Petra Diamonds Regulatory News (PDL)

19 Feb 2008 08:56

Petra Diamonds Ld19 February 2008 19 February 2008 AIM: PDL Petra Diamonds Limited Interim Results - Profit of US$8.2m Petra Diamonds Limited ("Petra", "the Company" or "the Group") announces itsinterim results (unaudited) for the six months to 31 December 2007 ("the Period"), following its trading update announced on 24 January 2008. These results record substantial revenue growth with a corresponding turnaround inprofits and cash flows. The Company is pleased to report its first profitsfollowing its successful development from an exploration base into a leadingdiamond producer and exploration group. The Company has, over the past 14 months, successfully grown its base ofproduction assets through the separate acquisitions of the Cullinan,Koffiefontein and Kimberley Underground mines, complementing Petra's world classexploration base in Angola (Alto Cuilo, Luangue), Botswana (Kalahari Diamonds)and operations in Sierra Leone (Kono). SUMMARY OF RESULTS (unaudited) 6 months to 31 6 months to 31 December 2007 December 2006 US$ million US$ millionRevenue 32.1 8.2Rough diamond sales 31.7 8.2Polished diamond sales 0.4 -Gross profit / (loss) * 16.1 (1.6)Exploration expenses * 1.0 0.4Administration expenses * 5.9 4.1 Net profit / (loss) for the Period 8.2 (9.5) EPS cents 2.44 (6.33)Cash at bank 58.9 19.2Group EBITDA 8.8 (3.2) * stated before depreciation, amortisation of intangibles, interest paid andforeign exchange gains • Group revenue growth of 291% driven largely by Koffiefontein salescoming on stream in July 2007 and a significant increase in the prices achievedfrom production at the South African fissure mines; turnaround in results due torevenue growth combined with consistent cost control throughout the Group MAJOR GROUP DEVELOPMENTS • Petra-led consortium to acquire the Cullinan mine, historically aproducer of spectacular diamonds; expected to add over 1 million carats p.a.gross production to the Group • Petra also to acquire the Kimberley Underground mines; expected to addover 100,000 carats p.a. gross production to the Group TRADING & PRODUCTION South Africa • Production of 101,213 carats for the Period (17% increase on six months to 31 December 2006: 86,396 carats) • Sales of 115,918 carats for the Period (79% increase on six months to 31 December 2006: 64,940 carats) • Strong diamond prices recorded at: o Koffiefontein: US$408/carat o Fissure mines - Helam, Star and Sedibeng: US$182/carat (44% increase on 6 months to 31 December 2006: US$126/carat)• January 2008 (post Period end): exceptional 50.14 carat diamond recovered at Sedibeng mine and sold for US$1,312,018, (US$26,167 per carat) EXPLORATION Angola • Alto Cuilo - second large diameter drill rig on site to accelerate mini bulk sampling campaign; encouraging results received from AC63 and AC98 • Luangue - Joint Venture agreed with BHP Billiton Botswana • 57,000 line km gradient array magnetometer survey completed for Kukama; 7,000 line km gradient array magnetic survey completed for majority of Tswapong area • Drilling programme (3,000m+) to commence shortly in the Gope East, Gope West and Kukama project areas Sierra Leone • Trial mining continues on two shafts; 8,640 diamonds totalling 760 carats recovered to date, including a 10.55 carat octahedron CUTTING & POLISHING ('beneficiation') • Calibrated Diamonds production build up continues; aiming to cut and polish 2,500 carats of rough by mid 2008; initial sales of US$0.4 million (27.42 carats) of polished diamonds to date Adonis Pouroulis, Chairman, commented; "In the period under review Petra agreed two further key acquisitions, Cullinanand Kimberley Underground, in line with our strategy to introduce high qualityproducing assets into the Group. Upon completion of these two acquisitions,Petra will be the operator of six producing diamond mines in South Africa andthese assets, combined with our strong exploration pipeline, ensure that theGroup is well positioned to become a top tier global diamond producer. WithGroup production expected to rise to well over 1 million carats per annum by2010, against a previous management target of 500,000 carats for the sameperiod, we have rapidly established strong revenue growth that will in turnenhance shareholder value." For further information, please contact: Cathy Malins Tel: +44 (0) 20 7493 7671Petra Diamonds, London Louise Goodeve / Justine Howarth Tel: +44 (0) 20 7851 7480Parkgreen Communications, London Adrian Hadden / Piers Coombs Tel: +44 (0) 20 7523 8000Collins Stewart, London About Petra Diamonds Petra Diamonds is a pan-African diamond mining group with a balanced portfoliocombining major producing mines, world class exploration assets and a cuttingand polishing business. With operations in South Africa, Angola, Botswana and Sierra Leone, Petra'sobjective remains to develop its stature as a leading diamond producer in all ofthe countries in which it operates. In South Africa, Petra has four producingmines and recently reached agreements to acquire a further two mines from DeBeers (Cullinan and Kimberley Underground). The Company is on track to increaseits annual production from 180,000 carats in the year to June 2007 to over400,000 carats in the year to June 2009 and is targeting annual production ofover 1 million carats thereafter. Complementing the Group's production is an exploration and development portfoliospread across some of the world's most prospective diamond fields. In Angola,Petra is developing its world class Alto Cuilo and neighbouring Luangue projectsin two separate joint ventures with BHP Billiton. In Botswana, Petra hasestablished the largest exploration holding in the country, where it believesthat modern exploration techniques will hold the key to the discovery of new,major kimberlites. In Sierra Leone, Petra is developing a fissure operation andtest work to date indicates the potential for economic operations. The Petra group now employs some 3,000 people in Africa and over the last 10years, the Company has developed a range of social initiatives which continue tomake a meaningful impact upon the lives of employees and surroundingcommunities. Petra's