these stated objectives with the mini-bulk sampling programmeunderway at Alto Cuilo, the acquisition of a world class diamond mine,Koffiefontein, and the on-going development of the existing fissure mines. In addition to these achievements, we acquired an interest in the Luanguediamond project in Angola, entered into our second joint venture with BHPBilliton, and brought into the Group cutting and polishing capabilites with theacquisition of Calibrated Diamonds. Post year end, we entered into an agreementto acquire the Kimberley Underground mines from De Beers. The formal completion of the acquisition of Koffiefontein took longer than weexpected and occurred after the end of our 2006/07 financial year, but asreported below, since the announcement of successful completion on 18 July 2007we have been very pleased with the progress made and the results from our firsttwo tenders. The compelling investment case for diamonds continues, with the market widelypredicted by analysts to slip into a major supply deficit within the next fiveyears, due to the lack of significant new production coming on stream. At ourrecent tenders diamond prices recovered from the weaker prices recorded duringthe financial year and, despite the turbulent events in the financial markets,many market participants believe that an increase in diamond prices is overdue. The highlights of a very productive year, set out by division, are outlinedbelow. Results The loss for the year amounted to US$20.9 million (30 June 2006: US$18.8m) afteramortisation of intangibles of US$3.7m (30 June 2006: US$2.8m), exchange lossesof US$4.8m (30 June 2006: US$6.1m), and depreciation of US$6.5m (30 June 2006:US$5.7m). Revenue generated by the South African mines decreased from $20.9 million in theprevious year to $16.7 million for the 2007 financial year (the balance ofrevenue for the year of US$300,000 being non-beneficiation revenue at CalibratedDiamonds). Revenue from the fissure mines was negatively impacted due to delaysin the commissioning of the processing plant at Sedibeng. However, thesestockpiled carats will be released in the current period as the plant is nowfully operational. Skills shortages at Helam resulted in its production targetsnot being reached; this skills shortage has now been largely addressed and Helamproduction is back on track. The Koffiefontein acquisition was expected to be completed in all respectsbefore June 2007, but the last administrative conditions were met in July 2007,post year end; had this occurred pre 30 June as expected, revenue to June 2007would have been $9.9 million higher. Although Petra extracted ore as part of thecave maintenance and plant testing programme and processing of the ore commencedin May, diamond sales could not be made until all conditions were met.Therefore Koffiefontein production of 44,423 carats to June 2007 has beenincluded in diamond inventory at a cost of $3.5 million and a gross profit ofUS$6.4 million will be realised in the financial year ending 30 June 2008. On-mine gross profit for the year would have significantly surpassed theprevious year's achievement of $3.3 million had Koffiefontein's sales beenrealised, with an estimated $6.4 million being added to the current year's grossprofit on-mine of $1.3 million. The Group prides itself in its low operational cost culture and the benefitswere evident at all operations in the current period. A charge of US$3.7 million (30 June 2006: US$2.8m) for amortisation ofintangibles, is in respect of the amortisation of prospecting licences held bySekaka Diamonds (Pty) Limited, the Group's Botswana operating company. IFRSrequires that the cost of the licences be written off over their estimated life,which the Board has estimated to be four years. Group net cash inflow for the period is stated after taking account ofcapitalised mining development cash outflows in Sierra Leone of US$3.8 million(30 June 2006: US$4.1m), other capital expenditure (mainly in respect of theSouth African operations) for the period of US$5.0 million (30 June 2006:US$4.2m), acquisitions of new operations for US$1.9 million, cash inflows fromthe US$20 million Al Rajhi Holdings convertible bond and US$36.1 million fromthe issue of new shares, mainly due to a US$34.3 million (£17.5 million) placingwith Saad Investments. At June 2007, our cash position was US$44.1 million. This was further bolsteredin August 2007 by the sale to BHP Billiton of 25% of Frannor Investments andFinance Limited ("Frannor") for US$22.35m. As at 30 September 2007, Petra hadcash balances of US$65 million. South Africa The South African operations increased production by 3.1% from 175,011 carats(June 2006) to 180,474 carats for the year to 30 June 2007. Second halfproduction (108,546 carats) saw a substantial increase on the first half (71,928carats), due largely to the production contribution from Koffiefontein (44,423carats) in closing inventory. The capacity and engineering improvements put inplace at our fissure mines, including the commissioning of the refurbished plantat Star towards the end of December 2006 and the construction of the new plantat Sedibeng, completed in May 2007, will deliver upside in the year to June2008. With