focus remains upon sustainable development, viaeducational programmes and skills transfer, to ensure a broad based approachwith a lasting legacy, and all operations are carried out with the highestregard for the environment according to best practice. For further information, please go to www.petradiamonds.com Chairman's Statement It is with great pleasure that I present the interim financial statements toDecember 2007, a period in which Petra has continued its steady and consideredgrowth. In particular we recorded two very important achievements in the historyof the Petra Group; the agreement to acquire the Cullinan mine from De Beers andthe Group achieving a milestone in its financial results with substantialon-mine profits and the generation of the associated operating cash flows. In the period under review, Petra reached agreements to acquire both theKimberley Underground and Cullinan mines and completed the acquisition of theKoffiefontein mine. With only some 25 kimberlite diamond mines in the worldbeing actively mined today, a tiny figure in comparison to other commodities,our strategy has been to capitalise upon this rare window of opportunity toacquire substantial diamond production. These deals bear witness to the continued evolution of the diamond market. It isan industry where a spirit of partnership and forward thinking is essential andwe are proud of the strong relationships we have cultivated. In particular, Iwould like to thank De Beers for the work they have done to encourage growth anddevelopment in the industry, helping to facilitate broad ownership andcompetition within the South African diamond sector. The Petra Group portfolio is now well balanced and diversified. We have a worldclass diamond exploration portfolio, having gained early entry to Angolafollowed by Sierra Leone and Botswana. We await further developments at AltoCuilo in Angola, where a second large diameter drill rig will expedite the minibulk sampling programme currently underway. Initial results received in theperiod under review have been encouraging and we look forward to reportingfurther progress in 2008. The highlights for the Period are set out below: FINANCIAL RESULTS A gross profit (before depreciation) of US$16.1 million was reported due to boththe substantial growth in diamond production combined with the excellent averageprices received for Koffiefontein production and the strong average priceincrease achieved for the fissure mines production. Further, our most recenttender, held in January, also saw strong prices being achieved and at this timewe are not seeing a weakening in demand for Petra's production. The profit after tax for the Period amounted to US$8,235,329 (loss to 6 monthsto 31 December 2006: US$9,469,559), stated after foreign exchange gains ofUS$5,726,819, of which US$1,375,559 and US$1,266,195 are realised and unrealisedgains from forward exchange contracts on diamond sales and $3,085,065 is anunrealised gain on Group loan balances (6 months to 31 December 2006: loss ofUS$1,747,930), amortisation of intangibles of US$1,982,627 (6 months to 31December 2006: US$1,995,688), and depreciation of US$3,793,227 (6 months to 31December 2006: US$2,829,324). DIAMOND MARKET Despite the turbulence in world financial markets, we remain upbeat on theoutlook for the diamond market. Whilst there is concern about a consumerslowdown in the US, it is worth noting that demand for diamonds is rising at aconsiderable pace in new emerging markets, such as China, India and the MiddleEast. The market is expected to continue to be in deficit for the foreseeablefuture (with demand exceeding supply) and indeed De Beers has already raisedprices for rough diamonds by 3.5% in 2008, a key industry indicator. Consistentwith this, we have recorded price increases at our first tenders held this year. In January 2008 we sold the highest value diamond in Petra's history, a 50.14carat stone that realised over US$1.3 million, equating to US$26,167 per carat. TRADING Koffiefontein - South Africa In July 2007, Petra completed the acquisition of the Koffiefontein mine andhaving conducted care and maintenance activities at the mine in the 12 monthsprior to completion, was able to bring the mine on stream immediately. Withmodifications made by Petra to the plant and the mining process, the Company isnow achieving an average value per carat of US$408, an exceptional value for akimberlite mine and almost double that forecast in Petra's original mine model(US$240 per carat). A grade of 8.2 carats per hundred tonnes ("cpht") has beenachieved, against an estimate of 7.3 cpht used in the original business plan. Costs and capital expenditure ("CAPEX") at Koffiefontein were both in line withmanagement expectations. The cash costs at Koffiefontein ran at approximatelyR86 per tonne, a level which (other than inflation based increases) we expect tomaintain going forward. CAPEX for the Period was US$1.7 million, with totalCAPEX spend at the mine for the 12 months to June 2008 expected to be US$5.5million, which includes the installation at Koffiefontein of electricitygeneration capacity. We are confident that we can replicate our success at Koffiefontein and intendto follow a similar strategy at both Cullinan and Kimberley Underground. Koffiefontein production: Unit 6 months ended 6 months ended 31 December 2007 31 December 2006ProductionDiamonds produced Cts 38,456 14,468Grade Cpht 8.2 7.7 SalesRevenue US$m 19.2 -Diamonds sold Cts 46,937 -Average price per carat US$ 408 - Note 1: All production and sales figures are stated gross; 70% is attributableto the Group. Note 2: Although production was recorded at Koffiefontein in the year to June2007 during the care and maintenance period, sales only commenced in July 2007when the remaining conditions in the Koffiefontein acquisition agreement weremet. Kimberley Underground - South Africa In September 2007, Petra reached agreement to acquire the Kimberley Undergroundmines ("Kimberley Underground") from De Beers, following a competitive tenderprocess, for a total consideration of R78.5 million. Kimberley Undergroundcomprises Wesselton, Du Toitspan and Bultfontein, three historic mines whichwere