the acquisition of Koffiefontein and the conditional agreement to acquireKimberley Underground, we are now on track to increase Group production from ourSouth African operations to 400,000 carats per annum by FY 2008/9. Increasingour production will not only add to the upside of the major exploration projectswithin the Group, it will also deliver steady earnings growth. The Company today announced a substantial increase in reserves and resources, animportant development as, just like other mining companies, diamonds 'in theground' is a key contributor to company value and potential. Petra announced an updated JORC compliant statement of the Group's South Africanreserves and resources in respect of the Koffiefontein, Helam, Sedibeng and Starmines. The total carat base increased 101% to 9.3 million carats attributable,compared to that last reported in May 2005 of 4.6 million carats. Thecorresponding in-situ value is calculated to be US$1.5 billion. This increase intotal carat base was largely due to the acquisition of Koffiefontein as well asa review of the fissure mines. Koffiefontein We were selected by De Beers as the successful purchasers of Koffiefontein(December 2006) and Kimberley Underground (September 2007) following rigorousselection processes. Koffiefontein brought a world class diamond mine to theGroup, in line with our strategy of growing production. The Company had been, with permission from the South African Department ofMinerals and Energy ("DME"), maintaining the cave at Koffiefontein since July2006. This was a very valuable period as it enabled the Petra team to gain athorough working knowledge of the mine, optimise and test the plant andstreamline operations. As the conditions within the purchase agreement meantthat diamonds could not be sold until all conditions had been met, whichoccurred in July, extracted ore is included in June's closing stock. Since the financial year end, Petra has commenced sales of diamonds recoveredfrom the ore extracted during this preparatory period. Whilst Koffiefontein isrenowned for the exceptional quality and value of its diamonds, the results ofboth tenders held since June exceeded management expectations. Based onhistorical production and sales information, Petra had assumed an average ofUS$245 per carat for Koffiefontein underground production (excluding tailings).The first tender achieved an average of US$410 per carat and the second asimilar average of US$420 per carat. Two exceptional stones of 74.7 and 60.25carats were sold for US$1,012,636 and US$735,885 respectively. Excluding thesestones from average values, we recorded an average of $367 and $334 per caratfor the first and second tenders respectively. The acquisition of Koffiefontein was important to Petra, but bringing the mineback into production was critical to the local community. Since we haverecommenced operations, we have created approximately 400 new jobs which,combined with the multiplier effect of mining, will provide a crucial boost tothe local economy. We would like to extend our thanks to both the DME and DeBeers for their support in ensuring a successful outcome for all stakeholders. Kimberley Underground The acquisition and integration of Koffiefontein served as the blueprint for oursecond deal with De Beers, when on 14 September 2007 we entered into aconditional agreement to buy the Kimberley Underground mines (together theWesselton, Du Toitspan and Bultfontein mines) ("Kimberley Underground") in SouthAfrica. Based on historical production and sales information, Petra expects annual salesfrom Kimberley Underground in excess of 100,000 carats at an average of US$160per carat once full production is recommenced, giving gross annual revenues inexcess of US$16 million and a life of mine of at least 12 years. The consideration of R78.5 million (US$11 million) is to be settled by Petraassuming De Beers' rehabilitation obligations with regards to KimberleyUnderground of R63.5 million (US$8.9 million), and the payment in cash by Petrato De Beers of R15 million (US$2.1 million). Angola Angola is undoubtedly one of the most prospective countries in Africa fordiamond exploration, expected by many to yield the world's next large kimberlitediamond mine. Petra has interests in both Project Alto Cuilo and ProjectLuangue, situated in the Kasai Craton diamond belt of the country. Project Alto Cuilo Exploration at Alto Cuilo entered the next phase in January 2007 with thecommencement of the Large Diameter Drilling ("LDD") and Mini Bulk Sampling ("MBS") campaigns. The MBS programme is of particular importance as it is the nextstep in estimating the economic viability of the many kimberlites at Alto Cuiloand their potential to be developed into mines. The first mini bulk sample results were a major milestone in the development ofAlto Cuilo. The first priority kimberlite to be tested was AC63 and we werepleased to report intersections of 22.7 cpht over 90 metres, peaking at a gradeof 35.5 cpht over 30 metres, along with other high grade zones. These resultsmean that AC63 is likely to be further investigated by geophysical techniquesand sampled again at a later stage of the MBS campaign. The second kimberlite tobe