at the heart of South Africa's diamond rush in the late 1800's. Petra has since been operating the mines on a care and maintenance basis onbehalf of De Beers until all required mining authorisations are received fromthe South African authorities (expected mid 2008). Based on historicalproduction and sales information, we expect annual sales in excess of 100,000carats at an average of US$160 per carat once full production is recommenced,giving gross annual revenues in excess of US$16 million and a life of mine of atleast 12 years. Cullinan - South Africa In November 2007, Petra signed a landmark deal to acquire the Cullinan diamondmine ("Cullinan"), from De Beers, as part of a Petra-led consortium for a totalcash consideration of R1 billion. As with the acquisition of Koffiefontein andthe agreement to acquire Kimberley Underground, this agreement followed arigorous and competitive tender process. The Petra Diamonds Cullinan Consortium ("PDCC") comprises Petra Diamonds Limited(37% initial interest), Al Rajhi Holdings W.L.L. ("Al Rajhi") (37% initialinterest) and PDCC's Black Economic Empowerment partners (26% interest). Petracan increase its interest in PDCC (from Al Rajhi) to 60% based on performance ofthe mine and pre-agreed option payments. Cullinan (known as the Premier Mine until 2003) is renowned for producing manyof the world's largest and most famous diamonds, including the largest ever gemdiamond, the Cullinan diamond at 3,106 carats rough, as well as more than aquarter of all diamonds weighing more than 400 carats. It also frequentlyyields diamonds larger than ten carats. The prices of high end diamonds remain strong and price growth buoyant, despitethe current economic uncertainty, and record sales have recently been noted atauction houses. Fancy colours, and in particular blue diamonds, are highlysought after and the world's highest value diamond by carat, a 6.04 caratinternally flawless, emerald cut, fancy blue diamond, was sold in October 2007for US$7.98 million at a Sotheby's auction in Hong Kong - achieving an all timehigh price of US$1.32 million per carat. This bodes well for Cullinan, theworld's only significant source of blue diamonds. In the year to December 2006, De Beers produced 1.15 million carats at the mine,with a market value of R504.9 million (US$75.2million). We believe that thereare reserves and resources in place at the existing mine (excluding theCentenary-Cut resource) to support an additional mine life in excess of 20years, yielding annual rough diamond production of in excess of 1 millioncarats. Underneath the existing mining operations lies the Centenary Cut, or 'C-Cut'resource. Estimated at 133.1 million carats in-situ, the C-Cut is the world'ssecond largest diamond indicated resource. Whilst previous studies haveindicated a high capital cost required to develop the C-Cut, we intend toconsider new alternatives, such as a phased approach to development. There arealso substantial tailings resources at Cullinan, incorporating both dumps andthe higher grade optical sort tailings. In December 2007, the South African Department of Minerals and Energy convertedthe old order mining right in respect of Cullinan into a new order mining right,and in February 2008 the South African Competition Commission gave its approvalof the acquisition. We now expect the remaining conditions precedent to theacquisition to be met between May and July 2008. Fissure mines At the fissure mines, our attention has shifted from volume of carats producedto optimisation of revenues by focus on grade and final recovery, resulting inaverage value per carat achieved increasing from $126 per carat for the periodending 31 December 2006 to $182 per carat. Cash costs per tonne ran atapproximately R530 per tonne overall for the three fissure mines, a level whichmanagement is confident can be substantially improved upon. CAPEX for the periodwas US$2 million, with a total expenditure for the full year to June 2008 ofUS$3.8 million expected. The current skill shortages and interruptions to power supply being experiencedin South Africa have meant that the Company is redirecting management attentionto continue improving efficiencies via further mechanisation and otherinitiatives. Helam Power outages have had an impact on production at Helam but steps have beentaken to address this, such as using lower energy pumps and overall focus onbest use of power supplies. We have continued to make great strides towards thesemi-mechanisation of the mine, which will lead to future cost reductions in themedium term. The deepening of shafts and addition of new levels are progressingaccording to plan. Star The main shaft sinking programme has been successfully completed to 14 level andthe deepening to 15 level is well underway. When the main shaft reaches 15level the current sub-shaft system will be decommissioned. It is anticipatedthat the main shaft (with ore passes and loading arrangements) will have beendeepened to 16 level by the end of 2008. This will be a major step forwardtoward the semi-mechanisation of Star mine and is expected to lead tosignificant cost reductions. Sedibeng The mechanisation process at Sedibeng is the most advanced of all of Petra'sfissure mining operations. Raise boring is now being undertaken to deepen theDancarl shaft to beyond 20 level and this should be completed by the end of2008, opening up a block of ground in excess of half a million tonnes formining access. This is a considerable tonnage, given that approximately 150,000tonnes is currently mined each year at Sedibeng. The recently commissioned diamond recovery plant is operating well and has apositive impact on both costs and diamond security. The stockpile built upduring the commissioning phase was virtually depleted by the Period end. Sedibeng regularly produces exceptional diamonds, including a 99.43 caratdiamond sold in the Period for US$1,305,009 (equivalent to US$13,125 per carat).Since the Period end, a further exceptional diamond of 50.14 carats wasrecovered in January 2008 and sold for US$1,312,018, (US$26,167 per carat),being the most valuable diamond to be sold in Group history. Fissures mines (Helam, Star, Sedibeng) combined production: Unit 6 months ended 6 months ended 31 December 2007 31 December 2006ProductionDiamonds produced Cts 62,757 71,928Grade Cpht 47.5 41.6 SalesRevenue US$m 12.5 8.2Diamonds sold Cts 68,981 64,940Average price per carat US$ 182 126 Note 1: All production and sales figures are stated gross Power shortages - South Africa The current issue of power shortages in South Africa is well documented and anumber of our mining operations have been temporarily impacted. Over the lastmonth, Petra has experienced occasional load-shedding at each of our fourproducing mines in South Africa, however we have back-up generator facilities inplace at all operations which ensure the safety of our employees, as well asensuring that conditions in our underground mining areas are kept in goodworking order. The recent outages have not caused us to adjust our overallexpectations of production levels and, should Eskom maintain supply of power at90%, we remain on track to reach our internal forecasts for the year to June2008. EXPLORATION Angola - Alto Cuilo The development of Alto Cuilo, a project with some 77 kimberlites confirmed,remains a priority for Petra. As previously reported, the first mini bulk sample("MBS") results were a major milestone in the development of Alto Cuilo and wewere very encouraged by the high grade zones encountered at kimberlites AC63 andAC98. Sadly operations at Alto Cuilo were temporarily disrupted following the tragichelicopter accident in Angola in November 2007. Whilst this incident wasunrelated to Alto Cuilo, all BHP Billiton operations in Angola were temporarilysuspended. A second large diameter drill rig is now at site and we expect this toaccelerate our MBS programme. Bulk samples are now scheduled on surface outcropsof AC16 and AC98 and further high priority targets have been identified. Inorder to increase our understanding of the complex morphology of the kimberliticclusters at Alto Cuilo, several NSAMT (Natural Source Audio Magneto Tellurics)surveys are planned for 2008. As at 31 December 2007, BHP Billiton's spend at Alto Cuilo totalled US$57.8million, with the result that our partner is close to its earn-in threshold ofUS$60 million, upon which it will hold a 75% share of our interest in AltoCuilo. Once this US$60 million threshold is met, the agreement in place betweenPetra and BHP Billiton requires that both parties fund further development ofAlto Cuilo in proportion to their shareholdings. Angola - Luangue In July, Petra entered into a second joint venture agreement with BHP Billitonto develop the Luangue diamond project, the contiguous concession to the northof Alto Cuilo. Exploration work carried out to date at Luangue supports thepresence of kimberlitic clusters in the area. As detailed information on diamondcontent emerges on the Alto Cuilo kimberlitic occurrences, the selection andprioritisation of bulk sample targets at Luangue is enhanced. This is expectedto fast-track exploration developments at Luangue, accelerating progress towardsa pre-feasibility study. In December 2007, a low level aero magnetic survey was completed over theLuangue concession. Targets will be prioritised for the narrow diameter drilling(NDD) programme and three core drill rigs are currently en route to site tocommence the kimberlite verification programme. Botswana - Kalahari In Botswana, where we have an on-craton area of some 52,000km(2) underinvestigation, Petra continues to carry out a highly focused explorationprogramme. In addition to the ground geophysical follow up of anomalies inpreparation for drilling, a 57,000 line kilometre low level gradient arraymagnetometer survey was completed for the Kukama area and target selection isexpected to be completed by March 2008. A 7,000 line kilometre gradient arraymagnetic survey was also completed in the Tswapong area, investigatingkimberlite indicator mineral anomalies detected during our sampling programmes. The next phase of the exploration programme is a 3,000 to 5,000 metre drillingprogramme which will commence shortly in the Gope East, Gope West and Kukamaproject areas. This programme will target new anomalies as well as definitiondrilling on known kimberlites such as kimberlite 173S in the Kukama area that isnow, on new data, interpreted to be 25 hectares in surface area. We have completed ground geophysical follow up of the two diamondiferouskimberlites, DK4 and DK6, in the Jwaneng locality and gravity data suggests thatthese kimberlites are both larger than originally suspected. We now aim to testthe indicated grades of approximately 8 cpht as recorded by previous operatorsand Petra plans to commence underground test shafts towards the end of 2008. Sierra Leone - Kono Trial mining operations at the Kono project, a joint venture with StellarDiamonds, continue with highly encouraging results at the Pol K and Bardu testshafts. A total of 8,640 diamonds (760 carats) have now been recovered at Kono(bottom cut 1 mm). A parcel of 581 carats has been shipped to South Africa andthese are being cleaned, awaiting valuation. At Pol K shaft, a total of 757.5 tonnes of in-situ fissure has now beenextracted. Ore processing has yielded 5,603 diamonds totalling 479.5 carats,rendering a very satisfactory in-situ grade of 63 cpht, with the ten largestdiamonds ranging in size from 1.1 carats to 10.55 carats. At the extractiondepth of 32 metres, satisfactory mining conditions have been experienced. Shaftsinking will now be extended to a depth of 60 metres, at which point stopepanels will be established to increase ore extraction. At Bardu shaft, trial mining started in early December 2007. The limited amountof in-situ fissure tonnes extracted so far at a depth of 30 metres below surfaceyielded encouraging in-situ grades, however Petra is of the opinion that thescale of the work conducted is presently too limited to arrive at anyrepresentative in-situ grade. Test work will continue in order to obtain anin-situ grade and evaluate the quality of the diamonds. As previously stated,we expect to be in a position to make a development decision at Kono by mid2008. It is also worth noting the considerable exploration potential at Kono and