sampled, AC98, recorded similarly encouraging results, includingintersections of 33.13 cpht over 33 metres, 12.1 cpht over 137 metres and 10.8cpht over 90 metres. We continue to be pleased with the unusually high discovery rate for kimberlitesat Alto Cuilo and there are now 77 confirmed kimberlites (July 2006: 50confirmed kimberlites) out of a total of 99 targets drilled, a success rate of78%. Micro diamond analysis has been carried out to date on 15 kimberlites ofwhich 13 have proved diamondiferous; these success rates are very high by worlddiamond exploration standards. Following micro diamond analysis, we are then ina position to target further kimberlites for the MBS campaign. Given the volume, size and complex internal morphology of these kimberlites, wehave embarked on a ground geophysical programme of Natural Source Audio MagnetoTellurics (NSAMT) and gravity in order to get a better understanding of the orebodies. This strategy is proving to be very effective in assisting with theplacement of the LDD holes and the core drilling programme continues apace, withthree drill rigs now working round the clock at Alto Cuilo, taking core samplesfrom kimberlite bodies for mineral chemistry analysis. The MBS programme has importantly served to vindicate Petra's exploration modelas prospective areas can be identified using initial Heavy Mineral Analysisbefore selection for drilling. In order to accelerate the pace of the mini bulksampling, a second LDD rig has been secured and is currently en route to AltoCuilo. We anticipate regular news flow with regards to results from the nextdrill targets. Alto Cuilo is a 'major' project in all senses of the word, with a largefootprint (in excess of 1,500 hectares) and a much higher number of prospectivekimberlites to be investigated than are found in most other diamond explorationprojects. It is for this reason that we welcome the technical, financial andstrategic input of our joint venture partner BHP Billiton. This partnership isensuring that Alto Cuilo is developed in as fast a timeframe as possible, and asat September 2007 BHP Billiton had provided funding of US$52.2 million (June2006: US$ 22.8 million), a very significant exploration spend. I would like to extend our gratitude to the Angolan state diamond body, Endiama,for their continued support. Project Luangue In March 2007, Petra announced the acquisition of Frannor in an all sharetransaction from AIM quoted Xceldiam Limited. Frannor holds interests in theLuangue concession which borders the northern side of Alto Cuilo, and has bothkimberlite and alluvial potential. The acquisition is very significant as it entrenches the Company's position inthe diamond belt of north east Angola, an area widely believed to host majordiamond deposits. Furthermore it is Petra's belief that Luangue is asprospective as Alto Cuilo, sharing as it does the same geology which pays noheed to licence boundaries. This view was further substantiated by the entry of BHP Billiton into Frannor inAugust 2007. Through a new joint venture agreement with Petra, BHP Billitonacquired a 25% stake in Frannor from Petra for a cash consideration of US$22.35million and agreed, in order to earn-in to 75% of the joint venture, to solefund the exploration programme to the later of the completion of a BHP Billitonstandard pre-feasibility study and a minimum expenditure commitment of threetimes Petra's net investment cost at Luangue. Petra and BHP Billiton will now jointly manage and develop Luangue with theobjective of accelerating the pace of exploration. Of key importance is theextensive experience and knowledge gained from the exploration programme at AltoCuilo, which will be applied to develop Luangue's considerable potential. The next step in the Luangue exploration programme is the analysis of a 'towedbird' helicopter borne, low level, gradient array aeromagnetic survey. Thissurvey should generate a substantial amount of new anomalies with high dataquality in addition to the 106 magnetic anomalies previously identified. From alluvial operations carried out to date, 2,004 carats have been recovered,with the largest stone being 18.29 carats. It is worth noting that the alluvialpotential at Luangue is significantly higher than at Alto Cuilo. There are manyadvantages to alluvial mining, particularly the prospect of lower capital costscombined with a faster route to production, and Angola's alluvials are regardedas some of the best quality gem diamonds in the world. Botswana There are now more than 20 international mining companies carrying outexploration programmes in Botswana, and with sound reason. Botswana is alreadythe world's largest diamond producer by value but we believe, as do ourcompetitors, that modern exploration techniques hold the key to the discovery ofnew, large kimberlite mines. Petra has the largest area under diamond prospecting licence in Botswana, ofapproximately 52,000km(2), all of which is "on craton". We are particularlyexcited by the potential of prospecting licences granted in the vicinity of themajor Jwaneng diamond mine, which hold two previously identified kimberlites,DK4 and DK6, both of which are diamondiferous. The Kalahari exploration programme