Petrahas, subject to successful contract negotiations, awarded a contract to FugroAirborne Surveys to conduct a survey in the Kono area to prospect for potentialkimberlite pipes and blows. CUTTING & POLISHING Calibrated Diamonds, Petra's cutting and polishing business, continues to buildcapacity. Calibrated Diamonds' proprietary technology produces brilliant cutdiamonds of a high and consistent standard, and test work to date has deliveredexcellent results. Revenue from the polished diamonds sold in the period wasUS$0.4 million (27.42 carats); the stock of diamonds on hand at 31 December willbe completed over the next few weeks and then the polished diamonds sold in theperiod to 30 June 2008. CONCLUSION Throughout 2007 Petra continued to grow its production base throughacquisitions, culminating with the agreement to acquire Cullinan. Petra'sprofile as a low cost producer and our innovative mining approach has turned theKoffiefontein mine into a profitable operation, and demonstrated our ability tosuccessfully operate major underground diamond mines. We have plans in place toachieve similar results at both Kimberley Underground and Cullinan. Today we are able to offer our shareholders an integrated diamond groupcomprising rapidly rising production, substantial reserves and resources and thesignificant upside potential of major exploration assets. Set against a marketof limited supply and rising diamond prices, these attributes will ensure abright future for the Company and all its stakeholders as we further establishourselves as a world class diamond group. Adonis PouroulisChairman19 February 2008 PETRA DIAMONDS LIMITED CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2007 Notes (Unaudited) (Restated) (Restated) 1 July 2007- (Unaudited) 1 July 2006 - 31 December 2007 1 July 2006 - 30 June 2007 31 December 2006 US$ US$ US$Revenue 32,185,814 8,268,611 17,048,794Cost of Sales (19,642,512) (9,831,860) (21,003,936)Gross profit / (loss) 12,543,302 (1,563,249) (3,955,142)Exploration expenditure (3,552,815) (2,440,798) (6,091,669)Administration expenditure 7 (5,936,879) (4,092,533) (6,431,315)Financial income 6,965,169 113,814 654,151Financial expense (1,653,044) (2,351,474) (7,034,185)Net financing income / (costs) 8 5,312,125 (2,237,660) (6,380,034)Profit / (loss) before tax 8,365,733 (10,334,240) (22,858,160)Income tax (expense) (130,404) 864,681 1,909,234Profit / (loss) for the period 8,235,329 (9,469,559) (20,948,926) Attributable to:Equity holders of the holding company 4,450,693 (9,469,559) (20,948,926)Minority shareholders 3,784,636 - - 8,235,329 (9,469,559) (20,948,926) Basic earnings / (loss) per share - cents 11 2.44 (6.33) (13.60)Diluted earnings / (loss) per share - cents 11 2.37 (6.33) (13.60) CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2007 (Unaudited) (Restated) (Restated) 1 July 2007- (Unaudited) 1 July 2006 - 31 December 2007 1 July 2006- 30 June 2007 31 December 2006 US$ US$ US$ Exchange differences on translation of foreign 960,858 8,283,906 8,677,941operationsNet income recognised directly in equity 960,858 8,283,906 8,677,941Profit / (loss) for the period 8,235,329 (9,469,559) (20,948,926)Total recognised income and expenses 9,196,187 (1,185,653) (12,270,985) Attributable to:Equity holders of the holding company 5,411,551 (1,185,653) (12,270,985)Minority shareholders 3,784,636 - - 9,196,187 (1,185,653) (12,270,985) CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2007 Notes (Unaudited) (Restated) 31 December (Unaudited) 2007 31 December 2006 30 June 2007 US$ US$ US$ASSETSNon-current assetsProperty, plant and equipment 95,119,713 73,429,878 84,872,711Intangible assets 45,992,598 14,308,597 72,816,432Available for sale financial assets 69,905 1,371,372 70,136Investment in associate 5 6,241,671 - -Other receivables 157,591 200,576 151,987Total non-current assets 147,581,478 89,310,423 157,911,266Current assetsInventories 11,243,742 4,653,190 8,900,532Trade and other receivables 14,708,962 4,030,737 14,822,729Derivative financial assets 1,266,195 - -Cash and cash equivalents 58,989,948 19,215,929 44,124,829Total current assets 86,208,847 27,899,856 67,848,090Total assets 233,790,325 117,210,279 225,759,356EQUITY AND LIABILITIESEquityShare capital 9 36,742,769 29,522,189 36,360,403Share premium account 10 229,024,305 134,654,784 227,366,888Foreign currency translation reserve 10 (7,097,712) (5,742,819) (6,136,854)Share-based payment reserve 10 2,256,205 1,196,715 1,527,000Other reserves 10 4,003,682 4,003,682 4,003,682Accumulated loss 10 (98,106,900) (91,078,226) (102,557,593)Equity attributable to equity holders of the 166,822,349 72,556,325 160,563,526holding companyMinority interest 3,784,636 - -Total equity 170,606,985 72,556,325 160,563,526Non-current liabilitiesLiabilitiesLoans and borrowings 2,548,588 3,115,295 3,103,252Trade and other payables 3,377,585 2,021,556 2,800,506Provisions 14,198,526 1,824,427 9,852,535Deferred tax liabilities 9,289,370 9,713,898 9,551,924Total non-current liabilities 29,414,069 16,675,176 25,308,217 Current liabilitiesLoans and borrowings 19,337,527 19,563,472 27,755,710Other payables 12,308,723 6,560,671 9,821,436Provisions 2,123,021 1,854,635 2,310,467Total current liabilities 33,769,271 27,978,778 39,887,613Total liabilities 63,183,340 44,653,954 65,195,830Total equity and liabilities 233,790,325 117,210,279 225,759,356 CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2007 Notes (Unaudited) (Restated) (Restated) 1 July 2007- (Unaudited) 1 July 2006 - 31 December 2007 1 July 2006- 30 June 2007 31 December 2006 US$ US$ US$ Profit / (loss) before taxation for the period 8,365,733 (10,334,240) (22,858,160)Depreciation of property plant and equipment - 567,533 28,807 1,115,782explorationDepreciation of property plant and equipment - 3,168,364 2,784,064 5,274,209miningDepreciation of property plant and equipment - 57,330 16,453 113,283otherAmortisation of intangible assets 1,982,627 1,995,688 3,740,928Loss / (profit) on sale of property plant and 2,999 - (81,852)equipmentFinance income (1,238,350) (113,814) (654,151)Finance expense 938,540 603,544 1,307,715Unrealised foreign exchange (gain) / loss (4,351,260) 1,747,930 4,811,205Share