has progressed well and our first drillingprogramme commenced in the period under review. Results from the 600 metrediameter gravity negative anomaly have confirmed that the surface area of thekimberlite with the anomaly is likely to be significantly larger than previouslyaccepted. Likewise, at the Kukama project, our initial drilling campaign,supported by geophysical interpretation, has established that diamondiferouskimberlite 173S could be 25 hectares in size. This kimberlite has the potentialto be a substantial deposit, although the grade over the majority of it is atthis stage untested. One of the most exciting developments in our Botswana exploration programme wasthe discovery of a new kimberlite, X25, in an area which has previously beenintensively explored by other reputable exploration companies since the early1980's. This is very significant as it demonstrates the opportunities presentedin Botswana when using modern exploration techniques. The next stage of ourprogramme is to complete a detailed ground geophysical programme in the areashowing the most promising kimberlite indicator minerals, to be followed up by adrilling programme towards the end of the year. We have an array of highly prospective targets to be further investigated and wewill continue to run a focused exploration programme. A 55,000 line kilometrelow level, gradient array magnetic survey has been commissioned over the Kukamaproject and a 5,000 metre drilling programme has been commissioned to testanomalies detected in our Orapa North, Gope, Kukama and Mabutsane project areas.Additional drilling will be scheduled to test the kimberlites in the Jwaneng andKukama areas, as well as the largest kimberlite in the Kikao field, which is 700metres in diameter. Sierra Leone Great strides have been made in the development of the Kono Project in SierraLeone, where test work has moved into the final phase. Petra has developed aseries of exploration shafts and trial mining has now commenced, with the aim ofbetter understanding the grade and structure of the fissures. This year will be critical to establishing whether we have an economic mine atKono and the results from our development work to date are very encouraging. BySeptember 2007, we established trial mining on three shafts and had recoveredsome 2,809 diamonds totaling 241.7 carats. Crucially, our operations had alsostarted to encounter much better, consistent widths of kimberlite, along withexcellent in-situ kimberlite grades of between 50 and 80 cpht. These results,combined with the rapid advance gained in our understanding the fissures atKono, all serve to increase our confidence in the positive potential of thisproject. Petra now plans to extract a 1,000 tonne bulk sample from each of the threeshafts with the aim of establishing possible run-of-mine grades, diamond valuesand the other parameters required for a scoping study. Given the nature of ourdevelopment work, the Company now has the plant and related infrastructure inplace to fast track the project towards production, possibly within 12 to 18months. Petra's interest in Kono is 51%, with its joint venture partner Stellar DiamondsLimited, a 68.5% owned subsidiary of Mano River Resources Inc, holding theremaining 49%, and each party funds the project as per its percentage holding. Move into cutting and polishing - Calibrated Diamonds In November 2006, Petra made a strategic move into the cutting and polishing('beneficiation') of diamonds with the acquisition of Calibrated DiamondsInvestments Holding ("Calibrated Diamonds"). This acquisition gives Petra thein-house capability to cut and polish its own rough diamond production, which inturn will directly impact Petra's bottom line given the value uplift in apolished stone compared to the rough form. Petra acquired Calibrated Diamonds as it saw an important opportunity to take astep further down the diamond pipeline value chain. Petra will not enter theretailing business, but will add significant value for shareholders by taking aproportion of our production to the cutting and polishing stage. Calibrated Diamonds' proprietary laser cutting process has significantadvantages over traditional cutting and polishing methodology, producing stonesto a very high and consistent standard. Calibrated Diamonds' cut and polishedstones are a premium product, producing the highly sought after 'hearts andarrows' quality which is rarely achieved by conventional means. As such, giventhe scarcity in the global market for this product, we believe there will bestrong demand. Calibrated Diamonds' transition from focused research and development and pilotproduction to full scale, commercial production facilities is progressing well.The company is currently in the build up phase, cutting around 120 carats permonth of Petra rough and building up capacity by bringing more machines on line.We expect to be cutting approximately 2,500 carats of rough production per monthby mid 2008. Objectives and Strategy Petra's objective remains to grow our stature as a world class diamond producer.By offering investors exposure to a mid-tier diamond group with productioncash flows and major exploration projects, we believe we can deliver