based payment provision 729,205 223,753 749,406Present value adjustment on rehabilitation 86,770 73,857 186,121provisionOperating profit / (loss) before working capital 10,309,491 (2,973,958) (6,295,514)changes(Increase) / decrease in trade and other (1,152,149) (1,334,699) (12,031,562)receivablesIncrease / (decrease) in trade and other payables 2,372,171 1,294,367 4,111,526(Increase) in inventories (2,912,549) (2,801,123) (6,133,588)Cash generated from / (utilised) in operations 8,616,964 (5,815,413) (20,349,138)Interest paid (938,540) (300,784) (1,307,715)Net cash generated from / (utilised) by operating 7,678,424 (6,116,197) (21,656,853)activitiesCash flows from investing activitiesProceeds from sale of property, plant and - - 568equipmentProceeds from sale of intangibles 22,354,768 - -Acquisition of subsidiary net of cash acquired - (2,334,665) 1,934,936Interest received 1,238,350 113,814 654,151Acquisition of investment in associate (3,000,000) (99,960) -Acquisition of property, plant and equipment (3,876,701) (1,971,552) (5,086,569)Development expenditure (1,939,261) (1,522,980) (3,847,301)Net cash from investing activities 14,777,156 (5,815,343) (6,344,215) Cash flows from financing activitiesNet proceeds from the issue of share capital 2,788,633 2,075,106 36,087,171(Decrease) / increase in short-term borrowings (7,855,968) - 9,635,689Increase / (decrease) in long-term borrowings (2,431,324) 22,293,600 19,424,564Net cash (utilised) / generated from financing (7,498,659) 24,368,706 65,147,424activities Net increase in cash and cash equivalents 14,956,921 12,437,166 37,146,356Cash and cash equivalents at beginning of the 44,124,829 7,019,644 7,019,644periodEffect of exchange rate fluctuations on cash held (91,802) (240,881) (41,171)Cash and cash equivalents at end of the period 58,989,948 19,215,929 44,124,829 NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2007 1. ACCOUNTING POLICIES The interim results, which are unaudited, have been prepared in accordance withInternational Financial Reporting Standards (IFRS) adopted by the InternationalAccounting Standards Board (IASB). The interim financial statements have beenprepared in accordance with the requirements of International AccountingStandard 34. This interim report does not include all the notes of the typenormally included in an annual financial report. Accordingly, this report is tobe read in conjunction with the Annual Report for the year ended 30 June 2007and any public announcements made by the Company during the interim reportingperiod. The unaudited interim financial statements for the six months ended 31 December2007 do not constitute statutory accounts and have been drawn up usingaccounting policies and presentation consistent with those applied in theaudited accounts for the year ended 30 June 2007 as adjusted for the adoption ofany new IFRS's which are applicable to the group for the year ended 30 June 2008and as adjusted for the following restatements: Analysis of foreign exchange gains and losses In the financial statements for the year ended 30 June 2007 and for the interimperiod ended 31 December 2006 all foreign exchange gains and losses wereincluded within administration expenditure. These foreign exchange gains andlosses have now been re-allocated to finance income or finance costs, asappropriate. The amounts re-allocated are deemed to be more closely aligned tofinancing than operating costs. The re-allocation of costs has no impact on theresults for the year ended 30 June 2007. Foreign exchange losses of US$4,811,205and US$1,747,930 were restated for the year ended 30 June 2007 and the periodending 31 December 2006 respectively. Cash flow statement - analysis of short term borrowings In the financial statements for the year ended 30 June 2007 an increase ofUS$9,635,689 in short term borrowings was included within the movement in tradepayables. This has now been restated as an increase in short term borrowingsunder financing activities. This restatement has no impact on the net increasein cash and cash equivalents for the year ended 30 June 2007. The financial information for the year ended 30 June 2007 has been extractedfrom the statutory accounts for that period. The auditors report for the yearended 30 June 2007 was unqualified. The financial information for the 6 months ended 31 December 2006 has beenextracted from the interim results released to 31 December 2006. 2. DIVIDENDS No dividends were proposed or paid during the period. 3. SEGMENTAL INFORMATION The Group comprises the following business segments: Mining - extraction and sale of rough diamonds from mining operations in SouthAfrica. Exploration - exploration activities in Angola, Botswana, Sierra Leone and SouthAfrica. Beneficiation - cutting and polishing of rough diamonds. Business segments Mining Exploration Beneficiation Consolidated 1 July 2007 - 1 July 2007 - 1 July 2007 - 1 July 2007 - 31 December 2007 31 December 2007 31 December 2007 31 December 2007 US$ US$ US$ US$Revenue 31,668,533 - 517,281 32,185,814Segment result 16,147,606 (3,617,687) 13,383 12,543,302Operating profit / (loss) 11,034,490 (7,409,925) (570,957) 3,053,608Financial income 1,919,537 5,058,139 (12,507) 6,965,169Financial expense (396,759) (1,256,239) (46) (1,653,044)Income tax expense (130,404) - - (130,404)Outside shareholders Interest (3,784,636) - - (3,784,636)Profit / (loss) for the period 8,642,228 (3,608,025) (583,510) 4,450,693Segment assets 99,475,679 130,541,539 3,773,107 233,790,325Segment liabilities 34,994,805 25,671,846 2,516,689 63,183,340 Geographical segments Angola Botswana Sierra Leone South Africa Jersey Consolidated 1 July 2007 - 31 1 July 2007 - 1 July 2007 - 1 July 2007 - 1 July 2007 - 1 July 2007 - December 31 December 31 December 31 December 31 December 31 December 2007 2007 2007 2007 2007 2007 US$ US$ US$ US$ US$ US$Revenue - - - 32,185,814 - 32,185,814Segment assets 43,422,262 7,641,074 10,360,225 115,422,720 56,944,044 233,790,325Segment liabilities - 43,332 3,754,736 37,689,647 21,695,625 63,183,340Capital expenditure - 101,976 1,939,261 3,774,725 - 5,815,962 Business segments Mining Exploration Beneficiation Consolidated 1 July 2006 - 1 July 2006 - 1 July 2006 - 1 July 2006 - 31 December 31 December 31 December 31 December 2006 2006 2006 2006 US$ US$ US$ US$Revenue 8,268,611 - - 8,268,611Segment result (1,563,249) - - (1,563,249)Operating loss (2,261,505) (5,750,200) (84,875) (8,096,580)Financial income 1,154 112,653 7 113,814Financial expense (1,349,757) (1,001,717) - (2,351,474)Income tax 864,681 - - 864,681Loss for the period (2,745,427) (6,639,264) (84,868) (9,469,559)Segment assets 68,788,111 47,362,117 1,060,051 117,210,279Segment liabilities 20,194,232 23,955,923 503,799 44,653,954 Geographical segments Angola Botswana Sierra Leone South Africa Jersey Consolidated 1 July 2006 - 31 1 July 2006 - 1 July 2006 - 1 July 2006 - 1 July 2006 - 1 July 2006 - December 31 December 31 December 31 December 31 December 31 December 2006 2006 2006 2006 2006 2006 US$ US$ US$ US$ US$ US$Revenue - - - 8,268,611 - 8,268,611Segment assets 4,785,697 11,776,609 5,928,791 69,500,761 25,218,421 117,210,279Segment liabilities - 98,634 1,232,812 23,026,679 20,295,829 44,653,954Capital expenditure - 157,735 1,522,980 1,813,817 - 3,494,532 Business segments Mining Exploration Beneficiation Consolidated 1 July 2006 - 1 July 2006 - 1 July 2006 - 1 July 2006 - 30 June 30 June 30 June 30 June 2007 2007 2007 2007 US$ US$ US$ US$Revenue from external customers 16,712,146 336,648 - 17,048,794Segment result (5,851,790) 1,981,525 (84,877) (3,955,142)Operating loss (6,333,466) (9,545,432) (599,228) (16,478,126)Financial income - 651,767 2,384 654,151Financial expense (3,659,372) (3,374,813) - (7,034,185)Income tax 1,909,234 - - 1,909,234Loss for the period (8,083,604) (12,268,478) (596,844) (20,948,926)Segment assets 87,227,690 137,374,026 1,157,640 225,759,356Segment liabilities 32,165,070 32,108,430 922,330 65,195,830 Geographical segments Angola Botswana Sierra Leone South Africa Jersey Consolidated 1 July 2006 - 1 July 2006 - 1 July 2006 - 1 July 2006 - 1 July 2006 - 1 July 2006 - 30 June 30 June 30 June 30 June 30 June 30 June 2007 2007 2007 2007 2007 2007 US$ US$ US$ US$ US$ US$Revenue - - - 16,712,146 336,648 17,048,794Segment assets 52,318,248 9,318,811 8,369,539 106,890,457 48,862,301 225,759,356Segment liabilities 12,988 54,787 3,165,035 40,439,879 21,523,141 65,195,830Capital expenditure - (155,132) (3,847,301) (4,818,397) (113,040) (8,933,870) 4. ACQUISITIONS 4(a) Acquisition of Kimberley Underground Mines assets On 14 September 2007, the Company entered into a conditional agreement with DeBeers Consolidated Mines Limited ('De Beers') to acquire the mining andassociated assets previously used by De Beers in the operation of the KimberleyUnderground diamond mines ('Kimberley Underground'), which are situated nearKimberley, South Africa. The consideration payable is R78.5 million (US$11.1 million). The considerationis to be settled by Petra assuming De Beers' rehabilitation obligations withregards to Kimberley Underground of R63.5 million (US$8.9 million), and thepayment in cash by Petra to De Beers of R15 million (US$2.2 million). The acquisition is not reflected in the financial statements as at 31 December 2007 as the agreement is conditional uponthe following: (i) the DME converting the old order mining right in respect of Kimberley Underground held by De Beers into a new order mining right; (ii) the amendment of the new order mining right to subdivide the Kimberley Underground mines from other rights to be retained by De Beers; (iii) DME consenting to the cession to Petra of the new order mining right in respect of Kimberley Underground; (iv) the DME consenting to the cession, transfer and delegation of the rehabilitation obligations and liabilities in respect of Kimberley Underground from De Beers to Petra; (v) other related sale assets being sub-divided as required, and all regulatory approvals or consents being obtained inthat regard; (vi) issue of appropriate guarantees to De Beers; and (vii) all other regulatory approvals as may be required. No pro-forma financial information as at 19 February 2008 is available inrespect of the Kimberley Underground operations as no mining activity occurredduring the period. Fair values of the assets and liabilities have not beendisclosed as the conditions above have not yet been met. For the six monthsending 31 December 2007, care and maintenance costs of US$591,098 and capitalexpenditure of US$1,320,040 have been incurred. 4(b) Acquisition of Cullinan Diamond Mine assets On 22 November 2007, the Company announced that it had, as a member of the PetraDiamonds Cullinan Consortium ('PDCC'), entered into an agreement with De Beersto acquire the Cullinan Diamond Mine ('Cullinan') in South Africa. Salient features of the transaction are: (i) PDCC will acquire Cullinan from De Beers for a total cash considerationof R1 billion (US$149.0 million); Petra's share of the consideration is R325million (US$48.4 million); (ii) the members of PDCC are Petra Diamonds Limited (37% initial interest), AlRajhi Holdings W.L.L. ('Al Rajhi') (37% initial interest) and PDCC's BlackEconomic Empowerment ('BEE') partners (26% interest). The Company can at itsoption increase its interest in PDCC (from Al Rajhi) based on performance of themine and pre-agreed option payments. PDCC will be funded by Petra US$50 millionand Al Rajhi US$150 million; the total funding of US$200 million will be appliedto the purchase consideration of Cullinan of R1 billion (US$149.0m), with thebalance for the mine's working capital and Capex requirements; (iii) the BEE partners will pay for their interests from their share of futurecash flows from the mine, after servicing interest at appropriate interestrates, or they can arrange independent financing; and iv) the BEE partners are represented by Thembinkosi Mining Investments (Pty)Ltd, a consortium of BEE mining companies with a 14% interest, and a broad basedPetra employee share trust with a 12% interest that will ensure that all Petraemployees can benefit in the mine's success. The acquisition is not reflected in the financial statements as 31 December 2007as the agreement is conditional on upon the following conditions: (i) approval by the South African Competition Authority (approval received 18 February 2008); (ii) Ministerial consent to the cession to PDCC of the new order mining right in respect of Cullinan; (iii) the DME consenting to the cession, transfer and delegation of the rehabilitation obligations and liabilities in respect of Cullinan from De Beers to PDCC; and (iv) all regulatory and other approvals as may be required. 