superiorreturns to our shareholders. Though Petra established its position on AIM before the mining boom took holdand is AIM's leading diamond group, we are now in the midst of a 'diamond rush',as characterised by the many diamond companies which have recently sought toraise money and acquire a public listing in London. This is due to the shift ofpower in the diamond industry, which has seen the field open up to new players,and the dramatic restructuring of the diamond pipeline. Improving conditions inmany of the most promising African countries, such as Angola, the DRC and SierraLeone, have also precipitated a wealth of opportunities. Our focus going forward remains Africa, where we have built up 10 yearsexpertise, and where a spirit of partnership, agility and entrepreneurial flairhave been the building blocks of our success. Social and Environmental Responsibility Petra believes that social and environmental stewardship is of the utmostimportance when developing mining projects, particularly in Africa where aresources project might be the primary economic contributor to the localcommunity. This is the case with many of our projects, which are located inremote areas with few opportunities for employment. We believe that it is our responsibility to help improve the lives of thecommunities in the areas in which we operate and we have a range of socialinitiatives in place to continue making a meaningful impact on the lives of ouremployees and the surrounding communities. With regards to all of our projects, we are very concerned with environmentalprotection and rehabilitation, and ensure that all operations are conducted inline with international best practice. Staff The development of the Group over the past year has been quite exceptional and Ithank everyone at Petra for their individual contributions to this success.Petra is a vibrant group, reflecting the countries in which we operate, and Icontinue to be grateful for the hard work and energy that drives the Companyforward. Outlook There have been significant developments for Petra since the end of ourfinancial year, not least the formal completion of the acquisition ofKoffiefontein and more recently our successful selection as the acquirer ofKimberley Underground. Revenues for the three months to 30 September 2007 havealready reached US$15.9m, only US$1.1m less than that for the full year to June2007. With expected production of 250,000 carats for the year to 30 June 2008, anincrease in our South African reserves and resources (not including KimberleyUnderground) to 9.3 million carats, a strong background for diamond prices andencouraging progress across our development projects in Angola, Botswana andSierra Leone, Petra's prospects for the current financial year and beyond areextremely encouraging. Adonis PouroulisChairman8 October 2007 PETRA DIAMONDS LIMITED - PRELIMINARY RESULTS CONSOLIDATED INCOME STATEMENTFOR THE YEAR ENDED 30 JUNE 2007(Unaudited) Notes 2007 2006 US$ US$Revenue 17,048,794 20,868,757Cost of sales 4 (21,003,936) (23,178,587) Gross loss (3,955,142) (2,309,830)Exploration expenditure 5 (6,091,669) (4,924,437)Operating expenditure 6 (11,242,520) (12,596,449)Financial income 654,151 411,107Financial expense (2,222,980) (565,201)Net financing costs 7 (1,568,829) (154,094)Loss before tax (22,858,160) (19,984,810)Income tax expense 1,909,234 1,120,354Loss for the year (20,948,926) (18,864,456)Basic and diluted loss per share - US cents 8 (13.60) (13.11) CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFOR THE YEAR ENDED 30 JUNE 2007 2007 2006 US$ US$Exchange differences on translation of foreign operations 8,677,941 1,561,653Net income recognised directly in equity 8,677,941 1,561,653Loss for the year (20,948,926) (18,864,456)Total recognised income and expense for the year (12,270,985) (17,302,803) PETRA DIAMONDS LIMITED - PRELIMINARY RESULTS CONSOLIDATED BALANCE SHEETFOR THE YEAR ENDED 30 JUNE 2007(UNAUDITED) Notes 2007 2006 US$ US$ASSETSNon current assetsProperty, plant and equipment 84,872,711 70,831,324Intangible assets 72,816,432 13,105,561Investment in associates - -Available for sale assets - listed 70,136 1,271,410Other receivables 151, 987 164,402Total non-current assets 157,911,266 85,372,697Current assetsInventories 8,900,532 2,197,605Trade and other receivables 14,822,729 2,760,378Cash and cash equivalents 44,124,829 7,019,644Total current assets 67,848,090 11,977,627Total assets 225,759,356 97,350,324 EQUITY AND LIABILITIESEquityShare capital 9 36,360,403 27,031,103Share premium account 9 227,366,888 123,189,903Foreign currency translation reserve 9 (6,136,854) 2,541,087Share based payment reserve 9 1,527,000 972,962Other reserves 9 4,003,682 -Accumulated loss 9 (102,557,593) (81,608,667)Total equity 160,563,526 72,126,388 Non current liabilitiesLoans and borrowings 3,103,252 2,914,960Trade and other payables 2,800,506 867,823Provisions 9,852,535 1,697,756Deferred tax liabilities 9,551,924 9,932,634Total non-current liabilities 25,308,217 15,413,173Current liabilitiesLoans and borrowings 27,755,710 1,149,646Trade and other payables 9,821,436 6,658,735Provisions 2,310,467 2,002,382Total current liabilities 39,887,613 9,810,763Total liabilities 