5. INVESTMENT IN ASSOCIATE In August 2007 the Company acquired a 40% equity interest inOrganizacoes Moyoweno - Comercio Geral, Lda.("Moyoweno"), an Angolan registeredcompany, for US$6 million. Moyoweno's sole asset is an interest in the AltoCuilo kimberlite and alluvial exploration contracts. 6. SALE OF INTEREST IN SUBSIDIARY On 1 August 2007, the Company entered into an agreement ('Luangue Agreement')with BHP Billiton to develop the Luangue diamond project ('Project Luangue') innorth eastern Angola. Under the terms of the Luangue Agreement: (i) BHP Billiton acquired 25% of the issued share capital of FrannorInvestments and Finance Limited ("Frannor"), from Petra for a cash considerationof US$22.35 million; the consideration has been treated as a disposal of 25% ofthe prospecting licences acquired at the date of acquisition; (ii) BHP Billiton's shareholding in Frannor will remain at 25% untilBHP Billiton's earn-in date ('BHP Billiton Earn-in Date'), defined as theearlier of (i) the formation of a kimberlite mining company or (ii) 180 daysfollowing the submission of a Technical and Economic Viability Study inaccordance with the Luangue kimberlite concession contract, provided that ineither case a BHP Billiton pre-feasibility study is completed beforehand. At theBHP Billiton Earn-in Date, BHP Billiton's shareholding in Frannor will increaseto 75%, with Petra holding the remaining 25% of Frannor; and (iii) BHP Billiton will sole fund the development of ProjectLuangue up to the BHP Billiton Earn-in Date; and (iv) BHP Billiton refunded Petra's Project Luangue operatingexpenditure, of circa US$3.5 million. As at 31 December 2007 the Company maintained its 75% shareholding in Frannorand consolidated 100% of Frannor's assets, liabilities and operational results. 1 July 2007 - 1 July 2006 - 1 July 2006 31 December 31 December - 30 June 2007 2006 2007 $ $ $ 7. ADMINISTRATION EXPENDITURE Auditors' remuneration- audit services 289,460 - 195,437- other services - - 19,394Depreciation of property, plant and equipment 57,330 16,453 113,283Operating lease rentals - buildings 78,628 62,524 153,739Staff costs 2,146,888 852,640 1,881,271Bid and project expenditure 133,013 26,458 55,293Loss / (profit) on disposal of property, plant and 2,999 - (81,852)equipmentAdministration expenses - mining operations 1,512,698 858,709 1,794,312Care and maintenance 591,098 1,240,040 -Other charges 395,560 593,415 1,863,098Share-based payments- directors 347,660 200,997 253,656- senior management 381,545 241,297 183,684 5,936,879 4,092,533 6,431,315 1 July 2007 - 1 July 2006 - 1 July 2006 31 December 31 December - 30 June 2007 2006 2007 $ $ $ 8. NET FINANCING INCOME/(COSTS)On bank loans and overdrafts (938,540) (263,795) (813,377)Other debt finance costs (714,504) (339,749) (1,409,603)Unrealised foreign exchange losses - (1,747,930) (4,811,205)Financial expense (1,653,044) (2,351,474) (7,034,185)Interest received 1,238,350 113,814 654,151Realised foreign exchange gains on the settlement 1,375,559 - -of forward exchange contractsUnrealised foreign exchange gains on forward 1,266,195 - -exchange contractsOther unrealised foreign exchange gains 3,085,065 - -Financial income 6,965,169 113,814 654,151 5,312,125 (2,237,660) (6,380,034) 9. ISSUED CAPITAL Number of shares 31 December Number of shares 31 December 2007 2006 US$ US$ Authorised - ordinary shares of 10p eachAs at 31 December 2006 and 31 300,000,000 60,117,000 200,000,000 35,982,000December 2007Issued and fully paidAt 1 July 181,448,191 36,360,403 148,825,098 27,031,103Allotments during the period 2,514,000 382,366 1,867,509 2,491,086At 31 December 183,962,191 36,742,769 150,692,607 29,522,189 10. 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$6 Month period ending31 December 2006:At 1 July 2006 27,031,103 123,189,903 2,541,087 972,962 - (81,608,667) 72,126,388Loss for the period - - - - - (9,469,559) (9,469,559)Equity portion of - - - - 4,003,682 - 4,003,682convertible bondEquity based share - - - 223,753 - - 223,753optionsExchange differences - 9,685,360 (8,283,906) - - - 1,401,454Allotments during the 2,491,086 - - - - - 2,491,086periodPremium allotments - 1,792,182 - - - - 1,792,182during the yearShare issue costs - (12,661) - - - - (12,661)At 31 December 2006 29,522,189 134,654,784 (5,742,819) 1,196,715 4,003,682 (91,078,226) 72,556,325 6 Month period ending31 December 2007:At 1 July 2007 36,360,403 227,366,888 (6,136,854) 1,527,000 4,003,682 (102,557,593) 160,563,526Profit for the period - - - - - 4,450,693 4,450,693Equity based share - - - 729,205 - - 729,205paymentsExchange differences - (748,850) (960,858) (1,709,708)Allotments during the 382,366 - - - - - 382,366periodPremium allotments - 2,406,267 - - - - 2,406,267during the yearAt 31 December 2007 36,742,769 229,024,305 (7,097,712) 2,256,205 4,003,682 (98,106,900) 166,822,349 11. EARNINGS PER SHARE The calculation of basic earnings per share is based on earnings for the interimperiod of US$4,450,693 (31 December 2006: loss for the period US$9,469,559) andon a weighted average of 182,684,584 (31 December 2006: 149,679,152) ordinaryshares of 10p each in issue during the period. The calculation of diluted earnings per share is based on earnings for theinterim period of US$4,450,693 (31 December 2006: loss for the periodUS$9,469,559) and on a diluted number of 188,073,841 (31 December 2006:170,591,152) ordinary shares of 10p each in issue during the period. 12. HEDGING INSTRUMENTS From time to time the Company may acquire forward contracts to fix theexchange rate on future transactions. At the period end such forward contractswith an unrealised foreign exchange gain of US$1,266,195 was credited to theincome statement within net financing income. A corresponding asset is includedwithin derivative financial assets. 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