65,195,830 25,223,936Total equity and liabilities 225,759,356 97,350,324 PETRA DIAMONDS LIMITED - PRELIMINARY RESULTS CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 30 JUNE 2007(UNAUDITED) 2007 2006 US$ US$Loss before taxation for the year (22,858,160) (19,984,810)Depreciation of property plant and equipment - exploration 1,115,782 35,687Depreciation of property plant and equipment - mining 5,274,209 5,630,717Depreciation of property plant and equipment - other 113,283 40,573Amortisation of intangible assets 3,740,928 2,832,355(Profit)/loss on sale of property plant and equipment (81,852) 26,717Interest received (654,151) (411,107)Interest paid 1,307,715 565,201Present value adjustment on rehabilitation provision 186,121 140,783Share based payment reserve 749,406 -Foreign exchange loss 4,811,205 6,114,780Operating loss before working capital changes (6,295,514) (5,009,104)(Increase) / decrease in trade and other receivables (12,031,562) 140,515Increase / (decrease) in trade and other payables 13,747,215 (3,604,742)(Increase) in inventories (6,133,588) (792,440)Cash utilised in operations (10,713,449) (9,265,771)Interest paid (1,307,715) (565,201) Net cash utilised by operating activities (12,021,164) (9,830,972)Cash flows from investing activitiesProceeds from sale of property, plant and equipment 568 41,447Acquisition of subsidiary net of cash acquired 1,934,936 5,560,464Interest received 654,151 411,107Acquisition of investments - (1,271,410)Acquisition of property, plant and equipment (5,086,569) (4,152,748)Development expenditure (3,847,301) (4,069,863)Net cash from investing activities (6,344,215) (3,481,003)Cash flows from financing activitiesNet proceeds from the issue of share capital 36,087,171 469,404Increase / (decrease) in long term borrowings 19,424,564 (7,605,319)Net cash from financing activities 55,511,735 (7,135,915)Net increase / (decrease) in cash and cash equivalents 37,146,356 (20,447,890)Cash and cash equivalents at beginning of the year 7,019,644 27,591,394Effect of exchange rate fluctuations on cash held (41,171) (123,860)Cash and cash equivalents at end of the year 44,124,829 7,019,644 PETRA DIAMONDS LIMITED - PRELIMINARY RESULTS NOTES TO THE ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2006(UNAUDITED) 1. BASIS OF PREPARATION The Group financial statements are prepared in accordance with InternationalFinancial Reporting Standards, as adopted by the European Union (IFRS) andinterpretations issued by the International Financial Reporting InterpretationsCommittee of the International Accounting Standards Board. The functionalcurrency of the Group's business transactions in Angola, Botswana, and SierraLeone and South African diamond sales are US Dollars. References totransactions in South African Rand (ZAR) are denoted by an R. The reportingcurrency of the group is US Dollars 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 period ofrevision and future periods if the revision affects both current and futureperiods. Areas where management have made judgments, estimates and assumptionsrelate to decommissioning, mine closure, environmental rehabilitation, compoundfinancial instruments and share based payments. The accounting policies set out below have been applied consistently to allperiods presented in these financial statements by all Group entities. 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. Beneficiation - cutting and polishing of rough diamonds. Business segments Mining Exploration Beneficiation Consolidated 2007 2007 2007 2007 US$ US$ US$ US$ Revenue from external customers 16,712,146 336,648 - 17,048,794Segment result (5,851,790) (3,495,749) (84,877) (9,432,416)Operating loss (8,852,808) (11,837,295) (599,228) (21,289,331)Financial income - 647,767 2,384 644,151Financial expense (1,140,030) (1,082,950) - (2,222,980)Income tax 1,909,234 - - 1,909,234Loss for year (8,083,604) (12,268,478) (596,844) (20,948,926) Segment assets 87,227,690 137,374,026 1,157,640 225,759,356Total assets 87,227,690 137,374,026 1,157,640 225,759,356 Segment liabilities 32,165,070 32,108,430 922,330 65,195,830Total liabilities 32,165,070 32,108,430 922,330 65,195,830 Cash flows from operations (10,053,291) (954,401) (1,013,472) (12,021,164)Cash flows from investing (5,212,480) (1,134,119) 2,384 (6,344,215)Cash flows from financing (3,514,530) 57,698,000 1,328,265 55,511,735Capital expenditure 4,818,397 4,115,473 - 8,933,870Depreciation and amortisation 5,274,209 4,885,117 84,876 10,244,202Impairment losses - - - - Geographical segments Angola Botswana South Africa Sierra Leone Jersey Consolidated 2007 2007 2007 2007 2007 2007 US$ US$ US$ US$ US$ US$ Revenue from external customers - - 16,712,146 - 336,648 17,048,794Segment assets 52,318,248 9,318,811 106,890,457 8,369,539 48,862,301 225,759,356Segment liabilities 12,988 54,787 40,439,879 3,165,035 21,523,141 65,195,830Cash flows from operations (19,864) 1,638,195 (8,757,883) (687,205) (4,194,407) (12,021,164) Cash flows from investing 4,684 (149,153) (4,727,703) (3,847,301) 2,375,258 (6,344,215) Cash flows from 101,158 3,093,099 (2,447,727) 3,847,301 50,917,904 55,511,735financing Capital expenditure - (155,132) (4,818,397) (3,847,301) (113,040) (8,933,870) Impairment losses - - - - - - 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 profit/(loss) (4,862,172) (14,968,544) - (19,830,716)Net financing income/(costs) (1,178,884) 1,024,790 - (154,094)Income tax expense 1,120,354 - - 1,120,354Profit/(loss) 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 Sierra Jersey Consolidated Africa Leone 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 - 97,350,324Segment Liabilities - 1,712,936 23,511,000 - - 25,223,936Cash 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 - - - - - - The Group commenced beneficiation activities effective 27 November 2006 on theacquisition of Calibrated Diamonds Investment Holdings (Pty) Limited. Thereforethere are no comparative numbers for the year to 30 June 2006. 3. ACQUISITIONS OF SUBSIDIARIES 3 (a) Acquisition of subsidiaries Calibrated Diamonds Investment Holdings (Pty) Limited On 27 November 2006, the Company acquired the issued share capital in CalibratedDiamonds Investment Holdings (Pty) Limited ("CDIH"), for $2,334,665, satisfiedby a cash payment. CDIH is focused on the cutting and polishing('beneficiation') of rough diamonds utilising a unique process developed by theCDIH Group, which enables CDIH to produce polished diamonds of a very high andconsistent standard. In the seven months to 30 June 2007, CDIH made a loss of$596,844. If the acquisition had occurred on 1 July 2006, the Group's loss forthe period ending 30 June 2007 would have increased by $982,534. Effect of the acquisition The acquisition had the following effect on the Group's assets and liabilities. Calibrated Diamonds Investment Holdings net assets Book Values Fair Value Carrying Valuesat acquisition date: Adjustments US$ US$ US$Fair value of net assets of entity acquiredIntellectual property 362,689 3,157,017 3,519,706Plant & Equipment 283,985 - 283,985Cash assets 9,185 - 9,185Receivables 30,446 - 30,446Inventory 345,537 - 345,537Deferred tax liability - (709,717) (709,717)Accruals and payables (62,079) - (62,079)Non interest bearing non-current liabilities (1,082,398) - (1,082,398)Consideration amount satisfied in cash (112,635) 2,447,300 2,334,665 Total fair value of assets acquired 2,334,665Consideration (amount settled in cash) 2,334,665Goodwill - The fair value adjustment of $2,447,300 arose as a result of the premiumattributable to the Intellectual Property purchased from Calibrated DiamondsInvestment Holdings (Pty) Limited. The allocation of the premium to intellectualproperty is deemed to be provisional. 3 (b) Acquisition of assets Frannor Investments & Finance Limited The Company acquired the issued share capital in Frannor Investments & FinanceLtd ("FBVI"), for US$60,684,720, effective 1 March 2007. The consideration wassatisfied by the issue of 19,674,584 Petra shares. FBVI, through its whollyowned subsidiary, Frannor Investments and Financing (Pty) Limited ("FRSA"),holds a 40% and 39% interest in the Luangue alluvial and kimberlite prospectinglicences respectively in Angola together with its Angolan partners. In the threemonths to 30 June 2007, FBVI recorded an exploration loss of US$85. If theacquisition had occurred on 1 July 2006, the Group's loss for the period ending30 June 2007 would have decreased by $9,229. Effect of the acquisition The acquisition had the following effect on the Group's assets and liabilities. Frannor Investments & Finance Limited net assets at Book Values Fair Value Carrying Valuesacquisition date: Adjustments US$ US$ US$Fair value of net assets of entity acquiredPlant & Equipment 1,456,368 - 1,456,368Prospecting licences 14,962,850 42,341,130 57,303,980Cash 1,925,751 - 1,925,751Accruals and payables (1,379) - (1,379)Consideration amount satisfied in cash 18,343,590 42,341,130 60,684,720 The fair value adjustment of $42,341,130 arose as a result of the revaluation ofthe Prospecting licences purchased from Frannor Investments & Finance Limited.The allocation of the premium to prospecting licences is deemed to beprovisional.. Deferred taxation has not been provided on the acquisition of thecompanies as the transaction was not deemed to be a business combination inaccordance with IFRS 3. Acquisition of Koffiefontein Diamond Mine Assets In December 2006 Petra entered into a conditional agreement with De BeersConsolidated Mines Limited ("De beers") to acquire the mining and associatedcapital assets ("the Assets") previously used by De Beers in the operation ofthe Koffiefontein diamond mine ("Koffiefontein") in South Africa. Theconsideration for the Assets was R81,921,585 ($11,612,506), settled by way ofPetra assuming De Beers' rehabilitation obligations at Koffiefontein amountingto R80,021,583 ($11,343,178), plus the payment in cash by Blue Diamond Mines(Petra's operating subsidiary in South Africa) to De Beers of R1,900,000($269,328). Deferred taxation has not been provided on the acquisition of theassets as the transaction was not deemed to be a business combination inaccordance with IFRS 3. Effect of the acquisition The acquisition had the following effect on the Group's assets and liabilities. Koffiefontein diamond mine net assets at date of Book Values Fair Value Carrying Valuesacquisition: Adjustments US$ US$ US$Fair value of net assets of entity acquiredLand 508,723 - 508,723Plant and residential houses 1,769,018 - 1,769,018Mining property, plant and equipment 8,478,821 - 8,478,821Underground development 611,332 - 611,332Non-mining property, plant and equipment 20,810 - 20,810Inventory 223,802 - 223,802Environmental liabilities (11,343,178) - (11,343,178)Consideration amount satisfied in cash 269,328 - 269,328 4. COST OF SALES 2007 2006 US$ US$ Raw materials and consumables used 8,109,941 6,292,071Employee expenses 13,020,423 12,214,540Depreciation of mining assets 5,274,209 5,630,717Changes in inventory of finished goods (5,400,637) (958,741) 21,003,936 23,178,587 5. EXPLORATION EXPENDITURE Employee expenses 323,107 313,182Depreciation of exploration assets 1,115,782 35,687Amortisation of intangible assets 3,740,928 2,832,355Drilling costs 243,717 1,277,973Equipment hire 6,722 207,689Other exploration costs 661,413 257,551 6,091,669 4,924,437 6. OTHER OPERATING EXPENDITURE Auditors' remuneration- Current auditors - audit services 195,437 - - other services 19,394 -- Previous auditors - audit services - 368,132Depreciation of property plant and equipment 113,283 40,573Foreign exchange losses 4,811,205 6,114,780Operating lease rentals 153,739 222,257Employee expenses 1,888,271 1,804,326Corporate activity expenditure 55,293 359,743Loss/(profit) on disposal of property plant and equipment (81,852) 26,717Administration expenses - mining operations 1,794,312 1,421,192Other charges 1,856,098 1,620,437Share based options - directors 253,656 349,303 - senior management 183,684 268,989 11,242,520 12,596,449 7. NET FINANCING COSTS 2007 2006 US$ US$ On bank loans and overdrafts (813,377) (412,485)Other debt finance costs (1,409,603) (152,716)Financial expense (2,222,980) (565,201)Interest received 654,151 411,107 (1,568,829) (154,094) 8. LOSS PER SHARE 2007 2006 US$ US$ Loss for the year 20,948,926 18,864,456 Weighted average number of ordinary sharesAs at 1 July 143,916,416 73,937,847Effect of shares issued during the period 10,103,075 69,978,569As at 30 June 154,019,491 143,916,416 Shares SharesBasic weighted average number of ordinary shares in issue 154,019,491 143,916,416 US cents US centsBasic loss per share - cents (13.60) (13.11)Due to the Group's loss for the year, the diluted loss per share is thesame as the basic loss per share. The number of potentially dilutiveordinary shares, in respect of employee share options and warrants is22,231,000. These potentially dilutive ordinary shares may have adilutionary effect on future earnings per share. 9. RESERVES Share Share Foreign Share based Other Accumulated Total capital premium currency payment reserves loss account translation reserve reserve US$ US$ US$ US$ US$ US$ US$ At 1 July 2005 23,500,190 101,775,127 4,102,740 - - (62,393,694) 66,984,363Implementation of - - - 354,670 - (354,670) -IFRS 2Restated balance 23,500,190 101,775,127 4,102,740 354,670 - (62,748,364) 66,984,363at 1 July 2005Loss for the - - - - - (18,864,456) (18,864,456)periodEquity settled - - - 618,292 - - 618,282based sharepaymentsExchange - - (1,561,653) - - 4,153 (1,557,500)differencesPremium allotments 3,347,105 20,550,930 - - - - 23,898,035during the yearShare issue costs - (57,472) - - - - (57,472)Convertible notes 183,808 921,318 - - - - 1,105,126issuedAt 30 June 2006 27,031,103 123,189,903 2,541,087 972,962 - (81,608,667) 72,126,388 27,031,103 123,189,903 2,541,087 972,962 - (81,608,667) 72,126,388 At 1 July 2006Loss for the year - - - - - (20,948,926) (20,948,926)Equity settled - - - 554,038 - - 554,038share basedpaymentsEquity portion of - - - - 4,003,682 - 4,003,682convertible bondExchange - 14,706,573 (8,677,941) - - - 6,028,632differencesPremium allotments 9,329,300 90,200,058 - - - - 99,529,358during the yearShare issue costs - (729,646) - - - - (729,646)At 30 June 2007 36,360,403 227,366,888 (6,136,854) 1,527,000 4,003,682 (102,557,593) 160,563,526 10. CONVERTIBLE NOTE - UNSECURED On 19 September 2006 the Company issued a US$20 million unsecured interest freeconvertible bond ("the Convertible").The Convertible is convertible at anexercise price of 130 pence per Petra share at the election of the holder. Ifnot converted, the Convertible is repayable in full on 18 September 2009. On 29September 2006 the Company drew down on the Convertible. 30 June 30 June 30 June 30 June 2007 2006 2007 2006Movements in convertible notes and bond Number Number US$ US$Balance at beginning of year - 16,078,191 - 2,206,678Issue of convertible bond 7,677,337 - 20,000,000 -Equity portion - - (4,003,682) -Interest accreted for the year - - 915,265 -Exchange differences - - - (94,399)Redeemed during the period - (9,417,761) - (1,239,403)Converted to ordinary Shares - (6,660,430) - (872,876) Balance at the end of year 7,677,337 - 16,911,583 - 11. ANNUAL REPORT AND ACCOUNTS The results for the year ended 30 June 2007 are unaudited and do not constitutestatutory accounts. The Report and Accounts for the year ended 30 June 2006,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 2007 willbe posted to shareholders in November 2007. This information is provided by RNS The company news service from the London Stock Exchange